AVESTA TRUST, 485APOS, 1997-09-29

AVESTA TRUST
485APOS, 1997-09-29

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1997
FILE NOS. 33-9421
811-5526
=============================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 \x\

PRE-EFFECTIVE AMENDMENT NO. \ \

POST-EFFECTIVE AMENDMENT NO. 20 \x\

AND/OR

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 \x\

AMENDMENT NO. 24 \x\
----------------

AVESTA TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

26-TCBE-45
P.O. BOX 2558, HOUSTON, TEXAS 77252-8045
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)

--------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 216-6433
--------------------

JEFFREY B. REITMAN, ESQ.
GENERAL COUNSEL
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
712 MAIN STREET, HOUSTON, TEXAS 77002
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:
GARY S. SCHPERO, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017

It is proposed that this filing will become effective:

\ \ immediately upon filing pursuant
to paragraph (b) \ \ on pursuant to paragraph (b)

\x\ 60 days after filing pursuant to
paragraph (a)(1) \ \ on pursuant to paragraph (a)(1)
<PAGE>
\ \ 75 days after filing pursuant
to paragraph (a)(2) \ \ on pursuant to paragraph (a)(2)
of Rule 485

If appropriate, check the following box:

\ \ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Registrant has previously elected, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, to register an indefinite number of units of
beneficial interest for sale under the Securities Act of 1933. Registrant's
Rule 24f-2 Notice for the fiscal year 1996 was filed on or about February 27,
1997.
=============================================================================
<PAGE>
AVESTA TRUST
Registration Statement on Form N-1A

CROSS-REFERENCE SHEET
Pursuant to Rule 495(a) Under the Securities Act of 1933

Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
---------- ------------------ -----------------------

Captions apply to all
Prospectuses except where
indicated in parenthesis.
Parenthesis indicate captions
for Institutional Shares
Prospectuses

1 Front Cover Page *

2(a) Expense Summary *

(b) Not Applicable *
3(a) Financial Highlights *
(b) Not Applicable *
(c) Performance Information *
4(a)(b) Other Information Concerning *
the Fund; Fund Objective;
Investment Policies
(c) Fund Objective; Investment *
Policies
(d) Not Applicable *
5(a) Management *
(b) Management *
(c)(d) Management; Other Information *
Concerning the Fund
(e) Other Information Concerning *
the Fund; Back Cover Page
(f) Other Information Concerning *
the Fund
(g) Not Applicable *
5A Not Applicable *
6(a) Other Information Concerning *
the Fund
(b) Not Applicable *
(c) Not Applicable *
<PAGE>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
---------- ------------------ -----------------------

(d) Not Applicable *
(e)(f) About Your Investment; How to *
Buy, Sell and Exchange Shares
(How to Purchase, Redeem and
Exchange Shares); How
Distributions Are Made; Tax
Information; Other
Information Concerning the
Fund; Make the Most of Your
Vista Privileges.
(f) How Distributions are Made; *
Tax Information
(g) How Distributions are Made; Tax Matters
Tax Information
(h) About Your Investment; How to *
Buy, Sell and Exchange Shares
(How to Purchase, Redeem and
Exchange Shares); Other
Information Concerning the
Fund
7(a) How to Buy, Sell and Exchange *
Shares (How to Purchase,
Redeem and Exchange Shares)
(b) How the Fund Values its *
Shares; How to Buy, Sell and
Exchange Shares (How to
Purchase, Redeem and Exchange
Shares)
(c) Not Applicable *
(d) How to Buy, Sell and Exchange *
Shares (How to Purchase,
Redeem and Exchange Shares)
(e) Management; Other Information *
Concerning the Fund
(f) Other Information Concerning *
the Fund
8(a) How to Buy, Sell and Exchange *
Shares (How to Purchase,
Redeem and Exchange Shares)
(b) How to Buy, Sell and Exchange *
Shares (How to Purchase,
Redeem and Exchange Shares)
<PAGE>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
---------- ------------------ -----------------------

(c) How to Buy, Sell and Exchange *
Shares (How to Purchase,
Redeem and Exchange Shares)
(d) How to Buy, Sell and Exchange *
Shares (How to Purchase,
Redeem and Exchange Shares)
9 Not Applicable *
10 * Front Cover Page
11 * Front Cover Page

12 * Not Applicable
13(a)(b) Fund Objective; Investment Investment Policies and
Policies Restrictions

14(c) * Management of the Trust and
Funds or Portfolios

(b) * Not Applicable
(c) * Management of the Trust and
Funds or Portfolios

15(a) * Not Applicable
(b) * General Information

16(a) Management Management of the Trust and
Funds or Portfolios
(b) Management Management of the Trust and
Funds or Portfolios

(c) Other Information Concerning Management of the Trust and
the Fund Funds or Portfolios
(d) Management Management of the Trust and
Funds or Portfolios

(e) * Not Applicable

(f) How to Buy, Sell and Exchange Management of the Trust and
Shares (How to Purchase, Funds or Portfolios
Redeem and Exchange Shares);
Other Information Concerning
the Fund
(g) * Not Applicable

(h) * Management of the Trust and
Funds or Portfolios;
Independent Accountants
(i) * Not Applicable
<PAGE>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
---------- ------------------ -----------------------

17 Investment Policies Investment Policies and
Restrictions
18(a) Other Information Concerning General Information
the Fund; How to Buy, Sell
and Exchange Shares (How to
Purchase, Redeem and Exchange
Shares)

(b) * Not Applicable

19(a) How to Buy, Sell and Exchange Purchases, Redemptions and
Shares (How to Purchase, Exchanges
Redeem and Exchange Shares)
(b) How the Fund Values its Determination of Net Asset
Shares; How to Buy, Sell and Value
Exchange Shares (How to
Purchase, Redeem and Exchange
Shares)

21(a) * Management of the Trust and
Funds or Portfolios

(b) * Management of the Trust and
Funds or Portfolios
(c) * Not Applicable

22 * Performance Information
23 * Not Applicable
<PAGE>
EXPLANATORY NOTE

The Prospectus relating to shares of the Money Market Fund, Income Fund,
Intermediate Term Bond Fund, Equity Growth Fund, Equity Income Fund, Balanced
Fund, Risk Manager-Income Fund, Risk Manager-Balanced Fund, Risk Manager-
Growth Fund, Short-Intermediate Term U.S. Government Securities Fund, U.S.
Government Securities Fund, Small Capitalization Fund, Core Equity Fund,
International Equity Fund and International Bond Fund are incorporated by
reference to the Registrant's filing of a definitive copy under Rule 497(c)
under the Securities Act of 1933, as amended (the "Securities Act").

The Statement of Additional Information for the Money Market Fund, Income
Fund, Intermediate Term Bond Fund, Equity Growth Fund, Equity Income Fund,
Balanced Fund, Risk Manager-Income Fund, Risk Manager-Balanced Fund, Risk
Manager-Growth Fund, Short-Intermediate Term U.S. Government Securities Fund,
U.S. Government Securities Fund, Small Capitalization Fund, Core Equity Fund,
International Equity Fund and International Bond Fund are incorporated by
reference to the Registrant's filing of a definitive copy under Rule 497(c)
under the Securities Act.<PAGE>
PROSPECTUS
AVESTA FUNDS

INVESTMENT STRATEGIES:

AVESTA MONEY MARKET FUND: Current Income

AVESTA TAX FREE MONEY MARKET FUND: Current Income
AVESTA TAX FREE INCOME FUND: Income

AVESTA NEW YORK TAX FREE INCOME FUND: Income

AVESTA SHORT-INTERMEDIATE TERM U.S.

GOVERNMENT SECURITIES FUND: Income
AVESTA U.S. GOVERNMENT SECURITIES FUND: Income

AVESTA INTERMEDIATE TERM BOND FUND: Income

AVESTA INCOME FUND: Income

AVESTA BALANCED FUND: Income and Growth
AVESTA EQUITY INCOME FUND: Growth and Income

AVESTA CORE EQUITY FUND: Total Return

AVESTA EQUITY GROWTH FUND: Capital Growth

AVESTA MID CAP GROWTH FUND: Capital Growth
AVESTA SMALL CAPITALIZATION FUND: Capital Growth

AVESTA INTERNATIONAL EQUITY FUND: Capital Growth
<PAGE>
INSTITUTIONAL SHARES

January 1, 1998

This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Funds in their January 1, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call ______________ at 1-800- ________. The SAI has been filed
with the Securities and Exchange Commission (the "Commission") and is
incorporated into this Prospectus by reference. In addition, the Commission
maintains a Web site (http://www.sec.gov) that contains the SAI, the Funds'
reports to shareholders and other information regarding the Funds which has
been electronically filed with the Commission.

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.

Investments in the Money Market Fund and Tax Free Money Market Fund are
neither insured nor guaranteed by the U.S. Government and there can be no
assurance that such Funds will be able to maintain a stable net asset value
of $1.00 per share.

Shares of the Funds are not bank deposits or obligations of, or guaranteed or
endorsed by, The Chase Manhattan Bank, Texas Commerce Bank National
Association or any of their affiliates and are not insured by the FDIC, the
Federal Reserve Board or any other government agency. Investments in mutual
funds involve risk, including the possible loss of the principal amount
invested.
<PAGE>
TABLE OF CONTENTS

Page

AVESTA MONEY MARKET FUND . . . . . . . . . . . . . . . . . . . . . . . . 4
AVESTA TAX FREE MONEY MARKET FUND . . . . . . . . . . . . . . . . . . . . 8
AVESTA TAX FREE INCOME FUND . . . . . . . . . . . . . . . . . . . . . . . 10
AVESTA NEW YORK TAX FREE INCOME FUND . . . . . . . . . . . . . . . . . . 12
AVESTA SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND . . . . . 14
AVESTA U.S. GOVERNMENT SECURITIES FUND . . . . . . . . . . . . . . . . . 17
AVESTA INTERMEDIATE TERM BOND FUND . . . . . . . . . . . . . . . . . . . 20
AVESTA INCOME FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
AVESTA BALANCED FUND . . . . . . . . . . . . . . . . . . . . . . . . . . 26
AVESTA EQUITY INCOME FUND . . . . . . . . . . . . . . . . . . . . . . . . 29
AVESTA CORE EQUITY FUND . . . . . . . . . . . . . . . . . . . . . . . . . 32
AVESTA EQUITY GROWTH FUND . . . . . . . . . . . . . . . . . . . . . . . . 35
AVESTA MID CAP GROWTH FUND . . . . . . . . . . . . . . . . . . . . . . . 38
AVESTA SMALL CAPITALIZATION FUND . . . . . . . . . . . . . . . . . . . . 40
AVESTA INTERNATIONAL EQUITY FUND . . . . . . . . . . . . . . . . . . . . 43
COMMON INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . 46
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
HOW TO BUY, SELL AND EXCHANGE SHARES . . . . . . . . . . . . . . . . . . 59
HOW THE FUNDS VALUE THEIR SHARES . . . . . . . . . . . . . . . . . . . . 61
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION . . . . . . . . . . . . . . . 62
OTHER INFORMATION CONCERNING THE FUNDS . . . . . . . . . . . . . . . . . 64
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 67
<PAGE>
The Avesta Funds are portfolios of Mutual Fund Investment Trust ("MFIT"), an
open-end investment company organized as a Massachusetts business trust in
September 1997. The Avesta Funds are managed by The Chase Manhattan Bank
("Chase"), a subsidiary of The Chase Manhattan Corporation ("CMC"). As
indicated below, certain of the Funds are successor investment portfolios to
portfolios of the AVESTA Trust, the predecessor entity of MFIT. The AVESTA
Trust was a collective trust established under the laws of the State of Texas
by Texas Commerce Bank National Association ("TCB"), an affiliate of CMC. The
AVESTA Trust was registered under the Investment Company Act of 1940 and was
available solely for certain individual retirement accounts and pension and
profit-sharing plans. The --
AVESTA Trust was converted and redomiciled into MFIT, effective as of January
1, 1998 (the "Conversion"). TCB acted as the trustee of the AVESTA Trust, and
as trustee was obligated to provide the investment portfolios of the AVESTA
Trust with the investment advisory, administrative, custodial and other
services necessary to manage the portfolios.

AVESTA MONEY MARKET FUND

Fund Objective and Investment Approach

Objective. The Money Market Fund's objective is to provide maximum current
income consistent with the preservation of capital and the maintenance of
liquidity.

Style and Portfolio Composition. The Fund invests in high quality, short-term
U.S. dollar-denominated money market instruments. The Fund invests
principally in (i) high quality commercial paper and other short-term
obligations, including floating and variable rate master demand notes of U.S.
and foreign issuers; (ii) U.S. dollar-denominated obligations of foreign
governments and supranational agencies (e.g., the International Bank for
Reconstruction and Development); (iii) obligations issued or guaranteed by
U.S. banks with total assets exceeding $1 billion (including obligations of
foreign branches of such banks) and by foreign banks with total assets
exceeding $10 billion (or the equivalent in other currencies) which have
branches or agencies in the U.S. (including U.S. branches of such banks), or
such other U.S. or foreign commercial banks which are judged by the Fund's
adviser to meet comparable credit standing criteria; (iv) securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities; and
(v) repurchase agreements.

Maturity. The dollar weighted average maturity of the Fund will be 90 days or
less. The Fund purchases only instruments which have or are deemed to have
remaining maturities of 397 days or less in accordance with federal
regulations.

Credit Quality. The Fund invests only in U.S. dollar-denominated high quality
obligations which are determined to present minimal credit risks. This credit
determination must be made in accordance with procedures established by the
Board of Trustees. Each investment must be rated in the highest short-term
rating category by at least two nationally recognized statistical rating
organizations ("NRSROs") (or one NRSRO if the instrument was rated only by
<PAGE>
one such organization) or, if unrated, must be determined to be of comparable
quality in accordance with the procedures of the Trust. If a security has an
unconditional guarantee or similar enhancement, the issuer of the guarantee
or enhancement may be relied upon in meeting these ratings requirements
rather than the issuer of the security.

Miscellaneous. The Fund seeks to maintain a net asset value of $1.00 per
share. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Money Market Fund based on
estimated expenses for the current fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee . . . . . . . . . . . . . . . . . . . . . . . . 0.30%
12b-1 Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Shareholder Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses<F1> . . . . . . . . . . . . . . . . . . . . . . . . . . 0.20%
Total Fund Operating Expenses<F1> . . . . . . . . . . . . . . . . . . . 0.50%

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

Institutional Shares. . . . . . . 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$5 $16 $28 $63

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.29% and 0.59%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
example should not be considered a representation of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
Financial Highlights

Effective January 1, 1998, the Money Market Fund series (the "Predecessor
Fund") of the AVESTA Trust was converted into the Money Market Fund, which
was created to be the successor to the Predecessor Fund. The table set forth
below provides selected per share data and ratios for one Unit of the
Predecessor Fund. This information is supplemented by financial statements
and accompanying notes appearing in the Predecessor Fund's Annual Report to
Shareholders for the fiscal year ended December 31, 1996 and Semi-Annual
Report for the period ended June 30, 1997, which are incorporated by
reference into the SAI. Shareholders may obtain a copy of the Annual Report
and the Semi-Annual Report by contacting the Fund. The Financial Highlights
for the periods ended December 31, 1992 through December 31, 1996 have been
audited by Price Waterhouse LLP, whose unqualified report is included in the
Annual Report. Information for periods prior to the fiscal year ended
December 31, 1992 have been examined by other accountants whose opinion was
unqualified.

<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------------------------------------------------------------------
For the
period
ended
June 30,
1997 1996 1995 1994 1993 1992
------- ------------------- ---------------- ------------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- --------- --------- -------
Investment income . 0.054 0.059 0.045 0.032 0.041
Expenses . . . . . . (0.006)<F3> (0.006)<F3> (0.007)<F3> (0.008) (0.008)
Expense
reimbursement . . . 0.001 0.001 0.001 0.002 0.002
-------- ------- --------- --------- -------
Net investment
income . . . . . . . 0.049 0.054 0.039 0.026 0.035
Dividends to
unitholders . . . . (0.049) (0.054) (0.039) (0.026) (0.035)
-------- ------- --------- --------- -------
Net asset value, end
of period . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ========= ========= =======
Total return . . . . . 5.10% 5.57% 3.80% 2.60% 3.44%
Ratios/supplemental
data:
Net assets, end of
period (000) . . . . $119,106 $71,310 $ 55,505 $ 28,024 $32,861
<PAGE>
Ratio of expenses
to average net
assets . . . . . . 0.57% 0.57% 0.68% 0.82% 0.81%
Ratio of expense
reimbursement to
average net
assets . . . . . . (0.07%) (0.07%) (0.18%) (0.17%) (0.16%)
-------- ------- --------- --------- -------
Ratio of net
expenses to
average net
assets . . . . . . 0.50%<F2> 0.50%<F2> 0.50%<F2> 0.65% 0.65%
======== ======= ========= ========= =======
Ratio of net
income to average
net assets . . . . 4.93% 5.43% 3.90% 2.57% 3.37%

For the years ended December 31,
---------------------------------------------------------------------------
1991 1990 1989 1988<F1>
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period . . $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------
Investment income . 0.063 0.082 0.091 0.061
Expenses . . . . . . (0.007) (0.009) (0.010) (0.016)
Expense reimbursement 0.001 0.002 0.003 0.011
------- ------- ------- ------
Net investment income 0.057 0.075 0.084 0.056
Dividends to
unitholders . . . . (0.057) (0.075) (0.084) (0.056)
------- ------- ------- ------
Net asset value, end of
period . . . . . . . . $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======
Total return . . . . . 6.01% 7.80% 8.91% 7.45%
Ratios/supplemental
data:
Net assets, end of
period (000) . . . . $32,230 $25,832 $18,891 $5,079
Ratio of expenses
to average net
assets . . . . . . 0.80% 0.88% 0.96% 2.16%<F4>
Ratio of expense
reimbursement to
average net assets (0.15%) (0.23%) (0.31%) (1.51%)<F4>
------- ------- ------- ------
Ratio of net
expenses to
average net assets 0.65% 0.65% 0.65% 0.65%<F4>
======= ======= ======= ======
Ratio of net income
to average net
assets . . . . . . 5.69% 7.53% 8.49% 6.11%<F4>
<PAGE>
____________________
<FN>

<F1> Commenced investment operations on March 29, 1988.
<F2> Reflects management fee reduction of 0.15% or $134,952, $100,525 and
$27,802, for the years ended December 31, 1996, 1995, and 1994
respectively. For the year ended December 31, 1994 the actual net
expense ratio for the year was 0.56% of average net assets as the fee
reduction went into effect on 5/2/94.
<F3> Reflects management fee reduction of $134,952 or $0.002 per unit,
$100,525 or $0.002 per unit, and $27,802 or $0.001 per unit for the
years ended December 31, 1996, 1995 and 1994 respectively. Without
management fee reduction, expense per unit is $0.007, $0.007, and
$0.008 for the years ended December 31, 1996, 1995 and 1994
respectively.
<F4> Annualized.
</TABLE>
<PAGE>
AVESTA TAX FREE MONEY MARKET FUND

Fund Objective and Investment Approach

Objective. The Tax Free Money Market Fund's objective is to provide as high a
level of current income which is excluded from gross income for federal
income tax purposes as is consistent with the preservation of capital and
maintenance of liquidity.

Style and Portfolio Composition. The Fund invests in a non-diversified
portfolio of short-term, fixed rate and variable rate Municipal Obligations.
"Municipal Obligations" are obligations issued by or on behalf of states,
territories and possessions of the United States, and their authorities,
agencies, instrumentalities and political subdivisions, the interest on
which, in the opinion of bond counsel, is excluded from gross income for
federal income tax purposes (without regard to whether the interest thereon
is also exempt from the personal income taxes of any state or whether the
interest thereon constitutes a preference item for purposes of the federal
alternative minimum tax).

As a fundamental policy, under normal market conditions the Fund will have at
least 80% of its total assets invested in Municipal Obligations the interest
on which, in the opinion of bond counsel, is excluded from gross income for
federal income tax purposes and does not constitute a preference item which
would be subject to the federal alternative minimum tax on individuals (these
preference items are referred to as "AMT Items"). Although the Fund will seek
to invest 100% of its assets in such Municipal Obligations, it reserves the
right under normal market conditions to invest up to 20% of its total assets
in AMT Items or securities the interest on which is subject to federal income
tax. For temporary defensive purposes, the Fund may exceed this limitation.

Credit Quality. The Fund invests only in U.S. dollar-denominated high quality
obligations which are determined to present minimal credit risks. This credit
determination must be made in accordance with procedures established by the
Board of Trustees. Each investment must be rated in the highest short-term
rating category by at least two NRSROs (or one NRSRO if the instrument was
rated only by one such organization) or, if unrated, must be determined to be
of comparable quality in accordance with the procedures of the Trust. If a
security has an unconditional guarantee or similar enhancement, the issuer of
the guarantee or enhancement may be relied upon in meeting these ratings
requirements rather than the issuer of the security.

Miscellaneous. The Fund seeks to maintain a net asset value of $1.00 per
share. The Fund is classified as a "non-diversified" fund under federal
securities law.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Tax Free Money Market Fund
based on estimated expenses for the current fiscal year. The example shows
the cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years
Institutional Shares . . . . ------ -------
$5 $16

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.__% and 0.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
AVESTA TAX FREE INCOME FUND

Fund Objective and Investment Approach

Objective. The Tax Free Income Fund's objective is to provide monthly
dividends which are excluded from gross income for federal income tax
purposes, as well as to protect the value of its shareholders' investment.

Style and Portfolio Composition. As a fundamental policy, under normal market
conditions the Fund will have at least 80% of its total assets invested in
Municipal Obligations the interest on which, in the opinion of bond counsel,
is excluded from gross income for federal income tax purposes and does not
constitute an AMT Item. The Fund reserves the right under normal market
conditions to invest up to 20% of its total assets in AMT Items or securities
the interest on which is subject to federal income tax. For temporary
defensive purposes, the Fund may exceed this limitation.

The Fund's investments may include, among other instruments, fixed, variable
or floating rate general obligation and revenue bonds, zero coupon
securities, inverse floaters and bonds with interest rate caps. However, the
Fund does not have any present intention to invest in inverse floaters or
bonds with interest rate caps.

Maturity. There is no restriction on the maturity of the Fund's portfolio or
any individual portfolio security. The Fund's adviser may adjust the average
maturity of the Fund's portfolio based upon its assessments of the relative
yields available on securities of different maturities and their expectations
of future changes in interest rates.

Credit Quality. The Fund's Municipal Obligations will be rated at the time of
purchase at least in the category Baa, MIG-3 or VMIG-3 by Moody's Investors
Service, Inc. ("Moody's"), or BBB or SP-2 by Standard & Poor's Corporation
("S&P"), or BBB or F-3 by Fitch Investors Service, Inc. ("Fitch") or
comparably rated by another NRSRO, or, if unrated, considered by the Fund's
adviser to be of comparable quality. Bonds rated in the category Baa or BBB
are generally considered to be investment grade obligations which are neither
highly protected nor poorly secured; obligations rated MIG-3, VMIG-3, SP-2 or
F-3 are generally considered to have satisfactory capacity to pay principal
and interest. Although the adviser is not required to dispose of securities
which are downgraded below investment grade subsequent to acquisition, there
is no present intention to retain securities which are downgraded below
investment grade.

Miscellaneous. The Fund is classified as a "non-diversified" fund under
federal securities law.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Tax Free Income Fund based
on estimated expenses for the current fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
12b-1 Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Shareholder Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses<F1> . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Total Fund Operating Expenses<F1> . . . . . . . . . . . . . . . . . . . 0.75%

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years
Institutional Shares . . . . ------ -------
$8 $24

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.__% and 0.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Objective. The New York Tax Free Income Fund's objective is to provide
monthly dividends which are excluded from gross income for federal income tax
purposes and exempt from New York State and New York City personal income
taxes, as well as to protect the value of its shareholders' investment.

Style and Portfolio Composition. The Fund invests primarily in New York
Municipal Obligations. "New York Municipal Obligations" are Municipal
Obligations of the State of New York and its political subdivisions and of
Puerto Rico, other U.S. territories and their political subdivisions, the
interest on which, in the opinion of bond counsel, is exempt from New York
State and New York City personal income taxes.

As a fundamental policy, under normal market conditions the Fund will have at
least 80% of its total assets invested in New York Municipal Obligations the
interest on which, in the opinion of bond counsel, does not constitute an AMT
Item. The Fund reserves the right under normal market conditions to invest up
to 20% of its total assets in AMT Items or securities the interest on which
is subject to federal income tax and New York State and New York City
personal income taxes. For temporary defensive purposes, the Fund may exceed
this limitation.

Credit Quality. The Fund's Municipal Obligations will be rated at the time of
purchase at least in the category Baa, MIG-3 or VMIG-3 by Moody's or BBB or
SP-2 by S&P or BBB or F-3 by Fitch or comparably rated by another NRSRO, or,
if unrated, considered by the Fund's adviser to be of comparable quality.
Bonds rated in the category Baa or BBB are generally considered to be
investment grade obligations which are neither highly protected nor poorly
secured; obligations rated MIG-3, VMIG-3, SP-2 or F-3 are generally
considered to have satisfactory capacity to pay principal and interest.
Although the adviser is not required to dispose of securities which are
downgraded below investment grade subsequent to acquisition, there is no
present intention to retain securities which are downgraded below investment
grade.

Miscellaneous. The Fund is classified as a "non-diversified" fund under
federal securities law.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the New York Tax Free Income
Fund based on estimated expenses for the current fiscal year. The example
shows the cumulative expenses attributable to a hypothetical $1,000
investment over specified periods.

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years
Institutional Shares . . . . ------ -------
$8 $24

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.__% and 0.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Objective. The Short-Intermediate Term Fund's objective is to provide as high
a level of current income as is consistent with the preservation of capital.

Style and Portfolio Composition. The Fund invests primarily (under normal
market conditions, at least 70% of the value of the Fund's total assets) in
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements with respect thereto. The Fund
expects that substantially all of its assets will be so invested. The Fund
seeks to preserve capital by investing in shorter-term securities; it expects
the volatility in the principal value of its shorter-term investments to be
more limited than that associated with investments in comparable securities
having longer maturities. The Fund may invest in mortgage-backed securities
issued or guaranteed by certain agencies of the U.S. Government as described
below under "Common Investment Policies--Other Investment Practices--
Mortgage-Related Securities."

Maturity. As a matter of operating policy, under normal market conditions,
the dollar-weighted average maturity of the Fund's portfolio, measured at the
time an investment is made, will be between two and five years. There is no
restriction on the maturity of any individual asset which may be acquired by
the Fund. The average maturity of securities in the Fund will be based
primarily upon the adviser's expectations for the future course of interest
rates and the then prevailing price and yield levels in the U.S. Government
securities market.

Miscellaneous. Guarantees of principal and interest on obligations that may
be purchased by the Fund are not guarantees of the market value of such
obligations, nor do they extend to the value of the shares of the Fund. The
Fund is classified as a "diversified" fund under federal securities laws.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Short-Intermediate Term
Fund based on estimated expenses for the current fiscal year. The example
shows the cumulative expenses attributable to a hypothetical $1,000
investment over specified periods.

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares. . . . . . $8 $24 $42 $93

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.62% and 1.12%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
Financial Highlights

Effective January 1, 1998, the Short-Intermediate Term U.S. Government
Securities Fund series (the "Predecessor Fund") of the AVESTA Trust was
converted into the Short-Intermediate Term U.S. Government Securities Fund,
which was created to be the successor to the Predecessor Fund. The table set
forth below provides selected per share data and ratios for one Unit of the
Predecessor Fund. This information is supplemented by financial statements
and accompanying notes appearing in the Predecessor Fund's Annual Report to
Shareholders for the fiscal year ended December 31, 1996 and Semi-Annual
Report for the period ended June 30, 1997, which are incorporated by
reference into the SAI. Shareholders may obtain a copy of the Annual Report
and the Semi-Annual Report by contacting the Fund. The Financial Highlights
for the periods presented below have been audited by Price Waterhouse LLP,
whose unqualified report is included in the Annual Report.

<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------------------------------
For the
period ended
June 30, 1997 1996 1995 1994 1993<F1>
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, $ 11.35 $ 10.14 $ 10.24 $ 10.00
beginning of period . . . . . . -------- ------- ------- -------
Investment income . . . . . . . 0.69 0.66 0.52 0.33
Expenses . . . . . . . . . . . . (0.10) (0.10) (0.09) (0.11)<F2>
0.01 0.02 0.02 0.07
Expense reimbursement . . . . . -------- ------- ------- -------
Net investment income . . . . . 0.60 0.58 0.45 0.29
Net gains or (losses) on
securities (both realized and (0.29) 0.63 (0.55) (0.05)
unrealized) . . . . . . . . . -------- ------- ------- -------
0.31 1.21 (0.10) 0.24
Total from investment operations -------- ------- ------- -------
$ 11.66 $ 11.35 $ 10.14 $ 10.24
Net asset value, end of period . . ======== ======== ======== ========
Total return . . . . . . . . . . . 2.68% 12.01% (1.05%) 2.43
Ratios/supplemental data:
Net assets, end of period (000) $ 28,551 $28,783 $22,992 $ 17,391
Ratio of expenses to average net
assets . . . . . . . . . . . . . 0.88% 0.91% 0.96% 1.66%<F3>
Ratio of expense reimbursement (0.13%) (0.16%) (0.21%) (0.91%)<F3>
to average net assets . . . . -------- -------- -------- --------
Ratio of net expenses to average 0.75% 0.75% 0.75% 0.75%<F4>
net assets . . . . . . . . . . ======== ======== ======== ========
Ratio of net income to average net
assets . . . . . . . . . . . . . 5.26% 5.38 4.41% 3.76%
Portfolio turnover rate . . . . 177% 187% 268% 247%

Number of units outstanding at
end of period (000) . . . . . 2,449 2,536 2,269 1,698
<PAGE>
____________________
<FN>
<F1> Commenced investment operations on April 1, 1993.
<F2> Annualized.
<F3> Reflects voluntary fee waiver of $9,789 or $0.02 per unit. Without
voluntary fee waiver, expense per unit is $0.13.
<F4> Does not reflect voluntary waiver of management fees of $9,789. Net of
the voluntary management fee waiver, the net expense ratio is 0.60% of
average net assets. This figure is annualized.
</TABLE>
<PAGE>
AVESTA U.S. GOVERNMENT SECURITIES FUND

Fund Objective and Investment Approach

Objective. The U.S. Government Securities Fund's objective is to provide
current income with emphasis on the preservation of capital.

Maturity. As a matter of operating policy, under normal market conditions,
the dollar-weighted average maturity of the Fund's portfolio, measured at the
time an investment is made, will be between five and fifteen years. There is
no restriction on the maturity of any individual asset which may be acquired
by the Fund. The average maturity of securities in the Fund will be based
primarily upon the adviser's expectations for the future course of interest
rates and the then prevailing price and yield levels in the U.S. Government
securities market. Fixed income securities with longer maturities generally
have less stable market values.

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the U.S. Government Securities
Fund based on estimated expenses for the current fiscal year. The example
shows the cumulative expenses attributable to a hypothetical $1,000
investment over specified periods.

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares. . . . . . $8 $24 $42 $93

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 3.75% and 4.25%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
Financial Highlights

Effective January 1, 1998, the U.S. Government Securities Fund series (the
"Predecessor Fund") of the AVESTA Trust was converted into the U.S.
Government Securities Fund, which was created to be the successor to the
Predecessor Fund. The table set forth below provides selected per share data
and ratios for one Unit of the Predecessor Fund. This information is
supplemented by financial statements and accompanying notes appearing in the
Predecessor Fund's Annual Report to Shareholders for the fiscal year ended
December 31, 1996 and Semi-Annual Report for the period ended June 30, 1997,
which are incorporated by reference into the SAI. Shareholders may obtain a
copy of the Annual Report and the Semi-Annual Report by contacting the Fund.
The Financial Highlights for the periods presented below have been audited by
Price Waterhouse LLP, whose unqualified report is included in the Annual
Report.

<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------------------------------
For the
period
ended
June 30,
1997 1996 1995 1994 1993<F1>
--------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ 10.00
Net asset value, $ 13.01 -------- $ 10.91 $ 10.00
beginning of period . . . . --------- -------- --------
Investment income . . . . . 0.83 0.81 0.70 0.45
Expenses . . . . . . . . . . (0.25)<F3> (0.24)<F3> (0.23)<F3> (0.36)<F5>
0.16 0.16 0.15 0.31
Expense reimbursement . . . --------- ------- -------- --------
Net investment income . . . 0.74 0.73 0.62 0.40
Net gains or (losses) on
securities (both realized (0.99) 2.28 (1.53) 0.51
and unrealized) . . . . . --------- -------- -------- --------
Total from investment (0.25) 3.01 (0.91) 0.91
operations . . . . . . . . . --------- -------- -------- --------
$ 12.76 $ 13.01 $ 10.00 $ 10.91
Net asset value, end of period ========= ======== ======== ========
Total return . . . . . . . . . (1.89%) 30.11% (8.39%) 9.12
Ratios/supplemental data:
Net assets, end of period
(000) . . . . . . . . . . . $ 2,747 $ 2,877 $ 2,628 $ 2,916
Ratio of expenses to average
net assets . . . . . . . . . 1.99% 2.12% 2.28% 4.69%<F2>
Ratio of expense
reimbursement to average (1.24%) (1.37%) (1.53%) (3.84%)<F2>
net assets . . . . . . . . -------- -------- -------- --------
<PAGE>
Ratio of net expenses to 0.75%<F4> 0.75%<F4> 0.75%<F4> 0.85%<F6>
average net assets . . . . ======== ======== ======== ========
Ratio of net income to
average net assets . . . . . 6.01% 6.38 6.23% 4.91%
Portfolio turnover rate . . 48% 17% 174% 232%
Number of units
outstanding at end of
period (000) . . . . . . . 215 221 263 267

____________________
<FN>
<F1> Commenced investment operations on April 1, 1993.
<F2> Annualized.
<F3> Reflects management fee reduction of $2,757 or $0.01 per unit, $2,527
or $0.01 per unit and $1,886 or $0.01 per unit for the years ended
December 31, 1996, 1995 and 1994. Without management fee reduction,
expense per unit is $0.26, $0.25 and $0.24 for the years ended
December 31, 1996, 1995 and 1994, respectively
<F4> Reflects management fee reduction of 0.10% or $2,757, $2,527 and
$1,886 for the years ended December 31, 1996, 1995 and 1994,
respectively. For the year ended December 31, 1994, the actual net
expense ratio for the year was 0.80% of average net assets as the fee
reduction went into effect on May 2, 1994.
<F5> Reflects voluntary fee waiver of $3,040 or $0.02 per unit. Without
voluntary fee waiver, expense per unit is $0.38.
<F6> Does not reflect voluntary waiver of management fees of $3,040. Net
of the voluntary management fee waiver, the net expense ratio is 0.64%
of average net assets. This figure is annualized.
</TABLE>
<PAGE>
AVESTA INTERMEDIATE TERM BOND FUND

Fund Objective and Investment Approach

Objective. The Intermediate Term Bond Fund's objective is to provide current
income, with consideration also given to stability of principal.

Style and Portfolio Composition. Primary investment emphasis is on
intermediate term debt securities. Under normal market conditions, at least
70% of the Fund's total assets will be invested in bonds, notes and
debentures issued by domestic or foreign issuers, U.S. Government securities,
debt obligations collateralized by U.S. Government securities or by private
mortgages and preferred stock of domestic issuers. The Fund may also invest
in debt securities issued by foreign issuers. The Fund will not typically
invest in common stocks, although the Fund may acquire common stocks as a
result of purchases of unit offerings of fixed income securities, which
include such securities, or in connection with the conversion or exchange of
fixed income securities.

Maturity. The Fund will maintain a dollar weighted average portfolio maturity
ranging from three to ten years. Fixed income securities purchased by the
Fund will normally have a maturity in excess of one year. The average
maturity of securities in the Fund will be based primarily upon the adviser's
expectations for the future course of interest rates and the then prevailing
price and yield levels in the fixed income market. Fixed income securities
with longer maturities generally have less stable market values.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Investment
grade debt securities are securities rated in the category Baa or higher by
Moody's or BBB or higher by S&P or the equivalent by another NRSRO. Although
the adviser is not required to dispose of securities which are downgraded
below investment grade subsequent to acquisition, there is no present
intention to retain securities which are downgraded below investment grade.
The Fund's investments in securities other than debt of domestic and foreign
issuers and debt obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities (e.g., preferred stock) will be based on the
adviser's judgment of the quality of the securities. The judgment may be
based upon such considerations as the issuer's financial strength, including
its historic and current financial condition, its historic and projected
earnings; the issuer's market position; and other factors relevant to an
analysis of a particular issuer, as determined by the adviser.

Miscellaneous. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Intermediate Term Bond Fund
based on estimated expenses for the current fiscal year. The example shows
the cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares. . . . . . $8 $24 $42 $93

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.78% and 1.28%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
Financial Highlights

Effective January 1, 1998, the Intermediate Term Bond Fund series (the
"Predecessor Fund") of the AVESTA Trust was converted into the Intermediate
Term Bond Fund, which was created to be the successor to the Predecessor
Fund. The table set forth below provides selected per share data and ratios
for one Unit of the Predecessor Fund. This information is supplemented by
financial statements and accompanying notes appearing in the Predecessor
Fund's Annual Report to Shareholders for the fiscal year ended December 31,
1996 and Semi-Annual Report for the period ended June 30, 1997, which are
incorporated by reference into the SAI. Shareholders may obtain a copy of the
Annual Report and Semi-Annual Report by contacting the Fund. The Financial
Highlights for the periods presented below have been audited by Price
Waterhouse LLP, whose unqualified report is included in the Annual Report.

<TABLE>
<CAPTION>
For the years ended
December 31,
-------------------------------- October 3,
For the 1994<F1> to
period ended December 31,
June 30, 1997 1996 1995 1994
-------------- --------------- --------------- -----------------------------
<S> <C> <C> <C> <C>
Net asset value, $11.67 $ 9.99 $ 10.00
beginning of period . . ------ ------ --------
Investment income . . . 0.70 0.72 0.17
Expenses . . . . . . . . (0.16) (0.16) (0.08)
0.07 0.08 0.06
Expense reimbursement . ------ ------ --------
Net investment income . 0.61 0.64 0.15
Net gains or (losses) on
securities (both
realized and (0.39) 1.04 (0.16)
unrealized) . . . . . ------ ------ --------
Total from investment 0.22 1.68 (0.01)
operations . . . . . . . ------ ------ --------
Net asset value, end of $11.89 $11.67 $ 9.99
period . . . . . . . . . . ====== ====== ========
Total return . . . . . . . 1.86% 16.79% (0.32%)
Ratios/supplemental data:
Net assets, end of period
(000) . . . . . . . . . $6,949 $5,031 $ 5,124
Ratio of expenses to
average net assets . . 1.42% 1.43% 1.38%<F2>
Ratio of expense
reimbursement to (0.67%) (0.68%) (0.63%)<F2>
average net assets . . ------ ------ --------
Ratio of net expenses to 0.75% 0.75% 0.75%<F2>
average net assets . . ====== ====== ========
<PAGE>
Ratio of net income to
average net assets . . 5.32% 5.89% 6.12%<F2>
Portfolio turnover rate 134% 198% 7%
Number of units
outstanding at end of
period (000) . . . . . 585 431 513

____________________
<FN>
<F1> Commencement of operations.
<F2> Annualized.
</TABLE>
<PAGE>
AVESTA INCOME FUND

Fund Objective and Investment Approach

Objective. The Income Fund's objective is to invest in securities that earn a
high level of current income with consideration also given to safety of
principal.

Style and Portfolio Composition. Investment emphasis is on fixed income
securities, primarily domestic debt securities, such as bonds, notes and
debentures issued by domestic issuers, U.S. Government securities, debt
obligations collateralized by U.S. Government securities or by private
mortgages and preferred stock of domestic issuers. Under normal market
conditions, at least 70% of the Income Fund's total assets will be invested
in such securities. The Fund may also invest in debt securities issued by
foreign issuers. The Fund will not typically invest in common stock, although
the Fund may acquire common stock as a result of purchases of unit offerings
of fixed income securities, which include such securities, or in connection
with the conversion or exchange of fixed income securities.

Maturity. Under normal market conditions it is expected that the dollar
weighted average maturity of the Fund will range between five to fifteen
years. Fixed income securities purchased by the Fund will normally have a
maturity in excess of one year. The average maturity of securities in the
Fund will be based primarily upon the adviser's expectations for the future
course of interest rates and the then prevailing price and yield levels in
the fixed income market. Fixed income securities with longer maturities
generally have less stable market values.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade. The Fund's
investments in securities other than debt of domestic and foreign issuers and
debt obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities (e.g., preferred stock) will be based on the adviser's
judgment of the quality of the securities. The judgment may be based upon
such considerations as the issuer's financial strength, including its
historic and current financial condition, its historic and projected
earnings; the issuer's market position; and other factors relevant to an
analysis of a particular issuer, as determined by the adviser.

Miscellaneous. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Income Fund based on
estimated expenses for the current fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares. . . . . . $8 $24 $42 $93

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.42% and 0.92%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
Financial Highlights

Effective January 1, 1998, the Income Fund series (the "Predecessor Fund") of
the AVESTA Trust was converted into the Income Fund, which was created to be
the successor to the Predecessor Fund. The table set forth below provides
selected per share data and ratios for one Unit of the Predecessor Fund. This
information is supplemented by financial statements and accompanying notes
appearing in the Predecessor Fund's Annual Report to Shareholders for the
fiscal year ended December 31, 1996 and Semi-Annual Report for the period
ended June 30, 1997, which are incorporated by reference into the SAI.
Shareholders may obtain a copy of the Annual Report and Semi-Annual Report by
contacting the Fund. The Financial Highlights for the periods ended December
31, 1992 through December 31, 1996 have been audited by Price Waterhouse LLP,
whose unqualified report is included in the Annual Report. Information for
periods prior to the fiscal year ended December 31, 1992 have been examined
by other accountants whose opinion was unqualified.

<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------------------------------------------------------
For the
period
ended
June 30,
1997 1996 1995 1994 1993<F1> 1992<F1>
-------- ---------------- ----------------- ----------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period . . . . . . . $ 18.21 $ 15.39 $ 16.11 $ 14.62 $ 13.90
-------- -------- -------- -------- --------
Investment income . 1.14 1.09 0.97 0.97 1.02
Expenses . . . . . . (0.15)<F3> (0.14)<F3> (0.14)<F3> (0.17) (0.16)
Expense
reimbursement . . . 0.01 0.02 0.01 0.02 0.02
-------- -------- -------- -------- --------
Net investment
income . . . . . . . 1.00 0.97 0.84 0.82 0.88
Net gains or
(losses) on
securities (both
realized and
unrealized) . . . (0.65) 1.85 (1.56) 0.67 (0.16)
-------- -------- -------- -------- --------
Total from
investment
operations . . . 0.35 2.82 (0.72) 1.49 0.72
-------- -------- -------- -------- --------
Net asset value, end of
period . . . . . . . . $ 18.56 $ 18.21 $ 15.39 $ 16.11 $ 14.62
======== ======== ======== ======== ========
Total return . . . . . 1.91% 18.38% (4.47%) 10.18% 5.13%
<PAGE>
Ratios/supplemental
data:
Net assets, end of
period (000) . . . . $53,614 $57,452 $52,235 $76,085 $64,509
Ratio of expenses to average
net assets . . . 0.82% 0.83% 0.82% 1.09% 1.17%
Ratio of expense
reimbursement to
average net assets (0.07%) (0.08%) (0.07%) (0.09%) (0.17%)
-------- -------- -------- -------- --------
Ratio of net
expenses to
average net assets 0.75%<F4> 0.75%<F4> 0.75%<F4> 1.00% 1.00%
======== ======== ======== ======== ========
Ratio of net income
to average net
assets . . . . . . 5.58% 5.77% 5.43% 5.20% 6.21%
Portfolio turnover
rate . . . . . . . . 72% 93% 239% 156% 285%
Number of units
outstanding at end
of period (000) . 2,889 3,154 3,395 4,724 4,413

For the years ended December 31,
----------------------------------------------------------------------------------------
1991<F1> 1990<F1> 1989<F1> 1988<F1><F2>
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period . . . . . . . . . . . . . . $ 12.22 $ 11.47 $ 10.39 $ 10.00
-------- -------- -------- ---------
Investment income . . . . . . . . 0.97 1.02 0.96 0.69
Expenses . . . . . . . . . . . . . (0.15) (0.14) (0.15) (0.16)
Expense reimbursement . . . . . . 0.02 0.03 0.04 0.08
-------- -------- -------- ---------
Net investment income . . . . . . 0.84 0.91 0.85 0.61
Net gains or (losses) on
securities (both realized and
unrealized) . . . . . . . . . . 0.84 (0.16) 0.23 (0.22)
-------- -------- -------- ---------
Total from investment
operations . . . . . . . . . . 1.68 0.75 1.08 0.39
-------- -------- -------- ---------
Net asset value, end of period . . . $ 13.90 $ 12.22 $ 11.47 $ 10.39
======== ======== ======== =========
Total return . . . . . . . . . . . . 13.73% 6.60% 10.37% 5.23%
Ratios/supplemental data:
Net assets, end of period (000) . $41,872 $19,353 $13,548 $6,095
Ratio of expenses to average
net assets . . . . . . . . . . 1.18% 1.24% 1.32% 2.15%<F5>
Ratio of expense reimbursement to
average net assets . . . . . . . (0.18%) (0.24%) (0.32%) (1.15%)<F5>
-------- -------- -------- ---------
<PAGE>
Ratio of net expenses to average
net assets . . . . . . . . . . . 1.00% 1.00% 1.00% 1.00%<F5>
======== ======== ======== =========
Ratio of net income to average net
assets . . . . . . . . . . . . . 6.57% 7.91% 7.65% 7.97%<F5>
Portfolio turnover rate . . . . . 304% 241% 361% 110%
Number of units outstanding at end
of period (000) . . . . . . . . 3.012 1,583 1,181 586
____________________
<FN>
<F1> Amounts for the years 1988-1993 are adjusted to reflect 10:1 reverse
split of the Fund's units on May 7, 1993.
<F2> Commenced investment operations on March 29, 1988.
<F3> Reflects management fee reduction of $135,137 or $0.05 per unit,
$136,617 or $0.04 per unit, and $99,627 or $0.03 per unit for the
years ended December 31, 1996, 1995, and 1994 respectively. Without
management fee reduction, expense per unit is $0.18, $0.18 and $0.17
for the years ended December 31, 1996, 1995, and 1994 respectively.
<F4> Reflects management fee reductions of 0.25% or $135,137, $136,617, and
$99,627 for the years ended December 31, 1996, 1995, and 1994
respectively. For the year ended December 31, 1994 the actual net
expense ratio for the year was 0.80% of average net assets as the fee
reduction went into effect on 5/2/94.
<F5> Annualized.
</TABLE>
<PAGE>
AVESTA BALANCED FUND

Fund Objective and Investment Approach

Objective. The Balanced Fund's objective is to provide a balance of current
income and growth of capital.

Style and Portfolio Composition. The Fund seeks to meet its objective by
investing in a combination of bonds and equity-based securities, which
include common stocks and those debt securities and preferred stock that are
convertible into common stock. Under normal market conditions, 30% to 70% of
the Fund's total assets will be invested in equity-based securities. Under
normal market conditions, at least 25% of the value of the total assets of
the Fund will be invested in U.S. Government securities and fixed income
senior securities other than convertible securities. The Fund's adviser may
alter the relative portion of the Fund's assets invested in equity-based and
fixed income securities depending on its judgment as to general market and
economic conditions and trends, yields and interest rates and changes in
monetary policies.

Equity-Based Investments. The majority of the Fund's equity-based investments
will be in well-known, established companies with market capitalizations of
at least $500 million which are traded on established securities markets or
over-the-counter. In selecting equity-based securities, the Fund's adviser
adopts an active management style, stressing first fundamental security
selection, with secondary consideration given to factors such as sector
weighting and market timing.

