AVESTA TRUST, 485BPOS, 1997-12-30

AVESTA TRUST
485BPOS, 1997-12-30

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 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. 21 \x\

AND/OR

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

AMENDMENT NO. 25 \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) \x\ on December 31, 1997 pursuant to paragraph (b)

\ \ 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>

PROSPECTUS

CHASE FUNDS

INVESTMENT STRATEGIES:

CHASE MONEY MARKET FUND: CURRENT INCOME

CHASE TAX FREE MONEY MARKET FUND: CURRENT INCOME

CHASE TAX FREE INCOME FUND: INCOME

CHASE NEW YORK TAX FREE INCOME FUND: INCOME

CHASE SHORT-INTERMEDIATE TERM
U.S. GOVERNMENT SECURITIES FUND: INCOME

CHASE U.S. GOVERNMENT SECURITIES FUND: INCOME

CHASE INTERMEDIATE TERM BOND FUND: INCOME

CHASE INCOME FUND: INCOME

CHASE BALANCED FUND: INCOME AND GROWTH

CHASE EQUITY INCOME FUND: GROWTH AND INCOME

CHASE CORE EQUITY FUND: TOTAL RETURN

CHASE EQUITY GROWTH FUND: CAPITAL GROWTH

CHASE MID CAP GROWTH FUND: CAPITAL GROWTH

CHASE SMALL CAPITALIZATION FUND: CAPITAL GROWTH

CHASE INTERNATIONAL EQUITY FUND: CAPITAL GROWTH

PREMIER 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 the Chase Funds Service Center at 1-800-62-CHASE. 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 OR ANY OF ITS 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>

The Chase Funds are portfolios of Mutual Fund Investment Trust ('MFIT'), an
open-end investment company organized as a Massachusetts business trust in
September 1997. The Chase 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, which will change its name to Chase Bank of
Texas, National Association on January 20, 1998 (herein, 'Chase Texas'). 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'). Chase Texas 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.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
CHASE MONEY MARKET FUND.................................................... 4

CHASE TAX FREE MONEY MARKET FUND........................................... 8

CHASE TAX FREE INCOME FUND................................................. 10

CHASE NEW YORK TAX FREE INCOME FUND........................................ 12

CHASE SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND.............. 14

CHASE U.S. GOVERNMENT SECURITIES FUND...................................... 17

CHASE INTERMEDIATE TERM BOND FUND.......................................... 20

CHASE INCOME FUND.......................................................... 23

CHASE BALANCED FUND........................................................ 27

CHASE EQUITY INCOME FUND................................................... 31

CHASE CORE EQUITY FUND..................................................... 35

CHASE EQUITY GROWTH FUND................................................... 38

CHASE MID CAP GROWTH FUND.................................................. 42

CHASE SMALL CAPITALIZATION FUND............................................ 44

CHASE INTERNATIONAL EQUITY FUND............................................ 47

COMMON INVESTMENT POLICIES................................................. 50

MANAGEMENT................................................................. 63

HOW TO BUY, SELL AND EXCHANGE SHARES....................................... 65

HOW THE FUNDS VALUE THEIR SHARES........................................... 66

HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION................................ 67

OTHER INFORMATION CONCERNING THE FUNDS..................................... 69

PERFORMANCE INFORMATION.................................................... 71
</TABLE>

<PAGE>

CHASE 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 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.

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.30%
12b-1 Fee............................................................. None
Other Expenses (after estimated waivers and reimbursements)*.......... 0.20%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 0.50%
</TABLE>

<TABLE>
<CAPTION>
EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming
5% annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Premier Shares............................. $5 $16 $28 $ 63
</TABLE>

* 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. 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 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
period
ended
June 30, For the years ended December 31,
1997 -----------------------------------------------
(unaudited) 1996 1995 1994 1993
----------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of
period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- -------- ------- ------- -------
Investment income....... 0.027 0.054 0.059 0.045 0.032
Expenses................ (0.002)(3) (0.006)(3) (0.006)(3) (0.007)(3) (0.008)
Expense reimbursement... 0.000 0.001 0.001 0.001 0.002
----------- -------- ------- ------- -------
Net investment income... 0.025 0.049 0.054 0.039 0.026
Dividends to
unitholders........... (0.025) (0.049) (0.054) (0.039) (0.026)
----------- -------- ------- ------- -------
Net asset value, end of
period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- -------- ------- ------- -------
----------- -------- ------- ------- -------
Total return.............. 2.51% 5.10% 5.57% 3.80% 2.60%
Ratios/supplemental data:
Net assets, end of
period (000).......... $ 125,607 $119,106 $71,310 $55,505 $28,024
Ratio of expenses to
average net assets.... .55%(4) 0.57% 0.57% 0.68% 0.82%
Ratio of expense
reimbursement to
average net assets.... (0.05%)(4) (0.07%)(5) (0.07%)(5) (0.18%)(5) (0.17%)(5)
----------- -------- ------- ------- -------

Ratio of net expenses to
average net assets.... 0.50%(2)(4) 0.50%(2) 0.50%(2) 0.50%(2) 0.65%
----------- -------- ------- ------- -------
----------- -------- ------- ------- -------
Ratio of net income to
average net assets.... 5.02%(4) 4.93% 5.43% 3.90% 2.57%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------------------------
1992 1991 1990 1989 1988(1)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------

Investment income....... 0.041 0.063 0.082 0.091 0.061

Expenses................ (0.008) (0.007) (0.009) (0.010) (0.016)

Expense reimbursement... 0.002 0.001 0.002 0.003 0.011
------- ------- ------- ------- -------

Net investment income... 0.035 0.057 0.075 0.084 0.056

Dividends to
unitholders........... (0.035) (0.057) (0.075) (0.084) (0.056)
------- ------- ------- ------- -------

Net asset value, end of
period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------

Total return.............. 3.44% 6.01% 7.80% 8.91% 7.45%

Ratios/supplemental data:

Net assets, end of
period (000).......... $32.961 $32,230 $25,832 $18,891 $5,079

Ratio of expenses to
average net assets.... 0.81% 0.80% 0.88% 0.96% 2.16%(4)

Ratio of expense
reimbursement to
average net assets.... (0.16%)(5) (0.15%)(5) (0.23%)(5) (0.31%)(5) (1.51)(4)(5)
------- ------- ------- ------- -------

Ratio of net expenses to
average net assets.... 0.65% 0.65% 0.65% 0.65% 0.65%(4)
------- ------- ------- ------- -------
------- ------- ------- ------- -------

Ratio of net income to
average net assets.... 3.37% 5.69% 7.53% 8.49% 6.11%(4)
</TABLE>

(1) Commenced investment operations on March 29, 1988.

(2) Reflects management fee reduction of 0.15% or $87,988, $134,952, $100,525
and $27,802, for the six months ended June 30, 1997, and 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.

(3) Reflects management fee reduction of $87,988 or $0.001 per unit, $134,952
or $0.002 per unit, $100,525 or $0.002 per unit, and $27,802 or $0.001 per
unit for the six months ended June 30, 1997, and for the years ended
December 31, 1996, 1995 and 1994, respectively. Without management fee
reduction, expense per unit is $0.003, $0.007, $0.007, and $0.008 for the
six months ended June 30, 1997, and for the years ended December 31, 1996,
1995 and 1994, respectively.

(4) Annualized.

(5) Reflects agreement in effect for periods prior to January 1, 1998 to
reimburse expenses in excess of 0.65% of average net assets.

<PAGE>

CHASE 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 '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.

<TABLE>
<CAPTION>
EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years
------ -------
<S> <C> <C>
Premier Shares............................................... $5 $16
</TABLE>

* 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 4.05%, 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>

CHASE 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.

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.50%
12b-1 Fee............................................................. None
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 0.75%
</TABLE>

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

1 Year 3 Years
------ -------
<S> <C> <C>
Premier Shares............................................... $8 $24
</TABLE>

* 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>

CHASE NEW YORK TAX FREE INCOME FUND

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.

<TABLE>
<CAPTION>
EXAMPLE
Your investment of $1,000 would incur the following expenses, assuming 5% annual
return:
1 Year 3 Years
------ -------
<S> <C> <C>
Premier Shares............................................... $8 $24
</TABLE>

* 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>

CHASE SHORT-INTERMEDIATE TERM
U.S. GOVERNMENT SECURITIES FUND

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.

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee......................................................... 0.50%
12b-1 Fee.............................................................. None
Other Expenses (after estimated waivers and reimbursements)*........... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*...................................................... 0.75%
</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Premier Shares............................... $8 $24 $42 $ 93
</TABLE>

* 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. 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 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, 1993 through December 31, 1996 have been audited by Price
Waterhouse LLP, whose unqualified report is included in the Annual Report.

<TABLE>
<CAPTION>
For the
period ended For the years ended December 31,
June 30, 1997 ----------------------------------------------
(unaudited) 1996 1995 1994 1993(1)
------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.66 $ 11.35 $ 10.14 $ 10.24 $ 10.00
------------- ------- ------- ------- -------
Investment income...... 0.36 0.69 0.66 0.52 0.33
Expenses............... (0.05) (0.10) (0.10) (0.09) (0.11)(3)
Expense
reimbursement ....... 0.01 0.01 0.02 0.02 0.07
------------- ------- ------- ------- -------
Net investment
income .............. 0.32 0.60 0.58 0.45 0.29
Net gains or (losses)
on securities (both
realized and
unrealized).......... (0.05) (0.29) 0.63 (0.55) (0.05)
------------- ------- ------- ------- -------
Total from investment
operations........... 0.27 0.31 1.21 (0.10) 0.24
------------- ------- ------- ------- -------
Net asset value, end of
period................. $ 11.93 $ 11.66 $ 11.35 $ 10.14 $ 10.24
------------- ------- ------- ------- -------
------------- ------- ------- ------- -------
Total return............ 2.35% 2.68% 12.01% (1.05%) 2.43%
Ratios/supplemental
data:
Net assets, end of
period (000)......... $24,703 $28,551 $28,783 $22,992 $17,391
Ratio of expenses to
average net assets... 0.93%(2) 0.88% 0.91% 0.96% 1.66%(2)
Ratio of expense
reimbursement to
average net assets... (0.18%)(2)(5) (0.13%)(5) (0.16%)(5) (0.21%)(5) (0.91)(2)(5)
------------- ------- ------- ------- -------
Ratio of net expenses
to average net

assets .............. 0.75%(2) 0.75% 0.75% 0.75% 0.75%(2)(4)
------------- ------- ------- ------- -------
------------- ------- ------- ------- -------
Ratio of net income to
average net assets... 5.44%(2) 5.26% 5.38% 4.41% 3.76%(2)
Portfolio turnover
rate................. 46% 177% 187% 268% 247%
Number of units
outstanding at end of
period (000)......... 2,070 2,449 2,536 2,269 1,698
</TABLE>

(1) Commenced investment operations on April 1, 1993.
(2) Annualized.
(3) Reflects voluntary fee waiver of $9,789 or $0.02 per unit. Without
voluntary fee waiver, expense per unit is $0.13.
(4) 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.

(5) Reflects agreement in effect for periods prior to January 1, 1998 to
reimburse expenses in excess of 0.75% of average net assets.

<PAGE>

CHASE 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.

<PAGE>

EXPENSE_ SUMMARY

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.

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Premier.................................... $8 $24 $42 $ 93
</TABLE>

* 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. 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 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, 1993 through December 31, 1996 have been audited by Price
Waterhouse LLP, whose unqualified report is included in the Annual Report.

<TABLE>
<CAPTION>
For the
period ended For the years ended December 31,
June 30, 1997 -------------------------------------------
(unaudited) 1996 1995 1994 1993(1)
------------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ................ $ 12.76 $13.01 $10.00 $10.91 $10.00
------ ------ ------ ------ -------
Investment income......... 0.43 0.83 0.81 0.70 0.45
Expenses.................. (0.15) (0.25)(3) (0.24)(3) (0.23)(3) (0.36)(5)
Expense reimbursement..... 0.10 0.16 0.16 0.15 0.31
------ ------ ------ ------ -------
Net investment income..... 0.38 0.74 0.73 0.62 0.40
Net gains or (losses) on
securities (both
realized and
unrealized)............. (0.18) (0.99) 2.28 (1.53) 0.51
------ ------ ------ ------ -------
Total from investment
operations.............. 0.20 (0.25) 3.01 (0.91) 0.91

------ ------ ------ ------ -------
Net asset value, end of
period.................... $ 12.76 $12.76 $13.01 $10.00 $10.91
------ ------ ------ ------ -------
------ ------ ------ ------ -------
Total return................ 1.55% (1.89%) 30.11% (8.39%) 9.12%
Ratios/supplemental data:
Net assets, end of period
(000)................... $ 2,669 $2,746 $2,877 $2,628 $2,916
Ratio of expenses to
average net assets...... 2.47%(2) 1.99% 2.12% 2.28% 4.69%(2)
Ratio of expense
reimbursement to average
net assets.............. (1.72%)(2)(7) (1.24%)(7) (1.37%)(7) (1.53%)(7) (3.84)(2)(7)
------ ------ ------ ------ -------
Ratio of net expenses to
average net assets...... 0.75%(2)(4) 0.75%(4) 0.75%(4) 0.75%(4) 0.85%(6)
------ ------ ------ ------ -------
------ ------ ------ ------ -------
Ratio of net income to
average net assets...... 6.12%(2) 6.01% 6.38% 6.23% 4.91%(2)
Portfolio turnover rate... 12% 48% 17% 174% 232%
Number of units
outstanding at end of
period (000)............ 206 215 221 263 267
</TABLE>

(1) Commenced investment operations on April 1, 1993.

(2) Annualized.

(3) Reflects management fee reduction of $1,291 or $0.01 per unit, $2,757 or
$0.01 per unit, $2,527 or $0.01 per unit and $1,886 or $0.01 per unit for
the six months ended June 30, 1997, and for the years ended December 31,
1996, 1995 and 1994. Without management fee reduction, expense per unit is
$0.16, $0.26, $0.25 and $0.24 for the six months ended June 30, 1997, and
for the years ended December 31, 1996, 1995 and 1994, respectively.

(4) Reflects management fee reduction of 0.10% or $1,291, $2,757, $2,527 and
$1,886 for the six months ended June 30, 1997, and 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.

(5) Reflects voluntary fee waiver of $3,040 or $0.02 per unit. Without
voluntary fee waiver, expense per unit is $0.38.

(6) 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.

(7) Reflects agreement in effect for periods prior to January 1, 1998 to
reimburse expenses in excess of 0.85% of average net assets.

<PAGE>

CHASE 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, and

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.

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Premier Shares............................. $8 $24 $42 $ 93
</TABLE>

* 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. 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 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, 1994 through December 31, 1996 have been audited by Price Waterhouse LLP,
whose unqualified report is included in the Annual Report.

<TABLE>
<CAPTION>
For the
period
ended
June 30, For the years ended December 31,
1997 ------------------------------------
(unaudited) 1996 1995 1994
----------- ------ ------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period ................ $ 11.89 $11.67 $ 9.99 $10.00
----------- ------ ------ ------
Investment income......... 0.36 0.70 0.72 0.17
Expenses.................. (0.07) (0.16) (0.16) (0.08)
Expense reimbursement..... 0.03 0.07 0.08 0.06
----------- ------ ------ ------
Net investment income..... 0.32 0.61 0.64 0.15
Net gains or (losses) on
securities (both
realized and
unrealized) ............ (0.08) (0.39) 1.04 (0.16)
----------- ------ ------ ------
Total from investment

operations.............. 0.24 0.22 1.68 (0.01)
----------- ------ ------ ------
Net asset value, end of
period.................... $ 12.13 $11.89 $11.67 $ 9.99
----------- ------ ------ ------
----------- ------ ------ ------
Total return................ 2.04% 1.86% 16.79% (0.32%)
Ratios/supplemental data:
Net assets, end of period
(000)................... $17,155 $6,949 $5,031 $5,124
Ratio of expenses to
average net assets...... 1.19%(2) 1.42% 1.43% 1.38%(2)
Ratio of expense
reimbursement to average
net assets.............. (0.44%)(2)(3) (0.67%)(3) (0.68%)(3) (0.63%)(2)(3)
----------- ------ ------ ------
Ratio of net expenses to
average net assets...... 0.75%(2) 0.75% 0.75% 0.75%(2)
----------- ------ ------ ------
----------- ------ ------ ------
Ratio of net income to
average net assets...... 5.52%(2) 5.32% 5.89% 6.12%(2)
Portfolio turnover rate... 101% 134% 198% 7%
Number of units
outstanding at end of
period (000)............ 1,415 585 431 513
</TABLE>

(1) Commenced investment operations on October 3, 1994.

(2) Annualized.

(3) Reflects agreement in effect for periods prior to January 1, 1998 to
reimburse expenses in excess of 0.75% of average net assets.

<PAGE>

CHASE 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, and 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.

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Premier Shares............................. $8 $24 $42 $ 93
</TABLE>

* 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. 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 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
period
ended
June 30, For the years ended December 31,
1997 -----------------------------------------------------------
(unaudited) 1996 1995 1994 1993(1) 1992(1)
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period.......... $ 18.56 $ 18.21 $ 15.39 $ 16.11 $ 14.62 $ 13.90
----------- ------- ------- ------- ------- -------
Investment
income........... .61 1.14 1.09 0.97 0.97 1.02
Expenses........... (.08)(3) (0.15)(3) (0.14)(3) (0.14)(3) (0.17) (0.16)
Expense
reimbursement.... .01 0.01 0.02 0.01 0.02 0.02
----------- ------- ------- ------- ------- -------
Net investment
income........... .54 1.00 0.97 0.84 0.82 0.88
Net gains or
(losses) on
securities (both
realized and
unrealized)...... (0.11) (0.65) 1.85 (1.56) 0.67 (0.16)
----------- ------- ------- ------- ------- -------
Total from
investment
operations....... .43 0.35 2.82 (0.72) 1.49 0.72
----------- ------- ------- ------- ------- -------
Net asset value, end
of period.......... $ 18.99 $ 18.56 $ 18.21 $ 15.39 $ 16.11 $ 14.62
----------- ------- ------- ------- ------- -------
----------- ------- ------- ------- ------- -------
Total return........ 2.31% 1.91% 18.38% (4.47%) 10.18% 5.13%
Ratios/supplemental
data:
Net assets, end of
period (000)..... $49,711 $53,614 $57,452 $52,235 $76,085 $64,509
Ratio of expenses

to average net
assets........... 0.84%(5) 0.82% 0.83% 0.82% 1.09% 1.17%
Ratio of expense
reimbursement to
average net
assets........... (.09)%(5)(6) (0.07%)(6) (0.08%)(6) (0.07%)(6) (0.09%)(6) (0.17%)(6)
----------- ------- ------- ------- ------- -------
Ratio of net
expenses to
average net
assets........... .75%(4)(5) 0.75%(4) 0.75%(4) 0.75%(4) 1.00% 1.00%
----------- ------- ------- ------- ------- -------
----------- ------- ------- ------- ------- -------
Ratio of net income
to average net
assets........... 5.82%(5) 5.58% 5.77% 5.43% 5.20% 6.21%
Portfolio turnover
rate............. 73% 72% 93% 239% 156% 285%
Number of units
outstanding at
end of period
(000)............ 2,617 2,889 3,154 3,395 4,724 4,413
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------------
1991(1) 1990(1) 1989(1) 1988(1)(2)
------- ------- ------- ----------
<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%(5)
Ratio of expense reimbursement to
average net assets.............. (0.18%)(6) (0.24%)(6) (0.32%)(6) (1.15%)(5)(6)
------- ------- ------- ----------
Ratio of net expenses to average
net assets...................... 1.00% 1.00% 1.00% 1.00%(5)
------- ------- ------- ----------
------- ------- ------- ----------
Ratio of net income to average
net assets...................... 6.57% 7.91% 7.65% 7.97%(5)
Portfolio turnover rate........... 304% 241% 361% 110%
Number of units outstanding at end
of period (000)................. 3.012 1,583 1,181 586
</TABLE>

(1) Amounts for the years 1988-1993 are adjusted to reflect 10:1 reverse split
of the Fund's units on May 7, 1993.

(2) Commenced investment operations on March 29, 1988.

(3) Reflects management fee reduction of $65,096 or $0.03 per unit, $135,137
or $0.05 per unit, $136,617 or $0.04 per unit, and $99,627 or $0.03 per
unit for the six months ended June 30, 1997, and for the years ended
December 31, 1996, 1995, and 1994, respectively. Without management fee
reduction, expense per unit is $0.11, $0.18, $0.18 and $0.17 for the six
months ended June 30, 1997, and for the years ended December 31, 1996,
1995, and 1994, respectively.

(4) Reflects management fee reduction of 0.25% or $65,096, $135,137, $136,617,
and $99,627 for the six months ended June 30, 1997, and 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.

(5) Annualized.

(6) Reflects agreement in effect for periods prior to January 1, 1998 to
reimburse expenses in excess of 1.00% of average net assets.

<PAGE>

CHASE 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 will employ a combination of (1) an
active equity management style focused primarily on strong earnings momentum
and profitability within a growth-oriented stock universe, and (2) an active
fixed income management style using primarily domestic debt securities. Under
normal market conditions, 30% to 70% of the Fund's total assets will be invested
in equity-based securities, which include common stocks and those debt
securities and preferred stock that are convertible into common stock. 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 Fund's equity investments are typically made in companies displaying one or
more of the following characteristics: projected earnings growth at a rate equal
to or greater than the equity markets in general, return on assets and equity
equal to or greater than the equity markets, above market average price/earnings
ratios, below average dividend yield, above average market volatility, and a
market capitalization in excess of $500 million. The Fund will focus on
companies with strong earnings growth and high levels of profitability as well
as positive industry and company specific characteristics, and attractive
valuations given growth potential.

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.

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.75%
12b-1 Fee............................................................. None
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.00%
</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Premier Shares............................. $ 10 $32 $55 $122
</TABLE>

* 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. 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 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
period
ended
June 30, For the years ended December 31,
1997 -------------------------------------------------
(unaudited) 1996 1995 1994 1993(1)
----------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.............. $ 23.66 $ 21.25 $ 17.16 $ 17.56 $ 16.57
----------- ------- ------- ------- -------
Investment income... 0.46 0.85 0.76 0.63 0.64
Expenses............ (0.15) (0.26) (0.23) (0.20) (0.19)
Expense
reimbursement..... 0.03 0.04 0.04 0.03 0.02
----------- ------- ------- ------- -------
Net investment
income ........... 0.34 0.63 0.57 0.46 0.47
Net gains or
(losses) on
securities (both
realized and
unrealized)....... 2.93 1.78 3.52 (0.86) 0.52
----------- ------- ------- ------- -------
Total from
investment

operations........ 3.27 2.41 4.09 (0.40) 0.99
----------- ------- ------- ------- -------
Net asset value, end
of period........... $ 26.93 $ 23.66 $ 21.25 $ 17.16 $ 17.56
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Total return.......... 13.82% 11.31% 23.83% (2.27%) 6.01%
Ratios/supplemental
data:
Net assets, end of
period (000)...... $25,323 $22,631 $21,471 $22,802 $37,276
Ratio of expenses to
average net
assets............ 1.19%(3) 1.17% 1.17% 1.17% 1.10%
Ratio of expense
reimbursement to
average net
assets............ 0.19%(3)(4) (0.17%)(4) (0.17%)(4) (0.17%)(4) (0.10%)(4)
----------- ------- ------- ------- -------
Ratio of net
expenses to
average net
assets............ 1.00%(3) 1.00% 1.00% 1.00% 1.00%
----------- ------- ------- ------- -------
----------- ------- ------- ------- -------
Ratio of net income
to average net
assets............ 2.71%(3) 2.82% 2.94% 2.69% 2.78%
Portfolio turnover
rate ............. 35% 70% 98% 157% 148%
Number of units
outstanding at end
of period (000)... 943 957 1,011 1,328 2,123
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------------------------------------
1992(1) 1991(1) 1990(1) 1989(1) 1988(1)(2)
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.............. $ 15.73 $ 12.67 $ 12.50 $ 10.57 $10.00
------- ------- ------- ------- ----------
Investment income... 0.68 0.68 0.77 0.77 0.44

Expenses............ (0.18) (0.18) (0.16) (0.18) (0.28)
Expense
reimbursement..... 0.02 0.04 0.03 0.06 0.21
------- ------- ------- ------- ----------
Net investment
income............ 0.52 0.54 0.64 0.65 0.37
Net gains or
(losses) on
securities (both
realized and
unrealized)....... 0.32 2.52 (0.47) 1.28 0.20
------- ------- ------- ------- ----------
Total from
investment
operations........ 0.84 3.06 0.17 1.93 0.57
------- ------- ------- ------- ----------
Net asset value, end
of
period.............. $ 16.57 $ 15.73 $ 12.67 $ 12.50 $10.57
------- ------- ------- ------- ----------
------- ------- ------- ------- ----------
Total return.......... 5.32% 24.16% 1.34% 18.26% 7.68%
Ratios/supplemental
data:
Net assets, end of
period (000)...... $51,092 $30,542 $17,373 $10,965 $2,890
Ratio of expenses to
average net
assets............ 1.17% 1.20% 1.26% 1.49% 3.83%(3)
Ratio of expense
reimbursement to
average net
assets............ (0.17%)(4) (0.20%)(4) (0.26%)(4) (0.49%)(4) (2.83%)(3)(4)
------- ------- ------- ------- ----------
Ratio of net
expenses to
average net
assets............ 1.00% 1.00% 1.00% 1.00% 1.00%(3)
------- ------- ------- ------- ----------
------- ------- ------- ------- ----------
Ratio of net income
to average net
assets............ 3.33% 3.77% 5.27% 5.35% 4.92%(3)
Portfolio turnover
rate (fixed
income)........... 187% 213% 141% 217% 90%
Portfolio turnover
rate (equity
based)............ 25% 39% 42% 124% 15%
Number of units
outstanding at end
of period (000)... 3,084 1,942 1,371 877 273
</TABLE>

(1) Amounts for the years 1988-1993 are adjusted to reflect 10:1 reverse split
of the Fund's units on May 7, 1993.

(2) Commenced investment operations on March 29, 1988.

(3) Annualized.

(4) Reflects agreement in effect for periods prior to January 1, 1998 to
reimburse expenses in excess of 1.00% of average net assets.

<PAGE>

CHASE 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. The Fund will employ an active equity
management style focused primarily on both earnings momentum and value within an
income-oriented stock universe. 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. The Fund will emphasize companies displaying one or
more of the following characteristics: above average dividend yield, a
consistent dividend record, below average market volatility, attractive earnings
momentum, below market price/earnings ratios, and a market capitalization in
excess of $500 million.

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.

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Premier Shares............................. $ 10 $32 $55 $122
</TABLE>

* 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.

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 Equity Income Fund series (the 'Predecessor
Fund') of the AVESTA Trust was converted into the Equity Income 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 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
period
ended
June 30, For the years ended December 31,
1997 ---------------------------------------------------------------
(unaudited) 1996 1995 1994 1993(1) 1992(1)
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............... $ 28.21 $ 23.93 $ 17.90 $ 18.52 $ 16.49 $ 15.60
----------- ------- ------- ------- ------- -------
Investment income.... .33 0.69 0.65 0.57 0.52 0.55
Expenses............. (.16) (0.27) (0.23) (0.20) (0.20)(3) (0.19)
Expense
reimbursement...... .01 0.01 0.02 0.02 0.03 0.03
----------- ------- ------- ------- ------- -------
Net investment
income............. .18 0.43 0.44 0.39 0.35 0.39
Net gains or (losses)
on securities (both
realized and
unrealized)........ 5.53 3.85 5.59 (1.01) 1.68 0.50

----------- ------- ------- ------- ------- -------
Total from investment
operations ........ 5.71 4.28 6.03 (0.62) 2.03 0.89
----------- ------- ------- ------- ------- -------
Net asset value, end of
period............... $ 33.92 $ 28.21 $ 23.93 $ 17.90 $ 18.52 $ 16.49
----------- ------- ------- ------- ------- -------
----------- ------- ------- ------- ------- -------
Total return........... 20.24% 17.87% 33.72% (3.37%) 12.34% 5.61%
Ratios/supplemental
data:
Net assets, end of
period (000)....... $69,799 $63,390 $54,985 $39,296 $41,605 $22,908
Ratio of expenses to
average net
assets............. 1.07%(5) 1.07% 1.09% 1.12% 1.21% 1.24%
Ratio of expense
reimbursement to
average net
assets............. (0.07%)(5)(6) (0.07%)(6) (0.09%)(6) (0.12%)(6) (0.21%)(6) (0.24%)(6)
----------- ------- ------- ------- ------- -------
Ratio of net expenses
to average net
assets............. 1.00%(5) 1.00% 1.00% 1.00% 1.00%(4) 1.00%
----------- ------- ------- ------- ------- -------
----------- ------- ------- ------- ------- -------
Ratio of net income
to average net
assets............. 1.17%(5) 1.67% 2.10% 2.13% 1.98% 2.52%
Portfolio turnover
rate............... 2% 24% 11% 42% 40% 25%
Number of units
outstanding at end
of period (000).... 2,058 2,247 2,297 2,195 2,246 1,389
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------------------
1991(1) 1990(1) 1989(1) 1988(1)(2)
------- ------- ------- ----------
<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%(5)
Ratio of expense reimbursement to
average net assets.............. (0.34%)(6) (0.46%)(6) (0.59%)(6) (1.80%)(5)(6)
------- ------- ------- ----------
Ratio of net expenses to average
net assets ..................... 1.00% 1.00% 1.00% 1.00%(5)
------- ------- ------- ----------
------- ------- ------- ----------
Ratio of net income to average net
assets.......................... 3.25% 4.26% 3.73% 4.37%(5)
Portfolio turnover rate........... 39% 42% 124% 15%
Number of units outstanding at end
of period (000)................. 903 483 370 346
</TABLE>

(1) Amounts for the years 1988-1993 are adjusted to reflect 10:1 reverse split
of the Fund's units on May 7, 1993.

(2) Commenced investment operations on March 29, 1988.

(3) Reflects voluntary fee waiver of $17,330 or $0.01 per unit. Without
voluntary fee waiver, expense per unit is $0.21.

(4) 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.

(5) Annualized.

(6) Reflects agreement in effect for periods prior to January 1, 1998 to
reimburse expenses in excess of 1.00% of average net assets.

<PAGE>

CHASE 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. The Fund will employ an active equity
management style focused primarily on strong earnings momentum and profitability
within the S&P 500 stock universe. Portfolio emphasis is on equity-based
securities, which include common stocks and those debt securities and preferred
stocks convertible into common stocks. Under normal 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 and money market instruments.

EQUITY-BASED INVESTMENTS. The Fund will typically emphasize companies displaying
one or more of the following characteristics: superior and stable record of
earnings growth relative to the equity markets in general, return on assets and
equity equal to or greater than the equity markets averages, and projected
earnings growth at a rate equal to or greater than the equity markets, and a
market capitalization in excess of $500 million. The Fund's assets will be
allocated among both the growth and cyclical sectors of the economy.

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.

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Premier Shares............................. $ 10 $32 $55 $122
</TABLE>

* 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. 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 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, 1993 through
December 31, 1996 have been audited by Price Waterhouse LLP, whose unqualified
report is included in the Annual Report.

<TABLE>
<CAPTION>
For the
period ended For the years ended December 31,
June 30, 1997 ------------------------------------------------
(unaudited) 1996 1995 1994 1993(1)
-------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............... $ 15.94 $ 13.01 $ 10.36 $ 10.80 $ 10.00
-------------- ------- ------- ------- -------
Investment income.... .16 0.30 0.29 0.28 0.21
Expenses............. (.10) (0.16) (0.14) (0.13) (0.20)(3)
Expense
reimbursement ..... .01 0.02 0.02 0.03 0.13
-------------- ------- ------- ------- -------
Net investment
income ............ .07 0.16 0.17 0.18 0.14
Net gains or (losses)
on securities (both
realized and
unrealized)........ 3.12 2.77 2.48 (0.62) 0.66
-------------- ------- ------- ------- -------
Total from investment
operations......... 3.19 2.93 2.65 (0.44) 0.80
-------------- ------- ------- ------- -------
Net asset value, end
of period............ $ 19.13 $ 15.94 $ 13.01 $ 10.36 $ 10.80
-------------- ------- ------- ------- -------
-------------- ------- ------- ------- -------
Total return.......... 20.03% 22.54% 25.53% (4.03%) 7.95%
Ratios/supplemental
data:
Net assets, end of
period (000)....... $ 37,461 $28,584 $24,367 $21,035 $11,718
Ratio of expenses to
average net
assets............. 1.15%(2) 1.14% 1.17% 1.27% 2.74%(2)
Ratio of expense
reimbursement to
average net

assets............. (0.15%)(2)(5) (0.14%)(5) (0.17%)(5) (0.27%)(5) (1.74)(2)(5)
-------------- ------- ------- ------- -------
Ratio of net expenses
to average net
assets............. 1.00%(2) 1.00% 1.00% 1.00% 1.00%(4)
-------------- ------- ------- ------- -------
-------------- ------- ------- ------- -------
Ratio of net income
to average net
assets............. .86%(2) 1.10% 1.44% 1.68% 1.84%(2)
Portfolio turnover
rate............... 14% 29% 133% 129% 83%
Number of units
outstanding at end
of period (000).... 1,958 1,793 1,874 2,030 1,086
</TABLE>

(1) Commenced investment operations on April 1, 1993.

(2) Annualized.

(3) Reflects voluntary fee waiver of $6,949 or $0.01 per unit. Without
voluntary fee waiver, expense per unit is $0.21.

(4) 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.

(5) Reflects agreement in effect for periods prior to January 1, 1998 to
reimburse expenses in excess of 1.00% of average net assets.

<PAGE>

CHASE 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.

securities, which include common stocks and those debt securities and preferred
stocks that are 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 and money market instruments.

EQUITY-BASED INVESTMENTS. The Fund's investments are typically made in companies
displaying one or more of the following characteristics: projected earnings
growth at a rate equal to or greater than the equity markets in general, return
on assets and equity equal to or greater than the equity markets, above market
average price-earnings ratios, below average dividend yield, above average
market volatility, and a market capitalization in excess of $500 million. The
Fund will focus on companies with strong earnings and high levels of
profitability as well as positive industry and company specific characteristics,
and attractive valuation given growth potential.

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.

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Premier Shares............................. $ 10 $32 $55 $122
</TABLE>

* 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. 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 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
period ended For the years ended December 31,
June 30, 1997 -------------------------------------------------
(Unaudited) 1996 1995 1994 1993(1)
------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 27.95 $ 23.20 $ 18.44 $ 18.61 $ 18.16
------ ------- ------- ------- -------
Investment income.......... 0.19 0.35 0.38 0.38 0.38
Expenses................... (0.16) (0.27) (0.23) (0.21) (0.21)(3)
Expense reimbursement ..... 0.01 0.02 0.02 0.03 0.03
------ ------- ------- ------- -------
Net investment income ..... 0.04 0.10 0.17 0.20 0.20
Net gains or (losses) on
securities (both realized
and unrealized).......... 6.71 4.65 4.59 (0.37) 0.25
------ ------- ------- ------- -------
Total from investment
operations............... 6.75 4.75 4.76 (0.17) 0.45
------ ------- ------- ------- -------
Net asset value, end of
period..................... $ 34.70 $ 27.95 $ 23.20 $ 18.44 $ 18.61
------ ------- ------- ------- -------
------ ------- ------- ------- -------
Total return................ 24.11% 20.52% 25.78% (0.90%) 2.48%
Ratios/supplemental data:
Net assets, end of period
(000).................... $70,467 $57,328 $45,578 $36,683 $30,648
Ratio of expenses to
average net assets....... 1.08%(5) 1.08% 1.10% 1.17% 1.21%
Ratio of expense
reimbursement to average
net assets............... (0.08%)(5)(6) (0.08%)(6) (0.10%)(6) (0.17%)(6) (0.21%)(6)
------ ------- ------- ------- -------
Ratio of net expenses to
average net assets....... 1.00%(5) 1.00% 1.00% 1.00% 1.00%(4)
------ ------- ------- ------- -------
------ ------- ------- ------- -------
Ratio of net income to
average net assets....... 0.25%(5) 0.41% 0.78% 1.07% 1.12%
Portfolio turnover rate.... 19% 62% 99% 116% 97%
Number of units outstanding
at end of period (000)... 2,031 2,051 1,965 1,989 1,646
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------------------------
1992(1) 1991(1) 1990(1) 1989(1) 1988(1)(2)
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............... $ 17.06 $ 12.96 $13.15 $10.48 $10.00
------- ------- ------- ------- ----------
Investment income.... 0.36 0.42 0.39 0.49 0.21
Expenses............. (0.21) (0.21) (0.20) (0.24) (0.22)
Expense
reimbursement...... 0.04 0.05 0.07 0.11 0.15
------- ------- ------- ------- ----------
Net investment
income............. 0.19 0.26 0.26 0.36 0.14
Net gains or (losses)
on securities (both
realized and
unrealized)........ 0.91 3.84 (0.45) 2.31 0.34
------- ------- ------- ------- ----------
Total from investment
operations......... 1.10 4.10 (0.19) 2.67 0.48
------- ------- ------- ------- ----------
Net asset value, end of
period............... $ 18.16 $ 17.06 $12.96 $13.15 $10.48
------- ------- ------- ------- ----------
------- ------- ------- ------- ----------
Total return........... 6.43% 31.69% (1.45%) 25.73% 6.15%
Ratios/supplemental
data:
Net assets, end of
period (000)....... $25,514 $16,716 $5,357 $2,839 $2,576
Ratio of expenses to
average net
assets............. 1.23% 1.32% 1.56% 1.91% 2.92%(5)
Ratio of expense
reimbursement to
average net
assets............. (0.23%)(6) (0.32%)(6) (0.56%)(6) (0.91%)(6) (1.92%)(5)(6)
------- ------- ------- ------- ----------
Ratio of net expenses
to average net
assets ............ 1.00% 1.00% 1.00% 1.00% 1.00%(5)
------- ------- ------- ------- ----------
------- ------- ------- ------- ----------
Ratio of net income
to average net
assets ............ 1.16% 1.73% 2.03% 2.95% 1.84%(5)
Portfolio turnover
rate............... 99% 135% 156% 235% 80%

Number of units
outstanding at end
of period (000).... 1,405 980 413 216 246
</TABLE>

(1) Amounts for the years 1988-1993 are adjusted to reflect 10:1 reverse split
of the Fund's units on May 7, 1993.

(2) Commenced investment operations on March 29, 1988.

(3) Reflects voluntary fee waiver of $11,479 or $0.01 per unit. Without
voluntary fee waiver, expense per unit is $0.22.

(4) 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.

(5) Annualized.

(6) Reflects agreement in effect for periods prior to January 1, 1998 to
reimburse expenses in excess of 1.00% of average net assets.

<PAGE>

CHASE 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.

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Premier Shares............................. $ 10 $32 $55 $122
</TABLE>

* 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 4.50%, 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>

CHASE SMALL CAPITALIZATION FUND

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 will employ an active equity
management style focused primarily on delivering risk and return characteristics
representative of a small capitalization asset class. Portfolio emphasis is on
equity-based securities, which include common stocks and those debt securities
and preferred stocks convertible into common stocks. Under normal 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 of small cap issuers. 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 investments are typically made in companies
displaying one or more of the following characteristics: above market average
price/earnings ratios and price/book ratios, below average dividend yield and
above average market volatility. In addition, small capitalization companies
will be emphasized that possess one or more of the following: high quality
management, a leading or dominant position in a major product line, new or
innovative products, services or processes, a sound financial position and a
relatively high rate of return of invested capital so that future growth can be
financed from internal sources. The Fund primarily targets companies with market

capitalizations of $100 million to $1 billion at time of purchase. Purchases are
a direct result of a disciplined stock selection process focusing on identifying
attractively valued stock of companies with positive business fundamentals.

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.

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.75%
12b-1 Fee............................................................. None
Other Expenses (after estimated waivers and reimbursements*........... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements*..................................................... 1.00%
</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Premier Shares........................... $ 10 $32 $55 $122
</TABLE>

* 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. 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 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, 1993 through December 31, 1996 have been audited by
Price Waterhouse LLP, whose unqualified report is included in the Annual Report.

<TABLE>
<CAPTION>
For the
period
ended
June 30, For the years ended December 31,
1997 ------------------------------------------
(unaudited) 1996 1995 1994 1993(1)
----------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of
period................... $ 17.55 $ 13.41 $ 10.23 $10.89 $10.00
----------- ------- ------- ------ -------
Investment income........ 0.09 0.16 0.17 0.16 0.09
Expenses................. (0.10) (0.18)(3) (0.16)(3) (0.15)(3) (0.17)(5)

Expense reimbursement.... 0.01 0.03 0.04 0.05 0.10
----------- ------- ------- ------ -------
Net investment income.... 0.00 0.01 0.05 0.06 0.02
Net gains or (losses) on
securities (both
realized and
unrealized)............ 1.99 4.13 3.13 (0.72) 0.87
----------- ------- ------- ------ -------
Total from investment
operations............. 1.99 4.14 3.18 (0.66) 0.89
----------- ------- ------- ------ -------
Net asset value, end of
period................... $ 19.54 $ 17.55 $ 13.41 $10.23 $10.89
----------- ------- ------- ------ -------
----------- ------- ------- ------ -------
Total return............... 11.32% 30.88% 31.14% (6.12%) 8.94%
Ratios/supplemental data:
Net assets, end of period
(000) ................. $30,817 $20,750 $12,848 $9,267 $9,838
Ratio of expenses to
average net assets..... 1.22%(4) 1.22% 1.35% 1.45% 2.46%(4)
Ratio of expense
reimbursement to
average net assets..... (0.22%)(4)(7) (0.22%)(7) (0.35%)(7) (0.45%)(7) (1.31)(4)(7)
----------- ------- ------- ------ -------
Ratio of net expenses to
average net assets..... 1.00%(4) 1.00%(2) 1.00%(2) 1.00%(2) 1.15%(6)
----------- ------- ------- ------ -------
----------- ------- ------- ------ -------
Ratio of net income to
average net assets..... 63.01%(4) 0.04% 0.46% 0.55% 0.28%(4)
Portfolio turnover
rate................... 26% 68% 89% 120% 161%
Number of units
outstanding at end of
period (000)........... 1,577 1,182 958 906 903
</TABLE>

(1) Commenced investment operations on April 1, 1993.

(2) Reflects management fee reduction of 0.15% or $17,690, $24,219, $15,584
and $9,153 for the six months ended June 30, 1997 and 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.

(3) Reflects management fee reduction of $17,690 or $0.01 per unit, $24,219 or
$0.02 per unit, $15,584 or $0.02 per unit and $9,153 or $0.01 per unit for
the six months ended June 30, 1997 and for the years ended December 31,
1996, 1995 and 1994, respectively. Without management fee reduction,
expense per unit is $0.11, $0.19, $0.17 and $0.16 for the six months ended
June 30, 1997 and for the years ended December 31, 1996, 1995 and 1994,

respectively.

(4) Annualized.
(5) Reflects voluntary fee waiver of $14,349 or $0.02 per unit. Without
voluntary fee waiver, expense per unit is $0.19.
(6) 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.

(7) Reflects agreement in effect for periods prior to January 1, 1998 to
reimburse expenses in excess of 1.15% of average net assets.

<PAGE>

CHASE 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 weighted

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

<PAGE>

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.

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.

