CONESTOGA FAMILY OF FUNDS, 497, 1996-02-29

CONESTOGA FAMILY OF FUNDS
497, 1996-02-29

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<PAGE> 1

CONESTOGA FAMILY OF FUNDS

SUPPLEMENT DATED FEBRUARY 27, 1996 TO THE
PROSPECTUS DATED FEBRUARY 21, 1995

RETAIL SHARES

THIS SUPPLEMENT TO THE PROSPECTUS SUPERSEDES AND REPLACES ALL
EXISTING SUPPLEMENTS TO THE PROSPECTUS. THIS SUPPLEMENT PROVIDES NEW AND
ADDITIONAL INFORMATION BEYOND THAT CONTAINED IN THE PROSPECTUS AND SHOULD BE
RETAINED AND READ IN CONJUNCTION WITH THE PROSPECTUS.

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

(1) Meridian Bancorp, Inc., the parent corporation of Meridian
Investment Company ("MIC"), the investment adviser to Conestoga Family of Funds
(the "Company"), has agreed to merge with CoreStates Financial Corp (the
"Merger"). Because the Merger will result in a change in control of MIC, the
existing investment advisory and sub-advisory agreements for the Company will,
by their terms, automatically terminate upon the Merger. The Merger is expected
to take place on or about April 1, 1996.

In connection with the Merger, the Board of Trustees of the
Company approved several changes for the Company. At a meeting held on
December 21, 1995, the Trustees approved an Agreement and Plan of
Reorganization (the "Agreement") between the Company and CoreFunds, Inc.
("CoreFunds") which provides for the merger of each portfolio of the Company
(each a "Fund" and, together, the "Funds") with certain funds of CoreFunds,
which are advised by CoreStates Investment Advisers, Inc. ("CoreStates
Advisers"), a wholly-owned subsidiary of CoreStates Bank, N.A. (which is itself
a wholly-owned subsidiary of CoreStates Financial Corp). The Trustees voted to
reorganize the Cash Management Fund into CoreFunds Cash Reserve Fund, the
Tax-Free Fund into the CoreFunds Tax-Free Reserve Fund, the U.S. Treasury
Securities Fund into the CoreFunds Treasury Reserve Fund, the Equity Fund into
the CoreFunds Value Equity Fund, the Intermediate Income Fund into the
CoreFunds Intermediate Bond Fund, the Pennsylvania Tax-Free Bond Fund into the
CoreFunds Pennsylvania Municipal Bond Fund, the Balanced Fund into the
CoreFunds Balanced Fund and the International Equity Fund into the CoreFunds
International Growth Fund. Additionally, the Special Equity Fund, Bond Fund and
Short-Term Income Fund each would be reorganized into separate, newly-formed
CoreFund investment portfolios of the same name.

A Special Meeting of the Shareholders of the Funds has been
scheduled for March 22, 1996, at which Shareholders will be asked to approve
the Agreement in connection with the proposed reorganization, including an
interim investment advisory agreement between the Company, on behalf of each
Fund, and MIC (or its successor), and an interim sub-advisory agreement between
MIC and Marvin & Palmer Associates, Inc. with respect to the International
Equity Fund. These interim agreements with the current adviser and sub-adviser
would be in effect between the Merger and the effective times of the
reorganization between the Company and CoreFunds as to particular Funds.

If shareholders of the Company approve the Agreement,
substantially all of the assets and liabilities of the Funds will be
transferred to the corresponding investment portfolio of CoreFunds, and the
Company's shareholders will become shareholders of CoreFunds. The Agreement
provides that each holder of Retail Shares of a Fund will hold, immediately
after the reorganization, Individual Shares of the corresponding investment
portfolio of CoreFunds with the same aggregate net asset value as immediately
before the reorganization.

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

<PAGE> 2
(2) THE FOLLOWING INFORMATION REPLACES THE SECTION ENTITLED "EXPENSE SUMMARY"
IN THE RETAIL SHARE PROSPECTUS ON PAGES 4 AND 5:

EXPENSE SUMMARY

The purpose of the following table is to assist a potential purchaser
of Retail Shares of a Fund in understanding the various costs and expenses that
an investor in such Shares of the Fund will bear directly or indirectly.