Maturity. The average maturity of fixed income securities in the Fund will be
based primarily upon the adviser's expectations for the future course of
interest rates and the then prevailing price and yield levels in the fixed
income market.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

Miscellaneous. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Balanced Fund based on
estimated expenses for the current fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee . . . . . . . . . . . . . . . . . . . . . . . . 0.75%
12b-1 Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Shareholder Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses<F1> . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Total Fund Operating Expenses<F1> . . . . . . . . . . . . . . . . . . . 1.00%

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares. . . . . . $10 $32 $55 $122

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.61% and 1.36%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
Financial Highlights

Effective January 1, 1998, the Balanced Fund series (the "Predecessor Fund")
of the AVESTA Trust was converted into the Balanced Fund, which was created
to be the successor to the Predecessor Fund. The table set forth below
provides selected per share data and ratios for one Unit of the Predecessor
Fund. This information is supplemented by financial statements and
accompanying notes appearing in the Predecessor Fund's Annual Report to
Shareholders for the fiscal year ended December 31, 1996 and Semi-Annual
Report for the period ended June 30, 1997, which are incorporated by
reference into the SAI. Shareholders may obtain a copy of the Annual Report
and Semi-Annual Report by contacting the Fund. The Financial Highlights for
the periods ended December 31, 1992 through December 31, 1996 have been
audited by Price Waterhouse LLP, whose unqualified report is included in the
Annual Report. Information for periods prior to the fiscal year ended
December 31, 1992 have been examined by other accountants whose opinion was
unqualified.
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------------------------------------------
For the
period
ended
June 30,
1997 1996 1995 1994 1993<F1> 1992<F1>
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period . . . . . . . . . . . . . $ 21.25 $ 17.16 $ 17.56 $ 16.57 $ 15.73
------- ------- ------- ------- -------
Investment income . . . . . . 0.85 0.76 0.63 0.64 0.68
Expenses . . . . . . . . . . . (0.26) (0.23) (0.20) (0.19) (0.18)
Expense reimbursement . . . . 0.04 0.04 0.03 0.02 0.02
------- ------- ------- ------- -------
Net investment income . . . . 0.63 0.57 0.46 0.47 0.52
Net gains or (losses) on
securities (both realized
and unrealized) . . . . . . 1.78 3.52 (0.86) 0.52 0.32
------- ------- ------- ------- -------
Total from investment
operations . . . . . . . . . . 2.41 4.09 (0.40) 0.99 0.84
------- ------- ------- ------- -------
Net asset value, end of period . $ 23.66 $ 21.25 $ 17.16 $ 17.56 $ 16.57
======= ======= ======= ======= =======
Total return . . . . . . . . . . 11.31% 23.83% (2.27%) 6.01% 5.32%
Ratios/supplemental data:
Net assets, end of period
(000) . . . . . . . . . . . . $22,631 $21,471 $22,802 $37,276 $51,092
Ratio of expenses to average
net assets . . . . . . . . . . 1.17% 1.17% 1.17% 1.10% 1.17%
<PAGE>
Ratio of expense
reimbursement to average net
assets . . . . . . . . . . . (0.17%) (0.17%) (0.17%) (0.10%) (0.17%)
------- ------- ------- ------- -------
Ratio of net expenses to
average net assets . . . . . 1.00% 1.00% 1.00% 1.00% 1.00%
======= ======= ======= ======= =======
Ratio of net income to
average net assets . . . . . 2.82% 2.94% 2.69% 2.78% 3.33%
Portfolio turnover rate (fixed
income) . . . . . . . . . . . 30% 98% 98% 84% 187%
Portfolio turnover rate
(equity based) . . . . . . . . 40% 98% 60% 64% 25%
Number of units outstanding
at end of period (000) . . . 957 1,011 1,328 2,123 3,084

For the years ended December 31,
-------------------------------------------------------------
1991<F1> 1990<F1> 1989<F1> 1988<F1><F2>
------------- ------------- ------------- --------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period . . . . . . . . . . . . . $ 12.67 $ 12.50 $ 10.57 $ 10.00
------- ------- ------- -------
Investment income . . . . . . 0.68 0.77 0.77 0.44
Expenses . . . . . . . . . . . (0.18) (0.16) (0.18) (0.28)
Expense reimbursement . . . . 0.04 0.03 0.06 0.21
------- ------- ------- -------
Net investment income . . . . 0.54 0.64 0.65 0.37
Net gains or (losses) on
securities (both realized
and unrealized) . . . . . . 2.52 (0.47) 1.28 0.20
------- ------- ------- -------
Total from investment
operations . . . . . . . . . . 3.06 0.17 1.93 0.57
------- ------- ------- -------
Net asset value, end of period . $ 15.73 $ 12.67 $ 12.50 $ 10.57
======= ======= ======= =======
Total return . . . . . . . . . . 24.16% 1.34% 18.26% 7.68%
Ratios/supplemental data:
Net assets, end of period
(000) . . . . . . . . . . . . $30,542 $17,373 $10,965 $2,890
Ratio of expenses to average
net assets . . . . . . . . . . 1.20% 1.26% 1.49% 3.83%<F3>
Ratio of expense
reimbursement to average net
assets . . . . . . . . . . . (0.20%) (0.26%) (0.49%) (2.83%)<F3>
------- ------- ------- -------
Ratio of net expenses to
average net assets . . . . . 1.00% 1.00% 1.00% 1.00%<F3>
======= ======= ======= =======
<PAGE>
Ratio of net income to
average net assets . . . . . 3.77% 5.27% 5.35% 4.92%<F3>
Portfolio turnover rate (fixed
income) . . . . . . . . . . . 213% 141% 217% 90%
Portfolio turnover rate
(equity based) . . . . . . . . 39% 42% 124% 15%
Number of units outstanding
at end of period (000) . . . 1,942 1,371 877 273

____________________
<FN>

<F1> Amounts for the years 1988-1993 are adjusted to reflect 10:1 reverse
split of the Fund's units on May 7, 1993.
<F2> Commenced investment operations on March 29, 1988.
<F3> Annualized.
</TABLE>
<PAGE>
AVESTA EQUITY INCOME FUND

Fund Objective and Investment Approach

Objective. The Equity Income Fund's objective is to invest in securities that
provide both capital appreciation as well as current income.

Style and Portfolio Composition. Investment emphasis is on equity-based
securities, which include common stocks and those debt securities and
preferred stocks convertible into common stocks. Under normal market
conditions, it is expected that at least 70% of the value of the total assets
of the Fund will be invested in equity-based securities. The Fund may invest
any portion of its assets not invested as described above in other types of
securities, including fixed income securities, money market instruments and
non-income producing equity securities.

Equity-Based Investments. Companies in which the Fund will typically invest
will have one or more of the following characteristics: a sound balance
sheet, consistency of profitability, less price volatility resulting from
market or below-market price/earnings ratios, a consistent dividend record, a
dividend yield in excess of the market and market capitalization in excess of
$500 million. In selecting equity-based securities, the Fund's adviser adopts
an active management style, stressing first fundamental security selection,
with secondary consideration given to factors such as sector weighting and
market timing.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

Miscellaneous. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Equity Income Fund based on
estimated expenses for the current fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares. . . . . . $10 $32 $55 $122

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.37% and 1.12%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
Financial Highlights

Effective January 1, 1998, the Equity Income Fund series (the "Predecessor
Fund") of the AVESTA Trust was converted into the Equity Income Fund, which
was created to be the successor to the Predecessor Fund. The table set forth
below provides selected per share data and ratios for one Unit of the
Predecessor Fund. This information is supplemented by financial statements
and accompanying notes appearing in the Predecessor Fund's Annual Report to
Shareholders for the fiscal year ended December 31, 1996 and Semi-Annual
Report for the period ended June 30, 1997, which are incorporated by
reference into the SAI. Shareholders may obtain a copy of the Annual Report
and Semi-Annual Report by contacting the Fund. The Financial Highlights for
the periods ended December 31, 1992 through December 31, 1996 have been
audited by Price Waterhouse LLP, whose unqualified report is included in the
Annual Report. Information for periods prior to the fiscal year ended
December 31, 1992 have been examined by other accountants whose opinion was
unqualified.

<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------------------------------------------------------
For the
period
ended
June 30,
1997 1996 1995 1994 1993<F1> 1992<F1>
------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period . . . . . . . . . $ 23.93 $ 17.90 $ 18.52 $ 16.49 $ 15.60
------- ------- ------- ------- -------
Investment income . . . 0.69 0.65 0.57 0.52 0.55
Expenses . . . . . . . . (0.27) (0.23) (0.20) (0.20)# (0.19)
Expense reimbursement . 0.01 0.02 0.02 0.03 0.03
------- ------- ------- ------- -------
Net investment income . 0.43 0.44 0.39 0.35 0.39
Net gains or (losses)
on securities (both
realized and
unrealized) . . . . . 3.85 5.59 (1.01) 1.68 0.50
------- ------- ------- ------- -------
Total from investment
operations . . . . . . . 4.28 6.03 (0.62) 2.03 0.89
------- ------- ------- ------- -------
Net asset value, end of
period . . . . . . . . . . $ 28.21 $ 23.93 $ 17.90 $ 18.52 $ 16.49
======= ======= ======= ======= =======
Total return . . . . . . . 17.87% 33.72% (3.37%) 12.34% 5.61%
Ratios/supplemental data:
Net assets, end of
period (000) . . . . . . $63,390 $54,985 $39,296 $41,605 $22,908
<PAGE>
Ratio of expenses to
average net assets . . 1.07% 1.09% 1.12% 1.21% 1.24%
Ratio of expense
reimbursement to
average net assets . . (0.07%) (0.09%) (0.12%) (0.21%) (0.24%)
------- ------- ------- ------- -------
Ratio of net expenses
to average net assets 1.00% 1.00% 1.00% 1.00%<F4> 1.00%
======= ======= ======= ======= =======
Ratio of net income to
average net assets . . 1.67% 2.10% 2.13% 1.98% 2.52%
Portfolio turnover rate 24% 11% 42% 40% 25%
Number of units
outstanding at end of
period (000) . . . . . 2,247 2,297 2,195 2,246 1,389

For the years ended December 31,
----------------------------------------------------------------
1991<F1> 1990<F1> 1989<F1> 1988<F1><F2>
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period . . . . . . . . . . . $ 12.79 $ 13.38 $ 10.93 $ 10.00
------- ------- ------- -------
Investment income . . . . 0.61 0.66 0.59 0.42
Expenses . . . . . . . . . (0.20) (0.18) (0.20) (0.22)
Expense reimbursement . . 0.05 0.06 0.07 0.14
------- ------- ------- -------
Net investment income . . 0.46 0.54 0.46 0.34
Net gains or (losses) on
securities (both
realized and
unrealized) . . . . . . 2.35 (1.13) 1.99 0.59
------- ------- ------- -------
Total from investment
operations . . . . . . . . 2.81 (0.59) 2.45 0.93
------- ------- ------- -------
Net asset value, end of
period . . . . . . . . . . . $ 15.60 $ 12.79 $ 13.38 $ 10.93
======= ======= ======= =======
Total return . . . . . . . . 22.10% (4.40%) 22.50% 12.44%
Ratios/supplemental data:
Net assets, end of period
(000) . . . . . . . . . . $14,092 $ 6,180 $ 4,948 $ 3,782
Ratio of expenses to
average net assets . . . 1.34% 1.46% 1.59% 2.80%<F5>
Ratio of expense
reimbursement to average
net assets . . . . . . . (0.34%) (0.46%) (0.59%) (1.80%)<F5>
------- ------- ------- -------
<PAGE>
Ratio of net expenses to
average net assets . . . 1.00% 1.00% 1.00% 1.00%<F5>
======= ======= ======= =======
Ratio of net income to
average net assets . . . 3.25% 4.26% 3.73% 4.37%<F5>
Portfolio turnover rate . 39% 42% 124% 15%
Number of units
outstanding at end of
period (000) . . . . . . 903 483 370 346

____________________
<FN>

<F1> Amounts for the years 1988-1993 are adjusted to reflect 10:1 reverse
split of the Fund's units on May 7, 1993.
<F2> Commenced investment operations on March 29, 1988.
<F3> Reflects voluntary fee waiver of $17,330 or $0.01 per unit. Without
voluntary fee waiver, expense per unit is $0.21.
<F4> Does not reflect voluntary waiver of management fees of $17,330. Net
of the voluntary management fee waiver, the net expense ratio is 0.95%
of average net assets.
<F5> Annualized.
</TABLE>
<PAGE>
AVESTA CORE EQUITY FUND

Fund Objective and Investment Approach

Objective. The Core Equity Fund's objective is to maximize total investment
return through emphasis on long-term capital appreciation and current income
consistent with reasonable risk.

Style and Portfolio Composition. Under normal market conditions, the Fund
pursues its objective by investing at least 70% of its total assets in a
diversified portfolio of common stocks of well-established companies
domiciled in the U.S. The Fund may also invest in other equity-based
securities, such as debt securities and preferred stocks that are convertible
into common stocks. The Fund may invest any portion of its assets not
invested as described above in other types of securities, including fixed
income securities and money market instruments.

Equity-Based Investments. The Fund targets a broad range of companies which
have one or more of the following characteristics: a sound balance sheet,
strong earnings momentum, high levels of profitability and market
capitalization in excess of $500 million. The adviser anticipates that the
Fund's portfolio will generally reflect exposure to and the level of
volatility in all major sectors of the U.S. economy and the Standard & Poor's
500 Index. In selecting equity-based securities, the Fund's adviser adopts an
active management style, stressing first fundamental security selection, with
secondary consideration given to factors such as sector weighting and market
timing.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

Miscellaneous. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Core Equity Fund based on
estimated expenses for the current fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares. . . . . . $10 $32 $55 $122

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.49% and 1.24%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
Financial Highlights

Effective January 1, 1998, the Core Equity Fund series (the "Predecessor
Fund") of the AVESTA Trust was converted into the Core Equity Fund, which was
created to be the successor to the Predecessor Fund. The table set forth
below provides selected per share data and ratios for one Unit of the
Predecessor Fund. This information is supplemented by financial statements
and accompanying notes appearing in the Predecessor Fund's Annual Report to
Shareholders for the fiscal year ended December 31, 1996 and Semi-Annual
Report for the period ended June 30, 1997, which are incorporated by
reference into the SAI. Shareholders may obtain a copy of the Annual Report
and Semi-Annual Report by contacting the Fund. The Financial Highlights for
the periods presented below have been audited by Price Waterhouse LLP, whose
unqualified report is included in the Annual Report.

<TABLE>
<CAPTION>
For the years ended
December 31,
-----------------------------------------------------------------------------------
For the
period
ended
June 30,
1997 1996 1995 1994 1993<F1>
---------- ------------ ------------------ -------------------- --------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, $ 13.01 $ 10.36 $ 10.80 $ 10.00
beginning of period . . . . ------- ------- -------- --------
Investment income . . . . . 0.30 0.29 0.28 0.21
Expenses . . . . . . . . . (0.16) (0.14) (0.13) (0.20)<F3>
0.02 0.02 0.03 0.13
Expense reimbursement . . . ------- ------- -------- --------
Net investment income . . . 0.16 0.17 0.18 0.14
Net gains or (losses) on
securities (both realized 2.77 2.48 (0.62) 0.66
and unrealized) . . . . . . ------- ------- -------- --------
Total from investment 2.93 2.65 (0.44) 0.80
operations . . . . . . . . ------- ------- -------- --------
$ 15.94 $ 13.01 $ 10.36 $ 10.80
Net asset value, end of period ======= ======= ======== ========
Total return . . . . . . . . . 22.54% 25.53% (4.03%) 7.95%
Ratios/supplemental data:
Net assets, end of period
(000) . . . . . . . . . . . $28,584 $24,367 $ 21,035 $ 11,718
Ratio of expenses to average
net assets . . . . . . . . 1.14% 1.17% 1.27% 2.74%<F2>
Ratio of expense
reimbursement to average net (0.14%) (0.17%) (0.27%) (1.74%)<F2>
assets . . . . . . . . . . ------- ------- -------- --------
Ratio of net expenses to 1.00% 1.00% 1.00% 1.00%<F4>
average net assets . . . . ======= ======= ======== ========
<PAGE>
Ratio of net income to
average net assets . . . . 1.10% 1.44% 1.68% 1.84%<F2>
Portfolio turnover rate . . 29% 133% 129% 83%
Number of units outstanding
at end of period (000) . . 1,793 1,874 2,030 1,086

____________________
<FN>
<F1> Commencement of operations April 1, 1993.
<F2> Annualized.
<F3> Reflects voluntary fee waiver of $6,949 or $0.01 per unit. Without
voluntary fee waiver, expense per unit is $0.21.
<F4> Does not reflect voluntary waiver of management fees of $6,949. Net of
the voluntary management fee waiver, the net expense ratio is 0.79% of
average net assets. This figure is annualized.
</TABLE>
<PAGE>
AVESTA EQUITY GROWTH FUND

Fund Objective and Investment Approach

Objective. The Equity Growth Fund's objective is to provide capital
appreciation. Current income is a secondary objective.

Style and Portfolio Composition. Primary investment emphasis is on equity-
based securities, which include common stocks and those debt securities and
preferred stocks that are convertible into common stocks. Under normal market
conditions, at least 70% of the value of the total assets of the Fund will be
invested in equity-based securities. The Fund may invest any portion of its
assets not invested as described above in other types of securities,
including fixed income securities and money market instruments.

Equity-Based Investments. The Fund's adviser normally seeks to target
companies whose long-term earnings are expected to grow significantly faster
than the earnings of stocks represented in major unmanaged stock indices,
such as the Standard & Poor's 500 Index. The Fund will target companies which
have one or more of the following characteristics: a sound balance sheet,
strong earnings momentum, high levels of profitability and market
capitalization in excess of $500 million. While emphasizing fundamental
security selection, the Fund's growth orientation will result in its
portfolio being overweighted in growth sectors of the economy. In selecting
equity-based securities, the Fund's adviser adopts an active management
style, stressing first fundamental security selection, with secondary
consideration given to factors such as sector weighting and market timing.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

Miscellaneous. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Equity Growth Fund based on
estimated expenses for the current fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares. . . . . . $10 $32 $55 $122

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund
Operating Expenses would be 0.37% and 1.12%, respectively. Chase has
agreed voluntarily to waive fees payable to it and/or reimburse
expenses for a period of at least one year commencing January 1, 1998
to the extent necessary to prevent Total Fund Operating Expenses for
such period from exceeding the amount in the table.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
Financial Highlights

Effective January 1, 1998, the Equity Growth Fund series (the "Predecessor
Fund") of the AVESTA Trust was converted into the Equity Growth Fund, which
was created to be the successor to the Predecessor Fund. The table set forth
below provides selected per share data and ratios for one Unit of the
Predecessor Fund. This information is supplemented by financial statements
and accompanying notes appearing in the Predecessor Fund's Annual Report to
Shareholders for the fiscal year ended December 31, 1996 and Semi-Annual
Report for the period ended June 30, 1997, which are incorporated by
reference into the SAI. Shareholders may obtain a copy of the Annual Report
and Semi-Annual Report by contacting the Fund. The Financial Highlights for
the periods ended December 31, 1992 through December 31, 1996 have been
audited by Price Waterhouse LLP, whose unqualified report is included in the
Annual Report. Information for periods prior to the fiscal year ended
December 31, 1992 have been examined by other accountants whose opinion was
unqualified.

<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------------------------------------------
For the
period
ended
June 30,
1997 1996 1995 1994 1993<F1> 1992<F1>
--------- -------------- ------------- ------------- -------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period . . . . . . . . . . . $ 23.20 $ 18.44 $ 18.61 $ 18.16 $ 17.06
------- ------- ------- ------- -------
Investment income . . . . 0.35 0.38 0.38 0.38 0.36
Expenses . . . . . . . . . (0.27) (0.23) (0.21) (0.21)<F3> (0.21)
Expense reimbursement . . 0.02 0.02 0.03 0.03 0.04
------- ------- ------- ------- -------
Net investment income . . 0.10 0.17 0.20 0.20 0.19
Net gains or (losses) on
securities (both
realized and unrealized) 4.65 4.59 (0.37) 0.25 0.91
------- ------- ------- ------- -------
Total from investment
operations . . . . . . . . 4.75 4.76 (0.17) 0.45 1.10
------- ------- ------- ------- -------
Net asset value,
end of period $ 27.95 $ 23.20 $ 18.44 $ 18.61 $ 18.16
======= ======= ======= ======= =======
Total return . . . . . . . . 20.52% 25.78% (0.90%) 2.48% 6.43%
Ratios/supplemental data:
Net assets, end of period
(000) . . . . . . . . . . $57,328 $45,578 $36,683 $30,648 $25,514
Ratio of expenses to
average net assets . . . 1.08% 1.10% 1.17% 1.21% 1.23%
<PAGE>
Ratio of expense
reimbursement to average
net assets . . . . . . . (0.08%) (0.10%) (0.17%) (0.21%) (0.23%)
------- ------- ------- ------- -------
Ratio of net expenses to
average net assets . . . 1.00% 1.00% 1.00% 1.00%<F4> 1.00%
======= ======= ======= ======= =======
Ratio of net income to
average net assets . . . 0.41% 0.78% 1.07% 1.12% 1.16%
Portfolio turnover rate . 62% 99% 116% 97% 99%
Number of units
outstanding at end of
period (000) . . . . . . 2,051 1,965 1,989 1,646 1,405

For the years ended December 31,
----------------------------------------------------------------------
1991<F1> 1990<F1> 1989<F1> 1988<F1><F2>
-------------- -------------- -------------- --------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period . . . $ 12.96 $ 13.15 $ 10.48 $ 10.00
------- ------- ------- -------
Investment income . . 0.42 0.39 0.49 0.21
Expenses . . . . . . . (0.21) (0.20) (0.24) (0.22)
Expense reimbursement 0.05 0.07 0.11 0.15
------- ------- ------- -------
Net investment income 0.26 0.26 0.36 0.14
Net gains or (losses)
on securities (both
realized and
unrealized) . . . . 3.84 (0.45) 2.31 0.34
------- ------- ------- -------
Total from investment
operations . . . . . . 4.10 (0.19) 2.67 0.48
------- ------- ------- -------
Net asset value, end of
period . . . . . . . . . $ 17.06 $ 12.96 $ 13.15 $ 10.48
======= ======= ======= =======
Total return . . . . . . 31.69% (1.45%) 25.73% 6.15%
Ratios/supplemental data:
Net assets, end of
period (000) . . . . . $16,716 $ 5,357 $ 2,839 $ 2,576
Ratio of expenses to
average net assets . 1.32% 1.56% 1.91% 2.92%<F5>
Ratio of expense
reimbursement to
average net assets . (0.32%) (0.56%) (0.91%) (1.92%)<F5>
------- ------- ------- -------
Ratio of net expenses
to average net
assets . . . . . . . 1.00% 1.00% 1.00% 1.00%<F5>
======= ======= ======= =======
<PAGE>
Ratio of net income
to average net
assets . . . . . . . 1.73% 2.03% 2.95% 1.84%<F5>
Portfolio turnover
rate . . . . . . . . . 135% 156% 235% 80%
Number of units
outstanding at end
of period (000) . . 980 413 216 246

____________________
<FN>

<F1> Amounts for the years 1988-1993 are adjusted to reflect 10:1 reverse
split of the Fund's units on May 7, 1993.
<F2> Commenced investment operations on March 29, 1988.
<F3> Reflects voluntary fee waiver of $11,479 or $0.01 per unit. Without
voluntary fee waiver, expense per unit is $0.22.
<F4> Does not reflect voluntary waiver of management fees of $11,479. Net
of the voluntary management fee waiver, the net expense ratio is 0.96%
of average net assets.
<F5> Annualized.
</TABLE>
<PAGE>
AVESTA MID CAP GROWTH FUND

Fund Objective and Investment Approach

Objective. The Mid Cap Growth Fund's objective is to provide long-term
capital growth. Current income, if any, is a consideration incidental to the
Fund's objective of long-term capital growth.

Style and Portfolio Composition. The Fund will invest primarily in a broad
portfolio of common stocks. Under normal market conditions, the Fund will
invest at least 70% of its total assets in common stocks of mid cap
companies. The Fund may invest any portion of its assets not invested as
described above in other types of securities, including equity securities of
small and large cap companies, fixed income securities and money market
instruments.

Equity-Based Investments. The Fund will seek to invest primarily in stocks of
companies with market capitalizations of $750 million to $4 billion. The Fund
will target companies which have one or more of the following
characteristics: a sound balance sheet, strong earnings momentum and high
levels of profitability. In selecting equity-based securities, the Fund's
adviser adopts an active management style, stressing first fundamental
security selection, with secondary consideration given to factors such as
sector weighting and market timing.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

Miscellaneous. Investments in mid cap companies may be more volatile than
investments in companies with greater capitalization, as described under
"Risk Factors" below. The Fund is classified as a "diversified" fund under
federal securities law.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Mid Cap Growth Fund based
on estimated expenses for the current fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares. . . . . . $10 $32 $55 $122

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.__% and 1.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Objective. The Small Cap Fund's objective is to provide capital appreciation.
Although the Fund, in seeking its objective, may receive current income from
dividends and interest, income is only an incidental consideration of the
Fund.

Style and Portfolio Composition. The Fund invests primarily (under normal
market conditions, at least 70% of the value of the Fund's total assets) in
common stocks of U.S. small cap companies. The Fund may also invest in other
equity-based securities, which include debt securities and preferred stocks
that are convertible into common stocks. The Fund may invest any portion of
its assets not invested as described above in other types of securities,
including equity securities of mid and large cap companies, fixed income
securities and money market instruments.

Equity-Based Investments. The Fund will seek to invest primarily in stocks of
companies with market capitalizations of less than $1 billion. The Fund will
seek to identify small cap companies that possess one or more of a variety of
characteristics, including high quality management, a leading or dominant
market position in a major product line, new or innovative products, services
or processes, a sound financial position and a relatively high rate of return
on invested capital so that future growth can be financed from internal
sources. The Fund may also invest in companies that offer the possibility of
accelerating earnings growth because of management changes or structural
changes in the economy. In selecting equity-based securities, the Fund's
adviser adopts an active management style, stressing first fundamental
security selection, with secondary consideration given to factors such as
sector weighting and market timing.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

Miscellaneous. Investments in smaller companies may be more volatile than
investments in companies with greater capitalization, as described under
"Risk Factors" below. The Fund is classified as a "diversified" fund under
federal securities laws.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Small Cap Fund based on
estimated expenses for the current fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares. . . . . . $10 $32 $55 $122

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.54% and 1.29%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
Financial Highlights

Effective January 1, 1998, the Small Capitalization Fund series (the
"Predecessor Fund") of the AVESTA Trust was converted into the Small
Capitalization Fund, which was created to be the successor to the Predecessor
Fund. The table set forth below provides selected per share data and ratios
for one Unit of the Predecessor Fund. This information is supplemented by
financial statements and accompanying notes appearing in the Predecessor
Fund's Annual Report to Shareholders for the fiscal year ended December 31,
1996 and Semi-Annual Report for the period ended June 30, 1997, which are
incorporated by reference into the SAI. Shareholders may obtain a copy of the
Annual Report and Semi-Annual Report by contacting the Fund. The Financial
Highlights for the periods presented below have been audited by Price
Waterhouse LLP, whose unqualified report is included in the Annual Report.

<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------------------------------------
For the
period ended
June 30, 1997 1996 1995 1994 1993<F1>
-------------- -------------- -------------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period . . . $ 13.41 $ 10.23 $ 10.89 $ 10.00
-------- ------- -------- -------
Investment income . . . . 0.16 0.17 0.16 0.09
Expenses . . . . . . . . . (0.18)<F3> (0.16)<F3> (0.15)<F3> (0.17)<F5>
Expense reimbursement . . 0.03 0.04 0.05 0.10
------- ------- ------- -------
Net investment income . . 0.01 0.05 0.06 0.02
Net gains or (losses) on
securities (both realized
and unrealized) . . . . . 4.13 3.13 (0.72) 0.87
------- ------- ------- -------
Total from investment
operations . . . . . . . . 4.14 3.18 (0.66) 0.89
------- ------- ------- -------
Net asset value, end of
period . . . . . . . . . . . $ 17.55 $ 13.41 $ 10.23 $ 10.89
======= ======= ======= =======
Total return . . . . . . . . 30.88% 31.14% (6.12%) 8.94%
Ratios/supplemental data:
Net assets, end of period
(000) . . . . . . . . . . $20,750 $12,848 $ 9,267 $ 9,838
Ratio of expenses to
average net assets . . . . 1.22% 1.35% 1.45% 2.46%<F4>
Ratio of expense
reimbursement to average
net assets . . . . . . . . (0.22%) (0.35%) (0.45%) (1.31%)<F4>
-------- -------- -------- -------
Ratio of net expenses to
average net assets . . . . 1.00% 1.00% 1.00%<F2> 1.15%<F6>
======== ======== ======== ========
<PAGE>
Ratio of net income to
average net assets . . . . 0.04% 0.46% 0.55% 0.28%<F4>
Portfolio turnover rate . . 68% 89% 120% 161%
Number of units
outstanding at end of
period (000) . . . . . . . 1,182 958 906 903

____________________
<FN>

<F1> Commenced investment operations on April 1, 1993.
<F2> Reflects management fee reduction of 0.15% or $24,219, $15,584 and
$9,153 for the years ended December 31, 1996, 1995 and 1994
respectively. For the year ended December 31, 1994 the actual net
expense ratio for the year was 1.06% of average net assets as the fee
reduction went into effect on 5/2/94.
<F3> Reflects management fee reduction of $24,219 or $0.02 per unit,
$15,584 or $0.02 per unit and $9,153 or $0.01 per unit for the years
ended December 31, 1996, 1995 and 1994 respectively. Without
management fee reduction, expense per unit is $0.19, $0.17 and $0.16
for the years ended December 31, 1996, 1995 and 1994 respectively.
<F4> Annualized.
<F5> Reflects voluntary fee waiver of $14,349 or $0.02 per unit. Without
voluntary fee waiver, expense per unit is $0.19.
<F6> Does not reflect voluntary waiver of management fees of $14,349. Net
of the voluntary management fee waiver, the net expense ratio is 0.82%
of average net assets. This figure is annualized.
</TABLE>
<PAGE>
AVESTA INTERNATIONAL EQUITY FUND

Fund Objective and Investment Approach

Objective. The International Equity Fund's objective is to provide total
return from long-term capital growth and income.

Style and Portfolio Composition. The Fund will invest principally (under
normal market conditions, at least 65% of its total assets) in a broad
portfolio of marketable equity securities of established foreign companies
organized in countries other than the U.S. and foreign subsidiaries of U.S.
companies participating in foreign economies. These will include common
stocks, preferred stocks, securities convertible into common stocks, and
warrants to purchase common stocks.

The Fund's adviser seeks to identify those countries and industries where
economic and political factors, including currency movements, are likely to
produce above-average growth rates. The Fund's adviser attempts to identify
those companies in such countries and industries that are best positioned and
managed to take advantage of these economic and political factors. The Fund
will seek to diversify investments broadly among issuers in various countries
and, normally, the Fund's portfolio will include securities of issuers
located in at least three different countries other than the U.S. The Fund
may invest a substantial portion of its assets in one or more of such
countries.

The Fund intends to invest in companies based in (or governments located in)
the Far East (including Japan, Hong Kong, Singapore and Malaysia), Western
Europe (including the United Kingdom, Germany, Netherlands, France,
Switzerland, Italy and Spain), Scandinavia, Australia, Canada and such other
areas and countries as the Fund's adviser may determine from time to time.
Because the Fund invests a large portion of its assets in countries
comprising the Morgan Stanley Capital International Europe, Australia and Far
East Index, which is heavily weighed towards companies based in Japan and the
United Kingdom, a substantial portion of the Fund's assets may be invested in
companies based in Japan, the United Kingdom and/or other countries
represented in the Index. However, investments may be made from time to time
in companies in, or governments of, developing countries.

The Fund's adviser will allocate investments among securities denominated in
the U.S. dollar and currencies of foreign countries. The adviser may adjust
the Fund's exposure to each currency based on its perception of the most
favorable markets and issuers. The percentage of the Fund's assets invested
in securities of a particular country or denominated in a particular currency
will vary in accordance with the adviser's assessment of the relative yield
and appreciation potential of such securities and the current and anticipated
relationship of a country's currency to the U.S. dollar. Fundamental economic
strength, earnings growth, quality of management, industry growth, credit
quality and interest rate trends are some of the principal factors which may
be considered by the Fund's adviser in determining whether to increase or
decrease the emphasis placed upon a particular type of security, industry
sector, country or currency. Securities purchased by the Fund may be
<PAGE>
denominated in a currency other than that of the country in which the issuer
is domiciled.

Primary emphasis will be placed on equity securities and securities with
equity features. However, the Fund may invest in any type of debt security
including, but not limited to, other convertible securities, bonds, notes and
other debt securities of foreign governmental and private issuers, and
various derivative securities.

The Fund will not invest more than 25% of its net assets in debt securities
denominated in a single currency other than the U.S. dollar, nor will it
invest more than 25% of its net assets in debt securities issued by a single
foreign government or supranational organization.

Equity-Based Investments. The Fund may invest in securities of companies of
various sizes, including smaller companies whose securities may be more
volatile and less liquid than securities of larger companies. With respect to
certain countries in which capital markets are either less developed or not
easily accessed, investments by the Fund may be made through investments in
closed-end investment companies that in turn are authorized to invest in the
securities of such countries.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

Miscellaneous. Investments in foreign securities involve a higher degree of
risk than investments in U.S. securities, as described under "Common
Investment Policies--Other Investment Practices--Foreign Securities" and
"Risk Factors" below. The Fund is classified as a "diversified" fund under
federal securities law.
<PAGE>
Expense Summary

Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the International Equity Fund
based on estimated expenses for the current fiscal year. The example shows
the cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee . . . . . . . . . . . . . . . . . . . . . . . . 1.00%
12b-1 Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Shareholder Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses<F1> . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Total Fund Operating Expenses<F1> . . . . . . . . . . . . . . . . . . . 1.25%

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years
------ -------
Institutional Shares. . . . . . . . . . $13 $40

[FN]
<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund
Operating Expenses would be 0.__% and 1.__%, respectively. Chase has
agreed voluntarily to waive fees payable to it and/or reimburse
expenses for a period of at least one year commencing January 1, 1998
to the extent necessary to prevent Total Fund Operating Expenses for
such period from exceeding the amount in the table.

Although the Money Market Fund and Tax Free Money Market Fund each seek to be
fully invested, at times they may hold uninvested cash reserves, which would
adversely affect their yield.

Each Fund may invest any portion of its assets not invested as described
above in high quality money market instruments and repurchase agreements. For
temporary defensive purposes, a Fund may invest without limitation in these
instruments. At times when the advisers of the Balanced Fund, Equity Income
Fund, Core Equity Fund, Equity Growth Fund, Mid Cap Growth Fund, Small Cap
Fund, or International Equity Fund (the "Equity Funds") deem it advisable to
limit the Fund's exposure to the equity markets, each Equity Fund may invest
without limitation in investment grade fixed income securities (exclusive of
any investments in money market instruments). To the extent a Fund departs
from its investment policies during temporary defensive periods, its
investment objective may not be achieved.

Fixed income securities in each Fund's portfolio may include, to the extent
permitted by the Fund's investment policies, bonds, notes, mortgage-related
securities, asset-backed securities, government and government agency and
instrumentality obligations, zero coupon securities, convertible securities
and money market instruments, as discussed below.

In determining the credit quality of a fixed income security, each Fund's
adviser will consider the issuer's financial strength, including its historic
and current financial condition, its historic and projected earnings; the
issuer's market position; and other factors relevant to an analysis of a
particular issuer, as determined by the adviser.

In making investment decisions for the Tax Free Income Fund, the New York Tax
Free Income Fund, the Short-Intermediate Term Fund, the U.S. Government
Securities Fund, the Intermediate Term Bond Fund and the Income Fund (the
"Fixed Income Funds"), each such Fund's adviser considers many factors in
addition to current yield, including preservation of capital, maturity and
yield to maturity. Each Fixed Income Fund's adviser will adjust such Fund's
investments in particular securities or types of securities based upon its
appraisal of changing economic conditions and trends. Each Fixed Income
Fund's adviser may sell one security and purchase another security of
comparable quality and maturity in order to take advantage of what it
believes to be short-term differentials in market values or yield
disparities.

The maturity of securities with put features will be measured based on the
next put date, and the maturity of mortgage-backed and asset-backed
securities will be based on their weighted average lives.

In lieu of investing directly, each Fund is authorized to seek to achieve its
objective by investing all of its investable assets in an investment company
having substantially the same investment objective and policies as the
applicable Fund. See "Unique Characteristics of Master/Feeder Structure."
<PAGE>
The Tax Free Money Market Fund, Tax Free Income Fund and New York Tax Free
Income Fund (the "Tax Free Funds") are classified as "non-diversified" funds
under federal securities laws. These Funds' assets may be more concentrated
in the securities of any single issuer or group of issuers than if the Funds
were diversified. The other Funds are classified as "diversified" funds under
federal securities laws. Upon the adoption of certain changes to the federal
securities laws which are expected to be implemented during 1998, the Tax
Free Money Market Fund will be required to be a "diversified" fund.

No Fund is intended to be a complete investment program, and there is no
assurance that any Fund will achieve its investment objective.

OTHER INVESTMENT PRACTICES

The Funds may also engage in the following investment practices when
consistent with their overall objective and policies. These practices, and
certain associated risks, are more fully described in the SAI.

Foreign Securities. The Tax Free Funds may not invest in foreign securities.
The International Equity Fund may invest without limitation in foreign
securities, including Depositary Receipts, which are described below. The
Money Market Fund may invest up to 30% of its total assets in securities of
foreign governments and supranational agencies. The Money Market Fund will
limit its investments in foreign government obligations to commercial paper
and other short-term notes issued or guaranteed by the governments of Western
Europe, Australia, New Zealand, Japan and Canada. Each other Fund may invest
up to 30% of its total assets in foreign securities, including Depositary
Receipts.

Since foreign securities are normally denominated and traded in foreign
currencies, the values of a Fund's foreign investments may be influenced by
currency exchange rates and exchange control regulations. There may be less
information publicly available about foreign issuers than U.S. issuers, and
they are not generally subject to accounting, auditing and financial
reporting standards and practices comparable to those in the U.S. Foreign
securities may be less liquid and more volatile than comparable U.S.
securities. Foreign settlement procedures and trade regulations may involve
certain expenses and risks. One risk would be the delay in payment or
delivery of securities or in the recovery of a Fund's assets held abroad. It
is possible that nationalization or expropriation of assets, imposition of
currency exchange controls, taxation by withholding Fund assets, political or
financial instability and diplomatic developments could affect the value of a
Fund's investments in certain foreign countries. Foreign laws may restrict
the ability to invest in certain countries or issuers and special tax
considerations will apply to foreign securities. The risks can increase if a
Fund invests in emerging market securities.

Depositary Receipts. Each of the Equity Funds, the Intermediate Term Bond
Fund and the Income Fund may invest its assets in securities of foreign
issuers in the form of American Depositary Receipts, European Depositary
Receipts, Global Depositary Receipts or other similar securities representing
securities of foreign issuers (collectively, "Depositary Receipts"). Each
<PAGE>
Fund treats Depositary Receipts as interests in the underlying securities for
purposes of its investment policies. Each Fund will limit its investment in
Depositary Receipts not sponsored by the issuer of the underlying securities
to no more than 5% of the value of its net assets (at the time of
investment).

Supranational and ECU Obligations. Each Fund other than the Tax Free Funds
may invest in debt securities issued by supranational organizations, which
include organizations such as The World Bank, the European Community, the
European Coal and Steel Community and the Asian Development Bank. Obligations
of supranational agencies are supported by subscribed, but unpaid,
commitments of member countries. There is no assurance that these commitments
will be undertaken or complied with in the future, and foreign and
supranational securities are subject to certain risks associated with foreign
investing. Each such Fund may also invest in securities denominated in the
ECU, which is a "basket" consisting of specified amounts of the currencies of
certain member states of the European Community. These securities are
typically issued by European governments and supranational organizations.

U.S. Government Securities. Each Fund may invest in U.S. Treasury
obligations, which are bills, notes and bonds backed by the full faith and
credit of the U.S. Government as to payment of principal and interest which
generally differ only in their interest rates and maturities. Each Fund also
may invest in securities issued or guaranteed by U.S. Government agencies and
instrumentalities including obligations that are supported by the full faith
and credit of the U.S. Treasury, the limited authority of the issuer or
guarantor to borrow from the U.S. Treasury, or only the credit of the issuer
or guarantor. In the case of obligations not backed by the full faith and
credit of the U.S. Treasury, the agency issuing or guaranteeing the
obligation is principally responsible for ultimate repayment.

Money Market Instruments. Each Fund may invest in cash or high-quality,
short-term money market instruments. These may include U.S. Government
securities, commercial paper of domestic and foreign issuers and obligations
of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.

Repurchase Agreements, Securities Loans and Forward and Stand-by Commitments.
Each Fund may enter into agreements to purchase and resell securities at an
agreed-upon price and time. Each Fund also has the ability to lend portfolio
securities in an amount equal to not more than 30% of its total assets to
generate additional income. These transactions must be fully collateralized
at all times. Each Fund may purchase securities for delivery at a future
date, which may increase its overall investment exposure and involves a risk
of loss if the value of the securities declines prior to the settlement date.
Each Fund may enter into put transactions, including those sometimes referred
to as stand-by commitments, with respect to securities in its portfolio. In
these transactions, a Fund would acquire the right to sell a security at an
agreed upon price within a specified period prior to its maturity date. A put
transaction will increase the cost of the underlying security and
consequently reduce the available yield. Each of these transactions involve
some risk to a Fund if the other party should default on its obligation and
<PAGE>
the Fund is delayed or prevented from recovering the collateral or completing
the transaction.

Convertible Securities. Each Fund other than the Money Market Fund and the
Tax Free Funds may invest in convertible securities, which are securities
generally offering fixed interest or dividend yields which may be converted
either at a stated price or stated rate for common or preferred stock.
Although to a lesser extent than with fixed income securities generally, the
market value of convertible securities tends to decline as interest rates
increase, and increase as interest rates decline. Because of the conversion
feature, the market value of convertible securities also tends to vary with
fluctuations in the market value of the underlying common or preferred stock.

Other Investment Companies. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, each Fund may invest up to 10% of its
total assets in shares of other registered investment companies when
consistent with its investment objective and policies, subject to applicable
regulatory limitations. Additional fees may be charged by such other
investment companies.

Zero Coupon Securities, Payment-in-Kind Obligations and Stripped Obligations.
The Short-Intermediate Term Fund and U.S. Government Securities Fund may
invest without limitation in zero coupon securities issued by governmental
issuers and each other Fund other than the Money Market Fund and the Tax Free
Money Market Fund may invest up to 25% of its total assets in zero coupon
securities issued by governmental and private issuers. Zero coupon securities
are debt securities that do not pay regular interest payments, and instead
are sold at substantial discounts from their value at maturity. Each Fund
other than the Money Market Fund and Tax Free Money Market Fund may invest in
payment-in-kind obligations. Payment-in-kind obligations are obligations on
which the interest is payable in additional securities rather than cash. The
Short-Intermediate Term Fund and the U.S. Government Securities Fund may
invest without limitation and each other Fund other than the Money Market
Fund may invest up to 25% of its total assets in stripped obligations (i.e.,
separately traded principal and interest components of securities) where the
underlying obligations are backed by the full faith and credit of the U.S.
Government, including instruments known as "STRIPS." The value of these
instruments tends to fluctuate more in response to changes in interest rates
<PAGE>
than the value of ordinary interest-paying debt securities with similar
maturities. The risk is greater when the period to maturity is longer.

Indexed Investments. The International Equity Fund may invest in instruments
which are indexed to certain specific foreign currency exchange rates. The
terms of such instruments may provide that their principal amounts or just
their coupon interest rates are adjusted upwards or downwards (but not below
zero) at maturity or on established coupon payment dates to reflect changes
in the exchange rate between two or more currencies while the obligation is
outstanding. Such indexed investments entail the risk of loss of principal
and/or interest payments from currency movements in addition to principal
risk, but offer the potential for realizing gains as a result of changes in
foreign currency exchange rates.

Real Estate Investment Trusts. Equity investments may include shares of real
estate investment trusts ("REITs"). REITs are pooled investment vehicles
which invest primarily in income-producing real estate ("equity trust") or
real estate related loans or interests ("mortgage trusts"). The value of
equity trusts will depend upon the value of the underlying properties, and
the value of the mortgage trusts will be sensitive to the value of the
underlying loans or interests. The value of REITs may decline when interest
rates rise.

Inverse Floaters and Interest Rate Caps. Each of the Fixed Income Funds may
invest in inverse floaters and in securities with interest rate caps. Inverse
floaters are instruments whose interest rates bear an inverse relationship to
the interest rate on another security or the value of an index. The market
value of an inverse floater will vary inversely with changes in market
interest rates, and will be more volatile in response to interest rates
changes than that of a fixed rate obligation. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, known as the cap rate,
<PAGE>
which is tied to a specific index. These financial products will be more
volatile in price than securities which do not include such a structure. No
Fund has any present intention to invest in inverse floaters or securities
with interest rate caps.

Mortgage-Related Securities. Each Equity Fund may invest in investment grade
mortgage-related securities. The Intermediate Term Bond Fund and Income Fund
each may invest up to two-thirds of its total assets in investment grade
mortgage-related and asset-backed securities. The Short-Intermediate Term
Fund and U.S. Government Securities Fund may invest without limitation in
mortgage-related U.S. Government Securities. Mortgage pass-through securities
are securities representing interests in "pools" of mortgages in which
payments of both interest and principal on the securities are made monthly,
in effect "passing through" monthly payments made by the individual borrowers
on the residential mortgage loans which underlie the securities. Early
repayment of principal on mortgage pass-through securities held by a Fund
(due to prepayments of principal on the underlying mortgage loans) may result
in a lower rate of return when the Fund reinvests such principal. In
addition, as with callable fixed income securities generally, if a Fund
purchased the securities at a premium, sustained early repayment would limit
the value of the premium. Like other fixed income securities, when interest
rates rise the value of a mortgage-related security generally will decline;
however, when interest rates decline, the value of mortgage-related
securities with prepayment features may not increase as much as other fixed
income, fixed maturity securities which have no prepayment or call features.

Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Certain mortgage pass-through securities created by nongovernmental issuers
may be supported by various forms of insurance or guarantees, while other
such securities may be backed only by the underlying mortgage collateral.

Each Fund other than the Money Market Fund and the Tax Free Funds may also
invest in investment grade Collateralized Mortgage Obligations ("CMOs"),
which are hybrid instruments with characteristics of both mortgage-backed
bonds and mortgage pass-through securities. Similar to a bond, interest and
prepaid principal on a CMO are paid, in most cases, monthly. CMOs may be
collateralized by whole residential or commercial mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by the U.S. Government or its agencies or instrumentalities. CMOs
are structured into multiple classes, with each class having a different
expected average life and/or stated maturity. Monthly payments of principal,
including prepayments, are allocated to different classes in accordance with
the terms of the instruments, and changes in prepayment rates or assumptions
may significantly affect the expected average life and value of a particular
class.

Each Fund other than the Money Market Fund and the Tax Free Funds may invest
in principal-only or interest-only stripped mortgage-backed securities.
<PAGE>
Stripped mortgage-backed securities have greater volatility than other types
of mortgage-related securities. Stripped mortgage-backed securities which are
purchased at a substantial premium or discount generally are extremely
sensitive not only to changes in prevailing interest rates but also to the
rate of principal payments (including prepayments) on the related underlying
mortgage assets, and a rapid rate of principal payments may have a material
adverse effect on such securities' yield to maturity. In addition, stripped
mortgage securities may be illiquid.

The Funds expect that governmental, government-related or private entities
may create other mortgage-related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, a Fund may consider making investments in such securities.

Dollar Rolls. Each Fund other than the Money Market Fund and the Tax Free
Funds may enter into mortgage "dollar rolls" in which a Fund sells mortgage--
backed securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar (same type, coupon and
maturity) securities on a specified future date. These transactions involve
some risk to a Fund if the other party should default on its obligation and
the Fund is delayed or prevented from completing the transaction.

Asset-Backed Securities. Each Fund other than the Short-Intermediate Term
Fund, the U.S. Government Securities Fund and the Tax Free Funds may invest
in investment grade asset-backed securities, which represent a participation
in, or are secured by and payable from, a stream of payments generated by
particular assets, most often a pool of assets similar to one another, such
as motor vehicle receivables or credit card receivables.

Derivatives and Related Instruments. Each Fund other than the Money Market
Fund and the Tax Free Money Market Fund may invest its assets in derivative
and related instruments to hedge various market risks or to increase the
Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover a Fund's obligations. Each such Fund may
(i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward currency and
interest rate contracts; and (iv) purchase and sell structured products,
which are instruments designed to restructure or reflect the characteristics
of certain other investments.

There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which a
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of a Fund to successfully utilize
these instruments may depend in part upon the ability of its adviser to
forecast these factors correctly. Inaccurate forecasts could expose a Fund to
a risk of loss. There can be no guarantee that there will be a correlation
between price movements in a hedging instrument and in the portfolio assets
being hedged. No Fund is required to use any hedging strategies. Hedging
<PAGE>
strategies, while reducing risk of loss, can also reduce the opportunity for
gain. Derivatives transactions not involving hedging may have speculative
characteristics, involve leverage and result in losses that may exceed the
original investment of a Fund. There can be no assurance that a liquid market
will exist at a time when a Fund seeks to close out a derivatives position.
Activities of large traders in the futures and securities markets involving
arbitrage, "program trading," and other investment strategies may cause price
distortions in derivatives markets. In certain instances, particularly those
involving over-the-counter transactions or forward contracts, there is a
greater potential that a counterparty or broker may default. In the event of
a default, a Fund may experience a loss. For additional information
concerning derivatives, related instruments and the associated risks, see the
SAI.

Portfolio Turnover. It is intended that the Money Market Fund and the Tax
Free Money Market Fund will be fully managed by buying and selling
securities, as well as holding securities to maturity. The frequency of each
Fund's buy and sell transactions will vary from year to year. A Fund's
investment policies may lead to frequent changes in investments, particularly
in periods of rapidly changing market conditions. High portfolio turnover
rates would generally result in higher transaction costs, including brokerage
commissions or dealer mark-ups.

ADDITIONAL INVESTMENT POLICIES OF THE MONEY MARKET FUND

Bank Obligations. Bank obligations include certificates of deposit, time
deposits and bankers' acceptances issued or guaranteed by U.S. banks
(including their foreign branches) and foreign banks (including their U.S.
branches). These obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligation
or by government regulation. Foreign bank obligations involve certain risks
associated with foreign investing.

Custodial Receipts. The Fund may acquire securities in the form of custodial
receipts that evidence ownership of future interest payments, principal
payments or both on certain U.S. Treasury notes or bonds in connection with
programs sponsored by banks and brokerage firms. These are not deemed U.S.
Government securities. These notes and bonds are held in custody by a bank on
behalf of the owners of the receipts.

ADDITIONAL INVESTMENT POLICIES OF THE TAX FREE FUNDS

The following provides additional information regarding the permitted
investments of the Tax Free Money Market Fund, the Tax Free Income Fund and
the New York Tax Free Income Fund. These investments, and certain associated
risks are more fully described in the SAI.
<PAGE>
Municipal Obligations. Municipal Obligations are issued to obtain funds for
various public purposes, such as the construction of public facilities, the
payment of general operating expenses or the refunding of outstanding debts.
They may also be issued to finance various private activities, including the
lending of funds to public or private institutions for the construction of
housing, educational or medical facilities, and may include certain types of
industrial development bonds, private activity bonds or notes issued by
public authorities to finance privately owned or operated facilities, or to
fund short-term cash requirements. Short-term Municipal Obligations may be
issued as interim financing in anticipation of tax collections, revenue
receipts or bond sales to finance various public purposes. The Municipal
Obligations in which the Tax Free Money Market Fund invests may consist of
municipal notes, municipal commercial paper and municipal bonds maturing or
deemed to mature in 397 days or less.

The two principal classifications of Municipal Obligations are general
obligation and revenue obligation securities. General obligation securities
involve a pledge of the credit of an issuer possessing taxing power and are
payable from the issuer's general unrestricted revenues. Their payment may
depend on an appropriation by the issuer's legislative body. The
characteristics and methods of enforcement of general obligation securities
vary according to the law applicable to the particular issuer. Revenue
obligation securities are payable only from revenues derived from a
particular facility or class of facilities, or a specific revenue source, and
generally are not payable from the unrestricted revenues of the issuer.
Industrial development bonds and private activity bonds are in most cases
revenue obligation securities, the credit quality of which is directly
related to the private user of the facilities.