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 1.00%
12b-1 Fee............................................................. None
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.25%
</TABLE>

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

1 Year 3 Years
------ -------
<S> <C> <C>
Premier Shares............................................... $ 13 $40
</TABLE>

* 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 4.75%, 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>

COMMON INVESTMENT
POLICIES

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

<PAGE>

substantially the same investment objective and policies as the applicable Fund.
See 'Unique Characteristics of Master/Feeder Structure.'

The Tax Free Income Fund and New York Tax Free Income Fund 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.

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 Money Market Fund, Tax Free Income Fund and New
York Tax Free Income Fund (the 'Tax Free Funds') will invest in Municipal
Obligations, which may be backed by foreign institutions as discussed below
under 'Additional Investment Policies of the Tax Free Funds.' 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.

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

<PAGE>

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 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-

<PAGE>

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 involves 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.

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 will be charged by such other investment companies.

<PAGE>

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>

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, 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 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

<PAGE>

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.

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

<PAGE>

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 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 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

<PAGE>

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.

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.

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.

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

<PAGE>

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.

LIMITING INVESTMENT RISKS

<PAGE>

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 and
Tax Free 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.

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>

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 Income Fund and the New York Tax Free Income Fund 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.

Interest on certain Municipal Obligations (including certain industrial
development bonds),

<PAGE>

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.

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.

<PAGE>

Such companies may have limited product lines, markets or financial resources,
or may depend on a limited management group.

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.

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

MANAGEMENT

THE FUNDS' ADVISERS

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 the percentage of the average daily net assets of each
Fund set forth below:

<TABLE>
<CAPTION>
Fee
Fund Rate
- ----------------------------- -----
<S> <C>
Money Market Fund............ 0.30%
Tax Free Money
Market Fund................ 0.30%
Tax Free Income Fund......... 0.50%
New York Tax Free Income
Fund........................ 0.50%
Short-Intermediate Term U.S.
Government Securities
Fund .................... 0.50%
U.S. Government Securities
Fund........................ 0.50%
Intermediate Term Bond
Fund........................ 0.50%
Income Fund.................. 0.50%
Balanced Fund................ 0.75%
Equity Income Fund........... 0.75%
Core Equity Fund............. 0.75%

Equity Growth Fund........... 0.75%
Mid Cap Growth Fund.......... 0.75%
Small Cap Fund............... 0.75%
International Equity Fund 1.00%
</TABLE>

Chase Texas serves as sub-investment adviser to certain of the Funds under a
Sub-Investment Advisory Agreement between Chase and Chase Texas. Chase Texas is
a wholly-owned subsidiary of The Chase Manhattan Corporation. Chase Texas makes
investment decisions for these Funds on a day-to-day basis. For these services,
Chase Texas is entitled to receive a fee, payable by Chase, at the percentage of
the average daily net assets of each Fund set forth below:

<PAGE>

<TABLE>
<CAPTION>
Fee
Fund Rate
- ----------------------------- ------
<S> <C>
U.S. Government Securities
Fund ....................... 0.25%
Intermediate Term Bond
Fund........................ 0.25%
Income Fund.................. 0.25%
Balanced Fund................ 0.375%
Equity Income Fund........... 0.375%
Core Equity Fund............. 0.375%
Equity Growth Fund........... 0.375%
Small Cap Fund............... 0.375%
</TABLE>

Chase Texas is located at 712 Main Street, Houston, Texas 77002. Prior to
January 1, 1998, Chase Texas 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.

PORTFOLIO MANAGERS. Guy Barba, a Senior Investment Officer at Chase Texas, 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 Chase Texas 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 Chase Texas, has served as
the portfolio manager of the Intermediate Term Bond Fund since its inception.
Mr. Harper has been employed by Chase Texas since 1987.

John Miller, a Senior Investment Officer at Chase Texas, 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 Chase Texas since 1986.

Henry Lartigue, the Chief Investment Officer at Chase Texas, 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 Chase Texas, has served as the
portfolio manager of the Equity Income Fund since its inception. Mr. Heintz has
been employed by Chase Texas since 1983.

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

<PAGE>

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

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

Premier Shares may be purchased through selected financial service firms, such
as broker-dealer firms and banks ('Financial Intermediaries') who have entered
into an 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.

Premier Shares are purchased at their public offering price, which is their next
determined net asset value. Orders received by Financial Intermediaries 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 Chase
Funds Service Center prior to its close of business. Orders are in proper form
only after funds are converted to federal funds. Financial Intermediaries are
responsible for forwarding orders for the purchase of shares on a timely basis.
Premier Shares will be maintained in book entry form and share certificates will
not be issued.

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

Financial Intermediaries may offer additional services to their customers,
including customized procedures for the purchase and redemption of Premier
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 Premier Shares. Financial Intermediaries
must maintain an average account balance of $100,000 in the Premier Shares of a
Fund at all times. There is no minimum for subsequent investments. Financial
Intermediaries may impose their own initial and subsequent investment minimums
on customers who purchase shares through them.

HOW TO SELL SHARES

Shares may be redeemed at any time at the net asset value next determined after
a redemption request in proper form is furnished to your Financial Intermediary
and

<PAGE>

transmitted to and received by the Chase Funds Service Center.

The price you 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 Chase Funds Service Center must receive your request before the close
of regular trading on the New York Stock Exchange. Your Financial Intermediary
will be responsible for furnishing all necessary documentation to the Chase
Funds Service Center, and may charge you for its services.

The Funds generally send your Financial Intermediary 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.

If a Financial Intermediary is authorized to act upon redemption and transfer
instructions received by telephone from an investor and the Financial
Intermediary fails to employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, it 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 the investor's
Financial Intermediary nor any of 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 Chase Funds
Service Center.

HOW TO EXCHANGE SHARES

You can exchange your shares for Premier Shares of other Chase Funds if
permitted by your Financial Intermediary. Any exchange requests should be made
through your Financial Intermediary. 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.

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

<PAGE>

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 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 that the order is received in proper form by the
Fund. Dividends are distributed monthly. 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.

<PAGE>

GENERAL. You can choose from three distribution options if made available by
your Financial Intermediary: (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 Financial Intermediary 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 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 (which term shall include
short-term capital gains) will be taxable as ordinary income. Any distributions
of net capital gain which are designated as 'capital gain dividends' will be
taxable as long-term capital gain at the currently applicable 28% or 20% rate,
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 your Financial

<PAGE>

Intermediary 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 Chase Texas, Chase or Chase Texas may
aggregate investments in the Chase Funds with balances held in Chase or Chase
Texas 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, Chase Texas 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 Chase 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

CFD Fund 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 One Chase
Manhattan Plaza, Third Floor, New York, New York 10081.

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

<PAGE>

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.

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.

Premier Shares may be purchased only by shareholders who are able to meet the
minimum investment requirement. 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. 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

<PAGE>

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 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 Premier
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. In the event that a Fund adopts a master/feeder structure and invests
all its investable assets in a Portfolio, shareholders of the Fund will be given
at least 30 days' prior written notice. For additional information regarding the
master/feeder structure, see the SAI.

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.

<PAGE>

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>

TRANSFER AGENT AND DIVIDEND PAYING AGENT
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105

LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017

INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036

<PAGE>

CHASE FUNDS

INVESTMENT STRATEGIES:

CHASE MONEY MARKET FUND: CURRENT INCOME

CHASE TAX FREE MONEY MARKET FUND: CURRENT INCOME

CHASE TAX FREE INCOME FUND: INCOME

CHASE NEW YORK TAX FREE INCOME FUND: INCOME

CHASE SHORT-INTERMEDIATE TERM U.S.

GOVERNMENT SECURITIES FUND: INCOME

CHASE U.S. GOVERNMENT SECURITIES FUND: INCOME

CHASE INTERMEDIATE TERM BOND FUND: INCOME

CHASE INCOME FUND: INCOME

CHASE BALANCED FUND: INCOME AND GROWTH

CHASE EQUITY INCOME FUND: GROWTH AND INCOME

CHASE CORE EQUITY FUND: TOTAL RETURN

CHASE EQUITY GROWTH FUND: CAPITAL GROWTH

CHASE MID CAP GROWTH FUND: CAPITAL GROWTH

CHASE SMALL CAPITALIZATION FUND: CAPITAL GROWTH

CHASE INTERNATIONAL EQUITY FUND: CAPITAL GROWTH

RETAIL SHARES

January 1, 1998

<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, which will change its name to Chase Bank of
Texas, National Association on January 20, 1998 (herein, 'Chase Texas'). 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'). Chase Texas 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.

<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
CHASE MONEY MARKET FUND.................................................... 4

CHASE TAX FREE MONEY MARKET FUND........................................... 6

CHASE TAX FREE INCOME FUND................................................. 8

CHASE NEW YORK TAX FREE INCOME FUND........................................ 10

CHASE SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND.............. 12

CHASE U.S. GOVERNMENT SECURITIES FUND...................................... 14

CHASE INTERMEDIATE TERM BOND FUND.......................................... 16

CHASE INCOME FUND.......................................................... 18

CHASE BALANCED FUND........................................................ 20

CHASE EQUITY INCOME FUND................................................... 22

CHASE CORE EQUITY FUND..................................................... 24

CHASE EQUITY GROWTH FUND................................................... 26

CHASE MID CAP GROWTH FUND.................................................. 28

CHASE SMALL CAPITALIZATION FUND............................................ 30

CHASE INTERNATIONAL EQUITY FUND............................................ 32

COMMON INVESTMENT POLICIES................................................. 35

MANAGEMENT................................................................. 48

HOW TO BUY, SELL AND EXCHANGE SHARES....................................... 50

HOW THE FUNDS VALUE THEIR SHARES........................................... 53

HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION................................ 53

OTHER INFORMATION CONCERNING THE FUNDS..................................... 55

PERFORMANCE INFORMATION.................................................... 58
</TABLE>

<PAGE>

CHASE 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.

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.

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.30%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.20%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 0.75%
</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Retail Shares.............................. $8 $24 $42 $ 93
</TABLE>

* 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 0.84%, 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>

CHASE 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.

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 attributable to a hypothetical $1,000 investment over specified
periods.

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.30%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.20%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 0.75%
</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Retail Shares.............................. $8 $24 $42 $ 93
</TABLE>

* 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 0.84%, 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>

CHASE 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.

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 'diversified' fund under federal securities law.

<PAGE>

EXPENSE_ SUMMARY

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.30%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.20%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 0.75%
</TABLE>

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

1 Year 3 Years
------ -------
<S> <C> <C>
Retail Shares............................................... $8 $24
</TABLE>

* 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 4.30%, 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>

CHASE TAX FREE INCOME FUND

FUND_ OBJECTIVE_ AND_ INVESTMENT_ APPROACH

MISCELLANEOUS. The Fund is classified as a 'non-diversified' fund under federal
securities law.

<PAGE>

EXPENSE_ SUMMARY

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Advisory Fee............................................... 0.50%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.00%
</TABLE>

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

1 Year 3 Years
------ -------
<S> <C> <C>
Retail Shares................................................ $ 10 $32
</TABLE>

* 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 4.50%, 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>

CHASE NEW YORK TAX FREE INCOME FUND

FUND_ OBJECTIVE_ AND_ INVESTMENT_ APPROACH

MISCELLANEOUS. The Fund is classified as a 'non-diversified' fund under federal

securities law.

<PAGE>

EXPENSE_ SUMMARY

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.50%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.00%
</TABLE>

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

1 Year 3 Years
------ -------
<S> <C> <C>
Retail Shares................................................ $ 10 $32
</TABLE>

* 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 4.50%, 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>

CHASE SHORT-INTERMEDIATE TERM
U.S. GOVERNMENT SECURITIES FUND

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.

<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.

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.50%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.00%
</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Retail Shares........................... $ 10 $32 $55 $122
</TABLE>

* 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 1.37%, 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>

CHASE 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.

<PAGE>

EXPENSE_ SUMMARY

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.50%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.00%

</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Retail Shares.............................. $ 10 $32 $55 $122
</TABLE>

* 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 4.50%, 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>

CHASE 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.

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.

MISCELLANEOUS. The Fund is classified as a 'diversified' fund under federal
securities laws.

<PAGE>

EXPENSE_ SUMMARY

Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.00%
</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Retail Shares.............................. $ 10 $32 $55 $122
</TABLE>

* 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 1.53%, 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>

CHASE 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.

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.

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 and 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

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.50%

12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.00%
</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Retail Shares.............................. $ 10 $32 $55 $122
</TABLE>

* 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 1.17%, 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>

CHASE 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 will employ a combination of (1) an active equity

management style focused primarily on strong earnings momentum and profitability
within a growth-oriented stock universe, and (2) an active fixed income
management style using primarily domestic debt securities. Under normal market
conditions, 30% to 70% of the Fund's total assets will be invested in
equity-based securities, which include common stocks and those debt securities
and preferred stocks that are convertible into common stock. 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 Fund's equity investments are typically made in
companies displaying one or more of the following characteristics: projected
earnings growth at a rate equal to or greater than the equity markets in
general, return on assets and equity equal to or greater than the equity
markets, above market average price/earnings ratios, below average dividend
yield, above average market volatility, and a market capitalization in excess of
$500 million. The Fund will focus on companies with strong earnings growth and
high levels of profitability as well as positive industry and company specific
characteristics, and attractive valuations given growth potential. The equity
portion of the Fund will emphasize the growth sectors of the economy.

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

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.75%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.25%
</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Retail Shares.............................. $ 13 $40 $69 $151
</TABLE>

* 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 1.61%, 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>

CHASE 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.

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

Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.25%
</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Retail Shares.............................. $ 13 $40 $69 $151
</TABLE>

* 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 1.37%, 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>

CHASE 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.

securities, which include common stocks and those debt securities and preferred
stocks convertible into common stocks. Under normal 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 and money market instruments.

EQUITY-BASED INVESTMENTS. The Fund will typically emphasize companies displaying
one or more of the following characteristics: superior and stable record of
earnings growth relative to the equity markets in general, return on assets and
equity equal to or greater than the equity markets averages, and projected
earnings growth at a rate equal to or greater than the equity markets, and a
market capitalization in excess of $500 million. The Fund will be well
diversified among both the growth and cyclical sectors of the economy.

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

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.75%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.25%
</TABLE>

<TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Retail Shares.............................. $ 13 $40 $69 $151
</TABLE>

* 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 1.49%, 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>

CHASE 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. The Fund will employ an active equity
management style focused primarily on strong earnings momentum and profitability
within a growth-oriented stock universe. Portfolio 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,
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 and money market instruments.

EQUITY-BASED INVESTMENTS. The Fund investments are typically made in companies
displaying one or more of the following characteristics: projected earnings
growth at a rate equal to or greater than the equity markets in general, return
on assets and equity equal to or greater than the equity markets, above market
average price-earnings ratios, below average dividend yield, above average
market volatility, and a market capitalization in excess of $500 million. The
Fund will focus on companies with strong earnings and high levels of
profitability as well as positive industry and company specific characteristics,
and attractive valuation given growth potential. The Fund will emphasize the
growth sectors of the economy.

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

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.75%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.25%
</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Retail Shares.............................. $ 13 $40 $69 $151
</TABLE>

* 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 1.37%, 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>

CHASE 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.

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.

<PAGE>

EXPENSE_ SUMMARY

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.75%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.25%
</TABLE>

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

1 Year 3 Years
------ -------
<S> <C> <C>
Retail Shares................................................ $ 13 $40
</TABLE>

* 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>

CHASE SMALL CAPITALIZATION FUND

FUND_ OBJECTIVE_ AND_ INVESTMENT_ APPROACH

EQUITY-BASED INVESTMENTS. The Fund investments are typically made in companies
displaying one or more of the following characteristics: above market average
price/earnings ratios and price/book ratios, below average dividend yield, and
above average market volatility. In addition, small capitalization companies
will be emphasized that possess one or more of the following: high quality
management, a leading or dominant position in a major product line, new or
innovative products, services, or processes, a sound financial position, and a
relatively high rate of return of invested capital so that future growth can be
financed from internal sources. The Fund primarily targets companies with market
capitalizations of $100 million to $1 billion at time of purchase. Purchases are

a direct result of a disciplined stock selection process focusing on identifying
attractively valued stock of companies with positive business fundamentals.

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.

<PAGE>

EXPENSE_ SUMMARY

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 0.75%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.25%
</TABLE>

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

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Retail Shares.............................. $ 13 $40 $69 $151
</TABLE>

* 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 1.54%, 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>

CHASE 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.

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 weighted
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.

<PAGE>

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.

<PAGE>

EXPENSE_ SUMMARY

<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee........................................................ 1.00%
12b-1 Fee............................................................. 0.25%
Other Expenses (after estimated waivers and reimbursements)*.......... 0.25%
Total Fund Operating Expenses (after estimated waivers and
reimbursements)*.................................................... 1.50%
</TABLE>

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

1 Year 3 Years
------ -------
<S> <C> <C>
Retail Shares.............................................. $ 15 $47
</TABLE>

* 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 5.00%, 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>

COMMON INVESTMENT
POLICIES

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.

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.

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

<PAGE>

substantially the same investment objective and policies as the applicable Fund.
See 'Unique Characteristics of Master/Feeder Structure.'

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

FOREIGN SECURITIES. The Tax Free Money Market Fund, Tax Free Income Fund and New
York Tax Free Income Fund (the 'Tax Free Funds') will invest in Municipal
Obligations, which may be backed by foreign institutions as described below
under 'Additional Investment Policies of the Tax Free Funds.' 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

<PAGE>

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).

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.

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

<PAGE>

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 involves 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.

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.

<PAGE>

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.

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.

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

<PAGE>

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.

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.

<PAGE>

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.

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.

DERIVATIVES AND RELATED INSTRUMENTS. Each Fund other than the Money Market Fund
and

<PAGE>

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.

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

<PAGE>

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.

ADDITIONAL INVESTMENT POLICIES OF THE TAX FREE FUNDS

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.

<PAGE>

revenue obligation securities, the credit quality of which is directly related
to the private user of the facilities.

<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 and Tax Free 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

<PAGE>

from possible financial difficulties of borrowers play an important part in the
operations of this industry.

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),

<PAGE>

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.

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

MANAGEMENT

THE FUNDS' ADVISERS

For its investment advisory services to the Funds, Chase is entitled to receive
an annual fee equal to the percentage of the average daily net assets of each
Fund set forth below:

Government Securities
Fund ....................... 0.50%
U.S. Government Securities
Fund........................ 0.50%
Intermediate Term Bond
Fund........................ 0.50%
Income Fund.................. 0.50%
Balanced Fund................ 0.75%
Equity Income Fund........... 0.75%
Core Equity Fund............. 0.75%
Equity Growth Fund........... 0.75%
Mid Cap Growth Fund.......... 0.75%
Small Cap Fund............... 0.75%
International Equity Fund 1.00%
</TABLE>

Chase Texas serves as sub-investment adviser to certain of the Funds under a
Sub-Investment Advisory Agreement between Chase and Chase Texas. Chase Texas is
a wholly-owned subsidiary of The Chase Manhattan Corporation. Chase Texas makes
investment decisions for these Funds on a day-to-day basis. For these services,
Chase Texas is entitled to receive a fee, payable by Chase, at an annual rate
equal to the percentage of the average daily net assets of each Fund set forth
below:

<TABLE>
<CAPTION>
Fee
Fund Rate
- ----------------------------- ------
<S> <C>
Money Market Fund............ 0.15%
Short-Intermediate Term U.S.
Government Securities
Fund ....................... 0.25%
U.S. Government Securities
Fund ....................... 0.25%
Intermediate Term Bond
Fund........................ 0.25%
Income Fund.................. 0.25%
Balanced Fund................ 0.375%
Equity Income Fund........... 0.375%
Core Equity Fund............. 0.375%
Equity Growth Fund........... 0.375%
Small Cap Fund............... 0.375%
</TABLE>

<PAGE>

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.

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

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

A team composed of Chase investment professionals is

<PAGE>

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 Chase Funds Service Center, or through the
Systematic Investment Plan.

All purchases made by check should be in U.S. dollars and made payable to the
Chase 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 Chase Funds
Service Center.

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 Chase Funds Service
Center. Call the Chase Funds Service Center at 1-800-62-CHASE for complete
instructions.

Shares are purchased at the public offering price, which is based on the net
asset value next determined after the Chase Funds Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Chase Funds 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,

<PAGE>

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
Chase Funds 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 Chase Funds 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 Chase Funds Service Center for details.

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 Chase Funds 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 Chase Funds 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

<PAGE>

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
Chase Funds Service Center.

During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase Funds 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 Chase Funds Service Center
at 1-800-62-CHASE 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 Chase Funds 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 Chase
Funds at net asset value beginning 15 days after purchase. Not all Chase Funds
offer all classes of shares. The description of the other Chase 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 Chase Funds 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

<PAGE>

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 Chase Funds 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 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

<PAGE>

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
that the order is received in proper form by the Fund. 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).

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.

All Fund distributions of net investment income (which term shall include net
short-term capital gain) will be taxable as ordinary income. Any distributions
of net capital gain which are designated as 'capital gain dividends' will be
taxable as long-term capital gain at the currently applicable 28% or 20% rate,
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

<PAGE>

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.

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

DISTRIBUTION PLANS

The Funds' distributor is CFD Fund Distributors, Inc. ('CFD'). CFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. 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-

<PAGE>

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.

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 One Chase Manhattan Plaza, Third Floor,
New York, NY 10081.

CUSTODIAN

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

<PAGE>

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.

ORGANIZATION AND DESCRIPTION OF SHARES

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.

Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances

<PAGE>

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 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

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.

<PAGE>

maximum public offering price per share on the last day of that period.

<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 1998

CHASE BALANCED FUND
CHASE CORE EQUITY FUND
CHASE EQUITY GROWTH FUND
CHASE EQUITY INCOME FUND
CHASE INCOME FUND
CHASE INTERMEDIATE TERM BOND FUND
CHASE INTERNATIONAL EQUITY FUND
CHASE MID CAP GROWTH FUND
CHASE MONEY MARKET FUND
CHASE NEW YORK TAX FREE INCOME FUND
CHASE SHORT-INTERMEDIATE TERM U.S. GOVERNMENT SECURITIES FUND
CHASE SMALL CAPITALIZATION FUND
CHASE TAX FREE INCOME FUND
CHASE TAX FREE MONEY MARKET FUND
CHASE 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 Premier
and Retail shares of Chase Money Market Fund and Chase Tax Free Money Market
Fund (collectively the 'Money Market Funds'), Chase Income Fund, Chase
Intermediate Term Bond Fund, Chase New York Tax Free Income Fund, Chase Short-
Intermediate Term U.S. Government Securities Fund, Chase Tax Free Income Fund
and Chase U.S. Government Securities Fund (collectively the 'Income Funds'), and
Chase Balanced Fund, Chase Core Equity Fund, Chase Equity Income Fund, Chase
Equity Growth Fund, Chase International Equity Fund, Chase Mid Cap Growth Fund
and Chase Small Capitalization Fund (collectively the 'Equity Funds'). The Chase
Tax Free Money Market Fund, Chase Tax Free Income Fund and Chase 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 CFD
Fund 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.

For more information about your account, simply call or write the Chase
Funds Service Center at:

1-800-62-CHASE
Chase Funds Service Center
P.O. Box 419392
Kansas City, MO 64141

<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
The Funds.................................................................................................. 3
Investment Policies and Restrictions....................................................................... 3
Performance Information.................................................................................... 21
Determination of Net Asset Value........................................................................... 25
Purchases, Redemptions and Exchanges....................................................................... 26
Tax Matters................................................................................................ 27
Management of the Trust and the Funds...................................................................... 32
Independent Accountants.................................................................................... 39
Certain Regulatory Matters................................................................................. 39
General Information........................................................................................ 40

APPENDIX A
Description of certain obligations issued or guaranteed by U.S. Government
Agencies or Instrumentalities............................................................................ 42

APPENDIX B
Description of Ratings..................................................................................... 44

APPENDIX C
Special investment considerations relating to New York Municipal Obligations............................... 47
</TABLE>

2
<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 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

3
<PAGE>
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, 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.

4
<PAGE>
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. 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 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

5
<PAGE>

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.

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

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insured by an insurer that meets such quality criteria, or on the basis of a
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.

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

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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 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.

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Zero coupon obligations are sold at a substantial discount from their value
at maturity and, when held to maturity, their entire return, which 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 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

<PAGE>
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 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.

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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 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 have 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 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

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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 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 may
invest in securities denominated in foreign currencies may, in

12
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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.

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

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<PAGE>
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 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 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

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<PAGE>
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 senior securities. 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 Receivables(Service Mark)' 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.

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

15
<PAGE>
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.

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.

MASTER-FEEDER 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 in 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

16
<PAGE>
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
Portfolio might be available through other funds by contacting the Chase Funds
Service Center. 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.

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.

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;

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<PAGE>
(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) 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.

For purposes of investment restriction (3) above, the Money Market Funds
may invest more than 25% of their respective total assets in obligations issued
by banks, including foreign branches of U.S. banks where the investment risk of
investing in the foreign branch is the same as that of investing in the U.S.
parent, in that the U.S. parent would be unconditionally liable in the event the
foreign branch failed to pay on its instruments for any reason.

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 Income Fund and New York Tax
Free Income Fund 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 Income Fund and New York Tax Free Income Fund 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 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.

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<PAGE>
(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.

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.

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:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
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 %
</TABLE>

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 each expected not to exceed 200%.

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.

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<PAGE>
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.

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 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 Fund paid aggregate brokerage commissions of
$74,725, $78,529 and $14,201, respectively.

20
<PAGE>
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 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).

21
<PAGE>
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 Chase 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 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 Chase 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.

AVERAGE ANNUAL TOTAL RETURNS(1)

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>
Balanced Fund 3/29/88
Premier Shares................................. 27.37% 12.48% 11.71% 3/29/88
Retail Shares(2)............................... 27.37% 12.48% 11.71% / /98
Core Equity Fund 4/1/93
Premier Shares................................. 42.14% -- 17.51% 4/1/93
Retail Shares(2)............................... 42.14% -- 17.51% / /98
Equity Growth Fund 3/29/88
Premier Shares................................. 44.18% 17.66% 14.96% 3/29/88
Retail Shares(2)............................... 44.18% 17.66% 14.96% / /98
Equity Income Fund 3/29/88
</TABLE>

22
<PAGE>

Retail Shares(2)............................... 36.19% 18.07% 14.43% / /98

Income Fund 3/29/88
Premier Shares................................. 8.71% 5.98% 7.36% 3/29/88
Retail Shares(2)............................... 8.71% 5.98% 7.36% / /98

Intermediate Term Bond Fund 10/4/94
Premier Shares................................. 7.43% -- 7.61% 10/4/94
Retail Shares(2)............................... 7.43% -- 7.61% / /98

Short-Intermediate Term
U.S. Government Securities Fund 4/1/93
Premier Shares................................. 6.47% -- 4.52% 4/1/93
Retail Shares(2)............................... 6.47% -- 4.52% / /98

Small Capitalization Fund 4/1/93
Premier Shares................................. 35.87% -- 20.02% 4/1/93
Retail Shares(2)............................... 35.87% -- 20.02% / /98

U.S. Government Securities Fund 4/1/93
Premier Shares................................. 10.76% -- 6.97% 4/1/93
Retail Shares(2)............................... 10.76% -- 6.97% / /98
</TABLE>

- ------------------
(1) The ongoing fees and expenses borne by Retail Shares are greater than those
borne by Premier 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 Chase 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.

(Footnotes continued on next page)

23
<PAGE>
(Footnotes continued from previous page)
(2) 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.

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:

<TABLE>
<CAPTION>
PREMIER
-------
<S> <C>
Balanced Fund................................................................................. 2.76%
Core Equity Fund.............................................................................. 0.61%
Equity Growth Fund............................................................................ 0.06%
Equity Income Fund............................................................................ 1.18%
Income Fund................................................................................... 5.96%
Intermediate Term Bond Fund................................................................... 5.63%
Short-Intermediate Term U.S. Government Securities Fund....................................... 5.24%
Small Capitalization Fund..................................................................... (0.14%)
U.S. Government Securities Fund............................................................... 5.33%
</TABLE>

24
<PAGE>
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:

<TABLE>
<CAPTION>
EFFECTIVE
CURRENT COMPOUND
ANNUALIZED YIELD ANNUALIZED YIELD
------------------ ----------------
<S> <C> <C>
Money Market Fund
Premier Shares.................................................. 5.03% 5.16%
</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.

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

25
<PAGE>
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
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.

26
<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 gain over
net short-term capital loss) 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').

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').

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.

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 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

27
<PAGE>
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.

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.

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.

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 Premier and Retail shares are
calculated at the same time. In general, dividends on Retail shares are expected
to be lower than those on Premier 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%. 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

28
<PAGE>
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 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) under
the Rules of Code Section 246(c)(3) and (4); (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 if the corporate shareholder fails to satisfy the foregoing requirements
with respect to its shares of a Fund.

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

29
<PAGE>
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 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.

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.'

30
<PAGE>
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.

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, 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 and capital gain dividends and exempt-interest
dividends and amounts retained by the Fund that are designated as undistributed
capital gains.

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

31
<PAGE>
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.

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.

*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.

- ------------------
* 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. Liddell, McDavid,

Otto, Reid and Tyson. The function of the Audit Committee is to recommend
independent auditors and monitor accounting and financial matters.

32
<PAGE>
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.

Lee Schultheis--Assistant Treasurer and Assistant Secretary. President,
BISYS Fund Distributors; formerly Senior Managing Director, Forum Financial
Group. Age: 41. Address: One Chase Manhattan Plaza, Third Floor, New York, NY
10081.

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.

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:

<TABLE>
<CAPTION>
TOTAL COMPENSATION
FROM
AVESTA TRUST
------------------
<S> <C>
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
</TABLE>

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.

As of November 30, 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

33
<PAGE>
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 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, which will change its name to Chase Bank of Texas,
National Association on January 20, 1998 (herein 'Chase Texas'). 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.

34
<PAGE>
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.

Chase Texas, 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
Chase Texas'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
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, Chase Texas 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. Chase
Texas 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, Chase Texas provided investment
advisory services to the Avesta Funds. However, Chase Texas 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, Chase
Texas 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 MILLION
UP TO BUT LESS THAN IN EXCESS OF
FUND $250 MILLION $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>

35
<PAGE>
The Funds in operation paid management fees to the Trustee, net of
voluntary waivers(1), for the years ended, respectively, as follows:

<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(2) 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
</TABLE>

- ------------------
(1) 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.

(2) Reflects fees for the period of October 4, 1994 (commencement of operations)
through December 31, 1994.

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.

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.

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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 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.

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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 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 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

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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 the related financial highlights which appear in the Prospectuses,
have been incorporated herein and included in the Prospectuses in reliance on
the report of Price Waterhouse LLP, 1201 Louisiana, Suite 2900, Houston, Texas
77002, 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.

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

39
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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 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 Premier 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
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

40
<PAGE>
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, no persons beneficially owned of record 5% or more
of the outstanding shares of any Fund.

FINANCIAL STATEMENTS

The 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
for the AVESTA Trust, including the report of independent accounts, financial
highlights and financial statements for the fiscal year ended December 31, 1996
contained therein, are incorporated herein by reference.

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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 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.

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<PAGE>
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.

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.

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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.

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.

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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, 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.

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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.

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 deposits, 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.

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.

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APPENDIX C
SPECIAL INVESTMENT CONSIDERATIONS RELATING TO
NEW YORK MUNICIPAL OBLIGATIONS

Some of the significant financial considerations relating to the
investments of the New York Tax Free Income Fund and New York Tax Free Money
Market 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 Jersey. The State has never
been called upon to make any direct payments pursuant to such guarantees. The
State-guaranteed bonds of the Port Authority of New York and New Jersey were
fully retired on December 31, 1996. State-guaranteed bonds issued by the Thruway
Authority were fully retired on July 1, 1995.

In February 1997, the Job Development Authority ('JDA') issued
approximately $85 million of State-guaranteed bonds to refinance certain of its
outstanding bonds and notes in order to restructure and improve JDA's capital

structure. Due to concerns regarding the economic viability of its programs,
JDA's loan and loan guarantee activities had been suspended since the Governor
took office in 1995. As a result of the structural imbalances in JDA's capital
structure, and defaults in its loan portfolio and loan guarantee program
incurred between 1991 and 1996, JDA would have experienced a debt service cash
flow shortfall had it not completed its recent refinancing. JDA anticipates that
it will transact additional refinancings in 1999, 2000 and 2003 to complete its
long-term plan of finance and further alleviate cash flow imbalances which are
likely to occur in future years. The State does not anticipate that it will be
called upon to make any payments pursuant to the State guarantee in the 1997-98
fiscal year. JDA recently resumed its lending activities under a revised set of
lending programs and underwriting guidelines.

Payments of debt service on State general obligation and State-guaranteed
bonds and notes are legally enforceable obligations of the State.

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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 requiring 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 1997-98 fiscal
year. The State expects to issue $605 million in general obligation bonds
(including $140 million for purposes of redeeming outstanding BANs) and $140
million in general obligation commercial paper. The Legislature has also
authorized the issuance of up to $311 million in COPs during the State's 1997-98
fiscal year for equipment purchases. The projection of the State regarding its
borrowings for the 1997-98 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 $1.9 billion, including costs of issuances, reserve funds,
and other costs, net of anticipated refundings and other adjustments for 1997-98
capital projects. Included therein are borrowings by (i) DASNY for the State
University of New York ('SUNY'), The City University of New York ('CUNY'),
health facilities, and mental health facilities; (ii) the 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') and other authorities. In addition, in the 1997 legislative session, the
Legislature also approved two new authorizations for lease-purchase and
contractual obligation financings. An aggregate $425 million was authorized for
four public authorities (Thruway Authority, DASNY, UDC and HFA) for the
Community Enhancement Facility Program for economic development purposes,
including sports facilities, cultural institutions, transportation,
infrastructure and other community facility projects. DASNY was also authorized
to issue up to $40 million to finance the expansion and improvement of
facilities at the Albany County airport.

In addition to the arrangements described above, State law provides for the
creation of State municipal assistance corporations, which are public
authorities established to aid financially troubled localities. The Municipal
Assistance Corporation for The City of New York ('MAC') was created to provide
financing

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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. In 1995, the State
created the Municipal Assistance Corporation for the City of Troy ('Troy MAC').

The bonds issued by Troy MAC, however, do not include moral obligation
provisions.

The 1997-1998 State Financial Plan. The State's budget for the State's
1997-98 fiscal year, commencing on April 1, 1997 and ending on March 31, 1998,
was enacted by the Legislature on August 4, 1997. The State Financial Plan for
the 1997-98 fiscal year (the 'State Financial Plan') was formulated on August
11, 1997 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 State Financial Plan is updated in October and
January. The State Financial Plan is currently projected to be balanced on a
cash basis; however there can be no assurance that the State Financial Plan will
continue to be in balance. Total General Fund receipts and transfers from other
funds are projected to be $35.09 billion, while total General Fund disbursements
and transfers to other funds are projected to be $34.60 billion. After
adjustments for comparability, the adopted 1997-98 budget projects a year-
over-year increase in General Fund disbursements of 5.2 percent. As compared to
the Governor's proposed budget as revised in February 1997, the State's adopted
budget for 1997-98 increases General Fund spending by $1.70 billion, primarily
from increases for local assistance ($1.3 billion). Resources used to fund these
additional expenditures include $540 million in increased revenues projected for
1997-98, increased resources produced in the 1996-1997 fiscal year that will be
utilized in 1997-1998, reestimates of social service, fringe benefit and other
spending, and certain non-recurring resources.

The State Financial Plan includes actions that will have an effect on the
budget outlook for State fiscal year 1997-98 and beyond. The State Division of
the Budget ('DOB') estimates that the 1997-98 State Financial Plan contains
actions that provide non-recurring resources or savings totaling approximately
$270 million. These include the use of $200 million in federal reimbursement
funds available from retroactive social service claims approved by the federal
government in April 1997. The balance is composed of various other actions,
primarily the transfer of unused special revenue fund balances to the General
Fund.

The State closed projected budget gaps of $5.0 billion, $3.9 billion and
$2.3 billion for its 1995-96 through 1997-98 fiscal years, respectively. The
1998-99 gap was projected at $1.68 billion, in the outyear projections submitted
to the legislature in February 1997. As a result of changes made in the enacted
budget, that gap is now expected to be about the same or smaller than the amount
previously projected, after application of the $530 million reserve for future
needs. The expected gap is smaller than the three previous budget gaps closed by
the State.

The outyear projection will be impacted by a variety of factors. Certain
actions taken in the State's 1997-98 fiscal year, such as medicaid and welfare
reforms, are expected to provide recurring savings in future fiscal years.
Continued controls on State agency spending will also provide recurring savings.
The availability of $530 million in reserves created as a part of the 1997-98
adopted budget and included in the State Financial Plan is expected to benefit
the 1998-99 fiscal year. Sustained growth in the State's economy and continued
declines in welfare case load and health care costs would also produce
additional savings in the State Financial Plan. Finally, various federal
actions, including the potential benefit effect on State tax receipts from

changes to the federal tax treatment of capital gains, would potentially provide
significant benefits to the State over the next several years.

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.

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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.

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 following discussion summarizes the 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 1997-98 fiscal year, the General Fund is expected by the State to
account for approximately 48 percent of total governmental-funds disbursements
and 71 percent of total State Funds 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 currently projected to be balanced on a cash basis for
the 1997-98 fiscal year; however there can be no assurance that the General Fund
will remain balanced for the entire fiscal year. Total receipts are projected to
be $35.09 billion, an increase of $2 billion over total receipts in the prior
fiscal year. Total General Fund disbursements are projected to be $34.60
billion, an increase of $2.05 billion 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.

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 42 percent
of total governmental funds receipts and disbursements in the 1997-98 fiscal
year, about three-quarters of that activity relates to Federally-funded
programs.

Projected receipts in this fund type total $28.22 billion, an increase of
$2.51 billion over the prior year. Projected disbursements in this fund type
total $28.45 billion, an increase of $2.43 billion over 1996-97 levels.
Disbursements from Federal funds, primarily the Federal share of Medicaid and
other social services programs, are projected to total $21.19 billion in the
1997-98 fiscal year. Remaining projected spending of $7.26 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 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 various other
capital funds established to distinguish specific capital construction purposes
supported by other revenues. In the 1997-98 fiscal year, activity in these funds
is expected to comprise 5 percent of total governmental receipts and
disbursements.

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Total receipts in this fund type are projected at $3.30 billion. Bond and
note proceeds are expected to provide $605 million in other financing sources.
Disbursements from this fund type are projected to be $3.70 billion, a decrease
of $154 million (4.3 percent) over prior-year levels. The Dedicated Highway and
Bridge Trust Fund is the single largest dedicated fund, comprising an estimated
$982 million (27 percent) of the activity in this fund type. Total spending for
capital projects will be financed through a combination of sources: federal
grants (29 percent), public authority bond proceeds (31 percent), general

obligation bond proceeds (15 percent), and pay-as-you-go revenues (25 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 1997-98 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 1997-98 fiscal year, total disbursements in this fund type are projected at
$3.17 billion, an increase of $64 million or 25 percent, most of which is
explained by increases in the General Fund transfer. The projected transfer from
the General Fund of $2.07 billion is expected to finance 65 percent of these
payments.

Prior Fiscal years. A narrative description of cash-basis results in the
General Fund is presented below 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 five fiscal years,
however, the State has recorded balanced budgets on a cash basis, with positive
fund balances as described below. There can be no assurance, however, that such
trends will continue.

Fiscal year 1996-97. The State ended its 1996-97 fiscal year on March 31,
1997 in balance on a cash basis, with a General Fund cash surplus as reported by
DOB of approximately $1.4 billion. The cash surplus was derived primarily from
higher-than-expected revenues and lower-than-expected spending for social
services programs. The Governor in his Executive Budget applied $1.05 billion of
the cash surplus amount to finance the 1997-98 Financial Plan, and the
additional $373 million is available for use in financing the 1997-98 Financial
Plan when enacted by the State Legislature.

The General Fund closing fund balance was $433 million. Of that amount,
$317 million was in the TSRF, after a required deposit of $15 million and an
additional deposit of $65 million in 1996-97. The TSRF can 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 remains on deposit in the CRF. This
fund assists the State in financing any extraordinary litigation costs during
the fiscal year. The remaining $75 million reflects amounts on deposit in the
Community Projects Fund. This fund was created to fund certain legislative
initiatives. The General Fund closing fund balance does not include $1.86
billion in the tax refund reserve account, of which $521 million was made
available as a result of the Local Government Assistance Corporation ('LGAC')
financing program and was required to be on deposit as of March 31, 1997.

General Fund receipts and transfers from other funds for the 1996-97 fiscal
year totaled $33.04 billion, an increase of 0.7 percent from the previous fiscal
year (excluding deposits into the tax refund reserve account). General Fund
disbursements and transfers to other funds totaled $32.90 billion for the
1996-97 fiscal year, an increase of 0.7 percent from the 1995-96 fiscal year.

Fiscal Year 1995-96. 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.

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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, yielded savings from
Medicaid utilization controls, office space consolidation, overtime and
contractual expense reductions, and statewide productivity improvements achieved
by State agencies.

Fiscal Year 1994-95. 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.

Other Funds. 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 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 $24.38 billion
to $26.02 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 declined from $3.62 billion to
$3.54 billion over the last three years, as spending for miscellaneous capital
programs decreased, partially offset by increases for mental hygiene, health 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.

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State Financial Plan Considerations. 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 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 DOB 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.

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.

The State Financial Plan is based upon a July 1997 projection by DOB of
national and State economic activity. The information below summarizes the
national and State economic situation and outlook upon which projections of
receipts and certain disbursements were made for the 1997-98 Financial Plan.

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On August 22, 1996 the President signed the Personal Responsibility and
Work Opportunity Reconciliation Act of 1996 (the '1996 Welfare Act'). This new
law made significant changes to welfare and other benefit programs. Major
changes included conversion of AFDC into the TANF block grant to states, new
work requirements and durational limits on recipients of TANF, and limits on
assistance provided to immigrants. City expenditures as a result of welfare
reform are estimated in the Financial Plan at $49 million in fiscal year 1998,
$45 million in fiscal year 1999, $38 million in fiscal year 2000 and $44 million
in fiscal year 2001. In addition, the City's naturalization initiative,
CITIZENSHIP NYC, will assist immigrants made ineligible under Federal law to
regain eligibility for benefits, by helping them through the application process
for citizenship. The Financial Plan assumes that 75% of those immigrants who
otherwise would have lost benefits will become citizens, resulting in projected
savings to the City in public assistance expenditures of $6 million in fiscal
year 1999, $24 million in fiscal year 2000 and $25 million in fiscal year 2001.
Federal legislation enacted August 5, 1997, reinstated eligibility for even more
immigrants currently on the rolls than projected. The outyear estimates made by
OMB are preliminary and depend on a variety of factors, which are impossible to
predict, including the implementation of workfare and child care programs
modified by newly enacted State law, the impact of possible litigation
challenging the law, and the impact of adverse economic developments on welfare
and other benefit programs. In accordance with the Federal welfare reform law,
the Governor submitted a State plan to the Federal government and such plan was
deemed complete as of December 2, 1996. New York State's welfare reform,
bringing the State into compliance with the 1996 Welfare Act and making changes
to the Home Relief program, was signed into law on August 20, 1997. The Governor
submitted an amended State plan to the Federal government, reflecting these
changes, on September 20, 1997. Implementation of the changes at the State level
will in part determine the possible costs or savings to the City. it is expected
that OMB's preliminary estimates of potential costs will change, based on new
policies to be developed by the State and City with respect to benefits no
longer funded as Federal entitlements.

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
State 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 DOB that the State Financial Plan will reflect a

continuing strategy of substantially reduced State spending, including agency
consolidations, reductions in the State workforce, 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.