<TABLE>
<CAPTION>
Conestoga Conestoga Conestoga
Money Equity Conestoga Balanced
Market Funds Funds Bond Funds Fund
------------ -------- ---------- ---------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) . . . . . . . . . . 0% 2.0% 2.0% 2.0%
Maximum Sales Load Imposed on Reinvested Dividends . . . . 0% 0% 0% 0%
Deferred Sales Load . . . . . . . . . . . . . . . . . . . 0% 0% 0% 0%
Redemption Fees . . . . . . . . . . . . . . . . . . . . . 0% 0% 0% 0%
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . 0% 0% 0% 0%
</TABLE>

<TABLE>
<CAPTION>
U.S. Treasury International
ANNUAL FUND OPERATING EXPENSES Cash Management Tax-Free Securities Equity Equity
(as a percentage of average net assets) Fund Fund Fund Fund Fund
-------------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Advisory Fees After Fee Waivers(1). . . . . .20% .16% .27% .74% 1.00%
12b-1 Fees After Fee Waivers(2) . . . . . . .25% .05% .15% .25% .25%
Other Expenses After Reimbursements(3). . . .36% .30% .35% .31% .88%
---- ---- ---- ----- -----
Total Fund Operating Expenses . . . . . . . .81% .51% .77% 1.30% 2.13%
==== ==== ==== ===== =====
</TABLE>

<TABLE>
<CAPTION>
Pennsylvania
Special Intermediate Tax-Free Short-Term
Equity Bond Income Bond Income Balanced
Fund Fund Fund Fund Fund Fund
-------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees After Fee Waivers(1). . . .05% .34% .25% .00% .29% .49%
12b-1 Fees After Fee Waivers(2) . . . . 00% .25% .25% .00% .25% .25%
Other Expenses After Reimbursements(3) .35% .37% .39% .51% .34% .33%
---- ---- ----- ---- ----- -----
Total Fund Operating Expenses . . . . . .40% .96% .89% .51% .88% 1.07%
==== ==== ===== ===== ===== =====
</TABLE>

- ------------------------
(1) Advisory Fees are payable at the maximum annual rates of .40%, .40%, .40%,
.74%, 1.00%, 1.50%, .74%, .74%, .74%, .74% and .75% of the average daily net
assets of the Cash Management Fund, the Tax-Free Fund, the U.S. Treasury
Securities Fund, the Equity Fund, the International Equity Fund, the Special
Equity Fund, the Bond Fund, the Intermediate Income Fund, the Pennsylvania
Tax-Free Bond Fund, the Short-Term Income Fund and the Balanced Fund,
respectively.

(2) 12b-1 fees are payable at the annual rate of .40%. Long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charges permitted by the rules of National Association of Securities Dealers,
Inc. ("NASD") for investment companies without 12b-1 fees. Does not include
other fees which certain financial or other institutions may charge certain
customers in connection with their accounts. (See "MANAGEMENT OF THE FUND --
Distribution and Services Plan.").

(3) "Other Expenses After Reimbursements" include administration fees payable at
the maximum annual rate of .17% of each Fund's average daily net assets.
Before May 1, 1995, administration fees were payable at the rate of .20% of
each Fund's average net assets pursuant to an administration agreement with a
prior administrator. (See "MANAGEMENT OF THE FUND -- Investment Advisor and
Administrator and Distributor.")
<PAGE> 3
EXAMPLE

You would pay the following expenses on a $1,000 investment, assuming:

(1) a 5% annual return;

(2) redemption at the end of each time period; and

(3) the imposition of a maximum sales load at the beginning of the
period.

<TABLE>
<CAPTION>
Cash U.S. Treasury International Special
Management Tax-Free Securities Equity Equity Equity
Fund Fund Fund Fund Fund Fund
------ ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
1 Year . . . . . . $ 8 $ 5 $ 8 $33 $41 $24
3 Years . . . . . . 26 16 25 60 85 33
5 Years . . . . . . 45 29 43 90 N/A 42
10 Years . . . . . 100 64 95 174 N/A 70

<CAPTION>
Intermediate Pennsylvania Short-Term
Bond Income Tax-Free Income Balanced
Fund Fund Bond Fund Fund Fund
------ ------ ---------- ------ --------
<S> <C> <C> <C> <C> <C>
1 Year . . . . . . $30 $29 $25 $29 $31
3 Years . . . . . . 50 48 36 48 53
5 Years . . . . . . 72 68 48 N/A N/A
10 Years . . . . . 135 127 83 N/A N/A
</TABLE>

THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. THE ABOVE FIGURES WITH RESPECT TO EACH FUND ARE ESTIMATES FOR
THE CURRENT YEAR ONLY. ACTUAL EXPENSES FOR EACH FUND MAY BE GREATER OR LESSER
THAN THOSE SHOWN.