From time to time, each Fund may invest more than 25% of the value of its
total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of non-governmental issuers such as hospitals or airports, provided,
however, that a Fund may not invest more than 25% of the value of its total
assets in such bonds if the issuers are in the same industry.

Municipal Lease Obligations. Each Tax Free Fund may invest in municipal lease
obligations. These are participations in a lease obligation or installment
purchase contract obligation and typically provide a premium interest rate.
Municipal lease obligations do not constitute general obligations of the
municipality. Certain municipal lease obligations in which the Funds may
invest contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment payments in
future years unless money is later appropriated for such purposes. Although
"non-appropriation" lease obligations are secured by the leased property,
disposition of the property in the event of foreclosure might prove
difficult. Certain investments in municipal lease obligations may be
illiquid. Each Fund's adviser will evaluate the liquidity of municipal lease
obligations in accordance with procedures established by the Funds.
<PAGE>
LIMITING INVESTMENT RISKS

Specific investment restrictions help the Funds limit investment risks for
their shareholders. These restrictions prohibit each Fund from (a) investing
more than 15% of its net assets (10% in the case of the Money Market Fund and
the Tax Free Money Market Fund) in illiquid securities (which include
securities restricted as to resale unless they are determined to be readily
marketable in accordance with procedures established by the Board of
Trustees) or (b) investing more than 25% of its total assets in any one
industry (excluding (i) U.S. Government obligations, (ii) with respect to the
Money Market Fund and Tax Free Money Market Fund, bank obligations, and (iii)
with respect to the Tax Free Funds, obligations of states, cities,
municipalities or other public authorities, as well as municipal obligations
secured by bank letters of credit or guarantees). Each "diversified" Fund may
not, with respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of any one issuer (other than U.S. Government
obligations) or hold more than 10% of the voting securities of any issuer. In
addition, in order to comply with federal securities regulations relating to
money market funds, the Money Market Fund will not, with respect to 100% of
its total assets, invest more than 5% of its total assets in the securities
of any one issuer (other than U.S. Government obligations). A complete
description of these and other investment policies is included in the SAI.
Except for restriction (b) above and investment policies designated as
fundamental in the SAI, the Funds' investment policies (including their
investment objectives) are not fundamental. The Trustees may change any non-
fundamental investment policy without shareholder approval. However, in the
event of a change in any such Fund's investment objective, shareholders will
be given at least 30 days' prior written notice.

RISK FACTORS

There can be no assurance that the Money Market Fund or Tax Free Money Market
Fund will be able to maintain a stable net asset value. Changes in interest
rates may affect the value of the obligations held by such Funds. The value
of fixed income securities varies inversely with changes in prevailing
interest rates, although money market instruments are generally less
sensitive to changes in interest rates than are longer-term securities.

Securities issued by foreign banks, foreign branches of U.S. banks and
foreign governmental and private issuers involve investment risks in addition
<PAGE>
to those of obligations of domestic issuers, including risks relating to
future political and economic developments, more limited liquidity of foreign
obligations than comparable domestic obligations, the possible imposition of
withholding taxes on interest income, the possible seizure or nationalization
of foreign assets, and the possible establishment of exchange controls or
other restrictions. There may be less publicly available information
concerning foreign issuers, there may be difficulties in obtaining or
enforcing a judgment against a foreign issuer (including branches), and
accounting, auditing and financial reporting standards and practices may
differ from those applicable to U.S. issuers. In addition, foreign banks are
not subject to regulations comparable to U.S. banking regulations.

The Tax Free Money Market Fund may invest without limitation and each of the
Tax Free Income Fund and New York Tax Free Income Fund may invest up to 25%
of its total assets in Municipal Obligations secured by letters of credit or
guarantees from U.S. banks (including their foreign branches), and may also
invest in Municipal Obligations backed by foreign institutions. These
investments are subject to the considerations discussed in the preceding
paragraphs relating to the Money Market Fund. Changes in the credit quality
of banks or other financial institutions backing the Fund's Municipal
Obligations could cause losses to the Fund and affect its share price. Credit
enhancements which are supplied by foreign or domestic banks are not subject
to federal deposit insurance.

Each of the Tax Free Funds is "non-diversified," which may make the value of
its shares more susceptible to developments affecting issuers in which such
Funds invest. In addition, more than 25% of the assets of the Tax Free Funds
may be invested in securities to be paid from revenue of similar projects,
which may cause such Funds to be more susceptible to similar economic,
political or regulatory developments. The New York Tax Free Income Fund will
be particularly susceptible to such economic, political or regulatory
developments since the issuers in which it will invest will generally be
located in the State of New York.

Because the Tax Free Funds will invest primarily in obligations issued by
states, cities, public authorities and other municipal issuers, such Funds
are susceptible to factors affecting such states and their municipal issuers.
A number of municipal issuers, including New York issuers, have a recent
history of significant financial and fiscal difficulties. If a municipal
issuer is unable to meet its financial obligations, the income derived by a
Tax Free Fund and a Tax Free Fund's ability to preserve capital and liquidity
could be adversely affected. See the SAI for further information regarding
New York municipal issuers.

The net asset value of the shares of each Fund (other than the Money Market
Fund and Tax Free Money Market Fund) will fluctuate based on the value of the
securities in the Fund's portfolio. The Fixed Income Funds are subject to the
general risks and considerations associated with fixed income investing, as
well as the risks discussed herein. The Equity Funds are subject to the
general risks and considerations associated with equity and, to the extent
they invest in fixed income securities, fixed income investing, as well as
the risks discussed herein.

The performance of each Fixed Income Fund and, to the extent it invests in
fixed income securities, each Equity Fund depends in part on interest rate
changes. As interest rates increase, the value of the fixed income securities
held by a Fund tends to decrease. This effect will be more pronounced with
respect to investments by a Fund in mortgage-related securities, the value of
which are more sensitive to interest rate changes. Except as indicated in its
investment policies, there is no restriction on the maturity of a Fund's
portfolio or any individual portfolio security, and to the extent a Fund
invests in securities with longer maturities, the volatility of the Fund in
response to changes in interest rates can be expected to be greater than if
the Fund had invested in comparable securities with shorter maturities. The
performance of a Fund will also depend on the quality of its investments.
While U.S. Government securities generally are of high quality, government
securities that are not backed by the full faith and credit of the U.S.
Treasury may be affected by changes in the creditworthiness of the agency
that issued them. Guarantees of principal and interest on obligations that
may be purchased by a Fund are not guarantees of the market value of such
obligations, nor do they extend to the value of shares of the Fund. Other
fixed income securities in which a Fund may invest, while of investment-grade
quality, may be of lesser credit quality than U.S. Government Securities.
Securities rated in the category Baa by Moody's or BBB by S&P or the
equivalent by another NRSRO lack certain investment characteristics and may
have speculative characteristics.

To the extent permitted by its investment objective and policies, each Fund
may invest in the securities of small or mid cap companies. The securities of
small to mid cap companies often trade less frequently and in more limited
volume, and may be subject to more abrupt or erratic price movements, than
securities of larger, more established companies. Such companies may have
limited product lines, markets or financial resources, or may depend on a
limited management group.

As the International Equity Fund invests primarily in equity securities of
companies outside the U.S., an investment in the Fund's shares involves a
higher degree of risk than an investment in a U.S. equity fund. See "Common
Investment Policies-Other Investment Practices-Foreign Securities."
Investments in securities of issuers based in developing countries entail
certain additional risks, including greater risks of expropriation, taxation
by withholding Fund assets, nationalization, and less social, political and
economic stability. The small size of markets for securities of issuers based
<PAGE>
in such countries and the low or nonexistent volume of trading may result in
a lack of liquidity and in price volatility. Certain national policies may
restrict the investment opportunities, including restrictions on investing in
issuers or industries deemed sensitive to relevant national interests. There
may be an absence of developed legal structures governing private or foreign
investment and private property.

For a discussion of certain other risks associated with each Fund's
additional investment activities, see "Other Investment Practices" above.

MANAGEMENT
- ----------

THE FUNDS' ADVISERS

The Chase Manhattan Bank ("Chase") acts as investment adviser to the Funds
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of each of the Funds, subject to the oversight of
the Board of Trustees. Chase is a wholly-owned subsidiary of The Chase
Manhattan Corporation, a bank holding company. Chase and its predecessors
have over 100 years of money management experience.

For its investment advisory services to the Funds, Chase is entitled to
receive an annual fee equal to 0.30%, 0.30%, 0.50%, 0.50%, 0.50%, 0.50%,
0.50%, 0.50%, 0.75%, 0.75%, 0.75%, 0.75%, 0.75%, 0.75% and 1.00% of the
average daily net assets of the Money Market Fund, Tax Free Money Market
Fund, Tax Free Income Fund, New York Tax Free Income Fund, Short-Intermediate
U.S. Government Securities Fund, U.S. Government Securities Fund,
Intermediate Term Bond Fund, Income Fund, Balanced Fund, Equity Income Fund,
Core Equity Fund, Equity Growth Fund, Mid Cap Growth Fund, Small Cap Fund and
International Equity Fund, respectively.

Texas Commerce Bank National Association ("TCB") serves as sub-investment
adviser to certain of the Funds under a Sub-Investment Advisory Agreement
between Chase and TCB. TCB is a wholly-owned subsidiary of The Chase
Manhattan Corporation. TCB makes investment decisions for these Funds on a
day-to-day basis. For these services, TCB is entitled to receive a fee,
payable by Chase, at an annual rate equal to 0.__%, 0.__%, 0.__%, 0.__%,
0.__%, 0.__%, 0.__%, 0.__%, 0.__% and 0.__% of the average daily net assets
of the Money Market Fund, Short-Intermediate U.S. Government Securities Fund,
U.S. Government Securities Fund, Intermediate Term Bond Fund, Income Fund,
Balanced Fund, Equity Income Fund, Core Equity Fund, Equity Growth Fund and
Small Cap Fund, respectively. TCB is located at 600 Travis, Houston, Texas
77252. Prior to January 1, 1998, TCB acted as trustee of the AVESTA Trust
and, as trustee, was obligated to provide the investment portfolios of the
AVESTA Trust with the investment advisory, administrative, custodial and
other services necessary to manage the portfolios.

Chase may enter into one or more additional Sub-Investment Advisory
Agreements with respect to the Tax Free Money Market Fund, Tax Free Income
Fund, New York Tax Free Income Fund, Mid Cap Growth Fund and International
Equity Fund.
<PAGE>
Portfolio Managers. Guy Barba, a Senior Investment Officer at TCB, has served
as the portfolio manager of the Money Market Fund since April 1993 and the
Short-Intermediate Term Fund since its inception. Mr. Barba has been employed
by TCB since 1988.

A team composed of Chase investment professionals is responsible for the
management of the Tax Free Money Market Fund's portfolio.

A team composed of Chase investment professionals is responsible for the
management of the Tax Free Income Fund's portfolio.

A team composed of Chase investment professionals is responsible for the
management of the New York Tax Free Income Fund's portfolio.

H. Mitchell Harper, a Senior Investment Officer at TCB, has served as the
portfolio manager of the Intermediate Term Bond Fund since its inception. Mr.
Harper has been employed by TCB since 1987.

John Miller, a Senior Investment Officer at TCB, has served as the portfolio
manager for each of the Income Fund and the fixed income portion of the
Balanced Fund since July 1994 and for the U.S. Government Securities Fund
since June 1995. Mr. Miller has been employed with TCB since 1986.

Henry Lartigue, the Chief Investment Officer at TCB, has served as the
portfolio manager for the Equity Growth Fund since July 1994, the equity
portion of the Balanced Fund since July 1994 and the Core Equity Fund since
January 1996. Between July 1992 and July 1994, Mr. Lartigue was self-employed
as a registered investment adviser.

Robert Heintz, a Senior Investment Officer at TCB, has served as the
portfolio manager of the Equity Income Fund since its inception. Mr. Heintz
has been employed by TCB since 1983.

A team composed of Chase investment professionals is responsible for the
management of the Mid Cap Growth Fund's portfolio.

Juliet Ellis, a Senior Investment Officer at TCB, has served as the portfolio
manager of the Small Cap Fund since September 1993. Ms. Ellis has been
employed by TCB since 1987. Prior to becoming portfolio manager for the
Small Cap Fund, Ms. Ellis was the director of research and an equity analyst
at TCB.

A team composed of Chase investment professionals is responsible for the
management of the International Equity Fund's portfolio.

HOW TO BUY, SELL AND EXCHANGE SHARES
- ------------------------------------

HOW TO BUY SHARES

Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
<PAGE>
into a selected dealer agreement with the Funds' distributor on each business
day during which the Federal Reserve Bank of New York and the New York Stock
Exchange are open for business ("Fund Business Day"). The Funds reserve the
right to reject any purchase order or cease offering shares for purchase at
any time.

Institutional Shares are purchased at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided that the order is received by the Avesta
Service Center prior to its close of business. Dealers are responsible for
forwarding orders for the purchase of shares on a timely basis. Institutional
Shares will be maintained in book entry form and share certificates will not
be issued.

Orders received and not accepted after the New York Stock Exchange closing
time will be considered received prior to the New York Stock Exchange closing
time on the following Fund Business Day and processed accordingly.

All purchases of Institutional Shares must be paid for by federal funds wire.
If federal funds are not received by the Avesta Service Center by 4:00
Eastern time on the day of the purchase order, the order will be canceled.
Any order received after the New York Stock Exchange closing time will not be
accepted. Any funds received in connection with late orders will be invested
on the next Fund Business Day.

Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening an account.

Dealers may offer additional services to their customers, including
customized procedures for the purchase and redemption of Institutional
Shares, such as pre-authorized or systematic purchase and withdrawal
programs, "sweep" checking programs, cash advances, automated access and
direct demand deposit debit.

Minimum Investments. Each Fund has established a minimum initial investment
amount of $100,000 for the purchase of Institutional Shares. Shareholders
must maintain an average account balance of $100,000 in the Institutional
Shares of a Fund at all times. There is no minimum for subsequent
investments.

HOW TO SELL SHARES

You may redeem all or any portion of the shares in your account at any time
at the net asset value next determined after a redemption request in proper
form is furnished by you to your Dealer and transmitted to and received by
the Avesta Service Center. A wire redemption may be requested by telephone to
the Avesta Service Center. For telephone redemptions, call the Avesta Service
Center at 1-800-________.

In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied. The price you receive
<PAGE>
is the next net asset value calculated after the Fund receives your request
in proper form. In order to receive that day's net asset value, the Avesta
Service Center must receive your request before the close of regular trading
on the New York Stock Exchange.

Delivery of Proceeds. The Funds generally send you payment for your shares in
federal funds on the business day after your request is received in proper
form. Under unusual circumstances, the Funds may suspend redemptions, or
postpone payment for more than seven business days, as permitted by federal
securities laws.

Telephone Redemptions. You may use the Funds' Telephone Redemption Privilege
to redeem shares from your account unless you have notified the Avesta
Service Center of an address change within the preceding 30 days. Telephone
redemption requests in excess of $25,000 will only be made by wire to a bank
account on record with the Funds. Unless an investor indicates otherwise on
the account application, the Funds will be authorized to act upon redemption
and transfer instructions received by telephone from a shareholder, or any
person claiming to act as his or her representative, who can provide the
Funds with his or her account registration and address as it appears on the
Funds' records.

The Avesta Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, a Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither a Fund nor its agents
will be liable for any loss, liability, cost or expense arising out of any
redemption request, including any fraudulent or unauthorized request. For
information, consult the Avesta Service Center.

Selling Shares through Your Dealer. Your Dealer must transmit your request to
the Avesta Service Center so that it is received by the Avesta Service Center
before the close of regular trading on the New York Stock Exchange to receive
that day's net asset value. Your representative will be responsible for
furnishing all necessary documentation to the Avesta Service Center, and may
charge you for its services.

Involuntary Redemption of Accounts. If the aggregate net asset value of the
shares of that Fund in your account is less than $100,000, you will receive
at least 60 days' notice in which to either contribute additional funds to
meet the minimum balance requirement or, provided that you meet the
applicable eligibility requirements, elect to exchange shares into another
class of the Fund's shares. If the 60 day period expires without any action
on your part, each Fund may involuntarily redeem your shares.
<PAGE>
HOW TO EXCHANGE YOUR SHARES

You can exchange your shares for Institutional Shares of other Funds at net
asset value beginning 5 days after purchase. Any exchange requests should be
made through your Dealer, who will relay such requests to the Avesta Service
Center. The description of the other Fund into which shares are being
exchanged, which appears in this Prospectus, should be read carefully and
this Prospectus should be retained for future reference.

For federal income tax purposes, an exchange between Funds is treated as a
sale of shares and generally results in capital gain or loss.

Exchanging by Phone. A Telephone Exchange Privilege is currently available.
Call the Avesta Service Center for procedures for telephone transactions.
Please read the Prospectus carefully before investing and keep it for future
reference.

Exchange Parameters. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and in other circumstances where Fund management
or the Trustees believe doing so would be in the best interest of the Funds,
the Funds reserve the right to revise or terminate the exchange privilege,
limit the amount or number of exchanges or reject any exchange. In addition,
any shareholder who makes more than ten exchanges of shares involving a Fund
in a year or three in a calendar quarter will be charged a $5.00
administration fee for each such exchange. Shareholders would be notified of
any such action to the extent required by law. Consult the Avesta Service
Center before requesting an exchange. See the SAI to find out more about the
exchange privilege.

HOW THE FUNDS VALUE THEIR SHARES
- --------------------------------

Money Market Funds. The net asset value of each class of shares of the Money
Market Fund and the Tax Free Money Market Fund is currently determined as of
4:00 p.m., Eastern time on each Fund Business Day by dividing the net assets
of a Fund attributable to such class by the number of shares of such class
outstanding at the time the determination is made.
The portfolio securities of the Money Market Fund and the Tax Free Money
Market Fund are valued at their amortized cost in accordance with federal
securities laws, certain requirements of which are summarized under "Common
Investment Policies." This method increases stability in valuation, but may
result in periods during which the stated value of a portfolio security is
higher or lower than the price a Fund would receive if the instrument were
sold. It is anticipated that the net asset value of each share of each Fund
will remain constant at $1.00 and the Funds will employ specific investment
policies and procedures to accomplish this result, although no assurance can
be given that they will be able to do so on a continuing basis. The Board of
Trustees will review the holdings of each Fund at intervals it deems
appropriate to determine whether that Fund's net asset value calculated by
using available market quotations (or an appropriate substitute which
<PAGE>
reflects current market conditions) deviates from $1.00 per share based upon
amortized costs. In the event the Trustees determine that a deviation exists
that may result in material dilution or other unfair results to investors or
existing shareholders, the Trustees will take such corrective action as they
regard as necessary and appropriate.

Non-Money Market Funds. The net asset value of each class of each other
Fund's shares is determined once daily based upon prices determined as of the
close of regular trading on the New York Stock Exchange (normally 4:00 p.m.,
Eastern time, however, options are priced at 4:15 p.m., Eastern time), on
each Fund Business Day, by dividing the net assets of the Fund attributable
to that class by the total number of outstanding shares of that class. Values
of assets held by the Funds are determined on the basis of their market or
other fair value, as described in the SAI.

HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
- -------------------------------------------

Money Market Funds. The net investment income (i.e., a Fund's investment
company taxable income as that term is defined in the Internal Revenue Code
of 1986, as amended (the "Code") without regard to the deduction for
dividends paid) of each class of shares of each of the Money Market Fund and
the Tax Free Money Market Fund is declared as a dividend to the shareholders
each Fund Business Day. Dividends are declared as of the time of day which
corresponds to the latest time on that day that a Fund's net asset value is
determined. Shares begin accruing dividends on the day they are purchased.
Dividends are distributed monthly. Unless a shareholder arranges to receive
dividends in cash or by Automated Clearing House (ACH) to a pre-established
bank account, dividends are distributed in the form of additional shares. The
Money Market Fund and Tax Free Money Market Fund do not expect to realize net
capital gain (i.e., the excess of a Fund's net long-term capital gains over
short-term capital losses).

Non-Money Market Funds. Each Fixed Income Fund declares dividends daily and
distributes any net investment income at least monthly. Each Equity Fund
other than the International Equity Fund distributes any net investment
income at least quarterly. The International Equity Fund distributes any net
investment income at least annually. Each Fund other than the Money Market
Fund and the Tax Free Money Market Fund (which do not expect to earn net
capital gain) distributes any net capital gain at least annually.

General. You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares; (2) receive distributions from net
investment income in cash while reinvesting net capital gain distributions in
additional shares; or (3) receive all distributions in cash. You can change
your distribution option by notifying your account administrator in writing.
If you do not select an option when you open your account, all distributions
will be reinvested.

Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes under Subchapter M of the Code and to meet all other
requirements that are necessary for it to be relieved of federal taxes on
<PAGE>
income and gain it distributes to shareholders. If a Fund does not qualify as
a regulated investment company for any taxable year or does not meet certain
other requirements, such Fund will be subject to tax on all of its taxable
income and gains.

All Fund distributions of net investment income will be taxable to you as
ordinary income. Any distributions of net capital gain which are designated
as "capital gain dividends" will be taxable as long-term capital gain,
regardless of how long you have held the shares. Distributions by the Tax
Free Funds of their tax-exempt interest income will not be subject to federal
income tax. Such distributions will generally be subject to state and local
taxes, but may be exempt if paid out of interest on municipal obligations of
the state or locality in which you reside. To the extent distributions are
attributable to interest from obligations of the U.S. Government and certain
of its agencies and instrumentalities, such distributions may be exempt from
certain types of state and local taxes. Distributions will be taxable as
described above whether received in cash or in shares through the
reinvestment of distributions.

A portion of the ordinary income dividends paid by certain Funds may qualify
for the 70% dividends-received deduction for corporate shareholders.

Investment income received by the International Equity Fund from sources
within foreign countries may be subject to foreign taxes withheld at the
source. Since more than 50% of the value of the total assets of the Fund at
the close of the Fund's taxable year is anticipated to be stock or securities
of foreign corporations, the Fund may elect to "pass through" to its
shareholders the amount of foreign taxes paid by the Fund.

Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.

Early in each calendar year the Funds will notify you of the amount and tax
status of distributions paid for the preceding year.

The foregoing is a summary of certain federal income tax consequences of
investing in the Funds. You should consult your tax adviser to determine the
precise effect of an investment in the Funds on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).

OTHER INFORMATION CONCERNING THE FUNDS
- --------------------------------------

For shareholders that bank with Chase or TCB, Chase or TCB may aggregate
investments in the Avesta Funds with balances held in Chase or TCB bank
accounts for purposes of determining eligibility for certain bank privileges
that are based on specified minimum balance requirements, such as reduced or
no fees for certain banking services or preferred rates on loans and
<PAGE>
deposits. Chase, TCB and certain other financial institutions may, at their
own expense, provide gifts, such as computer software packages, guides and
books related to investment or additional Fund shares valued up to $250 to
their customers that invest in the Avesta Funds.

ADMINISTRATOR

Chase acts as the Funds' administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of each
Fund's average daily net assets.

SUB-ADMINISTRATOR AND DISTRIBUTOR

CF Distributors, Inc. ("CFD") acts as the Funds' sub-administrator and
distributor. CFD is a subsidiary of The BISYS Group, Inc. and is unaffiliated
with Chase. For the sub-administrative services it performs, CFD is entitled
to receive a fee from each Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. CFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. CFD is located
at 101 Park Avenue, New York, NY 10178.

CUSTODIAN

Chase acts as custodian for the Funds and receives compensation under an
agreement with the Trust. Chase may sub-contract for the provision of certain
services to be provided under the custody agreement. Fund securities and cash
may be held by sub-custodian banks if such arrangements are reviewed and
approved by the Trustees.

EXPENSES

Each Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Funds' custodian for all services to the Funds, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Funds. Shareholder servicing and distribution fees
are allocated to specific classes of a Fund. In addition, each Fund may
allocate transfer agency and certain other expenses by class. Service
providers to a Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
<PAGE>
ORGANIZATION AND DESCRIPTION OF SHARES

The Funds are portfolios of Mutual Fund Investment Trust, an open-end
management investment company organized as a Massachusetts business trust on
September 23, 1997 (the "Trust"). The Trust has reserved the right to create
and issue additional series and classes. Each share of a series or class
represents an equal proportionate interest in that series or class with each
other share of that series or class. The shares of each series or class
participate equally in the earnings, dividends and assets of the particular
series or class. Shares have no preemptive or conversion rights. Shares when
issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each whole share held, and each
fractional share shall be entitled to a proportionate fractional vote, except
that Trust shares held in the treasury of the Trust shall not be voted.
Shares of each class of a Fund generally vote together except when required
under federal securities laws to vote separately on matters that only affect
a particular class, such as the approval of distribution plans for a
particular class.

Each Fund issues multiple classes of shares. This Prospectus relates only to
Institutional Shares of the Funds. Institutional Shares may be purchased only
by shareholders who are able to meet the minimum investment requirement. The
Funds offer other classes of shares in addition to this class. The categories
of investors that are eligible to purchase shares may differ for each class
of Fund shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service
fee levels, and levels of certain other expenses, which will affect the
relative performance of the different classes. Investors may call 1-800-
_______ to obtain additional information about other classes of shares of the
Funds that are offered. Any person entitled to receive compensation for
selling or servicing shares of a Fund may receive different levels of
compensation with respect to one class of shares over another.

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

Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.

The Trust was formed to receive the assets of the AVESTA Trust, a Texas
business trust ("Avesta"). Pursuant to a reorganization which took place on
December 31, 1997, the Money Market Fund, Short-Term Intermediate Term Fund,
U.S. Government Securities Fund, Intermediate Term Bond Fund, Income Fund,
Balanced Fund, Equity Income Fund, Core Equity Fund, Equity Growth Fund and
<PAGE>
Small Cap Fund each acquired the assets of a corresponding series of Avesta
in exchange for Institutional Shares of such Fund.

UNIQUE CHARACTERISTICS OF MASTER/FEEDER FUND STRUCTURE

Unlike other mutual funds which directly acquire and manage their own
portfolio securities, each Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in a Fund's underlying investment securities
would be indirect. In addition to selling a beneficial interest to a Fund, a
Portfolio could also sell beneficial interests to other mutual funds or
institutional investors. Such investors would invest in such Portfolio on the
same terms and conditions and would pay a proportionate share of such
Portfolio's expenses. However, other investors in a Portfolio would not be
required to sell their shares at the same public offering price as a Fund,
and might bear different levels of ongoing expenses than a Fund. Shareholders
of the Funds should be aware that these differences may result in differences
in returns experienced in the different funds that invest in a Portfolio.
Such differences in return are also present in other mutual fund structures.

Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing the Portfolio. For example, if a large fund
were to withdraw from a Portfolio, the remaining funds might experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control
of such Portfolio. Under this master/feeder investment approach, whenever the
Trust was requested to vote on matters pertaining to a Portfolio, the Trust
would hold a meeting of shareholders of the relevant Fund and would cast all
of its votes in the same proportion as did such Fund's shareholders. Shares
of a Fund for which no voting instructions had been received would be voted
in the same proportion as those shares for which voting instructions had been
received. Certain changes in a Portfolio's objective, policies or
restrictions might require the Trust to withdraw the relevant Fund's interest
in such Portfolio. Any such withdrawal could result in a distribution in kind
of portfolio securities (as opposed to a cash distribution from such
Portfolio). A Fund could incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of investments or adversely affect the
liquidity of the relevant Fund.

A Fund will not adopt a master/feeder structure under which the disinterested
Trustees of the Trust are Trustees of the Portfolio unless the Trustees of
the Trust, including a majority of the disinterested Trustees, adopt
procedures they believe to be reasonably appropriate to deal with any
conflict of interest up to and including creating a separate Board of
Trustees.

If a Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
<PAGE>
Portfolio might be available through other funds by contacting the Fund at
1-800-_________. In the event a Fund adopts a master/feeder structure and
invests all of its investable assets in a Portfolio, shareholders of the Fund
will be given at least 30 days' prior written notice.

PERFORMANCE INFORMATION
- -----------------------

Money Market Funds. The Money Market Fund and the Tax Free Money Market Fund
may each advertise its annualized "yield" and its "effective yield."
"Annualized "yield" is determined by assuming that income generated by an
investment in a Fund over a stated seven-day period (the "yield") will
continue to be generated each week over a 52-week period. It is shown as a
percentage of such investment. "Effective yield" is the annualized "yield'
calculated assuming the reinvestment of the income earned during each week of
the 52-week period. The "effective yield" will be slightly higher than the
"yield" due to the compounding effect of this assumed reinvestment.

The Tax Free Money Market Fund may also quote a "tax equivalent yield," the
yield that a taxable money market fund would have to generate in order to
produce an after-tax yield equivalent to the tax free fund's yield. The tax
equivalent yield of the Tax Free Money Market Fund can then be compared to
the yield of a taxable money market fund. Tax equivalent yields can be quoted
on either a "yield" or "effective yield" basis.

Non-Money Market Funds. The investment performance of each Fund other than
the Money Market Fund and the Tax Free Money Market Fund may from to time be
included in advertisements about the Fund. "Yield" is calculated by dividing
the annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share on the last day of that
period.

"Total return" for the one-, five- and ten-year periods (or for the life of a
class, if shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in a Fund
invested at the public offering price. Total return may also be presented for
other periods.

General. All performance data is based on each Fund's past investment results
and does not predict future performance. Investment performance, which will
vary, is based on many factors, including market conditions, the composition
of a Fund's portfolio and a Fund's operating expenses. Investment performance
also often reflects the risks associated with a Fund's investment objectives
and policies. These factors should be considered when comparing a Fund's
investment results to those of other mutual funds and other investment
vehicles. Quotation of investment performance for any period when a fee
waiver or expense limitation was in effect will be greater than if the waiver
or limitation had not been in effect. Each Fund's performance may be compared
to other mutual funds, relevant indices and rankings prepared by independent
services. See the SAI.<PAGE>
PROSPECTUS
AVESTA FUNDS

INVESTMENT STRATEGIES:

AVESTA MONEY MARKET FUND: Current Income
AVESTA TAX FREE MONEY MARKET FUND: Current Income
AVESTA TAX FREE INCOME FUND: Income
AVESTA NEW YORK TAX FREE INCOME FUND: Income
AVESTA SHORT-INTERMEDIATE TERM U.S.
GOVERNMENT SECURITIES FUND: Income
AVESTA U.S. GOVERNMENT SECURITIES FUND: Income
AVESTA INTERMEDIATE TERM BOND FUND: Income
AVESTA INCOME FUND: Income
AVESTA BALANCED FUND: Income and Growth
AVESTA EQUITY INCOME FUND: Growth and Income
AVESTA CORE EQUITY FUND: Total Return
AVESTA EQUITY GROWTH FUND: Capital Growth
AVESTA MID CAP GROWTH FUND: Capital Growth
AVESTA SMALL CAPITALIZATION FUND: Capital Growth
AVESTA INTERNATIONAL EQUITY FUND: Capital Growth

RETAIL SHARES

January 1, 1998

Page

AVESTA MONEY MARKET FUND . . . . . . . . . . . . . . . . . . . . . . . . 5
AVESTA TAX FREE MONEY MARKET FUND . . . . . . . . . . . . . . . . . . . . 9
AVESTA TAX FREE INCOME FUND . . . . . . . . . . . . . . . . . . . . . . . 13
AVESTA NEW YORK TAX FREE INCOME FUND . . . . . . . . . . . . . . . . . . 17
AVESTA SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND . . . . . 21
AVESTA U.S. GOVERNMENT SECURITIES FUND . . . . . . . . . . . . . . . . . 24
AVESTA INTERMEDIATE TERM BOND FUND . . . . . . . . . . . . . . . . . . . 27
AVESTA INCOME FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
AVESTA BALANCED FUND . . . . . . . . . . . . . . . . . . . . . . . . . . 35
AVESTA EQUITY INCOME FUND . . . . . . . . . . . . . . . . . . . . . . . . 38
AVESTA CORE EQUITY FUND . . . . . . . . . . . . . . . . . . . . . . . . . 41
AVESTA EQUITY GROWTH FUND . . . . . . . . . . . . . . . . . . . . . . . . 44
AVESTA MID CAP GROWTH FUND . . . . . . . . . . . . . . . . . . . . . . . 47
AVESTA SMALL CAPITALIZATION FUND . . . . . . . . . . . . . . . . . . . . 50
AVESTA INTERNATIONAL EQUITY FUND . . . . . . . . . . . . . . . . . . . . 53
COMMON INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . 57
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
HOW TO BUY, SELL AND EXCHANGE SHARES . . . . . . . . . . . . . . . . . . 74
HOW THE FUNDS VALUE THEIR SHARES . . . . . . . . . . . . . . . . . . . . 78
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION . . . . . . . . . . . . . . . 78
OTHER INFORMATION CONCERNING THE FUNDS . . . . . . . . . . . . . . . . . 80
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 86
<PAGE>
The Avesta Funds are portfolios of Mutual Fund Investment Trust ("MFIT"), an
open-end investment company organized as a Massachusetts business trust in
September 1997. The Avesta Funds are managed by The Chase Manhattan Bank
("Chase"), a subsidiary of The Chase Manhattan Corporation ("CMC"). As
indicated below, certain of the Funds are successor investment portfolios to
portfolios of the AVESTA Trust, the predecessor entity of MFIT. The AVESTA
Trust was a collective trust established under the laws of the State of Texas
by Texas Commerce Bank National Association ("TCB"), an affiliate of CMC. The
AVESTA Trust was registered under the Investment Company Act of 1940 and was
available solely for certain individual retirement accounts and pension and
profit-sharing plans. The AVESTA Trust was converted and redomiciled into
MFIT, effective as of January 1, 1998 (the "Conversion"). TCB acted as the
trustee of the AVESTA Trust, and as trustee was obligated to provide the
investment portfolios of the AVESTA Trust with the investment advisory,
administrative, custodial and other services necessary to manage the
portfolios.

AVESTA MONEY MARKET FUND

Fund Objective and Investment Approach

Objective. The Money Market Fund's objective is to provide maximum current
income consistent with the preservation of capital and the maintenance of
liquidity.

Credit Quality. The Fund invests only in U.S. dollar-denominated high quality
obligations which are determined to present minimal credit risks. This credit
determination must be made in accordance with procedures established by the
Board of Trustees. Each investment must be rated in the highest short-term
rating category by at least two nationally recognized statistical rating
organizations ("NRSROs") (or one NRSRO if the instrument was rated only by
one such organization) or, if unrated, must be determined to be of comparable
quality in accordance with the procedures of the Trust. If a security has an
unconditional guarantee or similar enhancement, the issuer of the guarantee
or enhancement may be relied upon in meeting these ratings requirements
rather than the issuer of the security.
<PAGE>
Miscellaneous. The Fund seeks to maintain a net asset value of $1.00 per
share. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee . . . . . . . . . . . . . . . . . . . . . . . . 0.30%
12b-1 Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Shareholder Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses<F1> . . . . . . . . . . . . . . . . . . . . . . . . . . 0.20%
Total Fund Operating Expenses<F1> . . . . . . . . . . . . . . . . . . . 0.75%

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Retail Shares . . . . . . $8 $24 $42 $93

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.__% and _.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Credit Quality. The Fund invests only in U.S. dollar-denominated high quality
obligations which are determined to present minimal credit risks. This credit
determination must be made in accordance with procedures established by the
Board of Trustees. Each investment must be rated in the highest short-term
rating category by at least two NRSROs (or one NRSRO if the instrument was
rated only by one such organization) or, if unrated, must be determined to be
of comparable quality in accordance with the procedures of the Trust. If a
security has an unconditional guarantee or similar enhancement, the issuer of
the guarantee or enhancement may be relied upon in meeting these ratings
requirements rather than the issuer of the security.

Miscellaneous. The Fund seeks to maintain a net asset value of $1.00 per
share. The Fund is classified as a "non-diversified" fund under federal
securities law.
<PAGE>
Expense Summary

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years
------ -------

Retail Shares . . . . . . . . . . $8 $24

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.__% and 0.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Miscellaneous. The Fund is classified as a "non-diversified" fund under
federal securities law.
<PAGE>
Expense Summary

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
12b-1 Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Shareholder Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses<F1> . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Total Fund Operating Expenses<F1> . . . . . . . . . . . . . . . . . . . 1.00%

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years
------ -------

Retail Shares . . . . . . . . . . $10 $32

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.__% and 0.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Miscellaneous. The Fund is classified as a "non-diversified" fund under
federal securities law.
<PAGE>
Expense Summary

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years
------ -------

Retail Shares . . . . . . . . . . $10 $32

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.__% and 0.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Objective. The Short-Intermediate Term Fund's objective is to provide as high
a level of current income as is consistent with the preservation of capital.

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Retail Shares . . . . . . $10 $32 $55 $122

Fund Objective and Investment Approach

Objective. The U.S. Government Securities Fund's objective is to provide
current income with emphasis on the preservation of capital.

Maturity. As a matter of operating policy, under normal market conditions,
the dollar-weighted average maturity of the Fund's portfolio, measured at the
time an investment is made, will be between five and fifteen years. There is
no restriction on the maturity of any individual asset which may be acquired
by the Fund. The average maturity of securities in the Fund will be based
primarily upon the adviser's expectations for the future course of interest
rates and the then prevailing price and yield levels in the U.S. Government
securities market. Fixed income securities with longer maturities generally
have less stable market values.

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Retail Shares . . . . . . $10 $32 $55 $122

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be _.__% and _.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Objective. The Intermediate Term Bond Fund's objective is to provide current
income, with consideration also given to stability of principal.

Miscellaneous. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Retail Shares . . . . . . $10 $32 $55 $122

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be _.__% and _.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
AVESTA INCOME FUND

Fund Objective and Investment Approach

Objective. The Income Fund's objective is to invest in securities that earn a
high level of current income with consideration also given to safety of
principal.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade. The Fund's
investments in securities other than debt of domestic and foreign issuers and
debt obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities (e.g., preferred stock) will be based on the adviser's
judgment of the quality of the securities. The judgment may be based upon
such considerations as the issuer's financial strength, including its
historic and current financial condition, its historic and projected
earnings; the issuer's market position; and other factors relevant to an
analysis of a particular issuer, as determined by the adviser.

Miscellaneous. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Retail Shares . . . . . . $10 $32 $55 $122

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be _.__% and _.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund.
<PAGE>
AVESTA BALANCED FUND

Fund Objective and Investment Approach

Objective. The Balanced Fund's objective is to provide a balance of current
income and growth of capital.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

Miscellaneous. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee . . . . . . . . . . . . . . . . . . . . . . . . 0.75%
12b-1 Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Shareholder Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses<F1> . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Total Fund Operating Expenses<F1> . . . . . . . . . . . . . . . . . . . 1.25%

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Retail Shares . . . . . . $13 $40 $69 $151

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be _.__% and _.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Objective. The Equity Income Fund's objective is to invest in securities that
provide both capital appreciation as well as current income.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

Miscellaneous. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Retail Shares . . . . . . $13 $40 $69 $151

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be _.__% and _.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Objective. The Core Equity Fund's objective is to maximize total investment
return through emphasis on long-term capital appreciation and current income
consistent with reasonable risk.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

Miscellaneous. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Retail Shares . . . . . . $13 $40 $69 $151

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be _.__% and _.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Objective. The Equity Growth Fund's objective is to provide capital
appreciation. Current income is a secondary objective.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

Miscellaneous. The Fund is classified as a "diversified" fund under federal
securities laws.
<PAGE>
Expense Summary

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Retail Shares . . . . . . $13 $40 $69 $151

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be _.__% and _.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Objective. The Mid Cap Growth Fund's objective is to provide long-term
capital growth. Current income, if any, is a consideration incidental to the
Fund's objective of long-term capital growth.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years
------ -------

Retail Shares . . . . . . . . . . $13 $40

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.__% and 1.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

EXAMPLE

Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Retail Shares . . . . . . $13 $40 $69 $151

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be _.__% and _.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Fund Objective and Investment Approach

Objective. The International Equity Fund's objective is to provide total
return from long-term capital growth and income.

The Fund's adviser will allocate investments among securities denominated in
the U.S. dollar and currencies of foreign countries. The adviser may adjust
the Fund's exposure to each currency based on its perception of the most
favorable markets and issuers. The percentage of the Fund's assets invested
in securities of a particular country or denominated in a particular currency
will vary in accordance with the adviser's assessment of the relative yield
and appreciation potential of such securities and the current and anticipated
relationship of a country's currency to the U.S. dollar. Fundamental economic
strength, earnings growth, quality of management, industry growth, credit
quality and interest rate trends are some of the principal factors which may
be considered by the Fund's adviser in determining whether to increase or
decrease the emphasis placed upon a particular type of security, industry
sector, country or currency. Securities purchased by the Fund may be
denominated in a currency other than that of the country in which the issuer
is domiciled.
<PAGE>
Primary emphasis will be placed on equity securities and securities with
equity features. However, the Fund may invest in any type of debt security
including, but not limited to, other convertible securities, bonds, notes and
other debt securities of foreign governmental and private issuers, and
various derivative securities.

Credit Quality. The Fund will invest in debt securities of domestic and
foreign issuers only if they are rated investment grade or, if unrated,
determined by the Fund's adviser to be of comparable quality. Although the
adviser is not required to dispose of securities which are downgraded below
investment grade subsequent to acquisition, there is no present intention to
retain securities which are downgraded below investment grade.

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee . . . . . . . . . . . . . . . . . . . . . . . . 1.00%
12b-1 Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Shareholder Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses<F1> . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Total Fund Operating Expenses<F1> . . . . . . . . . . . . . . . . . . . 1.50%

EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:

1 Year 3 Years
------ -------

Retail Shares . . . . . . . . . . $15 $47

<F1> Reflects current waivers and reimbursements to maintain Total Fund
Operating Expenses at the level indicated in the table above. Absent
such waivers and reimbursements, Other Expenses and Total Fund Operating
Expenses would be 0.__% and 1.__%, respectively. Chase has agreed
voluntarily to waive fees payable to it and/or reimburse expenses for a
period of at least one year commencing January 1, 1998 to the extent
necessary to prevent Total Fund Operating Expenses for such period from
exceeding the amount in the table.

Although the Money Market Fund and Tax Free Money Market Fund each seek to be
fully invested, at times they may hold uninvested cash reserves, which would
adversely affect their yield.

The Tax Free Money Market Fund, Tax Free Income Fund and New York Tax Free
Income Fund (the "Tax Free Funds") are classified as "non-diversified" funds
under federal securities laws. These Funds' assets may be more concentrated
in the securities of any single issuer or group of issuers than if the Funds
were diversified. The other Funds are classified as "diversified" funds under
<PAGE>
federal securities laws. Upon the adoption of certain changes to the federal
securities laws which are expected to be implemented during 1998, the Tax
Free Money Market Fund will be required to be a "diversified" fund.

No Fund is intended to be a complete investment program, and there is no
assurance that any Fund will achieve its investment objective.

OTHER INVESTMENT PRACTICES

Depositary Receipts. Each of the Equity Funds, the Intermediate Term Bond
Fund and the Income Fund may invest its assets in securities of foreign
issuers in the form of American Depositary Receipts, European Depositary
Receipts, Global Depositary Receipts or other similar securities representing
securities of foreign issuers (collectively, "Depositary Receipts"). Each
Fund treats Depositary Receipts as interests in the underlying securities for
purposes of its investment policies. Each Fund will limit its investment in
Depositary Receipts not sponsored by the issuer of the underlying securities
to no more than 5% of the value of its net assets (at the time of
investment).

Supranational and ECU Obligations. Each Fund other than the Tax Free Funds
may invest in debt securities issued by supranational organizations, which
include organizations such as The World Bank, the European Community, the
European Coal and Steel Community and the Asian Development Bank. Obligations
<PAGE>
of supranational agencies are supported by subscribed, but unpaid,
commitments of member countries. There is no assurance that these commitments
will be undertaken or complied with in the future, and foreign and
supranational securities are subject to certain risks associated with foreign
investing. Each such Fund may also invest in securities denominated in the
ECU, which is a "basket" consisting of specified amounts of the currencies of
certain member states of the European Community. These securities are
typically issued by European governments and supranational organizations.

Repurchase Agreements, Securities Loans and Forward and Stand-by Commitments.
Each Fund may enter into agreements to purchase and resell securities at an
agreed-upon price and time. Each Fund also has the ability to lend portfolio
securities in an amount equal to not more than 30% of its total assets to
generate additional income. These transactions must be fully collateralized
at all times. Each Fund may purchase securities for delivery at a future
date, which may increase its overall investment exposure and involves a risk
of loss if the value of the securities declines prior to the settlement date.
Each Fund may enter into put transactions, including those sometimes referred
to as stand-by commitments, with respect to securities in its portfolio. In
these transactions, a Fund would acquire the right to sell a security at an
agreed upon price within a specified period prior to its maturity date. A put
transaction will increase the cost of the underlying security and
consequently reduce the available yield. Each of these transactions involve
some risk to a Fund if the other party should default on its obligation and
the Fund is delayed or prevented from recovering the collateral or completing
the transaction.

Borrowings and Reverse Repurchase Agreements. Each Fund may borrow money from
banks for temporary or short-term purposes, but will not borrow money to buy
additional securities, known as "leveraging." Each Fund may also sell and
simultaneously commit to repurchase a portfolio security at an agreed-upon
price and time. Each Fund may use this practice to generate cash for
shareholder redemptions without selling securities during unfavorable market
conditions. Whenever a Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Funds would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
<PAGE>
Convertible Securities. Each Fund other than the Money Market Fund and the
Tax Free Funds may invest in convertible securities, which are securities
generally offering fixed interest or dividend yields which may be converted
either at a stated price or stated rate for common or preferred stock.
Although to a lesser extent than with fixed income securities generally, the
market value of convertible securities tends to decline as interest rates
increase, and increase as interest rates decline. Because of the conversion
feature, the market value of convertible securities also tends to vary with
fluctuations in the market value of the underlying common or preferred stock.

Zero Coupon Securities, Payment-in-Kind Obligations and Stripped Obligations.
The Short-Intermediate Term Fund and U.S. Government Securities Fund may
invest without limitation in zero coupon securities issued by governmental
issuers and each other Fund other than the Money Market Fund and the Tax Free
Money Market Fund may invest up to 25% of its total assets in zero coupon
securities issued by governmental and private issuers. Zero coupon securities
are debt securities that do not pay regular interest payments, and instead
are sold at substantial discounts from their value at maturity. Each Fund
other than the Money Market Fund and Tax Free Money Market Fund may invest in
payment-in-kind obligations. Payment-in-kind obligations are obligations on
which the interest is payable in additional securities rather than cash. The
Short-Intermediate Term Fund and the U.S. Government Securities Fund may
invest without limitation and each other Fund other than the Money Market
Fund may invest up to 25% of its total assets in stripped obligations (i.e.,
separately traded principal and interest components of securities) where the
underlying obligations are backed by the full faith and credit of the U.S.
Government, including instruments known as "STRIPS." The value of these
instruments tends to fluctuate more in response to changes in interest rates
than the value of ordinary interest-paying debt securities with similar
maturities. The risk is greater when the period to maturity is longer.

Floating and Variable Rate Securities; Participation Certificates. Each Fund
may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The securities in which a Fund may invest include participation
certificates and certificates of indebtedness or safekeeping. Participation
certificates are pro rata interests in securities held by others;
certificates of indebtedness or safekeeping are documentary receipts for such
original securities held in custody by others. As a result of the floating or
variable rate nature of these investments, a Fund's yield may decline and it
may forego the opportunity for capital appreciation during periods when
interest rates decline; however, during periods when interest rates increase,
the Fund's yield may increase and it may have reduced risk of capital
depreciation. Demand features on certain floating or variable rate securities
may obligate the Fund to pay a "tender fee" to a third party. Demand features
provided by foreign banks involve certain risks associated with foreign
investments.
<PAGE>
Indexed Investments. The International Equity Fund may invest in instruments
which are indexed to certain specific foreign currency exchange rates. The
terms of such instruments may provide that their principal amounts or just
their coupon interest rates are adjusted upwards or downwards (but not below
zero) at maturity or on established coupon payment dates to reflect changes
in the exchange rate between two or more currencies while the obligation is
outstanding. Such indexed investments entail the risk of loss of principal
and/or interest payments from currency movements in addition to principal
risk, but offer the potential for realizing gains as a result of changes in
foreign currency exchange rates.

Inverse Floaters and Interest Rate Caps. Each of the Fixed Income Funds may
invest in inverse floaters and in securities with interest rate caps. Inverse
floaters are instruments whose interest rates bear an inverse relationship to
the interest rate on another security or the value of an index. The market
value of an inverse floater will vary inversely with changes in market
interest rates, and will be more volatile in response to interest rates
changes than that of a fixed rate obligation. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, known as the cap rate,
which is tied to a specific index. These financial products will be more
volatile in price than securities which do not include such a structure. No
Fund has any present intention to invest in inverse floaters or securities
with interest rate caps.

Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
<PAGE>
the U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Certain mortgage pass-through securities created by nongovernmental issuers
may be supported by various forms of insurance or guarantees, while other
such securities may be backed only by the underlying mortgage collateral.

Each Fund other than the Money Market Fund and the Tax Free Funds may invest
in principal-only or interest-only stripped mortgage-backed securities.
Stripped mortgage-backed securities have greater volatility than other types
of mortgage-related securities. Stripped mortgage-backed securities which are
purchased at a substantial premium or discount generally are extremely
sensitive not only to changes in prevailing interest rates but also to the
rate of principal payments (including prepayments) on the related underlying
mortgage assets, and a rapid rate of principal payments may have a material
adverse effect on such securities' yield to maturity. In addition, stripped
mortgage securities may be illiquid.

Derivatives and Related Instruments. Each Fund other than the Money Market
Fund and the Tax Free Money Market Fund may invest its assets in derivative
and related instruments to hedge various market risks or to increase the
Fund's income or gain. Some of these instruments will be subject to asset
<PAGE>
segregation requirements to cover a Fund's obligations. Each such Fund may
(i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward currency and
interest rate contracts; and (iv) purchase and sell structured products,
which are instruments designed to restructure or reflect the characteristics
of certain other investments.