U.S. Economy. The national economy has resumed a more robust rate of
growth after a 'soft landing' in 1995, with approximately 14 million jobs added
nationally since early 1992. The State economy has continued to expand, but
growth remains somewhat slower than in the nation. Although the State has added
approximately 300,000 jobs since late 1992, employment growth in the State has
bee hindered during recent years by significant cutbacks in the computer and
instrument manufacturing, utility, defense, and banking industries. Government
downsizing has also moderated these job gains.

DOB forecasts that national economic growth will be quite strong in the
first half of calendar 1997, but will moderate considerably as the year
progresses. The overall growth rate of the national economy for calendar year
1997 is expected to be practically identical to the consensus forecast of a
widely followed survey of national economic forecasters. Growth in real Gross
Domestic Product for 1997 is projected to be 3.6 percent, with an anticipated
decline in net exports and continued restraint in Federal spending more than
offset by increases in consumption and investment. Inflation, as measured by the
Consumer Price Index, is projected to remain subdued at about 2.6 percent due to
improved productivity and foreign competition. Personal income and wages are
projected to increase by 6.0 percent and 6.7 percent respectively.

New York Economy. The DOB forecast of the State's economy shows moderate
expansion during the first half of calendar 1997 with the trend continuing
through the year. Although industries that export goods and services are
expected to continue to do well, growth is expected to be moderated by tight
fiscal constraints on the health care and social services industries.

Current forecasts for continued growth, and any resultant impact on the
State's 1997-98 Financial Plan, contain some uncertainties.
Stronger-than-expected gains in employment could lead to a significant
improvement in consumer spending. Investments could also remain robust.
Conversely, hints of accelerating inflation or fears

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of excessively rapid economic growth could create upward pressures on interest
rates. In addition, the State economic forecast could over- or underestimate the
level of future bonus payments or inflation growth, resulting in forecasted
average wage growth that could differ significantly form actual growth.
Similarly, the State forecast could fail to correctly account for declines in
banking employment and the direction of employment change that is likely to
accompany telecommunications and energy deregulation.

New York is the third most populous state in the nation and has a
relatively high level of personal wealth. The State's economy is diverse, with a
comparatively large share of the nation's finance, insurance, transportation,
communications and services employment, and a very small share of the nation's
farming and mining activity. The State's location and its excellent air

transport facilities and natural harbors have made it an important link in
international commerce. Travel and tourism constitute an important part of the
economy. Like the rest of the nation, New York has a declining proportion of its
workforce engaged in manufacturing, and an increasing proportion engaged in
service industries. The following paragraphs summarize the state of major
sectors of the New York economy:

Services: The services sector, which includes entertainment, personal
services, such as health care and auto repairs, and business-related
services, such as information processing, law and accounting, is the
State's leading economic sector. The services sector accounts for more than
three of every ten nonagricultural jobs in New York and has a noticeably
higher proportion of total jobs than does the rest of the nation.

Manufacturing: Manufacturing employment continues to decline in
importance in New York, as in most other states, and New York's economy is
less reliant on this sector than is the nation. The principal manufacturing
industries in recent years produced printing and publishing materials,
instruments and related products, machinery, apparel and finished fabric
products, electronic and other electric equipment, food and related
products, chemicals and allied products, and fabricated metal products.

Trade: Wholesale and retail trade is the second largest sector in
terms of nonagricultural jobs in New York but is considerably smaller when
measured by income share. Trade consists of wholesale businesses and retail
businesses, such as department stores and eating and drinking
establishments.

Finance, Insurance and Real Estate:New York City is the nation's
leading center of banking and finance and, as a result, this is a far more
important sector in the State than in the nation as a whole. Although this
sector accounts for under one-tenth of all nonagricultural jobs in the
State, it contributes over one-sixth of all nonfarm labor and proprietors'
income.

Agriculture: Farming is an important part of the economy of large
regions of the State, although it constitutes a very minor part of total
State output. Principal agricultural products of the State include milk and
dairy products, greenhouse and nursery products, apples and other fruits,
and fresh vegetables. New York ranks among the nation's leaders in the
production of these commodities.

Government: Federal, State and local government together are the
third largest sector in terms of nonagricultural jobs, with the bulk of the
employment accounted for by local governments. Public education is the
source of nearly one-half of total state and local government employment.

Relative to the nation, the State has a smaller share of manufacturing and
construction and a larger share of service-related industries. The State's
finance, insurance, and real estate share, as measured by income, is
particularly large relative to the nation. The State is likely to be less
affected than the nation as a whole during an economic recession that is
concentrated in manufacturing and construction, but likely to be more affected
during a recession that is concentrated in the service-producing sector.

In the calendar years 1987 through 1996, the State's rate of economic
growth was somewhat slower than that of the nation. In particular, during the
1990-91 recession and post-recession period, the economy of the State, and that
of the rest of the Northeast, was more heavily damaged than that of the nation
as a whole and has been slower to recover. The total employment growth rate in
the State has been below the national average since 1987. The unemployment rate
in the State dipped below the national rate in the second half of 1981 and
remained lower until 1991; since then, it has been higher. According to data
published by the US Bureau of Economic Analysis, total personal income in the
State has risen more slowly than the national average since 1988.

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State per capita personal income has historically been significantly higher
than the national average, although the ratio has varied substantially. Because
the City is a regional employment center for a multi-state region, State
personal income measured on a residence basis understates the relative
importance of the State to the national economy and the size of the base to
which State taxation applies.

Financial Plan Update. The State is required to issue Financial Plan
updates to the cash-basis State Financial Plan in July, October, and January,
respectively. These quarterly updates reflect analysis of actual receipts and
disbursements for each respective period and revised estimates of receipts and
disbursements for the then current fiscal year. The First Quarter Update was
incorporated into the cash-basis State Financial Plan of August 15, 1997 (the
'August Financial Plan').

The State issued its first update to the cash-basis 1997-98 State Financial
Plan (the 'Mid-Year Update') on October 30, 1997. No revisions were made to the
estimates of receipts and disbursements based on the current economic forecasts
for both the nation and the State. The Mid-Year Update continues to reflect a
balanced 1997-98 State Financial Plan, with a projected General Fund reserve for
future needs of $530 million. This projected surplus is now considered to be at
the low end of the range of possible outcomes for the 1997-98 fiscal year.

The forecast of the State economy also remains unchanged from the one
formulated with the August Financial Plan. Steady growth was projected to
continue through the second half of 1997. Personal income was projected to
increase by 6.1 percent in 1997 and 4.5 percent in 1998, reflecting projected
wage growth fueled in part by financial sector bonus payments. The forecast
projected employment increases of 1.4 percent in 1997 and 1.0 percent in 1998.

The projected 1997-98 closing fund balance in the General Fund of $927
million reflects a reserve for future needs of $530 million, a balance of $332
million in the Tax Stabilization Reserve Fund (following a payment of $15
million during the current fiscal year) and a balance of $65 million in the
Contingency Reserve Fund (following a deposit of $24 million during the current
fiscal year). These two reserves remain available to help offset potential risks
to the Financial Plan. Based upon experience to date, it is likely that the
closing fund balance will be larger, providing additional resources for the
1998-99 fiscal year.

All governmental funds receipts and disbursements are also unchanged. The
projected closing fund balance for all governmental funds remains $1.43 billion.
The annual increase in spending for all governmental funds remains approximately
7 percent. Total projected receipts in all governmental funds (excluding
transfers) are approximately $67.31 billion. All funds disbursements (excluding
transfers) are $67.37 billion. Total net other financing sources across all
governmental funds are projected at $505 million.

On September 11, 1997, the State Comptroller released a report entitled
'The 1997-98 Budget: Fiscal Review and Analysis' 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 $1.5 billion for the
State's 1998-99 fiscal year and approximately $3.4 billion for the State's
1999-00 fiscal year. The 1998-99 fiscal year estimate by the State Comptroller
is within the range discussed by the Division of the Budget in the section
entitled 'Outyear Projections of Receipts and Disbursements' in the Annual
Information Statement of August 15, 1997. Any increase in the 1997-98 reserve
for future needs would reduce this imbalance further and, based upon results to
date, such an outcome is considered possible. In addition, the Comptroller
identified risks in future years from an economic slowdown and from spending and
revenue actions enacted as a part of the 1997-98 budget that will add pressure
to future budget balance. The Governor is required to submit a balanced budget
each year to the State Legislature.

On August 11, 1997 President Clinton exercised his line item veto powers to
cancel a provision in the Federal Balanced Budget Act of 1997 that would have
deemed New York State's health care provider taxes to be approved by the federal
government. New York and several other states have used hospital rate
assessments and other provider tax mechanisms to finance various Medicaid and
health insurance programs since the early 1980s. The State's process of taxation
and redistribution of health care dollars was sanctioned by federal legislation
in 1987 and 1991. However, the federal Health Care Financing Administration
(HCFA) regulations governing the use of provider taxes require the State to seek
waivers from HCFA that would grant explicit approval of the

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provider taxing system now in place. The State filed the majority of these
waivers with HCFA in 1995 but has yet to receive final approval.

The Balanced Budget Act of 1997 provision passed by Congress was intended
to rectify the uncertainty created by continued inaction on the State's waiver
requests. A federal disallowance of the State's provider tax system could
jeopardize up to $2.6 billion in Medicaid reimbursement received through
December 31, 1998. The President's veto message valued any potential
disallowance at $200 million. The 1997-98 Financial Plan does not anticipate any
provider tax disallowance.

On October 9, 1997 the President offered a corrective amendment to the HCFA
regulations governing such taxes. The Governor has stated that this proposal
does not appear to address all of the State's concerns, and negotiations are
ongoing between the State and HCFA. In addition, the City of New York and other
affected parties in the health care industry have filed a lawsuit challenging
the constitutionality of the President's line item veto.

On July 31, 1997, the New York State Tax Appeals Tribunal delivered a
decision involving the computation of itemized deductions and personal income
taxes of certain high income taxpayers. By law, the State cannot appeal the
Tribunal's decision. The decision will lower income tax liability attributable
to such taxpayers for the 1997 and earlier open tax years, as well as on a
prospective basis.

Ratings Agencies. On August 28, 1997, Standard & Poor's ('S&P') revised
its ratings on the State's general obligation bonds to A from A-, and, in
addition, revised its ratings on the State's moral obligation, lease purchase,
guaranteed and contractual obligation debt. S&P rated the State's general
obligation bonds AA- from August 1987 to March 1990 and A+ from November 1982 to
August 1987. In March 1990, S&P lowered its rating of all of the State's general
obligation bonds from AA- to A. On January 13, 1992, 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. On April 26, 1993 S&P revised the rating outlook
assessment to stable. On February 14, 1994, S&P revised its outlook on the
State's general obligation bonds to positive and, on August 5, 1996, confirmed
its A- rating.

On February 10, 1997, Moody's confirmed its A2 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. On January 6, 1992, Moody's reduced its ratings on
outstanding limited-liability State lease purchase and contractual obligations
from A to Baa1.

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, 1996 there were 17 public
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 $75.4 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.

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Some authorities also receive monies from State appropriations to pay for
the operating costs of certain of their programs. As described below, the 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 1997-98 fiscal year, total State assistance to the MTA is projected to total
approximately $1.2 billion, an increase of $76 million over the 1996-97 fiscal
year.

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 $12.17 billion MTA capital plan for the 1995 through 1999
calendar years (the '1995-99 Capital Program'). In July 1997, the Capital
Program Review Board approved the 1995-99 Capital Program. This plan supersedes
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
future capital programs 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,

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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 1997-98
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.

Eighteen 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 1995, the total
indebtedness of all localities in the State other than the City was
approximately $19.0 billion. A small portion (approximately $102.3 million) of
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. Eighteen localities had outstanding indebtedness for deficit
financing at the close of their fiscal year ending in 1995.

From time to time, 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

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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; (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; and (xiii) a
challenge to the constitutionality of the Clean Water/Clean Air Bond Act of 1996
and its implementing regulations.

Adverse developments in the proceedings described above or the initiation
of new proceedings could affect the ability of the State to maintain a balanced
1997-98 State Financial Plan. In its Notes to its General Purpose Financial
Statements for the fiscal year ended March 31, 1997, the State reports its
estimated liability for awards and anticipated unfavorable judgments at $364
million. There can be no assurance that an adverse decision in any of the above
cited proceedings would not exceed the amount of the 1997-98 State Financial
Plan reserves for the payment of judgments and, therefore, could affect the
ability of the State to maintain a balanced 1997-98 State Financial Plan.

NEW YORK CITY

The fiscal health of the State may also be particularly affected by the
fiscal health of 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 (the 'City 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 projections set forth
in the City Financial Plan are based on various assumptions and contingencies,
some of which are uncertain and may not materialize. 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.

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

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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.

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, while economic recovery in New York City has
been slower than in other regions of the country, a surge in Wall Street
profitability resulted in increased tax revenues and generated a substantial
surplus for the City in City fiscal year 1996-97. Although several sectors of
the City's economy have expanded recently, especially tourism and business and
professional services, City tax revenues remain heavily dependent on the
continued profitability of the securities industries and the course of the
national economy. These reports have also indicated that recent City budgets
have been balanced in part through the use of non-recurring resources; that the
City 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 gaps between forecast revenues and expenditures in future years
that must be closed with reduced expenditures and/or increased revenues. In
addition to these monitoring agencies, the Independent Budget Office ('IBO') has
been established pursuant to the City Charter to provide analysis to elected
officials and the public on relevant fiscal and budgetary issues affecting the
City.

The City Financial Plan currently projects revenues and expenditures for
the 1998 fiscal year balanced in accordance with GAAP; however there can be no
assurance that revenues and expenditures will be balanced. The City Financial
Plan includes increased tax revenue projections; reduced debt service costs; the
assumed restoration of Federal funding for programs assisting certain legal
aliens; additional expenditures for textbooks, computers, improved education
programs and welfare reform, law enforcement, immigrant naturalization,
initiatives proposed by the City Council and other initiatives; and a proposed
discretionary transfer in the 1998 fiscal year of $300 million of debt service
due in the 1999 fiscal year for budget stabilization purposes. In addition, the
City Financial Plan reflects the discretionary transfer in the 1997 fiscal year
of $1.3 billion of debt service due in the 1998 and 1999 fiscal years, and
includes actions to eliminate a previously projected budget gap for the 1998
fiscal year. These gap closing actions include (i) additional agency actions
totaling $621 million (ii) the proposed sale of various assets; (iii) additional
State aid of $294 million, including a proposal that the State accelerate a $142
million revenue sharing payment to the City from March 1999; and (iv)
entitlement savings of $128 million which would result from certain of the
reductions in Medicaid spending proposed in the Governor's 1997-1998 Executive
Budget and the State making available to the City $77 million of additional
Federal block grant aid, as proposed in the Governor's 1997-1998 Executive
Budget. The City Financial Plan also sets forth projections for the 1999 through
2001 fiscal years and projects gaps of $1.8 billion, $2.8 billion and $2.6
billion for the 1999 through 2001 fiscal years, respectively.

The Financial Plan assumes approval by the State Legislature and the
Governor of (i) a tax reduction program proposed by the City totaling $272
million, $435 million, $465 million and $481 million in the 1998 through 2001
fiscal years, respectively, which includes a proposed elimination of the 4% City
sales tax on clothing items under $500 as of December 1, 1997, and (ii) a
proposed State tax relief program, which would reduce the City property tax and
personal income tax, and which the Financial Plan assumes will be offset by
proposed increased State aid totaling $47 million, $254 million, $472 million
and $722 million in the 1998 through 2001 fiscal years, respectively.

The Financial Plan also assumes (i) approval by the Governor and the State
Legislature of the extension of the 14% personal income tax surcharge, which is
scheduled to expire on December 31, 1999 and the extension of which is projected
to provide revenue of $166 million and $494 million in the 2000 and 2001 fiscal
years, respectively, and of the extension of the 12.5% personal income tax
surcharge, which is scheduled to expire on December 31, 1998 and the extension
of which is projected to provide revenue of $188 million, $527 million and $554
million in the 1999 through 2001 fiscal years, respectively; and (ii) collection
of the projected rent payments for the City's airports, totaling $385 million,
$175 million, and $170 million in the 1999, 2000 and 2001 fiscal years,
respectively, 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 through pending legal actions. The Financial Plan provides no additional
wage increases for City employees after their contracts expire in fiscal

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years 2000 and 2001. In addition, the economic and financial condition of the

City may be affected by various financial, social, economic and political
factors which could have a material effect on the City.

The City's financial plans have been the subject of extensive public
comment and criticism. The City Comptroller has issued a report commenting on
certain developments since the release of the Financial Plan. In his report the
City Comptroller noted, among other things, that tax revenues for the first
quarter of the 1998 fiscal year were above projections in the City Financial
Plan. However, the report also noted that if the stock market decline which has
occurred in recent days were to continued, tax revenue forecasts for subsequent
fiscal years might have to be revised downward. The report concluded that the
City faces, with respect to the 1998 fiscal year, a possible $112 million
surplus or a possible net budget gap of up to $440 million, and, with respect to
the 1999 and subsequent fiscal years, total net budget gaps between $1.9 billion
and $2.8 billion, $2.6 billion and $4.0 billion, and $2.4 billion and $3.8
billion for the 1999 through 2001 fiscal years, which include the gaps set forth
in the City Financial Plan.

In connection with the Financial Plan, the City has outlined a gap-closing
program for the 1999, 2000 and 2001 fiscal years to eliminate the remaining $1.8
billion, $2.8 billion and $2.6 billion projected gaps for such fiscal years.
This program, which is not specified in detail, assumes for the 1999, 2000 and
2001 fiscal years, respectively, additional agency programs to reduce
expenditures or increase revenues by $580 million, $853 million and $762
million; savings from restructuring City government and privatization and
procurement initiatives of $285 million, $550 million and $550 million;
additional revenue initiatives and asset sales of $180 million, $135 million and
$60 million; additional State aid of $350 million, $500 million and $500
million; additional entitlement cost containment initiatives of $300 million,
$675 million and $675 million; and the availability of $100 million, $100
million and $100 million of the General Reserve. There can be no assurance that
these gap-closing measures can be implemented as planned.

The City's projected budget gaps for the 2000 and 2001 fiscal years do not
reflect the savings expected to result from the prior years' programs to close
the gaps set forth in the City Financial Plan. Thus, for example, recurring
savings anticipated from the actions which the City proposes to take to balance
the fiscal year 1999 budget are not taken into account in projecting the budget
gaps for the 2000 and 2001 fiscal years.

The City's projected budget gaps for the 2000 and 2001 fiscal years do not
reflect the savings expected to result from prior years' programs to close the
gaps set forth in the City 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 2000 and 2001 fiscal years.

Although the City has maintained balanced budgets in each of its last
seventeen fiscal years, and is projected to achieve balanced operating results
for the 1998 fiscal year, there can be no assurance that the gap- closing
actions proposed in the City 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 City 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 City 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 1998 through 2001 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 City 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 City 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

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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 City 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 City's control, will be
realized. The principal projections and assumptions described below are based on
information available in June 1997.

City Employees. 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 City 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 or water and sewer funds, will increase from an estimated
level of 203,401 on June 30, 1997 to an estimated level of 203,465 by June 30,
2001, before implementation of the gap closing program outlined in the City
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 86% of the City's workforce. The City 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.

The projections for the 1998 through 2001 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 workforce, 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. Subsequently, the City reached settlements, through agreements or
statutory impasse procedures, with bargaining units which, together with the UFT
and District Council 37, represent approximately 86% of the City's workforce.
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 City Financial Plan.

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Reports on the City Financial Plan. 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 September 18, 1997, the City Comptroller issued a report commenting on
developments with respect to the 1998 fiscal year. The report noted that the
City's adopted budget, which is reflected in the City Financial Plan, had
assumed additional State resources of $612 million in the 1998 fiscal year, and
that the approved State budget provided resources of only $216 million for
gap-closing purposes. The report further noted that, while the City will receive
$322 million more in education aid in the 1998 fiscal year than assumed in the
City's adopted budget, it is unlikely that the funding will be entirely
available for gap-closing purposes. In addition, the report noted that the
City's financial statements currently contain approximately $643 million in
uncollected State education aid receivables from prior years as a result of the
failure of the State to appropriate funds to pay these claims, and that the
staff of BOE has indicated that an additional $302 million in prior year claims
is available for accrual. The report stated that the City Comptroller maintains
the position that no further accrual of prior year aid will take place,
including $75 million in aid assumed in the City's adopted budget for the 1998
fiscal year, unless the State makes significant progress to retire the
outstanding prior year receivables. On October 28, 1997, the City Comptroller
issued a subsequent report commenting on recent developments. With respect to
the 1997 fiscal year, the report noted that the City ended the 1997 fiscal year
with an operating surplus of $1.367 billion, before certain expenditures and
discretionary transfers, of which $1.362 billion was used for expenditures due
in the 1998 fiscal year. With respect to tax revenues for the 1998 fiscal year,
the report noted that total tax revenues in the first quarter of the 1998 fiscal
year were $244.3 million above projections in the City Financial Plan, excluding
audit collections which were $31.2 million less than projected. The report
stated that the increased tax revenues included $110.3 million of greater than
projected general property tax receipts, which resulted, in part, from a
prepayment discount program, and increased revenues from the personal income,
banking corporation, general corporation and unincorporated business taxes. The
report noted that Wall Street profits exceeded expectations in the first half of
the 1997 calendar year. However, the report noted that the stock market in the
last two weeks of October has declined as a result of currency turmoil in
Southeast Asia. The report noted that, while tax revenues in the 1998 fiscal
year should not be significantly affected by the recent stock market decline,
since there is a lag between activity on Wall Street and City tax revenues, if
the current stock market decline persists, tax revenue forecasts for subsequent
years will have to be revised downward. The report noted that the City was not
affected by the October 1987 stock market crash until the 1990 fiscal year, when
revenues from the City's business and real estate taxes fell by 20% over the
1989 fiscal year. The report also noted that expenditures for short-term and
long-term debt issued during the first half of the 1998 fiscal year are
estimated to be between approximately $53.9 million and $58.8 million below
levels anticipated in the City's adopted budget for the 1998 fiscal year,
approximately $20 million below anticipated levels in the 1999 fiscal year and
approximately $30 million below anticipated levels in each of fiscal years 2000
and 2001 due to less borrowing and lower interest rates than assumed.

On July 16, 1997, the City Comptroller issued a report on the City
Financial Plan. With respect to the 1998 fiscal year, the report identified a

possible $112 million surplus or a possible total net budget gap of up to $440
million, depending primarily on whether the tax reduction program proposed in
the City Financial Plan is implemented and the 14% personal income tax surcharge
is extended beyond December 31, 1997. The risks identified in the report for the
1998 fiscal year include (i) $178 million related to BOE, resulting primarily
from unidentified expenditure reductions and prior year State aid receivables;
(ii) State aid totaling $115 million which is assumed in the City Financial Plan
but not provided for in the Governor's Executive Budget; (iii) State approval of
the extension of the 14% personal income tax surcharge beyond December 31, 1997,
which would generate $169 million in the 1998 fiscal year; (iv) City proposals
for State aid totaling $271 million, including the acceleration of $142 million
of State revenue sharing payments from the 1999 fiscal year to the 1998 fiscal
year, which are subject to approval by the Governor and/or the State
Legislature; and (v) the assumed sale of the

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Coliseum for $200 million, which may be delayed. The report noted that these
risks could be partially offset by between $597 million and $765 million in
potentially available resources, including $200 million of higher projected tax
revenues, $150 million of possible additional State education aid and the
possibility that the proposed sales tax reduction will not be enacted, which
would result in $157 million of additional tax revenues in the 1998 fiscal year.
With respect to the 1998 fiscal year, the report stated that the City has
budgeted $200 million in the General Reserve and included in the City Financial
Plan a $300 million surplus to be used in the 1999 fiscal year, making the
potential $440 million budget gap manageable. However, the report also expressed
concern as to the sustainability of profits in the securities industry.

With respect to the 1999 and subsequent fiscal years, the report identified
total net budget gaps of between $1.9 billion and $2.8 billion, $2.6 billion and
$4.0 billion, and $2.4 billion and $3.8 billion for the 1999 through 2001 fiscal
years, respectively, which include the gaps set forth in the City Financial
Plan. The potential risks and potential available resources identified in the
report for the 1999 through 2001 fiscal years include most of the risks and
resources identified for the 1998 fiscal year, except that the additional risks
for the 1999 through 2001 fiscal years include (i) assumed payments from the
Port Authority relating to the City's claim for back rentals and an increase in
future rentals, part of which are the subject of arbitration, totaling $350
million, $140 million and $135 million in the 1999-2001 fiscal years,
respectively; and (ii) State approval of the extension of the 12.5% personal
income tax surcharge beyond December 31, 1998, which would generate $190
million, $527 million and $554 million in the 1999 through 2001 fiscal years,
respectively.

On July 15, 1997, the staff of the Control Board issued a report commenting
on the City Financial Plan. The report stated that, while the City should end
the 1998 fiscal year with its budget in balance, the City Financial Plan still
contains large gaps beginning in the 1999 fiscal year, reflecting revenues which
are not projected to grow during the Financial Plan Period and expenditures
which are projected to grow at about the rate of inflation. The report
identified net risks totaling $485 million, $930 million, $1.2 billion and $1.4
billion for 1998 through 2001 fiscal years, respectively, in addition to the
gaps projected in the City Financial Plan for fiscal years 1999 through 2001.

The principal risks identified in the report included (i) potential tax revenues
shortfalls totaling $150 million, $300 million and $400 million for the 1999
through 2001 fiscal years, respectively, based on historical average trends;
(ii) BOE's structural gap, uncertain State funding of BOE and implementation by
BOE of various unspecified actions, totaling $163 million, $209 million, $218
million and $218 million in the 1998 through 2001 fiscal years, respectively;
(iii) the proposed sale of certain assets in the 1998 fiscal year totaling $248
million, which could be delayed; (iv) assumed additional State actions totaling
$271 million, $121 million, $125 million and $129 million in the 1998 through
2001 fiscal years, respectively; (v) revenues from the extension of the 12.5%
personal income tax surcharge beyond December 31, 1998, totaling $188 million,
$527 million and $554 million in the 1999 through 2001 fiscal years,
respectively, which requires State legislation; and (vi) the receipt of $350
million, $140 million and $135 million from the Port Authority in the 1999
through 2001 fiscal years, respectively, which is the subject of arbitration.
Taking into account the risks identified in the report and the gaps projected in
the City Financial Plan, the report projected a gap of $485 million for the 1998
fiscal year, which could be offset by available reserves, and gaps $2.7 billion,
$4.1 billion and $4.0 billion for the 1999 through 2001 fiscal years,
respectively. The report also noted that (i) if the securities industry or
economy slows down to a greater extent than projected, the City could face
sudden and unpredictable changes to its forecast; (ii) the City's entitlement
reduction assumptions require a decline of historic proportions in the number of
eligible welfare recipients; (iii) the City has not yet shown how the City's
projected debt service, which would consume 20% of tax revenues by the 1999
fiscal year, can be accommodated on a recurring basis; (iv) the City is
deferring recommended capital maintenance; and (v) continuing growth in
enrollment at BOE has helped create projected gaps of over $100 million annually
at BOE. However, the report noted that if proposed tax reductions are not
approved, additional revenue will be realized, ranging from $272 million in the
1998 fiscal year to $481 million in the 2001 fiscal year.

On July 2, 1997, the staff of the OSDC issued a report on the City
Financial Plan. The report projected a potential surplus for the 1998 fiscal
year of $190 million, due primarily to the potential for greater than forecast
tax revenues, and projected budget gaps for the 1999 through 2001 fiscal years
which are slightly less than the gaps set forth in the City Financial Plan for
such years. The report also identified risks of $518 million, $1.1 billion, $1.3
billion and $1.4 billion for the 1998 through 2001 fiscal years, respectively.
The additional risks identified in the report relate to: (i) the receipt of Port
Authority lease payments totaling $350 million, $140

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million and $135 million in the 1999 through 2001 fiscal years, respectively;
(ii) City proposals for State aid totaling $271 million, $121 million, $125
million and $129 million in the 1998 through 2001 fiscal years, respectively,
including the acceleration of $142 million of State revenue sharing payments
from the 1999 fiscal year to the 1998 fiscal year, which are subject to approval
by the Governor and/or the State Legislature; (iii) the receipt of $200 million
in the 1998 fiscal year in connection with the proposed sale of the New York
Coliseum; (iv) the receipt of $47 million in the 1998 fiscal year from the sale
of certain other assets; (v) uncertain State education aid and expenditure
reductions relating to BOE totaling $325 million in each of the 1999 through

2001 fiscal years; (vi) State approval of a three-year extension to the City's
12.5% personal income tax surcharge, which is scheduled to expire on December
31, 1998 and which would generate revenues of $230 million, $525 million and
$550 million in the 1999 through 2001 fiscal years, respectively; and (vii) the
potential for additional funding needs for the City's labor reserve totaling
$104 million, $225 million and $231 million in the 1999 through 2001 fiscal
years, respectively, to pay for collective bargaining increases for the Covered
Organizations, which the City Financial Plan assumes will be paid for by the
Covered Organizations, rather than the City. The report also noted that the City
Financial Plan assumes that the State will extend the 14% personal income tax
that is scheduled to expire in December 1997, which would generate revenues of
$200 million in the 1998 fiscal year and $500 million annually in subsequent
fiscal years, and that the City Financial Plan makes no provision for wage
increases after the expiration of current contracts in fiscal year 2000, which
would add $430 million to the 2001 fiscal year budget gap if employees receive
wage increases at the projected rate of inflation. The report noted that the
City Financial Plan includes an annual General Reserve of $200 million and sets
aside an additional $300 million in the 1998 fiscal year to reduce the budget
gap for the 1999 fiscal year if such funds are not needed in the 1998 fiscal
year. With respect to the gap-closing program for the 1999 through 2001 fiscal
years, the report noted that the City has broadly outlined a program that relies
heavily on unspecified agency actions, savings from reinvention and other
unspecified initiatives and uncertain State aid and entitlement program
reductions which depend on the cooperation of others.

The report concluded that while 1997 was an unexpectedly good fiscal year
for City revenues, the City projects that the rate of spending for the 1998
fiscal year will grow substantially faster than the rate of revenues, reflecting
increasing costs for labor, debt service, Medicaid and education, and that the
gaps for the subsequent fiscal years continue to present a daunting challenge.
With respect to the economy, the report noted that the major risks to the City's
economic and revenue forecasts continue to relate to the pace of both the
national economy and activity on Wall Street, that the potential exists for a
national recession over the next four years, and that Wall Street volatility can
have a negative effect, as was apparent in 1994 when the Federal Reserve
repeatedly raised interest rates and the profits of securities firms fell. Other
concerns identified in the report include: (i) $76 million in retroactive claims
for State education aid included in the City Financial Plan for the 1998 fiscal
year which may not be realized; (ii) a potential risk of $698 million in State
education aid owed to the City by the State for prior years, all or a portion of
which the City could be forced to write-off if further delays occur in the State
agreeing to fund these claims; and (iii) the potential adverse impact on HHC
over the long-term of the planned expansion of managed care which emphasizes
out-patient services with fixed monthly fees, uncertainty covering projected
savings from a proposal that most Medicaid recipients be required to enroll in
managed care, which is subject to approval by the Federal Government, and the
possibility that the recent Federal budget agreement could substantially reduce
aid to hospitals which serve a large number of medically indigent patients.

On May 27, 1997, the IBO released a report analyzing the financial plan
published on May 8, 1997 (the 'May Financial Plan'). In its report, the IBO
estimated gaps of $27 million, $91 million, $2.1 billion, $2.9 billion and $2.9
billion for the 1997 through 2001 fiscal years, respectively, which include the
gaps set forth in the May Financial Plan for fiscal years 1999 through 2001. The

gaps estimated in the IBO report reflect (i) uncertainty concerning the size and
timing of projected airport rents of $270 million and $215 million in the 1998
and 1999 fiscal years, respectively, which are the subject of an ongoing dispute
between the Port Authority and the City; and (ii) additional funding needs for
the City's labor reserve totaling $104 million, $224 million and $231 million in
the 1999 through 2001 fiscal years, respectively, to pay for collective
bargaining increases for the Covered Organizations, which the May Financial Plan
assumes will be paid for by the Covered Organizations, rather than the City.
These reduced revenues and increased expenditures identified in the IBO report
are substantially offset by tax revenue forecasts which exceed those in the May
Financial Plan. However, the report noted that the May Financial Plan assumes
continued strong revenue growth and that, in the event of an economic downturn,
the City will be required to increase taxes in a slow economy or reduce spending
when it is most

66
<PAGE>
needed. With respect to the tax reductions proposed in the May Financial Plan,
the IBO stated that the principal question is whether the City will be able to
afford the tax reductions. In addition, the report discussed various issues with
implications for the City's 1998 budget. These issues include the reliance in
the budget on a number of State legislative actions, including (i) $294 million
from legislation the City has requested to increase State aid; (ii) $128 million
in savings attributable to both a larger City share of Federal welfare grant
funds and State reforms to Medicaid; and (iii) $115 million to restore
expenditure reductions proposed in the Governor's Executive Budget. The report
also noted that the City's claim for $900 million of State reimbursement of
prior year education expenditures remains unresolved, that proposals affecting
the MTA, including proposals to eliminate two-fare zones for bus and subway
riders, will result in a significant reduction in revenues for the MTA, and that
the implementation of changes in the City's computer system, resulting from the
inability of the current computer system to recognize the year 2000, could cost
the City up to $150 million to $200 million over the next three years. In a
subsequent report released on June 16, 1997, the IBO noted that in the City
Financial Plan the City had deferred to fiscal years 1999 through 2001 the
assumed receipt of back airport rents, and that the tax revenue forecasts for
the 1998 fiscal year in the City Financial Plan are closer than the forecasts in
the May Financial Plan to the IBO's forecast of City tax revenues in its May
report.

On August 25, 1997, the IBO issued a report relating to recent developments
regarding welfare reform. The report noted that Federal legislation adopted in
August 1997, modified certain aspects of the 1996 Welfare Act, by reducing SSI
eligibility restrictions for certain legal aliens residing in the country as of
August 22, 1996, resulting in the continuation of Federal benefits, by providing
funding to the states to move welfare recipients from public assistance and into
jobs and by providing continued Medicaid Coverage for those children who lose
SSI due to stricter eligibility criteria. In addition, the report noted that the
State had enacted the Welfare Reform Act of 1997 which, among other things,
requires the City to achieve work quotas and other work requirements and
requires all able-bodied recipients to work after receiving assistance for two
years. The report noted that this provision could require the City to spend
substantial funds over the next several years for workfare and day care in
addition to the funding reflected in the City Financial Plan. The report also

noted that the State Welfare Reform Act of 1997 established a Food Assistance
Program designed to replace Federal food stamp benefits for certain classes of
legal aliens denied eligibility for such benefits by the 1996 Welfare Act. The
report noted that if the City elects to participate in the Food Assistance
Program, it will be responsible for 50% of the costs for the elderly and
disabled. The IBO has stated that it will release an updated report to provide a
detailed analysis of these developments and their likely impact on the City.

On October 31, 1996, the IBO released a report assessing the costs that
could be incurred by the City in response to the 1996 Welfare Act, which, among
other things, replaces the AFDC entitlement program with TANF, imposes a
five-year time limit on TANF assistance, requires 50% of states' TANF caseload
to be employed by 2002, and restricts assistance to legal aliens. The report
noted that if the requirement that all recipients work after two years of
receiving benefits is enforced, these additional costs could be substantial
starting in 1999, reflecting costs for worker training and supervision of new
workers and increased child care costs. The report further noted that, if
economic performance weakened, resulting in an increased number of public
assistance cases, potential costs to the City could substantially increase.
States are required to develop plans during 1997 to implement the new law. The
report noted that decisions to be made by the State which will have a
significant impact on the City budget include the allocation of block grant
funds between the State and New York local governments such as the City and the
division between the State and its local governments of welfare costs not funded
by the Federal government.

Finally, the report noted that the new welfare law's most significant
fiscal impact is likely to occur in the years 2002 and beyond, reflecting the
full impact of the lifetime limit on welfare participation which only begins to
be felt in 2002 when the first recipients reach the five-year limit and are
assumed to be covered by Home Relief. In addition, the report noted that, given
the constitutional requirement to care for the needy, the 1996 Welfare Act might
well prompt a migration of benefit-seekers into the City, thereby increasing
City welfare expenditures in the long run. The report concluded that the impact
of the 1996 Welfare Act on the City will ultimately depend on the decisions of
State and City officials, the performance of the local economy and the behavior
of thousands of individuals in response to the new system.

Seasonal Financing. 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. Although the City's current

67
<PAGE>
financial plan projects $2.4 billion of seasonal financing for the 1998 fiscal
year, the City expects to undertake only approximately $1.4 billion of seasonal
financing. The City has issued $1.075 billion of short-term obligations on
October 15, 1997 and expects to issue additional short-term obligations to
finance the City's projected cash flow needs for the 1998 fiscal year. The City
issued $2.4 billion of short-term obligations in fiscal year 1997. 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 in the 1993 fiscal year. The
delay in the adoption of the State's budget in certain past fiscal years has

required the City to issue short-term notes in amounts exceeding those expected
early in such fiscal years.

Litigation. The City is a defendant in a significant number of lawsuits.
Such litigation includes, but is not limited to, actions commenced and claims
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 City 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, 1997 amounted to approximately $3.5 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 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.

Ratings Agencies. 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 City 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. 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. On November 25, 1996, S&P issued a report which stated
that, if the City reached its debt limit without the ability to issue bonds
through other means, it would cause a deterioration in the City's infrastructure
and significant cutbacks in the capital plan which would eventually impact the
City's economy and revenues, and could have eventual negative credit
implications.

Moody's rating for City general obligation bonds is Baa1. On July 17, 1997,
Moody's changed its outlook on City bonds to positive from stable. 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

68
<PAGE>
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. 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, in
May 1988 to A and again in February 1991 to Baa1.

Fitch Investors Service, Inc. ('Fitch') rates City general obligation bonds
A- since July 15, 1993. 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. Since then Fitch has revised the
outlook to stable. 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.

<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. Declaration of Trust dated as of September 19, 1997.*

2. By-Laws.

3. None.

4. None.

5.1 Form of Investment Advisory Agreement between Trust and The Chase
Manhattan Bank.

5.2 Form of Sub-Advisory Agreement between The Chase Manhattan Bank and
Texas Commerce Bank National Association.

5.3 Form of Administration Agreement.

5.4 Form of Investment Advisory Agreement.

6. Form of Distribution and Sub-Administration Agreement.

7. None.

8.1 Form of Custodian Agreement.

8.2 Form of Transfer Agency Agreement.

9. None.

245

<PAGE>

10. Opinion and consent of counsel as to the legality of the securities
being registered.

11. Consent of Independent Auditors.

12. None.

13. None.

14. None.

15. Distribution Plan.

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.

246

<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 November 30, 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.

247

<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

248

<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

249

<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:

250

<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

251

<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.

252

<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.

253

<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 29th day of December, 1997.

AVESTA TRUST

By: TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
Trustee

By: /s/Thomas J. Press
- - - - - - - - - - - - - - - - -
Thomas J. Press
Senior Vice President
Secretary, AVESTA Trust

254

<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, December 29, 1997
_______________________ Supervisory Committee
Frank A. Liddell, Jr.

<F1> Member, December 29, 1997
_______________________ Supervisory Committee
George E. McDavid

<F1> Member, December 29, 1997
_______________________ Supervisory Committee
Kenneth L. Otto

<F1> Member, December 29, 1997
_______________________ Supervisory Committee
H. Michael Tyson

<F1> Chairman, December 29, 1997
_______________________ Supervisory Committee
Henry J. Lartigue
/s/Nancy Burge Principal Financial and December 29, 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

255

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ---------------------------------------------------------------------------------------------- ----
<S> <C> <C>
1. Declaration of Trust dated as of September 19, 1997.*
2. By-Laws.
3. None.
4. None.
5.1 Form of Investment Advisory Agreement between Trust and The Chase Manhattan Bank.
5.2 Form of Sub-Advisory Agreement between The Chase Manhattan Bank and Texas Commerce Bank
National Association.
5.3 Form of Administration Agreement.
5.4 Form of Investment Advisory Agreement.
6. Form of Distribution and Sub-Administration Agreement.
7. None.
8.1 Form of Custodian Agreement.
8.2 Form of Transfer Agency Agreement.
9. None.
10. Opinion and consent of counsel as to the legality of the securities being registered.
11. Consent of Independent Auditors.
12. None.
13. None.
14. None.
15. Distribution Plan.
16. Schedules for computation of each performance quotation provided in the Registration
Statement.*
17. Financial Data Schedules.*
18. None.
</TABLE>

- ------------------
* Previously filed with Registration Statement and Post-effective Amendments and
are herein incorporated by reference.

<PAGE>

Mutual Fund Investment Trust

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

DECLARATION OF TRUST

Dated September 19, 1997

<PAGE>

TABLE OF CONTENTS

Page

ARTICLE I

NAME AND DEFINITIONS......................... 1

Section 1.1. Name.................................................... 1
Section 1.2. Definitions............................................. 1

ARTICLE II

TRUSTEES............................... 3

Section 2.1. Number of Trustees...................................... 3
Section 2.2. Term of Office of Trustees.............................. 3
Section 2.3. Resignation and Appointment of Trustees................. 4
Section 2.4. Vacancies............................................... 4
Section 2.5. Delegation of Power to Other Trustees................... 4

ARTICLE III

POWERS OF TRUSTEES.......................... 5

Section 3.1. General................................................. 5
Section 3.2. Investments............................................. 5
Section 3.3. Legal Title............................................. 6
Section 3.4. Issuance and Repurchase of Securities................... 7
Section 3.5. Borrowing Money; Lending Trust Property................. 7
Section 3.6. Delegation; Committees.................................. 7
Section 3.7. Collection and Payment.................................. 7
Section 3.8. Expenses................................................ 7
Section 3.9. Manner of Acting; By-Laws............................... 7
Section 3.10. Miscellaneous Powers.................................... 8
Section 3.11. Principal Transactions.................................. 8
Section 3.12. Trustees and Officers as Shareholders................... 9

ARTICLE IV

INVESTMENT ADVISER, DISTRIBUTOR, ADMINISTRATOR,
TRANSFER AGENT AND SHAREHOLDER SERVICING AGENTS.... 10

Section 4.1. Investment Adviser...................................... 10
Section 4.2. Distributor............................................. 10
Section 4.3. Administrator........................................... 10
Section 4.4. Transfer Agent and Shareholder Servicing
Agents............................................... 11
Section 4.5. Parties to Contract..................................... 11

<PAGE>
Page

ARTICLE V

LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS................. 11

Section 5.1. No Personal Liability of Shareholders,
Trustees; Etc........................................ 11
Section 5.2. Non-Liability of Trustees, Etc.......................... 12
Section 5.3. Mandatory Indemnification............................... 12
Section 5.4. No Bond Required of Trustees............................ 14
Section 5.6. Reliance on Experts, Etc................................ 15

ARTICLE VI

SHARES OF BENEFICIAL INTEREST.................... 15

Section 6.1. Beneficial Interest..................................... 15
Section 6.2. Rights of Shareholders.................................. 15
Section 6.3. Trust Only.............................................. 16
Section 6.4. Issuance of Shares...................................... 16
Section 6.5. Register of Shares...................................... 16
Section 6.6. Transfer of Shares...................................... 16
Section 6.7. Notices................................................. 17
Section 6.8. Voting Powers........................................... 17
Section 6.9. Series Designation...................................... 18

ARTICLE VII

REDEMPTIONS............................. 21

Section 7.1. Redemptions............................................. 21
Section 7.2. Suspension of Right of Redemption....................... 21
Section 7.3. Redemption of Shares, Disclosure of
Holding.............................................. 22
Section 7.4. Redemptions of Accounts of Less than
$500................................................. 22

ARTICLE VIII

DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS.............. 23

ARTICLE IX

DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC................ 23

Section 9.1. Duration........................................ 23
Section 9.2. Termination of Trust............................ 23
Section 9.3. Amendment Procedure............................. 24

Section 9.4. Merger, Consolidation and Sale of
Assets....................................... 25
Section 9.5. Incorporation, Reorganization................... 25

<PAGE>

Page

Section 9.6. Incorporation or Reorganization of
Series....................................... 26

ARTICLE X

REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS..................... 26

ARTICLE XI

MISCELLANEOUS.................... 27

Section 11.1. Filing.......................................... 27
Section 11.2. Governing Law................................... 27
Section 11.3. Counterparts.................................... 27
Section 11.4. Reliance by Third Parties....................... 28
Section 11.5. Provisions in Conflict with Law or
Regulations.................................. 28

iii

<PAGE>
DECLARATION OF TRUST

OF THE

Mutual Fund Investment Trust

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

Dated September 19, 1997

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

WHEREAS, the Trustees desire to establish a trust for
the investment and reinvestment of funds contributed thereto; and

WHEREAS, the Trustees desire that the beneficial interest in
the trust assets be divided into transferable Shares of Beneficial Interest (par
value $0.001 per share) issued in one or more series as hereinafter provided;
and

NOW THEREFORE, the Trustees hereby declare that all money and
property contributed to the trust established hereunder shall be held and
managed in trust for the benefit of holders, from time to time, of the Shares of
Beneficial Interest (without par value) issued hereunder and subject to the
provisions hereof.