The Expense Summary has been restated with respect to the Cash Management,
Tax-Free, U.S. Treasury Securities, Equity, International Equity, Special
Equity, Bond, Intermediate Income, Pennsylvania Tax-Free Bond, Short-Term
Income and Balanced Funds to reflect various projected fee and expense rates
for the current fiscal year. Without fee waivers and expense reimbursements by
the Investment Advisor, distributor and/or administrator, Total Fund Operating
Expenses for the Cash Management Fund, the Tax-Free Fund, the U.S. Treasury
Securities Fund, the Equity Fund, the International Equity Fund, the Special
Equity Fund, the Bond Fund, the Intermediate Income Fund, the Pennsylvania
Tax-Free Bond Fund, the Short-Term Income Fund and the Balanced Fund would be
1.16%, 1.10%, 1.17%, 1.50%, 2.28%, 2.27%, 1.52%, 1.53%, 1.65%, 1.48%, and
1.48%, respectively, for the current fiscal year. There may be a charge of
$7.00 for each redemption paid by wire. See "MANAGEMENT OF THE FUND-Expenses"
for a more complete discussion of the shareholder transaction expenses and
annual operating expenses of the Funds.

The information in the foregoing fee tables and examples relates only to the
Retail Shares of each Fund. Each of the Company's eleven Funds also offers
another class of Shares known as Institutional Shares. The Institutional
Shares and Retail Shares of each Fund are subject to the same expenses except
that Institutional Shares are not subject to a Rule 12b-1 fee and the
Institutional Shares of the Equity, International Equity, Special Equity, Bond,
Intermediate Income, Pennsylvania Tax-Free Bond, Short-Term Income and Balanced
Funds are not sold with a sales charge.
<PAGE> 4
(3) THE FOLLOWING FINANCIAL HIGHLIGHTS REPLACE THOSE INCLUDED IN THE RETAIL
SHARE PROSPECTUS ON PAGES 5 THROUGH 9:

FINANCIAL HIGHLIGHTS

The "Financial Highlights" in the following tables supplement the
Company's financial statements incorporated by reference in the Statement of
Additional Information and set forth certain historic investment results of
Shares of each Fund. The Company's financial statements and the data reported
in "Financial Highlights" for the years ended October 31, 1995, 1994, 1993,
1992 and 1991 and the period ended October 31, 1990 with respect to the Cash
Management, Tax-Free, U.S. Treasury Securities, Equity, Bond and Intermediate
Income Funds, the years ended October 31, 1995, 1994 and 1993 and the period
ended October 31, 1992 with respect to the Pennsylvania Tax-Free Bond Fund, the
year ended October 31, 1995 and the period ended October 31, 1994 with respect
to the Special Equity Fund and the periods ended October 31, 1995 with respect
to the International Equity, Short-Term Income and Balanced Funds were audited
by Coopers & Lybrand, L.L.P., the Company's independent accountants, whose
report thereon is incorporated by reference in the Statement of Additional
Information. Further information about the performance of the Company is
contained in the Company's annual report which may be obtained without charge.
The financial data included in this table should be read in conjunction with
the financial statements and related notes incorporated by reference in the
statement of additional information.

The information in the following tables is not necessarily
indicative of future results with respect to Retail Shares. See the "EXPENSE
SUMMARY."