There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which a
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of a Fund to successfully utilize
these instruments may depend in part upon the ability of its adviser to
forecast these factors correctly. Inaccurate forecasts could expose a Fund to
a risk of loss. There can be no guarantee that there will be a correlation
between price movements in a hedging instrument and in the portfolio assets
being hedged. No Fund is required to use any hedging strategies. Hedging
strategies, while reducing risk of loss, can also reduce the opportunity for
gain. Derivatives transactions not involving hedging may have speculative
characteristics, involve leverage and result in losses that may exceed the
original investment of a Fund. There can be no assurance that a liquid market
will exist at a time when a Fund seeks to close out a derivatives position.
Activities of large traders in the futures and securities markets involving
arbitrage, "program trading," and other investment strategies may cause price
distortions in derivatives markets. In certain instances, particularly those
involving over-the-counter transactions or forward contracts, there is a
greater potential that a counterparty or broker may default. In the event of
a default, a Fund may experience a loss. For additional information
concerning derivatives, related instruments and the associated risks, see the
SAI.

ADDITIONAL INVESTMENT POLICIES OF THE MONEY MARKET FUND

Municipal Obligations. The Fund may invest in high-quality, short-term
municipal obligations that carry yields that are competitive with those of
other types of money market instruments in which they may invest. Dividends
paid by this Fund that are derived from interest on municipal obligations
will be taxable to shareholders for federal income tax purposes.
<PAGE>
Custodial Receipts. The Fund may acquire securities in the form of custodial
receipts that evidence ownership of future interest payments, principal
payments or both on certain U.S. Treasury notes or bonds in connection with
programs sponsored by banks and brokerage firms. These are not deemed U.S.
Government securities. These notes and bonds are held in custody by a bank on
behalf of the owners of the receipts.

ADDITIONAL INVESTMENT POLICIES OF THE TAX FREE FUNDS

Municipal Obligations. Municipal Obligations are issued to obtain funds for
various public purposes, such as the construction of public facilities, the
payment of general operating expenses or the refunding of outstanding debts.
They may also be issued to finance various private activities, including the
lending of funds to public or private institutions for the construction of
housing, educational or medical facilities, and may include certain types of
industrial development bonds, private activity bonds or notes issued by
public authorities to finance privately owned or operated facilities, or to
fund short-term cash requirements. Short-term Municipal Obligations may be
issued as interim financing in anticipation of tax collections, revenue
receipts or bond sales to finance various public purposes. The Municipal
Obligations in which the Tax Free Money Market Fund invests may consist of
municipal notes, municipal commercial paper and municipal bonds maturing or
deemed to mature in 397 days or less.

Municipal Lease Obligations. Each Tax Free Fund may invest in municipal lease
obligations. These are participations in a lease obligation or installment
purchase contract obligation and typically provide a premium interest rate.
Municipal lease obligations do not constitute general obligations of the
municipality. Certain municipal lease obligations in which the Funds may
invest contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment payments in
<PAGE>
future years unless money is later appropriated for such purposes. Although
"non-appropriation" lease obligations are secured by the leased property,
disposition of the property in the event of foreclosure might prove
difficult. Certain investments in municipal lease obligations may be
illiquid. Each Fund's adviser will evaluate the liquidity of municipal lease
obligations in accordance with procedures established by the Funds.

LIMITING INVESTMENT RISKS

RISK FACTORS

The Money Market Fund is permitted to invest any portion of its assets in
obligations of domestic banks (including their foreign branches), and in
obligations of foreign issuers. The ability to concentrate in the banking
industry may involve certain credit risks, such as defaults or downgrades, if
at some future date adverse economic conditions prevail in such industry.
U.S. banks are subject to extensive governmental regulations which may limit
both the amount and types of loans which may be made and interest rates which
may be charged. In addition, the profitability of the banking industry is
largely dependent upon the availability and cost of funds for the purpose of
financing lending operations under prevailing money market conditions.
General economic conditions as well as exposure to credit losses arising from
possible financial difficulties of borrowers play an important part in the
operations of this industry.
<PAGE>
Securities issued by foreign banks, foreign branches of U.S. banks and
foreign governmental and private issuers involve investment risks in addition
to those of obligations of domestic issuers, including risks relating to
future political and economic developments, more limited liquidity of foreign
obligations than comparable domestic obligations, the possible imposition of
withholding taxes on interest income, the possible seizure or nationalization
of foreign assets, and the possible establishment of exchange controls or
other restrictions. There may be less publicly available information
concerning foreign issuers, there may be difficulties in obtaining or
enforcing a judgment against a foreign issuer (including branches), and
accounting, auditing and financial reporting standards and practices may
differ from those applicable to U.S. issuers. In addition, foreign banks are
not subject to regulations comparable to U.S. banking regulations.

Interest on certain Municipal Obligations (including certain industrial
development bonds), while exempt from federal income tax, is a preference
item for the purpose of the alternative minimum tax. Where a mutual fund
receives such interest, a proportionate share of any exempt-interest dividend
paid by the mutual fund may be treated as such a preference item to
shareholders. Federal tax legislation enacted over the past few years has
limited the types and volume of bonds which are not AMT Items and the
interest on which is not subject to federal income tax. This legislation may
affect the availability of Municipal Obligations for investments by the Tax
Free Funds.
<PAGE>
The net asset value of the shares of each Fund (other than the Money Market
Fund and Tax Free Money Market Fund) will fluctuate based on the value of the
securities in the Fund's portfolio. The Fixed Income Funds are subject to the
general risks and considerations associated with fixed income investing, as
well as the risks discussed herein. The Equity Funds are subject to the
general risks and considerations associated with equity and, to the extent
they invest in fixed income securities, fixed income investing, as well as
the risks discussed herein.

As the International Equity Fund invests primarily in equity securities of
companies outside the U.S., an investment in the Fund's shares involves a
higher degree of risk than an investment in a U.S. equity fund. See "Common
Investment Policies-Other Investment Practices-Foreign Securities."
Investments in securities of issuers based in developing countries entail
certain additional risks, including greater risks of expropriation, taxation
by withholding Fund assets, nationalization, and less social, political and
economic stability. The small size of markets for securities of issuers based
in such countries and the low or nonexistent volume of trading may result in
a lack of liquidity and in price volatility. Certain national policies may
restrict the investment opportunities, including restrictions on investing in
issuers or industries deemed sensitive to relevant national interests. There
may be an absence of developed legal structures governing private or foreign
investment and private property.
<PAGE>
For a discussion of certain other risks associated with each Fund's
additional investment activities, see "Other Investment Practices" above.

MANAGEMENT

THE FUNDS' ADVISERS

Portfolio Managers. Guy Barba, a Senior Investment Officer at TCB, has served
as the portfolio manager of the Money Market Fund since April 1993 and the
Short-Intermediate Term Fund since its inception. Mr. Barba has been employed
by TCB since 1988.

A team composed of Chase investment professionals is responsible for the
management of the Tax Free Money Market Fund's portfolio.

A team composed of Chase investment professionals is responsible for the
management of the Tax Free Income Fund's portfolio.
<PAGE>
A team composed of Chase investment professionals is responsible for the
management of the New York Tax Free Income Fund's portfolio.

H. Mitchell Harper, a Senior Investment Officer at TCB, has served as the
portfolio manager of the Intermediate Term Bond Fund since its inception. Mr.
Harper has been employed by TCB since 1987.

Robert Heintz, a Senior Investment Officer at TCB, has served as the
portfolio manager of the Equity Income Fund since its inception. Mr. Heintz
has been employed by TCB since 1983.

A team composed of Chase investment professionals is responsible for the
management of the Mid Cap Growth Fund's portfolio.

Juliet Ellis, a Senior Investment Officer at TCB, has served as the portfolio
manager of the Small Cap Fund since September 1993. Ms. Ellis has been
employed by TCB since 1987. Prior to becoming portfolio manager for the Small
Cap Fund, Ms. Ellis was the director of research and an equity analyst at
TCB.

A team composed of Chase investment professionals is responsible for the
management of the International Equity Fund's portfolio.

HOW TO BUY, SELL AND EXCHANGE SHARES

HOW TO BUY SHARES

You can open a Fund account with as little as $2,500 for regular accounts or
$1,000 for IRAs, SEP-IRAs and the Systematic Investment Plan. Additional
investments can be made at any time with as little as $100. You can buy Fund
shares three ways -- through an investment representative, directly through
the Fund's distributor by calling the Avesta Service Center, or through the
Systematic Investment Plan.

All purchases made by check should be in U.S. dollars and made payable to the
Avesta Funds. Third Party checks, credit cards and cash will not be
accepted. The Funds reserve the right to reject any purchase order or cease
offering shares for purchase at any time. When purchases are made by check,
redemptions will not be allowed until the check clears, which may take 15
calendar days or longer. In addition, the redemption of shares purchased
through Automated Clearing House (ACH) will not be allowed until your payment
clears, which may take 7 business days or longer.

BUYING SHARES THROUGH THE FUNDS' DISTRIBUTOR. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Avesta Service Center.
<PAGE>
BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular investments
of $100 or more per transaction through automatic periodic deduction from
your bank checking or savings account. Shareholders electing to start this
Systematic Investment Plan when opening an account should complete Section 8
of the account application. Current shareholders may begin such a plan at
any time by sending a signed letter and a deposit slip or voided check to the
Avesta Service Center. Call the Avesta Service Center at 1-800-________ for
complete instructions.

Shares are purchased at the public offering price, which is based on the net
asset value next determined after the Avesta Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Avesta Service Center must receive your order in proper
form before the close of regular trading on the New York Stock Exchange. If
you buy shares through your investment representative, the representative
must receive your order generally before the close of regular trading on the
New York Stock Exchange to receive that day's public offering price; however
your investment representative may impose an earlier deadline. Orders are in
proper form only after funds are converted to federal funds. Orders paid by
check and received by 2:00 p.m., Eastern Time will generally be available for
the purchase of shares the following business day.

If you are considering redeeming or exchanging shares or transferring shares
to another person shortly after purchase, you should pay for those shares
with a certified check to avoid any delay in redemption, exchange or
transfer. Otherwise the Funds may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for
safekeeping, the Funds will not issue certificates for your shares and all
shares will be held in book entry form.

HOW TO SELL SHARES

You can sell your Fund shares any day the New York Stock Exchange and Federal
Reserve Bank of New York are open, either directly to the Funds or through
your investment representative. Each Fund will only forward redemption
payments on shares for which it has collected payment of the purchase price.

SELLING SHARES DIRECTLY TO THE FUNDS. Send a signed letter of instruction to
the Avesta Service Center. The price you will receive is the next net asset
value calculated after the Fund receives your request in proper form. In
order to receive that day's net asset value, the Avesta Service Center must
receive your request before the close of regular trading on the New York
Stock Exchange.

If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions.
See the SAI for more information about where to obtain a signature guarantee.

If you want your redemption proceeds sent to an address other than your
address as it appears on the Funds' records, a signature guarantee is
required. The Funds may require additional documentation for the sale of
shares by a corporation, partnership, agent or fiduciary, or a surviving
joint owner. Contact the Avesta Service Center for details.
<PAGE>
DELIVERY OF PROCEEDS. Each Fund generally sends you payment for your shares
the business day after your request is received in proper form, assuming the
Fund has collected payment of the purchase price of your shares. Under
unusual circumstances, the Funds may suspend redemptions, or postpone payment
for more than seven days, as permitted by federal securities law.

TELEPHONE REDEMPTIONS. You may use the Funds' Telephone Redemption Privilege
to redeem shares from your account unless you have notified the Avesta
Service Center of an address change within the preceding 30 days. Telephone
redemption requests in excess of $25,000 will only be made by wire or ACH to
a bank account on record with the Funds. Unless an investor indicates
otherwise on the account application, each Fund will be authorized to act
upon redemption and transfer instructions received by telephone from a
shareholder, or any person claiming to act as his or her representative, who
can provide the Fund with his or her account registration and address as it
appears on the Fund's records.

The Avesta Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Funds may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Funds nor their
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request.
For information, consult the Avesta Service Center.

During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Avesta Service Center by telephone. In
this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.

SYSTEMATIC WITHDRAWAL. You can make regular withdrawals of $50 or more
monthly, quarterly or semiannually. A minimum account balance of ______is
required to establish a systematic withdrawal plan. Call the Avesta Service
Center at 1-800-________ for complete instructions.

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

INVOLUNTARY REDEMPTION OF ACCOUNTS. Each Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 due to redemptions or if you purchase through the
Systematic Investment Plan and fail to meet the Fund's investment minimum
within a twelve month period. In the event of any such redemption, you will
receive at least 60 days notice prior to the redemption.

HOW TO EXCHANGE YOUR SHARES

You can exchange your shares for shares of the same class of certain other
Avesta Funds at net asset value beginning 15 days after purchase. Not all
Avesta Funds offer all classes of shares. The description of the other
<PAGE>
Avesta Fund into which shares are being exchanged which appears in this
prospectus should be read carefully and retained for future reference.

For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.

EXCHANGING BY PHONE. A Telephone Exchange Privilege is currently available.
Call the Avesta Service Center for procedures for telephone transactions.
The Telephone Exchange Privilege is not available if you were issued
certificates for shares that remain outstanding.

EXCHANGE PARAMETERS. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and in other circumstances where Fund management
or the Trustees believe doing so would be in the best interests of the Funds,
each Fund reserves the right to revise or terminate the exchange privilege,
limit the amount or number of exchanges or reject any exchange. In addition,
any shareholder who makes more than ten exchanges of shares involving a Fund
in a year or three in a calendar quarter will be charged a $5.00
administration fee for each such exchange. Shareholders would be notified of
any such action to the extent required by law. Consult the Avesta Service
Center before requesting an exchange. See the SAI to find out more about the
exchange privilege.

HOW THE FUNDS VALUE THEIR SHARES

The portfolio securities of the Money Market Fund and the Tax Free Money
Market Fund are valued at their amortized cost in accordance with federal
securities laws, certain requirements of which are summarized under "Common
Investment Policies." This method increases stability in valuation, but may
result in periods during which the stated value of a portfolio security is
higher or lower than the price a Fund would receive if the instrument were
sold. It is anticipated that the net asset value of each share of each Fund
will remain constant at $1.00 and the Funds will employ specific investment
policies and procedures to accomplish this result, although no assurance can
be given that they will be able to do so on a continuing basis. The Board of
Trustees will review the holdings of each Fund at intervals it deems
appropriate to determine whether that Fund's net asset value calculated by
using available market quotations (or an appropriate substitute which
reflects current market conditions) deviates from $1.00 per share based upon
amortized costs. In the event the Trustees determine that a deviation exists
that may result in material dilution or other unfair results to investors or
existing shareholders, the Trustees will take such corrective action as they
regard as necessary and appropriate.

Non-Money Market Funds. The net asset value of each class of each other
Fund's shares is determined once daily based upon prices determined as of the
close of regular trading on the New York Stock Exchange (normally 4:00 p.m.,
Eastern time, however, options are priced at 4:15 p.m., Eastern time), on
each Fund Business Day, by dividing the net assets of the Fund attributable
to that class by the total number of outstanding shares of that class. Values
<PAGE>
of assets held by the Funds are determined on the basis of their market or
other fair value, as described in the SAI.

HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION

Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes under Subchapter M of the Code and to meet all other
requirements that are necessary for it to be relieved of federal taxes on
income and gain it distributes to shareholders. If a Fund does not qualify as
a regulated investment company for any taxable year or does not meet certain
other requirements, such Fund will be subject to tax on all of its taxable
income and gains.

Early in each calendar year the Funds will notify you of the amount and tax
status of distributions paid for the preceding year.

OTHER INFORMATION CONCERNING THE FUNDS

For shareholders that bank with Chase or TCB, Chase or TCB may aggregate
investments in the Avesta Funds with balances held in Chase or TCB bank
accounts for purposes of determining eligibility for certain bank privileges
that are based on specified minimum balance requirements, such as reduced or
no fees for certain banking services or preferred rates on loans and
deposits. Chase, TCB and certain other financial institutions may, at their
own expense, provide gifts, such as computer software packages, guides and
books related to investment or additional Fund shares valued up to $250 to
their customers that invest in the Avesta Funds.

DISTRIBUTION PLANS

The Funds' distributor is CF Distributors, Inc. ("CFD"). CFD is a subsidiary
of The BISYS Group, Inc. and is unaffiliated with TCB. The Trust has adopted
a Rule 12b-1 distribution plan for Retail Class shares, which provides for
the payment of distribution fees at an annual rate of up to 0.25% of the
average daily net assets attributable to Retail Class shares of each Fund.
Payments under the distribution plan shall be used to compensate the Funds'
distributor and broker-dealers for services provided and expenses incurred in
connection with the sale of Retail Class shares, and are not tied to the
actual expenses incurred. Payments may be used to compensate broker-dealers
with trail or maintenance commissions at an annual rate of up to 0.25% of the
average daily net assets value of Retail Class shares invested in each Fund
by customers of those broker-dealers. Trail or maintenance commissions are
paid to broker-dealers beginning the 13th month following the purchase of
shares by their customers. Promotional activities for the sale of Retail
Class shares will be conducted generally by the Chase Funds, and activities
intended to promote one Fund's Retail Class shares may also benefit such
Fund's other shares and other Chase Funds.
<PAGE>
CFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Chase Funds. These incentives may include gifts
of up to $100 per person annually; an occasional meal, ticket to a sporting
event or theater for entertainment for broker-dealers and their guests; and
payment or reimbursement for travel expenses, including lodging and meals, in
connection with attendance at training and educational meetings within and
outside the U.S.

ADMINISTRATOR

Chase acts as the Funds' administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of each
Fund's average daily net assets.

SUB-ADMINISTRATOR AND DISTRIBUTOR

CFD acts as the Funds' sub-administrator and distributor. CFD is a subsidiary
of The BISYS Group, Inc. and is unaffiliated with Chase. For the
sub-administrative services it performs, CFD is entitled to receive a fee
from each Fund at an annual rate equal to 0.05% of the Fund's average daily
net assets. CFD has agreed to use a portion of this fee to pay for certain
expenses incurred in connection with organizing new series of the Trust and
certain other ongoing expenses of the Trust. CFD is located at 101 Park
Avenue, New York, NY 10178.

CUSTODIAN

EXPENSES

ORGANIZATION AND DESCRIPTION OF SHARES

The Funds are portfolios of Mutual Fund Investment Trust, an open-end
management investment company organized as a Massachusetts business trust on
<PAGE>
September 23, 1997 (the "Trust"). The Trust has reserved the right to create
and issue additional series and classes. Each share of a series or class
represents an equal proportionate interest in that series or class with each
other share of that series or class. The shares of each series or class
participate equally in the earnings, dividends and assets of the particular
series or class. Shares have no preemptive or conversion rights. Shares when
issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each whole share held, and each
fractional share shall be entitled to a proportionate fractional vote, except
that Trust shares held in the treasury of the Trust shall not be voted.
Shares of each class of a Fund generally vote together except when required
under federal securities laws to vote separately on matters that only affect
a particular class, such as the approval of distribution plans for a
particular class.

Each Fund issues multiple classes of shares. This Prospectus relates only to
Retail Shares of the Funds. The Funds offer other classes of shares in
addition to this class. The categories of investors that are eligible to
purchase shares may differ for each class of Fund shares. In addition, other
classes of Fund shares may be subject to differences in sales charge
arrangements, ongoing distribution and service fee levels, and levels of
certain other expenses, which will affect the relative performance of the
different classes. Investors may call 1-800- _______ to obtain additional
information about other classes of shares of the Funds that are offered. Any
person entitled to receive compensation for selling or servicing shares of a
Fund may receive different levels of compensation with respect to one class
of shares over another.

The Trust was formed to receive the assets of the AVESTA Trust, a Texas
business trust ("Avesta"). Pursuant to a reorganization which took place on
December 31, 1997, the Money Market Fund, Short-Term Intermediate Term Fund,
U.S. Government Securities Fund, Intermediate Term Bond Fund, Income Fund,
Balanced Fund, Equity Income Fund, Core Equity Fund, Equity Growth Fund and
Small Cap Fund each acquired the assets of a corresponding series of Avesta
in exchange for Institutional Shares of such Fund.

UNIQUE CHARACTERISTICS OF MASTER/FEEDER FUND STRUCTURE

Unlike other mutual funds which directly acquire and manage their own
portfolio securities, each Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
<PAGE>
event, a shareholder's interest in a Fund's underlying investment securities
would be indirect. In addition to selling a beneficial interest to a Fund, a
Portfolio could also sell beneficial interests to other mutual funds or
institutional investors. Such investors would invest in such Portfolio on the
same terms and conditions and would pay a proportionate share of such
Portfolio's expenses. However, other investors in a Portfolio would not be
required to sell their shares at the same public offering price as a Fund,
and might bear different levels of ongoing expenses than a Fund. Shareholders
of the Funds should be aware that these differences may result in differences
in returns experienced in the different funds that invest in a Portfolio.
Such differences in return are also present in other mutual fund structures.

If a Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-_________. In the event a Fund adopts a master/feeder structure and
invests all of its investable assets in a Portfolio, shareholders of the Fund
will be given at least 30 days' prior written notice.

PERFORMANCE INFORMATION

Money Market Funds. The Money Market Fund and the Tax Free Money Market Fund
may each advertise its annualized "yield" and its "effective yield."
"Annualized "yield" is determined by assuming that income generated by an
investment in a Fund over a stated seven-day period (the "yield") will
continue to be generated each week over a 52-week period. It is shown as a
percentage of such investment. "Effective yield" is the annualized "yield'
<PAGE>
calculated assuming the reinvestment of the income earned during each week of
the 52-week period. The "effective yield" will be slightly higher than the
"yield" due to the compounding effect of this assumed reinvestment.

AVESTA BALANCED FUND
AVESTA CORE EQUITY FUND
AVESTA EQUITY GROWTH FUND
AVESTA EQUITY INCOME FUND
AVESTA INCOME FUND
AVESTA INTERMEDIATE TERM BOND FUND
AVESTA INTERNATIONAL EQUITY FUND
AVESTA MID CAP GROWTH FUND
AVESTA MONEY MARKET FUND
AVESTA NEW YORK TAX FREE INCOME FUND
AVESTA SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND
AVESTA SMALL CAPITALIZATION FUND
AVESTA TAX FREE INCOME FUND
AVESTA TAX FREE MONEY MARKET FUND
AVESTA U.S. GOVERNMENT SECURITIES FUND

101 Park Avenue, New York, New York 10178

This Statement of Additional Information sets forth information which
may be of interest to investors but which is not necessarily included in the
Prospectuses offering shares of the Funds. This Statement of Additional
Information should be read in conjunction with the Prospectuses offering
Institutional and Retail shares of Avesta Money Market Fund and Avesta Tax
Free Money Market Fund (collectively the "Money Market Funds"), Avesta Income
Fund, Avesta Intermediate Term Bond Fund, Avesta New York Tax Free Income
Fund, Avesta Short-Intermediate Term U.S. Government Securities Fund, Avesta
Tax Free Income Fund and Avesta U.S. Government Securities Fund (collectively
the "Income Funds"), and Avesta Balanced Fund, Avesta Core Equity Fund,
Avesta Equity Income Fund, Avesta Equity Growth Fund, Avesta International
Equity Fund, Avesta Mid Cap Growth Fund and Avesta Small Capitalization Fund
(collectively the "Equity Funds"). The Avesta Tax Free Money Market Fund,
Avesta Tax Free Income Fund and Avesta New York Tax Free Income Fund are
collectively known as the "Tax Free Funds." Any references to a "Prospectus"
in this Statement of Additional Information is a reference to one or more of
the foregoing Prospectuses, as the context requires. Copies of each
Prospectus may be obtained by an investor without charge by contacting CF
Distributors, Inc. ("CFD"), the Funds' distributor (the "Distributor"), at
the above-listed address.

This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus.
<PAGE>
For more information about your account, simply call or write the Avesta
Service Center at:

1-800-
Avesta Service Center
P.O. Box 419392
Kansas City, MO 64141
<PAGE>
TABLE OF CONTENTS

Page

THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

INVESTMENT POLICIES AND RESTRICTIONS . . . . . . . . . . . . . . . . . . 4

PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 30

DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . 38

PURCHASES, REDEMPTIONS AND EXCHANGES . . . . . . . . . . . . . . . . . . 39

TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

MANAGEMENT OF THE TRUST AND THE FUNDS . . . . . . . . . . . . . . . . . . 49

INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . 58

CERTAIN REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . . . . 59

GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

APPENDIX A

DESCRIPTION OF CERTAIN OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES OR INSTRUMENTALITIES . . . . . . . . . . . . . . . . . . . . . . 62

APPENDIX B

DESCRIPTION OF RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . 65

APPENDIX C

SPECIAL INVESTMENT CONSIDERATIONS RELATING TO
NEW YORK MUNICIPAL OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 70
<PAGE>
THE FUNDS

Mutual Fund Investment Trust (the "Trust") is an open-end management
investment company which was organized as a business trust under the laws of
the Commonwealth of Massachusetts on September 23, 1997. The Trust presently
consists of 15 separate series (the "Funds"). Certain of the Funds are
diversified and other Funds are non-diversified, as such term is defined in
the Investment Company Act of 1940, as amended (the "1940 Act"). The shares
of the Funds are collectively referred to in this Statement of Additional
Information as the "Shares."

Effective January 1, 1998, the Money Market, Short-Intermediate Term
U.S. Government Securities, U.S. Government Securities, Intermediate Term
Bond, Income, Balanced, Equity Income, Core Equity, Equity Growth and Small
Capitalization Funds of the AVESTA Trust, a collective investment trust, were
converted and redomiciled into the corresponding portfolios of the Trust (the
"Avesta Conversion").

The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. The Chase Manhattan Bank ("Chase")
is the investment adviser for the Funds. Chase also serves as the Trust's
administrator (the "Administrator") and supervises the overall administration
of the Trust, including the Funds. A majority of the Trustees of the Trust
are not affiliated with the investment adviser or sub-advisers.

INVESTMENT POLICIES AND RESTRICTIONS

Investment Policies

The Prospectuses set forth the various investment policies of each Fund.
The following information supplements and should be read in conjunction with
the related sections of the Prospectuses. As used in this Statement of
Additional Information, with respect to those Funds and policies for which it
applies, the term "Municipal Obligations" has the meaning given to it in the
Prospectuses. For descriptions of the securities ratings of Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P") and Fitch
Investors Service, Inc. ("Fitch"), see Appendix B.

U.S. Government Securities. U.S. Government Securities include (1) U.S.
Treasury obligations, which generally differ only in their interest rates,
maturities and times of issuance, including: U.S. Treasury bills (maturities
of one year or less), U.S. Treasury notes (maturities of one to ten years)
and U.S. Treasury bonds (generally maturities of greater than ten years); and
(2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
any amount listed to a specific line of credit from the U.S. Treasury, (c)
discretionary authority of the U.S. Government to purchase certain
obligations of the U.S. Government agency or instrumentality or (d) the
credit of the agency or instrumentality. Agencies and instrumentalities of
the U.S. Government include but are not limited to: Federal Land Banks,
Federal Financing Banks, Banks for Cooperatives, Federal Intermediate Credit
Banks, Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage
<PAGE>
Corporation, Federal National Mortgage Association, Student Loan Marketing
Association, United States Postal Service, Chrysler Corporate Loan Guarantee
Board, Small Business Administration, Tennessee Valley Authority and any
other enterprise established or sponsored by the U.S. Government. Certain
U.S. Government Securities, including U.S. Treasury bills, notes and bonds,
Government National Mortgage Association certificates and Federal Housing
Administration debentures, are supported by the full faith and credit of the
United States. Other U.S. Government Securities are issued or guaranteed by
federal agencies or government sponsored enterprises and are not supported by
the full faith and credit of the United States. These securities include
obligations that are supported by the right of the issuer to borrow from the
U.S. Treasury, such as obligations of the Federal Home Loan Banks, and
obligations that are supported by the creditworthiness of the particular
instrumentality, such as obligations of the Federal National Mortgage
Association or Federal Home Loan Mortgage Corporation. For a description of
certain obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, see Appendix A.

In addition, certain U.S. Government agencies and instrumentalities
issue specialized types of securities, such as guaranteed notes of the Small
Business Administration, Federal Aviation Administration, Department of
Defense, Bureau of Indian Affairs and Private Export Funding Corporation,
which often provide higher yields than are available from the more common
types of government-backed instruments. However, such specialized instruments
may only be available from a few sources, in limited amounts, or only in very
large denominations; they may also require specialized capability in
portfolio servicing and in legal matters related to government guarantees.
While they may frequently offer attractive yields, the limited-activity
markets of many of these securities means that, if a Fund were required to
liquidate any of them, it might not be able to do so advantageously;
accordingly, each Fund investing in such securities normally to hold such
securities to maturity or pursuant to repurchase agreements, and would treat
such securities (including repurchase agreements maturing in more than seven
days) as illiquid for purposes of its limitation on investment in illiquid
securities.

Bank Obligations. Investments in bank obligations are limited to those
of U.S. banks (including their foreign branches) which have total assets at
the time of purchase in excess of $1 billion and the deposits of which are
insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund of the Federal Deposit Insurance Corporation, and foreign
banks (including their U.S. branches) having total assets in excess of $10
billion (or the equivalent in other currencies), and such other U.S. and
foreign commercial banks which are judged by the advisers to meet comparable
credit standing criteria.

Bank obligations include negotiable certificates of deposit, bankers'
acceptances, fixed time deposits and deposit notes. A certificate of deposit
is a short-term negotiable certificate issued by a commercial bank against
funds deposited in the bank and is either interest-bearing or purchased on a
discount basis. A bankers' acceptance is a short-term draft drawn on a
commercial bank by a borrower, usually in connection with an international
commercial transaction. The borrower is liable for payment as is the bank,
<PAGE>
which unconditionally guarantees to pay the draft at its face amount on the
maturity date. Fixed time deposits are obligations of branches of United
States banks or foreign banks which are payable at a stated maturity date and
bear a fixed rate of interest. Although fixed time deposits do not have a
market, there are no contractual restrictions on the right to transfer a
beneficial interest in the deposit to a third party. Fixed time deposits
subject to withdrawal penalties and with respect to which a Fund cannot
realize the proceeds thereon within seven days are deemed "illiquid" for the
purposes of its restriction on investments in illiquid securities. Deposit
notes are notes issued by commercial banks which generally bear fixed rates
of interest and typically have original maturities ranging from eighteen
months to five years.

Banks are subject to extensive governmental regulations that may limit
both the amounts and types of loans and other financial commitments that may
be made and the interest rates and fees that may be charged. The
profitability of this industry is largely dependent upon the availability and
cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the operations of this industry and exposure to credit
losses arising from possible financial difficulties of borrowers might affect
a bank's ability to meet its obligations. Bank obligations may be general
obligations of the parent bank or may be limited to the issuing branch by the
terms of the specific obligations or by government regulation. Investors
should also be aware that securities of foreign banks and foreign branches of
United States banks may involve foreign investment risks in addition to those
relating to domestic bank obligations.

Depositary Receipts. A Fund will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying security to no more
than 5% of the value of its net assets (at the time of investment). A
purchaser of an unsponsored Depositary Receipt may not have unlimited voting
rights and may not receive as much information about the issuer of the
underlying securities as with a sponsored Depositary Receipt.

ECU Obligations. The specific amounts of currencies comprising the ECU
may be adjusted by the Council of Ministers of the European Community to
reflect changes in relative values of the underlying currencies. The Trustees
do not believe that such adjustments will adversely affect holders of ECU-
denominated securities or the marketability of such securities.

Supranational Obligations. Supranational organizations, include
organizations such as The World Bank, which was chartered to finance
development projects in developing member countries; the European Community,
which is a twelve-nation organization engaged in cooperative economic
activities; the European Coal and Steel Community, which is an economic union
of various European nations steel and coal industries; and the Asian
Development Bank, which is an international development bank established to
lend funds, promote investment and provide technical assistance to member
nations of the Asian and Pacific regions.

Corporate Reorganizations. In general, securities that are the subject
of a tender or exchange offer or proposal sell at a premium to their historic
market price immediately prior to the announcement of the offer or proposal.
<PAGE>
The increased market price of these securities may also discount what the
stated or appraised value of the security would be if the contemplated action
were approved or consummated. These investments may be advantageous when the
discount significantly overstates the risk of the contingencies involved;
significantly undervalues the securities, assets or cash to be received by
shareholders of the prospective portfolio company as a result of the
contemplated transaction; or fails adequately to recognize the possibility
that the offer or proposal may be replaced or superseded by an offer or
proposal of greater value. The evaluation of these contingencies requires
unusually broad knowledge and experience on the part of the advisers that
must appraise not only the value of the issuer and its component businesses
as well as the assets or securities to be received as a result of the
contemplated transaction, but also the financial resources and business
motivation of the offeror as well as the dynamics of the business climate
when the offer or proposal is in progress. Investments in reorganization
securities may tend to increase the turnover ratio of a Fund and increase its
brokerage and other transaction expenses.

Warrants and Rights. Warrants basically are options to purchase equity
securities at a specified price for a specific period of time. Their prices
do not necessarily move parallel to the prices of the underlying securities.
Rights are similar to warrants but normally have a shorter duration and are
distributed directly by the issuer to shareholders. Rights and warrants have
no voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.

Commercial Paper. Commercial paper consists of short-term (usually from
1 to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note (which
is a type of commercial paper) represents a direct borrowing arrangement
involving periodically fluctuating rates of interest under a letter agreement
between a commercial paper issuer and an institutional lender pursuant to
which the lender may determine to invest varying amounts. The commercial
paper and other short-term obligations of U.S. and foreign corporations which
may be purchased by the Money Market Fund, other than those of bank holding
companies, include obligations which are (i) rated Prime-1 by Moody's, A-1 by
S&P, or F-1 by Fitch, or comparably rated by another NRO; or (ii) determined
by the advisers to be of comparable quality to those rated obligations which
may be purchased by the Money Market Fund at the date of purchase or which at
the date of purchase have an outstanding debt issue rated in the highest
rating category by Moody's, S&P, Fitch or another NRO. The commercial paper
and other short-term obligations of U.S. banks holding companies which may be
purchased by Money Market Fund include obligations issued or guaranteed by
bank holding companies with total assets exceeding $1 billion. For purposes
of the size standards with respect to banks and bank holding companies,
"total deposits" and "total assets" are determined on an annual basis by
reference to an institution's then most recent annual financial statements.

Repurchase Agreements. A Fund will enter into repurchase agreements only
with member banks of the Federal Reserve System and securities dealers
believed creditworthy, and only if fully collateralized by securities in
which such Fund is permitted to invest. Under the terms of a typical
repurchase agreement, a Fund would acquire an underlying instrument for a
<PAGE>
relatively short period (usually not more than one week) subject to an
obligation of the seller to repurchase the instrument and the Fund to resell
the instrument at a fixed price and time, thereby determining the yield
during the Fund's holding period. This procedure results in a fixed rate of
return insulated from market fluctuations during such period. A repurchase
agreement is subject to the risk that the seller may fail to repurchase the
security. Repurchase agreements are considered under the 1940 Act to be loans
collateralized by the underlying securities. All repurchase agreements
entered into by a Fund will be fully collateralized at all times during the
period of the agreement in that the value of the underlying security will be
at least equal to 102% of the amount of the loan, including the accrued
interest thereon, and the Fund or its custodian or sub-custodian will have
possession of the collateral, which the Board of Trustees believes will give
it a valid, perfected security interest in the collateral. Whether a
repurchase agreement is the purchase and sale of a security or a
collateralized loan has not been conclusively established. This might become
an issue in the event of the bankruptcy of the other party to the
transaction. In the event of default by the seller under a repurchase
agreement construed to be a collateralized loan, the underlying securities
would not be owned by the Fund, but would only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, a Fund may suffer
time delays and incur costs in connection with the disposition of the
collateral. The Board of Trustees believes that the collateral underlying
repurchase agreements may be more susceptible to claims of the seller's
creditors than would be the case with securities owned by a Fund. Repurchase
agreements maturing in more than seven days are treated as illiquid for
purposes of the Funds' restrictions on purchases of illiquid securities.
Repurchase agreements are also subject to the risks described below with
respect to stand-by commitments.

Forward Commitments. In order to invest a Fund's assets immediately,
while awaiting delivery of securities purchased on a forward commitment
basis, short-term obligations that offer same-day settlement and earnings
will normally be purchased. Although, with respect to any Tax Free Fund,
short-term investments will normally be in tax-exempt securities or Municipal
Obligations, short-term taxable securities or obligations may be purchased if
suitable short-term tax-exempt securities or Municipal Obligations are not
available. When a commitment to purchase a security on a forward commitment
basis is made, procedures are established consistent with the General
Statement of Policy of the Securities and Exchange Commission concerning such
purchases. Since that policy currently recommends that an amount of the
respective Fund's assets equal to the amount of the purchase be held aside or
segregated to be used to pay for the commitment, a separate account of such
Fund consisting of cash or liquid securities equal to the amount of such
Fund's commitments securities will be established at such Fund's custodian
bank. For the purpose of determining the adequacy of the securities in the
account, the deposited securities will be valued at market value. If the
market value of such securities declines, additional cash, cash equivalents
or highly 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
respective Fund.
<PAGE>
Although it is not intended that such purchases would be made for
speculative purposes, purchases of securities on a forward commitment basis
may involve more risk than other types of purchases. Securities purchased on
a forward commitment basis and the securities held in the respective Fund's
portfolio are subject to changes in value based upon the public's perception
of the issuer and changes, real or anticipated, in the level of interest
rates. Purchasing securities on a forward commitment basis can involve the
risk that the yields available in the market when the delivery takes place
may actually be higher or lower than those obtained in the transaction
itself. On the settlement date of the forward commitment transaction, the
respective Fund will meet its obligations from then available cash flow, sale
of securities held in the separate account, sale of other securities or,
although it would not normally expect to do so, from sale of the forward
commitment securities themselves (which may have a value greater or lesser
than such Fund's payment obligations). The sale of securities to meet such
obligations may result in the realization of capital gains or losses which,
for consideration by investors in the Tax Free Funds, are not exempt from
federal, state or local taxation.

To the extent a Fund engages in forward commitment transactions, it will
do so for the purpose of acquiring securities consistent with its investment
objective and policies and not for the purpose of investment leverage, and
settlement of such transactions will be within 90 days from the trade date.

Floating and Variable Rate Securities; Participation Certificates.
Floating and variable rate demand instruments permit the holder to demand
payment upon a specified number of days' notice of the unpaid principal
balance plus accrued interest either from the issuer or by drawing on a bank
letter of credit, a guarantee or insurance issued with respect to such
instrument. Investments by the Income Funds in floating or variable rate
securities normally will involve industrial development or revenue bonds that
provide for a periodic adjustment in the interest rate paid on the obligation
and may, but need not, permit the holder to demand payment as described
above. While there is usually no established secondary market for issues of
these types of securities, the dealer that sells an issue of such security
frequently will also offer to repurchase the securities at any time at a
repurchase price which varies and may be more or less than the amount the
holder paid for them. The floating or variable rate demand instruments in
which the Money Market Funds may invest are payable on demand on not more
than seven calendar days' notice.

The terms of these types of securities provide that interest rates are
adjustable at intervals ranging from daily to up to six months and the
adjustments are based upon the prime rate of a bank or other short-term
rates, such as Treasury Bills or LIBOR (London Interbank Offered Rate), as
provided in the respective instruments. The Funds will decide which floating
or variable rate securities to purchase in accordance with procedures
prescribed by Board of Trustees of the Trust in order to minimize credit
risks.

In the case of a Money Market Fund, the Board of Trustees may determine
that an unrated floating or variable rate security meets the Fund's high
quality criteria if it is backed by a letter of credit or guarantee or is
insured by an insurer that meets such quality criteria, or on the basis of a
<PAGE>
credit evaluation of the underlying obligor. If the credit of the obligor is
of "high quality", no credit support from a bank or other financial
institution will be necessary. The Board of Trustees will re-evaluate each
unrated floating or variable rate security on a quarterly basis to determine
that it continues to meet a Money Market Fund's high quality criteria. If an
instrument is ever deemed to fall below a Money Market Fund's high quality
standards, either it will be sold in the market or the demand feature will be
exercised.

The securities in which certain Funds may be invested include
participation certificates issued by a bank, insurance company or other
financial institution in securities owned by such institutions or affiliated
organizations ("Participation Certificates"). A Participation Certificate
gives a Fund an undivided interest in the security in the proportion that the
Fund's participation interest bears to the total principal amount of the
security and generally provides the demand feature described below. Each
Participation Certificate is backed by an irrevocable letter of credit or
guaranty of a bank (which may be the bank issuing the Participation
Certificate, a bank issuing a confirming letter of credit to that of the
issuing bank, or a bank serving as agent of the issuing bank with respect to
the possible repurchase of the Participation Certificate) or insurance policy
of an insurance company that the Board of Trustees of the Trust has
determined meets the prescribed quality standards for a particular Fund.

A Fund may have the right to sell the Participation Certificate back to
the institution and draw on the letter of credit or insurance on demand after
the prescribed notice period, for all or any part of the full principal
amount of the Fund's participation interest in the security, plus accrued
interest. The institutions issuing the Participation Certificates would
retain a service and letter of credit fee and a fee for providing the demand
feature, in an amount equal to the excess of the interest paid on the
instruments over the negotiated yield at which the Participation Certificates
were purchased by a Fund. The total fees would generally range from 5% to 15%
of the applicable prime rate or other short-term rate index. With respect to
insurance, a Fund will attempt to have the issuer of the participation
certificate bear the cost of any such insurance, although the Funds retain
the option to purchase insurance if deemed appropriate. Obligations that have
a demand feature permitting a Fund to tender the obligation to a foreign bank
may involve certain risks associated with foreign investment. A Fund's
ability to receive payment in such circumstances under the demand feature
from such foreign banks may involve certain risks such as future political
and economic developments, the possible establishments of laws or
restrictions that might adversely affect the payment of the bank's
obligations under the demand feature and the difficulty of obtaining or
enforcing a judgment against the bank.

The advisers have been instructed by the Board of Trustees to monitor on
an ongoing basis the pricing, quality and liquidity of the floating and
variable rate securities held by the Funds, including Participation
Certificates, on the basis of published financial information and reports of
the rating agencies and other bank analytical services to which the Funds may
subscribe. Although these instruments may be sold by a Fund, it is intended
that they be held until maturity.
<PAGE>
Past periods of high inflation, together with the fiscal measures
adopted to attempt to deal with it, have seen wide fluctuations in interest
rates, particularly "prime rates" charged by banks. While the value of the
underlying floating or variable rate securities may change with changes in
interest rates generally, the floating or variable rate nature of the
underlying floating or variable rate securities should minimize changes in
value of the instruments. Accordingly, as interest rates decrease or
increase, the potential for capital appreciation and the risk of potential
capital depreciation is less than would be the case with a portfolio of fixed
rate securities. A Fund's portfolio may contain floating or variable rate
securities on which stated minimum or maximum rates, or maximum rates set by
state law, limit the degree to which interest on such floating or variable
rate securities may fluctuate; to the extent it does, increases or decreases
in value may be somewhat greater than would be the case without such limits.
Because the adjustment of interest rates on the floating or variable rate
securities is made in relation to movements of the applicable banks' "prime
rates" or other short-term rate adjustment indices, the floating or variable
rate securities are not comparable to long-term fixed rate securities.
Accordingly, interest rates on the floating or variable rate securities may
be higher or lower than current market rates for fixed rate obligations of
comparable quality with similar maturities.

The maturity of variable rate securities is deemed to be the longer of
(i) the notice period required before a Fund is entitled to receive payment
of the principal amount of the security upon demand or (ii) the period
remaining until the security's next interest rate adjustment. With respect to
a Money Market Fund, the maturity of a variable rate demand instrument will
be determined in the same manner for purposes of computing the Fund's dollar-
weighted average portfolio maturity. With respect to Income Funds, if
variable rate securities are not redeemed through the demand feature, they
mature on a specified date which may range up to thirty years from the date
of issuance.

Tender Option Floating or Variable Rate Certificates. The Money Market
Funds may invest in tender option bonds. A tender option bond is a synthetic
floating or variable rate security issued when long term bonds are purchased
in the secondary market and are then deposited into a trust. Custodial
receipts are then issued to investors, such as the Funds, evidencing
ownership interests in the trust. The trust sets a floating or variable rate
on a daily or weekly basis which is established through a remarketing agent.
These types of derivatives, to be money market eligible under Rule 2a-7, must
have a liquidity facility in place which provides additional comfort to the
investors in case the remarketing fails. The sponsor of the trust keeps the
difference between the rate on the long term bond and the rate on the short
term floating or variable rate security.

Reverse Repurchase Agreements. Reverse repurchase agreements involve the
sale of securities held by a Fund with an agreement to repurchase the
securities at an agreed upon price and date. The repurchase price is
generally equal to the original sales price plus interest. Reverse repurchase
agreements are usually for seven days or less and cannot be repaid prior to
their expiration dates. Reverse repurchase agreements involve the risk that
<PAGE>
the market value of the portfolio securities transferred may decline below
the price at which the Fund is obliged to purchase the securities.

High Quality Municipal Obligations. Investments by the Tax Free Money
Market Fund will be made in unrated Municipal Obligations only if they are
determined to be of comparable quality to permissible rated investments on
the basis of the advisers' credit evaluation of the obligor or of the bank
issuing a participation certificate, letter of credit or guaranty, or
insurance issued in support of the obligation. High Quality instruments may
produce a lower yield than would be available from less highly rated
instruments. The Board of Trustees has determined that Municipal Obligations
which are backed by the credit of U.S. Government will be considered to have
a rating equivalent to Moody's Aaa.

If, subsequent to purchase by the Tax Free Money Market Fund, (a) an
issue of rated Municipal Obligations ceases to be rated in the highest short-
term rating category by at least two rating organizations (or one rating
organization if the instrument was rated by only one such organization) or
the Board of Trustees determines that it is no longer of comparable quality
or (b) the Tax Free Money Market Fund's advisers become aware that any
portfolio security not so highly rated or any unrated security has been given
a rating by any rating organization below the rating organization's second
highest rating category, the Board of Trustees will reassess promptly whether
such security presents minimal credit risk and will cause such Tax Free Money
Market Fund to take such action as it determines is in its best interest and
that of its shareholders; provided that the reassessment required by clause
(b) is not required if the portfolio security is disposed of or matures
within five business days of the advisers becoming aware of the new rating
and the Fund's Board is subsequently notified of the adviser's actions.

To the extent that a rating given by Moody's, S&P or Fitch for Municipal
Obligations may change as a result of changes in such organizations or their
rating systems, the Fund will attempt to use comparable ratings as standards
for its investments in accordance with the investment policies contained in
the Prospectus and this Statement of Additional Information. The ratings of
Moody's, S&P and Fitch represent their opinions as to the quality of the
Municipal Obligations which they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute
standards of quality. Although these ratings may be an initial criterion for
selection of portfolio investments, the advisers also will evaluate these
securities and the creditworthiness of the issuers of such securities.

Zero Coupon, Payment-in-Kind and Stripped Obligations. The principal and
interest components of United States Treasury bonds with remaining maturities
of longer than ten years are eligible to be traded independently under the
Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Under the STRIPS program, the principal and interest
components are separately issued by the United States Treasury at the request
of depository financial institutions, which then trade the component parts
separately. The interest component of STRIPS may be more volatile than that
of United States Treasury bills with comparable maturities.

Zero coupon obligations are sold at a substantial discount from their
value at maturity and, when held to maturity, their entire return, which
<PAGE>
consists of the amortization of discount, comes from the difference between
their purchase price and maturity value. Because interest on a zero coupon
obligation is not distributed on a current basis, the obligation tends to be
subject to greater price fluctuations in response to changes in interest
rates than are ordinary interest-paying securities with similar maturities.
The value of zero coupon obligations appreciates more than such ordinary
interest-paying securities during periods of declining interest rates and
depreciates more than such ordinary interest-paying securities during periods
of rising interest rates. Under the stripped bond rules of the Internal
Revenue Code of 1986, as amended (the "Code"), investments by a Fund in zero
coupon obligations will result in the accrual of interest income on such
investments in advance of the receipt of the cash corresponding to such
income.

Zero coupon securities may be created when a dealer deposits a U.S.
Treasury or federal agency security with a custodian and then sells the
coupon payments and principal payment that will be generated by this security
separately. Proprietary receipts, such as Certificates of Accrual on Treasury
Securities, Treasury Investment Growth Receipts and generic Treasury
Receipts, are examples of stripped U.S. Treasury securities separated into
their component parts through such custodial arrangements.

Payment-in-kind ("PIK") bonds are debt obligations which provide that
the issuer thereof may, at its option, pay interest on such bonds in cash or
in the form of additional debt obligations. Such investments benefit the
issuer by mitigating its need for cash to meet debt service, but also require
a higher rate of return to attract investors who are willing to defer receipt
of such cash. Such investments experience greater volatility in market value
due to changes in interest rates than debt obligations which provide for
regular payments of interest. A Fund will accrue income on such investments
for tax and accounting purposes, as required, which is distributable to
shareholders and which, because no cash is received at the time of accrual,
may require the liquidation of other portfolio securities to satisfy the
Fund's distribution obligations.

Illiquid Securities. For purposes of its limitation on investments in
illiquid securities, each Fund may elect to treat as liquid, in accordance
with procedures established by the Board of Trustees, certain investments in
restricted securities for which there may be a secondary market of qualified
institutional buyers as contemplated by Rule 144A under the Securities Act of
1933, as amended (the "Securities Act") and commercial obligations issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act ("Section 4(2) paper"). Rule
144A provides an exemption from the registration requirements of the
Securities Act for the resale of certain restricted securities to qualified
institutional buyers. Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to institutional
investors such as a Fund who agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale of Section
4(2) paper by the purchaser must be in an exempt transaction.

One effect of Rule 144A and Section 4(2) is that certain restricted
securities may now be liquid, though there is no assurance that a liquid
market for Rule 144A securities or Section 4(2) paper will develop or be
<PAGE>
maintained. The Trustees have adopted policies and procedures for the purpose
of determining whether securities that are eligible for resale under Rule
144A and Section 4(2) paper are liquid or illiquid for purposes of the
limitation on investment in illiquid securities. Pursuant to those policies
and procedures, the Trustees have delegated to the advisers the determination
as to whether a particular instrument is liquid or illiquid, requiring that
consideration be given to, among other things, the frequency of trades and
quotes for the security, the number of dealers willing to sell the security
and the number of potential purchasers, dealer undertakings to make a market
in the security, the nature of the security and the time needed to dispose of
the security. The Trustees will periodically review the Funds' purchases and
sales of Rule 144A securities and Section 4(2) paper.