ARTICLE I

NAME AND DEFINITIONS

Section 1.1. Name. The name of the trust created hereby is the
"Mutual Fund Investment Trust", but the Trust may conduct all or a portion of
its business and activities under such other designations or names as the
Trustees may from time to time authorize.

Section 1.2. Definitions. Wherever they are used herein,
the following terms have the following respective meanings:

(a) "Administrator" means a party furnishing services to the
Trust pursuant to any contract described in Section 4.3 hereof.

(b) "By-Laws" means the By-laws referred to in Section 3.9
hereof, as from time to time amended.

(d) "Custodian" means a party employed by the Trust to furnish
services as described in Article X of the By-Laws.

<PAGE>

(e) "Declaration" means this Declaration of Trust as amended
from time to time. Reference in this Declaration of Trust to
"Declaration", "hereof", "herein", and "hereunder" shall be deemed to
refer to this Declaration rather than the article or section in which
such words appear.

(f) "Distributor" means a party furnishing services to the
Trust pursuant to any contract described in Section 4.2 hereof.

(g) "Interested Person" has the meaning given that term in the
1940 Act.

(h) "Investment Adviser" means a party furnishing services to
the Trust pursuant to any contract described in Section 4.1 hereof.

(i) "Majority Shareholder Vote" has the same meaning as the
phrase "vote of a majority of the outstanding voting securities" as
defined in the 1940 Act, except that such term may be used herein with
respect to the Shares of the Trust as a whole or the Shares of any
particular series, as the context may require.

(j) "1940 Act" means the Investment Company Act of 1940 and
the Rules and Regulations thereunder, as amended from time to time.

(k) "Person" means and includes individuals, corporations,
limited liability companies, partnerships, trusts, associations, joint
ventures and other entities, whether or not legal entities, and
governments and agencies and political subdivisions thereof, whether
domestic or foreign.

(l) "Shareholder" means a record owner of outstanding Shares.

(m) "Shares" means the Shares of Beneficial Interest into
which the beneficial interest in the Trust shall be divided from time
to time or, when used in relation to any particular series (or class or
subseries of a series) of Shares established by the Trustees pursuant
to Section 6.9 hereof, the equal proportionate units into which such
series (or class or subseries of a series) of Shares shall be divided
from time to time. The term "Shares" includes fractions of Shares as
well as whole Shares.

(n) "Shareholder Servicing Agent" means a party furnishing
services to the Trust pursuant to any shareholder servicing contract
described in Section 4.4 hereof.

<PAGE>

(o) "Transfer Agent" means a party furnishing services to the
Trust pursuant to any transfer agency contract described in Section 4.4
hereof.

(p) "Trust" means the trust created hereby.

(q) "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the
account of the Trust or the Trustees, including, without limitation,
any and all property allocated or belonging to any series of Shares
pursuant to Section 6.9 hereof.

(r) "Trustees" means the persons who have signed the
Declaration, so long as they shall continue in office in accordance
with the terms hereof, and all other persons who may from time to time
be duly elected or appointed, qualified and serving as Trustees in
accordance with the provisions hereof, and reference herein to a
Trustee or the Trustees shall refer to such person or persons in their
capacity as trustees hereunder unless the context otherwise requires.

ARTICLE II

TRUSTEES

Section 2.1. Number of Trustees. The number of Trustees shall
be such number as shall be fixed from time to time by a written instrument
signed by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be less than three nor more than 15.

Section 2.2. Term of Office of Trustees. Subject to the
provisions of Section 16(a) of the 1940 Act, the Trustees shall hold office
during the lifetime of this Trust and until its termination as hereinafter
provided; except (a) that any Trustee may resign his trust (without need for
prior or subsequent accounting) by an instrument in writing signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified therein; (b) that any Trustee may be
removed with cause, at any time by written instrument, signed by at least
two-thirds of the remaining Trustees, specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired or who has become incapacitated by illness or injury may be retired by
written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (d) a Trustee may be removed at any meeting of
Shareholders by a vote of two-thirds of the outstanding Shares of each series.
Upon the resignation or removal of a Trustee, or his otherwise ceasing to be a
Trustee, he shall execute and deliver such documents as the remaining Trustees
shall require for the purpose of conveying to the Trust or the remaining
Trustees any Trust Property held in

<PAGE>

the name of the resigning or removed Trustee. Upon the incapacity or death of
any Trustee, his legal representative shall execute and deliver on his behalf
such documents as the remaining Trustees shall require as provided in the
preceding sentence.

Section 2.3. Resignation and Appointment of Trustees. In case
of the declination, death, resignation, retirement, removal or incapacity of any
of the Trustees, or in case a vacancy shall, by reason of an increase in number,
or for any other reason, exist, the remaining Trustees shall fill such vacancy
by appointing such other individual as they in their discretion shall see fit.
Such appointment shall be evidenced by a written instrument signed by a majority
of the Trustees in office. Any such appointment shall not become effective,
however, until the person named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be bound by
the terms of the Declaration. Within twelve months of such appointment, the
Trustees shall cause notice of such appointment to be mailed to each Shareholder
at his address as recorded on the books of the Trustees. An appointment of a
Trustee may be made by the Trustees then in office and notice thereof mailed to
Shareholders as aforesaid in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. The power of appointment is subject to the provisions of Section 16(a)
of the 1940 Act.

Section 2.4. Vacancies. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created pursuant to
the terms of this Declaration. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.3, the
Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon the
Trustees by the Declaration. A written instrument certifying the existence of
such vacancy signed by a majority of the Trustees shall be conclusive evidence
of the existence of such vacancy.

Section 2.5. Delegation of Power to Other Trustees. Any
Trustee may, by power of attorney, delegate his power for a period not exceeding
six months at any one time to any other Trustee or Trustees; provided that in no
case shall fewer than two Trustees personally exercise the powers granted to the
Trustees under the Declaration except as herein otherwise expressly provided.

<PAGE>

ARTICLE III

POWERS OF TRUSTEES

Section 3.1. General. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property

and business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as the Trustees deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. Any determination as to what is in the interests of the
Trust made by the Trustees in good faith shall be conclusive. In construing the
provisions of the Declaration, the presumption shall be in favor of a grant of
power to the Trustees.

The enumeration of any specific power herein shall not be
construed as limiting the aforesaid power. Such powers of the Trustees may be
exercised without order of or resort to any court.

Section 3.2. Investments. (a) The Trustees shall have the
power:

(i) to conduct, operate and carry on the business of
an investment company;

(ii) to subscribe for, invest in, reinvest in, purchase
or otherwise acquire, own, hold, pledge, sell, assign, transfer,
exchange, distribute, lend or otherwise deal in or dispose of U.S. and
foreign currencies, any form of gold or other precious metal, commodity
contracts, any form of option contract, contracts for the future
acquisition or delivery of fixed income or other securities, and
securities of every nature and kind, including, without limitation, all
types of bonds, debentures, stocks, negotiable or non-negotiable
instruments, obligations, evidences of indebtedness, certificates of
deposit or indebtedness, commercial paper, repurchase agreements,
bankers' acceptances, and other securities of any kind, issued,
created, guaranteed or sponsored by any and all Persons, including,
without limitation,

<PAGE>

(A) states, territories and possessions of the United States
and the District of Columbia and any political subdivision, agency or
instrumentality of any such Person,

(B) the U.S. Government, any foreign government, any political
subdivision or any agency or instrumentality of the U.S. Government, any foreign
government or any political subdivision of the U.S. Government or any foreign
government,

(D) any bank or savings institution, or

(E) any corporation or organization organized under the laws
of the United States or of any state, territory or possession thereof, or under
any foreign law;

or in "when issued" contracts for any such securities, to retain Trust assets in
cash and from time to time change the securities or obligations in which the
assets of the Trust are invested; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investments
of every kind and description, including, without limitation, the right to
consent and otherwise act with respect thereto, with power to designate one or
more Persons to exercise any of said rights, powers and privileges in respect of
any of said investments; and

(iii) to carry on any other business in connection with
or incidental to any of the foregoing powers, to do everything
necessary, proper or desirable for the accomplishment of any purpose or
the attainment of any object or the furtherance of any power
hereinbefore set forth, and to do every other act or thing incidental
or appurtenant to or connected with the aforesaid purposes, objects or
powers.

(b) The Trustees shall not be limited to investing in
securities or obligations maturing before the possible termination of the Trust,
nor shall the Trustees be limited by any law limiting the investments which may
be made by fiduciaries.

Section 3.3. Legal Title. Legal title to all Trust Property
shall be vested in the Trustees as joint tenants except that the Trustees shall
have power to cause legal title to any Trust Property to be held by or in the
name of one or more of the Trustees, or in the name of the Trust, or in the name
of any other Person or nominee, on such terms as the Trustees may determine. The
right, title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee, such Trustee shall automatically
cease to have any right, title or interest in any of the Trust Property,

<PAGE>

and the right, title and interest of such Trustee in the Trust Property shall
vest automatically in the remaining Trustees. Such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered.

Section 3.4. Issuance and Repurchase of Securities. The
Trustees shall have the power to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal
in Shares and, subject to the provisions set forth in Articles VII, VIII and IX
and Section 6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds of the Trust or other Trust

Property whether capital or surplus or otherwise, to the full extent now or
hereafter permitted by the laws of the Commonwealth of Massachusetts governing
business corporations.

Section 3.5. Borrowing Money; Lending Trust Property. The
Trustees shall have power to borrow money or otherwise obtain credit and to
secure the same by mortgaging, pledging or otherwise subjecting as security the
Trust Property, to endorse, guarantee, or undertake the performance of any
obligation, contract or engagement of any other Person and to lend Trust
Property.

Section 3.6. Delegation; Committees. The Trustees shall have
power to delegate from time to time to such of their number or to officers,
employees or agents of the Trust the doing of such things and the execution of
such instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.

Section 3.7. Collection and Payment. Subject to Section 6.9
hereof, the Trustees shall have power to collect all property due to the Trust;
to pay all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which any
property is owed to the Trust; and to enter into releases, agreements and other
instruments.

Section 3.8. Expenses. Subject to Section 6.9 hereof, the
Trustees shall have the power to incur and pay any expenses which in the opinion
of the Trustees are necessary or incidental to carry out any of the purposes of
the Declaration, and to pay reasonable compensation from the funds of the Trust
to themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees.

Section 3.9. Manner of Acting; By-Laws. Except as otherwise
provided herein or in the By-Laws, any action to be taken by the Trustees may be
taken by a majority of the Trustees present at a meeting of Trustees at which a
quorum is present, including any meeting held by means of a conference telephone
circuit or similar communications equipment by means of which all

<PAGE>

persons participating in the meeting can hear each other, or by written consents
of all the Trustees. The Trustees may adopt By-Laws not inconsistent with this
Declaration to provide for the conduct of the business of the Trust and may
amend or repeal such By-Laws to the extent such power is not reserved to the
Shareholders.

Section 3.10. Miscellaneous Powers. The Trustees shall have
the power to: (a) employ or contract with such Persons as the Trustees may deem
desirable for the transaction of the business of the Trust; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) remove
Trustees or fill vacancies in or add to their number, elect and remove such
officers and appoint and terminate such agents or employees as they consider

appropriate, and appoint from their own number, and terminate, any one or more
committees which may exercise some or all of the power and authority of the
Trustees as the Trustees may determine; (d) purchase, and pay for out of Trust
Property, insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, any Investment Adviser, Administrator, Distributor, selected
dealers or independent contractors of the Trust against all claims arising by
reason of holding any such position or by reason of any action taken or omitted
by any such Person in such capacity, whether or not constituting negligence, or
whether or not the Trust would have the power to indemnify such Person against
such liability; (e) establish pension, profit-sharing, Share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees or
agents of the Trust; (f) to the extent permitted by law, indemnify any person
with whom the Trust has dealings, including any Investment Adviser,
Administrator, Custodian, Distributor, Transfer Agent, Shareholder Servicing
Agent and any dealer, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine and
change the fiscal year of the Trust and the method by which its accounts shall
be kept; and (i) adopt a seal for the Trust, provided, that the absence of such
seal shall not impair the validity of any instrument executed on behalf of the
Trust.

Section 3.11. Principal Transactions. Except in transactions
permitted by the 1940 Act, or any order of exemption issued by the Commission,
the Trustees shall not, on behalf of the Trust, buy any securities (other than
Shares) from or sell any securities (other than Shares) to, or lend any assets
of the Trust to, any Trustee or officer of the Trust or any firm of which any
such Trustee or officer is a member acting as principal, or have any such
dealings with any Investment Adviser, Administrator, Shareholder Servicing
Agent, Custodian, Distributor or Transfer Agent or with any Interested Person of
such Person; but the Trust may, upon customary terms, employ any such Person, or
firm or company in which such Person is an Interested Person, as broker, legal
counsel, registrar, transfer agent, dividend disbursing agent or custodian. The
Trustees are

<PAGE>

specifically authorized to engage the service of The Chase Manhattan Bank and
its affiliates, to act as broker, as an agent or as a principal, subject to the
provisions of the 1940 Act and other applicable laws, to execute transactions
and to provide other services with respect to the Trust or any series of the
Trust so designated, in the Trustees' discretion as fiduciary, including the
purchase of any securities currently distributed or currently underwritten by
The Chase Manhattan Bank or its affiliates.

Section 3.12. Trustees and Officers as Shareholders. Except as
hereinafter provided, no officer, Trustee or Member of the Advisory Board of the
Trust, and no member, partner, officer, director or trustee of the Investment
Adviser, Administrator or of the Distributor, and no Investment Adviser,
Administrator or Distributor of the Trust, shall take long or short positions in
the securities issued by the Trust. The foregoing provision shall not prevent:

(a) The Distributor from purchasing Shares from the Trust if

such purchases are limited (except for reasonable allowances for
clerical errors, delays and errors of transmission and cancellation of
orders) to purchases for the purpose of filling orders for Shares
received by the Distributor and provided that orders to purchase from
the Trust are entered with the Trust or the Custodian promptly upon
receipt by the Distributor of purchase orders for Shares, unless the
Distributor is otherwise instructed by its customer;

(b) The Distributor from purchasing Shares as agent for the
account of the Trust;

(c) The purchase from the Trust or from the Distributor of
Shares by any officer, Trustee or member of the Advisory Board of the
Trust or by any member, partner, officer, director or trustee of the
Investment Adviser or of the Distributor at a price not lower than the
net asset value of the Shares at the moment of such purchase, provided
that any such sales are only to be made pursuant to an offer described
in the Trust's current prospectus or statement of additional
information; or

(d) The Investment Adviser, the Distributor, or any of their
officers, partners, directors or trustees from purchasing Shares prior
to the effective date of the Trust's Registration Statement under the
Securities Act of 1933, as amended, relating to the Shares.

<PAGE>

ARTICLE IV

INVESTMENT ADVISER, DISTRIBUTOR,
ADMINISTRATOR, TRANSFER AGENT AND SHAREHOLDER SERVICING AGENTS

Section 4.1. Investment Adviser. Subject to a Majority
Shareholder Vote of the Shares of each series affected thereby (except to the
extent such Majority Shareholder Vote is not required by the 1940 Act), the
Trustees may in their discretion from time to time enter into one or more
investment advisory or management contracts whereby the other party to each such
contract shall undertake to furnish the Trust such management, investment
advisory, statistical and research facilities and services, promotional
activities, and such other facilities and services, if any, with respect to one
or more series of Shares, as the Trustees shall from time to time consider
desirable and all upon such terms and conditions as the Trustees may in their
discretion determine. Notwithstanding any provision of the Declaration, the
Trustees may delegate to the Investment Adviser authority (subject to such
general or specific instructions as the Trustees may from time to time adopt) to
effect purchases, sales, loans or exchanges of assets of the Trust on behalf of
the Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of the
Investment Adviser (and all without further action by the Trustees). Any of such
purchases, sales, loans or exchanges shall be deemed to have been authorized by
all the Trustees. Such services may be provided by one or more Persons.

Section 4.2. Distributor. The Trustees may in their discretion
from time to time enter into one or more distribution contracts providing for
the sale of Shares whereby the Trust may either agree to sell the Shares to the
other party to any such contract or appoint any such other party its sales agent
for such Shares. In either case, any such contract shall be on such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of the Declaration
or the By-Laws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer agreements with registered
securities dealers to further the purpose of the distribution or repurchase of
the Shares. Such services may be provided by one or more Persons.

Section 4.3. Administrator. The Trustees may in their
discretion from time to time enter into one or more administrative services
contracts whereby the other party to each such contract shall undertake to
furnish such administrative services to the Trust as the Trustees shall from
time to time consider desirable and all upon such terms and conditions as the
Trustees may in their discretion determine, provided that such terms and
conditions are not inconsistent with the provisions of

<PAGE>

this Declaration or the By-Laws. Such services may be provided by one or more
persons.

Section 4.4. Transfer Agent and Shareholder Servicing Agents.
The Trustees may in their discretion from time to time enter into one or more
transfer agency and shareholder servicing contracts whereby the other party to
each such contract shall undertake to furnish such transfer agency and/or
shareholder services to the Trust or to shareholders of the Trust as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of this
Declaration or the By-Laws. Such services may be provided by one or more
Persons. Except as otherwise provided in the applicable shareholder servicing
contract, a Shareholder Servicing Agent shall be deemed to be the record owner
of outstanding Shares beneficially owned by customers of such Shareholder
Servicing Agent for whom it is acting pursuant to such shareholder servicing
contract.

Section 4.5. Parties to Contract. Any contract of the
character described in Section 4.1, 4.2, 4.3 or 4.4 of this Article IV or any
Custodian contract may be entered into with any Person, although one or more of
the Trustees or officers of the Trust may be an officer, partner, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence of
any such relationship; nor shall any Person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of any such contract or accountable for any profit realized
directly or indirectly therefrom, provided that the contract when entered into

was not inconsistent with the provisions of the Article IV or the By-Laws. The
same Person may be the other party to contracts entered into pursuant to
Sections 4.1, 4.2, 4.3 and 4.4 above or any Custodian contract, and any
individual may be financially interested or otherwise affiliated with Persons
who are parties to any or all of the contracts mentioned in this Section 4.5.

ARTICLE V

LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS

Section 5.1. No Personal Liability of Shareholders, Trustees;
Etc. No Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs of
the Trust. No Trustee, officer, employee or agent of the Trust shall be subject
to any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, wilful misfeasance, gross negligence or
reckless disregard

<PAGE>

for his duty to such Person; and all such Persons shall look solely to the Trust
Property for satisfaction of claims of any nature arising in connection with the
affairs of the Trust. If any Shareholder, Trustee, officer, employee, or agent,
as such, of the Trust, is made a party to any suit or proceeding to enforce any
such liability, he shall not, on account thereof, be held to any personal
liability. The Trust shall indemnify and hold each Shareholder harmless from and
against all claims and liabilities to which such Shareholder may become subject
by reason of his being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. The rights accruing to a
Shareholder under this Section 5.1 shall not exclude any other right to which
such Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Notwithstanding any other provision of this Declaration to the contrary, no
Trust Property shall be used to indemnify or reimburse any Shareholder of any
Shares of any series other than Trust Property allocated or belonging to such
series.

Section 5.2. Non-Liability of Trustees, Etc. No Trustee,
officer, employee or agent of the Trust shall be liable to the Trust, its
Shareholders, or to any Shareholder, Trustee, officer, employee, or agent
thereof for any action or failure to act (including without limitation the
failure to compel in any way any former or acting Trustee to redress any breach
of trust) except for his own bad faith, wilful misfeasance, gross negligence or
reckless disregard of his duties.

Section 5.3. Mandatory Indemnification. (a) Subject to the
exceptions and limitations contained in paragraph (b) below:

(i) every person who is or has been a Trustee or
officer of the Trust shall be indemnified by the Trust against all
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof;

(ii) the words "claim", "action", "suit", or
"proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal, administrative or other, including appeals), actual
or threatened; and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.

<PAGE>

(b) No indemnification shall be provided hereunder to a
Trustee or officer:

(i) against any liability to the Trust or the
Shareholders by reason of a final adjudication by the court or other
body before which the proceeding was brought that he engaged in wilful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;

(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or

(iii) in the event of a settlement involving a payment by
a Trustee or officer or other disposition not involving a final
adjudication as provided in paragraph (b) (i) or (b) (ii) above
resulting in a payment by a Trustee or officer. unless there has been
either a determination that such Trustee or officer did not engage in
wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office by the court or
other body approving the settlement or other disposition or by a
reasonable determination, based upon a review of readily available
facts (as opposed to a full trial-type inquiry) that he did not engage
in such conduct:

(A) by vote of a majority of the Disinterested
Trustees acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter); or

(B) by written opinion of independent legal counsel.

The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not

affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a Person
who has ceased to be such Trustee or officer and shall inure to the
benefit of the heirs, executors and administrators of such Person.
Nothing contained herein shall affect any rights to indemnification to
which personnel other than Trustees and officers may be entitled by
contract or otherwise under law.

(c) Expenses of preparation and presentation of a defense to
any claim, action, suit, or proceeding of the character described in paragraph
(a) of this Section 5.3 shall be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not

<PAGE>

entitled to indemnification under this Section 5.3, provided that either:

(i) such undertaking is secured by a surety bond or some
other appropriate security or the Trust shall be insured against losses
arising out of any such advances; or

(ii) a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested Trustees then
in office act on the matter) or an independent legal counsel in a
written opinion, shall determine, based upon a review of readily
available facts (as opposed to a full trial-type inquiry), that there
is reason to believe that the recipient ultimately will be found
entitled to indemnification.

As used in this Section 5.3 a "Disinterested Trustee" is one
(i) who is not an "Interested Person" of the Trust (including anyone who has
been exempted from being an "Interested Person" by any rule, regulation or order
of the Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.

Section 5.4. No Bond Required of Trustees. No Trustee shall
be obligated to give any bond or other security for the performance of any of
his duties hereunder.

Section 5.5. No Duty of Investigation; Notice in Trust
Instruments, Etc. No purchaser, lender, Shareholder Servicing Agent, Transfer
Agent or other Person dealing with the Trustees or any officer, employee or
agent of the Trust shall be bound to make any inquiry concerning the validity of
any transaction purported to be made by the Trustees or by said officer,
employee or agent or be liable for the application of money or property paid,
loaned, or delivered to or on the order of the Trustees or of said officer,
employee or agent. Every obligation, contract, instrument, certificate, Share,
other security of the Trust or undertaking, and every other act or thing
whatsoever executed in connection with the Trust shall be conclusively presumed
to have been executed or done by the executors thereof only in their capacity as

Trustees under the Declaration or in their capacity as officers, employees or
agents of the Trust. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking made or issued by
the Trustees shall recite that the same is executed or made by them not
individually, but as Trustees under the Declaration, and that the obligations of
any such instrument are not binding upon any of the Trustees or Shareholders
individually, but bind only the trust estate, and may contain any further
recital which they or he may deem appropriate, but the omission of such recital
shall not operate to bind any of the Trustees or Shareholders individually. The
Trustees shall at all times maintain insurance for the protection of the Trust
Property, the Trust's

<PAGE>

Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.

Section 5.6. Reliance on Experts, Etc. Each Trustee and
officer or employee of the Trust shall, in the performance of his duties, be
fully and completely justified and protected with regard to any act or any
failure to act resulting from reliance in good faith upon the books of account
or other records of the Trust, upon an opinion of counsel, or upon reports made
to the Trust by any of its officers or employees or by any Investment Adviser,
Administrator, Distributor, Transfer Agent, Custodian, Shareholder Servicing
Agent, selected dealers, accountants, appraisers or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of the
Trust, regardless of whether such counsel or expert may also be a Trustee.

ARTICLE VI

SHARES OF BENEFICIAL INTEREST

Section 6.1. Beneficial Interest. The interest of the
beneficiaries hereunder may be divided into transferable Shares of Beneficial
Interest (par value $0.001 per share), all of one class, which may be divided
into one or more series as provided in Section 6.9 hereof. Each Share shall
represent an equal proportionate beneficial interest in the net assets of the
Trust with each other Share, except that, if the Shares shall have been divided
into one or more series pursuant to Section 6.9 hereof, each Share of a
particular series shall represent an equal proportionate beneficial interest in
the net assets pertaining to such series with each other Share of such series.
The number of Shares authorized hereunder is unlimited. All Shares issued
hereunder including, without limitation, Shares issued in connection with a
dividend in Shares or a split of Shares, shall be fully paid and non-assessable.

Section 6.2. Rights of Shareholders. The ownership of the
Trust Property of every description and the right to conduct any business
hereinbefore described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust

nor can they be called upon to assume any losses of the Trust or suffer an
assessment of any kind by virtue of their ownership of Shares. The Shares shall
be personal property giving only the rights specifically set forth in the
Declaration. The Shares shall not entitle the holder to preference, preemptive,
appraisal, conversion or exchange rights, except as the Trustees may determine
with respect to any series of Shares.

<PAGE>

Section 6.3. Trust Only. It is the intention of the Trustees
to create only the relationship of Trustee and beneficiary between the Trustees
and each Shareholder from time to time. It is not the intention of the Trustees
to create a general partnership, limited partnership, joint stock association,
corporation, limited liability company, bailment or any form of legal
relationship other than a trust. Nothing in the Declaration shall be construed
to make the Shareholders, either by themselves or with the Trustees, partners or
members of a joint stock association.

Section 6.4. Issuance of Shares. The Trustees, in their
discretion may, from time to time without vote of the Shareholders, issue
Shares, in addition to the then issued and outstanding Shares and Shares held in
the treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times, and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with, the
assumption of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares. The Trustees may from time to
time divide or combine the Shares of any series into a greater or lesser number
without thereby changing their proportionate beneficial interests in Trust
Property allocated or belonging to such series. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or 1/1,000ths
of a Share or integral multiples thereof.

Section 6.5. Register of Shares. A register or registers shall
be kept at the principal office of the Trust or at an office of the Transfer
Agent or any one or more Shareholder Servicing Agents which register or
registers, taken together, shall contain the names and addresses of the
Shareholders and the number of Shares held by them respectively and a record of
all transfers thereof. Such register or registers shall be conclusive as to who
are the holders of the Shares and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of Shareholders. No
Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to him as herein or in the By-Laws
provided, until he has given his address to the Transfer Agent, the Shareholder
Servicing Agent which is the agent of record for such Shareholder, or such other
officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of Share
certificates and promulgate appropriate rules and regulations as to their use.

Section 6.6. Transfer of Shares. Shares shall be

transferable on the records of the Trust only by the record holder thereof or by
his agent thereunto duly authorized in writing, upon delivery to the Trustees,
the Transfer Agent or the

<PAGE>

Shareholder Servicing Agent which is the agent of record for such Shareholder,
of a duly executed instrument of transfer, together with any certificate or
certificates (if issued) for such Shares, and such evidence of the genuineness
of each such execution and authorization and of other matters as may reasonably
be required. Upon such delivery the transfer shall be recorded on the register
of the Trust. Until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereunder and neither
the Trustees nor any Transfer Agent, Shareholder Servicing Agent or registrar
nor any officer, employee or agent of the Trust shall be affected by any notice
of the proposed transfer.

Any person becoming entitled to any Shares in consequence of
the death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Trustees, the
Transfer Agent or the Shareholder Servicing Agent which is the agent of record
for such Shareholder; but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent, Shareholder Servicing Agent or
registrar nor any officer or agent of the Trust shall be affected by any notice
of such death, bankruptcy or incompetence, or other operation of law.

Section 6.7. Notices. Any and all notices to which any
Shareholder may be entitled and any and all communications shall be deemed duly
served or given if mailed, postage prepaid, addressed to any Shareholder of
record at his last known address as recorded on the register of the Trust.

Section 6.8. Voting Powers. The Shareholders shall have power
to vote only (i) for the removal of Trustees as provided in Section 2.2 hereof,
(ii) with respect to any investment advisory or management contract as provided
in Section 4.1 hereof, (iii) with respect to termination of the Trust as
provided in Section 9.2 hereof, (iv) with respect to any amendment of this
Declaration to the extent and as provided in Section 9.3 hereof, (v) with
respect to any merger, consolidation or sale of assets as provided in Sections
9.4 and 9.6 hereof, (vi) with respect to incorporation of the Trust or any
series to the extent and as provided in Sections 9.5 and 9.6 hereof, (vii) to
the same extent as the stockholders of a Massachusetts business corporation as
to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (viii) with respect to such additional matters relating
to the Trust as may be required by the Declaration, the By-Laws or any
registration of the Trust with the Commission (or any successor agency) or any
state, or as the Trustees may consider necessary or desirable. Each whole Share
shall be entitled to one vote as to any matter on which it is entitled to

<PAGE>

vote and each fractional Share shall be entitled to a proportionate fractional
vote, except that Shares held in the treasury of the Trust shall not be voted.
Shares shall be voted by individual series on any matter submitted to a vote of
the Shareholders of the Trust except as provided in Section 6.9(g) hereof. There
shall be no cumulative voting in the election of Trustees. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required by law, the Declaration or the By-Laws to be taken by
Shareholders. At any meeting of shareholders of the Trust or of any series of
the Trust, without limiting any right or power which it may otherwise have by
virtue of being the record owner of Shares, (a) a Shareholder Servicing Agent
may vote any shares as to which such Shareholder Servicing Agent is the agent of
record and which are not otherwise represented in person or by proxy at the
meeting, proportionately in accordance with the votes cast by holders of all
shares otherwise represented at the meeting in person or by proxy as to which
such Shareholder Servicing Agent is the agent of record and (b) any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for quorum purposes. The By-Laws may include further provisions for Shareholder
votes and meetings and related matters.

Section 6.9. Series Designation. As set forth in Appendix I
hereto, the Trustees have authorized the division of Shares into series, as
designated and established pursuant to the provisions of Appendix I and this
Section 6.9. The Trustees, in their discretion, may authorize the division of
Shares into one or more additional series, and the different series shall be
established and designated, and the variations in the relative rights,
privileges and preferences as between the different series shall be fixed and
determined by the Trustees upon and subject to the following provisions:

(a) All Shares shall be identical except that there may be
such variations as shall be fixed and determined by the Trustees
between different series as to purchase price, right of redemption and
the price, terms and manner of redemption, and special and relative
rights as to dividends and on liquidation.

(b) The number of authorized Shares and the number of Shares
of each series that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued Shares or any Shares previously
issued and reacquired of any series into one or more series that may be
established and designated from time to time. The Trustees may hold as
treasury shares (of the same or some other series), reissue for such
consideration and on such terms as they may determine, or cancel any
Shares of any series reacquired by the Trust at their discretion from
time to time.

<PAGE>

with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to
that series for all purposes, subject only to the rights of creditors
of such series, and shall be so recorded upon the books of account of
the Trust. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular series, the Trustees shall
allocate them among any one or more of the series established and
designated from time to time in such manner and on such basis as they,
in their sole discretion, deem fair and equitable. Each such allocation
by the Trustees shall be conclusive and binding upon the Shareholders
of all series for all purposes. No holder of Shares of any particular
series shall have any claim on or right to any assets allocated or
belonging to any other series of Shares.

(d) The assets belonging to each particular series shall be
charged with the liabilities of the Trust in respect of that series and
all expenses, costs, charges and reserves attributable to that series,
and any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any
particular series shall be allocated and charged by the Trustees to and
among any one or more of the series established and designated from
time to time in such manner and on such basis as the Trustees in their
sole discretion deem fair and equitable. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the holders of all series for all
purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
Shareholders. Under no circumstances shall the assets allocated or
belonging to any particular series be charged with liabilities
attributable to any other series. All Persons who have extended credit
which has been allocated to a particular series, or who have a claim or
contract which has been allocated to any particular series, shall look
only to the assets of that particular series for payment of such
credit, claim or contract.

(e) The power of the Trustees to invest and reinvest the Trust
Property allocated or belonging to any particular series shall be
governed by Section 3.2 hereof unless otherwise provided in the
instrument of the Trustees establishing such series which is
hereinafter described.

<PAGE>

(f) Each Share of a series shall represent a beneficial
interest in the net assets allocated or belonging to such series only,

and such interest shall not extend to the assets of the Trust
generally. Dividends and distributions on Shares of a particular series
may be paid with such frequency as the Trustees may determine, which
may be monthly or otherwise, pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees
may determine, to the holders of Shares of that series only, from such
of the income and capital gains, accrued or realized, from the assets
belonging to that series, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that series.
All dividends and distributions on Shares of a particular series shall
be distributed pro rata to the holders of that series in proportion to
the number of Shares of that series held by such holders at the date
and time of record established for the payment of such dividends or
distributions. Shares of any particular series of the Trust may be
redeemed solely out of Trust Property allocated or belonging to that
series. Upon liquidation or termination of a series of the Trust,
Shareholders of such series shall be entitled to receive a pro rata
share of the net assets of such series only.

(g) Notwithstanding any provision hereof to the contrary, on
any matter submitted to a vote of the Shareholders of the Trust, all
Shares then entitled to vote shall be voted by individual series,
except that (i) when required by the 1940 Act to be voted in the
aggregate, Shares shall not be voted by individual series, and (ii)
when the Trustees have determined that the matter affects only the
interests of Shareholders of one or more series, only Shareholders of
such series shall be entitled to vote thereon.

(h) The establishment and designation of any series of Shares
shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and
designation and the relative rights and preferences of such series, or
as otherwise provided in such instrument. At any time that there are no
Shares outstanding of any particular series previously established and
designated, the Trustees may by an instrument executed by a majority of
their number abolish that series and the establishment and designation
thereof. Each instrument referred to in this paragraph shall have the
status of an amendment to this Declaration.

(i) Notwithstanding anything in this Declaration to the
contrary, the Trustees may, in their discretion, authorize the division
of Shares of any series into shares of one or more classes of such
series. All Shares of a class shall be identical with each other and
with the Shares

<PAGE>

of each other class or subseries of the same series except for such
varieties between classes as may be approved by the Board of Trustees
and be permitted under the 1940 Act or pursuant to any exemptive order
issued by the Securities and Exchange Commission.

ARTICLE VII

REDEMPTIONS

Section 7.1. Redemptions. In case any Shareholder at any time
desires to dispose of his Shares, he may deposit his certificate or certificates
therefor, duly endorsed in blank or accompanied by an instrument of transfer
executed in blank, or if the Shares are not represented by any certificates, a
written request or other such form of request as the Trustees may from time to
time authorize, at the office of the Transfer Agent, the Shareholder Servicing
Agent which is the agent of record for such Shareholder, or at the office of any
bank or trust company, either in or outside of Massachusetts, which is a member
of the Federal Reserve System and which the said Transfer Agent or the said
Shareholder Servicing Agent has designated in writing for that purpose, together
with an irrevocable offer in writing in a form acceptable to the Trustees to
sell the Shares represented thereby to the Trust at the net asset value thereof
per Share, determined as provided in Section 8.1 hereof, next after such
deposit. Payment for said Shares shall be made to the Shareholder within seven
days after the date on which the deposit is made, unless (i) the date of payment
is postponed pursuant to Section 7.2 hereof, or (ii) the receipt, or
verification of receipt, of the purchase price for the Shares to be redeemed is
delayed, in either of which events payment may be delayed beyond seven days.

Section 7.2. Suspension of Right of Redemption. The
Trust may declare a suspension of the right of redemption or postpone the date
of payment of the redemption proceeds for the whole or any part of any period
(i) during which the New York Stock Exchange is closed other than customary
week-end and holiday closings, (ii) during which trading on the New York Stock
Exchange is restricted, (iii) during which an emergency exists as a result of
which disposal by the Trust of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Trust fairly to
determine the value of its net assets, or (iv) during any other period when the
Commission may for the protection of security holders of the Trust by order
permit suspension of the right of redemption or postponement of the date of
payment of the redemption proceeds; provided that applicable rules and
regulations of the Commission shall govern as to whether the conditions
prescribed in (ii), (iii) or (iv) exist. Such suspension shall take effect at
such time as the Trust shall specify but not later than the close of business on
the business day next following the declaration of suspension, and thereafter
there shall be no right of redemption or payment of the

<PAGE>

redemption proceeds until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which, in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the net asset value
existing after the termination of the suspension.

Section 7.3. Redemption of Shares, Disclosure of Holding. If
the Trustees shall at any time and in good faith, be of the opinion that direct
or indirect ownership of Shares or other securities of the Trust has or may
become concentrated in any Person to an extent which would disqualify the Trust
as a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code"), then the Trustees shall have the power by lot or other
means deemed equitable by them (i) to call for redemption by any such Person a
number, or principal amount. of Shares or other securities of the Trust
sufficient to maintain or bring the direct or indirect ownership of shares or
other securities of the Trust into conformity with the requirements for such
qualification, and (ii) to refuse to transfer or issue Shares or other
securities of the Trust to any Person whose acquisition of the Shares or other
securities of the Trust in question would result in such disqualification. The
redemption shall be effected at the redemption price and in the manner provided
in Section 7.1 hereof.

The holders of Shares or other securities of the Trust shall
upon demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Code, or to comply
with the requirements of any other authority. Upon the failure of a Shareholder
to disclose such information and to comply with such demand of the Trustees, the
Trust shall have the power to redeem such Shares at a redemption price
determined in accordance with Section 7.1 hereof.

Section 7.4. Redemptions of Accounts of Less than $500. The
Trustees shall have the power at any time to redeem Shares of any Shareholder at
a redemption price determined in accordance with Section 7.1 hereof if at such
time the aggregate net asset value of the Shares in such Shareholder's account
is less, than $500. A Shareholder shall be notified that the value of his
account is less than $500 and allowed 60 days to make an additional investment
before the redemption is effected.

<PAGE>

ARTICLE VIII

DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS

The Trustees, in their absolute discretion, may prescribe and
shall set forth in the By-Laws or in a duly adopted vote or votes of the
Trustees such bases and times for determining the per Share net asset value of
the Shares or net income, or the declaration and payment of dividends and
distributions, as they may deem necessary or desirable.

ARTICLE IX

DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.

Section 9.1. Duration. The Trust shall continue without
limitation of time but subject to the provisions of this Article IX.

Section 9.2. Termination of Trust. (a) The Trust may be
terminated (i) by a Majority Shareholder Vote of the holders of each series of
its Shares, or (ii) by the Trustees by written notice to the Shareholders. Any
series of the Trust may be terminated (i) by a Majority Shareholder Vote of the
holders of Shares of that series, or (ii) by the Trustees by written notice to
the Shareholders of that series. Upon the termination of the Trust or any series
of the Trust:

(i) The Trust or series of the Trust shall carry on
no business except for the purpose of winding up its
affairs;

(ii) The Trustees shall proceed to wind up the affairs
of the Trust or series of the Trust and all the powers of the Trustees
under this Declaration shall continue until the affairs of the Trust or
series of the Trust shall have been wound up, including the power to
fulfill or discharge the contracts of the Trust or series of the Trust,
collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining Trust Property or
Trust Property of the series to one or more persons at public or
private sale for consideration which may consist in whole or in part of
cash, securities or other property of any kind, discharge or pay its
liabilities, and to do all other acts appropriate to liquidate its
business; provided, that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the Trust
Property shall require Shareholder approval in accordance with Section
9.4 hereof, and any sale, conveyance, assignment, exchange, transfer or
other disposition of all or substantially all of the Trust

<PAGE>

Property allocated or belonging to any series shall require the
approval of the Shareholders of such series as provided in Section 9.6
hereof; and

(iii) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary for their
protection, the Trustees may distribute the remaining Trust Property or
Trust Property of the series, in cash or in kind or partly in cash and
partly in kind, among the Shareholders of the Trust or the series
according to their respective rights.

(b) After termination of the Trust or series and distribution
to the Shareholders of the Trust or series as herein provided, a majority of the
Trustees shall execute and lodge among the records of the Trust an instrument in

writing setting forth the fact of such termination, and the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder with
respect to the Trust or series, and the rights and interests of all Shareholders
of the Trust or series shall thereupon cease.

Section 9.3. Amendment Procedure. (a) This Declaration may be
amended by a Majority Shareholder Vote of the Shareholders of the Trust or by
any instrument in writing, without a meeting, signed by a majority of the
Trustees and consented to by the holders of not less than a majority of the
Shares of the Trust. The Trustees may also amend this Declaration without the
vote or consent of Shareholders to designate series in accordance with Section
6.9 hereof (or to modify any provision of this Declaration to the extent deemed
necessary or appropriate by the Trustees to reflect such designation), to change
the name of the Trust, to amend, alter, modify or repeal any provision of this
Declaration with respect to any item provided that such amendment, alteration,
modification or repeal does not adversely affect the economic value or legal
rights of a Shareholder, or if they deem it necessary or advisable to conform
this Declaration to the requirements of applicable federal laws or regulations
or the requirements of the regulated investment company provisions of the
Internal Revenue Code of 1986, as amended, but the Trustees shall not be liable
for failing to do so.

(b) No amendment which the Trustees shall have determined
shall adversely affect the rights, privileges or interests of holders of a
particular series of Shares, and which would otherwise require a Majority
Shareholder Vote under paragraph (a) of this Section 9.3, but not the rights,
privileges or interests of holders of Shares of the Trust generally, may be made
except with the vote or consent by a Majority Shareholder Vote of such series.

<PAGE>

(c) Notwithstanding any other provision hereof, no amendment
may be made under this Section 9.3 which would change any rights with respect to
the Shares, or any series of Shares, by reducing the amount payable thereon upon
liquidation of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the Majority Shareholder Vote of the Shares or
that series of Shares. Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from personal liability of
the Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders.

(d) A certificate signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by the Shareholders or
by the Trustees as aforesaid or a copy of the Declaration, as amended, and
executed by a majority of the Trustees, shall be conclusive evidence of such
amendment when lodged among the records of the Trust.

(e) Notwithstanding any other provision hereof, until such
time as a Registration Statement under the Securities Act of 1933, as amended,
covering the first public offering of securities of the Trust shall have become
effective, this Declaration may be amended in any respect by the affirmative

vote of a majority of the Trustees or by an instrument signed by a majority of
the Trustees.