<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Period

RETAIL
1995(1) $15.00 $0.18 $2.87 $(0.17) $(0.80) $17.08 21.94%
PRIOR CLASS
1994 15.39 0.11 0.22 (0.11) (0.61) 15.00 2.21%
1993 13.93 0.14 1.89 (0.14) (0.43) 15.39 14.90%
1992 13.08 0.19 1.02 (0.19) (0.17) 13.93 9.27%
1991 8.95 0.26 4.13 (0.26) __ 13.08 49.37%
1990(2) 10.00 0.14 (1.05) (0.14) __ 8.95 (9.22)%

SPECIAL EQUITY FUND
- -------------------

RETAIL
1995(1) $9.37 $0.12 $2.12 $(0.12) $(0.07) $11.42 24.44%
PRIOR CLASS
1994(3) 10.00 0.06 (0.63) (0.06) __ 9.37 (5.72)%

INTERNATIONAL EQUITY FUND
- -------------------------

RETAIL
1995(4) $10.00 $(0.01) $1.00 $ ___ $ ___ $10.99 9.90%

BALANCED FUND
- -------------

RETAIL
1995(5) $9.97 $0.11 $0.42 $(0.11) $___ $10.39 5.27%

BOND FUND
- ---------

RETAIL
1995(1) $9.81 $0.60 $0.72 $(0.57) $___ $10.56 13.83%
PRIOR CLASS
1994 11.18 0.53 (1.04) (0.52) (0.34) 9.81 (4.75)%

<CAPTION>
For a Share Outstanding Throughout the Period

Ratio
of Net
Ratio of Investment
Ratio of Expenses Income
Net to Average to Average
Net Assets Ratio of Investment Net Assets Net Assets
End of Expenses Income (Excluding (Excluding Portfolio
Period to Average to Average Waivers and Waivers and Turnover
(000) Net Assets Net Assets Reimbursements) Reimbursements) Rate
<S> <C> <C> <C> <C> <C> <C>
EQUITY FUND
- -----------

RETAIL
1995(1) $ 6,591 1.34% 1.23% 1.53% 1.04% 119%
PRIOR CLASS
1994 50,128 1.49% 0.75% 1.51% 0.73% 35%
1993 45,677 1.20% 0.94% 1.41% 0.73% 24%
1992 28,103 0.92% 1.47% 1.23% 1.17% 39%
1991 12,830 0.54% 2.30% 1.48% 1.36% 68%
1990(2) 5,982 0.65% 2.29% 1.59% 1.35% 43%

SPECIAL EQUITY FUND
- -------------------

RETAIL
1995(1) $734 0.27% 1.29% 2.24% (0.68)% 129%
PRIOR CLASS
1994(3) 10,069 0.15% 1.06% 2.10% (0.89)% 39%

INTERNATIONAL EQUITY FUND
- -------------------------

RETAIL
1995(4) $ 9 2.13% (0.69)% 2.26% (0.83)% 23%

BALANCED FUND
- -------------

RETAIL
1995(5) $69 1.07% 3.37% 1.32% 3.12% 65%

BOND FUND
- ---------

RETAIL
1995(1) $1,373 0.97% 6.02% 1.44% 5.55% 352%
PRIOR CLASS
1994 23,377 1.01% 5.07% 1.60% 4.48% 232%
</TABLE>
<PAGE> 5

Net
Realized and Distributions
Net Asset Unrealized Dividends from
Value Net Gains from Net Realized Net Asset
Beginning Investment (Losses) on Investment Capital Value End Total
of Period Income Investments Income Gains of Period Return*
<S> <C> <C> <C> <C> <C> <C>
1993 10.89 0.56 0.54 (0.56) (0.25) 11.18 10.63%
1992 10.65 0.70 0.32 (0.68) (0.10) 10.89 9.82%
1991 9.96 0.78 0.69 (0.78) ___ 10.65 15.16%
1990(2) 10.00 0.50 (0.04) (0.50) ___ 9.96 4.64%

INTERMEDIATE INCOME FUND
- ------------------------

RETAIL
1995(1) $10.27 $0.55 $0.44 $(0.54) $___ $10.72 9.90%
PRIOR CLASS
1994 11.01 0.50 (0.61) (0.49) (0.14) 10.27 (0.97)%
1993 10.87 0.53 0.21 (0.53) (0.07) 11.01 6.99%
1992 10.61 0.65 0.29 (0.64) (0.04) 10.87 9.11%
1991 10.12 0.77 0.50 (0.77) (0.01) 10.61 12.94%
1990(2) 10.00 0.48 0.12 (0.48) ___ 10.12 6.10%