Stand-By Commitments. In a put transaction, a Fund acquires the right to
sell a security at an agreed upon price within a specified period prior to
its maturity date, and a stand-by commitment entitles a Fund to same-day
settlement and to receive an exercise price equal to the amortized cost of
the underlying security plus accrued interest, if any, at the time of
exercise.

The amount payable to the Tax Free Money Market Fund upon its exercise
of a stand-by commitment with respect to a Municipal Obligation normally
would be (i) the acquisition cost of the Municipal Obligation (excluding any
accrued interest paid by the Fund on the acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the security, plus (ii) all interest accrued on the
security since the last interest payment date during the period the security
was owned by the Fund. Absent unusual circumstances relating to a change in
market value, the Tax Free Money Market Fund would value the underlying
Municipal Obligation at amortized cost. Accordingly, the amount payable by a
bank or dealer during the time a stand-by commitment is exercisable would be
substantially the same as the market value of the underlying Municipal
Obligation. The Tax Free Money Market Fund values stand-by commitments at
zero for purposes of computing their net asset value per share.

Stand-by commitments are subject to certain risks, which include the
inability of the issuer of the commitment to pay for the securities at the
time the commitment is exercised, the fact that the commitment is not
marketable by the Fund, and that the maturity of the underlying security will
generally be different from that of the commitment. Nor more than 10% of the
total assets of the Tax Free Money Market Fund will be invested in Municipal
Obligations that are subject to stand-by commitments from the same bank or
broker-dealer.

Securities Loans. To the extent specified in the Prospectuses, each Fund
is permitted to lend its securities to broker-dealers and other institutional
investors in order to generate additional income. Such loans of portfolio
securities may not exceed 30% of the value of a Fund's total assets. In
connection with such loans, a Fund will receive collateral consisting of
cash, cash equivalents, U.S. Government securities or irrevocable letters of
credit issued by financial institutions. Such collateral will be maintained
at all times in an amount equal to at least 102% of the current market value
plus accrued interest of the securities loaned. A Fund can increase its
income through the investment of such collateral. A Fund continues to be
<PAGE>
entitled to the interest payable or any dividend-equivalent payments received
on a loaned security and, in addition, to receive interest on the amount of
the loan. However, the receipt of any dividend-equivalent payments by a Fund
on a loaned security from the borrower will not qualify for the dividends-
received deduction. Such loans will be terminable at any time upon specified
notice. A Fund might experience risk of loss if the institutions with which
it has engaged in portfolio loan transactions breach their agreements with
such Fund. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delays in receiving
additional collateral or in the recovery of the securities or possible loss
of rights in the collateral should the borrower experience financial
difficulty. Loans will be made only to firms deemed by the advisers to be of
good standing and will not be made unless, in the judgment of the advisers,
the consideration to be earned from such loans justifies the risk.

Real Estate Investment Trusts. Certain Funds may invest in shares of
real estate investment trusts ("REITs"), which are pooled investment vehicles
which invest primarily in income-producing real estate or real estate related
loans or interests. REITs are generally classified as equity REITs or
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents.
Equity REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. The value of equity trusts will depend upon the value of the
underlying properties, and the value of mortgage trusts will be sensitive to
the value of the underlying loans or interests.

Additional Policies Regarding Derivative and Related Transactions

Introduction. As explained more fully below, the non-Money Market Funds
may employ derivative and related instruments as tools in the management of
portfolio assets. Put briefly, a "derivative" instrument may be considered a
security or other instrument which derives its value from the value or
performance of other instruments or assets, interest or currency exchange
rates, or indexes. For instance, derivatives include futures, options,
forward contracts, structured notes and various over-the-counter instruments.

Like other investment tools or techniques, the impact of using
derivatives strategies or similar instruments depends to a great extent on
how they are used. Derivatives are generally used by portfolio managers in
three ways: first, to reduce risk by hedging (offsetting) an investment
position; second, to substitute for another security particularly where it is
quicker, easier and less expensive to invest in derivatives; and lastly, to
speculate or enhance portfolio performance. When used prudently, derivatives
can offer several benefits, including easier and more effective hedging,
lower transaction costs, quicker investment and more profitable use of
portfolio assets. However, derivatives also have the potential to
significantly magnify risks, thereby leading to potentially greater losses
for a Fund.

Each Fund may invest its assets in derivative and related instruments
subject only to the Fund's investment objective and policies and the
requirement that the Fund maintain segregated accounts consisting of cash or
<PAGE>
other liquid assets (or, as permitted by applicable regulation, enter into
certain offsetting positions) to cover its obligations under such instruments
with respect to positions where there is no underlying portfolio asset so as
to avoid leveraging the Fund.

The value of some derivative or similar instruments in which the Funds
may invest may be particularly sensitive to changes in prevailing interest
rates or other economic factors, and--like other investments of the Funds-
ability of a Fund to successfully utilize these instruments may depend in
part upon the ability of the advisers to forecast interest rates and other
economic factors correctly. If the advisers inaccurately forecast such
factors and has taken positions in derivative or similar instruments contrary
to prevailing market trends, a Fund could be exposed to the risk of a loss.
The Funds might not employ any or all of the strategies described herein, and
no assurance can be given that any strategy used will succeed.

Set forth below is an explanation of the various derivatives strategies
and related instruments the Funds may employ along with risks or special
attributes associated with them. This discussion is intended to supplement
the Funds' current prospectuses as well as provide useful information to
prospective investors.

Risk Factors. As explained more fully below and in the discussions of
particular strategies or instruments, there are a number of risks associated
with the use of derivatives and related instruments. There can be no
guarantee that there will be a correlation between price movements in a
hedging vehicle and in the portfolio assets being hedged. An incorrect
correlation could result in a loss on both the hedged assets in a Fund and
the hedging vehicle so that the portfolio return might have been greater had
hedging not been attempted. This risk is particularly acute in the case of
"cross-hedges" between currencies. The advisers may inaccurately forecast
interest rates, market values or other economic factors in utilizing a
derivatives strategy. In such a case, a Fund may have been in a better
position had it not entered into such strategy. Hedging strategies, while
reducing risk of loss, can also reduce the opportunity for gain. In other
words, hedging usually limits both potential losses as well as potential
gains. Strategies not involving hedging may increase the risk to a Fund.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to a Fund than hedging strategies
using the same instruments. There can be no assurance that a liquid market
will exist at a time when a Fund seeks to close out an option, futures
contract or other derivative or related position. Many exchanges and boards
of trade limit the amount of fluctuation permitted in option or futures
contract prices during a single day; once the daily limit has been reached on
particular contract, no trades may be made that day at a price beyond that
limit. In addition, certain instruments are relatively new and without a
significant trading history. As a result, there is no assurance that an
active secondary market will develop or continue to exist. Finally, over-the-
counter instruments typically do not have a liquid market. Lack of a liquid
market for any reason may prevent a Fund from liquidating an unfavorable
position. Activities of large traders in the futures and securities markets
involving arbitrage, "program trading," and other investment strategies may
cause price distortions in these markets. In certain instances, particularly
<PAGE>
those involving over-the-counter transactions, forward contracts there is a
greater potential that a counterparty or broker may default or be unable to
perform on its commitments. In the event of such a default, a Fund may
experience a loss. In transactions involving currencies, the value of the
currency underlying an instrument may fluctuate due to many factors,
including economic conditions, interest rates, governmental policies and
market forces.

Specific Uses and Strategies. Set forth below are explanations of
various strategies involving derivatives and related instruments which may be
used by a Fund.

Options on Securities, Securities Indexes and Debt Instruments. A Fund
may purchase, sell or exercise call and put options on (i) securities, (ii)
securities indexes, and (iii) debt instruments.

Although in most cases these options will be exchange-traded, the Funds
may also purchase, sell or exercise over-the-counter options. Over-the-
counter options differ from exchange-traded options in that they are two-
party contracts with price and other terms negotiated between buyer and
seller. As such, over-the-counter options generally have much less market
liquidity and carry the risk of default or nonperformance by the other party.

One purpose of purchasing put options is to protect holdings in an
underlying or related security against a substantial decline in market value.
One purpose of purchasing call options is to protect against substantial
increases in prices of securities the Fund intends to purchase pending its
ability to invest in such securities in an orderly manner. A Fund may also
use combinations of options to minimize costs, gain exposure to markets or
take advantage of price disparities or market movements. For example, a Fund
may sell put or call options it has previously purchased or purchase put or
call options it has previously sold. These transactions may result in a net
gain or loss depending on whether the amount realized on the sale is more or
less than the premium and other transaction costs paid on the put or call
option which is sold. A Fund may write a call or put option in order to earn
the related premium from such transactions. Prior to exercise or expiration,
an option may be closed out by an offsetting purchase or sale of a similar
option. The Funds will not write uncovered options.

In addition to the general risk factors noted above, the purchase and
writing of options involve certain special risks. During the option period, a
Fund writing a covered call (i.e., where the underlying securities are held
by the Fund) has, in return for the premium on the option, given up the
opportunity to profit from a price increase in the underlying securities
above the exercise price, but has retained the risk of loss should the price
of the underlying securities decline. The writer of an option has no control
over the time when it may be required to fulfill its obligation as a writer
of the option. Once an option writer has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying securities at the
exercise price. The Funds will not write uncovered options.

If a put or call option purchased by a Fund is not sold when it has
remaining value, and if the market price of the underlying security, in the
<PAGE>
case of a put, remains equal to or greater than the exercise price or, in the
case of a call, remains less than or equal to the exercise price, such Fund
will lose its entire investment in the option. Also, where a put or call
option on a particular security is purchased to hedge against price movements
in a related security, the price of the put or call option may move more or
less than the price of the related security. There can be no assurance that a
liquid market will exist when a Fund seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed on the
options markets, a Fund may be unable to close out a position.

Futures Contracts and Options on Futures Contracts. A Fund may purchase
or sell (i) interest-rate futures contracts, (ii) futures contracts on
specified instruments or indices, and (iii) options on these futures
contracts ("futures options").

The futures contracts and futures options may be based on various
instruments or indices in which the Funds may invest such as foreign
currencies, certificates of deposit, Eurodollar time deposits, securities
indices, economic indices (such as the Consumer Price Indices compiled by the
U.S. Department of Labor).

Futures contracts and futures options may be used to hedge portfolio
positions and transactions as well as to gain exposure to markets. For
example, a Fund may sell a futures contract--or buy a futures option--to
protect against a decline in value, or reduce the duration, of portfolio
holdings. Likewise, these instruments may be used where a Fund intends to
acquire an instrument or enter into a position. For example, a Fund may
purchase a futures contract--or buy a futures option--to gain immediate
exposure in a market or otherwise offset increases in the purchase price of
securities or currencies to be acquired in the future. Futures options may
also be written to earn the related premiums.

When writing or purchasing options, the Funds may simultaneously enter
into other transactions involving futures contracts or futures options in
order to minimize costs, gain exposure to markets, or take advantage of price
disparities or market movements. Such strategies may entail additional risks
in certain instances. The Funds may engage in cross-hedging by purchasing or
selling futures or options on a security or currency different from the
security or currency position being hedged to take advantage of relationships
between the two securities or currencies.

Investments in futures contracts and options thereon involve risks
similar to those associated with options transactions discussed above. The
Funds will only enter into futures contracts or options on futures contracts
which are traded on a U.S. or foreign exchange or board of trade, or similar
entity, or quoted on an automated quotation system.

Forward Contracts. A Fund may use foreign currency and interest-rate
forward contracts for various purposes as described below.

Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments
in different countries, actual or perceived changes in interest rates and
other complex factors, as seen from an international perspective. A Fund that
<PAGE>
may invest in securities denominated in foreign currencies may, in addition
to buying and selling foreign currency futures contracts and options on
foreign currencies and foreign currency futures, enter into forward foreign
currency exchange contracts to reduce the risks or otherwise take a position
in anticipation of changes in foreign exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be a fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the
time of the contract. By entering into a forward foreign currency contract, a
Fund "locks in" the exchange rate between the currency it will deliver and
the currency it will receive for the duration of the contract. As a result, a
Fund reduces its exposure to changes in the value of the currency it will
deliver and increases its exposure to changes in the value of the currency it
will exchange into. The effect on the value of a Fund is similar to selling
securities denominated in one currency and purchasing securities denominated
in another. Transactions that use two foreign currencies are sometimes
referred to as "cross-hedges."

A Fund may enter into these contracts for the purpose of hedging against
foreign exchange risk arising from the Fund's investments or anticipated
investments in securities denominated in foreign currencies. A Fund may also
enter into these contracts for purposes of increasing exposure to a foreign
currency or to shift exposure to foreign currency fluctuations from one
country to another.

A Fund may also use forward contracts to hedge against changes in
interest rates, increase exposure to a market or otherwise take advantage of
such changes. An interest-rate forward contract involves the obligation to
purchase or sell a specific debt instrument at a fixed price at a future
date.

Interest Rate and Currency Transactions. A Fund may employ currency and
interest rate management techniques, including transactions in options
(including yield curve options), futures, options on futures, forward foreign
currency exchange contracts, currency options and futures and currency and
interest rate swaps. The aggregate amount of a Fund's net currency exposure
will not exceed the total net asset value of its portfolio. However, to the
extent that a Fund is fully invested while also maintaining currency
positions, it may be exposed to greater combined risk.

The Funds will only enter into interest rate and currency swaps on a net
basis, i.e., the two payment streams are netted out, with the Fund receiving
or paying, as the case may be, only the net amount of the two payments.
Interest rate and currency swaps do not involve the delivery of securities,
the underlying currency, other underlying assets or principal. Accordingly,
the risk of loss with respect to interest rate and currency swaps is limited
to the net amount of interest or currency payments that a Fund is
contractually obligated to make. If the other party to an interest rate or
currency swap defaults, a Fund's risk of loss consists of the net amount of
interest or currency payments that the Fund is contractually entitled to
receive. Since interest rate and currency swaps are individually negotiated,
the Funds expect to achieve an acceptable degree of correlation between their
portfolio investments and their interest rate or currency swap positions.
<PAGE>
A Fund may hold foreign currency received in connection with investments
in foreign securities when it would be beneficial to convert such currency
into U.S. dollars at a later date, based on anticipated changes in the
relevant exchange rate.

A Fund may purchase or sell without limitation as to a percentage of its
assets forward foreign currency exchange contracts when the advisers
anticipate that the foreign currency will appreciate or depreciate in value,
but securities denominated in that currency do not present attractive
investment opportunities and are not held by such Fund. In addition, a Fund
may enter into forward foreign currency exchange contracts in order to
protect against adverse changes in future foreign currency exchange rates. A
Fund may engage in cross-hedging by using forward contracts in one currency
to hedge against fluctuations in the value of securities denominated in a
different currency if its advisers believe that there is a pattern of
correlation between the two currencies. Forward contracts may reduce the
potential gain from a positive change in the relationship between the U.S.
Dollar and foreign currencies. Unanticipated changes in currency prices may
result in poorer overall performance for a Fund than if it had not entered
into such contracts. The use of foreign currency forward contracts will not
eliminate fluctuations in the underlying U.S. dollar equivalent value of the
prices of or rates of return on a Fund's foreign currency denominated
portfolio securities and the use of such techniques will subject the Fund to
certain risks.

The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will not be
precise. In addition, a Fund may not always be able to enter into foreign
currency forward contracts at attractive prices, and this will limit a Fund's
ability to use such contract to hedge or cross-hedge its assets. Also, with
regard to a Fund's use of cross-hedges, there can be no assurance that
historical correlations between the movement of certain foreign currencies
relative to the U.S. dollar will continue. Thus, at any time poor correlation
may exist between movements in the exchange rates of the foreign currencies
underlying a Fund's cross-hedges and the movements in the exchange rates of
the foreign currencies in which the Fund's assets that are the subject of
such cross-hedges are denominated.

A Fund may enter into interest rate and currency swaps to the maximum
allowed limits under applicable law. A Fund will typically use interest rate
swaps to shorten the effective duration of its portfolio. 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. Currency swaps involve the exchange of
their respective rights to make or receive payments in specified currencies.

Mortgage-Related Securities. A Fund may purchase mortgage-backed
securities--i.e., securities representing an ownership interest in a pool of
mortgage loans issued by lenders such as mortgage bankers, commercial banks
and savings and loan associations. Mortgage loans included in the pool--but
not the security itself--may be insured by the Government National Mortgage
Association or the Federal Housing Administration or guaranteed by the
Federal National Mortgage Association, the Federal Home Loan Mortgage
<PAGE>
Corporation or the Veterans Administration. Mortgage-backed securities
provide investors with payments consisting of both interest and principal as
the mortgages in the underlying mortgage pools are paid off. Although
providing the potential for enhanced returns, mortgage-backed securities can
also be volatile and result in unanticipated losses.

The average life of a mortgage-backed security is likely to be
substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and
mortgage foreclosures will usually result in the return of the greater part
of the principal invested far in advance of the maturity of the mortgages in
the pool. The actual rate of return of a mortgage-backed security may be
adversely affected by the prepayment of mortgages included in the mortgage
pool underlying the security.

A Fund may also invest in securities representing interests in
collateralized mortgage obligations ("CMOs"), real estate mortgage investment
conduits ("REMICs") and in pools of certain other asset-backed bonds and
mortgage pass-through securities. Like a bond, interest and prepaid principal
are paid, in most cases, monthly. CMOs may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by the U.S. Government, or U.S.
Government-related entities, and their income streams.

CMOs are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life will depend upon the
prepayment experience of the collateral. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, are
allocated to different classes in accordance with the terms of the
instruments, and changes in prepayment rates or assumptions may significantly
affect the expected average life and value of a particular class.

REMICs include governmental and/or private entities that issue a fixed
pool of mortgages secured by an interest in real property. REMICs are similar
to CMOs in that they issue multiple classes of securities. REMICs issued by
private entities are not U.S. Government securities and are not directly
guaranteed by any government agency. They are secured by the underlying
collateral of the private issuer.

The advisers expect that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. The mortgages underlying these securities
may include alternative mortgage instruments, that is, mortgage instruments
whose principal or interest payments may vary or whose terms to maturity may
differ from customary long-term fixed-rate mortgages. A Fund may also invest
in debentures and other securities of real estate investment trusts. As new
types of mortgage-related securities are developed and offered to investors,
the Funds may consider making investments in such new types of mortgage-
related securities.

Dollar Rolls. Under a mortgage "dollar roll," a Fund sells mortgage-
backed securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar (same type, coupon and
<PAGE>
maturity) securities on a specified future date. During the roll period, a
Fund forgoes principal and interest paid on the mortgage-backed securities. A
Fund is compensated by the difference between the current sales price and the
lower forward price for the future purchase (often referred to as the "drop")
as well as by the interest earned on the cash proceeds of the initial sale. A
Fund may only enter into covered rolls. A "covered roll" is a specific type
of dollar roll for which there is an offsetting cash position which matures
on or before the forward settlement date of the dollar roll transaction. At
the time a Fund enters into a mortgage "dollar roll", it will establish a
segregated account with its custodian bank in which it will maintain cash or
liquid securities equal in value to its obligations in respect of dollar
rolls, and accordingly, such dollar rolls will not be considered borrowings.
Mortgage dollar rolls involve the risk that the market value of the
securities the Fund is obligated to repurchase under the agreement may
decline below the repurchase price. In the event the buyer of securities
under a mortgage dollar roll files for bankruptcy or becomes insolvent, the
Fund's use of proceeds of the dollar roll may be restricted pending a
determination by the other party, or its trustee or receiver, whether to
enforce the Fund's obligation to repurchase the securities.

Asset-Backed Securities. A Fund may invest in asset-backed securities,
including conditional sales contracts, equipment lease certificates and
equipment trust certificates. The advisers expect that other asset-backed
securities (unrelated to mortgage loans) will be offered to investors in the
future. Several types of asset-backed securities already exist, including,
for example, "Certificates for Automobile ReceivablesSM" or "CARSSM"
("CARS"). CARS represent undivided fractional interests in a trust whose
assets consist of a pool of motor vehicle retail installment sales contracts
and security interests in the vehicles securing the contracts. Payments of
principal and interest on CARS are passed-through monthly to certificate
holders, and are guaranteed up to certain amounts and for a certain time
period by a letter of credit issued by a financial institution unaffiliated
with the trustee or originator of the CARS trust. An investor's return on
CARS may be affected by early prepayment of principal on the underlying
vehicle sales contracts. If the letter of credit is exhausted, the CARS trust
may be prevented from realizing the full amount due on a sales contract
because of state law requirements and restrictions relating to foreclosure
sales of vehicles and the obtaining of deficiency judgments following such
sales or because of depreciation, damage or loss of a vehicle, the
application of federal and state bankruptcy and insolvency laws, the failure
of servicers to take appropriate steps to perfect the CARS trust's rights in
the underlying loans and the servicer's sale of such loans to bona fide
purchasers, giving rise to interests in such loans superior to those of the
CARS trust, or other factors. As a result, certificate holders may experience
delays in payments or losses if the letter of credit is exhausted. A Fund
also may invest in other types of asset-backed securities. In the selection
of other asset-backed securities, the advisers will attempt to assess the
liquidity of the security giving consideration to the nature of the security,
the frequency of trading in the security, the number of dealers making a
market in the security and the overall nature of the marketplace for the
security.
<PAGE>
Structured Products. A Fund may invest in interests in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of certain other investments. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, or specified instruments (such as commercial bank loans) and the
issuance by that entity of one or more classes of securities ("structured
products") backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued structured products to create securities with
different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to structured products is dependent on the extent of the cash
flow on the underlying instruments. A Fund may invest in structured products
which represent derived investment positions based on relationships among
different markets or asset classes.

A Fund may also invest in other types of structured products, including,
among others, inverse floaters, spread trades and notes linked by a formula
to the price of an underlying instrument. Inverse floaters have coupon rates
that vary inversely at a multiple of a designated floating rate (which
typically is determined by reference to an index rate, but may also be
determined through a dutch auction or a remarketing agent or by reference to
another security) (the "reference rate"). As an example, inverse floaters may
constitute a class of CMOs with a coupon rate that moves inversely to a
designated index, such as LIBOR (London Interbank Offered Rate) or the Cost
of Funds Index. Any rise in the reference rate of an inverse floater (as a
consequence of an increase in interest rates) causes a drop in the coupon
rate while any drop in the reference rate of an inverse floater causes an
increase in the coupon rate. A spread trade is an investment position
relating to a difference in the prices or interest rates of two securities
where the value of the investment position is determined by movements in the
difference between the prices or interest rates, as the case may be, of the
respective securities. When a Fund invests in notes linked to the price of an
underlying instrument, the price of the underlying security is determined by
a multiple (based on a formula) of the price of such underlying security. A
structured product may be considered to be leveraged to the extent its
interest rate varies by a magnitude that exceeds the magnitude of the change
in the index rate of interest. Because they are linked to their underlying
markets or securities, investments in structured products generally are
subject to greater volatility than an investment directly in the underlying
market or security. Total return on the structured product is derived by
linking return to one or more characteristics of the underlying instrument.
Because certain structured products of the type in which a Fund may invest
may involve no credit enhancement, the credit risk of those structured
products generally would be equivalent to that of the underlying instruments.
A Fund may invest in a class of structured products that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated structured products typically have higher yields and present
greater risks than unsubordinated structured products. Although a Fund's
purchase of subordinated structured products would have similar economic
effect to that of borrowing against the underlying securities, the purchase
will not be deemed to be leverage for purposes of a Fund's fundamental
investment limitation related to borrowing and leverage.
<PAGE>
Certain issuers of structured products may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, a Fund's investments in
these structured products may be limited by the restrictions contained in the
1940 Act. Structured products are typically sold in private placement
transactions, and there currently is no active trading market for structured
products. As a result, certain structured products in which an Income Fund
invests may be deemed illiquid and subject to its limitation on illiquid
investments.

Investments in structured products generally are subject to greater
volatility than an investment directly in the underlying market or security.
In addition, because structured products are typically sold in private
placement transactions, there currently is no active trading market for
structured products.

Additional Restrictions on the Use of Futures and Option Contracts. None
of the Funds is a "commodity pool" (i.e., a pooled investment vehicle which
trades in commodity futures contracts and options thereon and the operator of
which is registered with the CFTC and futures contracts and futures options
will be purchased, sold or entered into only for bona fide hedging purposes,
provided that a Fund may enter into such transactions for purposes other than
bona fide hedging if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open contracts and options would not exceed 5%
of the liquidation value of the Fund's portfolio, provided, further, that, in
the case of an option that is in-the-money, the in-the-money amount may be
excluded in calculating the 5% limitation.

When a Fund purchases a futures contract, an amount of cash or cash
equivalents or high quality debt securities will be deposited in a segregated
account with such Fund's custodian or sub-custodian so that the amount so
segregated, plus the initial deposit and variation margin held in the account
of its broker, will at all times equal the value of the futures contract,
thereby insuring that the use of such futures is unleveraged.

In addition to the foregoing requirements, the Board of Trustees has
adopted an additional restriction on the use of futures contracts and options
thereon, requiring that the aggregate market value of the futures contracts
held by a Fund not exceed 50% of the market value of its total assets.
Neither this restriction nor any policy with respect to the above-referenced
restrictions, would be changed by the Board of Trustees without considering
the policies and concerns of the various federal and state regulatory
agencies.

Investment Restrictions

The Funds have adopted the following investment restrictions which may
not be changed without approval by a "majority of the outstanding shares" of
a Fund which, as used in this Statement of Additional Information, means the
vote of the lesser of (i) 67% or more of the shares of a Fund present at a
meeting, if the holders of more than 50% of the outstanding shares of a Fund
are present or represented by proxy, or (ii) more than 50% of the outstanding
shares of a Fund.
<PAGE>
Each Fund may not:

(1) borrow money, except that each Fund may borrow money for
temporary or emergency purposes, or by engaging in reverse repurchase
transactions, in an amount not exceeding 33-1/3% of the value of its
total assets at the time when the loan is made and may pledge, mortgage
or hypothecate no more than 1/3 of its net assets to secure such
borrowings. Any borrowings representing more than 5% of a Fund's total
assets must be repaid before the Fund may make additional investments;

(2) make loans, except that each Fund may: (i) purchase and hold
debt instruments (including without limitation, bonds, notes, debentures
or other obligations and certificates of deposit, bankers' acceptances
and fixed time deposits) in accordance with its investment objectives
and policies; (ii) enter into repurchase agreements with respect to
portfolio securities; and (iii) lend portfolio securities with a value
not in excess of one-third of the value of its total assets;

(3) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, or repurchase agreements secured thereby) if, as a
result, more than 25% of the Fund's total assets would be invested in
the securities of companies whose principal business activities are in
the same industry. Notwithstanding the foregoing, (i) with respect to a
Fund's permissible futures and options transactions in U.S. Government
securities, positions in such options and futures shall not be subject
to this restriction; (ii) the Money Market Funds may invest more than
25% of their total assets in obligations issued by banks, including U.S.
banks; and (iii) the Tax Free Money Market Fund may invest more than 25%
of its assets in municipal obligations secured by bank letters of credit
or guarantees, including participation certificates.

(4) purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments but this shall
not prevent a Fund from (i) purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities or (ii) engaging in forward purchases or sales of
foreign currencies or securities;

(5) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
a Fund from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business).
Investments by a Fund in securities backed by mortgages on real estate
or in marketable securities of companies engaged in such activities are
not hereby precluded;

(6) issue any senior security (as defined in the 1940 Act), except
that (a) a Fund may engage in transactions that may result in the
issuance of senior securities to the extent permitted under applicable
regulations and interpretations of the 1940 Act or an exemptive order;
(b) a Fund may acquire other securities, the acquisition of which may
result in the issuance of a senior security, to the extent permitted
under applicable regulations or interpretations of the 1940 Act; and (c)
<PAGE>
subject to the restrictions set forth above, a Fund may borrow money as
authorized by the 1940 Act. For purposes of this restriction, collateral
arrangements with respect to permissible options and futures
transactions, including deposits of initial and variation margin, are
not considered to be the issuance of a senior security; or

(7) underwrite securities issued by other persons except insofar as
a Fund may technically be deemed to be an underwriter under the
Securities Act of 1933 in selling a portfolio security.

In addition, as a matter of fundamental policy, notwithstanding any
other investment policy or restriction, each Fund may seek to achieve its
investment objective by investing all of its investable assets in another
investment company having substantially the same investment objective and
policies as the Fund.

For purposes of investment restriction (2) above, loan participations
are considered to be debt instruments.

For purposes of investment restriction (5) above, real estate includes
Real Estate Limited Partnerships.

For purposes of investment restriction (3) above, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together as
an "industry." Investment restriction (3) above, however, is not applicable
to investments by a Fund in municipal obligations where the issuer is
regarded as a state, city, municipality or other public authority since such
entities are not members of an "industry." Supranational organizations are
collectively considered to be members of a single "industry" for purposes of
restriction (3) above.

In addition, each Fund is subject to the following nonfundamental
restrictions which may be changed without shareholder approval:

(1) Each Fund other than the Tax Free Funds may not, with respect
to 75% of its assets, hold more than 10% of the outstanding voting
securities of any issuer or invest more than 5% of its assets in the
securities of any one issuer (other than obligations of the U.S.
Government, its agencies and instrumentalities); each of the Tax Free
Funds may not, with respect to 50% of its assets, hold more than 10% of
the outstanding voting securities of any issuer.

(2) Each Fund may not make short sales of securities, other than
short sales "against the box," or purchase securities on margin except
for short-term credits necessary for clearance of portfolio
transactions, provided that this restriction will not be applied to
limit the use of options, futures contracts and related options, in the
manner otherwise permitted by the investment restrictions, policies and
investment program of a Fund.

(3) Each Fund may not purchase or sell interests in oil, gas or
mineral leases.

(4) Each Fund other than the Money Market Funds may not invest more
than 15% of its net assets in illiquid securities; each Money Market
<PAGE>
Fund may not invest more than 10% of its net assets in illiquid
securities.

(5) Each Fund may not write, purchase or sell any put or call
option or any combination thereof, provided that this shall not prevent
(i) the writing, purchasing or selling of puts, calls or combinations
thereof with respect to portfolio securities or (ii) with respect to a
Fund's permissible futures and options transactions, the writing,
purchasing, ownership, holding or selling of futures and options
positions or of puts, calls or combinations thereof with respect to
futures.

(6) Except as specified above, each Fund may invest up to 5% of its
total assets in the securities of any one investment company, but may
not own more than 3% of the securities of any one investment company or
invest more than 10% of its total assets in the securities of other
investment companies.

It is the Trust's position that proprietary strips, such as CATS and
TIGRS, are United States Government securities. However, the Trust has been
advised that the staff of the Securities and Exchange Commission's Division
of Investment Management does not consider these to be United States
Government securities, as defined under the 1940 Act.

For purposes of the Funds' investment restrictions, the issuer of a tax-
exempt security is deemed to be the entity (public or private) ultimately
responsible for the payment of the principal of and interest on the security.

If a percentage or rating restriction on investment or use of assets set
forth herein or in a Prospectus is adhered to at the time a transaction is
effected, later changes in percentage resulting from any cause other than
actions by a Fund will not be considered a violation. If the value of a
Fund's holdings of illiquid securities at any time exceeds the percentage
limitation applicable at the time of acquisition due to subsequent
fluctuations in value or other reasons, the Board of Trustees will consider
what actions, if any, are appropriate to maintain adequate liquidity.

Portfolio Transactions and Brokerage Allocation

Specific decisions to purchase or sell securities for a Fund are made by
a portfolio manager who is an employee of the adviser or sub-adviser to such
Fund and who is appointed and supervised by senior officers of such adviser
or sub-adviser. Changes in a Fund's investments are reviewed by the Board of
Trustees of the Trust. The portfolio managers may serve other clients of the
advisers in a similar capacity.

The frequency of a Fund's portfolio transactions--the portfolio turnover
rate--will vary from year to year depending upon market conditions. Because a
high turnover rate may increase transaction costs and the possibility of
taxable short-term gains, the advisers will weigh the added costs of short-
term investment against anticipated gains. Each Fund will engage in portfolio
trading if its advisers believe a transaction, net of costs (including
custodian charges), will help it achieve its investment objective. Funds
investing in both equity and debt securities apply this policy with respect
to both the equity and debt portions of their portfolios.
<PAGE>
For the fiscal years ended December 31, 1995 and 1996, the annual rates
of portfolio turnover for the predecessors of the following Funds were as
follows:

1995 1996
--------- ---------

Core Equity Fund 133% 29%
Equity Growth Fund 99% 62%
Equity Income Fund 11% 24%
Income Fund 93% 72%
Intermediate Term Bond Fund 198% 134%
Short- Intermediate Term U.S.
Government Securities Fund 187% 177%
Small Capitalization Fund 89% 68%
U.S. Government Securities Fund 17% 48%

For the fiscal year ended December 31, 1998, the annual rates of
portfolio turnover for the International Equity Fund, Mid Cap Growth Fund,
New York Tax Free Income Fund and Tax Free Income Fund are expected not to
exceed ___%, ___%, ___% and ___%, respectively.

Under the advisory agreement and the sub-advisory agreements, the
adviser and sub-advisers shall use their best efforts to seek to execute
portfolio transactions at prices which, under the circumstances, result in
total costs or proceeds being the most favorable to the Funds. In assessing
the best overall terms available for any transaction, the adviser and sub-
advisers consider all factors they deem relevant, including the breadth of
the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, research services
provided to the adviser and sub-advisers, and the reasonableness of the
commissions, if any, both for the specific transaction and on a continuing
basis. The adviser and sub-advisers are not required to obtain the lowest
commission or the best net price for any Fund on any particular transaction,
and are not required to execute any order in a fashion either preferential to
any Fund relative to other accounts they manage or otherwise materially
adverse to such other accounts.

Debt securities are traded principally in the over-the-counter market
through dealers acting on their own account and not as brokers. In the case
of securities traded in the over-the-counter market (where no stated
commissions are paid but the prices include a dealer's markup or markdown),
the adviser or sub-adviser to a Fund normally seeks to deal directly with the
primary market makers unless, in its opinion, best execution is available
elsewhere. In the case of securities purchased from underwriters, the cost of
such securities generally includes a fixed underwriting commission or
concession. From time to time, soliciting dealer fees are available to the
adviser or sub-adviser on the tender of a Fund's portfolio securities in so-
called tender or exchange offers. Such soliciting dealer fees are in effect
recaptured for a Fund by the adviser and sub-adviser. At present, no other
recapture arrangements are in effect.
<PAGE>
Under the advisory and sub-advisory agreements and as permitted by
Section 28(e) of the Securities Exchange Act of 1934, the adviser or sub-
advisers may cause the Funds to pay a broker-dealer which provides brokerage
and research services to the adviser or sub-advisers, the Funds and/or other
accounts for which they exercise investment discretion an amount of
commission for effecting a securities transaction for a Fund in excess of the
amount other broker-dealers would have charged for the transaction if they
determine in good faith that the greater commission is reasonable in relation
to the value of the brokerage and research services provided by the executing
broker-dealer viewed in terms of either a particular transaction or their
overall responsibilities to accounts over which they exercise investment
discretion. Not all of such services are useful or of value in advising the
Funds. The adviser and sub-advisers report to the Board of Trustees regarding
overall commissions paid by the Funds and their reasonableness in relation to
the benefits to the Funds. The term "brokerage and research services"
includes advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
of purchasers or sellers of securities, furnishing analyses and reports
concerning issues, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts, and effecting securities
transactions and performing functions incidental thereto such as clearance
and settlement.

The management fees that the Funds pay to the adviser will not be
reduced as a consequence of the adviser's or sub-advisers' receipt of
brokerage and research services. To the extent the Funds' portfolio
transactions are used to obtain such services, the brokerage commissions paid
by the Funds will exceed those that might otherwise be paid by an amount
which cannot be presently determined. Such services generally would be useful
and of value to the adviser or sub-advisers in serving one or more of their
other clients and, conversely, such services obtained by the placement of
brokerage business of other clients generally would be useful to the adviser
or sub-advisers in carrying out their obligations to the Funds. While such
services are not expected to reduce the expenses of the adviser or sub-
advisers, the advisers would, through use of the services, avoid the
additional expenses which would be incurred if they should attempt to develop
comparable information through their own staffs.

In certain instances, there may be securities that are suitable for one
or more of the Funds as well as one or more of the adviser's or sub-advisers'
other clients. Investment decisions for the Funds and for other clients are
made with a view to achieving their respective investment objectives. It may
develop that the same investment decision is made for more than one client or
that a particular security is bought or sold for only one client even though
it might be held by, or bought or sold for, other clients. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling that same security. Some simultaneous transactions are
inevitable when several clients receive investment advice from the same
investment adviser, particularly when the same security is suitable for the
investment objectives of more than one client. When two or more Funds or
other clients are simultaneously engaged in the purchase or sale of the same
security, the securities are allocated among clients in a manner believed to
be equitable to each. It is recognized that in some cases this system could
<PAGE>
have a detrimental effect on the price or volume of the security as far as
the Funds are concerned. However, it is believed that the ability of the
Funds to participate in volume transactions will generally produce better
executions for the Funds.

For the fiscal years ended December 31, 1994, 1995 and 1996, the
predecessor to the Balanced Fund paid aggregate brokerage commissions of
$58,564, $31,889 and $17,647, respectively.

For the fiscal years ended December 31, 1994, 1995 and 1996, the
predecessor to the Core Equity Income Fund paid aggregate brokerage
commissions of $74,725, $78,529 and $14,201, respectively.

For the fiscal years ended December 31, 1994, 1995 and 1996, the
predecessor to the Equity Growth Fund paid aggregate brokerage commissions of
$105,860, $94,430 and $60,946, respectively.

For the fiscal years ended December 31, 1994, 1995 and 1996, the
predecessor to the Equity Income Fund paid aggregate brokerage commissions of
$64,821, $17,134 and $43,787, respectively.

For the fiscal years ended December 31, 1994, 1995 and 1996, the
predecessor to the Income Fund paid aggregate brokerage commissions of $0,
$45 and $0, respectively.

For the fiscal years ended December 31, 1994, 1995 and 1996, the
predecessor to the Small Capitalization Fund paid aggregate brokerage
commissions of $29, 834, $21,765 and $34,255, respectively.

No portfolio transactions are executed with the advisers or with any
affiliate of the advisers, acting either as principal or as broker.

PERFORMANCE INFORMATION

From time to time, a Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based
on past investment results, it should not be considered as an indication or
representation of the performance of any classes of a Fund in the future.
From time to time, the performance and yield of classes of a Fund may be
quoted and compared to those of other mutual funds with similar investment
objectives, unmanaged investment accounts, including savings accounts, or
other similar products and to stock or other relevant indices or to rankings
prepared by independent services or other financial or industry publications
that monitor the performance of mutual funds. For example, the performance of
a Fund or its classes may be compared to data prepared by Lipper Analytical
Services, Inc. or Morningstar Mutual Funds on Disc, widely recognized
independent services which monitor the performance of mutual funds.
Performance and yield data as reported in national financial publications
including, but not limited to, Money Magazine, Forbes, Barron's, The Wall
Street Journal and The New York Times, or in local or regional publications,
may also be used in comparing the performance and yield of a Fund or its
classes. A Fund's performance may be compared with indices such as the Lehman
Brothers Government/Corporate Bond Index, the Lehman Brothers Government Bond
Index, the Lehman Government Bond 1-3 Year Index and the Lehman Aggregate
<PAGE>
Bond Index; the S&P 500 Index, the S&P 400 Mid Cap Index, the S&P 600 Small
Cap Index, the Dow Jones Industrial Average or any other commonly quoted
index of common stock prices; and the Russell 2000 Index and the NASDAQ
Composite Index. Additionally, a Fund may, with proper authorization, reprint
articles written about such Fund and provide them to prospective
shareholders.

A Fund may provide period and average annual "total rates of return."
The "total rate of return" refers to the change in the value of an investment
in a Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period.
One-, five-, and ten-year periods will be shown, unless the class has been in
existence for a shorter-period.

Unlike some bank deposits or other investments which pay a fixed yield
for a stated period of time, the yields and the net asset values (in the case
of the non-Money Market Funds) of the classes of shares of a Fund will vary
based on market conditions, the current market value of the securities held
by the Fund and changes in the Fund's expenses. The advisers, the
Administrator, the Distributor and other service providers may voluntarily
waive a portion of their fees on a month-to-month basis. In addition, the
Distributor may assume a portion of a Fund's operating expenses on a month-
to-month basis. These actions would have the effect of increasing the net
income (and therefore the yield and total rate of return) of the classes of
shares of the Fund during the period such waivers are in effect. These
factors and possible differences in the methods used to calculate the yields
and total rates of return should be considered when comparing the yields or
total rates of return of the classes of shares of a Fund to yields and total
rates of return published for other investment companies and other investment
vehicles (including different classes of shares).

Each Fund presents performance information for each class thereof since
the commencement of operations of that Fund (or the related predecessor fund,
as described below), rather than the date such class was introduced.
Performance information for each class introduced after the commencement of
operations of the related Fund (or predecessor fund) is therefore based on
the performance history of a predecessor class. Historical expenses reflected
in performance information are based upon the distribution and other expenses
actually incurred during the periods presented and have not been restated,
for periods during which the performance information for a particular class
is based upon the performance history of a predecessor class, to reflect the
ongoing expenses currently borne by the particular class.

In connection with the Avesta Conversion, each of the Balanced, Core
Equity, Equity Growth, Equity Income, Income, Intermediate Term Bond, Money
Market, Short-Intermediate Term U.S. Government Securities, Small
Capitalization and U.S. Government Securities Funds of the Trust was
established to receive the assets of the corresponding investment portfolio
of the AVESTA Trust, a collective investment trust organized under Texas law.
Performance results presented for each class of the Avesta Funds include the
performance of the corresponding investment portfolio of the AVESTA Trust for
periods prior to the consummation of the Avesta Conversion. Accordingly, for
<PAGE>
periods prior to January 1, 1998, the performance results for each class of a
Fund will be identical.

Advertising or communications to shareholders may contain the views of
the advisers as to current market, economic, trade and interest rate trends,
as well as legislative, regulatory and monetary developments, and may include
investment strategies and related matters believed to be of relevance to a
Fund.

Advertisements for the Avesta Funds may include references to the asset
size of other financial products made available by Chase or its affiliates,
such as the offshore assets of other funds.

Total Rate of Return

A Fund's or class's total rate of return for any period will be
calculated by (a) dividing (i) the sum of the net asset value per share on
the last day of the period and the net asset value per share on the last day
of the period of shares purchasable with dividends and capital gains declared
during such period with respect to a share held at the beginning of such
period and with respect to shares purchased with such dividends and capital
gains distributions, by (ii) the public offering price per share on the first
day of such period, and (b) subtracting 1 from the result. The average annual
rate of return quotation will be calculated by (x) adding 1 to the period
total rate of return quotation as calculated above, (y) raising such sum to a
power which is equal to 365 divided by the number of days in such period, and
(z) subtracting 1 from the result.
<PAGE>
Average Annual Total Returns<F1>

The average annual total rate of return figures for the predecessors to
the following Funds, reflecting the initial investment and assuming the
reinvestment of all distributions for the one and five year periods ended
September 30, 1997 and for the period from commencement of business
operations of each such Fund to September 30, 1997 were as follows:

<TABLE>
<CAPTION>
Since Fund Date of Fund Date of Class
Fund One Year Five Years Inception Inception Introduction
-------- ---------- ------------ ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>

Balanced Fund 3/29/88
Institutional Shares 3/29/88
Retail Shares<F2> __/__/98

Core Equity Fund 4/1/93
Institutional Shares -- 4/1/93
Retail Shares<F2> -- __/__/98

Equity Growth Fund 3/29/88
Institutional Shares 3/29/88
Retail Shares<F2> __/__/98

Equity Income Fund 3/29/88
Institutional Shares 3/29/88
Retail Shares<F2> __/__/98

Income Fund 3/29/88
Institutional Shares 3/29/88
Retail Shares<F2> __/__/98

Intermediate Term Bond
Fund 10/4/94
Institutional Shares -- 10/4/94
Retail Shares<F2> -- __/__/98

Short-Intermediate
Term U.S. 4/1/93
Government
Securities Fund
Institutional Shares -- 4/1/93
Retail Shares<F2> -- __/__/98

Small Capitalization
Fund 4/1/93
Institutional Shares -- 4/1/93
Retail Shares<F2> -- __/__/98

U.S. Government
Securities Fund 4/1/93
Institutional Shares -- 4/1/93
Retail Shares<F2> -- __/__/98

<PAGE>

____________________
<FN>
<F1> The ongoing fees and expenses borne by Retail Shares are greater than
those borne by Institutional Shares. As indicated above, the
performance information for each class introduced after the
commencement of operations of the related Fund (or predecessor fund)
is based on the performance history of a predecessor class and
historical expenses have not been restated, for periods during which
the performance information for a particular class is based upon the
performance history of a predecessor class, to reflect the ongoing
expenses currently borne by the particular class. Accordingly, the
performance information presented in the table above and in each table
that follows may be used in assessing each Fund's performance history
but does not reflect how the distinct classes would have performed on
a relative basis prior to the introduction of those classes, which
would require an adjustment to the ongoing expenses.
The performance quoted reflects fee waivers that subsidize and reduce
the total operating expenses of certain Funds (or classes thereof).
Returns on these Funds (or classes) would have been lower if there
were not such waivers. With respect to certain Funds, Chase and/or
other service providers are obligated to waive certain fees and/or
reimburse certain expenses for a stated period of time. In other
instances, there is no obligation to waive fees or to reimburse
expenses. The Prospectuses disclose the extent of any agreements to
waive fees and/or reimburse expenses.
Performance presented in the table above and in each table that
follows for each class of these Funds includes the performance of
their respective predecessor funds for periods prior to the
consummation of the Avesta Conversion. Performance presented for each
class of each of these Funds is based on the historical expenses and
performance of a single class of shares of its predecessor fund and
does not reflect the current distribution, service and/or other
expenses that an investor would incur as a holder of such class of
such Fund. Date of Fund inception shown for these Funds is the date of
inception of their respective predecessor funds. These Funds commenced
operations as part of the Trust on January 1, 1998. The predecessor
funds (unlike the Avesta Funds and other investment companies) were
not required to comply with the diversification, distribution and
other requirements of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). Had the predecessor funds been subject
to such requirements, their investment performance might have been
adversely affected.
<F2> Performance information presented in the table above and in each table
that follows for this class of this Fund prior to the date the class
was introduced does not reflect distribution fees and certain other
expenses borne by this class which, if reflected, would reduce the
performance quoted.
</TABLE>

<PAGE>
Yield Quotations

Any current "yield" quotation for a class of shares shall consist of an
annualized hypothetical yield, carried at least to the nearest hundredth of
one percent, based on a thirty calendar day period and shall be calculated by
(a) raising to the sixth power the sum of 1 plus the quotient obtained by
dividing the Fund's net investment income earned during the period by the
product of the average daily number of shares outstanding during the period
that were entitled to receive dividends and the maximum offering price per
share on the last day of the period, (b) subtracting 1 from the result, and
(c) multiplying the result by 2.

Any current "yield" for a class of shares of a Money Market Fund which
is used in such a manner as to be subject to the provisions of Rule 482(d)
under the Securities Act of 1933, as amended, shall consist of an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a specific seven calendar day period and shall be calculated by
dividing the net change in the value of an account having a balance of one
Share at the beginning of the period by the value of the account at the
beginning of the period and multiplying the quotient by 365/7. For this
purpose, the net change in account value would reflect the value of
additional Shares purchased with dividends declared on the original Share and
dividends declared on both the original Share and any such additional Shares,
but would not reflect any realized gains or losses from the sale of
securities or any unrealized appreciation or depreciation on portfolio
securities. In addition, any effective yield quotation for a class of shares
of a Money Market Fund so used shall be calculated by compounding the current
yield quotation for such period by multiplying such quotation by 7/365,
adding 1 to the product, raising the sum to a power equal to 365/7, and
subtracting 1 from the result. A portion of the Tax Free Money Market Fund's
income used in calculating such yields may be taxable.

Any taxable equivalent yield quotation of a class of shares of a Tax
Free Fund, whether or not it is a Money Market Fund, shall be calculated as
follows. If the entire current yield quotation for such period is tax-exempt,
the tax equivalent yield will be the current yield quotation (as determined
in accordance with the appropriate calculation described above) divided by 1
minus a stated income tax rate or rates. If a portion of the current yield
quotation is not tax-exempt, the tax equivalent yield will be the sum of (a)
that portion of the yield which is tax-exempt divided by 1 minus a stated
income tax rate or rates and (b) the portion of the yield which is not tax-
exempt.