Section 9.4. Merger, Consolidation and Sale of Assets. The
Trust may merge or consolidate with any other corporation, association, trust or
other organization or may sell, lease or exchange all or substantially all of
the Trust Property (or all or substantially all of the Trust Property allocated
or belonging to a particular series of the Trust) including its good will, upon
such terms and conditions and for such consideration when and as authorized at
any meeting of Shareholders called for such purpose by the vote of the holders
of two-thirds of the outstanding shares of each affected series of the Trust or
by an instrument or instruments in writing without a meeting, consented to by
the vote of the holders of two-thirds of the outstanding Shares of each affected
series of the Trust; provided, however, that if such merger, consolidation,
sale, lease or exchange is recommended by the Trustees, the vote or written
consent by Majority Shareholder Vote shall be sufficient authorization; and any
such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. Nothing contained herein shall be construed as
requiring approval of Shareholders for any sale of assets in the ordinary course
of the business of the Trust.

Section 9.5. Incorporation, Reorganization. Subject
to a Majority Shareholder Vote, the Trustees may cause to be organized or assist
in organizing a corporation or corporations under the laws of any jurisdiction,
or any other trust, unit

<PAGE>

investment trust, partnership, association or other organization to take over
all of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation. trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. Subject to Section 9.4 hereof, the Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained in this Section 9.5 shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.

Section 9.6. Incorporation or Reorganization of Series. With
the approval of a Majority Shareholder Vote of any series, the Trustees may
sell, lease or exchange all of the Trust Property allocated or belonging to that
series, or cause to be organized or assist in organizing a corporation or
corporations under the laws of any other jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization, to take over

all of the Trust Property allocated or belonging to that series and to sell,
convey and transfer such Trust Property to any such corporation, trust, unit
investment trust, partnership, association, or other organization in exchange
for the shares or securities thereof or otherwise.

ARTICLE X

REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS

The Trustees shall at least semi-annually submit to the
Shareholders a written financial report of the transactions of the Trust,
including financial statements which shall at least annually be certified by
independent public accountants.

Whenever 10 or more Shareholders of record who have been such
for at least six months preceding the date of application, and who hold in the
aggregate either Shares having a net asset value of at least $25,000 or at least
1% of the Shares outstanding, whichever is less, shall apply to the Trustees in
writing, stating that they wish to communicate with other Shareholders with a
view to obtaining signatures to a request for a meeting of Shareholders for the
purpose of removing one or more Trustees pursuant to Section 2.2 hereof and
accompany such application with a form of communication and request which they
wish to transmit, the Trustees shall within five business days

<PAGE>

after receipt of such application either (a) afford to such applicants access to
a list of the names and addresses of all Shareholders as recorded on the books
of the Trust; or (b) inform such applicants as to the approximate number of
Shareholders of record, and the approximate cost of mailing to them the proposed
communication and form of request. If the Trustees elect to follow the course
specified in (b) above, the Trustees, upon the written request of such
applicants, accompanied by a tender of the material to be mailed and of the
reasonable expenses of mailing, shall, with reasonable promptness, mail such
material to all Shareholders of record, unless within five business days after
such tender the Trustees mail to such applicants and file with the Commission,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion.

ARTICLE XI

MISCELLANEOUS

Section 11.1. Filing. This Declaration, as amended, and any
subsequent amendment hereto shall be filed in the office of the Secretary of the
Commonwealth of Massachusetts and in such other place or places as may be
required under the laws of the Commonwealth of Massachusetts and may also be
filed or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and acknowledged

by a Trustee stating that such action was duly taken in a manner provided
herein, and unless such amendment or such certificate sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective upon
its filing. A restated Declaration, integrating into a single instrument all of
the provisions of the Declaration which are then in effect and operative, may be
executed from time to time by a majority of the Trustees and shall, upon filing
with the Secretary of the Commonwealth of Massachusetts, be conclusive evidence
of all amendments contained therein and may thereafter be referred to in lieu of
this original Declaration and the various amendments thereto.

Section 11.2. Governing Law. This Declaration is executed by
the Trustees and delivered in the Commonwealth of Massachusetts and with
reference to the laws thereof, and the rights of all parties and the validity
and construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.

Section 11.3. Counterparts. This Declaration may be
simultaneously executed in several counterparts, each of which shall be deemed
to be an original, and such counterparts,

<PAGE>

together, shall constitute one and the same instrument, which shall be
sufficiently evidenced by any such original counterpart.

Section 11.4. Reliance by Third Parties. Any certificate
executed by an individual who, according to the records of the Trust appears to
be a Trustee hereunder, certifying to: (i) the number or identity of Trustees or
Shareholders, (ii) the due authorization of the execution of any instrument or
writing, (iii) the form of any vote passed at a meeting of Trustees or
Shareholders, (iv) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements of
this Declaration, (v) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (vi) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.

Section 11.5. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986, as amended, or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration; provided however, that such determination shall not
affect any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.

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

Declaration in any jurisdiction.

<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this
instrument this 19th day of September, 1997.

-----------------------------
Sarah E. Jones
as Trustee
and not individually

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

as Trustee
and not individually

<PAGE>

STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )

September , 1997

Then personally appeared the above-named Sarah E. Jones who
acknowledged the foregoing instrument to be her free act and deed.

Before me,

----------------------
Notary Public

My commission expires:

<PAGE>

STATE OF TEXAS )

) ss.:
COUNTY OF HARRIS )

September , 1997

Then personally appeared the above-named who severally
acknowledged the foregoing instrument to be his free act and deed.

Before me,

----------------------
Notary Public

My commission expires:

<PAGE>

Appendix I

Mutual Fund Investment Trust

Establishment and
Designation of Series of Shares of
Beneficial Interest (without par value)

Pursuant to Section 6.9 of the Declaration of Trust, dated
September 19, 1997 (the "Declaration of Trust"), of the Mutual Fund Investment
Trust (the "Trust"), the Trustees of the Trust hereby establish and designate
fifteen initial series of Shares (as defined in the Declaration of Trust), such
series to have the following special and relative rights:

1. The series shall be respectively designated as follows:

Avesta Money Market Fund
Avesta Tax Free Money Market Fund
Avesta Tax Free Income Fund
Avesta New York Tax Free Income Fund
Avesta Short-Intermediate Term U.S. Government
Securities Fund
Avesta U.S. Government Securities Fund
Avesta Intermediate Term Bond Fund
Avesta Income Fund
Avesta Balanced Fund
Avesta Equity Income Fund
Avesta Core Equity Fund
Avesta Equity Growth Fund
Avesta Mid Cap Growth Fund
Avesta Small Capitalization Fund
Avesta International Equity Fund

When Shares of any of the above series are made available to
customers of an entity with which the Trust has entered into a shareholder
servicing or similar agreement, such series may be referred to by the
designation set forth above with an identifying prefix other than the word
"Avesta", to denote the services being offered by that entity to its customers
who own Shares of that series.

2. Each series shall be authorized to invest in cash,
securities, instruments and other property as from time to time described in the
Trust's then currently effective registration statement under the Securities Act
of 1933 to the extent pertaining to the offering of Shares of such series. Each
Share of each series shall be redeemable, shall be entitled to one vote or
fraction thereof in respect of a fractional share on matters on which shares of
that series shall be entitled to vote, shall represent a pro rata beneficial
interest in the assets allocated or belonging to such series, and shall be
entitled to receive its pro rata share of the net assets of such series upon
liquidation

<PAGE>

of the series, all as provided in Section 6.9 of the Declaration of Trust.

3. Shareholders of each series shall vote separately as a
class on any matter to the extent required by, and any matter shall be deemed to
have been effectively acted upon with respect to such series as provided in,
Rule 18f-3, as from time to time in effect, under the Investment Company Act of
1940, as amended, or any successor rule, and by the Declaration of Trust.

4. The assets and liabilities of the Trust shall be allocated
among these series as set forth in Section 6.9 of the Declaration of Trust.

5. Subject to the provisions of Section 6.9 and Article IX of
the Declaration of Trust, the Trustees (including any successor Trustees) shall
have the right at any time and from time to time to reallocate assets and
expenses or to change the designation of any series now or hereafter created, or
to otherwise change the special and relative rights of any such series.

<PAGE>

Appendix I

Mutual Fund Investment Trust

Establishment and
Designation of Series of Shares of
Beneficial Interest (without par value)

Pursuant to Section 6.9 of the Declaration of Trust, dated
September 19, 1997 (the "Declaration of Trust"), of the Mutual Fund Investment
Trust (the "Trust"), the Trustees of the Trust hereby hereby designate series of
Shares (as defined in the Declaration of Trust), such series to have the
following special and relative rights:

1. The series shall be respectively designated as follows:

Chase Money Market Fund
Chase Tax Free Money Market Fund
Chase Tax Free Income Fund
Chase New York Tax Free Income Fund
Chase Short-Intermediate Term U.S. Government
Securities Fund
Chase U.S. Government Securities Fund
Chase Intermediate Term Bond Fund
Chase Income Fund
Chase Balanced Fund
Chase Equity Income Fund
Chase Core Equity Fund
Chase Equity Growth Fund
Chase Mid Cap Growth Fund
Chase Small Capitalization Fund
Chase International Equity Fund

When Shares of any of the above series are made available to
customers of an entity with which the Trust has entered into a shareholder
servicing or similar agreement, such series may be referred to by the
designation set forth above with an identifying prefix other than the word
"Chase", to denote the services being offered by that entity to its customers
who own Shares of that series.

<PAGE>

of the series, all as provided in Section 6.9 of the Declaration of Trust.

4. The assets and liabilities of the Trust shall be allocated
among these series as set forth in Section 6.9 of the Declaration of Trust.

<PAGE>

BY-LAWS

OF THE

MUTUAL FUND INVESTMENT TRUST

ARTICLE I

DEFINITIONS

The terms "Commission", "Declaration", "Distributor",
"Investment Adviser", "Majority Shareholder Vote", "1940 Act",
"Shareholder","Shares", "Transfer Agent", "Trust", "Trust Property" and
"Trustees" have the respective meanings given them in the Declaration of Trust
of the Mutual Fund Investment Trust, dated September , 1997, as amended from
time to time.

ARTICLE II

OFFICES

Section 1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.

Section 2. Other Offices. The Trust may have offices in such
other places without as well as within the Commonwealth of Massachusetts as the
Trustees may from time to time determine.

ARTICLE III

SHAREHOLDERS

Section 1. Meetings. Meetings of Shareholders may be called at
any time by a majority of the Trustees and shall be called by any Trustee upon
written request, which shall specify the purpose or purposes for which such
meeting is to be called, of Shareholders holding in the aggregate not less than
10% of the outstanding Shares entitled to vote on the matters specified in such
written request. Any such meeting shall be held within or without the
Commonwealth of Massachusetts on such day and at such time as the Trustees shall
designate. The holders of a majority of outstanding Shares entitled to vote
present in person or by proxy shall constitute a quorum at any meeting of
Shareholders, except that where any provision of law, the Declaration or these
By-Laws permits or requires that holders of any series shall vote as a series,
then a majority of the aggregate number of Shares of that series entitled to
vote shall be necessary to constitute a quorum for the transaction of business
by that series. In the absence of a quorum, a majority of outstanding Shares
entitled to vote present in person or by proxy may adjourn the meeting from time
to time until a quorum shall be present.

<PAGE>

Section 2. Notice of Meetings. Notice of all meetings of
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder entitled to vote at such
meeting at his or her address as recorded on the register of the Trust, mailed
at least 10 days and not more than 60 days before the meeting. Only the business
stated in the notice of the meeting shall be considered at such meeting. Any
adjourned meeting may be held as adjourned without further notice. No notice
need be given to any Shareholder who shall have failed to inform the Trust of
his or her current address or if a written waiver of notice, executed before or
after the meeting by the Shareholder or his or her attorney thereunto
authorized, is filed with the records of the meeting.

Section 3. Record Date. For the purpose of determining the
Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding 30 days, as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date not more than 90 days prior to the
date of any meeting of Shareholders or distribution or other action as a record
date for the determination of the persons to be treated as Shareholders of
record for such purpose.

Section 4. Proxies. At any meeting of Shareholders, any holder
of Shares entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a vote of a majority of the Trustees, proxies may be solicited in
the name of one or more Trustees or one or more of the officers of the Trust.
Only Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the charge or management of such Share,
such Share may be voted by such guardian or such other person as regards the
charge or

<PAGE>
3

management of such Share, such Share may be voted by such guardian or such other
person appointed or having such control, and such vote may be given in person or
by proxy.

Section 5. Inspection of Records. The records of the Trust shall
be open to inspection by the Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation.

Section 6. Action without Meeting. Any action which may be taken
by Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.

ARTICLE IV

TRUSTEES

Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the Chairman or
by any Trustee. Notice of the time and place of each meeting other than regular
or stated meetings shall be given by the Secretary or an Assistant Secretary or
by the officer or Trustee calling the meeting and shall be mailed to each
Trustee at least two days before the meeting, or shall be telegraphed, cabled,
or wirelessed to each Trustee at his or her business address, or personally
delivered to him or her at least one day before the meeting. Such notice may,
however, be waived by any Trustee. Notice of a meeting need not be given to any
Trustee if a written waiver of notice, executed by him or her before or after
the meeting, is filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting prior thereto or at its commencement the
lack of notice to him or her. A notice or waiver of notice need not specify the
purpose of any meeting. The Trustees may meet by means of a telephone conference
circuit or similar communications equipment by means of which all persons
participating in the meeting can hear each other, which telephone conference
meeting shall be deemed to have been held at a place designated by the Trustees
at the meeting. Participation in a telephone conference meeting shall constitute
presence in person at such meeting. Any action required or permitted to be taken
at any

<PAGE>
4

meeting of the Trustees may be taken by the Trustees without a meeting if all
the Trustees consent to the action in writing and the written consents are filed
with the records of the Trustees' meetings. Such consents shall be treated as a
vote for all purposes.

Section 2. Quorum and Manner of Acting. A majority of the
Trustees present in person at any regular or special meeting of the Trustees
shall constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration or these By-Laws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.

ARTICLE V

COMMITTEES AND ADVISORY BOARD

Section 1. Executive and Other Committees. The Trustees by vote
of a majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three Trustees to hold office at the
pleasure of the Trustees. While the Trustees are not in session, the Executive
Committee shall have the power to conduct the current and ordinary business of
the Trust, including the purchase and sale of securities and the designation of
securities to be delivered upon redemption of Shares of the Trust, and such
other powers of the Trustees as the Trustees may, from time to time, delegate to
the Executive Committee except those powers which by law, the Declaration or
these By-Laws the Trustees are prohibited from so delegating. The Trustees may
also elect from their own number other Committees from time to time, the number
composing such Committees, the powers conferred upon the same (subject to the
same limitations as with respect to the Executive Committee) and the terms of
membership on such Committees to be determined by the Trustees. The Trustees may
designate a chairman of any such Committee. In the absence of such designation a
Committee may elect its own chairman.

Section 2. Meeting, Quorum and Manner of Acting. The Trustees
may (i) provide for stated meetings of any Committee, (ii) specify the manner of
calling and notice required for special meetings of any Committee, (iii) specify
the number of members of a Committee required to constitute a quorum and the
number of members of a Committee required to exercise specified powers delegated
to such Committee, (iv) authorize the making of decisions to exercise

<PAGE>
5

specified powers by written assent of the requisite number of members of a
Committee without a meeting, and (v) authorize the members of a Committee to
meet by means of a telephone conference circuit.

Each Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and kept in the office of the Trust.

Section 3. Advisory Board. The Trustees may appoint an Advisory
Board to consist in the first instance of not less than three members. Members
of such Advisory Board shall not be Trustees or officers and need not be
Shareholders. A member of such Advisory Board shall hold office for such period

as the Trustees may by vote provide and may resign therefrom by a written
instrument signed by him or her which shall take effect upon its delivery to the
Trustees. The Advisory Board shall have no legal powers and shall not perform
the functions of Trustees in any manner, such Advisory Board being intended
merely to act in an advisory capacity. Such Advisory Board shall meet at such
times and upon such notice as the Trustees may provide.

ARTICLE VI

OFFICERS

Section 1. General Provisions. The officers of the Trust shall
be a Chairman, a President, a Treasurer and a Secretary, who shall be elected by
the Trustees. The Trustees may elect or appoint such other officers or agents as
the business of the Trust may require, including one or more Vice Presidents,
one or more Assistant Treasurers, and one or more Assistant Secretaries. The
Trustees may delegate to any officer or committee the power to appoint any
subordinate officers or agents.

Section 2. Term of Office and Qualifications. Except as
otherwise provided by law, the Declaration of Trust or these ByLaws, the
Chairman, the President, the Treasurer and the Secretary shall hold office until
his or her respective successor shall have been duly elected and qualified, and
all other officers shall hold office at the pleasure of the Trustees. The
Secretary and Treasurer may be the same person. A Vice President and the
Treasurer or a Vice President and the Secretary may be the same person, but the
offices of Vice President, Secretary and Treasurer shall not be held by the same
person. Neither the Chairman nor the President shall hold any other office.
Except as above provided, any two offices may be held by the same person. Any
officer may be, but none need be, a Trustee or Shareholder.

<PAGE>
6

Section 3. Removal. The Trustees, at any regular or special
meeting of the Trustees, may remove any officer with or without cause by a vote
of a majority of the Trustees. Any officer or agent appointed by any officer or
committee may be removed with or without cause by such appointing officer or
committee.

Section 4. Powers and Duties of the Chairman. The Chairman may
call meetings of the Trustees and of any Committee thereof when he or she deems
it necessary and shall preside at all meetings of the Shareholders. Subject to
the control of the Trustees and any Committee of the Trustees, the Chairman
shall at all times exercise a general supervision and direction over the affairs
of the Trust. The Chairman shall have the power to employ attorneys and counsel
for the Trust and to employ such subordinate officers, agents, clerks and
employees as he or she may find necessary to transact the business of the Trust.
The Chairman shall also have the power to grant, issue, execute or sign such
powers of attorney, proxies or other documents as may be deemed advisable or
necessary in furtherance of the interests of the Trust. The Chairman shall have
such other powers and duties as, from time to time, may be conferred upon or
assigned to him or her by the Trustees.

Section 5. Powers and Duties of the President. In the absence or
disability of the Chairman, the President shall perform all the duties and may
exercise any of the powers of the Chairman, subject to the control of the
Trustees. The President shall perform such other duties as may be assigned to
him or her from time to time by the Trustees or the Chairman.

Section 6. Powers and Duties of Vice Presidents. In the absence
or disability of the President, the Vice President or, if there be more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him or her from time to time by the Trustees or the
President.

Section 7. Powers and Duties of the Treasurer. The Treasurer
shall be the principal financial and accounting officer of the Trust. The
Treasurer shall deliver all funds of the Trust which may come into his hands to
such custodian as the Trustees may employ pursuant to Article X hereof. The
Treasurer shall render a statement of condition of the finances of the Trust to
the Trustees as often as they shall require the same and shall in general
perform all the duties incident to the office of Treasurer and such other duties
as from time to time may be assigned to him or her by the Trustees. The
Treasurer shall give a bond to the faithful discharge

<PAGE>
7

of his duties, if required to do so by the Trustees, in such sum and with such
surety or sureties as the Trustees shall require.

Section 8. Powers and Duties of the Secretary. The Secretary
shall keep the minutes of all meetings of the Shareholders in the proper books
provided for that purpose; shall keep the minutes of all meetings of the
Trustees; shall have custody of the seal of the Trust; and shall have charge of
the Share transfer books, lists and records unless the same are in the charge of
a Transfer Agent of the Trust (as such party is defined in the Declaration). The
Secretary shall attend to the giving and serving of all notices by the Trust in
accordance with the provisions of these By-Laws and as required by law; and
subject to these By-Laws, shall in general perform all duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him or her by the Trustees.

Section 9. Powers and Duties of Assistant Treasurers. In the
absence or disability of the Treasurer, any Assistant Treasurer designated by
the Trustees shall perform all the duties, and may exercise any of the powers,
of the Treasurer. Each Assistant Treasurer shall perform such other duties as
from time to time may be assigned to him or her by the Trustees. Each Assistant
Treasurer shall give a bond for the faithful discharge of his duties, if
required to do so by the Trustees, in such sum and with such surety or sureties
as the Trustees shall require.

Section 10. Powers and Duties of Assistant Secretaries. In the
absence or disability of the Secretary, any Assistant Secretary designated by
the Trustees shall perform all of the duties, and may exercise any of the powers

of the Secretary. Each Assistant Secretary shall perform such other duties as
from time to time may be assigned to him or her by the Trustees.

Section 11. Compensation of Officers and Trustees and Members of
the Advisory Board. Subject to any applicable law or provision of the
Declaration, the compensation of the officers and Trustees and members of the
Advisory Board shall be fixed from time to time by the Trustees or, in the case
of officers, by any Committee or officer upon whom such power may be conferred
by the Trustees. No officer shall be prevented from receiving such compensation
as such officer by reason of the fact that he or she is also a Trustee.

<PAGE>

ARTICLE VII

FISCAL YEAR

The fiscal year of the Trust shall begin on the first day of
January in each year and shall end on the last day of December of such year,
provided, however, that the Trustees may from time to time change the fiscal
year.

ARTICLE VIII

SEAL

The Trustees shall adopt a seal which shall be in the form and
shall have such inscription thereon as the Trustees may from time to time
prescribe.

ARTICLE IX

WAIVERS OF NOTICE

Whenever any notice is required to be given by law, the
Declaration or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been telegraphed, cabled or wirelessed for the purposes of these By-Laws when it
has been delivered to a representative of any telegraph, cable or wireless
company with instruction that it be telegraphed, cabled or wirelessed. Any
notice shall be deemed to be given at the time when the same shall be mailed,
telegraphed, cabled or wirelessed.

ARTICLE X

AMENDMENTS

These By-Laws, or any of them, may be altered, amended or
repealed, or new By-Laws may be adopted (a) by Majority Shareholder Vote, or (b)
by the Trustees, provided, however, that no By-Law may be amended, adopted or
repealed by the Trustees if such amendment, adoption or repeal requires,
pursuant to law, the Declaration or these By-Laws, a vote of the Shareholders.

Dated: September , 1997

<PAGE>

INVESTMENT ADVISORY AGREEMENT
BETWEEN
MUTUAL FUND INVESTMENT TRUST
AND
THE CHASE MANHATTAN BANK

AGREEMENT made as of the 1st day of January, 1998, by and
between Mutual Fund Investment Trust, a Massachusetts business trust which may
issue one or more series of shares (hereinafter the "Trust"), and The Chase
Manhattan Bank, a New York chartered bank (hereinafter the "Adviser").

WHEREAS, the Trust is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and

WHEREAS, the Trust desires to retain the Adviser to furnish
investment advisory services in connection with the series of the Trust listed
on Schedule A (each, a "Fund" and collectively, the "Funds"), and the Adviser
represents that it is willing and possesses legal authority to so furnish such
services;

NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:

1. Structure of Agreement. The Trust is entering into this
Agreement on behalf of the Funds severally and not jointly. The responsibilities
and benefits set forth in this Agreement shall refer to each Fund severally and
not jointly. No individual Fund shall have any responsibility for any obligation
with respect to any other Fund arising out of this Agreement. Without otherwise
limiting the generality of the foregoing,

(a) any breach of any term of this Agreement regarding the Trust
with respect to any one Fund shall not create a right or obligation with respect
to any other Fund;

(b) under no circumstances shall the Adviser have the right to
set off claims relating to a Fund by applying property of any other Fund; and

(c) the business and contractual relationships created by this
Agreement, the consideration for entering into this Agreement, and the
consequences of such relationships and consideration relate solely to the Trust
and the particular Fund to which such relationship and consideration applies.

2. Delivery of Documents. The Trust has delivered to the Adviser
copies of each of the following documents and will deliver to it all future
amendments and supplements thereto, if any:

(a) The Trust's Declaration of Trust;

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(b) The By-Laws of the Trust;

(d) The most recent Registration Statement under the Securities
Act of 1933, as amended (the "1933 Act"), and the Investment Company Act of
1940, as amended (the "1940 Act"), on Form N-1A as filed with the Securities and
Exchange Commission (the "Commission") (the "Registration Statement");

(e) Notification of Registration of the Trust under the 1940
Act on Form N- 8A as filed with the Commission; and

(f) Prospectuses and Statements of Additional Information of the
Funds (collectively, the "Prospectuses").

3. Appointment.

(a) General. The Trust hereby appoints the Adviser to act as
investment adviser to the Funds for the period and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.

(b) Employees of Affiliates. The Adviser may, in its discretion,
provide such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser to the
Trust under applicable laws and are under the control of the Adviser; provided
that (i) all persons, when providing services hereunder, 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 Adviser.

(c) Sub-Advisers. It is understood and agreed that the Adviser
may from time to time employ or associate with such other entities or persons as
the Adviser believes appropriate to assist in the performance of this Agreement
with respect to a particular Fund or Funds (each a "Sub-Adviser"), and that any
such Sub-Adviser shall have all of the rights and powers of the Adviser set
forth in this Agreement; provided that a Fund shall not pay any additional
compensation for any Sub-Adviser and the Adviser shall be as fully responsible
to the Trust for the acts and omissions of the Sub-Adviser as it is for its own
acts and omissions; and provided further that the retention of any Sub-Adviser
shall be approved in advance by (i) the Board of Trustees of the Trust and (ii)
the shareholders of the relevant Fund if required under any applicable
provisions of the 1940 Act. The Adviser will review, monitor and report to the
Trust's Board of Trustees regarding the performance and investment procedures of
any Sub-Adviser. In the event that the services of any Sub-Adviser are
terminated, the Adviser may provide investment advisory services pursuant to
this Agreement to the Fund without a Sub-Adviser and without further shareholder
approval, to the extent consistent with the 1940 Act. A Sub-Adviser may be an
affiliate of the Adviser.

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<PAGE>

4. Investment Advisory Services.

(a) Management of the Funds. The Adviser hereby undertakes to
act as investment adviser to the Funds. The Adviser shall regularly provide
investment advice to the Funds and continuously supervise the investment and
reinvestment of cash, securities and other property composing the assets of the
Funds and, in furtherance thereof, shall:

(i) supervise all aspects of the operations of the Trust and
each Fund;

(ii) obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and developments, which
affect the economygenerally, the Funds' investment programs, and the issuers of
securities included in the Funds' portfolios and the industries in which they
engage, or which may relate to securities or other investments which the Adviser
may deemdesirable for inclusion in a Fund's portfolio;

(iii) determine which issuers and securities shall be
included in the portfolio of each Fund;

(iv) furnish a continuous investment program for each Fund;

(v) in its discretion and without prior consultation with
the Trust, buy, sell, lend and otherwise trade any stocks, bonds and other
securities and investment instruments on behalf of each Fund; and

(vi) take, on behalf of each Fund, all actions the Adviser
may deem necessary in order to carry into effect such investment program and the
Adviser's functions as provided above, including the making of appropriate
periodic reports to the Trust's Board of Trustees.

(b) Covenants. The Adviser shall carry out its investment
advisory and supervisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided in: (i) each Fund's
Prospectus and Statement of Additional Information as revised and in effect from
time to time; (ii) the Trust's Declaration of Trust, By-Laws or other governing
instruments, as amended from time to time; (iii) the 1940 Act; (iv) other
applicable laws; and (v) such other investment policies, procedures and/or
limitations as may be adopted by the Trust with respect to a Fund and provided
to the Adviser in writing. The Adviser agrees to use reasonable efforts to
manage each Fund so that it will qualify, and continue to qualify, as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended, and regulations issued thereunder (the "Code"), except as may
be authorized to the contrary by the Trust's Board of Trustees. The management
of the Funds by the Adviser shall at all times be subject to the review of the
Trust's Board of Trustees.

(c) Books and Records. The Adviser shall keep each Fund's books
and records required by applicable law to be maintained by the Funds with
respect to advisory services. The Adviser agrees that all records which it

maintains for a Fund are the property of the Fund and it will promptly surrender
any of such records to the Fund upon the Fund's request.

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<PAGE>

The Adviser further agrees to preserve for the periods prescribed by the 1940
Act any such records of the Fund required to be preserved by such Rule.

(d) Reports, Evaluations and other services. The Adviser shall
furnish reports, evaluations, information or analyses to the Trust with respect
to the Funds and in connection with the Adviser's services hereunder as the
Trust's Board of Trustees may request from time to time or as the Adviser may
otherwise deem to be desirable. The Adviser shall make recommendations to the
Trust's Board of Trustees with respect to Trust policies, and shall carry out
such policies as are adopted by the Board of Trustees. The Adviser shall,
subject to review by the Board of Trustees, furnish such other services as the
Adviser shall from time to time determine to be necessary or useful to perform
its obligations under this Agreement.

(e) Purchase and Sale of Securities. The Adviser shall place all
orders for the purchase and sale of portfolio securities for each Fund with
brokers or dealers selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser to the extent permitted by the 1940 Act and the
Trust's policies and procedures applicable to the Funds. The Adviser shall use
its 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 shall consider all factors it deems 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 the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. In no event
shall the Adviser be under any duty to obtain the lowest commission or the best
net price for any Fund on any particular transaction, nor shall the Adviser be
under any duty to execute any order in a fashion either preferential to any Fund
relative to other accounts managed by the Adviser or otherwise materially
adverse to such other accounts.

(f) Selection of Brokers or Dealers. In selecting brokers or
dealers qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) to the Adviser,
the Funds and/or the other accounts over which the Adviser exercises investment
discretion. The Adviser is authorized to pay a broker or dealer who provides
such brokerage and research services a commission for executing a portfolio
transaction for a Fund which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if the
Adviser determines in good faith that the total commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
overall responsibilities of the Adviser with respect to accounts over which it
exercises investment discretion. The Adviser shall report to the Board of

Trustees of the Trust regarding overall commissions paid by the Funds and their
reasonableness in relation to the benefits to the Funds.

(g) Aggregation of Securities Transactions. In executing
portfolio transactions for a Fund, the Adviser may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate the
securities to be sold or purchased with those of other Funds or its other
clients if, in the Adviser's reasonable judgment, such

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<PAGE>

aggregation (i) will result in an overall economic benefit to the Fund, taking
into consideration the advantageous selling or purchase price, brokerage
commission and other expenses, and trading requirements, and (ii) is not
inconsistent with the policies set forth in the Trust's registration statement
and the Fund's Prospectus and Statement of Additional Information. In such
event, the Adviser will allocate the securities so purchased or sold, and the
expenses incurred in the transaction, in an equitable manner, consistent with
its fiduciary obligations to the Fund and such other clients.

5. Expenses. (a) The Adviser shall, at its expense, provide the
Funds with office space, furnishings and equipment and personnel required by it
to perform the services to be provided by the Adviser pursuant to this
Agreement. The Adviser also hereby agrees that it will supply to any sub-adviser
or administrator (the "Administrator") of a Fund all necessary financial
information in connection with the Administrator's duties under any Agreement
between the Administrator and the Trust.

(b) Except as provided in subparagraph (a), the Trust shall be
responsible for all of the Funds' expenses and liabilities, including, but not
limited to, taxes; interest; fees (including fees paid to its trustees who are
not affiliated with the Adviser or any of its affiliates); fees payable to the
Securities and Exchange Commission; state securities qualification fees;
association membership dues; costs of preparing and printing Prospectuses for
regulatory purposes and for distribution to existing shareholders; advisory and
administration fees; charges of the custodian and transfer agent; insurance
premiums; auditing and legal expenses; costs of shareholders' reports and
shareholders' meetings; any extraordinary expenses; and brokerage fees and
commissions, if any, in connection with the purchase or sale of portfolio
securities.

6. Compensation. (a) In consideration of the services to be
rendered by the Adviser under this Agreement, the Trust shall pay the Adviser
monthly fees on the first Business Day (as defined in the Prospectuses) of each
month based upon the average daily net assets of each Fund during the preceding
month (as determined on the days and at the time set forth in the Prospectuses
for determining net asset value per share) at the annual rate set forth opposite
the Fund's name on Schedule A attached hereto. If the fees payable to the
Adviser pursuant to this paragraph begin to accrue before the end of any month
or if this Agreement terminates before the end of any month, the fees for the
period from such date to the end of such month or from the beginning of such
month to the date of termination, as the case may be, shall be prorated

according to the proportion which such period bears to the full month in which
such effectiveness or termination occurs. For purposes of calculating each such
monthly fee, the value of the Funds' net assets shall be computed in the manner
specified in the Prospectuses and the Declaration of Trust for the computation
of the value of the Funds' net assets in connection with the determination of
the net asset value of the Funds' shares of beneficial interest.

(b) If the aggregate expenses incurred by, or allocated to, each
Fund in any fiscal year shall exceed the lowest expense limitation, if
applicable to such Fund, imposed by state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time, the
Adviser shall reduce its investment advisory fee, but not below zero, to the
extent of its share of such excess expenses; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses

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<PAGE>

(including but not limited to legal claims and liabilities and litigation costs
and any indemnification related thereto) paid or payable by the Fund. Such
reduction, if any, shall be computed and accrued daily, shall be settled on a
monthly basis and shall be based upon the expense limitation applicable to the
Fund as at the end of the last business day of the month. Should two or more of
such expense limitations be applicable at the end of the last business day of
the month, that expense limitation which results in the largest reduction in the
Adviser's fee shall be applicable. For the purposes of this paragraph, the
Adviser's share of any excess expenses shall be computed by multiplying such
excess expenses by a fraction, the numerator of which is the amount of the
investment advisory fee which would otherwise be payable to the Adviser for such
fiscal year were it not for this subsection 6(b) and the denominator of which is
the sum of all investment advisory and administrative fees which would otherwise
be payable by the Fund were it not for the expense limitation provisions of any
investment advisory or administrative agreement to which the Fund is a party.

(c) In consideration of the Adviser's undertaking to render the
services described in this Agreement, the Trust agrees that the Adviser shall
not be liable under this Agreement for any error of judgment or mistake of law
or for any act or omission or loss suffered by the Trust in connection with the
performance of this Agreement, provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Investment Adviser against any
liability to the Trust or its stockholders to which the Adviser would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of the Adviser's duties under this Agreement or by reason of the
Adviser's reckless disregard of its obligations and duties hereunder or breach
of fiduciary duty with respect to receipt of compensation.

7. Non-Exclusive Services. Except to the extent necessary to
perform the Investment Adviser's obligations under this Agreement, nothing
herein shall be deemed to limit or restrict the right of the Adviser, or any
affiliate of the Adviser, including any employee of the Adviser, to engage in
any other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or to

render services of any kind to any other corporation, firm, individual or
association.

8. Interested Persons. It is understood that, to the extent
consistent with applicable laws, the Trustees, officers and investors of the
Trust are or may be or become interested in the Adviser as directors, officers
or otherwise and that directors, officers and shareholders of the Adviser are or
may be or become similarly interested in the Trust.

9. Effective Date; Modifications; Termination. This Agreement
shall become effective on the date hereof (the "Effective Date") provided that
it shall have been approved by a majority of the outstanding voting securities
of each Fund, in accordance with the requirements of the 1940 Act, or such later
date as may be agreed by the parties following such shareholder approval.

(a) This Agreement shall continue in force for two years from
the Effective Date and shall continue in effect from year to year thereafter for
successive annual periods, provided such continuance is specifically approved at
least annually (i) by a vote of the majority of the Trustees of the Trust who
are not parties to this Agreement or interested persons of any

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<PAGE>

such party, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by a vote of the Board of Trustees of the Trust or a majority
of the outstanding voting securities of each Fund.

(b) The modification of any of the non-material terms of this
Agreement may be approved by a vote of a majority of those Trustees of the Trust
who are not interested persons of any party to this Agreement, cast in person at
a meeting called for the purpose of voting on such approval.

(c) Notwithstanding the foregoing provisions of this Paragraph
8, either party hereto may terminate this Agreement at any time on sixty (60)
days' prior written notice to the other, without payment of any penalty. A
termination of this Agreement on behalf of a Fund may be effected by a vote of
the Trust's Board of Trustees or, with respect to a Fund, by vote of a majority
of the outstanding voting securities of that Fund. This Agreement may remain in
effect with respect to a Fund even if it has been terminated in accordance with
this paragraph with respect to the other Funds. This Agreement shall terminate
automatically in the event of its assignment as that term is defined under the
1940 Act.

10. Board of Trustees Meetings. The Trust agrees that notice of
each meeting of the Board of Trustees of the Trust will be sent to the Adviser
and that the Trust will make appropriate arrangements for the attendance (as
persons present by invitation) of such person or persons as the Adviser may
designate.

11. Limitation of Liability of Trustees and Investors. The
Adviser acknowledges the following limitation of liability:

The terms "Mutual Fund Investment Trust" and "Trustees of Mutual
Fund Investment Trust" refer, respectively, to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Declaration of Trust, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of the State of
Massachusetts, such reference being inclusive of any and all amendments thereto
so filed or hereafter filed. The obligations of "Mutual Fund Investment Trust"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities and
are not binding upon any of the Trustees, investors or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with the Trust or a Fund must look solely to the assets of the Trust or Fund for
the enforcement of any claims against the Trust or Fund.

12. Certain Definitions. The terms "vote of a majority of the
outstanding voting securities," "assignment," "control," and "interested
persons," when used herein, shall have the respective meanings specified in the
1940 Act. References in this Agreement to the 1940 Act and the Advisers Act
shall be construed as references to such laws as now in effect or as hereafter
amended, and shall be understood as inclusive of any applicable rules,
interpretations and/or orders adopted or issued thereunder by the Commission.

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<PAGE>

13. Independent Contractor. The Adviser shall for all purposes
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Board of Trustees of the Trust
from time to time, have no authority to act for or represent the Trust or any
Fund in any way or otherwise be deemed an agent of the Trust.

14. Governing Law. This Agreement shall be governed by the laws
of the State of New York, provided that nothing herein shall be construed in a
manner inconsistent with the 1940 Act or the Advisers Act.

15. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby and, to this extent,
the provisions of this Agreement shall be deemed to be severable.

16. Notices. Notices of any kind to be given to the Adviser
hereunder by the Trust shall be in writing and shall be duly given if mailed or
delivered to the Adviser at 270 Park Avenue, New York, New York 10017 or at such
other address or to such individual as shall be so specified by the Adviser to
the Trust. Notices of any kind to be given to the Trust hereunder by the Adviser
shall be in writing and shall be duly given if mailed or delivered to the Trust
at 101 Park Avenue, New York, New York 10178 or at such other address or to such
individual as shall be so specified by the Trust to the Adviser. Notices shall
be effective upon delivery.

IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, and their
respective seals to be hereunto affixed, all as of the date written above.

THE CHASE MANHATTAN BANK MUTUAL FUND INVESTMENT TRUST

By: By:
---------------------- ---------------------------
Name: Name:
Title: Title:

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<PAGE>

Schedule A

Fund: Fee:

1. Chase Money Market Fund 0.30%
2. Chase Short-Intermediate Term U.S. Government
Securities Fund 0.50%
3. Chase U.S. Government Securities Fund 0.50%
4. Chase Intermediate Term Bond Fund 0.50%
5. Chase Income Fund 0.50%
6. Chase Balanced Fund 0.75%
7. Chase Equity Income Fund 0.75%
8. Chase Core Equity Fund 0.75%
9. Chase Equity Growth Fund 0.75%
10. Chase Small Capitalization Fund 0.75%

<PAGE>

INVESTMENT SUBADVISORY AGREEMENT
between
THE CHASE MANHATTAN BANK
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION

AGREEMENT made as of the 1st day of January, 1998, by and between
The Chase Manhattan Bank, a New York chartered bank (the "Adviser"), and Texas
Commerce Bank National Association, a national bank (the "Sub-Adviser").

WHEREAS, the Adviser provides investment advisory services to the
series of Mutual Fund Investment Trust, a Massachusetts business trust (the
"Trust"), which is registered as an open-end, management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), pursuant
to an Investment Advisory Agreement dated January 1, 1998 (the "Advisory
Agreement"); and

WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish
investment subadvisory services in connection with the series of the Trust
listed on Schedule A (each, a "Fund" and collectively, the "Funds"), and the
Sub-Adviser represents that it is willing and possesses legal authority to so
furnish such services;

NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:

1. Appointment.

(a) General. The Adviser hereby appoints the Sub-Adviser to act as
investment subadviser to the Funds for the period and on the terms set forth in
this Agreement. The Sub-Adviser accepts such appointment and agrees to furnish
the services herein set forth for the compensation herein provided.

(b) Employees of Affiliates. The Sub-Adviser may, in its discretion,
provide such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment subadviser to
the Funds under applicable laws and are under the control of Texas Commerce
Bank; provided that (i) all persons, when providing services hereunder, 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.

2. Delivery of Documents. The Adviser has delivered to the
Sub-Adviser copies of each of the following documents along with all amendments
thereto through the date hereof, and will promptly deliver to it all future
amendments and supplements thereto, if any:

(1) the Trust's Declaration of Trust;

<PAGE>

(2) the By-Laws of the Trust;

(3) resolutions of the Board of Trustees of the Trust
authorizing the execution and delivery of the Advisory
Agreement and this Agreement;

(4) the most recent Post-Effective Amendment to the Trust's
Registration Statement under the Securities Act of 1933,
as amended (the "1933 Act"), and the 1940 Act, on Form
N-1A as filed with the Securities and Exchange
Commission (the "Commission");

(5) Notification of Registration of the Trust under the 1940
Act on Form N-8A as filed with the Commission; and

(6) the prospectuses and Statements of Additional
Information of the Funds.

3. Investment Advisory Services.

(a) Management of the Funds. The Sub-Adviser hereby undertakes to
act as investment subadviser to the Funds. The Sub-Adviser shall regularly
provide investment advice to the Funds and continuously supervise the investment
and reinvestment of cash, securities and other property composing the assets of
the Funds and, in furtherance thereof, shall:

(i) obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and developments, which
affect the economy generally, the Funds' investment programs, and the issuers of
securities included in the Funds' portfolios and the industries in which they
engage, or which may relate to securities or other investments which the
sub-Adviser may deem desirable for inclusion in a Fund's portfolio;

(ii) determine which issuers and securities shall be included in
the portfolio of each Fund;

(iii) furnish a continuous investment program for each Fund;

(iv) in its discretion, and without prior consultation, buy,
sell, lend and otherwise trade any stocks, bonds and other securities and
investment instruments on behalf of each Fund; and

(v) take, on behalf of each Fund, all actions the Sub-Adviser
may deem necessary in order to carry into effect such investment program and the
Sub-Adviser's functions as provided above, including the making of appropriate
periodic reports to the Adviser and the Trust's Board of Trustees.

(b) Covenants. The Sub-Adviser shall carry out its investment
subadvisory responsibilities in a manner consistent with the investment
objectives, policies, and restrictions provided in: (i) each Fund's Prospectus
and Statement of Additional Information as revised and

<PAGE>

in effect from time to time; (ii) the Trust's Declaration of Trust, By-Laws or
other governing instruments, as amended from time to time; (iii) the 1940 Act;
(iv) other applicable laws; and (v) such other investment policies, procedures
and/or limitations as may be adopted by the Trust or the Adviser with respect to
a Fund and provided to the Sub-Adviser in writing. The Sub-Adviser agrees to use
reasonable efforts to manage each Fund so that it will qualify, and continue to
qualify, as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended, and regulations issued thereunder (the
"Code"), except as may be authorized to the contrary by the Trust's Board of
Trustees. The management of the Funds by the Sub-Adviser shall at all times be
subject to the review of the Adviser and the Trust's Board of Trustees.