SHORT-TERM INCOME FUND
- ----------------------

RETAIL
1995(6) $10.01 $0.23 $0.02 $(0.22) $___ $10.04 2.57%

PENNSYLVANIA TAX-FREE BOND FUND
- -------------------------------

RETAIL
1995(1) $9.56 $0.47 $0.67 $(0.46) $(0.01) $10.23 12.30%
PRIOR CLASS
1994 10.48 0.46 (0.85) (0.46) (0.07) 9.56 (3.90)%
1993 9.77 0.45 0.70 (0.44) -- 10.48 11.94%
1992(7) 10.00 -- (0.23) -- -- 9.77 (2.28)%

CASH MANAGEMENT FUND
- --------------------

RETAIL
1995(1) $1.00 $0.05 $___ $(0.05) $___ $1.00 5.25%
PRIOR CLASS
1994 1.00 0.03 (0.03) ___ ___ 1.00 3.41%
1993 1.00 0.03 (0.03) ___ ___ 1.00 2.80%
1992 1.00 0.04 (0.04) ___ ___ 1.00 3.79%
1991 1.00 0.06 (0.06) ___ ___ 1.00 6.22%
1990(8) 1.00 0.07 (0.07) ___ ___ 1.00 7.59%

U.S. TREASURY SECURITIES FUND
- -----------------------------

RETAIL
1995(1) $1.00 $0.05 $___ $(0.05) $___ $1.00 5.16%
PRIOR CLASS
1994 1.00 0.03 (0.03) ___ ___ 1.00 3.07%
1993 1.00 0.03 (0.03) ___ ___ 1.00 2.57%
1992 1.00 0.04 (0.04) ___ ___ 1.00 3.64%
1991 1.00 0.06 (0.06) ___ ___ 1.00 5.96%
1990(8) 1.00 0.07 (0.07) ___ ___ 1.00 7.44%
<CAPTION>

INTERMEDIATE INCOME FUND
- ------------------------

RETAIL
1995(1) $1,230 0.93% 5.47% 1.51% 4.89% 260%
PRIOR CLASS
1994 21,247 0.90% 4.66% 1.64% 3.92% 170%
1993 24,047 0.78% 4.89% 1.50% 4.17% 90%
1992 16,718 0.47% 6.31% 1.24% 5.57% 53%
1991 7,116 0.40% 7.69% 1.34% 6.76% 33%
1990(2) 3,986 0.75% 7.42% 1.69% 6.48% 39%

SHORT-TERM INCOME FUND
- ----------------------

RETAIL
1995(6) $11 0.88% 5.05% 1.33% 4.60% 40%

PENNSYLVANIA TAX-FREE BOND FUND
- -------------------------------

RETAIL
1995(1) $820 0.51% 4.64% 1.62% 3.53% 15%
PRIOR CLASS
1994 7,008 0.38% 4.61% 1.57% 3.42% 37%
1993 5,883 0.51% 4.35% 1.63% 3.23% 50%
1992(7) 3,405 2.67% 0.52% 3.41% (0.22)% 31%

CASH MANAGEMENT FUND
- --------------------

RETAIL
1995(1) $3,358 0.74% 5.16% 0.97% 4.93% N/A
PRIOR CLASS
1994 140,545 0.71% 3.32% 0.99% 3.05% N/A
1993 215,223 0.65% 2.75% 0.87% 2.53% N/A
1992 113,096 0.48% 3.76% 0.70% 3.55% N/A
1991 151,166 0.49% 5.84% 0.79% 5.54% N/A
1990(8) 39,061 0.42% 7.95% 0.75% 7.62% N/A

U.S. TREASURY SECURITIES FUND
- -----------------------------

RETAIL
1995(1) $730 0.73% 5.26% 0.79% 5.20% N/A
PRIOR CLASS
1994 325,379 0.72% 3.03% 0.97% 2.78% N/A
1993 257,934 0.66% 2.55% 0.87% 2.33% N/A
1992 340,904 0.46% 3.65% 0.69% 3.44% N/A
1991 341,931 0.51% 5.61% 0.79% 5.32% N/A
1990(8) 106,771 0.38% 7.73% 0.79% 7.32% N/A