The yields of the shares of the non-Money Market Funds for the thirty
day period ended September 30, 1997 were as follows:
<PAGE>
Institutional
----------------

Balanced Fund
Core Equity Fund
Equity Growth Fund
Equity Income Fund
Income Fund
Intermediate Term Bond Fund
Short-Intermediate Term U.S. Government
Securities Fund
Small Capitalized Fund
U.S. Government Securities Fund

The yields and effective yields of the shares of the Money Market Fund
for the seven day period ended September 30, 1997 were as follows:

Current Annualized Effective Compound
Yield Annualized Yield
------------------- --------------------

Money Market Fund
Institutional Shares
Retail Shares

Non-Standardized Performance Results<F1>

The table below reflects the net change in the value of an assumed
initial investment of $10,000 in each class of Fund shares in the following
Funds for the period from the commencement date of business for each such
Fund through September 30, 1997. The values reflect an assumption that
capital gain distributions and income dividends, if any, have been invested
in additional shares of the same class. From time to time, the Funds may
provide these performance results in addition to the total rate of return
quotations required by the Securities and Exchange Commission. As discussed
more fully in the Prospectuses, neither these performance results, nor total
rate of return quotations, should be considered as representative of the
performance of the Funds in the future. These factors and the possible
differences in the methods used to calculate performance results and total
rates of return should be considered when comparing such performance results
and total rate of return quotations of the Funds with those published for
other investment companies and other investment vehicles.
<PAGE>
<TABLE>
<CAPTION>
Value of
Initial Value of Value of
$10,000 Capital Gains Reinvested Fund Inception
Investment Distributions Dividends Total Value Date
------------ --------------- ------------ ------------- ----------------
<S> <C> <C> <C> <C> <C>

Balanced Fund
Institutional Shares
Retail Shares<F2>

Core Equity Fund
Institutional Shares
Retail Shares<F2>

Equity Growth Fund
Institutional Shares
Retail Shares<F2>

Equity Income Fund
Institutional Shares
Retail Shares<F2>

Income Fund
Institutional Shares
Retail Shares<F2>

Intermediate Term Bond Fund
Institutional Shares
Retail Shares<F2>

Money Market Fund
Institutional Shares
Retail Shares<F2>

Short-Intermediate Term U.S. Government
Securities Fund
Institutional Shares
Retail Shares<F2>

Small Capitalization Fund
Institutional Shares
Retail Shares<F2>

U.S. Government Securities Fund
Institutional Shares
Retail Shares<F2>

<PAGE>
____________________
<FN>
<F1> See the notes to the table captioned "Average Annual Total Return"
above. The table above assumes an initial investment of $10,000 in a
particular class of a Fund for the period from the Fund's commencement
of operations, although the particular class may have been introduced
at a subsequent date. As indicated above, performance information for
each class introduced after the commencement of operations of the
related Fund (or predecessor fund) is based on the performance history
of a predecessor class, and historical expenses have not been
restated, for periods during which the performance information for a
particular class is based upon the performance history of a
predecessor class, to reflect the ongoing expenses currently borne by
the particular class. In addition, had the predecessor funds been
subject to the provisions of Subchapter M of the Code, their
investment performance might have been adversely affected.
</TABLE>

DETERMINATION OF NET ASSET VALUE

As of the date of this Statement of Additional Information, the New York
Stock Exchange is open for trading every weekday except for the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Since the
International Equity Fund invests in securities primarily listed on foreign
exchanges which may trade on Saturdays or other customary United States
national business holidays on which the Fund does not price, the Fund's
portfolio will trade and the net asset value of the Fund's shares may be
significantly affected on days on which the investor has no access to the
Fund.

Equity securities in a Fund's portfolio are valued at the last sale
price on the exchange on which they are primarily traded or on the NASDAQ
National Market System, or at the last quoted bid price for securities in
which there were no sales during the day or for other unlisted (over-the-
counter) securities not reported on the NASDAQ National Market System. Bonds
and other fixed income securities (other than short-term obligations, but
including listed issues) in a Fund's portfolio are valued on the basis of
valuations furnished by a pricing service, the use of which has been approved
by the Board of Trustees. In making such valuations, the pricing service
utilizes both dealer-supplied valuations and electronic data processing
techniques that take into account appropriate factors such as institutional-
size trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data,
without exclusive reliance upon quoted prices or exchange or over-the-counter
prices, since such valuations are believed to reflect more accurately the
fair value of such securities. Short-term obligations which mature in 60 days
or less are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Futures and option contracts that are
traded on commodities or securities exchanges are normally valued at the
settlement price on the exchange on which they are traded. Portfolio
securities (other than short-term obligations) for which there are no such
quotations or valuations are valued at fair value as determined in good faith
by or at the direction of the Board of Trustees.
<PAGE>
The Money Market Funds' portfolio securities are valued at their
amortized cost. Amortized cost valuation involves valuing an instrument at
its cost and thereafter accrediting discounts and amortizing premiums at a
constant rate to maturity. Pursuant to the rules of the Securities and
Exchange Commission, the Board of Trustees has established procedures to
stabilize the net asset value of each Money Market Fund at $1.00 per share.
These procedures include a review of the extent of any deviation of net asset
value per share, based on available market rates, from the $1.00 amortized
cost price per share. If fluctuating interest rates cause the market value of
a Money Market Fund's portfolio to approach a deviation of more than 1/2 of
1% from the value determined on the basis of amortized cost, the Board of
Trustees will considered what action, if any, should be initiated. Such
action may include redemption of shares in kind (as described in greater
detail below), selling portfolio securities prior to maturity, reducing or
withholding dividends and utilizing a net asset value per share as determined
by using available market quotations.

The Money Market Funds have established procedures designed to ensure
that their portfolio securities meet their high quality criteria.

Bonds and other fixed income securities, (other than short-term
obligations) in a Funds Portfolio are valued on the basis of valuations
furnished by a pricing service, the use of which has been approved by the
Board of Trustees. In making such valuations, the pricing service utilizes
both dealer-supplied valuations and electronic data processing techniques
that take into account appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, compound rate, maturity,
type of issue, trading characteristics and other market data, without
exclusive reliance upon quoted prices or exchange or over-the-counter prices,
since such valuations are believed to reflect more accurately the fair value
of such securities. Short-term obligations which mature in 60 days or less
are valued at amortized cost, which constitutes fair value as determined by
the Board of Trustees. Futures and option contracts that are traded on
commodities or securities exchanges are normally valued at the settlement
price on the exchange on which they are traded. Portfolio securities (other
than short-term obligations) for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Board of Trustees.

Interest income on long-term obligations in a Fund's portfolio is
determined on the basis of coupon interest accrued plus amortization of
discount (the difference between acquisition price and stated redemption
price at maturity) and premiums (the excess of purchase price over stated
redemption price at maturity). Interest income on short-term obligations is
determined on the basis of interest and discount accrued less amortization of
premium.

PURCHASES, REDEMPTIONS AND EXCHANGES

The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Funds' Transfer Agent may defer
<PAGE>
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in the Prospectuses are not
available until a completed and signed account application has been received
by the Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in Section 6 of the Account Application.

Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, a Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service
options chosen by the shareholder or joint shareholders in his or their
latest account application or other written request for services, including
purchasing, exchanging, or redeeming shares of such Fund and depositing and
withdrawing monies from the bank account specified in the Bank Account
Registration section of the shareholder's latest account application or as
otherwise properly specified to such Fund in writing.

Subject to compliance with applicable regulations, each Fund has
reserved the right to pay the redemption price of its Shares, either totally
or partially, by a distribution in kind of readily marketable portfolio
securities (instead of cash). The securities so distributed would be valued
at the same amount as that assigned to them in calculating the net asset
value for the shares being sold. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting
the securities to cash. The Trust has filed an election under Rule 18f-1
committing to pay in cash all redemptions by a shareholder of record up to
amounts specified by the rule (approximately $250,000).

Under the Exchange Privilege, shares may be exchanged for shares of
another fund only if shares of the fund exchanged into are registered in the
state where the exchange is to be made. Shares of a Fund may only be
exchanged into another fund if the account registrations are identical. Any
such exchange may create a gain or loss to be recognized for federal income
tax purposes. Normally, shares of the fund to be acquired are purchased on
the redemption rate, but such purchase may be delayed by either fund for up
to five business days if a fund determines that it would be disadvantaged by
an immediate transfer of the proceeds.

A Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in bank accounts, for any written requests for
additional account services made after a shareholder has submitted an initial
account application to the Fund, and in certain other circumstances described
in the Prospectuses. A Fund may also refuse to accept or carry out any
transaction that does not satisfy any restrictions then in effect. A
signature guarantee may be obtained from a bank, trust company, broker-dealer
or other member of a national securities exchange. Please note that a notary
public cannot provide a signature guarantee.
<PAGE>
TAX MATTERS

The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described
in the Prospectuses. No attempt is made to present a detailed explanation of
the tax treatment of the Fund or its shareholders, and the discussions here
and in the Prospectuses are not intended as substitutes for careful tax
planning.

Qualification as a Regulated Investment Company

Each Fund intends to qualify and elect to be taxed as a regulated
investment company (a "RIC") under Subchapter M of the Code. If a Fund
qualifies as a RIC, such Fund will not be subject to federal income tax on
the portion of its net investment income (i.e., its investment company
taxable income, as that term is defined in the Code, without regard to the
deduction for dividends paid ) and net capital gain (i.e., the excess of its
net long-term capital gains over net short-term capital losses) that it
distributes to shareholders, provided that it distributes (i) at least 90% of
its net investment income for the taxable year, and (ii) in the case of each
Tax Free Fund, at least 90% of its net tax-exempt interest income for the
taxable year (the "Distribution Requirement"). Distributions by a Fund made
during the taxable year or, under specified circumstances, within twelve
months after the close of the taxable year, will be considered distributions
of income and gains of the taxable year and can therefore satisfy the
Distribution Requirement.

In addition to satisfying the Distribution Requirement for each taxable
year, a RIC must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the
sale or other disposition of stock or securities or foreign currencies (to
the extent such currency gains are directly related to the RIC's principal
business of investing in stock or securities) and other income (including but
not limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or currencies
(the "Income Requirement").

Each non-Money Market Fund may engage in hedging or derivatives
transactions involving foreign currencies, forward contracts, options and
futures contracts (including options, futures and forward contracts on
foreign currencies) and short sales. See "Additional Policies Regarding
Derivative and Related Transactions." Such transactions will be subject to
special provisions of the Code that, among other things, may affect the
character of gains and losses realized by the Fund (that is, may affect
whether gains or losses are ordinary or capital), accelerate recognition of
income of the Fund and defer recognition of certain of the Fund's losses.
These rules could therefore affect the character, amount and timing of
distributions to shareholders. In addition, these provisions (1) will
require a Fund to "mark-to-market" certain types of positions in its
portfolio (that is, treat them as if they were closed out) and (2) may cause
a Fund to recognize income without receiving cash with which to pay dividends
or make distributions in amounts necessary to satisfy the Distribution
Requirement and avoid the 4% excise tax (described below). Each Fund intends
to monitor its transactions, will make the appropriate tax elections and will
<PAGE>
make the appropriate entries in its books and records when it acquires any
option, futures contract, forward contract or hedged investment in order to
mitigate the effect of these rules.

If a Fund purchases shares in a "passive foreign investment
company" (a "PFIC"), the Fund may be subject to U.S. federal income tax on a
portion of any "excess distribution" or gain from the disposition of such
shares even if such income is distributed as a taxable dividend by the Fund
to its shareholders. Additional charges in the nature of interest may be
imposed on the Fund in respect of deferred taxes arising from such
distributions or gains. If a Fund were to invest in a PFIC and elected to
treat the PFIC as a "qualified electing fund" under the Code (a "QEF"), in
lieu of the foregoing requirements, the Fund would be required to include in
income each year a portion of the ordinary earnings and net capital gain of
the qualified electing fund, even if not distributed to the Fund.
Alternatively, under recently enacted legislation, a Fund can elect to mark-
to-market at the end of each taxable year its shares in a PFIC; in this case,
the Fund would recognize as ordinary income any increase in the value of such
shares, and as ordinary loss any decrease in such value to the extent it did
not exceed prior increases included in income. Under either election, a Fund
might be required to recognize in a year income in excess of its
distributions from PFICs and its proceeds from dispositions of PFIC stock
during that year, and such income would nevertheless be subject to the
Distribution Requirement and would be taken into account for purposes of the
4% excise tax.

Treasury Regulations permit a RIC, in determining its investment company
taxable income and net capital gain for any taxable year, to elect (unless it
has made a taxable year election for excise tax purposes as discussed below)
to treat all or any part of any net capital loss, any net long-term capital
loss or any net foreign currency loss incurred after October 31 as if it had
been incurred in the succeeding year.

In addition to satisfying the requirements described above, each Fund
must satisfy an asset diversification test in order to qualify as a RIC.
Under this test, at the close of each quarter of a Fund's taxable year, at
least 50% of the value of the Fund's assets must consist of cash and cash
items, U.S. Government securities, securities of other RICs, and securities
of other issuers (as to which the Fund has not invested more than 5% of the
value of the Fund's total assets in securities of such issuer and as to which
the Fund does not hold more than 10% of the outstanding voting securities of
such issuer), and no more than 25% of the value of its total assets may be
invested in the securities of any one issuer (other than U.S. Government
securities and securities of other RICs), or in two or more issuers which the
Fund controls and which are engaged in the same or similar trades or
businesses.

If for any taxable year a Fund does not qualify as a RIC, all of its
taxable income (including its net capital gain) will be subject to tax at
regular corporate rates without any deduction for distributions to
shareholders, and such distributions will be taxable to the shareholders as
ordinary dividends to the extent of the Fund's current and accumulated
earnings and profits. Such distributions generally will be eligible for the
dividends-received deduction in the case of corporate shareholders.
<PAGE>
Excise Tax on Regulated Investment Companies

A 4% non-deductible excise tax is imposed on a RIC that fails to
distribute in each calendar year an amount equal to 98% of ordinary taxable
income for the calendar year and 98% of capital gain net income for the one-
year period ended on October 31 of such calendar year (or, at the election of
a RIC having a taxable year ending November 30 or December 31, for its
taxable year (a "taxable year election")). The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a RIC
is treated as having distributed any amount on which it is subject to income
tax for any taxable year ending in such calendar year.

For purposes of the excise tax, a RIC shall: (1) reduce its capital gain
net income (but not below its net capital gain) by the amount of any net
ordinary loss for the calendar year; and (2) exclude foreign currency gains
and losses incurred after October 31 of any year (or after the end of its
taxable year if it has made a taxable year election) in determining the
amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).

Each Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income
prior to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that a Fund may in certain circumstances be
required to liquidate portfolio investments to make sufficient distributions
to avoid excise tax liability.

Fund Distributions

Each Fund anticipates distributing substantially all of its net
investment income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal
income tax purposes, but they will qualify for the 70% dividends-received
deduction for corporations only to the extent discussed below. Dividends paid
on Institutional and Retail shares are calculated at the same time. In
general, dividends on Retail shares are expected to be lower than those on
Institutional shares due to the higher distribution expenses borne by the
Retail shares. Dividends may also differ between classes as a result of
differences in other class specific expenses.

A Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. Each Fund currently intends to distribute any
such amounts. If net capital gain is distributed and designated as a "capital
gain dividend," it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or
whether such gain was recognized by the Fund prior to the date on which the
shareholder acquired his shares. Under recently enacted legislation, the
maximum rate of tax on long-term capital gains of individuals will generally
be reduced from 28% to 20% (10% for gains otherwise taxed at 15%) for long-
term capital gains realized after July 28, 1997 with respect to capital
assets held for more than 18 months. Additionally, beginning after December
31, 2000, the maximum tax rate for capital assets with a holding period
beginning after that date and held for more than five years will be 18%.
<PAGE>
Under a literal reading of the legislation, capital gain dividends paid by a
RIC would not appear eligible for the reduced capital gain rates. However,
the legislation authorizes the Treasury Department to promulgate regulations
that would apply the new rates to capital gain dividends paid by a RIC.

Conversely, if a Fund elects to retain its net capital gain, the Fund
will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If a Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have
shareholders of record on the last day of its taxable year treated as if each
received a distribution of his pro rata share of such gain, with the result
that each shareholder will be required to report his pro rata share of such
gain on his tax return as long-term capital gain, will receive a refundable
tax credit for his pro rata share of tax paid by the Fund on the gain, and
will increase the tax basis for his shares by an amount equal to the deemed
distribution less the tax credit.

Each Tax Free Fund intends to qualify to pay exempt-interest dividends
by satisfying the requirement that at the close of each quarter of the Tax
Free Fund's taxable year at least 50% of the its total assets consist of
tax-exempt municipal obligations. Distributions from a Tax Free Fund will
constitute exempt-interest dividends to the extent of its tax-exempt interest
income (net of expenses and amortized bond premium). Exempt-interest
dividends distributed to shareholders of a Tax Free Fund are excluded from
gross income for federal income tax purposes. However, shareholders required
to file a federal income tax return will be required to report the receipt of
exempt-interest dividends on their returns. Investors should be aware that
gain from the sale or redemption of shares of a Tax Free Fund will be taxable
to the shareholders as capital gain even though the increase in value of such
shares is attributable to tax-exempt interest income. Moreover, while
exempt-interest dividends are excluded from gross income for federal income
tax purposes, they may be subject to alternative minimum tax ("AMT") in
certain circumstances and may have other collateral tax consequences as
discussed below. Distributions by a Tax Free Fund of any net investment
income or of any net capital gain will be taxable to shareholders as
discussed above.

AMT is imposed in addition to, but only to the extent it exceeds, the
regular income tax and is computed at a maximum marginal rate of 28% for
noncorporate taxpayers and 20% for corporate taxpayers on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. Exempt-interest dividends derived from certain "private activity"
municipal obligations issued after August 7, 1986 will generally constitute
an item of tax preference includable in AMTI for both corporate and
noncorporate taxpayers. In addition, exempt-interest dividends derived from
all municipal obligations, regardless of the date of issue, must be included
in adjusted current earnings, which are used in computing an additional
corporate preference item (i.e., 75% of the excess of a corporate taxpayer's
adjusted current earnings over its AMTI (determined without regard to this
item and the AMT net operating loss deduction)) includable in AMTI.

Exempt-interest dividends must be taken into account in computing the
portion, if any, of social security or railroad retirement benefits that must
be included in an individual shareholder's gross income and subject to
<PAGE>
federal income tax. Further, a shareholder of a Tax Free Fund is denied a
deduction for interest on indebtedness incurred or continued to purchase or
carry shares of the Tax Free Fund. Moreover, a shareholder who is (or is
related to) a "substantial user" of a facility financed by industrial
development bonds held by a Tax Free Fund will likely be subject to tax on
dividends paid by the Tax Free Fund which are derived from interest on such
bonds. Receipt of exempt-interest dividends may result in other collateral
federal income tax consequences to certain taxpayers, including financial
institutions, property and casualty insurance companies and foreign
corporations engaged in a trade or business in the United States. Prospective
investors should consult their own tax advisers as to such consequences.

Ordinary income dividends paid by a Fund with respect to a taxable year
will qualify for the 70% dividends-received deduction generally available to
corporations to the extent of the amount of qualifying dividends received by
a Fund from domestic corporations for the taxable year. A dividend received
by a Fund will not be treated as a qualifying dividend (1) if it has been
received with respect to any share of stock that the Fund has held for less
than 46 days (91 days in the case of certain preferred stock) during the 90
day period beginning on the date which is 45 days before the date on which
such share becomes ex-dividend with respect to such dividend (during the 180
day period beginning 90 days before such date in the case of certain
preferred stock)), excluding for this purpose any period during which a Fund
has an option to sell, is under a contractual obligation to sell, has made
and not closed a short sale of, is the grantor of a deep-in-the-money or
otherwise nonqualified option to buy, or has otherwise diminished its risk of
loss by holding other positions with respect to, such (or substantially
identical) stock; (2) to the extent that a Fund is under an obligation
(pursuant to a short sale or otherwise) to make related payments with respect
to positions in substantially similar or related property; or (3) to the
extent the stock on which the dividend is paid is treated as debt-financed
under the rules of Code Section 246A. Moreover, the dividends-received
deduction for a corporate shareholder may be disallowed or reduced (1) if the
corporate shareholder fails to satisfy the foregoing requirements with
respect to its shares of a Fund or (2) by application of Code Section 246(b)
which in general limits the dividends-received deduction to 70% of the
shareholder's taxable income (determined without regard to the dividends-
received deduction and certain other items).

For purposes of the Corporate AMT, the corporate dividends-received
deduction is not itself an item of tax preference that must be added back to
taxable income or is otherwise disallowed in determining a corporation's AMT.
However, corporate shareholders will generally be required to take the full
amount of any dividend received from a Fund into account (without a
dividends-received deduction) in determining its adjusted current earnings.

Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at
the source. The United States has entered into tax treaties with many foreign
countries which entitle any such Fund to a reduced rate of, or exemption
from, taxes on such income. It is impossible to determine the effective rate
of foreign tax in advance since the amount of any such Fund's assets to be
invested in various countries is not known. If more than 50% of the value of
<PAGE>
the International Equity Fund's total assets at the close of its taxable year
consists of the stock or securities of foreign corporations, the Fund may
elect to "pass through" to the Fund's shareholders the amount of foreign
taxes paid by such Fund. If the International Equity Fund so elects, each
shareholder would be required to include in gross income, even though not
actually received, his pro rata share of the foreign taxes paid by the Fund,
but would be treated as having paid his pro rata share of such foreign taxes
and would therefore be allowed to either deduct such amount in computing
taxable income or use such amount (subject to various Code limitations) as a
foreign tax credit against federal income tax (but not both). For purposes of
the foreign tax credit limitation rules of the Code, each shareholder would
treat as foreign source income his pro rata share of such foreign taxes plus
the portion of dividends received from the International Equity Fund
representing income derived from foreign sources. No deduction for foreign
taxes could be claimed by an individual shareholder who does not itemize
deductions. In certain circumstances, a shareholder that (i) has held shares
of the International Equity Fund for less than a specified minimum period
during which it is not protected from risk of loss or (ii) is obligated to
make payments related to the dividends, will not be allowed a foreign tax
credit for foreign taxes deemed imposed on dividends paid on such shares.
Additionally, the International Equity Fund must also meet this holding
period requirement with respect to its foreign stocks and securities in order
for "creditable" taxes to flow-through. Each shareholder should consult his
own tax adviser regarding the potential application of foreign tax credits.

Distributions by a Fund that do not constitute ordinary income
dividends, or capital gain dividends will be treated as a return of capital
to the extent of (and in reduction of) the shareholder's tax basis in his
shares; any excess will be treated as gain from the sale of his shares, as
discussed below.

Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares
received, determined as of the reinvestment date. In addition, if the net
asset value at the time a shareholder purchases shares of a Fund reflects
undistributed net investment income or recognized capital gain net income, or
unrealized appreciation in the value of the assets of the Fund, distributions
of such amounts will be taxable to the shareholder in the manner described
above, although such distributions economically constitute a return of
capital to the shareholder.

Ordinarily, shareholders are required to take distributions by a Fund
into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable
to shareholders of record on a specified date in such a month will be deemed
to have been received by the shareholders (and made by the Fund) on December
31 of such calendar year if such dividends are actually paid in January of
the following year. Shareholders will be advised annually as to the U.S.
federal income tax consequences of distributions made (or deemed made) during
the year.
<PAGE>
A Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all,
(2) who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it
is a corporation or other "exempt recipient."

Sale or Redemption of Shares

Each Money Market Fund seeks to maintain a net asset value of $1.00 per
share; however, there can be no assurance that a Money Market Fund will be
able to do this. In such a case and in any case involving the non-Money
Market Funds, a shareholder will recognize gain or loss on the sale or
redemption of shares of a Fund in an amount equal to the difference between
the proceeds of the sale or redemption and the shareholder's adjusted tax
basis in the shares. All or a portion of any loss so recognized may be
disallowed if the shareholder purchases other shares of the Fund within 30
days before or after the sale or redemption. In general, any gain or loss
arising from (or treated as arising from) the sale or redemption of shares of
a Fund will be considered capital gain or loss and will be long- term capital
gain or loss if the shares were held for longer than one year. However, any
capital loss arising from the sale or redemption of shares held for six
months or less will be disallowed to the extent of the amount of exempt-
interest dividends received on such shares and (to the extent not disallowed)
will be treated as a long-term capital loss to the extent of the amount of
capital gain dividends received on such shares. For this purpose, special
holding period rules may apply in determining the holding period of shares.
Capital losses in any year are deductible only to the extent of capital gains
plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income.

Foreign Shareholders

Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from a
Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.

If the income from a Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Furthermore, such a foreign shareholder may be subject to U.S. withholding
tax at the rate of 30% (or lower treaty rate) on the gross income resulting
from the International Equity Fund's election to treat any foreign taxes paid
by it as paid by the shareholders, but may not be allowed a deduction against
this gross income or a credit against this U.S. withholding tax for the
foreign shareholder's pro rata share of such foreign taxes which it is
treated as having paid. Such a foreign shareholder would generally be exempt
from U.S. federal income tax on gains realized on the sale of shares of the
Fund, capital gain dividends and exempt-interest dividends and amounts
retained by the Fund that are designated as undistributed capital gains.
<PAGE>
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax on a net basis at the rates
applicable to U.S. citizens or domestic corporations.

In the case of foreign noncorporate shareholders, a Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that
are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
its foreign status.

The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a
Fund, including the applicability of foreign taxes.

State and Local Tax Matters

Depending on the residence of the shareholder for tax purposes,
distributions may also be subject to state and local taxes or withholding
taxes. Most states provide that a RIC may pass through (without restriction)
to its shareholders state and local income tax exemptions available to direct
owners of certain types of U.S. government securities (such as U.S. Treasury
obligations). Thus, for residents of these states, distributions derived from
a Fund's investment in certain types of U.S. government securities should be
free from state and local income taxes to the extent that the interest income
from such investments would have been exempt from state and local income
taxes if such securities had been held directly by the respective
shareholders themselves. Certain states, however, do not allow a RIC to pass
through to its shareholders the state and local income tax exemptions
available to direct owners of certain types of U.S. government securities
unless the RIC holds at least a required amount of U.S. government
securities. Accordingly, for residents of these states, distributions derived
from a Fund's investment in certain types of U.S. government securities may
not be entitled to the exemptions from state and local income taxes that
would be available if the shareholders had purchased U.S. government
securities directly. Shareholders' dividends attributable to a Fund's income
from repurchase agreements generally are subject to state and local income
taxes, although states and regulations vary in their treatment of such
income. The exemption from state and local income taxes does not preclude
states from asserting other taxes on the ownership of U.S. government
securities. To the extent that a Fund invests to a substantial degree in U.S.
government securities which are subject to favorable state and local tax
treatment, shareholders of such Fund will be notified as to the extent to
which distributions from the Fund are attributable to interest on such
securities. Rules of state and local taxation of ordinary income dividends
and capital gain dividends from RICs may differ from the rules for U.S.
federal income taxation in other respects. Shareholders are urged to consult
their tax advisers as to the consequences of these and other state and local
tax rules affecting investment in a Fund.
<PAGE>
Effect of Future Legislation

The foregoing general discussion of U.S. federal income tax consequences
is based on the Code and the Treasury Regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions
may have a retroactive effect with respect to the transactions contemplated
herein.

MANAGEMENT OF THE TRUST AND THE FUNDS

Trustees and Officers

The Trustees and officers of the Trust and their principal occupations
for at least the past five years are set forth below. Their titles may have
varied during that period.

<F1>Sarah E. Jones-Chair and Trustee. President and Chief Operating
Officer of Chase Mutual Funds Corp.; formerly Managing Director for the
Global Asset Management and Private Banking Division of The Chase Manhattan
Bank. Age: 46. Address: Chase Mutual Funds Corp., 101 Park Avenue, Suite 15,
New York, NY 10178.

Frank A. Liddell, Jr.--Trustee. Retired; Of Counsel, Liddell, Sapp,
Zivley, Hill & LaBoon. Member of AVESTA Trust Supervisory Committee from
inception to 1997. Age: 68. Address: P.O. Box 2558, Houston, TX 77252.

George E. McDavid--Trustee. President, Houston Chronicle Publishing
Company. Member of AVESTA Trust Supervisory Committee from inception to 1997.
Age: 66. Address: P.O. Box 2558, Houston, TX 77252.

Kenneth L. Otto--Trustee. Retired; formerly Senior Vice President,
Tenneco Inc. Member of AVESTA Trust Supervisory Committee from inception to
1997. Age: 66. Address: P.O. Box 2558, Houston, TX 77252.

Fergus Reid, III-Trustee. Chairman and Chief Executive Officer, Lumelite
Corporation since September 1985. Chairman and Trustee, the Vista Funds.
Trustee, Morgan Stanley Funds. Age: 65. Address: 202 June Road, Stamford, CT
06903.

H. Michael Tyson--Trustee. Retired; formerly Executive Vice
President, Texas Commerce Bank from 19__ to 1995. Member of AVESTA Trust
Supervisory Committee from 1988 to 1997. Age: 58. Address: P.O. Box 2558,
Houston, TX 77252.

Martin R. Dean-Treasurer. Associate Director, Accounting Services, BISYS
Fund Services; formerly Senior Manager, KPMG Peat Marwick (1987-1994). Age:
33. Address: 3435 Stelzer Road, Columbus, OH 43219.

W. Anthony Turner-Secretary. Senior Vice President and Regional Client
Executive, BISYS Fund Services; formerly Senior Vice President, First Union
Brokerage Services, Inc. and Senior Vice President, Nationsbank. Age: 36.
Address: 125 West 55th Street, New York, NY 10019.
<PAGE>
________________________

[FN]
<F1> Asterisks indicate those Trustees that are "interested persons" (as
defined in the 1940 Act). The Board of Trustees of the Trust presently
has an Audit Committee. The members of the Audit Committee are Messrs.
__________. The function of the Audit Committee is to recommend
independent auditors and monitor accounting and financial matters.

Ms. Jones is also a Trustee of Mutual Fund Group, Mutual Fund Trust,
Mutual Fund Select Group, Mutual Fund Select Trust, Mutual Fund Variable
Annuity Trust, Capital Growth Portfolio, Growth and Income Portfolio and
International Equity Portfolio (these entities are referred to as the "Vista
Funds"). Mr. Reid is Chairman, President and a Trustee of the Vista Funds.
Mr. Dean and Mr. Turner also serve as Treasurer and Secretary, respectively,
of the Vista Funds.

Remuneration of Trustees and Certain Executive Officers:

Each Trustee is reimbursed for expenses incurred in attending each
meeting of the Board of Trustees or any committee thereof. Each Trustee who
is not an affiliate of the advisers is compensated for his or her services.
Each such Trustee receives a fee, which consists of an annual retainer
component and a meeting fee component.

Set forth below is information regarding compensation paid or accrued
during the fiscal year ended December 31, 1996 for each member of the
Supervisory Committee of the AVESTA Trust:

Total Compensation
from AVESTA Trust
--------------------

Frank A. Liddell, Jr., Trustee $ 7,000
George E. McDavid, Trustee 7,000
Kenneth L. Otto, Trustee 7,000
H. Michael Tyson, Trustee 7,000

The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with
the Trust, unless, as to liability to the Trust or its shareholders, it is
finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their
offices or with respect to any matter unless it is finally adjudicated that
they did not act in good faith in the reasonable belief that their actions
were in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined by a court
or other body approving the settlement or other disposition, or by a
reasonable determination based upon a review of readily available facts, by
vote of a majority of disinterested Trustees or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
<PAGE>
As of April 21, 1997, Mr. Liddell owned 1.15% of the outstanding units
of the Short-Intermediate U.S. Government Securities Fund. The Trustees and
officers as a group owned less than 1% of each other Fund's shares, all of
which were acquired for investment purposes.

Adviser and Sub-Advisers

Chase acts as investment adviser to the Funds pursuant to an Investment
Advisory Agreement, dated as of January 1, 1998 (the "Advisory Agreement").
Subject to such policies as the Board of Trustees may determine, Chase is
responsible for investment decisions for the Funds. Pursuant to the terms of
the Advisory Agreement, Chase provides the Funds with such investment advice
and supervision as it deems necessary for the proper supervision of the
Funds' investments. The advisers (including the sub-advisers) continuously
provide investment programs and determine from time to time what securities
shall be purchased, sold or exchanged and what portion of the Funds' assets
shall be held uninvested. The advisers to the Funds furnish, at their own
expense, all services, facilities and personnel necessary in connection with
managing the investments and effecting portfolio transactions for the Funds.
The Advisory Agreement for the Funds will continue in effect from year to
year only if such continuance is specifically approved at least annually by
the Board of Trustees or by vote of a majority of a Fund's outstanding voting
securities and by a majority of the Trustees who are not parties to the
Advisory Agreement or interested persons of any such party, at a meeting
called for the purpose of voting on such Advisory Agreement.

Under the Advisory Agreement and the sub-advisers' agreements with the
adviser, the adviser and sub-advisers may utilize the specialized portfolio
skills of all their various affiliates, thereby providing the Funds with
greater opportunities and flexibility in accessing investment expertise.

Pursuant to the terms of the advisory agreements, the advisers are
permitted to render services to others. Each advisory agreement is terminable
without penalty by the Trust on behalf of the Funds on not more than 60
days', nor less than 30 days', written notice when authorized either by a
majority vote of a Fund's shareholders or by a vote of a majority of the
Board of Trustees of the Trust, or by the adviser or sub-adviser on not more
than 60 days', nor less than 30 days', written notice, and will automatically
terminate in the event of its "assignment" (as defined in the 1940 Act). The
advisory agreements provide that the adviser or sub-adviser under such
agreement shall not be liable for any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission in the
execution of portfolio transactions for the respective Fund, except for
wilful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
thereunder.

In the event the operating expenses of the Funds, including all
investment advisory, administration and sub-administration fees, but
excluding brokerage commissions and fees, taxes, interest and extraordinary
expenses such as litigation, for any fiscal year exceed the most restrictive
expense limitation applicable to the Funds imposed by the securities laws or
regulations thereunder of any state in which the shares of the Funds are
qualified for sale, as such limitations may be raised or lowered from time to
<PAGE>
time, the adviser shall reduce its advisory fee (which fee is described
below) to the extent of its share of such excess expenses. The amount of any
such reduction to be borne by the adviser shall be deducted from the monthly
advisory fee otherwise payable with respect to the Funds during such fiscal
year; and if such amounts should exceed the monthly fee, the adviser shall
pay to a Fund its share of such excess expenses no later than the last day of
the first month of the next succeeding fiscal year.

Under the Advisory Agreement, Chase may delegate a portion of its
responsibilities to a sub-adviser. In addition, the Advisory Agreement
provides that Chase may render services through its own employees or the
employees of one or more affiliated companies that are qualified to act as an
investment adviser of the Fund and are under the common control of Chase, as
long as all such persons are functioning as part of an organized group of
persons, managed by authorized officers of Chase.

Chase, on behalf of the Money Market Fund, Short-Intermediate Term U.S.
Government Securities Fund, U.S. Government Securities Fund, Intermediate
Term Bond Fund, Income Fund, Balanced Fund, Equity Income Fund, Core Equity
Fund, Equity Growth Fund and Small Capitalization Fund, has entered into an
investment sub-advisory agreement dated as of January 1, 1998 with Texas
Commerce Bank National Association ("TCB"). Chase may enter into one or more
additional sub-advisory agreements with respect to the Tax Free Money Market
Fund, Tax Free Income Fund, New York Tax Free Income Fund, Mid Cap Growth
Fund and International Equity Fund. With respect to the day-to-day management
of the Funds, under the sub-advisory agreements, the sub-advisers make
decisions concerning, and place all orders for, purchases and sales of
securities and help maintain the records relating to such purchases and
sales. The sub-advisers may, in their discretion, provide such services
through their own employees or the employees of one or more affiliated
companies that are qualified to act as an investment adviser to the Company
under applicable laws and are under the common control of Chase; provided
that (i) all persons, when providing services under the sub-advisory
agreement, are functioning as part of an organized group of persons, and (ii)
such organized group of persons is managed at all times by authorized
officers of the sub-adviser. This arrangement will not result in the payment
of additional fees by the Funds.

Chase, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range
of banking and investment services to customers throughout the United States
and around the world. Also included among Chase's accounts are commingled
trust funds and a broad spectrum of individual trust and investment
management portfolios. These accounts have varying investment objectives.

TCB, a wholly-owned subsidiary of The Chase Manhattan Corporation, is a
commercial bank offering a wide range of banking and investment services to
customers throughout the United States and around the world. Also included
among TCB's accounts are commingled trust funds and a broad spectrum of
individual trust and investment management portfolios. These accounts have
varying investment objectives.

In consideration of the services provided by the adviser pursuant to the
Advisory Agreement, the adviser is entitled to receive from the appropriate
<PAGE>
Fund(s) an investment advisory fee computed daily and paid monthly based on a
rate equal to a percentage of such Fund's average daily net assets specified
in the Prospectuses. However, the adviser may voluntarily agree to waive a
portion of the fees payable to it on a month-to-month basis. For its services
under its sub-advisory agreement, TCB will be entitled to receive, with
respect to each such Fund, such compensation, payable by the advisor out of
its advisory fee, as described in the Prospectuses.

Prior to January 1, 1998, the Funds were series of the AVESTA Trust. TCB
acted as Trustee for the Avesta Funds pursuant to three separate, but
substantially similar, management agreements (the "Avesta Management
Agreements"). As with certain of the Funds, TCB provided investment advisory
services to the Avesta Funds. However, TCB was also obligated to perform
certain administrative and account servicing functions under the Avesta
Management Agreements, including preparation and distribution of
communications to shareholders, accounting and recordkeeping. As Trustee, TCB
also paid certain expenses, including (i) all costs and expenses arising in
connection with the organization of the AVESTA Trust, including the initial
registration statement and qualification of the AVESTA Trust and its units
under federal and state law; (ii) all marketing and advertising expenses of
the AVESTA Trust and (iii) expenses of all employees, office space and
facilities necessary to carry out its duties under the Avesta Management
Agreements. Accordingly, the compensation received by the Trustee under the
Avesta Management Agreements are not necessarily indicative of the fees to be
earned by Chase under the Advisory Agreement.

For its services under the Avesta Management Agreements, the Trustee was
entitled to receive compensation as follows:

<TABLE>
<CAPTION>
Average Daily Net Assets
---------------------------------------------------------------
In Excess of $250
Up to Million but less In Excess of
Fund $250 Million Than $500 Million $500 Million
- ------------------------------------------------------------ ---------------- --------------------- --------------
<S> <C> <C> <C>

Money Market 0.65% 0.65% 0.65%
Income 1.00% 0.90% 0.80%
Equity Growth 1.00% 0.90% 0.80%
Equity Income 1.00% 0.90% 0.80%
Balanced 1.00% 0.90% 0.80%
Short-Intermediate Term U.S. Government Securities 0.75% 0.65% 0.55%
U.S. Government Securities 0.85% 0.75% 0.65%
Small Capitalization 1.15% 1.05% 0.95%
Core Equity 1.00% 0.90% 0.80%
Intermediate Term Bond 0.75% 0.65% 0.55%

</TABLE>

The Funds in operation paid management fees to the Trustee, net of
voluntary waivers<F1>, for the years ended, respectively, as follows:

<PAGE>
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------------------
Fund 1994 1995 1996
- ------------------------------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>

Money Market Fund $177,507 $435,936 $449,833
Income Fund 538,547 546,375 405,352
Intermediate Term Bond Fund 9,332<F2> 44,818 47,537
Balanced Fund 278,203 218,177 219,535
Equity Growth Fund 308,089 407,599 509,223
Equity Income Fund 418,900 446,506 594,351
Short-Intermediate Term U.S. Government Securities Fund 161,289 182,714 212,672
U.S. Government Securities Fund 22,444 21,549 20,595
Small Capitalization Fund 102,189 119,346 164,194
Core Equity Fund 169,483 223,368 265,417

____________________
<FN>
<F1> For the year ended December 31, 1996, the Trustee waived management
fees for the Money Market, Income, U.S. Government Securities and
Small Capitalization Funds of $134,952, $135,137, $2,757, and $24,219,
respectively. For the year ended December 31, 1995, the Trustee waived
management fees for the Money Market, Income, U.S. Government
Securities and Small Capitalization Funds of $100,525, $136,616,
$2,527 and $15,584, respectively. For the year ended December 31,
1994, the Trustee waived management fees for the Money Market, Income,
U.S. Government Securities and Small Capitalization Funds of $27,802,
$99,627, $1,886 and $9,153, respectively.
<F2> Reflects fees for the period of October 4, 1994 (commencement of
operations) through December 31, 1994.
</TABLE>

The Trustee had agreed to reimburse each Fund for the amount by which
the expenses of that Fund (including the management fee, but excluding
interest, taxes, brokerage commissions and extraordinary expenses) during any
year exceed the management fee payable by the Fund, provided that the average
daily value of the Fund's net assets during such year provided that the
assets of the Fund did not exceed $250 million. As such, the total
reimbursements paid to the Funds below by the Trustee for the years ended
December 31, 1995, and December 31, 1996, respectively, were:

$51,822, $40,517 and $41,514 for the Equity Growth Fund;
$49,282, $41,135 and $38,806 for the Equity Income Fund;
$47,431, $37,986 and $37,603 for the Balanced Fund;
$42,217, $42,439 and $38,446 for the Income Fund;
$55,847, $45,354 and $67,069 for the Money Market Fund;
$46,037, $37,619 and $36,085 for the Core Equity Fund;
$43,410, $35,928 and $36,160 for the Small Capitalization Fund;
$44,620, $38,430 and $37,184 for the Short-Intermediate Term U.S.
Government Securities Fund;
$43,058, $34,649 and $34,175 for the U.S. Government Securities Fund.

The total reimbursements paid to the Intermediate Term Bond Fund below
by the Trustee for the period of October 4, 1994 (commencement of operations)
through December 31, 1994, and for the years ended December 31, 1995 and
December 31, 1996 were $31,738, $40,849 and $42,442, respectively.
<PAGE>
Administrator

Pursuant to an Administration Agreement (the "Administration
Agreement"), Chase is the administrator of the Funds. Chase provides certain
administrative services to the Funds, including, among other
responsibilities, coordinating the negotiation of contracts and fees with,
and the monitoring of performance and billing of, the Funds' independent
contractors and agents; preparation for signature by an officer of the Trust
of all documents required to be filed for compliance by the Trust with
applicable laws and regulations excluding those of the securities laws of
various states; arranging for the computation of performance data, including
net asset value and yield; responding to shareholder inquiries; and arranging
for the maintenance of books and records of the Funds and providing, at its
own expense, office facilities, equipment and personnel necessary to carry
out its duties. Chase in its capacity as administrator does not have any
responsibility or authority for the management of the Funds, the
determination of investment policy, or for any matter pertaining to the
distribution of Fund shares.

Under the Administration Agreement Chase is permitted to render
administrative services to others. The Administration Agreement will continue
in effect from year to year with respect to each Fund only if such
continuance is specifically approved at least annually by the Board of
Trustees of the Trust or by vote of a majority of such Fund's outstanding
voting securities and, in either case, by a majority of the Trustees who are
not parties to the Administration Agreement or "interested persons" (as
defined in the 1940 Act) of any such party. The Administration Agreement is
terminable without penalty by the Trust on behalf of each Fund on 60 days'
written notice when authorized either by a majority vote of such Fund's
shareholders or by vote of a majority of the Board of Trustees, including a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust, or by Chase on 60 days' written notice, and will
automatically terminate in the event of their "assignment" (as defined in the
1940 Act). The Administration Agreement also provides that neither Chase or
its personnel shall be liable for any error of judgment or mistake of law or
for any act or omission in the administration of the Funds, except for
willful misfeasance, bad faith or gross negligence in the performance of its
or their duties or by reason of reckless disregard of its or their
obligations and duties under the Administration Agreement.

In addition, the Administration Agreement provides that, in the event
the operating expenses of any Fund, including all investment advisory,
administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to that Fund imposed by the securities laws or
regulations thereunder of any state in which the shares of such Fund are
qualified for sale, as such limitations may be raised or lowered from time to
time, Chase shall reduce its administration fee (which fee is described
below) to the extent of its share of such excess expenses. The amount of any
such reduction to be borne by Chase shall be deducted from the monthly
administration fee otherwise payable to Chase during such fiscal year, and if
such amounts should exceed the monthly fee, Chase shall pay to such Fund its
<PAGE>
share of such excess expenses no later than the last day of the first month
of the next succeeding fiscal year.

In consideration of the services provided by Chase pursuant to the
Administration Agreement, Chase receives from each Fund a fee computed daily
and paid monthly at an annual rate equal to 0.10% of each of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year. Chase may voluntarily waive a portion of the fees payable to it
with respect to each Fund on a month-to-month basis.

Distribution Plan

The Trust has adopted a plan of distribution pursuant to Rule 12b-1
under the 1940 Act (a "Distribution Plan") on behalf of the Retail Class
shares of its Funds as described in the Prospectus, which provides such class
of the Funds shall pay for distribution services a distribution fee (the
"Distribution Fee"), including payments to the Distributor, at annual rates
not to exceed the amounts set forth in the Prospectus for Retail Class
shares. The Distributor may use all or any portion of such Distribution Fee
to pay for Fund expenses of printing prospectuses and reports used for sales
purposes, expenses of the preparation and printing of sales literature and
other such distribution-related expenses.

Retail Class shares pay a Distribution Fee of up to 0.25% of average
daily net assets. Some payments under the Distribution Plans may be used to
compensate broker-dealers with trail or maintenance commissions in an amount
not to exceed 0.25% annualized of the average net asset values of Retail
Class shares maintained in a Fund by such broker-dealers' customers. Since
the distribution fees are not directly tied to expenses, the amount of
distribution fees paid by a Fund during any year may be more or less than
actual expenses incurred pursuant to the Distribution Plans. For this reason,
this type of distribution fee arrangement is characterized by the staff of
the Securities and Exchange Commission as being of the "compensation variety"
(in contrast to "reimbursement" arrangements by which a distributor's
payments are directly linked to its expenses). With respect to Retail Class
shares, because of the 0.25% annual limitation on the compensation paid to
the Distributor during a fiscal year, compensation relating to a large
portion of the commissions attributable to sales of Retail Class shares in
any one year will be accrued and paid by a Fund to the Distributor in fiscal
years subsequent thereto. In determining whether to purchase Retail Class
shares, investors should consider that compensation payments could continue
until the Distributor has been fully reimbursed for the commissions paid on
sales of Retail Class shares. However, the shares are not liable for any
distribution expenses incurred in excess of the Distribution Fee paid.

The Retail Class shares are entitled to exclusive voting rights with
respect to matters concerning its Distribution Plan.

The Distribution Plan provides that it will continue in effect
indefinitely if such continuance is specifically approved at least annually
by a vote of both a majority of the Trustees and a majority of the Trustees
who are not "interested persons" (as defined in the 1940 Act) of the Trust
and who have no direct or indirect financial interest in the operation of the
Distribution Plan or in any agreement related to such Plan ("Qualified
<PAGE>
Trustees"). The Distribution Plan requires that the Trust shall provide to
the Board of Trustees, and the Board of Trustees shall review, at least
quarterly, a written report of the amounts expended (and the purposes
therefor) under the Distribution Plan. The Distribution Plan further provides
that the selection and nomination of Qualified Trustees shall be committed to
the discretion of the disinterested Trustees (as defined in the 1940 Act)
then in office. The Distribution Plan may be terminated at any time by a vote
of a majority of the Qualified Trustees or, with respect to a particular
Fund, by vote of a majority of the outstanding voting Retail Class shares of
such Fund (as defined in the 1940 Act). The Distribution Plan may not be
amended to increase materially the amount of permitted expenses thereunder
without the approval of shareholders and may not be materially amended in any
case without a vote of the majority of both the Trustees and the Qualified
Trustees. Each of the Funds will preserve copies of any plan, agreement or
report made pursuant to the Distribution Plan for a period of not less than
six years from the date of the Distribution Plan, and for the first two years
such copies will be preserved in an easily accessible place.

Distribution and Sub-Administration Agreement

The Trust has entered into a Distribution and Sub-Administration
Agreement dated January 1, 1998 (the "Distribution Agreement") with the
Distributor, pursuant to which the Distributor acts as the Funds' exclusive
underwriter, provides certain administration services and promotes and
arranges for the sale of each class of Shares. The Distributor is a wholly-
owned subsidiary of BISYS Fund Services, Inc. The Distribution Agreement
provides that the Distributor will bear the expenses of printing,
distributing and filing prospectuses and statements of additional information
and reports used for sales purposes, and of preparing and printing sales
literature and advertisements not paid for by the Distribution Plan. The
Trust pays for all of the expenses for qualification of the shares of each
Fund for sale in connection with the public offering of such shares, and all
legal expenses in connection therewith. In addition, pursuant to the
Distribution Agreement, the Distributor provides certain sub-administration
services to the Trust, including providing officers, clerical staff and
office space.

The Distribution Agreement is currently in effect and will continue in
effect with respect to each Fund only if such continuance is specifically
approved at least annually by the Board of Trustees or by vote of a majority
of such Fund's outstanding voting securities and, in either case, by a
majority of the Trustees who are not parties to the Distribution Agreement or
"interested persons" (as defined in the 1940 Act) of any such party. The
Distribution Agreement is terminable without penalty by the Trust on behalf
of each Fund on 60 days' written notice when authorized either by a majority
vote of such Fund's shareholders or by vote of a majority of the Board of
Trustees of the Trust, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, or by the
Distributor on 60 days' written notice, and will automatically terminate in
the event of its "assignment" (as defined in the 1940 Act). The Distribution
Agreement also provides that neither the Distributor nor its personnel shall
be liable for any act or omission in the course of, or connected with,
rendering services under the Distribution Agreement, except for willful
<PAGE>
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties.

In the event the operating expenses of any Fund, including all
investment advisory, administration and sub-administration fees, but
excluding brokerage commissions and fees, taxes, interest and extraordinary
expenses such as litigation, for any fiscal year exceed the most restrictive
expense limitation applicable to that Fund imposed by the securities laws or
regulations thereunder of any state in which the shares of such Fund are
qualified for sale, as such limitations may be raised or lowered from time to
time, the Distributor shall reduce its sub-administration fee with respect to
such Fund (which fee is described below) to the extent of its share of such
excess expenses. The amount of any such reduction to be borne by the
Distributor shall be deducted from the monthly sub-administration fee
otherwise payable with respect to such Fund during such fiscal year; and if
such amounts should exceed the monthly fee, the Distributor shall pay to such
Fund its share of such excess expenses no later than the last day of the
first month of the next succeeding fiscal year.

In consideration of the sub-administration services provided by the
Distributor pursuant to the Distribution Agreement, the Distributor receives
an annual fee, payable monthly, of 0.05% of the net assets of each Fund.
However, the Distributor has voluntarily agreed to waive a portion of the
fees payable to it under the Distribution Agreement with respect to each Fund
on a month-to-month basis.

Transfer Agent and Custodian

The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") pursuant to which DST acts as transfer agent for the
Trust. DST's address is 210 West 10th Street, Kansas City, MO 64105.

Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of each Fund and receives such compensation as is from time to time
agreed upon by the Trust and Chase. As custodian, Chase provides oversight
and record keeping for the assets held in the portfolios of each Fund. Chase
also provides fund accounting services for the income, expenses and shares
outstanding for such Funds. Chase is located at 3 Metrotech Center, Brooklyn,
NY 11245.