(c) Books and Records. Pursuant to applicable law, the Sub-Adviser
shall keep each Fund's books and records required to be maintained by, or on
behalf of, the Funds with respect to subadvisory services rendered hereunder.
The Sub-Adviser agrees that all records which it maintains for a Fund are the
property of the Fund and it will promptly surrender any of such records to the
Fund upon the Fund's request. The Sub-Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act any such records of the Fund
required to be preserved by such Rule.

(d) Reports, Evaluations and other services. The Sub-Adviser shall
furnish reports, evaluations, information or analyses to the Adviser and the
Trust with respect to the Funds and in connection with the Sub-Adviser's
services hereunder as the Adviser and/or the Trust's Board of Trustees may
request from time to time or as the Sub-Adviser may otherwise deem to be
desirable. The Sub-Adviser shall make recommendations to the Adviser and the
Trust's Board of Trustees with respect to the Trust's policies, and shall carry
out such policies as are adopted by the Board of Trustees. The Sub-Adviser may,
subject to review by the Adviser, furnish such other services as the Sub-Adviser
shall from time to time determine to be necessary or useful to perform its
obligations under this Agreement.

(e) Purchase and Sale of Securities. The Sub-Adviser shall place all
orders for the purchase and sale of portfolio securities for each Fund with
brokers or dealers selected by the Sub-Adviser, which may include brokers or
dealers affiliated with the Adviser or the Sub-Adviser to the extent permitted
by the 1940 Act and the Trust's policies and procedures applicable to the Funds.
The Sub-Adviser shall use its 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 Sub-Adviser shall consider all factors
it deems 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 Sub-Adviser, and the
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis. In no event shall the Sub-Adviser be under any duty to
obtain the lowest commission or the best net price for any Fund on any
particular transaction, nor shall the Sub-Adviser be under any duty to execute
any order in a fashion either preferential to any Fund relative to other
accounts managed by the Sub-Adviser or otherwise materially adverse to such
other accounts.

<PAGE>

(f) Selection of Brokers or Dealers. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Sub-Adviser, the Funds, and/or the other accounts over which the Sub-Adviser
exercises investment discretion. The Sub-Adviser is authorized to pay a broker
or dealer who provides such brokerage and research services a commission for
executing a portfolio transaction for a Fund which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Adviser determines in good faith that the total
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Sub-Adviser with
respect to accounts over which it exercises investment discretion. The
Sub-Adviser shall report to the Board of Trustees of the Trust regarding overall
commissions paid by the Funds and their reasonableness in relation to their
benefits to the Funds.

(g) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Sub-Adviser may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate the
securities to be sold or purchased with those of other Funds or its other
clients if, in the Sub-Adviser's reasonable judgment, such aggregation (i) will
result in an overall economic benefit to the Fund, taking into consideration the
advantageous selling or purchase price, brokerage commission and other expenses,
and trading requirements, and (ii) is not inconsistent with the policies set
forth in the Trust's registration statement and the Fund's Prospectus and
Statement of Additional Information. In such event, the Sub-Adviser will
allocate the securities so purchased or sold, and the expenses incurred in the
transaction, in an equitable manner, consistent with its fiduciary obligations
to the Fund and such other clients.

4. Representations and Warranties.

(a) The Sub-Adviser hereby represents and warrants to the Adviser as
follows:

(i) The Sub-Adviser is a national banking association duly
organized and validly existing under the laws of the United States and is fully
authorized to enter into this Agreement and carry out its duties and obligations
hereunder.

(ii) The Sub-Adviser at all times shall provide its best
judgment and effort to the Adviser in carrying out the Sub-Adviser's obligations
hereunder.

(b) The Adviser hereby represents and warrants to the Sub-Adviser as
follows:

(i) The Adviser is a chartered bank duly organized and in good
standing under the laws of the State of New York and is fully authorized to
enter into this Agreement and carry out its duties and obligations hereunder.

<PAGE>

(ii) The Trust has been duly organized as a business trust under
the laws of the State of Massachusetts.

(iii) The Trust is registered as an investment company with the
Commission under the 1940 Act, and shares of the each Fund are registered for
offer and sale to the public under the 1933 Act and all applicable state
securities laws where currently sold. Such registrations will be kept in effect
during the term of this Agreement.

5. Compensation. (a) As compensation for the services which the
Sub-Adviser is to provide or cause to be provided pursuant to Paragraph 3, with
respect to each Fund, the Adviser shall pay to the Sub-Adviser (or cause to be
paid by the Trust directly to the Sub-Adviser) a fee, which shall be accrued
daily and paid in arrears on the first business day of each month, at an annual
rate set forth in Schedule A, as a percentage of the average daily net assets of
the Fund during the preceding month (computed in the manner set forth in the
Fund's most recent Prospectus and Statement of Additional Information). Average
daily net assets shall be based upon determinations of net assets made as of the
close of business on each business day throughout such month. The fee for any
partial month shall be calculated on a proportionate basis, based upon average
daily net assets for such partial month.

(b) The Sub-Adviser shall have the right, but not the obligation, to
voluntarily waive any portion of the sub-advisory fee from time to time. Any
such voluntary waiver will be irrevocable and determined in advance of rendering
sub-investment advisory services by the Sub-Adviser, and shall be in writing and
signed by the parties hereto.

(c) If the aggregate expenses incurred by, or allocated to, each
Fund in any fiscal year shall exceed the lowest expense limitation, if
applicable to such Fund, imposed by state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time, the
Sub-Adviser shall reduce its investment advisory fee, but not below zero, to the
extent of its share of such excess expenses; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Fund as at the end of the last business
day of the month. Should two or more of such expense limitations be applicable
at the end of the last business day of the month, that expense limitation which
results in the largest reduction in the Sub-Adviser's fee shall be applicable.
For the purposes of this paragraph, the Sub-Adviser's share of any excess
expenses shall be computed by multiplying such excess expenses by a fraction,
the numerator of which is the amount of the investment advisory fee which would
otherwise be payable to the Sub-Adviser for such fiscal year were it not for

this subsection 5(b) and the denominator of which is the sum of all investment
advisory and administrative fees which would otherwise be payable by the Fund
were it not for the expense limitation provisions of any investment advisory or
administrative agreement to which the Fund is a party.

<PAGE>

6. Interested Persons. It is understood that, to the
extent consistent with applicable laws, the Trustees, officers and shareholders
of the Trust or the Adviser are or may be or become interested in the
Sub-Adviser as directors, officers or otherwise and that directors, officers and
shareholders of the Sub-Adviser are or may be or become similarly interested in
the Trust or the Adviser.

7. Expenses. The Sub-Adviser will pay all expenses incurred by it in
connection with its activities under this Agreement other than the cost of
securities (including brokerage commissions) purchased for or sold by the Funds.

8. Non-Exclusive Services; Limitation of Sub-Adviser's Liability.
The services of the Sub-Adviser hereunder are not to be deemed exclusive, and
the Sub-Adviser may render similar services to others and engage in other
activities. The Sub-Adviser and its affiliates may enter into other agreements
with the Funds, the Trust or the Adviser for providing additional services to
the Funds, the Trust or the Adviser which are not covered by this Agreement, and
to receive additional compensation for such services. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Sub-Adviser, or a breach of fiduciary duty
with respect to receipt of compensation, neither the Sub-Adviser nor any of its
directors, officers, shareholders, agents, or employees shall be liable or
responsible to the Adviser, the Trust, the Funds or to any shareholder of the
Funds for any error of judgment or mistake of law or for any act or omission in
the course of, or connected with, rendering services hereunder or for any loss
suffered by the Adviser, the Trust, a Fund, or any shareholder of a Fund in
connection with the performance of this Agreement.

9. Effective Date; Modifications; Termination. This
Agreement shall become effective on the date hereof (the "Effective Date")
provided that it shall have been approved by a majority of the outstanding
voting securities of each Fund, in accordance with the requirements of the 1940
Act, or such later date as may be agreed by the parties following such
shareholder approval.

(a) This Agreement shall continue in force for two years from the
Effective Date and shall continue in effect from year to year thereafter as to
each Fund for successive annual periods, provided such continuance is
specifically approved at least annually (i) by a vote of the majority of the
Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by a vote of the Board of Trustees of the
Trust or a majority of the outstanding voting securities of the Fund.

(c) Notwithstanding the foregoing provisions of this Paragraph 9,
either party hereto may terminate this Agreement as to any Fund(s) at any time
on sixty (60) days' prior

<PAGE>

written notice to the other, without payment of any penalty. A termination of
the Sub-Adviser may be effected as to any particular Fund by the Adviser, by a
vote of the Trust's Board of Trustees, or by vote of a majority of the
outstanding voting securities of the Fund. This Agreement shall terminate
automatically in the event of its assignment.

10. Limitation of Liability of Trustees and Shareholders. The
Sub-Adviser acknowledges the following limitation of liability:

The terms "Mutual Fund Investment Trust" and "Trustees of Mutual
Fund Investment Trust" refer, respectively, to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Declaration of Trust, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of the State of
Massachusetts, such reference being inclusive of any and all amendments thereto
so filed or hereafter filed. The obligations of "Mutual Fund Investment Trust"
entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities and
are not binding upon any of the Trustees, shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with the Trust or a Fund must look solely to the assets of the Trust or Fund for
the enforcement of any claims against the Trust or Fund.

11. Certain Definitions. The terms "vote of a majority of the
outstanding voting securities," "assignment," "control," and "interested
persons," when used herein, shall have the respective meanings specified in the
1940 Act. References in this Agreement to the 1940 Act and the Advisers Act
shall be construed as references to such laws as now in effect or as hereafter
amended, and shall be understood as inclusive of any applicable rules,
interpretations and/or orders adopted or issued thereunder by the Commission.

12. Independent Contractor. The Sub-Adviser shall for all purposes
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Board of Trustees of the Trust
from time to time, have no authority to act for or represent a Fund in any way
or otherwise be deemed an agent of a Fund.

13. Structure of Agreement. The Adviser and Sub-Adviser are entering
into this Agreement with regard to the respective Funds severally and not
jointly. The responsibilities and benefits set forth in this Agreement shall be

deemed to be effective as between the Adviser and Sub-Adviser in connection with
each Fund severally and not jointly. This Agreement is intended to govern only
the relationships between the Adviser, on the one hand, and the Sub-Adviser, on
the other hand, and is not intended to and shall not govern (i) the relationship
between the Adviser or Sub-Adviser and any Fund, or (ii) the relationships among
the respective Funds.

14. Governing Law. This Agreement shall be governed by the laws of
the State of New York, provided that nothing herein shall be construed in a
manner inconsistent with the 1940 Act or the Advisers Act.

<PAGE>

15. Severability. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby and, to this extent, the
provisions of this Agreement shall be deemed to be severable.

16. Notices. Notices of any kind to be given to the Adviser
hereunder by the Sub-Adviser shall be in writing and shall be duly given if
mailed or delivered to the Adviser at 270 Park Avenue, New York, New York 10017
or at such other address or to such individual as shall be so specified by the
Adviser to the Sub-Adviser. Notices of any kind to be given to the Sub-Adviser
hereunder by the Adviser shall be in writing and shall be duly given if mailed
or delivered to the Sub-Adviser at 600 Travis Street, Houston, Texas 77252 or at
such other address or to such individual as shall be so specified by the
Sub-Adviser to the Adviser. Notices shall be effective upon delivery.

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
written above.

THE CHASE MANHATTAN BANK TEXAS COMMERCE BANK NATIONAL

ASSOCIATION

By:----------------------- By:----------------------------
Name: Name:
Title: Title:

<PAGE>

Schedule A

Fund: Fee:
----- -----

1. Chase Money Market Fund 0.__%

2. Chase Short-Intermediate Term U.S. Government 0.__%
Securities Fund

3. Chase U.S. Government Securities Fund 0.__%

4. Chase Intermediate Term Bond Fund 0.__%

5. Chase Income Fund 0.__%

6. Chase Balanced Fund 0.__%

7. Chase Equity Income Fund 0.__%

8. Chase Core Equity Fund 0.__%

9. Chase Equity Growth Fund 0.__%

10. Chase Small Capitalization Fund 0.__%

<PAGE>

ADMINISTRATION AGREEMENT

THIS AGREEMENT made this 1st day of January, 1998, by and
between MUTUAL FUND INVESTMENT (the "Trust"), a Massachusetts business trust and
THE CHASE MANHATTAN BANK (the "Administrator").

WITNESSETH:

In consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:

FIRST: The Trust on behalf of each of its series and any new
series to be created hereby authorizes the Administrator to provide
administrative services to the Trust in accordance with the terms and conditions
of this Agreement. The Administrator's services shall be subject to the
direction and control of the Board of Trustees of the Trust and shall be
performed under the direction of the appropriate Trust officers. The
Administrator's functions shall be entirely ministerial in nature, and it shall
not have any responsibility or authority for the management of the Trust, the
determination of its policies, or for any matter pertaining to the distribution
of securities issued by the Trust.

SECOND: The Administrator shall provide certain administration
services including: (A) arranging for the maintenance of the Trust's books and
records except for: accounting books and records, sales literature and other
documents relating to the sale of securities

<PAGE>

issued by the Trust (other than copies of such documents preserved as a record
of presentations to the Board of Trustees or Trust officers), and records
pertaining to the ownership of securities issued by the Trust;

(B) preparing applications for insurance for the Trust and
claims under any insurance policy;

(C) preparing for the signature of the appropriate Trust
officer (or assist counsel and auditors in the preparation of) all required
Trust tax returns, proxy statements, semiannual reports to the Trust's
shareholders, semiannual reports to be filed with the Securities and Exchange
Commission, and updates to the Trust's Registration Statement under the
Investment Company Act of 1940 (the "Act");

(D) arranging for the printing and mailing (at the Trust's
expense) of proxy statements and other reports or other materials provided to
the Trust's shareholders;

(E) preparing (beginning January 1, 1998) applications and

reports which may be necessary to maintain on behalf of the Trust any
registration of the Trust and/or the shares of any series of the Trust under the
securities or "Blue Sky" laws of any state, province, or foreign country (the
Trust shall pay for any filing or legal fees in connection with such filings);

(F) preparing agendas and supporting documentation for, and
minutes of, Trustee and shareholder meetings;

(G) arranging for the computation of performance data
including net asset value and yield;

<PAGE>

(H) arranging for the publication of current price information
in newspapers and publications;

(I) responding to all inquires or other communications from
shareholders of the Trust and other parties or, if the inquiry is more properly
responded to by the Trust's transfer agent or distributor, referring the
individual making the inquiry to the appropriate person;

(J) reviewing from time to time the portfolios of each series
of the Trust and transactions with brokers and dealers for compliance with
applicable law and Trust policy;

(K) coordinating all relationships between the Trust and its
contractors, including coordinating the negotiation of agreements, the review of
performance of agreements, and the exchange of information, provided that
coordination with the distributor shall be limited to the exchange of
information necessary for the administration of the Trust and the reporting of
that information to the Board of Trustees and Trust officers.

THIRD: Any activities performed by the Administrator under
this Agreement shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the Act and of any rules or
regulations in force thereunder; (2) any other applicable provision of law; (3)
the provisions of the Agreement and Declaration of Trust and By-Laws of the
Trust as amended from time to time; (4) any policies and determinations of the
Board of Trustees of the Trust; and (5) the fundamental policies of each series
of the Trust, as reflected in the then current Registration Statement of the
Trust. As used in this

<PAGE>

Agreement, the term "Registration Statement" shall mean the Registration
Statement most recently filed by the Trust with the Securities and Exchange
Commission and effective under the Securities Act of 1933, as amended, as such
Registration Statement is amended at such time, and the term "Prospectus" and

"Statement of Additional Information" shall mean for the purposes of this
Agreement the form of the then current prospectus and statement of additional
information for each series of the Trust.

FOURTH: Nothing in this Agreement shall prevent the
Administrator or any officer thereof from acting as administrator for any other
person, firm or corporation and shall not in any way limit or restrict the
Administrator or any of its directors, officers, employees or affiliates from
buying, selling or trading any securities for its own or their own accounts or
for the accounts of others for whom it or they may be acting, provided, however,
that the Administrator expressly represents that it will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations
to the Trust under the Agreement.

FIFTH: The Administrator shall, at its own expense,
provide office space and facilities, equipment and personnel for
the performance of its functions hereunder.

SIXTH: The Trust shall pay the Administrator, as full
compensation for all services rendered hereunder, an annual fee on behalf of
each series payable monthly and computed on the net asset value of the series at
the end of each business day at the annual rates set forth in Exhibit A hereto.

<PAGE>

SEVENTH: In the event the operating expenses of any series of
the Trust, including all investment advisory, administration and
sub-administrator fees, but excluding brokerage commissions and fees, taxes,
interest and extraordinary expenses such as litigation, for any fiscal year
ending on a date on which this Agreement is in effect exceed the most
restrictive expense limitation applicable to the series imposed by the
securities laws or regulations thereunder of any state in which the shares of
the series are qualified for sale, as such limitations may be raised or lowered
from time to time, the Administrator shall reduce its administration fee to the
extent of its share of such excess expenses. The amount of any such reduction to
be borne by the Administrator shall be deducted from the monthly administration
fee otherwise payable to the Administrator during such fiscal year; and if such
amounts should exceed the monthly fee, the Administrator shall pay to such
series its share of such excess expenses no later than the last day of the first
month of the next succeeding fiscal year. For the purposes of this paragraph,
the term "fiscal year" shall exclude the portion of the current fiscal year
which shall have elapsed prior to the date hereof and shall include the portion
of the then current fiscal year which shall have elapsed at the date of
termination of this Agreement.

EIGHTH: (A) This Agreement shall go into effect at the close
of the business on the date hereof, and, unless terminated as hereinafter
provided, shall continue in effect for two years

<PAGE>

thereafter and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the Trust's Board of
Trustees, including the vote of a majority of the Trustees who are not parties
to this Agreement or "interested persons" (as defined in the Act) of any such
party cast in person at a meeting called for the purpose of voting on such
approval, or by the vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the applicable series and by such vote of the
Trustees.

(B) This Agreement may be terminated by the Administrator at
any time without penalty upon giving the Board of Trustees of the Trust sixty
(60) days' written notice (which notice may be waived by the Trust) and may be
terminated by the Board of Trustees of the Trust at any time without penalty
upon giving the Administrator sixty (60) days' written notice (which notice may
be waived by the Administrator), provided that such termination by the Board of
Trustees of the Trust shall be directed or approved by the vote of a majority of
all of its Trustees in office at the time, including a majority of the Trustees
who are not interested persons (as defined in the Act) of the Trust, or by the
vote of the holders of a majority (as defined in the Act) of the voting
securities of each series of the Trust at the time outstanding and entitled to
vote. This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the Act.

<PAGE>

NINTH: In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Administrator or any of its officers, directors or employees, the Trust
shall indemnify the Administrator against any and all claims, demands and
liabilities and expenses (including reasonable attorney's fees) which the
Administrator may incur based on any omission in the course of, or connected
with, rendering services hereunder.

TENTH: A copy of the Agreement and Declaration of Trust of the
Trust is on file with the Secretary of the Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually, and that the obligations
of this instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Trust.

ELEVENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed, postage paid, to the other party at such
address as such other party may designate for the receipt of such notices. Until
further notice to the other party, it is agreed that the address of the Trust
shall be 101 Park Avenue, New York, NY 10178, and the address of the
Administrator shall be 1 Chase Square, Rochester, NY 14643.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused the
Agreement to be executed by their duly authorized officers as of the day and
year first above written.

ATTEST: MUTUAL FUND INVESTMENT TRUST

____________________ By:___________________________

ATTEST: THE CHASE MANHATTAN BANK

____________________ By:___________________________

<PAGE>

INVESTMENT ADVISORY AGREEMENT
BETWEEN
MUTUAL FUND INVESTMENT TRUST
AND
THE CHASE MANHATTAN BANK

WHEREAS, the Trust is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and

NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:

(a) any breach of any term of this Agreement regarding the Trust
with respect to any one Fund shall not create a right or obligation with respect
to any other Fund;

(b) under no circumstances shall the Adviser have the right to
set off claims relating to a Fund by applying property of any other Fund; and

2. Delivery of Documents. The Trust has delivered to the Adviser
copies of each of the following documents and will deliver to it all future
amendments and supplements thereto, if any:

(a) The Trust's Declaration of Trust;

<PAGE>

(b) The By-Laws of the Trust;

(e) Notification of Registration of the Trust under the 1940 Act
on Form N- 8A as filed with the Commission; and

(f) Prospectuses and Statements of Additional Information of the
Funds (collectively, the "Prospectuses").

3. Appointment.

-2-

<PAGE>

4. Investment Advisory Services.

(i) supervise all aspects of the operations of the Trust
and each Fund;

(ii) obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and developments, which
affect the economy generally, the Funds' investment programs, and the issuers of
securities included in the Funds' portfolios and the industries in which they
engage, or which may relate to securities or other investments which the Adviser
may deem desirable for inclusion in a Fund's portfolio;

(iii) determine which issuers and securities shall be
included in the portfolio of each Fund;

(iv) furnish a continuous investment program for each Fund;

(v) in its discretion and without prior consultation with
the Trust, buy, sell, lend and otherwise trade any stocks, bonds and other
securities and investment instruments on behalf of each Fund; and

maintains for a Fund are the property of the Fund and it will promptly surrender
any of such records to the Fund upon the Fund's request.

-3-

<PAGE>

The Adviser further agrees to preserve for the periods prescribed by the 1940
Act any such records of the Fund required to be preserved by such Rule.

Trustees of the Trust regarding overall commissions paid by the Funds and their
reasonableness in relation to the benefits to the Funds.

-4-

<PAGE>

aggregation (i) will result in an overall economic benefit to the
Fund, taking into consideration the advantageous selling or purchase price,
brokerage commission and other expenses, and trading requirements, and (ii) is
not inconsistent with the policies set forth in the Trust's registration
statement and the Fund's Prospectus and Statement of Additional Information. In
such event, the Adviser will allocate the securities so purchased or sold, and
the expenses incurred in the transaction, in an equitable manner, consistent
with its fiduciary obligations to the Fund and such other clients.

(b) If the aggregate expenses incurred by, or allocated to, each
Fund in any fiscal year shall exceed the lowest expense limitation, if
applicable to such Fund, imposed by state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time, the
Adviser shall reduce its investment advisory fee, but not below zero, to the
extent of its share of such excess expenses; provided, however, there shall
be excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses

-5-

<PAGE>

aspects of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, firm, individual or
association.

-6-

<PAGE>

11. Limitation of Liability of Trustees and Investors. The
Adviser acknowledges the following limitation of liability:

-7-

<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, and their
respective seals to be hereunto affixed, all as of the date written above.

THE CHASE MANHATTAN BANK MUTUAL FUND INVESTMENT TRUST

By: By:
--------------------------- --------------------------
Name: Name:
Title: Title:

-8-

<PAGE>

Schedule A

Fund: Fee:
----- ----

1. Chase Tax Free Money Market Fund 0.30%
2. Chase Tax Free Income Fund 0.50%
3. Chase New York Tax Free Income Fund 0.50%
4. Chase Mid Cap Growth Fund 0.75%
5. Chase International Equity Fund 1.00%

<PAGE>

DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT

THIS AGREEMENT made as of the 1st day of January, 1998 by and
between MUTUAL FUND INVESTMENT TRUST (the "Trust"), a Massachusetts business
trust, and CF DISTRIBUTORS, INC. (the "Distributor"), an indirect wholly owned
subsidiary of THE BISYS GROUP, INC., a Delaware corporation.

W I T N E S S E T H:

In consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:

FIRST: The Trust on behalf of each of its series and any new
series to be created hereby appoints the Distributor as its sub-administrator
and as its exclusive underwriter to provide certain administration services and
to promote and arrange for the sale of shares of beneficial interest of each
series of the Trust in jurisdictions wherein shares may legally be offered for
sale. The Trust shall notify the Distributor in writing of all states in which
its shares are qualified for offer and sale, including any limitations with
respect to offers or sales in such states. In addition, the Distributor shall
receive payment for certain distribution expenses if and to the extent provided
for pursuant to Rule 12b-1 distribution plans ("12b-1 Plans") adopted by the
Trust.

The Trust agrees to sell and deliver its unissued shares of
each series, as from time to time shall be effectively registered under the
Securities Act of 1933 (the "1933 Act"), upon the terms hereinafter set forth.

SECOND: The Trust hereby authorizes the Distributor, subject
to law and the Declaration of Trust of the Trust (the "Declaration of Trust"),
to accept, for the account of each series of the Trust, orders for the purchase
of shares, satisfactory to the Distributor, as of the time of receipt of such
orders or as otherwise described in the then current Prospectuses and Statements
of Additional Information of the Trust.

THIRD: The price at which the shares may be sold (the
"offering price") shall be the net asset value per share plus any sales charge
that may be imposed on any class of shares. For the purpose of computing the
offering price, the net asset value per share and the sales charge, if any,
shall be determined in the manner provided in the Registration Statement of the
Trust, as amended from time to time.

FOURTH: The Distributor shall use its best efforts with
reasonable promptness to promote and sell shares of each of the series of the
Trust. The Distributor, with the consent of the Trust, may enter into agreements
with selected broker-dealers ("Selected Dealers") for the purpose of sale and
redemption of shares of each of the series of the Trust upon terms consistent
with those found in this Agreement. The Distributor shall not be obligated to
sell any certain number of shares of beneficial interest. Each series of the
Trust reserves the right to issue shares

<PAGE>

in connection with any merger or consolidation of the Trust or any series with
any other investment company or any personal holding company or in connection
with offers of exchange exempted from Section 11(a) of the Investment Company
Act of 1940 (the "Act").

FIFTH: All sales literature and advertisements used by the
Distributor in connection with sales of shares of any series of the Trust shall
be subject to the approval of the Trust. The Trust authorizes the Distributor in
connection with the sale or arranging for the sale of the shares to give only
such information and to make only such statements or representations as are
contained in the then current Prospectuses and Statements of Additional
Information of the Trust or in sales literature or advertisements approved for
any series by the Trust or in such financial statements and reports as are
furnished to the Distributor pursuant to this Agreement. The Trust shall not be
responsible in any way for any information, statements or representations given
or made by the Distributor or its representative or agents other than such
information, statements or representations contained in the then current
Prospectuses and Statement of Additional Information or other financial
statements of the Trust or any sales literature or advertisements approved by
the Trust.

SIXTH: The Distributor as agent of the Trust, and any Selected
Dealer entering into a Selected Dealer Agreement with the Distributor are
authorized, subject to the direction of the Trust, to accept shares of the
series of the Trust for redemption at their net asset value less any applicable
deferred sales charge, determined as prescribed in the then current Prospectuses
and Statement of Additional Information of the Trust.

SEVENTH: The Trust shall cause to be delivered to the
Distributor all books, records, and other documents and papers relating to the
federal and state registration of Trust shares, as well as all books, records
and other documents and papers relating in any way to the sub-administration of
the Trust or the distribution of Trust shares.

EIGHTH: The Trust shall bear:

(A) The costs and expenses incurred in connection
with the registration of the shares of each series of the Trust under the 1933
Act (including any amendment to any Registration Statement or Prospectuses or
Statements of Additional Information), and all expenses in connection with
preparing, printing and distributing the Prospectuses or Statements of
Additional Information except as set forth in Paragraph NINTH hereof;

(B) the expenses of qualification of the shares of
each series of the Trust for sale in connection with such public offerings in
such states as shall be selected by the Distributor and of continuing the
qualification therein until the Distributor notifies the Trust that it does not
wish such qualification continued; and

NINTH: The Distributor shall provide certain sub-
administration and distribution services including:

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<PAGE>

(A) providing officers, clerical staff and office
space to use as the headquarters of the Trust;

(B) arranging for the printing, distribution and
filing of prospectuses and statements of additional information;

(C) preparing, filing and maintaining all Trust
registrations with the securities regulatory agencies of all states and other
jurisdictions in which the Trust shares are sold;

(D) making all required filings of advertising and
promotional materials with the National Association of Securities Dealers, Inc.;
and

(E) bearing the expenses of:

(i) the printing, distribution and filing
of prospectuses and statements of additional information after such have been
typeset (other than those prospectuses and statements of additional information
required by applicable laws and regulations to be distributed to the existing
shareholders of the Trust, unless paid for by any 12b-1 Plan adopted by the
Trust);

(ii) any promotional or sales literature
which are used by the Distributor or furnished by the Distributor to purchasers
or dealers in connection with the Distributor's activities pursuant to this
Agreement (unless paid for by any 12b-1 Plan adopted by the Trust);

(iii) any advertising used by the
Distributor in connection with such public offering (unless paid for by any
12b-1 Plan adopted by the Trust); and

(iv) all legal expenses in connection with
the foregoing.

TENTH: The Distributor will accept orders for shares of a
series of the Trust only to the extent of purchase orders actually received and
not in excess of such orders, and it will not avail itself of any opportunity of
making a profit by expediting or withholding orders.

ELEVENTH: The Trust shall keep the Distributor fully informed
with regard to its affairs and shall furnish the Distributor with a certified
copy of all financial statements and any amendments to its Registration
Statement under the 1933 Act.

TWELFTH: The Trust shall register, from time to time as
necessary, additional shares with the Securities and Exchange Commission, state
and other regulatory bodies and to pay the related filing fees therefor and to
file such amendments, reports and other documents as may be necessary in order
that there may be no untrue statement of a material fact in the Registration
Statement, Prospectus or Statements of Additional Information necessary in order
that there may be no omission to state a material fact therein, in light of the
circumstances under which they were made, not misleading. As used in this
Agreement, the term "Registration

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<PAGE>

Statement" shall mean the Registration Statement most recently filed by the
Trust with the Securities and Exchange Commission and effective under the 1933
Act, as such Registration Statement is amended at such time, and the term
"Prospectus" and "Statement of Additional Information" shall mean for the
purposes of this Agreement the form of the then current prospectuses and
statements of additional information for each series authorized by the Trust for
use by the Distributor and by dealers.

THIRTEENTH:

(A) The Trust and the Distributor shall each comply with all
applicable provisions of the Act, the 1933 Act and the rules and regulations of
the National Association of Securities Dealers, Inc. and of all other Federal
and state laws, rules and regulations governing the issuance and sale of shares
of the series of Trust.

(B) The Distributor shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Distributor's part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.

(C) In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Distributor or any of its officers, directors or employees, the Trust
agrees to indemnify the Distributor and any controlling person of the
Distributor against any and all claims, demands, liabilities and expenses
(including reasonable attorney's fees) which the Distributor may incur (i) based
on any act or omission the course of, or connected with, rendering services
hereunder, (ii) based on any representations made herein by the Trust; (iii)
based on any act or omission of any prior Distributor (in its capacity as
Distributor or Sub-Administrator), Administrator or Adviser to the Trust,
including the registration or failure to register any shares of the Trust in
accordance with state or federal laws or resulting from or relating to any books
or records delivered to the Distributor in connection with its responsibilities
under this Agreement and occurring prior to the date of this Agreement; and (iv)
under the 1933 Act, or common law or otherwise, arising out of or based upon any

alleged untrue statement of a material fact contained in any Registration
Statement, Statements of Additional Information or Prospectuses of the Trust, or
any omission to state a material fact therein, the omission of which makes any
statement contained therein misleading, unless such statement or omission was
made in reliance upon, and in conformity with written information furnished to
the Trust in connection therewith by or on behalf of the Distributor.

(D) The Distributor shall indemnify the Trust against any and
all claims, demands, liabilities and expenses which the Trust may incur under
the 1933 Act, or common law or otherwise, arising out of or based upon any
alleged untrue statement of material fact contained in any Registration
Statement, Statements of Additional Information or Prospectuses of the Trust, or
any omission to state a material fact therein if such statement or omission was
made in reliance upon, and in conformity with, written information furnished to
the Trust in connection therewith by the Distributor.

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<PAGE>

FOURTEENTH: Nothing herein contained shall require the Trust
to take any action contrary to any provision of its Declaration of Trust or to
any applicable statute or regulation.

FIFTEENTH: The Trust shall pay the Distributor, as full
compensation for the sub-administration services rendered hereunder, an annual
fee on behalf of each series payable monthly and computed on the net asset value
of the series the end of each business day at the annual rate set forth in
Exhibit A, as the same may be amended from time to time.

It is understood that the fees payable by one series
under this Agreement shall be payable only from the assets relating to that
series, and that no series shall be liable for the payment of any fees relating
to another series.

SIXTEENTH:

(A) This Agreement shall go into effect at the close of business
on the date hereof, and, unless terminated as hereinafter provided, shall
continue in effect for six months thereafter and from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
by the Trust's Board of Trustees, including the vote of a majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the Act) of any such party cast in person at a meeting called for the
purpose of voting on such approval, or by the vote of the holders of a
"majority" (as so defined) of the outstanding voting securities of the
applicable series and by such vote of the Trustees.

(B) This Agreement may be terminated by the Distributor at
any time without penalty upon giving the Board of Trustees of the Trust sixty
(60) days' written notice (which notice may be waived by the Trust) and may be
terminated by the Board of Trustees of the Trust at any time without penalty
upon giving the Distributor sixty (60) days' written notice (which may be waived
by the Distributor), provided that such termination by the Board of Trustees of

the Trust shall be directed or approved by the vote of a majority of all of its
Trustees in office at the time, including a majority of the Trustees who are not
interested persons (as defined in the Act) of the Trust, or by the vote of the
holders of a majority (as defined in the Act) of the voting securities of each
series of the Trust at the time outstanding and entitled to vote. This Agreement
shall automatically terminate in the event of its assignment, the term
"Assignment" for this purpose having the meaning defined in Section 2(a)(4) of
the Act.

SEVENTEENTH: The Distributor may at any time or times in its
discretion and at its own expense appoint (and may at any time remove) an agent
or agents to carry out such of the provisions of Article EIGHTH herein as the
Distributor may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Distributor of its
responsibilities or liabilities hereunder.

EIGHTEENTH: A copy of the Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually, and that the

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<PAGE>

obligations of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property of
the Trust, and all persons dealing with any class of shares of the Trust must
look solely to the Trust property belonging to such class for the enforcement of
any claims against the Trust.

NINETEENTH: Any notice under this Agreement shall be in
writing, addressed and delivered, or mailed, postage paid, to the other party at
such address as such other party may designate for the receipt of such notices.
Until further notice to the other party, it is agreed that the address of the
Trust and the Distributor shall be 101 Park Avenue, New York, New York 10178.

IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized officers as of the day and year first above
written.

ATTEST: MUTUAL FUND INVESTMENT TRUST

_________________________________ By:____________________________________

ATTEST: CF DISTRIBUTORS, INC. a wholly
owned subsidiary of THE BISYS FUND
SERVICES, INC.

_________________________________ By:_________________________________

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<PAGE>

EXHIBIT A

Mutual Fund Investment Trust
Schedule of
Distribution and
Sub-Administration Fees

The Trust shall pay the Distributor/Sub-Administrator, as full
compensation for all services rendered, an annual fee on behalf of each Fund
payable monthly and computed on the net asset value of the Fund at the end of
each business day at the annual following rates:

Fund Fee
<S> <C>
Chase Money Market Fund 0.05%
Chase Tax Free Money Market Fund 0.05%
Chase Tax Free Income Fund 0.05%
Chase New York Tax Free Income Fund 0.05%
Chase Short-Intermediate Term U.S. Government
Securities Fund 0.05%
Chase U.S. Government Securities Fund 0.05%
Chase Intermediate Term Bond Fund 0.05%
Chase Income Fund 0.05%
Chase Balanced Fund 0.05%
Chase Equity Income Fund 0.05%
Chase Core Equity Fund 0.05%
Chase Equity Growth Fund 0.05%
Chase Mid Cap Growth Fund 0.05%
Chase Small Capitalization Fund 0.05%
Chase International Equity Fund 0.05%
</TABLE>

Agreed and Approved:
CF DISTRIBUTORS, INC. MUTUAL FUND INVESTMENT TRUST

By: By:
Name: Name:
Title: Title:

<PAGE>

MUTUAL FUND INVESTMENT TRUST CUSTODY AGREEMENT

THIS AGREEMENT is effective as of the 1st day of January,
1998, by and between Mutual Fund Investment Trust (the "Trust"), an open-end
management investment company organized as a Massachusetts business trust in
1997, on behalf of all of its existing Series and any and all Series it may
create in the future (individually "a Fund" and collectively "the Funds") and
The Chase Manhattan Bank (the "Custodian"), a New York State chartered bank.

W I T N E S S E T H:

WHEREAS, the Trust is registered as an open-end,
non-diversified, management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"); and

WHEREAS, the Trust desires to retain the Custodian to serve as
the Trust's custodian and the Custodian is willing to furnish such services;

NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:

1. Appointment.

(a) The Trust hereby appoints the Custodian to act as custodian
of its portfolio securities, cash and other property and to act as agent to
perform certain accounting and recordkeeping functions required of a duly
registered investment company in compliance with applicable provisions of
federal, state and local laws, rules and regulations including, as may be
required:

<PAGE>

(i) Provide information necessary for the Trust to file
required financial reports; maintaining and preserving
required books, accounts and records as the basis for
such reports; and performing certain daily functions in
connection with such accounts and records.

(ii) Calculating daily net asset value of each Fund, and

(iii) Acting as liaison with independent auditors.

(b) The Custodian accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as provided
in Paragraph 25 of this Agreement. The Custodian agrees to comply with all
relevant provisions of the 1940 Act and applicable rules and regulations
thereunder. The Trust may from time to time issue separate Funds, classes or
classify and reclassify shares of such Funds or classes. Pursuant to
Instructions, the Custodian shall identify to each such Fund or class Property
belonging to such Fund or class and in such reports, confirmations and notices
to the Trust called for under this Agreement shall identify the Fund or class to
which such report, confirmation or notice pertains.

2. Delivery of Documents. The Trust has furnished the
Custodian with copies properly certified or authenticated of each of the
following:
(a) Resolutions of the Trust's Board of Trustees authorizing
the appointment of the Custodian as custodian of the portfolio securities, cash
and other property of the Trust, the recordkeeper for certain Fund accounting
functions as described herein and approving this Agreement;

(b) Schedule A identifying and containing the signatures of
the Trust's officers and/or other persons authorized to issue Oral Instructions
and to sign Written Instructions, as hereinafter defined, on behalf of the
Trust;

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<PAGE>

(d) The Trust's current Registration Statement on Form N-1A
under the 1940 Act and the Securities Act of 1933, as amended ("the 1933 Act")
as filed with the Securities and Exchange Commission ("the SEC"), relating to
the Trust's shares of beneficial interest, no par value (the "Shares");

(e) The current prospectus and statement of additional
information of each of the Fund, including all amendments and supplements
thereto (the "Prospectuses").

(f) A copy of the notice filed with the Commodity Futures
Trading Commission ("CFTC") of eligibility to claim the exclusion from the
definition of "commodity pool operator" contained in Section 2(a)(1)(A) of the
Commodity Exchange Act ("CEA") that is provided in Rule 4.5 under the CEA,
together with all supplements as are required by the CFTC.

The Trust will furnish Custodian from time to time with
copies, properly certified or authenticated, of all amendments of or supplements
to the foregoing, if any.

3. Definitions.

(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any of the Trust's officers, and any other person,
whether or not any such person is an officer or employee of the Trust, duly
authorized by the Board of Trustees of the Trust to give Oral and Written
Instructions on behalf of the Trust and listed on Schedule A, which may be
amended from time to time.

(b) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve/Treasury book-entry system for
United States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system maintained by a clearing agency
registered with the SEC under Section 17A of the Securities Exchange Act of 1934
(the "1934 Act").

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<PAGE>

(c) "Oral Instructions". As used in this Agreement, the term
"Oral Instructions" means oral instructions actually received by the Custodian
from an Authorized Person or from a person reasonably believed by the Custodian
to be an Authorized Person. The Trust agrees to deliver to the Custodian, at the
time and in the manner specified in Paragraph 9 of this Agreement, Written
Instructions confirming Oral Instructions.

(d) "Officer's Certificate". The term "Officer's Certificate"
as used in this Agreement means instructions delivered by hand, mail, tested
telegram, cable, telex or facsimile sending device and received by the Custodian
signed by two officers of the Fund.

(e) "Property". The term "Property", as used in this
Agreement, means:
(i) any and all securities and other property of the
Trust which the Trust may from time to time deposit, or cause to
be deposited, with the Custodian or which the Custodian may from
time to time hold for the Trust;

(ii) all income in respect of any other such securities
or other property;

(iii) all proceeds of the sales of any of such
securities or other property; and

(iv) all proceeds of the sale of securities issued by
the Trust, which are received by the Custodian from time to time
from or on behalf of the Trust.

(f) "Securities Depository". As used in this Agreement, the
term "Securities Depository" shall mean the Depository Trust Company or
Participants Trust Company, each a clearing agency registered with the SEC or,
their successor or successors and their nominee or nominees; and shall also mean
any other registered or industry recognized clearing agency, its successor or
successors specifically identified in a certified copy of a resolution of the
Trust's Board of Trustees approving deposits by the Custodian therein.

-4-

<PAGE>

(g) "Written Instructions". As used in this Agreement,
"Written Instructions" means instructions delivered by hand, mail, tested
telegram, cable, telex, facsimile sending device, and received by the Custodian,
signed by two Authorized Persons.

4. Delivery and Registration of the Property. The Trust will
deliver or cause to be delivered to the Custodian all securities and all moneys
owned by it, including cash received for the issuance of its Shares, at any time

during the period of this Agreement, except for securities and monies to be
delivered to any subcustodian appointed pursuant to Paragraph 7 hereof. The
Custodian will not be responsible for such securities and such monies until
actually received by it. All securities delivered to the Custodian or to any
such subcustodian (other than in bearer form) shall be registered in the name of
the Trust or in the name of a nominee of the Trust or in the name of the
Custodian or any nominee of the Custodian (with or without indication of
fiduciary status) or in the name of any subcustodian or any nominee of such
subcustodian appointed pursuant to Paragraph 7 hereof or shall be properly
endorsed and in form for transfer satisfactory to the Custodian.

5. Domestic and Foreign Corporate Actions and Proxies.
With respect to all securities, however registered, it is understood that the
voting and other rights and powers shall be exercised by the Trust. The
Custodian shall transmit promptly to the Trust any proxy statement, proxy
materials, notice of a call or conversation or similar communications received
by it as Custodian for the Trust as follows:

(i) With respect to domestic U.S. and Canadian
securities (the latter if held in DTC), the Custodian will
send to the Trust or the proper authorized person, such
proxies (signed in blank, if issued in the name of the
Custodian's nominee or the nominee of a central depository)
and communications with respect to

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<PAGE>

securities in the Trust's Account as call for voting or relate
to legal proceedings within a reasonable time after sufficient
copies are received by the Custodian for forwarding to its
customers. In addition, the Custodian will follow coupon
payments, redemptions, exchanges or similar matters with respect
to securities in the Trust's Account and advise the Trust or the
proper authorized person for such Account of rights issued,
tender offers or any other discretionary rights with respect to
such securities, in each case, of which the Custodian has
received notice from the issuer of the securities, or as to
which notice is published in publications routinely utilized by
the Custodian for this purpose.

Where warrants, options, tenders or other securities
have fixed expiration dates, the Trust understands that in order
for the Custodian to act, the Custodian must receive the Trust's
instructions at its offices in New York City, addressed as the
Custodian may from time to time request, by no later than noon
(NY City time) at least one business day prior to the last
scheduled date to act with respect thereto (or such earlier date
or time as the Custodian may reasonably notify the Trust).
Absent the Custodian's timely receipt of such instructions, such
instructions will expire without liability to the Custodian.
Corporate reports need not be forwarded to the Trust.