INDEPENDENT ACCOUNTANTS

The financial statements incorporated herein by reference from the
AVESTA Trust's Annual Report to Shareholders for the fiscal year ended
December 31, 1996 and Semi-Annual Report to Shareholders for the period ended
June 30, 1997, and the related financial highlights which appear in the
Prospectuses, have been incorporated herein and included in the Prospectuses
in reliance on the reports of Price Waterhouse LLP, 1177 Avenue of the
Americas, New York, New York 10036, independent accountants of the Funds,
given on the authority of said firm as experts in accounting and auditing.
Price Waterhouse LLP provides the Funds with audit services, tax return
preparation and assistance and consultation with respect to the preparation
of filings with the Securities and Exchange Commission.
<PAGE>
CERTAIN REGULATORY MATTERS

Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in the Prospectus and this Statement of
Additional Information without violating such laws. If future changes in
these laws or interpretations required Chase to alter or discontinue any of
these services, it is expected that the Board of Trustees would recommend
alternative arrangements and that investors would not suffer adverse
financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.

Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
any of the Funds, including outstanding loans to such issuers which may be
repaid in whole or in part with the proceeds of securities so purchased.
Chase and its affiliates deal, trade and invest for their own accounts in
U.S. Government obligations, municipal obligations and commercial paper and
are among the leading dealers of various types of U.S. Government obligations
and municipal obligations. Chase and its affiliates may sell U.S. Government
obligations and municipal obligations to, and purchase them from, other
investment companies sponsored by the Funds' distributor or affiliates of the
distributor. Chase will not invest any Fund assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by any Fund. Chase has informed the Funds
that in making its investment decision, it does not obtain or use material
inside information in the possession of any other division or department of
Chase, including the division that performs services for the Trust as
custodian, or in the possession of any affiliate of Chase. Shareholders of
the Funds should be aware that, subject to applicable legal or regulatory
restrictions, Chase and its affiliates may exchange among themselves certain
information about the shareholder and his account. Transactions with
affiliated broker-dealers will only be executed on an agency basis in
accordance with applicable federal regulations.

GENERAL INFORMATION

Description of Shares, Voting Rights and Liabilities

Mutual Fund Investment Trust is an open-end, non-diversified management
investment company organized as Massachusetts business trust under the laws
of the Commonwealth of Massachusetts in 1997. The Trust currently consists of
<PAGE>
15 series of shares of beneficial interest, par value $.001 per share. With
respect to all of its Funds, the Trust may offer more than one class of
shares. The Trust has reserved the right to create and issue additional
series or classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class.
Expenses of the Trust which are not attributable to a specific series or
class are allocated amount all the series in a manner believed by management
of the Trust to be fair and equitable. Shares have no preemptive or
conversion rights. Shares when issued are fully paid and non-assessable,
except as set forth below. Shareholders are entitled to one vote for each
share held. Shares of each series or class generally vote together, except
when required under federal securities laws to vote separately on matters
that only affect a particular class, such as the approval of distribution
plans for a particular class.

The classes of shares have several different attributes relating to
expenses, as described herein and in the Prospectuses. In addition to such
differences, expenses borne by each class of a Fund may differ slightly
because of the allocation of other class-specific expenses. For example, a
higher transfer agency fee may be imposed on Retail Class shares than on
Institutional class shares. The relative impact of ongoing annual expenses
will depend on the length of time a share is held.

Selected dealers and financial consultants may receive different levels
of compensation for selling one particular class of shares rather than
another.

The Trust is not required to hold annual meetings of shareholders but
will hold special meetings of shareholders of a series or class when, in the
judgment of the Trustees, it is necessary or desirable to submit matters for
a shareholder vote. Shareholders have, under certain circumstances, the right
to communicate with other shareholders in connection with requesting a
meeting of shareholders for the purpose of removing one or more Trustees.
Shareholders also have, in certain circumstances, the right to remove one or
more Trustees without a meeting. No material amendment may be made to the
Trust's Declaration of Trust without the affirmative vote of the holders of a
majority of the outstanding shares of each portfolio affected by the
amendment. Shares have no preemptive or conversion rights. Shares, when
issued, are fully paid and non-assessable, except as set forth below. Any
series or class may be terminated (i) upon the merger or consolidation with,
or the sale or disposition of all or substantially all of its assets to,
another entity, if approved by the vote of the holders of two-thirds of its
outstanding shares, except that if the Board of Trustees recommends such
merger, consolidation or sale or disposition of assets, the approval by vote
of the holders of a majority of the series' or class' outstanding shares will
be sufficient, or (ii) by the vote of the holders of a majority of its
outstanding shares, or (iii) by the Board of Trustees by written notice to
the series' or class' shareholders. Unless each series and class is so
terminated, the Trust will continue indefinitely.

Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for its
<PAGE>
obligations. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of
the Trust. The Trust's Declaration of Trust also provides that the Trust
shall maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of the Trust, its
shareholders, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself was unable to meet its
obligations.

The Trust's Declaration of Trust further provides that obligations of
the Trust are not binding upon the Trustees individually but only upon the
property of the Trust and that the Trustees will not be liable for any action
or failure to act, errors of judgment or mistakes of fact or law, but nothing
in the Declaration of Trust protects a Trustee against any liability to which
he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct
of his office.

The Board of Trustees has adopted a code of ethics addressing personal
securities transactions by investment personnel and access persons and other
related matters. The code has been designated to address potential conflicts
of interest that can arise in connection with personal trading activities of
such persons. Persons subject to the code are generally permitted to engage
in personal securities transactions, subject to certain prohibitions, pre-
clearance requirements and blackout periods.

Principal Holders

As of November 30, 1997, the following persons owned of record 5% or
more of the outstanding shares of the following classes of the following
Funds:

Financial Statements

The Annual Report to Shareholders and Semi-Annual Report to Shareholders
for the AVESTA Trust, including the reports of independent accounts,
financial highlights and financial statements for the fiscal year ended
December 31, 1996 and the period ended June 30, 1997, respectively, contained
therein, are incorporated herein by reference.
<PAGE>
APPENDIX A

DESCRIPTION OF CERTAIN OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES OR INSTRUMENTALITIES

Federal Farm Credit System Notes and Bonds--are bonds issued by a
cooperatively owned nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
These bonds are not guaranteed by the U.S. Government.

Maritime Administration Bonds--are bonds issued and provided by the
Department of Transportation of the U.S. Government are guaranteed by the
U.S. Government.

FNMA Bonds--are bonds guaranteed by the Federal National Mortgage
Association. These bonds are not guaranteed by the U.S. Government.

FHA Debentures--are debentures issued by the Federal Housing
Administration of the U.S. Government and are guaranteed by the U.S.
Government.

FHA Insured Notes--are bonds issued by the Farmers Home Administration
of the U.S. Government and are guaranteed by the U.S. Government.

GNMA Certificates--are mortgage-backed securities which represent a
partial ownership interest in a pool of mortgage loans issued by lenders such
as mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration and therefore
guaranteed by the U.S. Government. As a consequence of the fees paid to GNMA
and the issuer of GNMA Certificates, the coupon rate of interest of GNMA
Certificates is lower than the interest paid on the VA-guaranteed or FHA-
insured mortgages underlying the Certificates. The average life of a GNMA
Certificate is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities. Prepayments of principal by
mortgagors and mortgage foreclosures may result in the return of the greater
part of principal invested far in advance of the maturity of the mortgages in
the pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee. As the prepayment rate of individual mortgage pools will vary
widely, it is not possible to accurately predict the average life of a
particular issue of GNMA Certificates. The yield which will be earned on GNMA
Certificates may vary from their coupon rates for the following reasons: (i)
Certificates may be issued at a premium or discount, rather than at par; (ii)
Certificates may trade in the secondary market at a premium or discount after
issuance; (iii) interest is earned and compounded monthly which has the
effect of raising the effective yield earned on the Certificates; and (iv)
the actual yield of each Certificate is affected by the prepayment of
mortgages included in the mortgage pool underlying the Certificates.
Principal which is so prepaid will be reinvested although possibly at a lower
rate. In addition, prepayment of mortgages included in the mortgage pool
underlying a GNMA Certificate purchased at a premium could result in a loss
to a Fund. Due to the large amount of GNMA Certificates outstanding and
active participation in the secondary market by securities dealers and
<PAGE>
investors, GNMA Certificates are highly liquid instruments. Prices of GNMA
Certificates are readily available from securities dealers and depend on,
among other things, the level of market rates, the Certificate's coupon rate
and the prepayment experience of the pool of mortgages backing each
Certificate. If agency securities are purchased at a premium above principal,
the premium is not guaranteed by the issuing agency and a decline in the
market value to par may result in a loss of the premium, which may be
particularly likely in the event of a prepayment. When and if available, U.S.
Government obligations may be purchased at a discount from face value.

FHLMC Certificates and FNMA Certificates--are mortgage-backed bonds
issued by the Federal Home Loan Mortgage Corporation and the Federal National
Mortgage Association, respectively, and are guaranteed by the U.S.
Government.

GSA Participation Certificates--are participation certificates issued by
the General Services Administration of the U.S. Government and are guaranteed
by the U.S. Government.

New Communities Debentures--are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development
Act of 1970, the payment of which is guaranteed by the U.S. Government.

Public Housing Bonds--are bonds issued by public housing and urban
renewal agencies in connection with programs administered by the Department
of Housing and Urban Development of the U.S. Government, the payment of which
is secured by the U.S. Government.

Penn Central Transportation Certificates--are certificates issued by
Penn Central Transportation and guaranteed by the U.S. Government.

SBA Debentures--are debentures fully guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.

Washington Metropolitan Area Transit Authority Bonds--are bonds issued
by the Washington Metropolitan Area Transit Authority. Some of the bonds
issued prior to 1993 are guaranteed by the U.S. Government.

FHLMC Bonds--are bonds issued and guaranteed by the Federal Home Loan
Mortgage Corporation. These bonds are not guaranteed by the U.S. Government.

Federal Home Loan Bank Notes and Bonds--are notes and bonds issued by
the Federal Home Loan Bank System and are not guaranteed by the U.S.
Government.

Student Loan Marketing Association ("Sallie Mae") Notes and bonds--are
notes and bonds issued by the Student Loan Marketing Association and are not
guaranteed by the U.S. Government.

D.C. Armory Board Bonds--are bonds issued by the District of Columbia
Armory Board and are guaranteed by the U.S. Government.

Export-Import Bank Certificates--are certificates of beneficial interest
and participation certificates issued and guaranteed by the Export-Import
Bank of the U.S. and are guaranteed by the U.S. Government.
<PAGE>
In the case of securities not backed by the "full faith and credit" of
the U.S. Government, the investor must look principally to the agency issuing
or guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the U.S. Government itself in the event the agency or
instrumentality does not meet its commitments.

Investments may also be made in obligations of U.S. Government agencies
or instrumentalities other than those listed above.
<PAGE>
APPENDIX B

DESCRIPTION OF RATINGS

A description of the rating policies of Moody's, S&P and Fitch with respect
to bonds and commercial paper appears below.

Moody's Investors Service's Corporate Bond Ratings

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

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

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

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

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

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

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

Ca--Bonds which are rated "Ca" represent obligations which are speculative in
high degree.

Such issues are often in default or have other marked shortcomings.
<PAGE>
C--Bonds which are rated "C" are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Moody's applies numerical modifiers "1", "2", and "3" to certain of its
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.

Standard & Poor's Ratings Group Corporate Bond Ratings

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

AA--Bonds rated "AA" also qualify as high quality debt obligations. Capacity
to pay principal and interest is very strong, and differs from "AAA" issues
only in small degree.

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

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

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

CI--Bonds rated "CI" are income bonds on which no interest is being paid.

D--Bonds rated "D" are in default. The "D" category 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. The "D" rating is also used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

The ratings set forth above may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.

Moody's Investors Service's Commercial Paper Ratings

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

Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, 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) rated "Prime-3" have an acceptable ability for repayment of
senior short-term obligations. The effect of industry characteristics and
market compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt protection
measurements and the requirement for relatively high financial leverage.
Adequate alternate liquidity is maintained.

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

Standard & Poor's Ratings Group Commercial Paper Ratings

A S&P commercial paper rating is current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded in several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. The four categories are as
follows:

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

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

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

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

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

D--Debt rated "D" is in payment default. The "D" rating category 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.
<PAGE>
Fitch Bond Ratings

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

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

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

BBB--Bonds rated BBB by Fitch are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
consequences 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. Plus and minus signs are used
by Fitch to indicate the relative position of a credit within a rating
category. Plus and minus signs, however, are not used in the AAA category.

Fitch Short-Term Ratings

Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.

The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.

Fitch's short-term ratings are as follows:

F-1+--Issues assigned this rating are regarded as having the strongest degree
of assurance for timely payment.

F-1--Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.

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

F-3--Issues assigned this rating have characteristics suggesting that the
degree of assurance for timely payment is adequate, although near-term
adverse changes could cause these securities to be rated below investment
grade.
<PAGE>
LOC--The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.

Like higher rated bonds, bonds rated in the Baa or BBB categories are
considered to have adequate capacity to pay principal and interest. However,
such bonds may have speculative characteristics, and 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 bonds.

After purchase by a Fund, a security may cease to be rated or its rating may
be reduced below the minimum required for purchase by such Fund. Neither
event will require a sale of such security by a Fund. However, a Fund's
investment manager will consider such event in its determination of whether
such Fund should continue to hold the security. To the extent the ratings
given by Moody's, S&P or Fitch may change as a result of changes in such
organizations or their rating systems, a Fund will attempt to use comparable
ratings as standards for investments in accordance with the investment
policies contained in this Statement of Additional Information.
<PAGE>
APPENDIX C

SPECIAL INVESTMENT CONSIDERATIONS RELATING TO
NEW YORK MUNICIPAL OBLIGATIONS

[To be updated]

Some of the significant financial considerations relating to the
investments of the New York Municipal Bond Fund in New York municipal
securities are summarized below. The following information constitutes only a
brief summary, does not purport to be a complete description and is largely
based on information drawn from official statements relating to securities
offerings of New York municipal obligations available as of the date of this
Statement of Additional Information. The accuracy and completeness of the
information contained in such offering statements has not been independently
verified.

New York State

New York State Financing Activities. There are a number of methods by
which New York State (the "State") may incur debt. Under the State
Constitution, the State may not, with limited exceptions for emergencies,
undertake long-term general obligation borrowing (i.e., borrowing for more
than one year) unless the borrowing is authorized in a specific amount for a
single work or purpose by the New York State Legislature (the "Legislature")
and approved by the voters. There is no limitation on the amount of long-term
general obligation debt that may be so authorized and subsequently incurred
by the State. With the exception of general obligation housing bonds (which
must be paid in equal annual installments or installments that result in
substantially level or declining debt service payments, within 50 years after
issuance, commencing no more than three years after issuance), general
obligation bonds must be paid in equal annual installments or installments
that result in substantially level or declining debt service payments, within
40 years after issuance, beginning not more than one year after issuance of
such bonds.

The State may undertake short-term borrowings without voter approval (i)
in anticipation of the receipt of taxes and revenues, by issuing tax and
revenue anticipation notes ("TRANs"), and (ii) in anticipation of the receipt
of proceeds from the sale of duly authorized but unissued bonds, by issuing
bond anticipation notes ("BANs"). TRANs must mature within one year from
their dates of issuance and may not be refunded or refinanced beyond such
period. BANS may only be issued for the purposes and within the amounts for
which bonds may be issued pursuant to voter authorizations. Such BANs must be
paid from the proceeds of the sale of bonds in anticipation of which they
were issued or from other sources within two years of the date of issuance
or, in the case of BANs for housing purposes, within five years of the date
of issuance.

The State may also, pursuant to specific constitutional authorization,
directly guarantee certain public authority obligations. The State
Constitution provides for the State guarantee of the repayment of certain
borrowings for designated projects of the New York State Thruway Authority,
the Job Development Authority and the Port Authority of New York and New
<PAGE>
Jersey. The State has never been called upon to make any direct payments
pursuant to such guarantees. The constitutional provisions allowing a
State-guarantee of certain Port Authority of New York and New Jersey debt
stipulates that no such guaranteed debt may be outstanding after December 31,
1996. State-guaranteed bonds issued by the Thruway Authority were fully
retired on July 1, 1995.

Payments of debt service on State general obligation and
State-guaranteed bonds and notes are legally enforceable obligations of the
State.

The State employs additional long-term financing mechanisms,
lease-purchase and contractual- obligation financing, which involve
obligations of public authorities or municipalities that are State-supported
but not general obligations of the State. Under these financing arrangements,
certain public authorities and municipalities have issued obligations to
finance the construction and rehabilitation of facilities or the acquisition
and rehabilitation of equipment and expect to meet their debt service
requirements through the receipt of rental or other contractual payments made
by the State. Although these financing arrangements involve a contractual
agreement by the State to make payments to a public authority, municipality
or other entity, the State's obligation to make such payments is generally
expressly made subject to appropriation by the Legislature and the actual
availability of money to the State for making the payments. The State has
also entered into a contractual-obligation financing arrangement with the New
York Local Government Assistance Corporation ("LGAC") to restructure the way
the State makes certain local aid payments. The State also participates in
the issuance of certificates of participation ("COPs") in a pool of leases
entered into by the State's Office of General Services on behalf of several
State departments and agencies interested in acquiring operational equipment,
or in certain cases, real property. Legislation enacted in 1986 established
restrictions upon and centralized State control, through the Comptroller and
the Director of the Budget, over the issuance of COPs representing the
State's contractual obligation, subject to annual appropriation by the
Legislature and availability of money, to make installment or lease-purchase
payments for the State's acquisition of such equipment or real property.

The State has never defaulted on any of its general obligation
indebtedness or its obligations under lease-purchase or
contractual-obligation financing arrangements and has never been called upon
to make any direct payments pursuant to its guarantees although there can be
no assurance that such a default or call will not occur in the future.

The State also employs moral obligation financing. Moral obligation
financing generally involves the issuance of debt by a public authority to
finance a revenue-producing project or other activity. The debt is secured by
project revenues and statutory provisions require the State, subject to
appropriation by the Legislature, to make up any deficiencies which may occur
in the issuer's debt service reserve fund. There has never been a default on
any moral obligation debt of any public authority although there can be no
assurance that such a default will not occur in the future.

The State anticipates that its capital programs will be financed, in
part, through borrowings by the State and public authorities in the 1996-97
<PAGE>
fiscal year. The State expects to issue $411 million in general obligation
bonds (including $153.6 million for purposes of redeeming outstanding BANs)
and $154 million in general obligation commercial paper. The Legislature has
also authorized the issuance of up to $101 million in COPs during the State's
1996-97 fiscal year for equipment purchases. The projection of the State
regarding its borrowings for the 1996-97 fiscal year may change if
circumstances require.

Borrowings by other public authorities pursuant to lease-purchase and
contractual-obligation financings for capital programs of the State are
projected to total $2.15 billion, including costs of issuances, reserve
funds, and other costs, net of anticipated refundings and other adjustments
for 1996-97 capital projects. Included therein are borrowings by (i) DASNY
for SUNY, The City University of New York ("CUNY"), health facilities, and
mental health facilities; (ii) Thruway Authority for the Dedicated Highway
and Bridge Trust Fund and Consolidated Highway Improvement Program; (iii) UDC
(doing business as the Empire State Development Corporation) for prison and
youth facilities; (iv) the Housing Finance Agency ("HFA") for housing
programs; and (v) borrowings by the Environmental Facilities Corporation
("EFC") or other authorities. In addition, the Legislature has authorized
DASNY to refinance a $787 million pension obligation of the State.

In the 1996 legislative session, the Legislature approved the Governor's
proposal to present to the voters in November 1996 a $1.75 billion State
general obligation bond referendum to finance various environmental
improvement and remediation projects. If the Clean Water, Clean Air Bond Act
is approved by the voters, the amount of general obligation bonds issued
during the 1996-97 fiscal year may increase above the $411 million currently
included in the 1996-97 Borrowing Plan to finance a portion of this new
program.

In addition to the arrangements described above, State law provides for
State municipal assistance corporations, which are Authorities authorized to
aid financially troubled localities. The Municipal Assistance Corporation for
The City of New York ("MAC") was created to provide financing assistance to
New York City (the "City"). To enable MAC to pay debt service on its
obligations, MAC receives, subject to annual appropriation by the
Legislature, receipts from the 4% New York State Sales Tax for the Benefit of
New York City, the State-imposed Stock Transfer Tax and, subject to certain
prior liens, certain local assistance payments otherwise payable to the City.
The legislation creating MAC also includes a moral obligation provision.
Under its enabling legislation, MAC's authority to issue bonds and notes
(other than refunding bonds and notes) expired on December 31, 1984.

State Financial Operations. The State has historically been one of the
wealthiest states in the nation. For decades, however, the State economy has
grown more slowly than that of the nation as a whole, gradually eroding the
State's relative economic affluence. Statewide, urban centers have
experienced significant changes involving migration of the more affluent to
the suburbs and an influx of generally less affluent residents. Regionally,
the older Northeast cities have suffered because of the relative success that
the South and the West have had in attracting people and business. The City
has also had to face greater competition as other major cities have developed
<PAGE>
financial and business capabilities which make them less dependent on the
specialized services traditionally available almost exclusively in the City.

Although the State ranks 22nd in the nation for its State tax burden,
the State has the second highest combined state and local tax burden in the
United States. In 1991, total State and local taxes in New York were $3,349
per capita, compared with $1,475 per capita in 1980. Between 1980 and 1991,
State and local taxes per capita increased at approximately the same rate in
the State as in the nation as a whole with per capita taxes in the State
increasing by 127% while such taxes increased 111% in the nation. The State
Division of the Budget ("DOB") believes, however, that it is more informative
to describe the state and local tax burden in terms of its relationship to
personal income. In 1992, total State and local taxes in New York were
$154.70 per $1,000 of personal income, compared with $152.70 in 1980. Between
1980 and 1992, State and local taxes per $1,000 of personal income increased
at a slower rate in the State than in the nation as a whole with such taxes
in the State increasing by 1.3 percent while such taxes increased 4 percent
in the nation. The State and its localities have used these taxes to develop
and maintain their respective transportation networks, public schools and
colleges, public health systems, other social services, and recreational
facilities. Despite these benefits, the burden of State and local taxation,
in combination with the many other causes of regional economic dislocation,
may have contributed to the decisions of some businesses and individuals to
relocate outside, or not locate within, the State.

The national economy began expanding in 1991 and has added over 7
million jobs since early 1992. However, the recession lasted longer in the
State, and the State's economic recovery has lagged behind the nation's.
Although the State has added approximately 185,000 jobs since November 1992,
employment growth in the State has been hindered during recent years by
significant cutbacks in the computer and instrument manufacturing, utility,
defense, and banking industries. DOB forecasted that national economic growth
would weaken, but not turn negative, during the course of 1995 before
beginning to rebound. This dynamic is often described as a "soft landing."

The national economy achieved the desired "soft landing" in 1995, as
growth slowed from 6.2 percent in 1994 to a rate sufficiently slow to inhibit
the buildup of inflationary pressures. This was achieved without any material
pause in the economic expansion, although recession worries flared in the
late spring and early summer. Growth in the national economy is expected to
moderate during 1996. Real GDP grew only 0.9 percent in the fourth quarter of
1995, and there were declines in the leading economic indicators in four of
the past five months. It is anticipated that slow economic growth will
continue through the first half of 1996 and inflationary pressures will be
modest in 1996. Economic growth will gradually accelerate in the second half
of 1996 as the lower level of interest rates over the last year is expected
to stimulate economic activity. Economic growth, as measured by the nation's
nominal GDP, is projected to expand by 4.3 percent in 1996 versus 4.6 in
1995. In 1992 dollars, real GDP is expected to grow 1.8 percent as compared
with the 2.1 percent growth in 1995. By either measure, economic growth is
projected to be noticeably slower for 1996 than 1995.

To stimulate economic growth, the State has developed programs,
including the provision of direct financial assistance, designed to assist
<PAGE>
businesses to expand existing operations located within the State and to
attract new businesses to the State. In addition, the State has provided
various tax incentives to encourage business relocation and expansion. These
programs include direct tax abatements from local property taxes for new
facilities (subject to locality approval) and investment tax credits that are
applied against the State corporation franchise tax. Furthermore, the State
has created 40 "economic development zones" in economically distressed
regions of the States. Businesses in these zones are provided a variety of
tax and other incentives to create jobs and make investments in the zones.
There can be no assurance that these programs will be successful.

From 1994 to 1995 the annual growth rates of most economic indicators
for the State improved. The pace of private sector employment expansion and
personal income and wage growth all accelerated. Government employment fell
as work force reductions were implemented at federal, State and local levels.
Similar to the nation, some moderation of growth is expected in the year
ahead. Private sector employment is expected to continue to rise, although
somewhat more slowly than in 1995, while public employment should continue to
fall, reflecting government budget cutbacks. Anticipated continued restraint
in wage settlements, a lower rate of employment growth and falling interest
rates are expected to slow personal income growth significantly.

The State's current fiscal year commenced on April 1, 1996, and ends on
March 31, 1997, and is referred to herein as the State's 1995-96 fiscal year.

The State's budget for the State's 1996-97 fiscal year, commencing on
April 1, 1996, was enacted by the Legislature on July 13, 1996. The State
Financial Plan for the 1996-97 fiscal year was formulated on July 25, 1996
and is based on the State's budget as enacted by the Legislature and signed
into law by the Governor, as well as actual results for the first quarter of
the current fiscal year. The 1996-97 State Financial Plan is updated in
October and January. The 1996-97 State Financial Plan is projected to be
balanced on a cash basis. Total General Fund receipts and transfers from
other funds are projected to be $33.17 billion, while total General Fund
disbursements and transfers to other funds are projected to be $33.12
billion. After adjustments for comparability, the adopted 1996-97 budget
projects a year-over-year increase in General Fund disbursements of 0.2
percent. As compared to the Governor's proposed budget as revised on March
20, 1996, the State's adopted budget for 1996-97 increases General Fund
spending by $842 million, primarily from increases for education, special
education and higher education ($563 million). Resources used to fund these
additional expenditures include $540 million in increased revenues projected
for 1996-97 based on higher than projected tax collections during the first
half of calendar 1996, $110 million in projected receipts from a new State
tax amnesty program, and other resources including certain non-recurring
resources.

The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. Those factors can
be very complex, may vary from fiscal year to fiscal year, and are frequently
the result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the Federal government, that
are not under the control of the State. In addition, the State Financial Plan
is based upon forecasts of national and State economic activity. Economic
<PAGE>
forecasts have frequently failed to predict accurately the timing and
magnitude of changes in the national and the State economies. Many
uncertainties exist in forecasts of both the national and State economies,
including consumer attitudes toward spending, the extent of corporate and
governmental restructuring, federal fiscal and monetary policies, the level
of interest rates, and the condition of the world economy, which could have
an adverse effect on the State. Actual results could differ materially and
adversely from projections and those projections may be changed materially
and adversely from time to time.

The 1996-97 State Financial Plan includes actions that will have an
effect on the budget outlook for State fiscal year 1996-97 and beyond. The
State Division of the Budget estimates that the 1996-97 State Financial Plan
contains actions that provide non-recurring resources or savings totaling
approximately $1.3 billion, or 3.9% of total General Fund receipts. These
include the use of $481 million in surplus funds available from the Medical
Malpractice Insurance Association, $134 million in savings from a refinancing
of certain pension obligations, $88 million in projected savings from bond
refundings, and $36 million in surplus fund transfers. The balance is
composed of $314 million in resources carried forward from the State's
1995-96 fiscal year and various other actions, including that portion of the
proposed tax amnesty program that is projected to be non-recurring.

The State closed projected budget gaps of $5.0 billion and $3.9 billion
for its 1995-96 and 1996-97 fiscal years, respectively. The 1997-98 gap was
projected at $1.44 billion, based on the Governor's proposed budget of
December 1995. As a result of changes made in the enacted budget, that gap is
now expected to be larger.

The out-year projection will be impacted by a variety of factors.
Enacted tax reductions, which reduced receipts in the 1996-97 State fiscal
year by an incremental $2.4 billion, are projected to reduce receipts in the
1997-98 State fiscal year by an additional increment of $2.1 billion. The use
of up to $1.3 billion of non- recurring resources in 1996-97, and the
annualized costs of certain program increases in the 1996-97 enacted budget,
will both add additional pressure in closing the 1997-98 gap. However,
actions undertaken in the State's 1996-97 fiscal year, such as work force
reductions, health care and education reforms, and strict controls on State
agency spending, are expected to provide larger recurring savings in State
fiscal year 1997- 98. Sustained growth in the State's economy and continued
declines in welfare caseload and Medicaid costs would produce additional
savings in the 1997-98 Financial Plan.

In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy,
actions of the Federal government and other factors have created structural
budget gaps for the State. These gaps resulted from a significant disparity
between recurring revenues and the costs of maintaining or increasing the
level of support for State programs. To address a potential imbalance in any
given fiscal year, the State would be required to take actions to increase
receipts and/or reduce disbursements as it enacts the budget for that year,
and under the State Constitution, the Governor is required to propose a
balanced budget each year. There can be no assurance, however, that the
Legislature will enact the Governor's proposals or that the State's actions
<PAGE>
will be sufficient to preserve budgetary balance in a given fiscal year or to
align recurring receipts and disbursements in future fiscal years.

On October 29, 1996, the State issued its second quarterly update to the
1996-97 State Financial Plan based on updated economic forecasts, actual
receipts and disbursements for the first six months of the fiscal year and an
assessment of changing program requirements. The update reflects a balanced
1996-97 State Financial Plan, with a reserve for contingencies in the General
Fund of $300 million, which will be utilized to help offset a variety of
potential risks and other unexpected contingencies that the State may face
during the balance of the 1996-97 fiscal year. Actual receipts through the
first two quarters of the 1996-97 State fiscal year reflect
stronger-than-expected growth in most taxes, with actual receipts exceeding
expectations by $276 million, and, based on the revised economic outlook and
actual receipts for the first six months of 1996- 97, projected General Fund
receipts for the 1996-97 State fiscal year have been increased by $420
million.

Uncertainties with regard to the economy, as well as the outcome of
certain litigation now pending against the State, could produce adverse
effects on the State's projections of receipts and disbursements. For
example, changes to current levels of interest rates or deteriorating world
economic conditions could have an adverse effect on the State economy and
produce results in the current fiscal year that are worse than predicted.
Similarly, adverse judgments in legal proceedings against the State could
exceed amounts reserved in the 1996-97 Financial Plan for payment of such
judgments and produce additional unbudgeted costs to the State.

On August 13, 1996, the State Comptroller released a report in which he
identified several risks to the State Financial Plan and estimated that the
State faces a potential imbalance in receipts and disbursements of
approximately $3 billion for the State's 1997-98 fiscal year and
approximately $3.2 billion for the State's 1998-99 fiscal year. The 1997-98
fiscal year estimate by the State Comptroller is within the range previously
discussed by the State Division of the Budget.

The Governor is required to submit a balanced budget to the State
Legislature and has indicated that he will close any potential imbalance in
the 1997-98 Financial Plan primarily through General Fund expenditure
reductions and without increases in taxes or deferrals of scheduled tax
reductions. It is expected by the State Division of the Budget that the
State's 1997-98 Financial Plan will reflect a continuing strategy of
substantially reduced State spending, including agency consolidations,
reductions in the State work force, and efficiency and productivity
initiatives. The division of the Budget intends to update the State Financial
Plan and provide an update to the Annual Information Statement upon release
of the 1997-98 Executive Budget.

On August 22, 1996, the President signed into law the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996. On October
16, 1996, the Governor submitted the State's TANF implementation plan to the
federal government, as required under the new federal welfare law.
Legislation will be required to implement the State's TANF plan. The Governor
has indicated that he plans to introduce legislation necessary to conform
<PAGE>
with federal law shortly, and that he may submit amendments to the State plan
if necessary. The Governor's proposals will be available for consideration by
the Legislature either before the end of calendar 1996 or in the 1997
legislative session. It is expected by the State that funding levels provided
under the federal TANF block grant will be higher than currently anticipated
in the State's financial plan. However, the net fiscal impact of any changes
to the State's welfare programs that are necessary to conform with federal
law will be dependent upon such factors as the ability of the State to avoid
any federal fiscal penalties, the level of additional resources required to
comply with any new State and/or federal requirements, and the division of
non-federal welfare costs between the State and its localities. States are
required to comply with the new federal welfare reform law no later than July
1, 1997. Given the size and scope of the changes required under federal law,
it is likely that these proposals will produce extensive public discussions.
There can be no assurances that the State Legislature will enact welfare
reform proposals as submitted by the Governor and as required under federal
law.

In recent years, the State has failed to adopt a budget prior to the
beginning of its fiscal year. A delay in the adoption of the State's budget
beyond the statutory April 1 deadline could delay the projected receipt by
the City of State aid, and there can be no assurance that State budgets in
future fiscal years will be adopted by the April 1 statutory deadline.

The State's budget for the 1995-96 fiscal year was enacted by the
Legislature on June 7, 1995, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for
debt service. The State Financial Plan for the 1995-96 fiscal year (the
"1995-96 State Financial Plan") was formulated on June 20, 1995 and is based
on the State's budget as enacted by the Legislature and signed into law by
the Governor. The State Financial Plan is updated quarterly pursuant to law
in July, October and January.

The 1995-96 budget is the first to be enacted in the administration of
Governor George Pataki, who assumed office on January 1, 1995. It is the
first budget in over half a century which proposed and, as enacted, projects
an absolute year-over-year decline in General Fund disbursements. Spending
for State operations is projected to drop even more sharply, by 4.6 percent.
Nominal spending from all State funding sources (i.e., excluding Federal aid)
is proposed to increase by only 2.5 percent from the prior fiscal year, in
contrast to the prior decade when such spending growth averaged more than 6.0
percent annually.

In his Executive Budget, the Governor indicated that in the 1995-96
fiscal year, the 1995-96 State Financial Plan, based on then-current law
governing spending and revenues, would be out of balance by almost $4.7
billion, as a result of the projected structural deficit resulting from the
ongoing disparity between sluggish growth in receipts, the effect of
prior-year tax changes, and the rapid acceleration of spending growth; the
impact of unfunded 1994-95 initiatives, primarily for local aid programs; and
the use of one-time solutions, primarily surplus funds from the prior year,
to fund recurring spending in the 1994-95 budget. The Governor proposed
<PAGE>
additional tax cuts to spur economic growth and provide relief for low and
middle-income tax payers, which were larger than those ultimately adopted,
and which added $240 million to the then projected imbalance or budget gap,
bringing the total to approximately $5 billion.

The 1995-96 State Financial Plan contemplates closing this gap based on
the enacted budget, through a series of actions, mainly spending reductions
and cost containment measures and certain re-estimates that are expected to
be recurring, but also through the use of one-time solutions. The 1995-96
State Financial Plan projects (i) nearly $1.6 billion in savings from cost
containment, disbursement reestimates, and other savings in social welfare
programs, including Medicaid, income maintenance and various child and family
care programs; (ii) $2.2 billion in savings from State agency actions to
reduce spending on the State work force, SUNY and CUNY, mental hygiene
programs, capital projects, the prison system and fringe benefits; (iii) $300
million in savings from local assistance reforms, including actions affecting
school aid and revenue sharing while proposing program legislation to provide
relief from certain mandates that increase local spending; (iv) over $400
million in revenue measures, primarily a new Quick Draw Lottery game, changes
to tax payment schedules, and the sale of assets; and (v) $300 million from
reestimates in receipts. There can be no assurance that these gap-closing
measures can be implemented as planned.

The following discussion summarizes updates to the 1995-96 State
Financial Plan and recent fiscal years with particular emphasis on the
State's General Fund. Pursuant to statute, the State updates the financial
plan at least on a quarterly basis. Due to changing economic conditions and
information, public statements or reports may be released by the Governor,
members of the Legislature, and their respective staffs, as well as others
involved in the budget process from time to time. Those statements or reports
may contain predictions, projections or other items of information relating
to the State's financial condition, including potential operating results for
the current fiscal year and projected baseline gaps for future fiscal years,
that may vary materially and adversely from the information provided herein.

The General Fund is the principal operating fund of the State and is
used to account for all financial transactions, except those required to be
accounted for in another fund. It is the State's largest fund and receives
almost all State taxes and other resources not dedicated to particular
purposes. In the State's 1995-96 fiscal year, the General Fund is expected by
the State to account for approximately 49 percent of total governmental-fund
receipts and 71 percent of total governmental-fund disbursements. General
Fund moneys are also transferred to other funds, primarily to support certain
capital projects and debt service payments in other fund types.

The General Fund is projected to be balanced on a cash basis for the
1995-96 fiscal year. Total receipts are projected to be $33.110 billion, an
increase of $48 million over total receipts in the prior fiscal year. Total
General Fund disbursements are projected to be $33.055 billion, an increase
of $344 million over the total amount disbursed and transferred in the prior
fiscal year.

In addition to the General Fund, the State Financial Plan includes
Special Revenue Funds, Capital Projects Funds and Debt Service Funds.
<PAGE>
Special Revenue Funds are used to account for the proceeds of specific
revenue sources such as Federal grants that are legally restricted, either by
the Legislature or outside parties, to expenditures for specified purposes.
Although activity in this fund type is expected to comprise more than 40
percent of total government funds receipts and disbursements in the 1995-96
fiscal year, about three-quarters of that activity relates to
Federally-funded programs.

Projected receipts in this fund type total $25.547 billion, an increase
of $1.316 billion over the prior year. Projected disbursements in this fund
type total $26.002 billion, an increase of $1.641 billion over 1994-95
levels. Disbursements from Federal funds, primarily the Federal share of
Medicaid and other social services programs, are projected to total $19.209
billion in the 1995-96 fiscal year. Remaining projected spending of $6.793
billion primarily reflects aid to SUNY supported by tuition and dormitory
fees, education aid funded from lottery receipts, operating aid payments to
the Metropolitan Transportation Authority (the "MTA") funded from the
proceeds of dedicated transportation taxes, and costs of a variety of
self-supporting programs which deliver services financed by user fees.

Capital Projects Funds are used to account for the financial resources
used for the acquisition, construction, or rehabilitation of major State
capital facilities and for capital assistance grants to certain local
governments or public authorities. This fund type consists of the Capital
Projects Fund, which is supported by tax dollars transferred from the General
Fund, and 37 other capital funds established to distinguish specific capital
construction purposes supported by other revenues. In the 1996-97 fiscal
year, activity in these funds is expected to comprise 6 percent of total
governmental receipts and disbursements.

Total receipts in this fund type are projected at $3.58 billion.
Disbursements from this fund type are projected to be $3.85 billion, a
decrease of $120 million (3.1 percent) over prior-year levels, due in part to
a reclassification of economic development projects to the category of grants
to local governments in the General Fund. The Dedicated Highway and Bridge
Trust Fund is the single largest dedicated fund, comprising an estimated $920
million (24 percent) of the activity in this fund type. Total spending for
capital projects will be financed through a combination of sources: federal
grants (28 percent), public authority bond proceeds (34 percent), general
obligation bond proceeds (12 percent), and pay-as-you-go revenues (26
percent).

Debt Service Funds are used to account for the payment of principal of,
and interest on, long-term debt of the State and to meet commitments under
lease-purchase and other contractual-obligation financing arrangements. This
fund is expected to comprise 4 percent of total governmental fund receipts
and disbursements in the 1996-97 fiscal year. Receipts in these funds in
excess of debt service requirements are transferred to the General Fund and
Special Revenue Funds, pursuant to law.

The Debt Service Fund type consists of the General Debt Service Fund,
which is supported primarily by tax dollars transferred from the General
Fund, and other funds established to accumulate moneys for the payment of
debt service. In the 1996-97 fiscal year, total disbursements in this fund
<PAGE>
type are projected at $2.58 billion, an increase of $164 million or 16.8
percent. The projected transfer from the General Fund of $1.59 billion is
expected to finance 62 percent of these payments.

The General Fund is the principal operating fund of the State and is
used to account for all financial transactions, except those required to be
accounted for in another fund. It is the State's largest fund and receives
almost all State taxes and other resources not dedicated to particular
purposes. General Fund moneys are also transferred to other funds, primarily
to support certain capital projects and debt service payments in other fund
types. A narrative description of cash-basis results in the General Fund is
presented below, followed by a tabular presentation of the actual General
Fund results for the prior three fiscal years.

New York State's financial operations have improved during recent fiscal
years. During the period 1989-90 through 1991-92, the State incurred General
Fund operating deficits that were closed with receipts from the issuance of
TRANs. A national recession, followed by the lingering economic slowdown in
the New York and regional economy, resulted in repeated shortfalls in
receipts and three budget deficits during those years. During its last four
fiscal years, however, the State has recorded balanced budgets on a cash
basis, with positive fund balances as described below.

The State ended its 1995-96 fiscal year on March 31, 1996 with a General
Fund cash surplus. The DOB reported that revenues exceeded projections by
$270 million, while spending for social service programs was lower than
forecast by $120 million and all other spending was lower by $55 million.
From the resulting benefit of $445 million, a $65 million voluntary deposit
was made into the TSRF, and $380 million was used to reduce 1996-97 Financial
Plan liabilities by accelerating 1996-97 payments, deferring 1995-96
revenues, and making a deposit to the tax refund reserve account.

The General Fund closing fund balance was $287 million, an increase of
$129 million from 1994-95 levels. The $129 million change in fund balance is
attributable to the $65 million voluntary deposit to the TSRF, a $15 million
required deposit to the TSRF, a $40 million deposit to the CRF, and a $9
million deposit to the Revenue Accumulation Fund. The closing fund balance
includes $237 million on deposit in the TSRF, to be used in the event of any
future General Fund deficit as provided under the State Constitution and
State Finance Law. In addition, $41 million is on deposit in the CRF. The CRF
was established in State fiscal year 1993-94 to assist the State in financing
the costs of extraordinary litigation. The remaining $9 million reflects
amounts on deposit in the Revenue Accumulation Fund. This fund was created to
hold certain tax receipts temporarily before their deposit to other accounts.
In addition, $678 million was on deposit in the tax refund reserve account,
of which $521 million was necessary to complete the restructuring of the
State's cash flow under the LGAC program.

General Fund receipts totaled $32.81 billion, a decrease of 1.1 percent
from 1994-95 levels. This decrease reflects the impact of tax reductions
enacted and effective in both 1994 and 1995. General Fund disbursements
totaled $32.68 billion for the 1995-96 fiscal year, a decrease of 2.2 percent
from 1994-95 levels. Mid-year spending reductions, taken as part of a
management review undertaken in October at the direction of the Governor,
<PAGE>
yielded savings from Medicaid utilization controls, office space
consolidation, overtime and contractual expense reductions, and statewide
productivity improvements achieved by State agencies.

Together with decreased social services spending, this management review
accounts for the bulk of the decline in spending.

The State ended its 1994-95 fiscal year with the General Fund in
balance. The $241 million decline in the fund balance reflects the planned
use of $264 million from the CRF, partially offset by the required deposit of
$23 million to the TSRF. In addition, $278 million was on deposit in the tax
refund reserve account, $250 million of which was deposited to continue the
process of restructuring the State's cash flow as part of the LGAC program.
The closing fund balance of $158 million reflects $157 million in the TSRF
and $1 million in the CRF.

General Fund receipts totaled $33.16 billion, an increase of 2.9 percent
from 1993-94 levels. General Fund disbursements totaled $33.40 billion for
the 1994-95 fiscal year, an increase of 4.7 percent from the previous fiscal
year. The increase in disbursements was primarily the result of one-time
litigation costs for the State, funded by the use of the CRF, offset by $188
million in spending reductions initiated in January 1995 to avert a potential
gap in the 1994-95 State Financial Plan. These actions included savings from
a hiring freeze, halting the development of certain services, and the
suspension of non-essential capital projects.

The State ended its 1993-94 fiscal year with a General Fund cash
surplus, primarily the result of an improving national economy, State
employment growth, tax collections that exceeded earlier projections and
disbursements that were below expectations. A deposit of $268 million was
made to the CRF, with a withdrawal during the year of $3 million, and a
deposit of $67 million was made to the TSRF. These three transactions result
in the change in fund balance of $332 million. In addition, a deposit of
$1.14 billion was made to the tax refund reserve account, of which $1.03
billion was available for budgetary purposes in the 1994-95 fiscal year. (For
more information on the personal income tax refund reserve account, see Table
5.) The remaining $114 million was redeposited in the tax refund reserve
account at the end of the State's 1994-95 fiscal year to continue the process
of restructuring the State's cash flow as part of the LGAC program. The
General Fund closing balance was $399 million, of which $265 million was on
deposit in the CRF and $134 million in the TSRF. The CRF was initially funded
with a transfer of $100 million attributable to a positive margin recorded in
the 1992-93 fiscal year.

General Fund receipts totaled $32.23 billion, an increase of 2.6 percent
from 1992-93 levels. General Fund disbursements totaled $31.90 billion for
the 1993-94 fiscal year, 3.5 percent higher than the previous fiscal year.
Receipts were higher in part due to improved tax collections from renewed
State economic growth although the State continued to lag behind the national
economic recovery. Disbursements were higher due in part to increased local
assistance costs for school aid and social services, accelerated payment of
certain Medicaid expenses, and the cost of an additional payroll for State
employees.
<PAGE>
Activity in the three other governmental funds has remained relatively
stable over the last three fiscal years, with federally-funded programs
comprising approximately two-thirds of these funds. The most significant
change in the structure of these funds has been the redirection, beginning in
the 1993-94 fiscal year, of a portion of transportation-related revenues from
the General Fund to two new dedicated funds in the Special Revenue and
Capital Projects Fund types. These revenues are used to support the capital
programs of the Department of Transportation and the MTA.

In the Special Revenue Funds, disbursements increased from $22.72
billion to $26.26 billion over the last three years, primarily as a result of
increased costs for the federal share of Medicaid. Other activity reflected
dedication of taxes to a new fund for mass transportation, new lottery games,
and new fees for criminal justice programs.

Disbursements in the Capital Projects Funds grew from $3.10 billion to
$3.97 billion over the last three years, as spending for transportation and
mental hygiene programs increased, partially offset by declines for
corrections and environmental programs. The composition of this fund type's
receipts also changed as the dedicated transportation taxes began to be
deposited, general obligation bond proceeds declined substantially, federal
grants remained stable, and reimbursements from public authority bonds
(primarily transportation related) increased. The increase in the negative
fund balance in 1994-95 resulted from delays in reimbursements caused by
delays in the timing of public authority bond sales.

Activity in the Debt Service Funds reflected increased use of bonds
during the three-year period for improvements to the State's capital
facilities and the continued implementation of the LGAC fiscal reform
program. The increases were moderated by the refunding savings achieved by
the State over the last several years using strict present value savings
criteria. The growth in LGAC debt service was offset by reduced short-term
borrowing costs reflected in the General Fund.

The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. These factors can
be very complex, may vary from fiscal year to fiscal year, and are frequently
the result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the federal government, that
are not under the control of the State. For example, various proposals
relating to federal tax and spending policies that are currently being
publicly discussed and debated could, if enacted, have a significant impact
on the State's financial condition in the current and future fiscal years.
Because of the uncertainty and unpredictability of the changes, their impact
cannot, as a practical matter, be included in the assumptions underlying the
State's projections at this time.

The State Financial Plan is based upon forecasts of national and State
economic activity developed through both internal analysis and review of
State and national economic forecasts prepared by commercial forecasting
services and other public and private forecasters. Economic forecasts have
frequently failed to predict accurately the timing and magnitude of changes
in the national and the State economies. Many uncertainties exist in
forecasts of both the national and State economies, including consumer
<PAGE>
attitudes toward spending, the extent of corporate and governmental
restructuring, federal fiscal and monetary policies, the level of interest
rates, and the condition of the world economy, which could have an adverse
effect on the State. There can be no assurance that the State economy will
not experience results in the current fiscal year that are worse than
predicted, with corresponding material and adverse effects on the State's
projections of receipts and disbursements.

Projections of total State receipts in the State Financial Plan are
based on the State tax structure in effect during the fiscal year and on
assumptions relating to basic economic factors and their historical
relationships to State tax receipts. In preparing projections of State
receipts, economic forecasts relating to personal income, wages, consumption,
profits and employment have been particularly important. The projection of
receipts from most tax or revenue sources is generally made by estimating the
change in yield of such tax or revenue source caused by economic and other
factors, rather than by estimating the total yield of such tax or revenue
source from its estimated tax base. The forecasting methodology, however,
ensures that State fiscal year estimates for taxes that are based on a
computation of annual liability, such as the business and personal income
taxes, are consistent with estimates of total liability under such taxes.

Projections of total State disbursements are based on assumptions
relating to economic and demographic factors, levels of disbursements for
various services provided by local governments (where the cost is partially
reimbursed by the State), and the results of various administrative and
statutory mechanisms in controlling disbursements for State operations.
Factors that may affect the level of disbursements in the fiscal year include
uncertainties relating to the economy of the nation and the State, the
policies of the federal government, and changes in the demand for and use of
State services.

The Division of the Budget believes that its projections of receipts and
disbursements relating to the current State Financial Plan, and the
assumptions on which they are based, are reasonable. Actual results, however,
could differ materially and adversely from the projections set forth in this
Annual Information Statement. In the past, the State has taken management
actions and made use of internal sources to address potential State Financial
Plan shortfalls, and DOB believes it could take similar actions should
variances occur in its projections for the current fiscal year.

In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy,
actions of the federal government and other factors, have created structural
budget gaps for the State. These gaps resulted from a significant disparity
between recurring revenues and the costs of maintaining or increasing the
level of support for State programs. To address a potential imbalance in any
given fiscal year, the State would be required to take actions to increase
receipts and/or reduce disbursements as it enacts the budget for that year,
and under the State Constitution, the Governor is required to propose a
balanced budget each year. There can be no assurance, however, that the
Legislature will enact the Governor's proposals or that the State's actions
will be sufficient to preserve budgetary balance in a given fiscal year or to
align recurring receipts and disbursements in future fiscal years.
<PAGE>
On January 13, 1992, Standard & Poor's ("S&P") lowered its rating on the
State's general obligation bonds from A to A- and, in addition, reduced its
ratings on the State's moral obligation, lease purchase, guaranteed and
contractual obligation debt. S&P also continued its negative rating outlook
assessment on State general obligation debt. On April 26, 1993 S&P revised
the rating outlook assessment to stable. On February 14, 1994, S&P revised
its outlook to positive and, on August 5, 1996, confirmed its A- rating. On
January 6, 1992, Moody's reduced its ratings on outstanding limited-liability
State lease purchase and contractual obligations from A to Baa1. On July 26,
1996, Moody's reconfirmed its A rating on the State's general obligation
long-term indebtedness.