(ii) With respect to securities held or settled through
the Chase global custody network, whenever the Custodian
receives information which requires discretionary action by the
Trust (other than a proxy), such as subscription rights, bonus
issues, stock repurchase plans and rights offerings, or legal
notices or other material intended to be transmitted to
securities holders ("Corporate Actions"), the

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<PAGE>

Custodian will give the Trust notice of such Corporate
Actions to the extent that the Custodian's central corporate
actions department has actual knowledge of a Corporate Action in
time to notify its customers.

When a rights entitlement or a fractional interest resulting
from a rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Custodian will endeavor to obtain
Instructions from the Trust, but if Instructions are not received in time for
the Custodian to take timely action, or actual notice of such Corporate Action
was received too late to seek Instructions, the Custodian is authorized to sell
such rights entitlement or fractional interest and to credit the proper Fund
account with the proceeds or take any other action it deems, in good faith, to
be appropriate in which case it shall be held harmless for any such action.

The Custodian will deliver proxies to the Trust or its
designated agent pursuant to special arrangements which may have been agreed to
in writing. Such proxies shall be executed in the appropriate nominee name
relating to portfolio securities in the Custody Account registered in the name
of such nominee but without indicating the manner in which such proxies are to
be voted; and where bearer securities are involved, proxies will be delivered in
accordance with Instructions.

6. Receipt and Disbursement of Money.

(a) The Custodian shall open and maintain a custody account for
each Fund of the Trust, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account, subject
to the provisions hereof, all cash received by it from or for each Fund of the
Trust. The Custodian shall make payments of cash to, or for the account of, each
Fund of the Trust from such cash only (i) for the purchase of securities for the

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<PAGE>

Trust as provided in paragraph 15 hereof; (ii) upon receipt of an Officer's
Certificate, for the payment of dividends or other distributions of shares, or
for the payment of interest, taxes, administration, distribution or advisory
fees or expenses which are to be borne by the Trust under the terms of this
Agreement, and, with respect to each Fund, any Investment Advisory Agreement,
Administration Agreement or Distribution and Sub-administration Agreement; (iii)

upon receipt of Written Instructions for payments in connection with the
conversion, exchange or surrender of securities owned or subscribed to by the
Trust and held by or to be delivered to the Custodian; (iv) to a subcustodian
pursuant to Paragraph 7 hereof; or (v) for the redemption of Trust Shares; or
(vi) upon receipt of an Officer's Certificate for other corporate purposes. No
payment pursuant to (i) other than pursuant to Instruction and in accordance
with local market practice.

(b) the Custodian is hereby authorized to endorse and collect
all checks, drafts or other orders for the payment of money received as
custodian for the Trust.

7. Receipt of Securities.

(a) Except as provided by Paragraph 8 hereof, the Custodian
shall hold and physically segregate in a separate account with respect to each
Fund, identifiable from those of any other person, all securities and non-cash
property received by it for the Trust. All such securities and non-cash property
are to be held or disposed of by the Custodian for each Fund of the Trust
pursuant to the terms of this Agreement. In the absence of Written Instructions
accompanied by a certified resolution authorizing the specific transaction by
the Trust's Board of Trustees, the Custodian shall have no power or authority to
withdraw, deliver, assign, hypothecate, pledge or otherwise dispose of any such
securities and investments, except in accordance with the express terms provided
for in this Agreement. In no case may any trustee,

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<PAGE>

officer, employee or agent of the Trust withdraw any securities except as
provided in this Agreement and pursuant to a duly adopted resolution of the
Board of Trustees. In connection with its duties under this Paragraph 7, the
Custodian may, at its own expense, except to the extent the Custodian is
instructed to engage a subcustodian it would not otherwise have engaged, enter
into subcustodian agreements with other banks or trust companies for the receipt
of certain securities and cash to be held by the Custodian for the account of a
Fund of the Trust pursuant to this Agreement; provided that each such bank or
trust company has an aggregate capital, surplus and undivided profits, as shown
by its last published report, of not less than one million dollars ($1,000,000)
for a Custodian Subsidiary or affiliate, or of not less than twenty million
dollars ($20,000,000) for a subcustodian that is not a Custodian Subsidiary or
affiliate and that in either case such bank or trust company agrees with the
Custodian to comply with all relevant provisions of the 1940 Act and applicable
rules and regulations thereunder. The Custodian will provide the Trust with a
copy of each subcustodian agreement it executes relating to the Trust. The
Custodian will be liable for acts or omissions of any such subcustodian, except
to the extent the Custodian is instructed by the Trust to engage a subcustodian
it would not otherwise have engaged and the Trust is a party to the agreement
with such sub-custodian, under the standards of care provided for herein, of any
bank or trust company that it chooses pursuant to this Paragraph 7.

(b) Notwithstanding any other provisions of this Agreement, the
foreign securities of each Fund of the Trust (as defined in Rule 17f-5(c)(1)

under the 1940 Act) and each Fund's cash or cash equivalents, in amounts
reasonably necessary to effect the Fund's foreign securities transactions, may
be held in the custody of one or more banks or trust companies acting as
subcustodians; and thereafter, pursuant to a written contract or contracts as
approved by

-9-
<PAGE>

Trust's Board of Trustees, may be transferred to an account maintained by such
subcustodian with an eligible foreign custodian, as defined in Rule 17f-5(c)(2),
provided that any such arrangement involving a foreign custodian shall be in
accordance with the provisions of Rule 17f-5 under the 1940 Act or any exemptive
order issued to the Custodian under the 1940 Act.

(c) Promptly after the close of business on each day the
Custodian shall furnish the Trust with a summary of all transfers to or from the
account of each Fund of the Trust during said day. Where securities are
transferred to the account of any Fund of the Trust established at a Securities
Depository or the Book Entry System pursuant to Paragraph 8 herein, the
Custodian shall also by book-entry or otherwise identify as belonging to such
Fund the quantity of securities in a fungible bulk of securities registered in
the name of the Custodian (or its nominee) or shown in the Custodian's account
on the books of a Securities Depository or the Book-Entry System. At least
monthly and from time to time, the Custodian shall furnish the Trust with a
detailed statement of the Property held for each Fund under this Agreement.

8. Use of Securities Depository or the Book-Entry System. The
Trust shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Trust approving, authorizing and instructing the Custodian on a
continuous and ongoing basis until instructed to the contrary by Oral or Written
Instructions actually received by the Custodian (i) to deposit in a Securities
Depository or the Book-Entry System all securities of the Trust eligible for
deposit therein and (ii) to utilize a Securities Depository or the Book-Entry
System to the extent possible in connection with the performance of its duties
hereunder, including without limitation settlements of purchases and sales of
securities by the Trust, and deliveries and returns of securities loaned,
subject to repurchase agreements or used as collateral in connection with

-10-

<PAGE>

borrowings. Without limiting the generality of such use, it is agreed that the
following provisions shall apply thereto:

(a) Securities and any cash of the Trust deposited in a
Securities Depository or the Book-Entry System will at all times be segregated
from any assets and cash controlled by the Custodian in other than a fiduciary
or custodian capacity. The Custodian and its subcustodians, if any, will pay out
money only upon receipt of securities and will deliver securities only upon
receipt of money, unless the Trust has given the Custodian Written Instructions
to the contrary.

(b) All Books and records maintained by the Custodian that
relate to the Trust participation in a Securities Depository or the Book-Entry
System will at all times during the Custodian's regular business hours be open
to the inspection of the Trust's duly authorized employees or agents, the
Trust's independent auditors in accordance with applicable regulations, and the
Trust will be furnished with all information in respect of the services rendered
to it as it may require.

(c) The Custodian will provide the Trust with copies of any
report obtained by the Custodian on the system of internal accounting control of
the Securities Depository or Book-Entry System promptly after receipt of such a
report by the Custodian. The Custodian will also provide the Trust with such
reports on its own system of internal control as the Trust may reasonably
request from time to time.

9. Instructions Consistent With the Charter, etc. Unless
otherwise provided in this Agreement, the Custodian shall act only upon Oral and
Written Instructions. The Custodian may assume that any Oral or Written
Instructions received hereunder are not in any way inconsistent with any
provision of the Charter, By-Laws, any prospectus pursuant to which

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<PAGE>

Shares of a Fund are offered for sale, any rule or regulation of any applicable
regulatory body or governmental agency or any vote or resolution of the Trust's
Board of Trustees, or any committee thereof. The Custodian shall be entitled to
rely upon any Oral or Written Instructions actually received by the Custodian
pursuant to this Agreement. The Trust agrees to forward to the Custodian Written
Instructions confirming Oral Instructions in such manner that the Written
Instructions are received by the Custodian at the close of business of the same
day that such Oral Instructions are given to the Custodian. The Trust agrees
that the fact that such confirming Written Instructions are not received by the
Custodian shall in no way affect the validity of any of the transactions
authorized by the Trust by giving Oral Instructions nor shall receipt of
conflicting Written Instructions affect the validity of transactions undertaken
based on Oral Instructions or the Custodian's obligations or responsibilities
with respect thereto if such actions have been taken prior to the receipt of
such Written Instructions. The Trust agrees that the Custodian shall incur no
liability in acting upon Oral Instructions given to the Custodian hereunder
concerning such transactions provided such instructions reasonably appear to
have been received from an Authorized Person, unless any liability to the Trust
results from the negligence or willful misconduct of the Custodian. In accord
with instructions from the Trust, as required by accepted industry practice or
as the Custodian may elect in effecting the execution of Trust instructions,
advances of cash or other Property made by the Custodian, arising from the
purchase, sale, redemption, transfer or other disposition of Property of the
Trust, or in connection with the disbursement of funds to any party, or in
payment of fees, expenses, claims or liabilities owed to the Custodian by the
Trust, or to any other party which has secured judgment in a court of law
against the Trust which creates an overdraft in the accounts or overdelivery of
Property
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<PAGE>

shall be deemed a loan by the Custodian to the Trust, payable on demand, bearing
interest at such rate customarily charged by the Custodian for similar loans.

10. Transactions Not Requiring Instructions. The Custodian is
authorized to take the following action without Written Instructions:

(a) Collection of Income and Other Payments. The Custodian
shall:

(i) collect and receive for the account of any Fund of
the Trust, all income and other payments and distributions,
including (without limitation) stock dividends, rights, warrants
and similar items, included or to be included in the Property of
any Fund of the Trust, and promptly advise the Trust of such
receipt and shall credit such income, as collected, to such Fund
of the Trust. With respect to non-foreign issuers, the Custodian
shall credit the account with interest, dividends or principal
payments on the payable date, in anticipation of receiving same
from a payor, central depository, broker or other agent employed
by the Trust or the Custodian (each advance made hereunder shall
be subject to reversal in the event that (i) payment to which it
relates is not made within a reasonable time after its due date
and (2) the Custodian notifies the Trust within 30 days of such
due date that it anticipates a delay in collection).

(ii) with respect to securities of foreign issue, effect
collection of dividends, interest and other income, and to
notify the Trust of any call for redemption, offer of exchange,
right of subscription, reorganization, or other proceedings
affecting such securities, or any default in payments due
thereon. It is understood, however, the Custodian shall be under
no responsibility for any failure or delay in effecting such
collections or giving such notice with respect to securities of

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foreign issue, regardless of whether or not the relevant
information is published in any financial service available to
it unless such failure or delay is due to its negligence.
Collections of income in foreign currency are, to the extent
possible, to be converted into United States dollars unless
otherwise instructed in writing, and in effecting such
conversion the Custodian may use such methods or agencies as it
may see fit, including the facilities of its own foreign
division at customary rates. All risk and expenses incident to
such collection and conversion is for the account of the Trust
and the Custodian shall have no responsibility for fluctuations
in exchange rates affecting any such conversion.

(iii) endorse and deposit for collection in the name of
the Trust and each of its Funds, checks, drafts, or other orders
for the payment of money on the same day as received;

(iv) receive and hold for the account of each of the
Funds all securities received by the Trust as a result of a
stock dividend, share split-up or reorganization,
recapitalization, readjustment or other rearrangement or
distribution of rights or similar securities issued with respect
to any portfolio securities of the Trust held by the Custodian
hereunder;

(v) present for payment and collect the amount payable
upon all securities which may mature or be called, redeemed or
retired, or otherwise become payable on the date such securities
become payable;

(vi) take any action which may be necessary and proper
in connection with the collection and receipt of such income and
other payments and the endorsement for collection of checks,
drafts and other negotiable instructions;

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(vii) to exchange securities in temporary form for
securities in definitive form, to effect an exchange of the
shares where the par value of stock is changed, and to surrender
securities at maturity or when advised of earlier call for
redemption, against payment therefor in accordance with accepted
local industry practice. When fractional shares of stock of a
declaring corporation are received as a stock distribution, the
Custodian is authorized to sell the fraction received and credit
the Trust's account. Unless specifically instructed to the
contrary in writing, the Custodian is authorized to exchange
securities in bearer form for securities in registered form. If
any Property registered in the name of a nominee of the
Custodian is called for partial redemption by the issuer of such
Property, the Custodian is authorized to allot the called
portion to the respective beneficial holders of the Property in
such manner deemed to be fair and equitable by the Custodian in
its sole discretion.

(b) Miscellaneous Transactions. The Custodian is
authorized to deliver or cause to be delivered Property against
payment or other consideration or written receipt therefor in
the following cases:

(i) for examination by a broker selling for the account
of the Trust in accordance with local industry practice;

(ii) for the exchange of interim receipts or temporary
securities for definitive securities;

(iii) for transfer of securities into the name of the
Trust or the Custodian or a nominee of either, or for exchange
or securities for a different number of bonds, certificates, or
other evidence, representing the same aggregate face amount or

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number of units bearing the same interest rate, maturity date
and call provisions, if any; provided that, in any such case,
the new securities are to be delivered to the Custodian.

11. Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, the Custodian, directly or through the
use of a Securities Depository or the Book-Entry System, shall:

(a) Execute and deliver to such persons as may be designated in
such Oral or Written Instructions, proxies, consents, authorizations, and any
other instruments whereby the authority of the Trust as owner of any securities
may be exercised;

(b) Deliver any securities held for any Fund of the Trust
against receipt of other securities or cash issued or paid in connection with
the liquidation, reorganization, refinancing, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;

(c) Deliver any securities held for any Fund of the Trust to any
protective committee, reorganization committee or other person in connection
with the reorganization, refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, against receipt of such certificates or
deposit, interim receipts or other instruments or documents as may be issued to
it to evidence such delivery;

(d) Make such transfers or exchanges of the assets of any Fund
of the Trust and take such other steps as shall be stated in said instructions
to be for the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Trust;

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<PAGE>

(e) Release securities belonging to any Fund of the Trust to any
bank or trust company for the purpose of pledge or hypothecation to secure any
loan incurred by the Trust; provided, however, that securities shall be released
only upon payment to the Custodian of the monies borrowed, except that in cases
where additional collateral is required to secure a borrowing already made,
subject to proper prior authorization, further securities may be released for
that purpose; and pay such loan upon redelivery to it of the securities pledged
or hypothecated therefore and upon surrender of the note or notes evidencing the
loan;

(f) Deliver any securities held for the Trust upon the exercise
of a covered call option written by the Trust on such securities;

(g) Release and deliver securities owned by the Trust in
connection with any repurchase agreement entered into on behalf of any Fund of
the Trust, but only on receipt of payment therefor; and pay out moneys of the
Trust in connection with such repurchase agreements, but only upon the delivery
of the securities;

(h) otherwise transfer, exchange or deliver securities in
accordance with Oral or Written Instructions.

12. Segregated Accounts. The Custodian shall upon receipt of
Written or Oral Instructions establish and maintain a segregated account or
accounts on its records for and on behalf of any Fund of the Trust, into which
account or accounts may be transferred cash and/or securities, including
securities in the Book-Entry System (i) for the purposes of compliance by the
Trust with the procedures required by a securities or option exchange, providing
such complies with the Investment Company Act and Release No. 10666 or any
subsequent release or releases of the SEC relating to the maintenance of
segregated accounts by registered investment

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companies and (ii) for other proper corporate purposes, but only, in the case of
clause (ii), upon receipt of, Written Instructions.

13. Calculation of Net Asset Value. Custodian will calculate
the net asset value of each Fund or class of a Fund once daily in accordance
with the procedures attached as Schedule C. Custodian will prepare and maintain
a daily evaluation of portfolio securities of each Fund for which market
quotations are available by the use of outside services normally used and
contracted for this purpose; all other portfolio securities of each Fund will
be evaluated in accordance with Trust's instructions. Custodian will have no
responsibility for the accuracy of the prices quoted by these outside services
or for the information supplied by Trust or upon instructions.

14. Dividends and Distributions. (a) The Trust shall furnish the
Custodian with appropriate evidence of action by the Trust's Board of Trustees
declaring and authorizing the payment of any dividends and distributions. The
amounts of Dividends and/or distributions will be calculated by the Custodian in
accordance with the procedures attached as Schedule C. Upon receipt by the
Custodian of an Officer's Certificate with respect to dividends and
distributions declared by the Trust's Board of Trustees and payable to
shareholders of any Fund or class who are entitled to receive cash for
fractional shares and those who have elected in the proper manner to receive
their distributions on dividends in cash, and in conformance with the procedures
mutually agreed upon by the Custodian, the Trust, and the Trust's Administrator
or Transfer Agent, the Custodian shall pay to the Trust's transfer agent, as
agent for the shareholders, an amount equal to the amount indicated in said
Officer's Certificate as payable by the Trust to such shareholders for

distribution in cash by the transfer agent to such shareholders. In lieu of
paying the Trust's transfer agent cash dividends and distributions, the
Custodian may
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arrange for the direct payment of cash dividends and distributions to
shareholders by the Custodian in accordance with such procedures and controls as
are mutually agreed upon from time to time by and among the Trust, the Custodian
and the Trust's Administrator and transfer agent.

(b) The Custodian may enter into separate custodial agreements
with various futures commission merchants ("FCMs") that the Trust uses (each an
"FCM Agreement"), pursuant to which the Trust's margin deposits in any
transactions involving futures contracts and options on futures contracts will
be held by Custodian in accounts (each an "FCM Account") subject to the
disposition by the FCM involved in such contracts in accordance with the
customer contract between FCM and the Trust ("FCM Contract"), SEC rules
governing such segregated accounts, CFTC rules and the rules of the applicable
commodities exchange. Such FCM Agreements shall only be entered into upon
receipt of Written Instructions from the Trust. Transfers of initial margin
shall be made into an FCM Account only upon Written Instructions; transfers of
premium and variation margin may be made into an FCM Account pursuant to Oral
Instructions. Transfers of funds from an FCM Account to the FCM for which
Custodian holds such an account may only occur upon certification by the FCM to
the Custodian that pursuant to the FCM Agreement and the FCM Contract, all
conditions precedent to its right to give the Custodian such instruction have
been satisfied.

15. Purchase of Securities. Promptly after each purchase of
securities by the Investment Adviser on behalf of any Fund, the Trust shall
deliver to the Custodian Oral or Written Instructions specifying with respect to
each such purchase: (a) the name of the issuer and the title of the securities,
(b) the number of shares or the principal amount purchased and accrued interest,
if any, (c) the dates of purchase and settlement, (d) the purchase price per
unit,

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(e) the total amount payable upon such purchase, (f) the name of the person from
whom or the broker through whom the purchase was made, (g) the Fund for which
the purchase was made and (h) the cusip number or other industry standard
identification when available. The Custodian shall upon receipt of securities
purchased by or for the Trust pay out of the moneys held for the account of such
Trust the total amount payable to the person from whom or the broker through
whom the purchase was made, provided that the same conforms to the total amount
payable as set forth in such Oral or Written Instructions.

16. Notation Pursuant to Section 17f-2 of the 1940 Act. With
respect to each deposit or withdrawal of securities or when ordering the deposit
or withdrawal of securities from safekeeping, the Custodian shall sign a
notation in respect of each such deposit, withdrawal or order that shall show:
(a) the date and time of the deposit, withdrawal or order; (b) the title and
amount of the securities or other investments deposited, withdrawn or ordered to
be withdrawn, and the identification thereof by certificate numbers or
otherwise; (c) the manner of acquisition of the securities or similar
investments deposited or the purpose for which they have been withdrawn, or
ordered to be withdrawn; and (d) if withdrawn and delivered to another person,
the name of such person. The time of any deposit, withdrawal or order means the
time of the formal recording of such transactions on the books of the Custodian
at the Custodian's close of business. Such notation shall be transmitted
promptly to an officer or trustee of the Trust designated by the Board of
Trustees who shall not otherwise be authorized to have access to the Trust's
securities. Such notation shall be on serially numbered forms and shall be
preserved for at least one year.

17. Sales of Securities. Promptly after each sale of securities
by the investment manager, the Trust shall deliver to the Custodian Oral or
Written Instructions, specifying with respect to each such sale: (a) the name of
the issuer and the title of the security,

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(b) the number of shares or principal amount sold, and accrued interest, if any,
(c) the date of sale, (d) the sale price per unit, (e) the total amount payable
to the Trust upon such sale, (f) the name of the broker through whom or the
person to whom the sale was made, (g) the Fund for which the sale was made and
(h) the cusip number or other industry standard identification when available.
The Custodian shall deliver the securities upon receipt of the total amount
payable to the Trust upon such sale, provided that the same conforms to the
total amount payable as set forth in such Oral or Written Instructions. Subject
to the foregoing, the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver securities and arrange for payment in
accordance with the local customs prevailing among dealers in securities.

18. Records. The books and records pertaining to the Trust shall
be prepared and maintained as required by the 1940 Act, as amended, and other
applicable securities laws and rules and regulations. The Trust, or the Trust's
authorized representatives, shall have access to such books and records at all
times during the Custodian's normal business hours, and such books and records
shall be surrendered to the Trust promptly upon request. Upon reasonable request
of the Trust, copies of any such books and records shall be provided by the
Custodian to the Trust or the Trust's authorized representative at the Trust's
expense.

19. Reports.

(a) The Custodian shall furnish the Trust the following
reports:

(1) such periodic and special reports as the Trust may
reasonably request;

(2) a monthly statement summarizing all transactions and
entries for the account of each Fund;

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<PAGE>

(3) a monthly report of portfolio securities belonging to
each Fund showing the adjusted average cost of each
issue and the market value at the end of such month;

(4) a monthly report of the cash account of each Fund
showing disbursements;

(5) the reports to be furnished to the Trust pursuant to
Rule 17f-4;

(6) the reports to be furnished to the Trust pursuant to
Rule 17f-5, and;

(7) such other information as may be agreed upon from time
to time between the Trust and the Custodian.

(b) The Custodian with the direction and as interpreted by the
Trust, the Trust's accountants and/or other tax advisors will prepare and
maintain as complete, accurate, and current all accounts and records required to
be maintained by each Fund under the Internal Revenue Code of 1986, as amended,
under the rules and regulations of the 1940 Act and as agreed upon between the
parties and will preserve such records in the manner and for the periods
required by law.

(c) Unless the information necessary to perform the above
functions is furnished in writing or its electronic or digital equivalent to the
Custodian in a timely manner prior to the next calculation of each Fund's net
asset value, the Custodian shall incur no liability except as provided in
Paragraph 9 herein and the Trust shall indemnify and hold the Custodian harmless
from and against any liability arising from any discrepancy between the
information received by the Custodian and used in such calculation and any
subsequent information received from the Trust.

(d) The Custodian shall assist the Trust's independent auditors,
or upon approval of the Trust or upon demand, any regulatory body, in any
requested review of the
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Trust's accounts and records maintained by the Custodian but shall be reimbursed
by the Trust for all expenses and employee time invested in any such review
outside of routine and normal periodic reviews.

(e) Upon receipt from the Trust of the necessary information,
the Custodian shall provide information for tax returns, questionnaires, or
periodic reports to shareholders and such other reports and information requests
as the Trust and the Custodian shall agree upon from time to time.

20. Cooperation with Accountants. The Custodian shall cooperate
with the Trust's independent certified public accountants and shall take all
reasonable action in the performance of its obligations under this Agreement and
under Rule 17f-2 to assure that the necessary information is made available to
such accountants for the expression of their unqualified opinion with respect
to, including without limitation, the three audits required each year, the
certificates with respect to such annual audits and the opinion included in the
Trust's semi-annual report on Form N-SAR, and will require each sub-custodian
appointed pursuant to paragraph 7 hereof to grant such access to the information
to the Trust's independent certified public accountant. The Custodian shall
require any sub-custodian it appoints with respect to the Trust to comply with
the provisions of this Paragraph 20.

21. Confidentiality. The Custodian agrees on behalf of itself
and its employees to treat confidentially and as the proprietary information of
the Trust all records and other information relative to the Trust and its prior,
present or potential shareholders and relative to the managers and its prior,
present or potential customers, and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval shall not be
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unreasonably withheld and may not be withheld where the Custodian may be exposed
to civil or criminal contempt proceedings for failure to comply, when requested
to divulge such information by duly constituted authorities, or when so
requested by the Trust.

22. Equipment Failures. In the event of equipment failures
beyond the Custodian's control, the Custodian shall, at no additional expense to
the Trust, take reasonable steps to minimize service interruptions but shall not
have liability with respect thereto. The Custodian shall make and maintain
reasonable provisions for back up emergency use of electronic data processing
equipment to the extent appropriate equipment is available.

23. Right to Receive Advice.

(a) Advice of Trust. If the Custodian shall be in doubt as to
any action to be taken or omitted by it, it may request, and shall receive, from
the Trust clarification or advice, including Oral or Written Instructions.

(b) Advice of Counsel. If the Custodian shall be in doubt as to
any question of law involved in any action to be taken or omitted by the
Custodian, it may request advice from counsel of its own choosing (who may be
counsel for the Trust or the Custodian, at the option of the Custodian).

(c) Conflicting Advice. In case of conflict between directions,
advice or Oral or Written Instructions received by the Custodian pursuant to
subparagraph (a) of this paragraph and advice received by the Custodian pursuant
to subparagraph (b) of this paragraph, the Custodian shall be entitled to rely
on and follow the advice received pursuant to the latter provision alone.

(d) Protection of The Custodian. The Custodian shall be
protected in any action or inaction which it takes or omits to take in reliance
on any directions, advice or Oral or

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Written Instructions received pursuant to subparagraphs (a) or (b) of this
section which the Custodian, after receipt of any such directions, advice or
Oral or Written Instructions, in good faith believes to be consistent with such
directions, advice or Oral or Written Instructions, as the case may be. Nothing
in this paragraph shall be construed as imposing upon the Custodian any
obligation (i) to seek such directions,advice or Oral or Written Instructions,
or (ii) to act in accordance with such directions, advice or Oral or Written
Instructions when received, unless, under the terms or another provision of this
Agreement, the same is a condition to the Custodian's properly taking or
omitting to take such action. Nothing in this subparagraph shall excuse the
Custodian when an action or omission on the part of the Custodian constitutes
willful misfeasance, bad faith, negligence or reckless disregard by the
Custodian of its duties under this Agreement.

24. Compliance with Governmental Rules and Regulations. The
Custodian undertakes to comply with all applicable requirements of the 1933 Act,
the 1934 Act, the 1940 Act and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties and obligations to be
performed by the Custodian hereunder. The Custodian acknowledges that it is
subject to Rule 17f-2 under the 1940 Act with respect to its duties to be
performed pursuant to this Agreement.

25. Compensation. As compensation for the services rendered by
the Custodian during the term of this Agreement, the Trust will pay to the
Custodian, in addition to reimbursement of its reasonable out-of-pocket
expenses, including reasonable counsel fees, monthly fees as outlined in
Schedule D, or as otherwise agreed upon from time to time in writing by the
Custodian and the Trust.

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26. Indemnification. The Trust, as sole owner of the Property,
agrees to indemnify and hold harmless the Custodian and its nominees from all
taxes, charges, expenses, assessments, claims, and liabilities (including,
without limitation, liabilities arising under the 1933 Act, the Act of 1934, the
1940 Act, the CEA, and any state and foreign securities and blue sky laws, all

as or to be amended from time to time) and expenses, including (without
limitation) attorney's fees and disbursements, arising directly or indirectly
(a) from the fact that securities included in the Property are registered in the
name of any such nominee or (b) without limiting the generality of the foregoing
clause (a) from any action or thing which the Custodian takes or does or omits
to take or do (i) at the request or on the direction of or in reliance on the
advice of the Trust, or (ii) upon Oral or Written Instructions, provided, that
neither the Custodian nor any of its nominees or subcustodian shall be
indemnified against any liability to any Fund of the Trust or to its
shareholders (or any expenses incident to such liability) arising out of (x) the
Custodian's or such nominee's or subcustodian's own willful misfeasance, bad
faith, negligence or reckless disregard of its duties under this Agreement or
(y) the Custodian's own negligent failure to perform its duties under this
Agreement. In the event of any advance of cash for any purpose made by the
Custodian resulting from Oral or Written Instructions of the Trust, or in the
event that the Custodian or its nominee or subcustodian shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's or subcustodian's own negligent action, negligent failure
to act, willful misconduct, or reckless disregard, the Trust shall promptly
reimburse the Custodian for such advance of cash or such taxes, charges,
expenses, assessment claims or liabilities. Notwithstanding anything to the
contrary, any one Fund shall not provide

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indemnification to the Custodian for any loss or liability resulting from
actions with respect to any other Fund.

27. Responsibility of The Custodian. The Custodian shall be
under no duty to take any action on behalf of the Trust except as specifically
set forth herein or as may be specifically agreed to by the Custodian in
writing. In the performance of its duties hereunder, the Custodian shall be
obligated to exercise reasonable care and diligence and to act in good faith to
insure the accuracy of all services performed under this Agreement. The
Custodian shall be responsible for its own negligent failure or that of any
subcustodian it shall appoint to perform its duties under this Agreement but to
the extent that duties, obligations and responsibilities are not expressly set
forth in this Agreement, the Custodian shall not be liable for any act or
omission which does not constitute willful misfeasance, bad faith, or negligence
on the part of the Custodian or reckless disregard of such duties, obligations
and responsibilities. Without limiting the generality of the foregoing or of any
other provision of this Agreement, the Custodian in connection with its duties
under this Agreement shall not be under any duty or obligation to inquire into
and shall not be liable for or in respect of (a) the validity or invalidity or
authority or lack thereof of any advice, direction, notice or other instrument
which conforms to the applicable requirements of this Agreement, if any, and
which the Custodian believes to be genuine, (b) the validity of the issue of any
securities purchased or sold by the Trust, the legality of the purchase or sale
thereof or the propriety of the amount paid or received therefore, (c) the
legality of the issue or sale of any Shares, or the sufficiency of the amount to
be received therefore, (d) delays or errors or loss of data occurring by reason

of circumstances beyond the Custodian's control, including acts of civil or
military authority, national emergencies, strikes or work stoppages, fire,
mechanical breakdown (except as provided in Paragraph 22), flood or catastrophe,
acts of God,
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insurrection, acts of war or terrorism, riots, revolutions, nuclear fusion,
fission or radiation, or failure of the mail, transportation, communication or
power supply. Without limiting the foregoing,the Custodian shall not be liable
for any loss which results from: (1) the general risk of investing, or (2)
investing or holding Fund assets in a particular country including, but not
limited to, losses resulting from nationalization, expropriation or other
governmental actions; regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; and market conditions which prevent
the orderly execution of securities transactions or affect the value of assets.

28. Collection. All collections of monies or other property in
respect, or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by the Custodian) shall be at the sole risk of the Trust.
In any case in which the Custodian does not receive any payment due the Trust
within a reasonable time after the Custodian has made proper demands for the
same, it shall so notify the Trust in writing, including copies of all demand
letters, any written responses thereto, and memoranda of all oral responses
thereto, and to telephonic demands, and await instructions from the Trust. The
Custodian shall not be obliged to take legal action for collection unless and
until reasonably indemnified to its satisfaction. The Custodian shall also
notify the Trust as soon as reasonably practicable whenever income due on
securities is not collected in due course.

29. Duration and Termination. This Agreement shall be effective
as of the date hereof and shall continue until termination by the Trust or by
the Custodian on 90 days' written notice. Upon any termination of this
Agreement, pending appointment of a successor to the Custodian or a vote of the
shareholders of the Trust to dissolve or to function without a custodian of its
cash, securities or other property, the Custodian shall not deliver cash,
securities

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or other property of the Trust to the Trust, but may deliver them to a bank or
trust company of its own selection, having aggregate capital, surplus and
undivided profits, as shown by its last published report of not less than twenty
million dollars ($20,000,000) as a custodian for the Trust to be held under
terms similar to those of this Agreement, provided, however, that the Custodian
shall not be required to make any such delivery or payment until full payment
shall have been made by the Trust of all liabilities constituting a charge on or
against the properties then held by the Custodian or on or against the Custodian
and until full payment shall have been made to the Custodian of all of its fee,
compensation, costs and expenses, subject to the provisions of Paragraph 22 of
this Agreement.

30. Notices. All notices and other communications (collectively
referred to as "Notice" or "Notices" in this paragraph) hereunder shall be in
writing or by confirmed telegram, cable, telex, or facsimile sending device.
Notices shall be addressed (a) if to the Custodian, The Chase Manhattan Bank,
Institutional Custody & Escrow, One Chase Manhattan Plaza Floor 3B, New York,
New York 10081; (b) if to the Trust, at the address of the Trust, Attention:
Secretary; or (c) if to neither of the foregoing, at such other address as shall
have been notified to the sender of any such Notice or other communication.
Notice shall be deemed to have been given when actually received by the other
party. All postage, cable, telegram, telex and facsimile sending device charges
arising from the sending of a Notice hereunder shall be paid by the sender.

31. Further Actions. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.

32. Amendments. This Agreement or any part hereof may be changed
or waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.

-29-

<PAGE>

33. Miscellaneous. This Agreement embodies the entire Agreement
and understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to the subject matter hereof. The
captions in this Agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement shall be deemed to be a contract made in
New York and governed by New York law. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below as of the day and
year first above written.

MUTUAL FUND INVESTMENT TRUST

By: ATTEST:
----------------- --------------
Title: Title:

THE CHASE MANHATTAN BANK

By: ATTEST:
----------------- --------------
Title: Title:

-30-

<PAGE>

SCHEDULE B

- ----------------------------------------------------------------------------
Chairman of the Board
- ----------------------------------------------------------------------------
President
- ----------------------------------------------------------------------------
Secretary and Assistant Treasurer
- ----------------------------------------------------------------------------
Treasurer and Assistant Secretary
- ----------------------------------------------------------------------------

<PAGE>

TRANSFER AGENCY AGREEMENT

THIS AGREEMENT made the 1st day of January, 1998, by and between
MUTUAL FUND INVESTMENT TRUST, a Massachusetts business trust, having its
principal place of business at 101 Park Avenue, New York, New York 10178
("Fund"), and DST SYSTEMS, INC., a Missouri corporation, having its principal
place of business at 210 West 10th Street, Kansas City, Missouri 64105 ("DST"):

WITNESSETH:

WHEREAS, the Fund is a Massachusetts business trust registered
with the Securities and Exchange Commission as an investment company pursuant to
the Investment Company Act of 1940, as amended; and

WHEREAS, the Fund wishes to appoint DST as transfer agent and
dividend disbursing agent as to any and all shares issued by the Fund; and

WHEREAS, DST wishes to accept such appointment; and

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:

1. Documents to be Filed with Appointment. In connection
with the appointment of DST as Transfer Agent and
Dividend Disbursing Agent for the Fund, there will be
filed with DST the following documents:

A. A certified copy of the Votes of the Board of
Trustees of the Fund appointing DST as Transfer
Agent and Dividend Disbursing Agent,

<PAGE>

approving the form of this Agreement, and
designating certain persons to sign stock
certificates, if any, and give written
instructions and requests on behalf of the Fund;

B. A certified copy of the Articles of
Incorporation and all future amendments
affecting the number of authorized shares or
DST's provision of services hereunder;

C. A certified copy of the Bylaws of the Fund;

D. Copies of all current and future Registration
Statements and amendments thereto, filed with
the Securities and Exchange Commission;

E. Specimens of all forms of outstanding stock
certificates, if any;

F. An opinion of counsel for the Fund with respect
to:

(1) Fund's organization and existence under
the laws of its state of organization,

(2) The status of all shares of stock of
Fund covered by the appointment under
the Securities Act of 1933, as amended,
and any other applicable federal or
state statute, and

(3) That all issued shares are, and all
unissued shares will be when issued,

<PAGE>

validly issued, fully paid and
nonassessable.

2. Certain Representations and Warranties of DST. DST
represents and warrants to the Fund that:

A. It is a corporation duly organized and existing
and in good standing under the laws of Missouri.

B. It is duly qualified to carry on its business in
the State of Missouri.

C. It is empowered under applicable laws and by its
Articles of Incorporation and bylaws to enter
into and perform the services contemplated in
this Agreement.

D. It is registered as a transfer agent to the
extent required under the Securities Exchange
Act of 1934.

E. All requisite corporate proceedings have been
taken to authorize it to enter into and perform
this Agreement.

F. It has and will continue to have and maintain
the necessary facilities, equipment and
personnel to perform its duties and obligations
under this Agreement.

3. Certain Representations and Warranties of the Fund. The
Fund represents and warrants to DST that:

<PAGE>
4

A. It is a business trust duly organized and
existing and in good standing under the laws of
the Commonwealth of Massachusetts.

B. It is an open-end diversified management
investment company registered under the
Investment Company Act of 1940, as amended.

C. A registration statement under the Securities
Act of 1933 has been filed and is effective with
respect to the shares of the Fund being offered
for sale.

D. All requisite steps have been and, in the
future, will be taken to register the Fund's
shares for sale in applicable states.

E. The Fund is empowered under applicable laws and
by Articles of Incorporation and bylaws to enter
into and perform this Agreement.

4. Scope of Appointment.

A. Subject to the conditions set forth in this
Agreement, effective the 1st day of January,
1998, the Fund hereby employs and appoints DST
as Transfer Agent and Dividend Disbursing Agent
as to all current and future issued and
outstanding shares of the Fund.

B. DST hereby accepts such employment and
appointment and agrees that it will act as the
Fund's Transfer Agent and Dividend Disbursing
Agent. DST agrees that it will

<PAGE>

also act as agent in connection with the Fund's
periodic investment and withdrawal payment
accounts, other open-account and similar plans
for shareholders, if any.

C. DST agrees to provide the necessary facilities,
equipment and personnel to perform its duties
and obligations hereunder in accordance with
industry practice.

D. The Fund agrees to deliver to DST in Kansas
City, Missouri, as soon as they are available,
all of its shareholder account records.

E. Subject to the provisions of Sections 19. and
20. hereof, DST agrees that it will perform all
of the usual and ordinary services of Transfer
Agent and Dividend Disbursing Agent and as Agent
for the various shareholder accounts, including,
without limitation, the following: issuing,
transferring and cancelling stock certificates;
maintaining all shareholder accounts; preparing
shareholder meeting lists, mailing proxies,
receiving and tabulating proxies (outside agency
bills treated as out-of-pocket expenses);
mailing shareholder reports and prospectuses;
withholding taxes on nonresident alien and
foreign corporation

<PAGE>

accounts, for pension and deferred income
accounts for which DST is the named trustee or
custodian, on accounts which DST has been
advised are subject to backup withholding or
other instances agreed upon by the parties;
preparing and mailing checks for disbursement of
income dividends and capital gains
distributions, preparing and filing U.S.
Treasury Department Form 1099 for shareholders
as directed by the Fund; preparing and mailing
confirmation forms to shareholders and dealers
with respect to purchases and liquidation of the
Fund shares and other transactions in
shareholder accounts for which confirmations are
required or as directed by the Fund; recording
reinvestments of dividends and distributions in
Fund shares; and preparing and mailing checks
for payments upon redemption and for
disbursements to withdrawal plan holders.

5. Limit of Authority.

Unless otherwise expressly limited by the resolution of
appointment or by subsequent action by the Fund, the
appointment of DST as Transfer Agent will be construed

to cover the full amount of the Shares of the Fund for
which DST is appointed as the same will, from time to
time, be

<PAGE>
7

constituted, and any subsequent increases in such
authorized amount.

In case of such increase the Fund will file with DST:

A. If the appointment of DST was theretofore
expressly limited, a certified copy of a Vote of
the Board of Trustees of the Fund increasing the
authority of DST;

B. A certified copy of the amendment to the
Articles of Incorporation authorizing the
increase of shares.

6. Compensation and Expenses.

A. In consideration for its services hereunder as
Transfer Agent and Dividend Disbursing Agent,
the Fund will pay to DST from time to time a
reasonable compensation for all services
rendered as Agent, and also, all its reasonable
out-of-pocket expenses, charges, counsel fees,
and other disbursements incurred in connection
with the agency. Such compensation will be set
forth in a separate schedule to be agreed to by
the Fund and DST, a copy of which is attached
hereto and incorporated herein by reference. If
the Fund has not paid such compensation and
expenses to DST within a reasonable time, and as
permitted by applicable law, DST may

<PAGE>
8

charge against any monies held under this
Agreement in the Fund's name, the amount of any
compensation, expense, loss or liability for
which DST shall be entitled to reimbursement
under this Agreement.

B. The Fund agrees to promptly reimburse DST for
all reasonable out-of-pocket expenses or
advances incurred by DST in connection with the
performance of services under this Agreement,
for postage (which may be required to be paid in
advance) and first class mail insurance in
connection with mailing stock certificates,

envelopes, check forms, continuous forms, forms
for reports and statements, stationery, and
other similar items, telephone and telegraph
charges incurred in answering or making
inquiries from or of dealers or shareholders,
microfilm used each year to record the previous
year's transactions in shareholder accounts and
computer tapes used for permanent storage of
records and cost of insertion of materials in
mailing envelopes by outside firms.

7. Operation of DST System.

A. In connection with the performance of its
services under this Agreement, DST is
responsible for such items as:

<PAGE>
9

(1) The accuracy of entries made by DST in
DST's records reflecting orders and
instructions received by DST from
dealers, shareholders, the Fund or its
principal underwriter;

(2) The availability and the accuracy of
shareholder lists, shareholder account
verifications, confirmations and other
shareholder account information to be
produced from its records or data;

(3) The accurate and timely issuance of
dividend and distribution checks in
accordance with instructions received
from the Fund;

(4) The accuracy of redemption transactions
and payments in accordance with
redemption instructions received from
dealers, shareholders or the Fund;

(5) The deposit daily in the Fund's
appropriate bank account of all checks
and payments received directly or
individually from dealers or
shareholders for investment in shares;

(6) The requiring of proper forms of
instructions, signatures and signature
guarantees and any necessary documents
supporting the legality of transfers,

<PAGE>
10

redemptions and other shareholder
account transactions, all in conformance
with DST's present procedures with such
changes as may be required or approved
by the Fund; and

(7) The maintenance of a current duplicate
set of the Fund's essential records
maintained by DST for the Fund under
this agreement at a secure distant
location.

B. DST is not responsible for and shall have no
liability as a result of or which arises out of
errors, inaccuracies or omissions in the Fund's
books and records as received by DST from the
prior transfer and dividend disbursing agent and
any errors, inaccuracies or omissions in
reports, lists, verifications, confirmations or
other information or data derived or produced
therefrom.

8. Indemnification

A. DST will not be responsible for, and the Fund
will hold harmless and indemnify DST from and
against any loss by or liability to the Fund or
a third party, including attorney's fees, in
connection with any claim or suit asserting any
such liability arising out of

<PAGE>
11

or attributable to actions taken or omitted by
DST pursuant to this Agreement, unless DST has
acted negligently or in bad faith. The matters
covered by this indemnification include but are
not limited to those of Section 14. hereof and
any costs, including legal fees, incurred in
enforcing this right of indemnification.