On June 6, 1990, Moody's changed its ratings on all of the State's
outstanding general obligation bonds from A1 to A, the rating having been A1
since May 27, 1986. On November 12, 1990, Moody's confirmed the A rating. In
1992, S&P lowered the State's general obligation bond rating to A-, where it
currently remains and was affirmed on July 13, 1995. Prior to this, on March
26, 1990, S&P lowered its rating of all of the State's outstanding general
obligation bonds from AA- to A. Previous S&P ratings were AA-from August,
1987 to March, 1990 and A+ from November, 1982 to August, 1987.

Authorities. The fiscal stability of the State is related, in part, to
the fiscal stability of its public authorities, which generally have
responsibility for financing, constructing and operating revenue-producing
public benefit facilities. Public authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the
State itself, and may issue bonds and notes within the amounts of, and as
otherwise restricted by, their legislative authorization. The State's access
to the public credit markets could be impaired, and the market price of its
outstanding debt may be materially adversely affected, if any of its public
authorities were to default on their respective obligations. As of September
30, 1995 there were 17 Authorities that had outstanding debt of $100 million
or more each, and the aggregate outstanding debt, including refunding bonds,
of all state public authorities was $73.45 billion.

There are numerous public authorities, with various responsibilities,
including those which finance, construct and/or operate revenue producing
public facilities. Public authority operating expenses and debt service costs
are generally paid by revenues generated by the projects financed or
operated, such as tolls charged for the use of highways, bridges or tunnels,
rentals charged for housing units, and charges for occupancy at medical care
facilities.

In addition, State legislation authorizes several financing techniques
for public authorities. Also, there are statutory arrangements providing for
State local assistance payments otherwise payable to localities to be made
under certain circumstances to public authorities. Although the State has no
obligation to provide additional assistance to localities whose local
assistance payments have been paid to public authorities under these
arrangements if local assistance payments are so diverted, the affected
localities could seek additional State assistance.

Some authorities also receive monies from State appropriations to pay
for the operating costs of certain of their programs. As described below, the
<PAGE>
MTA receives the bulk of this money in order to carry out mass transit and
commuter services.

The State's experience has been that if an Authority suffers serious
financial difficulties, both the ability of the State and the Authorities to
obtain financing in the public credit markets and the market price of the
State's outstanding bonds and notes may be adversely affected. The New York
State HFA, the New York State Urban Development Corporation and certain other
Authorities have in the past required and continue to require substantial
amounts of assistance from the State to meet debt service costs or to pay
operating expenses. Further assistance, possibly in increasing amounts, may
be required for these, or other, Authorities in the future. In addition,
certain other statutory arrangements provide for State local assistance
payments otherwise payable to localities to be made under certain
circumstances to certain Authorities. The State has no obligation to provide
additional assistance to localities whose local assistance payments have been
paid to Authorities under these arrangements. However, in the event that such
local assistance payments are so diverted, the affected localities could seek
additional State funds.

Metropolitan Transportation Authority. The MTA oversees the operation of
the City's subway and bus lines by its affiliates, the New York City Transit
Authority and the Manhattan and Bronx Surface Transit Operating Authority
(collectively, the "TA"). The MTA operates certain commuter rail and bus
lines in the New York Metropolitan area through MTA's subsidiaries, the Long
Island Rail Road Company, the Metro-North Commuter Railroad Company and the
Metropolitan Suburban Bus Authority. In addition, the Staten Island Rapid
Transit Operating Authority, an MTA subsidiary, operates a rapid transit line
on Staten Island. Through its affiliated agency, the Triborough Bridge and
Tunnel Authority (the "TBTA"), the MTA operates certain intrastate toll
bridges and tunnels. Because fare revenues are not sufficient to finance the
mass transit portion of these operations, the MTA has depended, and will
continue to depend for operating support upon a system of State, local
government and TBTA support, and, to the extent available, Federal operating
assistance, including loans, grants and operating subsidies. If current
revenue projections are not realized and/or operating expenses exceed current
projections, the TA or commuter railroads may be required to seek additional
State assistance, raise fares or take other actions.

Since 1980, the State has enacted several taxes--including a surcharge
on the profits of banks, insurance corporations and general business
corporations doing business in the 12-county Metropolitan Transportation
Region served by the MTA and a special one-quarter of 1 percent regional
sales and use tax-- that provide revenues for mass transit purposes,
including assistance to the MTA. In addition, since 1987, State law has
required that the proceeds of a one quarter of 1% mortgage recording tax paid
on certain mortgages in the Metropolitan Transportation Region be deposited
in a special MTA fund for operating or capital expenses. Further, in 1993 the
State dedicated a portion of the State petroleum business tax to fund
operating or capital assistance to the MTA. For the 1996-97 fiscal year,
total State assistance to the MTA is estimated by the State to be
approximately $1.09 billion.
<PAGE>
State legislation accompanying the 1996-97 adopted State budget
authorized the MTA, TBTA and TA to issue an aggregate of $6.5 billion in
bonds to finance a portion of a new $11.98 billion MTA capital plan for the
1995 through 1999 calendar years (the "1995-99 Capital Program"), and
authorized the MTA to submit the 1995-99 Capital Program to the Capital
Program Review Board for approval. This plan will supersede the overlapping
portion of the MTA's 1992-96 Capital Program. This is the fourth capital plan
since the Legislature authorized procedures for the adoption, approval and
amendment of MTA capital programs and is designed to upgrade the performance
of the MTA's transportation systems by investing in new rolling stock,
maintaining replacement schedules for existing assets and bringing the MTA
system into a state of good repair. The 1995-99 Capital Program assumes the
issuance of an estimated $5.1 billion in bonds under this $6.5 billion
aggregate bonding authority. The remainder of the plan is projected to be
financed through assistance from the State, the federal government, and the
City of New York, and from various other revenues generated from actions
taken by the MTA.

There can be no assurance that all the necessary governmental actions
for the 1995-99 Capital Program will be taken, that funding sources currently
identified will not be decreased or eliminated, or that the 1995-99 Capital
Program, or parts thereof, will not be delayed or reduced. If the 1995-99
Capital Program is delayed or reduced, ridership and fare revenues may
decline, which could, among other things, impair the MTA's ability to meet
its operating expenses without additional assistance.

Localities. Certain localities outside the City have experienced
financial problems and have requested and received additional State
assistance during the last several State fiscal years. The potential impact
on the State of any future requests by localities for additional assistance
is not included in the projections of the State's receipts and disbursements
for the State's 1996-97 fiscal year.

Fiscal difficulties experienced by the City of Yonkers resulted in the
re-establishment of the Financial Control Board for the City of Yonkers by
the State in 1984. That Board is charged with oversight of the fiscal affairs
of Yonkers. Future actions taken by the State to assist Yonkers could result
in increased State expenditures for extraordinary local assistance.

Beginning in 1990, the City of Troy experienced a series of budgetary
deficits that resulted in the establishment of a Supervisory Board for the
City of Troy in 1994. The Supervisory Board's powers were increased in 1995,
when Troy MAC was created to help Troy avoid default on certain obligations.
The legislation creating Troy MAC prohibits the City of Troy from seeking
federal bankruptcy protection while Troy MAC bonds are outstanding.

Seventeen municipalities received extraordinary assistance during the
1996 legislative session through $50 million in special appropriations
targeted for distressed cities.

Municipal Indebtedness. Municipalities and school districts have engaged
in substantial short-term and long-term borrowings. In 1994, the total
indebtedness of all localities in the State other than the City was
approximately $17.7 billion. A small portion (approximately $82.9 million) of
<PAGE>
that indebtedness represented borrowing to finance budgetary deficits and was
issued pursuant to State enabling legislation. State law requires the
Comptroller to review and make recommendations concerning the budgets of
those local government units other than the City authorized by State law to
issue debt to finance deficits during the period that such deficit financing
is outstanding. Fifteen localities had outstanding indebtedness for deficit
financing at the close of their fiscal year ending in 1994.

From time to time, proposed Federal expenditure reductions could reduce,
or in some cases eliminate, Federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities. If the State, the City or any of the Authorities were to
suffer serious financial difficulties jeopardizing their respective access to
the public credit markets, the marketability of notes and bonds issued by
localities within the State could be adversely affected. Localities also face
anticipated and potential problems resulting from certain pending litigation,
judicial decisions and long-range economic trends. Long-range potential
problems of declining urban population, increasing expenditures and other
economic trends could adversely affect certain localities and require
increasing State assistance in the future.

Litigation. Certain litigation pending against the State or its officers
or employees could have a substantial or long-term adverse effect on State
finances. Among the more significant of these cases are those that involve:
(i) employee welfare benefit plans seeking a declaratory judgment nullifying
on the ground of federal preemption provisions of Section 2807-c of the
Public Health Law and implementing regulations which impose a bad debt and
charity care allowance on all hospital bills and a 13 percent surcharge on
inpatient bills paid by employee welfare benefit plans; (ii) several
challenges to provisions of Chapter 81 of the Laws of 1995 which alter the
nursing home Medicaid reimbursement methodology; (iii) the validity of
agreements and treaties by which various Indian tribes transferred title to
the State of certain land in central and upstate New York; (iv) challenges to
the practice of using patients' Social Security benefits for the costs of
care of patients of State Office of Mental Health facilities; (v) an action
against State and City officials alleging that the present level of shelter
allowance for public assistance recipients is inadequate under statutory
standards to maintain proper housing; (vi) challenges to the practice of
reimbursing certain Office of Mental Health patient care expenses from the
client's Social Security benefits; (vii) alleged responsibility of State
officials to assist in remedying racial segregation in the City of Yonkers;
(viii) alleged responsibility of the State Department of Environmental
Conservation for a plaintiff's inability to complete construction of a
cogeneration facility in a timely fashion and the damages suffered thereby;
(ix) challenges to the promulgation of the State's proposed procedure to
determine the eligibility for and nature of home care services for Medicaid
recipients; (x) a challenge to State implementation of a program which
reduces Medicaid benefits to certain home-relief recipients; (xi) a challenge
to the constitutionality of petroleum business tax assessments authorized by
Tax Law SS 301; and (xii) an action for reimbursement from the State for
certain costs arising out of the provision of preschool services and programs
for children with handicapping conditions, pursuant to Sections 4410 (10) and
(11) of the Education Law.
<PAGE>
Adverse developments in the proceedings described above or the
initiation of new proceedings could affect the ability of the State to
maintain a balanced 1996-97 State Financial Plan. In its Notes to its General
Purpose Financial Statements for the fiscal year ended March 31, 1996, the
State reports its estimated liability for awards and anticipated unfavorable
judgments at $474 million. There can be no assurance that an adverse decision
in any of the above cited proceedings would not exceed the amount of the
1996-97 State Financial Plan reserves for the payment of judgments and,
therefore, could affect the ability of the State to maintain a balanced
1996-97 State Financial Plan.

New York City

The fiscal health of the State may also be impacted by the fiscal health
of its localities, particularly the City, which continues to require
significant financial assistance from the State. The City depends on State
aid both to enable the City to balance its budget and to meet its cash
requirements. The State could also be affected by the ability of the City to
market its securities successfully in the public credit markets. The City has
achieved balanced operating results for each of its fiscal years since 1981
as reported in accordance with the then-applicable GAAP standards. The City's
financial plans are usually prepared quarterly, and the annual financial
report for its most recent completed fiscal year is prepared at the end of
October of each year.

In response to the City's fiscal crisis in 1975, the State took action
to assist the City in returning to fiscal stability. Among these actions, the
State established the Municipal Assistance Corporation for the City of New
York ("MAC") to provide financing assistance to the City. The State also
enacted the New York State Financial Emergency Act for The City of New York
(the "Financial Emergency Act") which, among other things, established the
New York State Financial Control Board (the "Control Board") to oversee the
City's financial affairs. The State also established the Office of the State
Deputy Comptroller for the City of New York ("OSDC") to assist the Control
Board in exercising its powers and responsibilities and a "Control Period"
from 1975 to 1986 during which the City was subject to certain
statutorily-prescribed fiscal-monitoring arrangements. Although the Control
Board terminated the Control Period in 1986 when certain statutory conditions
were met, thus suspending certain Control Board powers, the Control Board,
MAC and OSDC continue to exercise various fiscal-monitoring functions over
the City, and upon the occurrence or "substantial likelihood and imminence"
of the occurrence of certain events, including, but not limited to a City
operating budget deficit of more than $100 million, the Control Board is
required by law to reimpose a Control Period. Currently, the City and its
"Covered Organizations" (i.e., those which receive or may receive money from
the City directly, indirectly or contingently) operate under a four-year
financial plan, which the City prepares annually and updates periodically and
which includes the City's capital revenue and expense projections and
outlines proposed gap-closing programs for years with projected budget gaps.
The City's current four-year financial plan projects substantial budget gaps
for each of the 1997 through 1999 fiscal years, before implementation of the
proposed gap-closing program contained in the current financial plan. The
<PAGE>
City is required to submit its financial plans to review bodies, including
the Control Board.

Although the City has balanced its budget since 1981, estimates of the
City's revenues and expenditures, which are based on numerous assumptions,
are subject to various uncertainties. If, for example, expected federal or
State aid is not forthcoming, if unforeseen developments in the economy
significantly reduce revenues derived from economically sensitive taxes or
necessitate increased expenditures for public assistance, if the City should
negotiate wage increases for its employees greater than the amounts provided
for in the City's financial plan or if other uncertainties materialize that
reduce expected revenues or increase projected expenditures, then, to avoid
operating deficits, the City may be required to implement additional actions,
including increases in taxes and reductions in essential City services. The
City might also seek additional assistance from the State. Unforeseen
developments and changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements.

Implementation of the Financial Plan is also dependent upon the ability
of the City and certain Covered Organizations to market their securities
successfully. The City issues securities to finance, refinance and
rehabilitate infrastructure and other capital needs, as well as for seasonal
financing needs. The City currently projects that if no action is taken, it
will exceed its State Constitutional general debt limit beginning in City
fiscal year 1998. The current Financial Plan includes certain alternative
methods of financing a portion of the City's capital program which require
State or other outside approval. Future developments concerning the City or
its Covered Organizations, and public discussion of such developments, as
well as prevailing market conditions and securities credit ratings, may
affect the ability or cost to sell securities issued by the City or such
Covered Organizations and may also affect the market for their outstanding
securities.

The staffs of the Control Board, OSDC and the City Comptroller issue
periodic reports on the City's Financial Plans which analyze the City's
forecasts of revenues and expenditures, cash flow, and debt service
requirements for, and Financial Plan compliance by, the City and its Covered
Organizations. According to recent staff reports, the City's economy has
experienced weak employment and moderate wage and income growth throughout
the mid-1990s. Although this trend is expected to continue for the rest of
the decade, there is the risk of a slowdown in the City's economy in the next
few years, which would depress revenue growth and put further strains on the
City's budget. These reports have also indicated that recent City budgets
have been balanced in part through the use of non-recurring resources; that
the City's Financial Plan tends to rely on actions outside its direct
control; that the City has not yet brought its long-term expenditure growth
in line with recurring revenue growth; and that the City is therefore likely
to continue to face substantial future budget gaps that must be closed with
reduced expenditures and/or increased revenues.

The 1997-2000 Financial Plan projects revenues and expenditures for the
1997 fiscal year balanced in accordance with GAAP. The projections for the
1997 fiscal year reflect proposed actions to close a previously projected gap
<PAGE>
of approximately $2.6 billion for the 1997 fiscal year. The proposed actions
for the 1997 fiscal year include (i) additional agency actions totaling $1.2
billion; (ii) a revised tax reduction program which would increase projected
tax revenues by $385 million due to the four year extension of the 12.5%
personal income tax surcharge and other actions; (iii) savings resulting from
cost containment in entitlement programs to reduce City expenditures and
additional proposed State aid of $75 million; (iv) the assumed receipt of
revenues relating to rent payments for the City's airports totaling $269
million, which are currently the subject of a dispute with the Port
Authority; (v) the sale of the City's television station for $207 million;
and (vi) pension cost savings totaling $134 million resulting from a proposed
increase in the earnings assumption for pension assets from 8.5% to 8.75%,
$40 million of which the City currently does not expect to be achieved. There
can be no assurance that these gap-closing measures can be implemented as
planned.

The Financial Plan also sets forth projections for the 1998 through 2000
fiscal years and projects gaps of $1.7 billion, $2.7 billion and $3.4 billion
for the 1998, 1999 and 2000 fiscal years, respectively.

The projections for the 1997 through 2000 fiscal years assume (i)
approval by the Governor and the State Legislature of the extension of the
12.5% personal income tax surcharge, which is projected to provide revenue of
$171 million, $447 million, $478 million and $507 million in the 1997 through
2000 fiscal years, respectively, (ii) collection of the projected rent
payments for the City's airports, which may depend on the successful
completion of negotiations with the Port Authority or the enforcement of the
City's rights under the existing leases thereto through pending legal
actions; (iii) the ability of HHC and BOE to identify actions to offset
substantial City and State revenue reductions and the receipt by BOE of
additional State aid; and (iv) State approval of the cost containment
initiatives and State aid proposed by the City. The Financial Plan does not
reflect any increased costs which the City might incur as a result of welfare
legislation recently enacted by Congress.

The City's financial plans have been the subject of extensive public
comment and criticism. On July 16, 1996, the staff of the City Comptroller
issued a report on the Financial Plan. The report concluded that the City's
fiscal situation remains serious, and that the City faces budgetary risks of
approximately $787 million to $941 million for the 1997 fiscal year, which
increase to $4.16 billion to $4.31 billion for fiscal year 2000.

In connection with the Financial Plan, the City has outlined a
gap-closing program for the 1998 through 2000 fiscal years to substantially
reduce the remaining $1.7 billion, $2.7 billion and $3.4 billion projected
budget gaps for such fiscal years. This program, which is not specified in
detail, assumes additional agency programs to reduce expenditures or increase
revenues by $674 million, $959 million and $1.1 billion in the 1998 through
2000 fiscal years, respectively; additional reductions in entitlement cost of
$400 million, $750 million and $1.0 billion in the 1998 through 2000 fiscal
years, respectively; additional savings of $250 million, $300 million and
$500 million in the 1998 through 2000 fiscal years, respectively, resulting
from restructuring City government by consolidating operations, privatization
and mandate management and other initiatives; additional proposed federal and
<PAGE>
State aid of $105 million, $200 million and $300 million in the 1998 through
2000 fiscal years, respectively; additional revenue initiatives and asset
sales of $155 million, $350 million and $400 million in the 1998 through 2000
fiscal years, respectively; and the availability in each of the 1998 through
2000 fiscal years of $100 million of the General Reserve.

The City's projected budget gaps for the 1999 and 2000 fiscal years do
not reflect the savings expected to result from prior years' programs to
close the gaps set forth in the Financial Plan. Thus, for example, recurring
savings anticipated from the actions which the City proposes to take to
balance the fiscal year 1998 budget are not taken into account in projecting
the budget gaps for the 1999 and 2000 fiscal years.

Although the City has maintained balanced budgets in each of its last
sixteen fiscal years, and is projected to achieve balanced operating results
for the 1997 fiscal year, there can be no assurance that the gap- closing
actions proposed in the Financial Plan can be successfully implemented or
that the City will maintain a balanced budget in future years without
additional State aid, revenue increases or expenditure reductions. Additional
tax increases and reductions in essential City services could adversely
affect the City's economic base.

Assumptions

The 1997-2000 Financial Plan is based on numerous assumptions, including
the condition of the City's and the region's economy and a modest employment
recovery and the concomitant receipt of economically sensitive tax revenues
in the amounts projected. The 1997-2000 Financial Plan is subject to various
other uncertainties and contingencies relating to, among other factors, the
extent, if any, to which wage increases for City employees exceed the annual
wage costs assumed for the 1997 through 2000 fiscal years; continuation of
projected interest earnings assumptions for pension fund assets and current
assumptions with respect to wages for City employees affecting the City's
required pension fund contributions; the willingness and ability of the
State, in the context of the State's current financial condition, to provide
the aid contemplated by the Financial Plan and to take various other actions
to assist the City; the ability of HHC, BOE and other such agencies to
maintain balanced budgets; the willingness of the Federal government to
provide the amount of Federal aid contemplated in the Financial Plan;
adoption of the City's budgets by the City Council in substantially the forms
submitted by the Mayor; the ability of the City to implement proposed
reductions in City personnel and other cost reduction initiatives, and the
success with which the City controls expenditures; the impact of conditions
in the real estate market on real estate tax revenues; the City's ability to
market its securities successfully in the public credit markets; and
unanticipated expenditures that may be incurred as a result of the need to
maintain the City's infrastructure. Certain of these assumptions have been
questioned by the City Comptroller and other public officials.

The projections and assumptions contained in the 1997-2000 Financial
Plan are subject to revision which may involve substantial change, and no
assurance can be given that these estimates and projections, which include
actions which the City expects will be taken but which are not within the
<PAGE>
City's control, will be realized. The principal projections and assumptions
described below are based on information available in May 1996.

Substantially all of the City's full-time employees are members of
labor unions. The Financial Emergency Act requires that all collective
bargaining agreements entered into by the City and the Covered Organizations
be consistent with the City's current financial plan, except for certain
awards arrived at through impasse procedures. During a Control Period, and
subject to the foregoing exception, the Control Board would be required to
disapprove collective bargaining agreements that are inconsistent with the
City's current financial plan.

Under applicable law, the City may not make unilateral changes in wages,
hours or working conditions under any of the following circumstances: (i)
during the period of negotiations between the City and a union representing
municipal employees concerning a collective bargaining agreement; (ii) if an
impasse panel is appointed, then during the period commencing on the date on
which such panel is appointed and ending sixty days thereafter or thirty days
after it submits its report, whichever is sooner, subject to extension under
certain circumstances to permit completion of panel proceedings; or (iii)
during the pendency of an appeal to the Board of Collective Bargaining.
Although State law prohibits strikes by municipal employees, strikes and work
stoppages by employees of the City and the Covered Organizations have
occurred.

The 1997-2000 Financial Plan projects that the authorized number of
City-funded employees whose salaries are paid directly from City funds, as
opposed to federal or State funds, will decrease from an estimated level of
206,716 on June 30, 1996 to an estimated level of 203,793 by June 30, 2000,
before implementation of the gap closing program outlined in the Financial
Plan.

Contracts with all of the City's municipal unions expired in the 1995
and 1996 fiscal years. The City has reached settlements with unions
representing approximately two-thirds of the City's work force. The Financial
Plan reflects the costs of the settlements and assumes similar increases for
all other City-funded employees.

The terms of wage settlements could be determined through the impasse
procedure in the New York City Collective Bargaining Law, which can impose a
binding settlement. Legislation passed in February 1996 will place collective
bargaining matters relating to police and fire fighters, including impasse
proceedings, under the jurisdiction of the State Public Employment Relations
Board ("PERB"), instead of the New York City Office of Collective Bargaining
("OCB"). OCB considers wage levels of municipal employees in similar cities
in the United States in reaching its determinations, while PERB's
determinations take into account wage levels in both private and public
employment in comparable communities, particularly within the State. In
addition, PERB can approve only two-year contracts, unlike OCB which can
approve longer contracts. For these reasons, among others, PERB jurisdiction
could result in labor settlements which impose higher costs on the City than
those reached under existing procedures. On January 23, 1996, the City
requested the Office of Collective Bargaining to declare an impasse against
the Patrolmen's Benevolent Association ("PBA") and the Uniformed Firefighters
<PAGE>
Association ("UFA"). In addition, on February 29, 1996, the City commenced an
action in the State Supreme Court seeking a declaratory judgment confirming
that OCB, rather than PERB, has jurisdiction over collective bargaining
matters relating to police. On April 10, 1996, the Court issued a decision
which found the legislation in violation of the home rule provisions of the
State Constitution, and held that OCB and not PERB had jurisdiction over
collective bargaining matters relating to police. On September 12, 1996, the
Appellate Division, First Department affirmed this decision. The PBA has
appealed the Appellate Division decision.

The projections for the 1997 through 2000 fiscal years reflect the costs
of the settlements with the United Federation of Teachers ("UFT") and a
coalition of unions headed by District Council 37 of the American Federation
of State, County and Municipal Employees ("District Council 37"), which
together represent approximately two-thirds of the City's work force, and
assume that the City will reach agreement with its remaining municipal unions
under terms which are generally consistent with such settlements. The
settlement provides for a wage freeze in the first two years, followed by a
cumulative effective wage increase of 11% by the end of the five year period
covered by the proposed agreements, ending in fiscal years 2000 and 2001.
Additional benefit increases would raise the total cumulative effective
increase to 13% above present costs. Costs associated with similar
settlements for all City-funded employees would total $49 million, $459
million and $1.2 billion in the 1997, 1998 and 1999 fiscal years,
respectively, and exceed $2 billion in each fiscal year after the 1999 fiscal
year. There can be no assurance that the City will reach an agreement with
the unions that have not yet reached a settlement with the City on the terms
contained in the Financial Plan.

In the event of a collective bargaining impasse, the terms of wage
settlements could be determined through statutory impasse procedures, which
can impose a binding settlement except in the case of collective bargaining
with the UFT, which may be subject to non-binding arbitration. On January 23,
1996, the City requested the Office of Collective Bargaining to declare an
impasse against the PBA and the UFA.

From time to time, the Control Board staff, MAC, OSDC, the City
Comptroller and others issue reports and make public statements regarding the
City's financial condition, commenting on, among other matters, the City's
financial plans, projected revenues and expenditures and actions by the City
to eliminate projected operating deficits. Some of these reports and
statements have warned that the City may have underestimated certain
expenditures and overestimated certain revenues and have suggested that the
City may not have adequately provided for future contingencies. Certain of
these reports have analyzed the City's future economic and social conditions
and have questioned whether the City has the capacity to generate sufficient
revenues in the future to meet the costs of its expenditure increases and to
provide necessary services. It is reasonable to expect that reports and
statements will continue to be issued and to engender public comment.

On July 16, 1996, the City Comptroller issued a report on the Financial
Plan, which concluded that the City's fiscal situation remains serious. With
respect to the 1997 fiscal year, the report identified between $787 million
and $941 million in potential risks, including (i) $319 million in airport
<PAGE>
related payments from the Port Authority that are the subject of arbitration;
(ii) $202 million to $266 million in risks related to BOE resulting primarily
from unidentified expenditure reductions and projected State aid which has
not been appropriated by the State Legislature; (iii) possible tax revenue
shortfalls totaling $69 million, reflecting the potential impact that rising
interest rates may have on the economy; and (iv) $144 million relating to
projected overtime savings. In addition, the report noted that HHC has not
provided any details with respect to assumed expenditure reductions and
revenue enhancements to close a projected deficit for the 1997 fiscal year,
and that HHC faces additional uncertainties, including the impact of reform
of the State's health care reimbursement methodology, lower Medicaid and
Medicare revenues due to proposed reductions by the Federal Government and
the impact of proposals to privatize certain hospital facilities. The report
also noted that the City's capital budget includes risks in the 1997 fiscal
year of $777 million, including $607 million in capital from the proposed
sale of the City's water and sewer system, which the City Comptroller has
opposed and which was ruled unconstitutional in a unanimous decision of the
Appellate Division of the State Supreme Court.

With respect to fiscal years 1998 through 2000, the report identified
total risks of between $2.47 billion and $2.58 billion for the 1998 fiscal
year, $3.38 billion and $3.53 billion for the 1999 fiscal year and $4.16
billion and $4.31 billion for fiscal year 2000, which include the gaps
identified in the Financial Plan and the same categories of risks for fiscal
years 1998 through 2000 that the report identified for the 1997 fiscal year.
With respect to the City's capital budget for the 1998 through 2000 fiscal
years, the report identified risks of $1.5 billion, $1.7 billion and $1.4
billion, respectively, including the risk that the proposed Infrastructure
Finance Agency may not be approved by the State Legislature. The report also
noted that the City's reliance on $1.5 billion of nonrecurring actions for
the 1997 fiscal year to close current year budget gaps and, therefore, defer
them into future fiscal years, has resulted in a rapid increase in the size
of estimated budget gaps for the later years of the Financial Plan. The
largest of these recent budget actions include City labor contracts, which
defer major costs until the end of the contract period, bond refundings, and
the sale of Mitchell-Lama mortgages. In a subsequent report, the City
Comptroller set forth various proposals to relieve overcrowding in the public
schools, including year-round schooling, double shifts, busing to nearby
schools with available space, and federal funding for new school construction
and renovation projects.

On July 18, 1996, the staff of the OSDC issued a report on the Financial
Plan. The report concluded that, while the City will end the 1996 fiscal year
with a balanced budget, the City has made no progress towards structural
budget balance, despite its head count and entitlement reduction programs and
higher revenue collections. The report noted that the City relied on $1.4
billion in non-recurring resources to achieve budget balance in the 1996
fiscal year and, as a result, future projected gaps have increased to the
largest the City has ever faced. The report projected budget gaps of $74
million, $1.8 billion, $2.7 billion and $3.5 billion, and identified
additional risks of $774 million, $1.3 billion, $1.0 billion and $1.1
billion, for the 1997 through 2000 fiscal years, respectively. The principal
risks identified in the report relate to (i) uncertain State education aid
<PAGE>
and mandate relief, and unspecified expenditure reductions, relating to BOE,
totaling $327 million in the 1997 fiscal year and $402 million in each of the
1998, 1999 and 2000 fiscal years; (ii) the receipt of Port Authority lease
payments totaling $314 million and $226 million in the 1997 and 1998 fiscal
years, respectively; (iii) State approval of a four-year extension to the
City's personal income tax surcharge which would generate revenues of $171
million, $447 million, $478 million and $507 million in the 1997 through 2000
fiscal years, respectively; and (iv) the receipt of $200 million in the 1998
fiscal year in connection with a proposed sale of the New York Coliseum. The
report noted that the large future budget gaps result primarily from tax cuts
and the cost of labor agreements, and that revenues are projected to increase
1.2% per year during the period covered by the Financial Plan, while
expenditures are projected to increase 6% per year. The report further noted
that the City's economy is heavily dependent on profits in the securities
sector, which are volatile, and that there is a strong likelihood of a
downturn in the national and local economies during the period of the
Financial Plan, which creates a risk to City tax collections beyond those
quantified in the report. In addition, the report noted that HHC could face a
budget gap of approximately $370 million for the 1997 fiscal year, resulting
from lower hospital utilization and other factors, and, with respect to the
capital plan, the report noted that the City anticipates funding over the
next four years of approximately $5.7 billion which is uncertain, including
financing from the proposed sale of the water and sewer system, savings from
amendments to the Wicks Law and the proceeds from the sale of bonds issued by
the proposed Infrastructure Finance Authority.

On July 18, 1996, the staff of the Control Board issued a report on the
Financial Plan. The report identified risks totaling $594 million, $1.1
billion, $851 million and $813 million, for the 1997 fiscal year, the 1998
fiscal year, the 1999 fiscal year and fiscal year 2000, respectively. The
principal risks identified in the report included (i) revenues from the
proposed extension of the 12.5% personal income tax surcharge totaling $171
million, $394 million, $419 million and $445 million in the 1997 through 2000
fiscal years, respectively, which requires State legislation; (ii)
implementation by BOE of various actions, totaling $56 million in the 1997
fiscal year and $334 million in each of the 1998 through 2000 fiscal years,
which include unspecified reductions and uncertain State funding; (iii) the
receipt of $314 million and $226 million from the Port Authority in the 1997
and 1998 fiscal years, respectively, which is the subject of arbitration; and
(iv) the potential for greater than forecast overtime spending totaling
between $71 and $77 million in each of the 1997 through 2000 fiscal years.
Taking into account the risks identified in the report and the unprecedented
gaps projected in the Financial Plan, the Control Board identified projected
gaps of $2.8 billion, $3.5 billion and $4.2 billion for the 1998 fiscal year,
the 1999 fiscal year and fiscal year 2000, respectively. The report concluded
that the City has not addressed its underlying problems, which include
inadequate and unstable revenue growth, high debt service expenditures and
increasing costs of health care and employee fringe benefits. The report
noted that by fiscal year 2000, City-funded revenues will have grown by only
6.1% since the 1996 fiscal year, which is substantially below the expected
rate of inflation, while expenditures are expected to grow at about the
expected rate of inflation. The report noted that this problem is increased
by the volatility and cyclicality of the City's tax revenues, which do not
<PAGE>
grow uniformly from one year to the next and which are sensitive to
fluctuations of the securities industry. The report further noted that the
City is approaching the limit on outstanding general obligation debt
permitted under the State Constitution and, as a result, has proposed the
creation of the Infrastructure Finance Authority. In addition, the report
stated that the City's structural imbalance has led to insufficient funding
for maintaining the existing capital plant through the expense budget, and
questioned whether the current capital plan is affordable over the long term.

On October 9, 1995, Standard & Poor's issued a report which concluded
that proposals to replace the graduated Federal income tax system with a
"flat" tax could be detrimental to the creditworthiness of certain municipal
bonds. The report noted that the elimination of Federal income tax deductions
currently available, including residential mortgage interest, property taxes
and state and local income taxes, could have a severe impact on funding
methods under which municipalities operate. With respect to property taxes,
the report noted that the total valuation of a municipality's tax base is
affected by the affordability of real estate and that elimination of mortgage
interest deduction would result in a significant reduction in affordability
and, thus, in the demand for, and the valuation of, real estate. The report
noted that rapid losses in property valuations would be felt by many
municipalities, hurting their revenue raising abilities. In addition, the
report noted that the loss of the current deduction for real property and
state and local income taxes from Federal income tax liability would make
rate increases more difficult and increase pressures to lower existing rates,
and that the cost of borrowing for municipalities could increase if the
tax-exempt status of municipal bond interest is worth less to investors.
Finally, the report noted that tax anticipation notes issued in anticipation
of property taxes could be hurt by the imposition of a flat tax, if
uncertainty is introduced with regard to their repayment revenues, until
property values fully reflect the loss of mortgage and property tax
deductions.

On December 17, 1996, the Control Board issued a report noting that the
City's general tax revenues are growing much more slowly than the City's
expenditures, which will make it increasingly difficult to balance the
budget. On the same day, the staff of the City Comptroller issued a report
which tended to support the Control Board report, finding that the rate of
growth of personal income in the City was much lower than the national rate.

The City since 1981 has fully satisfied its seasonal financing needs in
the public credit markets, repaying all short-term obligations within their
fiscal year of issuance. The City has issued $2.4 billion of short-term
obligations for fiscal year 1997 to finance the current estimate of its
seasonal cash flow needs for the 1997 fiscal year. Seasonal financing
requirements for the 1996 fiscal year increased to $2.4 billion from $2.2
billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively.
Seasonal financing requirements were $1.4 billion and $2.25 billion in the
1993 and 1992 fiscal years, respectively. The delay in the adoption of the
State's budget in certain past fiscal years has required the City to issue
short-term notes exceeding those expected early in such fiscal years.

The City is a defendant in a significant number of lawsuits. Such
litigation includes, but is not limited to, actions commenced and claims
<PAGE>
asserted against the City arising out of alleged constitutional violations,
alleged torts, alleged breaches of contracts and other violations of law and
condemnation proceedings. While the ultimate outcome and fiscal impact, if
any, on the proceedings and claims are not currently predictable, adverse
determinations in certain of them might have a material adverse effect upon
the City's ability to carry out the 1997-2000 Financial Plan. The City is a
party to numerous lawsuits and is the subject of numerous claims and
investigations. The City has estimated that its potential future liability on
account of outstanding claims against it as of June 30, 1996 amounted to
approximately $2.8 billion. This estimate was made by categorizing the
various claims and applying a statistical model, based primarily on actual
settlements by type of claim during the preceding ten fiscal years, and by
supplementing the estimated liability with information supplied by the City's
Corporation Counsel.

On July 10, 1995, S&P revised downward its rating on City general
obligation bonds from A- to BBB+ and removed City bonds from CreditWatch. S&P
stated that "structural budgetary balance remains elusive because of
persistent softness in the City's economy, highlighted by weak job growth and
a growing dependence on the historically volatile financial services sector."
Other factors identified by S&P's in lowering its rating on City bonds
included a trend of using one-time measures, including debt refinancings, to
close projected budget gaps, dependence on unratified labor savings to help
balance the Financial Plan, optimistic projections of additional federal and
State aid or mandate relief, a history of cash flow difficulties caused by
State budget delays and continued high debt levels.

Fitch Investors Service, Inc. ("Fitch") rates City general obligation
bonds A-. Moody's rating for City general obligation bonds is Baa1. On March
1, 1996, Moody's stated that the rating for the City's Baa1 general
obligation bonds remains under review for a possible downgrade pending the
outcome of the adoption of the City's budget for the 1997 fiscal year and in
light of the status of the debate on public assistance and Medicaid reform;
the enactment of a State budget, upon which major assumptions regarding State
aid are dependent, which may be extensively delayed; and the seasoning of the
City's economy with regard to its strength and direction in the face of a
potential national economic slowdown. Since July 15, 1993, Fitch has rated
City bonds A-. On February 28, 1996, Fitch placed the City's general
obligation bonds on FitchAlert with negative implications. On November 5,
1996, Fitch removed the City's general obligation bonds from FitchAlert
although Fitch stated that the outlook remains negative. There is no
assurance that such ratings will continue for any given period of time or
that they will not be revised downward or withdrawn entirely. Any such
downward revision or withdrawal could have an adverse effect on the market
prices of the City's general obligation bonds.

In 1975, S&P suspended its A rating of City bonds. This suspension
remained in effect until March 1981, at which time the City received an
investment grade rating of BBB from S&P. On July 2, 1985, S&P revised its
rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On July
10, 1995, S&P revised its rating of City bonds downward to BBB+, as discussed
above. Moody's ratings of City bonds were revised in November 1981 from B (in
effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1,
<PAGE>
in May 1988 to A and again in February 1991 to Baa1. Since July 15, 1993,
Fitch has rated City bonds A-.
<PAGE>
PART C - OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements

Included in Prospectus:

Financial Highlights

Included in the Statement of Additional Information: #

Portfolio of Investments as of December 31, 1996
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statement of Changes in Net Assets for each of the two years in the period
ended December 31, 1996 and December 31, 1995

# Incorporated by reference to the Registrant's Annual Report filed
with the Securities and Exchange Commission on February 27, 1997
(Accession No. 0000899243-97-000304).

All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been
omitted.

(b) Exhibits

1. Amended and Restated Declaration of Trust dated as of May 1, 1994.*

2. None.

3. None.

4. None.

5.1 Form of Management Agreement between Trust and Texas Commerce Bank
National Association, as Trustee.*

5.2 Form of Sub-Advisory Agreement between the Trust, Texas Commerce Bank
National Association, as Trustee, and Sub-Advisers.*

6. Form of Amended and Restated Distribution Agreement dated as of
May 1, 1994.*

7. None.

8.1 Form of Custodian Agreement between the Trust, Texas Commerce Bank
National Association, as Trustee, and State Street Bank and Trust
Company.*

8.2 Form of Sub-Custodian Agreement between State Street Bank and Trust
Company and various Sub-Custodians.*

9. None.
<PAGE>
10. Opinion and consent of counsel as to the legality of the securities
being registered, indicating whether they will when sold, be legally
issued, fully-paid and non-assessable was filed with the Securities
and Exchange Commission on February 27, 1997, pursuant to Rule 24f-2
and is herein incorporated by reference.*

11. Consent of Independent Auditors.*

12. None.

13. Agreements with initial Participating Trusts.*

14. None.

15. None.

16. Schedules for computation of each performance quotation provided in
the Registration Statement.*

17. Financial Data Schedules.

18. None.

* Previously filed with Registration Statement and Post-effective
Amendments and are herein incorporated by reference.
<PAGE>
Item 25. Persons Controlled by or under Common Control with
Registrant
Inapplicable.

Item 26. Number of Holders of Securities

Number of Record
Holders as of
Title of Class August 31, 1997
-------------- ---------------
Money Market Fund 773
Income Fund 350
Intermediate Term Bond Fund 111
Equity Growth Fund 469
Equity Income Fund 520
Balanced Fund 104
Risk Manager-Income Fund 6
Risk Manager-Balanced Fund 2
Risk Manager-Growth Fund 6
Short-Intermediate U.S. 254
Government Securities Fund 62
U.S. Government Securities Fund 403
Small Capitalization Fund 345
Core Equity Fund

Item 27. Indemnification

Sections 10.2 and 10.4 of the Amended and Restated Declaration of Trust,
filed as Exhibit 1, are incorporated herein by reference. Section 10.2
contains provisions limiting the liabilities of members of the Supervisory
Committee and Section 10.4 contains provisions for indemnification of the
Trustee, members of the Supervisory Committee and officers of the Trust.

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

Item 28. Business and Other Connections of Investment Adviser

(a) Upon effectiveness of this amendment to the Registration Statement, The
Chase Manhattan Bank ("Chase") will be the investment adviser of the Trust.
Chase is a commercial bank providing a wide range of banking and investment
services.
<PAGE>
To the knowledge of the Registrant, none of the Directors or executive
officers of Chase, except those described below, are or have been, at any
time during the past two years, engaged in any other business, profession,
vocation or employment of a substantial nature, except that certain Directors
and executive officers of Chase also hold or have held various positions with
bank and non-bank affiliates of Chase, including its parent, The Chase
Manhattan Corporation. Each Director listed below is also a Director of The
Chase Manhattan Corporation.

<TABLE>
<CAPTION>
Name Position with Chase Principal Occupation
---- ------------------- --------------------

<S> <C> <C>
Thomas G. Labreque President and Chief Chairman, Chief Executive
Operating Officer Officer and a Director of The
and Director Chase Manhattan Corporation and
a Director of AMAX, Inc.

M. Anthony Burns Director Chairman of the Board,
President and Chief Executive
Officer of Ryder System, Inc.

H. Laurance Fuller Director Chairman, President, Chief
Executive Officer and Director
of Amoco Corporation and
Director of Abbott Laboratories

Paul W. MacAvoy Director Dean of Yale School of
Organization and Management

David T. McLaughlin Director President and Chief Executive
Officer of The Aspen Institute,
Chairman of Standard Fuse
Corporation and a Director of
each of ARCO Chemical Company
and Westinghouse Electric
Corporation

Edmund T. Pratt, Jr. Director Chairman Emeritus, formerly
Chairman and Chief Executive
Officer, of Pfizer Inc. and a
Director of each of Pfizer,
Inc., Celgene Corp., General
Motors Corporation and
International Paper Company

Henry B. Schacht Director Chiarman and Chief Executive
Officer of Cummins Engine
Company, Inc. and a Director of
each of American Telephone and
Telegraph Company and CBS Inc.

Donald H. Trautlein Director Retired Chairman and Chief
Executive Officer of Bethlehem
Steel Corporation
<PAGE>
James L. Ferguson Director Retired Chairman and Chief
Executive Officer of General
Foods Corporation

William H. Gray III Director President and Chief Executive
Officer of the United Negro
College Fund, Inc.

David T. Kearns Director Retired Chairman and Chief
Executive Officer of the Xerox
Corporation

Delano E. Lewis Director President and Chief Executive
Officer of National Public
Radio

John H. McArthur Director Dean of the Harvard Graduate
School of Business
Administration

Frank A. Bennack, Jr. Director President and Chief Executive
Officer The Hearst Corporation

Michael C. Bergerac Director Chairman of the Board and Chief
Executive Officer Bergerac &
Co., Inc.

Susan V. Berresford Director President, The Ford Foundation

Randolph W. Bromery Director President, Springfield College;
President, Geoscience
Engineering Corporation

Charles W. Duncan, Jr. Director Private Investor

Melvin R. Goodes Director Chairman of the Board and Chief
Executive Officer, The Warner-
Lambert Company

George V. Grune Director Retired Chairman and Chief
Executive Officer, The Reader's
Digest Association, Inc.;
Chairman, The DeWitt Wallace-
Reader's Digest Fund; The Lila-
Wallace Reader's Digest Fund

William B. Harrison, Vice Chairman
Jr. of the Board

Harold S. Hook Director Chairman and Chief Executive
Officer, General Corporation

Helen L. Kaplan Director Of Counsel, Skadden, Arps,
Slate, Meagher & Flom
<PAGE>
E. Michael Kruse Vice Chairman
of the Board

J. Bruce Llewellyn Director Chairman of the Board, The
Philadelphia Coca-Cola Bottling
Company, The Coca-Cola Bottling
Company of Wilmington, Inc.,
Queen City Broadcasting, Inc.

John P. Mascotte Director Chairman, The Missouri
Corporation of Johnson &
Higgins

John F. McGillicuddy Director Retired Chairman of the Board
and Chief Executive Officer

Edward D. Miller Senior Vice
Chairman of the
Board

Walter V. Shipley Chairman of the
Board and Chief
Executive Officer

Andrew C. Sigler Director Chairman of the Board and Chief
Executive Officer, Champion
International Corporation

Michael I. Sovern Director President, Emeritus and
Chancellor Kent, Professor of
Law, Columbia University

John R. Stafford Director Chairman, President and Chief
Executive Officer, American
Home Products Corporation

W. Bruce Thomas Director Private Investor

Marina V. N. Whitman Director Professor of Business
Administration and Public
Policy, University of Michigan

Richard D. Wood Director Retired Chairman of the Board,
Eli Lilly and company
</TABLE>

(b) Texas Commerce Bank National Association ("TCB") is currently the
investment adviser of the Trust and its business has been solely that of a
national bank. Upon effectiveness of this amendment to the Registration
Statement, TCB will be investment sub-adviser with respect to certain of the
Funds.

The directors and executive officers (i.e., members of management committee)
of the investment adviser have held during the past two fiscal years the
following positions of a substantial nature:
<PAGE>
Position(s) Position(s)
and Offices and Offices Other Substantial
with with Business, Profession,
Name TCB Registrant Vocation or Employment
----- -------------- ----------- ----------------------

John L. Adams Director, None None
Vice Chairman

Elaine B. Agather CEO, TCB-Fort None None
Worth,
Vice Chairman,
TCB-Metroplex

David W. Biegler Director None Chairman, President and
CEO, ENSERCH Corporation,
300 South St. Paul St.,
Dallas TX 75201

Robert W. Bishop Executive None None
Vice President

Alan R. Buckwalter, III Director, None None
Vice Chairman

E. Worth Burke Executive None None
Vice President

Dan S. Hallmark Chairman and None None
CEO TCB-Beaumont

Dennis R. Hendrix Director None Chairman, Pan Energy
Corp., P.O. Box 1642,
Houston, TX 77251-1642

Harold S. Hook Director None Chairman and CEO, American
General Corporation, P.O.
Box 3247, Houston, TX
77253

Robert C. Hunter Director, None None
Vice Chairman

Ed Jones President and None None
CEO TCB-Midland

R. Bruce LaBoon Director None Managing Partner, Liddell,
Sapp, Zivley, Hill &
LaBoon, L.L.P.,
3400 Texas Commerce Tower,
Houston, TX 77002-3004

Shelaghmichael C. Lents Executive None None
Vice President

S. Todd Maclin President, None None
TCB-Dallas,
Executive
Vice President
<PAGE>
Position(s) Position(s)
and Offices and Offices Other Substantial
with with Business, Profession,
Name TCB Registrant Vocation or Employment
----- -------------- ------------- ----------------------
Al Martinez-Fonts Chairman and CEO None None
TCB-El Paso

Beverly E. McCaskill Executive Vice None None
President

Joe C. McKinney Chairman and CEO None None
TCB-San Antonio

Scott J. McLean Executive Vice None None
President

Randal B. McLelland President and CEO, None None
TCB-Rio Grande
Valley'

David L. Mendez Executive Vice None None
President

W. Merriman Morton Chairmand and CEO None None
TCB-Austin

Cathy Nunnally Senior Vice None None
President

Paul Poullard Executive Vice None None
President

Jeffrey B. Reitman General Counsel None None

Edward N. Robinson Executive Vice None None
President

Ann V. Rogers Executive Vice None None
President

Marc J. Shapiro Director, Chairman, None None
President and CEO

Larry L. Shryock Executive Vice None None
President

Richard Summers Executive Vice None None
President

Kenneth L. Tilton Executive Vice None None
President
and Controller

Harriet S. Wasserstrum Executive Vice None None
President

Gary K. Wright Executive Vice None None
President

Item 29. Principal Underwriters
Inapplicable.

Item 30. Location of Accounts and Records

Accounts and other documents are maintained at the offices of the Trustee,
Texas Commerce Bank National Association, 600 Travis Street, Houston, Texas
77002.
<PAGE>
Item 31. Management Services.

Inapplicable.

Item 32. Undertakings

(a) Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting upon the question of
removal of one or more of Registrant's directors when
requested in writing to do so by the holders of at least 10%
of Registrant's outstanding shares of common stock and, in
connection with such meeting, to assist in communications
with other shareholders in this regard, as provided under
Section 16(c) of the 1940 Act.

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

(c) Registrant undertakes to file a post-effective amendment,
using reasonably current financial statements which need not
be certified, within four to six months from the date of
commencement of investment operations for Tax Free Money
Market Fund, Tax Free Income Fund, New York Tax Free Income
Fund, Mid Cap Growth Fund and International Equity Fund.
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Amendment to Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Houston, and State
of Texas, on the 25th day of September, 1997.

AVESTA TRUST

By: TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
Trustee

By: /s/Thomas J. Press
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Thomas J. Press
Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.

Signature Title Date
_______________________ _______________________ __________________

Member, September 25, 1997
_______________________ Supervisory Committee
Frank A. Liddell, Jr.

<F1> Member, September 25, 1997
_______________________ Supervisory Committee
George E. McDavid

<F1> Member, September 25, 1997
_______________________ Supervisory Committee
Kenneth L. Otto
<F1> Member, September 25, 1997
_______________________ Supervisory Committee
H. Michael Tyson

<F1> Chairman, September 25, 1997
_______________________ Supervisory Committee
Henry J. Lartigue
/s/Nancy Burge Principal Financial and September 25, 1997
_______________________ Accounting Officer
Nancy Burge

[FN]
<F1> Thomas J. Press, pursuant to power of attorney, by signing his name hereto
does hereby sign and execute this Registration Statement of the AVESTA
Trust on behalf of each of the members of the Supervisory Committee named
above, in the capacities in which the name of each appears above.

By: /s/Thomas J. Press
____________________________
Thomas J. Press
Attorney-In-Fact