The Fund will be responsible for, and will have
the right to conduct or control the defense of
any litigation asserting liability against which
DST is indemnified hereunder. DST will not be
under any obligation to prosecute or defend any
action or suit in respect of the agency
relationship hereunder, which, in its opinion,
may involve it in expense or liability, unless
the Fund will, as often as requested, furnish

DST with reasonable, satisfactory security and
indemnity against such expense or liability and
pay all costs, including attorney's fees, as
incurred.

B. DST will hold harmless and indemnify the Fund
from and against any loss or liability arising
out of DST's failure to comply with the terms of
this Agreement or out of DST's negligence,
misconduct, or bad faith, except

<PAGE>
12

to the extent DST is entitled to indemnification
under Subsection A. hereof

9. Certain Covenants of DST and the Fund.

A. The Fund hereby agrees that all requisite steps
will be taken by the Fund from time to time when
and as necessary to register the Fund's shares
for sale in all states in which the Fund's
shares shall at the time be offered for sale and
require registration. If at any time the Fund
will receive notice of any stop order or other
proceeding in any such state affecting such
registration or the sale of the Fund's shares,
or of any stop order or other proceeding under
the Federal securities laws affecting the sale
of the Fund's shares, the Fund will give prompt
notice thereof to DST.

B. DST hereby agrees to perform such transfer
agency functions as are attached hereto as
Exhibit A and establish and maintain facilities
and procedures reasonably acceptable to the Fund
for safekeeping of stock certificates, check
forms, and facsimile signature imprinting
devices, if any; and for the preparation or use,
and for keeping account of, such certificates,
forms

<PAGE>

and devices, and to carry such insurance as
specified in Exhibit B.

C. To the extent required by Section 31 of the
Investment Company Act of 1940 as amended and
Rules thereunder, DST agrees that all records
maintained by DST relating to the services to be

performed by DST under this Agreement are the
property of the Fund and will be preserved and
will be surrendered promptly to the Fund on
request. The Fund will be responsible for the
costs of storing and retrieving such records.

D. DST agrees to furnish the Fund annual reports of
its financial condition, consisting of a balance
sheet, earnings statement and any other public
financial information reasonably requested by
the Fund. The annual financial statements will
be certified by DST's certified public
accountants.

E. DST represents and agrees that it will use its
best efforts to keep current on the trends of
the investment company industry relating to
transfer agent services and will use its best
efforts to continue to modernize and improve its
system without additional cost to the Fund.
Notwithstanding the foregoing, (i) DST shall not
be liable for

<PAGE>
14

failing to make any modification or improvement
as to the necessity which the Fund has not
advised DST in writing; (ii) for any delay in
the implementation of such modification or
improvement where DST reasonably required more
time than was permitted by circumstances or
regulations; and (iii) the Fund may be charged
for utilization of any modification or
improvement if utilization of such modification
or improvement is charged to DST's clients
generally, and provided such modification or
improvement is utilized to provide services to
the Fund hereunder.

F. DST will permit the Fund and its authorized
representatives to make periodic inspections of
its operations as such would involve the Fund at
reasonable times during business hours, subject
to such authorized representatives' execution of
DST's Confidentiality and Limited Use Agreement.

10. Recapitalization or Readjustment. In case of any
recapitalization, readjustment or other change in the
capital structure of the Fund requiring a change in the
form of share certificates, DST will issue or register
certificates in the new form in exchange for, or

<PAGE>
15

in transfer of, the outstanding certificates in the old
form, upon receiving:

A. Written instructions from an officer of the
Fund;

B. Certified copy of the amendment to the Articles
of Incorporation or other document effecting the
change;

C. Certified copy of the order or consent of each
governmental or regulatory authority, required
by law to the issuance of the shares in the new
form, and an opinion of counsel that the order
or consent of no other government or regulatory
authority is required;

D. Specimens of the new certificates in the form
approved by the Board of Trustees of the Fund,
with a certificate of the Clerk of the Fund as
to such approval;

E. Opinion of counsel for the Fund stating:

(1) The status of the shares of stock of the
Fund in the new form under the
Securities Act of 1933, as amended and
any other applicable federal or state
statute; and

(2) That the issued shares in the new form
are, and all unissued shares will be,

<PAGE>
16

when issued, validly issued, fully paid
and nonassessable.

11. Stock Certificates.

The Fund will furnish DST with a sufficient supply of
blank stock certificates and from time to time will
renew such supply upon the request of DST. Such
certificates will be signed manually or by facsimile
signatures of the officers of the Fund authorized by law
and by bylaws to sign share certificates, and if
required, will bear the Funds's seal or facsimile
thereof.

12. Death, Resignation or Removal of Signing Officer.

The Fund will file promptly with DST written notice of
any change in the officers authorized to sign share
certificates, written instructions or requests, together
with two signature cards bearing the specimen signature
of each newly authorized officer. In case any officer of
the Fund who will have signed manually or whose
facsimile signature will have been affixed to blank
share certificates will die, resign, or be removed prior
to the issuance of such certificates, DST may issue or
register such share certificates as the share
certificates of the Fund notwithstanding such death,
resignation, or removal, until specifically directed to
the contrary by the Fund in writing. In the absence

<PAGE>
17

of such direction, the Fund will file promptly with DST
such approval, adoption, or ratification as may be
required by law.

13. Future Amendments of Articles of Incorporation and
Bylaws.
The Fund will promptly file with DST copies of all
material amendments to its Articles of Incorporation or
bylaws made after the date of this Agreement.

14. Instructions, Opinion of Counsel and Signatures.
Except as otherwise provided for in a written memorandum
signed by both parties hereto, at any time DST may apply
to any officer of the Fund or The Chase Manhattan Bank
("Chase") for instructions, and if such instructions are
not received within a reasonable time following
subsequent notification with the Fund's Chief Executive
Officer, then DST may consult with legal counsel for the
Fund or its own legal counsel at the expense of the
Fund, with respect to any matter arising in connection
with the agency and it will not be liable for any action
taken or omitted by it in good faith in reliance upon
such instructions or upon the opinion of such counsel.
DST will be protected in acting upon any paper or
document reasonably believed by it to be genuine and to
have been signed by the proper person or

<PAGE>
18

persons and will not be held to have notice of any
change of authority of any person, until receipt of

written notice thereof from the Fund. It will also be
protected in recognizing share certificates which it
reasonably believes to bear the proper manual or
facsimile signatures of the officers of the Fund, and
the proper countersignature of any former Transfer Agent
or Registrar, or of a co-Transfer Agent or co-Registrar.

15. Papers Subject to Approval of Counsel.

The acceptance by DST, of its appointment as Transfer
Agent and Dividend Disbursing Agent and all documents
filed in connection with such appointment and thereafter
in connection with the agencies, will be subject to the
approval of legal counsel for DST (which approval will
be not unreasonably withheld).

16. Certification of Documents.

The required copy of the Articles of Incorporation of
the Fund and copies of all amendments thereto may be
duplicates of the original certified by the Secretary of
State (or other appropriate official) of the
Commonwealth of Massachusetts. The copy of the Bylaws,
copies of all amendments thereto, and copies of
resolutions or Votes of the Board of Trustees of the
Fund, will be certified by the

<PAGE>

Clerk or an Assistant Clerk of the Fund under the
Fund's seal, if any.

17. Records.

DST will maintain customary records in connection with
its agency, and particularly will maintain those records
required to be maintained pursuant to subparagraph
(2)(iv) of paragraph (b) of Rule 31a-1 under the
Investment Company Act of 1940, if any.

18. Disposition of Books, Records and Cancelled
Certificates. DST may send periodically to the Fund, or
to where designated by the Clerk or an Assistant Clerk
of the Fund, all books, documents, and all records no
longer deemed by it as needed for current purposes and
stock certificates which have been cancelled in transfer
or in exchange. At a minimum all such records will be
maintained for the periods required by applicable law
and under and in compliance with the requirements of 17
C.F.R. Section 240.17Ad-7(g), adopted under the
Securities and Exchange Act of 1934.

19. Provisions Relating to DST as Transfer Agent.

A. DST will make original issues of stock
certificates upon written request of an officer
of the Fund and upon being furnished with a
certified copy of a resolution of the Board of
Directors authorizing such original

<PAGE>
20

issue, an opinion of counsel as outlined in
paragraphs 1.D. and G. of this Agreement, any
documents required by paragraphs 5. or 10. of
this Agreement, and necessary funds for the
payment of any original issue tax.

B. Before making any original issue of certificates
the Fund will furnish DST with sufficient funds
to pay all required taxes on the original issue
of the stock, if any. The Fund will furnish DST
such evidence as may be required by DST to show
the actual value of the stock. If no taxes are
payable DST will be furnished with an opinion of
outside counsel to that effect.

C. Stock certificates will be transferred and new
certificates issued in transfer, or stock
certificates accepted for redemption and funds
remitted therefor, upon surrender of the old
certificates in form deemed by DST properly
endorsed for transfer or redemption accompanied
by such documents as DST may deem necessary to
evidence that authority of the person making the
transfer or redemption, and bearing satisfactory
evidence of the payment of any applicable
transfer taxes. DST reserves the right to refuse
to transfer or redeem shares until it is
satisfied that the

<PAGE>
21

endorsement or signature on the Certificate or
any other document is valid and genuine, and for
that purpose it may require a guarantee of
signature by a bank, broker or dealer, municipal
securities dealer or broker, government
securities dealer or broker, credit union,
national securities exchange, registered
securities association, clearing agency, savings
association (including savings bank and savings
and loan) or any entity which affixes a
medallion which reasonably appears to be that of

a Signature Guarantee Program (collectively an
"Eligible Guarantor Institution"). DST will
incur no liability and shall be indemnified and
held harmless by the Fund for any action taken
by it in accordance with an instruction bearing
what purports to be a signature guarantee or
medallion of an Eligible Guarantor Institution
or otherwise in accordance with DST's Signature
Guarantee Procedures adopted pursuant to 17
C.F.R. Section 240.17Ad-15 under the Securities
and Exchange Act of 1934. DST also reserves the
right to refuse to transfer or redeem shares
until it is satisfied that the requested
transfer or redemption is legally authorized,
and it will

<PAGE>

incur no liability and shall be indemnified and
held harmless by the Fund for the refusal in
good faith to make transfers or redemptions
which, in its judgment, are improper or
unauthorized. DST may, in effecting transfers or
redemptions, rely upon Simplification Acts or
other statutes which protect it and the Fund in
not requiring complete fiduciary documentation.
In cases in which DST is not directed or
otherwise required to maintain the consolidated
records of shareholder's accounts, DST will not
be liable for any loss which may arise by reason
of not having such records, provided that such
loss could not have been prevented by the
exercise of ordinary diligence. DST will be
under no duty to use a greater degree of
diligence by reason of not having such records.

D. When mail is used for delivery of stock
certificates DST will forward share certificates
in "nonnegotiable" form by first class or
registered mail and share certificates in
"negotiable" form by registered mail, all such
mail deliveries to be covered while in transit
to the addressee by insurance arranged for by
DST.

<PAGE>
23

E. DST will issue and mail subscription warrants,
certificates representing dividends, exchanges

or split ups, or act as Conversion Agent upon
receiving written instructions from any officer
of the Fund and such other documents as DST
deems necessary.

F. DST will issue, transfer, and split up
certificates and will issue certificates
representing full shares upon surrender of scrip
certificates aggregating one full share or more
when presented to DST for that purpose upon
receiving written instructions from an officer
of the Fund and such other documents as DST may
deem necessary.

G. DST may issue new certificates in place of
certificates represented to have been lost,
destroyed, stolen or otherwise wrongfully taken
upon receiving instructions from the Fund and
indemnity satisfactory to DST and the Fund, and
may issue new certificates in exchange for, and
upon surrender of, mutilated certificates.

H. DST will supply a shareholder's list to the Fund
for one meeting of shareholders upon receiving a
request therefor from an officer of the Fund. It
will also supply lists at such other times as
may be requested by an

<PAGE>

officer of the Fund, but may, in its discretion,
charge therefor.

I. Upon receipt of written instructions of an
officer of the Fund, DST will address and mail
notices to shareholders.

J. In case of any request or demand for the
inspection of the shareholder records of the
Fund or any other books in the possession of
DST, DST will endeavor to notify the Fund and
endeavor to secure instructions as to permitting
or refusing such inspection. DST reserves the
right, however, to exhibit the shareholder
records or other books to any person in case it
is advised by its counsel that it may be held
responsible for the failure to exhibit the
shareholder records or other books to such
person.

20. Provisions Relating to Dividend Disbursing Agency.

A. DST will, at the expense of the Fund, provide a
special form of check containing the imprint of
any device or other matter desired by the Fund.
Said checks must, however, be of a form and size
convenient for use by DST.

B. If the Fund desires to include additional
printed matter, financial statements, etc., with
the dividend checks, the same will be furnished
DST within a reasonable time prior

<PAGE>
25

to the date of mailing of the dividend checks,
at the expense of the Fund.

C. If the Fund desires its distributions mailed in
any special form of envelopes, sufficient supply
of the same will be furnished to DST but the
size and form of said envelopes will be subject
to the approval of DST. If stamped envelopes are
used, they must be furnished by the Fund; or if
postage stamps are to be affixed to the
envelopes, the stamps or the cash necessary for
such stamps must be furnished by the Fund (prior
to mailing if so requested by DST).

D. DST will maintain one or more deposit accounts
as Agent for the Fund, into which the funds for
payment of dividends, distributions, redemptions
or other disbursements provided for hereunder
will be deposited, and against which checks will
be drawn.

E. DST is authorized and directed op payment
of checks issued hereunder, but not presented
for payment, when the payees thereof allege
either that they have not received the checks or
that such checks have been mislaid, lost,
stolen, destroyed or through no fault of theirs,
are otherwise

<PAGE>
26

beyond their control, and cannot be produced by
them for presentation and collection, and, to
issue and deliver duplicate checks in
replacement thereof. DST shall bear no liability

if payment upon stopped checks is subsequently
compelled by a Holder in Due Course (or a Bona
Fide Purchaser for Value) .

21. Assumption of Duties By the Fund. The Fund or its agent
or affiliate may assume certain duties and
responsibilities of DST or those usual and ordinary
services of Transfer Agent and Dividend Disbursement
Agent as those terms are referred to in Section 4.E. of
this Agreement including but not limited to accepting
shareholder instructions and transmitting orders based
on such instructions to DST, preparing and mailing
confirmations, obtaining certified TIN numbers,
answering telephones, and disbursing monies of the Fund.
To the extent the Fund or its agent or affiliate assumes
such duties and responsibilities, DST shall be relieved
from all responsibility and liability therefor.

22. Termination of Agreement.

A. This Agreement may be terminated by either party
upon receipt of six (6) months prior written
notice from the other party.

<PAGE>
27

B. The Fund, in addition to any other rights and
remedies, shall have the right to terminate this
Agreement forthwith upon the occurrence at any
time of any of the following events:

(1) Any interruption or cessation of
operations by DST or its assigns which
materially interferes with the business
operation of the Fund;

(2) The bankruptcy of DST or its assigns or
the appointment of a receiver for DST or
its assigns;

(3) Any merger, consolidation or sale of
substantially all the assets of DST or
its assigns;

(4) The acquisition of a controlling
interest in DST or its assigns, by any
broker, dealer, investment adviser or
investment company except as may
presently exist; or

(5) Failure by DST or its assigns to perform
its duties in accordance with the
Agreement, which failure materially
adversely affects the business
operations of the Fund and which failure
continues for thirty (30) days after
receipt of written notice from the Fund.

<PAGE>
28

C. In the event of termination, the Fund will
promptly pay DST all amounts due to DST
hereunder.

D. In the event of termination, DST will use its
best efforts to transfer the books and records
of the Fund to the designated successor transfer
agent and to provide other information relating
to its service provided hereunder for reasonable
compensation therefore. In this connection,
DST's conversion assistance shall be billed at
its then current rates. DST's present rates are:
(i) for clerical assistance, __________ dollars
($__________) per hour; (ii) for
Supervisor/Manager assistance, __________
dollars ($__________) per hour; and (iii) for
programming assistance, to the extent DST agrees
thereto, __________ ($__________), __________
($__________) and __________ ($__________)
dollars per hour for non-technical, mainframe
and work station personnel.

E. Nothing herein is intended to, nor does it,
compel DST to disclose non-public information or
to provide programming assistance or information
which might tend to improve,

<PAGE>
29

enhance or add functionality to anyone else's
operating systems, respectively.

23. Assignment.

A. Neither this Agreement nor any rights or
obligations hereunder may be assigned by either
party hereto without the written consent of the
other party. In the event of a mutually agreed
to assignment, each party shall remain liable

for the performance of its assignee(s). DST may,
however, employ agents to assist it in
performing its duties hereunder. Notwithstanding
anything herein to the contrary, DST shall have
no responsibility or liability hereunder for
services provided or omissions to provide by
unaffiliated, nationally recognized third
parties such as federal Express, Airborne
Services, UPS, the U.S. Mails,
telecommunications companies, etc.

B. This Agreement will inure to the benefit of and
be binding upon the parties and their respective
successors and assigns.

24. Confidentiality.

A. DST agrees that, except as provided in the last
sentence of Section 19.H hereof, or as otherwise
required by law, DST will keep confidential all
records of and information

<PAGE>
30

in its possession relating to the Fund or its
shareholders or shareholder accounts and will
not disclose the same to any person except at
the request or with the consent of the Fund.

B. The Fund agrees to keep confidential all
financial statements and other financial records
(other than statements and records relating
solely to the Fund's business dealings with DST)
and all manuals, systems and other technical
information and data, not publicly disclosed,
relating to DST's operations and programs
furnished to it by DST pursuant to this
Agreement and will not disclose the same to any
person except at the request or with the consent
of DST.

C. The Fund acknowledges that DST and DST have
proprietary rights in and to the computerized
data processing recordkeeping system used by DST
to perform services hereunder including, but not
limited to the maintenance of shareholder
accounts and records, processing of related
information and generation of output (the "MFS
System"), including, without limitation any
changes or modifications of the MFS System and
any other DST or DST programs, data bases,
supporting documentation, or procedures
("collectively

<PAGE>
31

DST Protected Information") which the Fund's
access to the MFS System or computer hardware or
software may permit the Fund or its employees or
agents to become aware of or to access and that
the DST Protected Information constitutes
confidential material and trade secrets of DST.
The Fund agrees to maintain the confidentiality
of the DST Protected Information. The Fund
acknowledges that any unauthorized use, misuse,
disclosure or taking of DST Protected
Information which is confidential as provided by
law, or which is a trade secret, residing or
existing internal or external to a computer,
computer system, or computer network, or the
knowing and unauthorized accessing or causing to
be accessed of any computer, computer system, or
computer network, may be subject to civil
liabilities and criminal penalties under
applicable state law. The Fund will advise all
of its employees and agents who have access to
any DST Protected Information or to any computer
equipment capable of accessing DST or DST
hardware or software of the foregoing. DST is
intended to be, and shall be, a third party
beneficiary of the Fund's

<PAGE>
32

obligations and undertakings contained in this
Section.

25. Survival of Representations and Warranties,
Indemnifications and Miscellaneous Provisions.

A. All representations and warranties by either
party herein contained will survive the
execution and delivery of this Agreement.

B. All indemnifications and undertakings of (i)
confidential treatment of the other's
information, data, systems, materials, etc. and
(ii) of non-solicitation and non-employment of
employees of the other (and of affiliates of the
other) shall survive the termination of this
agreement.

26. Miscellaneous.

A. This Agreement is executed and delivered in the
State of Missouri and is intended to be and
shall be governed by the laws of said state.

B. All the terms and provisions of this Agreement
shall be binding upon, inure to the benefit of,
and be enforceable by the respective successor
and assigns of the parties hereto.

C. No provisions of the Agreement may be amended or
modified, in any manner except by a

<PAGE>
33

written agreement properly authorized and
executed by both parties hereto.

D. The captions in this Agreement are included for
convenience of reference only, and in no way
define or delimit any of the provisions hereof
or otherwise affect their construction or
effect.

E. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be
deemed an original but all of which together
shall constitute one and the same instrument.

F. If any part, term or provision of this Agreement
is by the courts held to be illegal, in conflict
with any law or otherwise invalid, the remaining
portion or portions shall be considered
severable and not be affected, and the rights
and obligations of the parties shall be
construed and enforced as if the Agreement did
not contain the particular part, term or
provision held to be illegal or invalid.

G. The obligations of this Agreement shall only be
binding upon the assets and property of the Fund
and shall not be binding upon any Director,
officer or shareholder of the Fund individually.

<PAGE>
34

H. Each party hereto agrees not to offer employment
to, solicit employment by or employ any employee
of the other or, in the case of DST, of the Fund
and its affiliated companies or, in the case of
the Fund, of DST or DST or either of their
affiliated companies. For purposes hereof, an
"affiliated company" shall be any entity which

directly or indirectly controls, is controlled
by or is under common control with the Fund or
payment thereof to DST and for internally
determining the appropriate allocation thereof
among the Portfolios.

I. Notice is hereby given that a copy of the Fund's
Agreement and Declaration of Trust and all
amendments thereto is on file with the Secretary
of the Commonwealth of Massachusetts; that this
Agreement has been executed on behalf of the
Fund by the undersigned duly authorized
representative of the Fund in his/her capacity
as such and not individually; and that the
obligations of this Agreement shall only be
binding upon the assets and property of the Fund
and shall not be binding upon any trustee,
officer or shareholder of the Fund individually.

<PAGE>
35

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers.

DST SYSTEMS, INC.

By:
---------------------------------------

ATTEST:

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

MUTUAL FUND INVESTMENT TRUST

By:
---------------------------------------

Title:
------------------------------------

ATTEST:

- ------------------------------
Secretary

<PAGE>
36

EXHIBIT A

TRANSFER AGENCY SERVICES AND SYSTEMS FEATURES

FUNCTIONS

A. Issuance of stock certificates

B. Recording of non-certificate shares

C. Purchase, redemptions, exchanges, transfers and legal

D. Changes of address, etc.

E. Daily balancing of the Fund

F. Dividend calculation and disbursement

G. Mailing of quarterly and annual reports, if requested

H. Filing of 1099/1042 information to shareholders and
government

I. Provide N1R information

[J. Systematic withdrawal plans]

K. Pre-authorized checks

L. Purchase reminders

M. Reconcilement of dividend and disbursement accounts

N. Provide research and correspondence to shareholder's
inquiries

O. Daily communication of reports to the Fund

P. Provide listings, labels and other special reports

Q. Proxy issuance and tabulation

R. Annual statements of shareholders on microfilm

S. Blue-sky reports

T. Wire order processing

U. 12b-1 processing

<PAGE>
37
EXHIBIT B

INSURANCE COVERAGE

Insurance coverages maintained by DST effective May 1, 1993, subject to
deductibles

DESCRIPTION OF POLICY:

Brokers Blanket Bond, Standard form 14
Covering losses caused by dishonesty of employees, physical
loss of securities on or outside of premises while in
possession of authorized person, loss caused by forgery or
alteration of checks or similar instruments.
Coverage: $75,000,000

Errors and Omissions Insurance
Covering replacement of destroyed records and computer errors
and omissions.
Coverage. $10,000,000

Special Forgery Bond
Covering losses through forgery or alteration of checks or
drafts of customers processed by insured but drawn on or
against them.
Coverage: $1,000,000

Mail Insurance (apples to all full service operations)
Provides indemnity for security lost in the mails.
Coverage:
$10,000,000 nonnegotiable securities mailed
to domestic locations via registered mail.

<PAGE>
38

$1,000,000 nonnegotiable securities mailed
to domestic locations via first-class or
certified mail.
$1,000,000 nonnegotiable securities mailed
to foreign locations via registered mail.
$1,000,000 negotiable securities mailed to
all locations via registered mail.

<PAGE>

MUTUAL FUND INVESTMENT TRUST

RETAIL CLASS SHARES

PLAN FOR PAYMENT OF CERTAIN EXPENSES FOR
DISTRIBUTION OR SHAREHOLDER SERVICING ASSISTANCE

Distribution Plan (the "Plan") of MUTUAL FUND INVESTMENT TRUST,
a Massachusetts business trust (the "Trust"), an open-end, non-diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"), on behalf of the class of shares designated as the
Retail Class Shares of its Avesta Money Market Fund, Avesta Tax Free Money
Market Fund, 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, Avesta U.S. Government Securities
Fund, 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, and the Retail Class Shares of
any series of the Trust which may be created in the future, adopted pursuant to
Section 12(b) of the Act and Rule 12b-1 promulgated thereunder ("Rule 12b-1").

1. Principal Underwriter. CF Distributors, Inc., a wholly-owned
subsidiary of The BISYS Group, Inc. ("the Distributor"), acts as the principal
underwriter of the shares of each series of the Trust pursuant to a Distribution
and Sub-Administration Agreement.

2. Distribution Payments. (a) The Trust may make payments
periodically (i) to the Distributor or to any broker-dealer (a "Broker") who is
registered under the Securities Exchange Act of 1934 and a member in good
standing of the National Association of Securities Dealers, Inc. and who has
entered into a selected dealer agreement with the Distributor in a form similar
to the one annexed hereto as Exhibit A or (ii) to other persons or organizations
("Servicing Agents") who have entered into shareholder processing and service
agreements with the Trust or with the Distributor, in a form similar to the one
annexed hereto as Exhibit B, with respect to Trust shares owned by shareholders
for which such broker is the dealer or holder of record or such Servicing Agent
has a servicing relationship.

(b) Payments may be made pursuant to the Plan for any
advertising and promotional expenses relating to selling efforts of the shares
of each series of the Trust, including but not limited to the incremental costs
of printing (excluding typesetting) of prospectuses, statements of additional
information, annual reports and other periodic reports for distribution to
persons who are not shareholders of the Trust; the costs of preparing and
distributing any other supplemental sales literature; expenses of certain
personnel engaged in the

<PAGE>
2

distribution of shares; costs of travel, office expenses (including rent and
overhead), equipment, printing, delivery and mailing costs incurred in the
distribution of shares.

(c) The aggregate amount of payments by the Trust in a fiscal
year, to brokers, servicing agents, or the Distributor pursuant to paragraphs
(a) and (b) shall not exceed .25% of the average daily net assets of each series
of the Trust.

(d) The schedule of such fees and the basis upon which such fees
will be paid shall be determined from time to time by the Board of Trustees of
the Trust.

3. Reports. Quarterly, in each year that this Plan remains in
effect, the Trust and the Distributor shall prepare and furnish to the Board of
Trustees of the Trust a written report, complying with the requirements of Rule
12b-1, setting forth the amounts expended by the Trust under the Plan and
purposes for which such expenditures were made.

4. Approval of Plan. This Plan shall become effective with
respect to a series upon approval of the Plan, the form of Selected Dealer
Agreement and the form of Shareholder Service Agreement, by the majority votes
of both (a) the Trust's Board of Trustees and the Trustees who are not
interested persons (as defined in Section 2(a)(19) of the Act) of the Trust and
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan (the "Qualified Trustees"), cast in person at
a meeting called for the purpose of voting on the Plan and (b) the outstanding
Retail Class voting securities of such series of the Trust, as defined in
Section 2(a)(42) of the Act.

5. Term. This Plan shall remain in effect for one year from its
adoption date and may be continued thereafter if this Plan and all related
agreements are approved at least annually by a majority vote of the Trustees of
the Trust, including a majority of the Qualified Trustees, cast in person at a
meeting called for the purpose of voting on such Plan and agreements. This Plan
may not be amended in order to increase materially the amount to be spent for
distribution assistance without shareholder approval in accordance with Section
4 hereof. All material amendments to this Plan must be approved by a vote of the
Board of Trustees of the Trust, and of the Qualified Trustees, cast in person at
a meeting called for the purpose of voting thereon.

6. Termination. This Plan may be terminated as to any series at
any time by a majority vote of the Qualified Trustees or by vote of a majority
of the outstanding Retail Class voting securities of such series, as defined in
Section 2(a)(42) of the Act.

<PAGE>
3

7. Nomination of "Disinterested" Trustees. While this Plan shall
be in effect, the selection and nomination of the "disinterested" trustees of
the Trust shall be committed to the discretion of the Qualified Trustees then in
office.

8. Miscellaneous. (a) Any termination or noncontinuance of (i) a
selected dealer agreement between the Distributor and a particular broker or
(ii) a shareholder service agreement between the Distributor or the Trust and a
particular person or organization, shall have no effect on any similar
agreements between brokers or other persons and the Distributor of the Trust
pursuant to this Plan.

(b) Neither the Distributor nor the Trust shall be under any
obligation because of this Plan to execute any selected dealer agreement with
any broker or any shareholder service agreement with any person or organization.

(c) All agreements with any person or organization relating to
the implementation of this Plan shall be in writing and any agreement related to
this Plan shall be subject to termination, without penalty, pursuant to the
provisions of Section 6 hereof.

Adopted effective January 1, 1998

<PAGE>

EXHIBIT A

CF Distributors, Inc.
101 Park Avenue
New York, New York 10178

Re: Selected Dealer Agreement for
Mutual Fund Investment Trust

Gentlemen:

We understand that Mutual Fund Investment Trust (the "Trust")
has adopted a plan (the "Plan") pursuant to Rule 12b-1 of the Investment Company
Act of 1940, as amended (the "Act") for making payments to selected brokers for
Trust distribution assistance.

We desire to enter into an Agreement with you for the sale and
distribution of the shares of the Premier Funds of the Trust (the "shares") for
which you are Distributor and whose shares are offered to the public at net
asset value. Upon acceptance of this Agreement by you, we understand that we may
offer and sell the shares, subject, however, to all of the terms and conditions
hereof and to your right to suspend or terminate the sale of such securities.

1. We understand that the shares covered by this Agreement will be offered and
sold at net asset value without a sales charge. We further understand that all
purchase requests and applications submitted by us are subject to acceptance or
resection in the Trust's discretion.

2. We certify that we are members of the National Association of
Securities Dealers, Inc. ("NASD") and agree to maintain membership in said
Association, or in the alternative, that we are foreign brokers not eligible for
membership in said Association. In either case, we agree to abide by all the
rules and regulations of the NASD which are binding upon underwriters and
brokers in the distribution of the shares of open-end investment companies,
including without limitation, Section 26 of Article III of the Rules of Fair
Practice, all of which are incorporated herein" as if set forth in full. We
further agree to comply with all applicable state and Federal laws and the rules
and regulations of authorized regulatory agencies. We agree that we will not
sell or offer for sale, the shares in any state or jurisdiction where they are
not exempt from or have not been qualified for sale.

<PAGE>

3. We will offer and sell the Shares covered by this Agreement
only in accordance with the terms and conditions of its then current Prospectus,
and we will make no representations not included in said Prospectus or in any
authorized supplemental material supplied by you. We will use our best efforts
in the development and promotion of sales of the shares covered by this

Agreement and agree to be responsible for the proper instruction and training of
all sales personnel employed by us, in order that the shares will be offered in
accordance with the terms and conditions of this Agreement and all applicable
laws, rules and regulations. We agree to hold you harmless and indemnify you in
the event that we, or any of our sales representatives, should violate any law,
rule or regulation, or any provisions of this Agreement, which may result in
liability to you; and in the event you determine to refund any amount paid by
any investor by reason of any such violation on our part, we shall return to you
any distribution assistance payments previously paid or allowed by you to us
with respect to the transaction for which the refund is made. All expenses which
we incur in connection with our activities under this Agreement shall be borne
by us.

4. For purposes of this Agreement "Qualified Accounts" shall
mean: accounts of customers of ours who have purchased shares and who use our
facilities to communicate with the Trust or to effect redemptions or additional
purchases of shares and with respect to which we provide shareholder and
administration services, which services may include, without limitation:
answering inquiries regarding the Trust; assistance to customers in changing
dividend options, account designations and addresses; performance of
sub-accounting; establishment and maintenance of shareholder accounts and
records; processing purchase and redemption transactions; automatic investment
in Trust shares of customer account cash balances; providing periodic statements
showing a customer's account balance and the integration of such statements with
those of other transactions and balances in the customer's other accounts
serviced by us; arranging for bank wires; and such other shareholder services as
you reasonably may request, to the extent we are permitted by applicable
statute, rule or regulation.

5. In consideration of the services and facilities described
herein, we shall be entitled to receive from you such fees as are set forth in
the Plan for Payment of Certain Expenses for Distribution or Shareholder
Servicing Assistance. We understand that the payment of such fees has been
authorized pursuant to a Plan approved by the Board of Trustees and shareholders
of certain of the Funds comprising the Trust and shall be paid only so long as
this Agreement is in effect.

6. The frequency of payment, the terms of any right to sell in a
territory, and any other supplemental terms, conditions or qualifications for us
to receive such payments are subject to change by you from time to time, upon 30
days' written notice. Any orders placed after the effective date of such

A-2

<PAGE>

change shall be subject to the fee rates in effect at the time of receipt of the
payment by the Trust or you. Such 30-day period may be waived at your sole
option in the event such change increases the distribution assistance payments
due us.

7. Payment for shares shall be made to the Trust and shall be
received by the Trust promptly after the acceptance of our order. If such
payment is not received by the Trust, we understand that the Trust reserves the

right without notice, forthwith to cancel the sale, or, at the Trust's option,
to sell the shares ordered by us back to the Trust in which latter case we may
be held responsible for any loss, including loss of profit, suffered by the
Trust resulting from our failure to make payments aforesaid.

8. Your obligations to us under this Agreement are subject to
all the provisions of any underwriting agreements you have or may enter into
with the Trust provided copies thereof have been provided to us. We understand
and agree that in performing our services covered by this Agreement we are
acting as principal, and you are in no way responsible for the manner of our
performance or for any of our acts or omissions in connection therewith. Nothing
in this Agreement or in the Plan shall be construed to constitute us or any of
our agents, employees or representatives as your agent, partner or employee, or
the agent, partner or employee of the Trust.

9. This Agreement shall terminate automatically (i) in the event
of its assignment, the term "assignment" for this purpose having the meaning
defined in Section 2(a)(4) of the Act or (ii) in the event the Plan is
terminated.

10. This Agreement may be terminated at any time (without
payment of any penalty) by a majority of the "Qualified Trustees" as defined in
the Plan or by a vote of a majority of the outstanding voting securities of the
Trust as defined in the Plan (on not more than 60 days' written notice to us at
our principal place of business). We, on 60 days' written notice addressed to
you at your principal place of business, may terminate this Agreement. You may
also terminate this Agreement for cause on violation by us of any of the
provisions of this Agreement, said termination to become effective on the date
of mailing notice to us of such termination. Without limiting the generality of
the foregoing, any provision hereof to the contrary notwithstanding, our
expulsion from the NASD will automatically terminate this Agreement without
notice; our suspension from the NASD or violation of applicable state or Federal
laws or rules and regulations of authorized regulatory agencies will terminate
this Agreement effective upon date of mailing notice to us of such termination.
Your failure to terminate for any cause shall not constitute a waiver of your
right to terminate at a later date for any such cause.

A-3

<PAGE>

11. All communications to you shall be sent to you at your
offices at 101 Park Avenue, New York, New York 10178. Any notice to us shall be
duly given if mailed or telegraphed to us at the address shown on this
Agreement.

12. This Agreement shall become effective as of the date when it
is executed and dated by you below. This Agreement and all the rights and
obligations of the parties hereunder shall be governed by and construed under
the laws of the State of New York.

-------------------------------------------
(Broker/Dealer)

By
------------------------------------------
Name:
Title:

-------------------------------------------
(Address)

-------------------------------------------
(City) (State) (Zip Code)

Accepted:

CF DISTRIBUTORS, INC.

By:
--------------------------------------
Name:
Title:

Dated:

A-4

<PAGE>

EXHIBIT B

Mutual Fund Investment Trust
101 Park Avenue
New York, New York 10178

Re: Shareholder Service Agreement for
Mutual Fund Investment Trust

Gentlemen:

We understand that Mutual Fund Investment Trust (the "Trust")
has adopted a plan (the "Plan"), on behalf of the existing series (the "Funds")
of the Trust, pursuant to Rule 12b-1 of the Investment Company Act of 1940, as
amended (the "Act"), for making payments to certain persons for distribution
assistance and shareholder servicing.

We desire to enter into an Agreement with the Trust for the
servicing of shareholders of, and the administration of shareholder accounts in,
certain Funds comprising the Trust. Subject to the Trust's acceptance of this
Agreement, the terms and conditions of this Agreement, shall be as follows:

1. We shall provide shareholder and administration services for certain
shareholders of the Funds who purchase shares of the Funds as a result of their
relationship to us, as further designated in Exhibit A hereto ("Qualified
Accounts"). Such services may include, without limitation, some or all of the
following: answering inquiries regarding the Funds; assistance in changing
dividend options, account designations and addresses; performance of
sub-accounting; establishment and maintenance of shareholder accounts and
records; assistance in processing purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by us, if any; and such other
information and services as the Trust reasonably may request, to the extent we
are permitted by applicable statute, rule or regulation to provide such
information or services.

2. If Fund shares are to be purchased or held by us on behalf of
our clients:

(i) Such shares will be registered in our name or in the
name of our nominee. The client will be the beneficial owner of
the shares of each Fund purchased and held by us in accordance
with the client's instructions and the client may exercise all
rights of a shareholder of a Fund. We agree to

<PAGE>

transmit to the Trust's transfer agent in a timely manner, all
purchase orders and redemption requests of our clients and to
forward to each client all proxy statements, periodic
shareholder reports and other communications received from the
Trust by us on behalf of our clients.

(ii) We agree to transfer to the Trust's transfer agent,
on the date such purchase orders are effective, federal funds in
an amount equal to the amount of all purchase orders placed by
us on behalf of our clients and accepted by the Trust (net of
any redemption orders placed by us on behalf of our clients). In
the event that the Trust fails to receive such federal funds on
such date (other than through the fault of the Trust or its
transfer agent), we shall indemnify the Trust against any
expense (including overdraft charges) incurred by the Trust as a
result of its failure to receive such federal funds.

(iii) We agree to make available to the Trust, upon the
Trust's request, such information relating to our clients who
are beneficial owners of Fund shares and their transactions in
Fund shares as may be required by applicable laws and
regulations or as may be reasonably requested by the Trust.

(iv) We agree to transfer record ownership of a client's
shares of a Fund to the client promptly upon the request of the
client. In addition, record ownership will be promptly
transferred to the client in the event that the person or entity
ceases to be our client.

3. We shall provide to the Trust copies of the lists of members
of our organization, if any, and make available to the Trust any publications
and other facilities of our organization for the placement of advertisements or
promotional materials and sending information regarding the Funds, to enable the
Trust to solicit for sale and to sell shares to such members.

4. We shall provide such facilities and personnel (which may be
all or any part of the facilities currently used in our business, or all or any
personnel employed by us) as is necessary or beneficial for providing
information and services to shareholders maintaining Qualified Accounts with the
Trust, and to assist the Trust in servicing accounts of such shareholders.

5. Neither we nor any of our employees or agents are authorized
to make any representation concerning Fund shares except those contained in the
then current Prospectus for the applicable Fund, copies of which will be
supplied by the Trust to us; and we shall have no authority to act as agent for
the Trust.

6. In consideration of the services and facilities described
herein, we shall be entitled to receive from each Fund such fees as are set
forth in Exhibit A hereto. We understand

B-2

<PAGE>

that the payment of such fees has been authorized pursuant to the Plan approved
by the Trustees and shareholders of the Trust and shall be paid only so long as
the Plan and this Agreement are in effect.

7. The Trust reserves the right, at the Trust's discretion and
without notice, to suspend the sale of shares or withdraw the sale of shares of
each Fund.

8. This Agreement shall terminate automatically (i) in the event
of its assignment, the term "assignment" for this purpose having the meaning
defined in Section 2(a)(4) of the Act or (ii) in the event that the Plan
terminates.

9. This Agreement may be terminated at any time (without payment
of any penalty) by a majority of the "Qualified Trustees" as defined in the Plan
or by a vote of a majority of the outstanding voting securities of each Fund as
defined in the Plan (on not more than 60 days' written notice to us at our
principal place of business). We, on 60 days' written notice addressed to the
Trust at its principal place of business, may terminate this Agreement. The
Trust may also terminate this Agreement for cause on violation by us of any of
the provisions of this Agreement or in the event that the Plan shall terminate,
said termination to become effective on the date of mailing notice to us of such
termination. The Trust's failure to terminate for any cause shall not constitute
a waiver of its right to terminate at a later date for any such cause.

10. All communications to the Trust shall be sent to the Trust
at the address set forth above. Any notice to us shall be duly given if mailed
or telegraphed to us at the address set forth below.

B-3

<PAGE>

11. This Agreement shall become effective as of the date when it
is executed and dated by the Trust below. This Agreement and all the rights and
obligations of the parties hereunder shall be governed by and construed under
the laws of the State of New York.

--------------------------------------
(Firm Name)

-----------------------------------------
(Address)

-----------------------------------------
(Firm Name)

-----------------------------------------
(City) (State) (Zip Code)

By
---------------------------------------
Name:
Title:

Accepted:

MUTUAL FUND INVESTMENT TRUST

By:
------------------------------------
Name:
Title:

Dated:

B-4

<PAGE>

PEABODY & BROWN
101 Federal Street
Boston, Massachusetts 02110-1832
(617) 345-1000

December 29, 1997

Securities and Exchange Commission
450 Fifth St., N.W.
Washington, DC 20549

Re: Mutual Fund Investment Trust
Chase Balanced Fund
Chase Core Equity Fund
Chase Equity Growth Fund
Chase Equity Income Fund
Chase Income Fund
Chase Intermediate Term Bond Fund
Chase International Equity Fund
Chase Mid Cap Growth Fund
Chase Money Market Fund
Chase New York Tax Free Income Fund
Chase Short-Intermediate Term U.S. Government Securities
Fund
Chase Small Capitalization Fund
Chase Tax Free Income Fund
Chase Tax Free Money Market Fund
Chase U.S. Government Securities Fund

Ladies and Gentleman:

We have acted as special Massachusetts counsel to Mutual Fund
Investment Trust, a Massachusetts business trust (the "Trust") currently
consisting of the above-referenced fifteen series (the "Funds") on various
general matters. This opinion is written in reference to the shares of
beneficial interest, $0.001 par value (the "Shares") of the Funds, to be offered
and sold pursuant to a Registration Statement on Form N-1A (registration no.
33-9421 and 811-5526) filed by the Trust pursuant to the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended (the
"Registration Statement").

We have reviewed, insofar as it relates or pertains to each of the
Funds, the Registration Statement. We have also examined originals or copies,
certified or otherwise identified to our satisfaction, of such documents,
records and other instruments we have deemed necessary or appropriate for the
purposes of this opinion. For purposes of such examination, we have assumed the
genuineness of all signatures and original documents and the conformity to
original documents of all copies submitted.

Based upon the foregoing, we are of the opinion that the Shares have
been duly and validly authorized and, when issued and sold in accordance with
the Trust's Declaration of Trust and

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Registration Statement, will be legally issued, fully paid and non-assessable.

We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement.

Very truly yours,

/s/ Peabody & Brown
-------------------------
PEABODY & BROWN

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Consent of Independent Accountants

We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 21
to the Registration Statement on Form N-1A of the AVESTA Trust (the "Trust") of
our report dated February 14, 1997, relating to the financial statements of the
Trust included in the Trust's December 31, 1996 Annual Report to Shareholders
which is also incorporated by reference into the Registration Statement, and to
the incorporation by reference of our report into the Prospectuses which
constitute part of this Registration Statement. We also consent to the
references to us under the headings "Financial Highlights" in such Prospectuses.

PRICE WATERHOUSE LLP

Houston, TX
December 29, 1997