</TABLE>
<PAGE> 6

<TABLE>
<CAPTION>
Net
Realized and Distributions
Net Asset Unrealized Dividends from
Value Net Gains from Net Realized Net Asset
Beginning Investment (Losses) on Investment Capital Value End Total
of Period Income Investments Income Gains of Period Return*
<S> <C> <C> <C> <C> <C> <C> <C>
TAX-FREE FUND
- -------------

RETAIL
1995(1) $1.00 $0.03 $___ $(0.03) $___ $1.00 3.39%
PRIOR CLASS
1994 1.00 0.02 (0.02) ___ ___ 1.00 2.21%
1993 1.00 0.02 (0.02) ___ ___ 1.00 1.97%
1992 1.00 0.03 (0.03) ___ ___ 1.00 2.88%
1991 1.00 0.04 (0.04) ___ ___ 1.00 4.44%
1990(8) 1.00 0.05 (0.05) ___ ___ 1.00 5.31%

<CAPTION>
Ratio
of Net
Ratio of Investment
Ratio of Expenses Income
Net to Average to Average
Net Assets Ratio of Investment Net Assets Net Assets
End of Expenses Income (Excluding (Excluding Portfolio
Period to Average to Average Waivers and Waivers and Turnover
(000) Net Assets Net Assets Reimbursements) Reimbursements) Rate
<S> <C> <C> <C> <C> <C> <C>
TAX-FREE FUND
- -------------

RETAIL
1995(1) $1,282 0.48% 3.35% 0.88% 2.95% N/A
PRIOR CLASS
1994 54,904 0.37% 2.22% 1.05% 1.53% N/A
1993 46,239 0.45% 1.95% 0.96% 1.44% N/A
1992 46,295 0.33% 2.83% 0.73% 2.45% N/A
1991 45,647 0.43% 4.37% 0.87% 3.93% N/A
1990(8) 24,167 0.31% 5.57% 0.91% 4.97% N/A
</TABLE>

*Total Return figures do not reflect applicable sales loads.

(1) On February 21, 1995 the shares of the Fund were redesignated as either
Retail or Institutional shares. For the year ended October 31, 1995,
the Financial Highlights' ratios of expenses, ratios of net investment
income, total return, and the per share investment activities and
distributions are presented on a basis whereby the Fund's net
investment income, expenses, and distributions for the period November
1, 1994 through February 20, 1995 were allocated to each class of
shares based upon the relative net assets of each class of shares as of
February 21, 1995 and the results combined therewith the results of
operations and distributions for each applicable class for the period
February 21, 1995 through October 31, 1995.

(2) Commenced operations on February 28, 1990. All ratios for the period
have been annualized.

(3) Commenced operations on March 15, 1994. All ratios for the period have
been annualized.

(4) Commenced operations on May 15, 1995. All ratios for the period have
been annualized.

(5) Commenced operations on June 29, 1995. All ratios for the period have
been annualized.

(6) Commenced operations on May 17, 1995. All ratios for the period have
been annualized.

(7) Commenced operations on September 21, 1992. All ratios for the period
have been annualized.

(8) Commenced operations on November 27, 1989. All ratios for the period
have been annualized.

(4) THE FOLLOWING SECTION IS ADDED TO PAGE 15, BEFORE "HOW TO PURCHASE AND
REDEEM SHARES":

RISK FACTORS

Certain risk factors associated with investments in some or all of the
Funds are discussed in the following paragraphs. A general discussion of risk
factors is contained in "PROSPECTUS SUMMARY - Investment Risks and
Characteristics," and other risks are identified throughout the sections
entitled "INVESTMENT OBJECTIVES AND POLICIES" AND "OTHER INVESTMENT POLICIES."

DERIVATIVE SECURITIES

A "derivative" is often defined as an instrument that derives its value
from the price of different securities, interest or currency exchange rates, or
indices. The Company considers the following types of securities to be
"derivatives" because they may present atypical or unexpected risks: forward
foreign currency contracts, futures contracts, put and call options purchased
on securities and indices, asset-backed and mortgage-backed securities,
"stripped securities" and variable and floating rate notes. The Funds will not
acquire such derivatives for speculative purposes, and will only acquire them
for investment or hedging purposes as specifically described in this Prospectus
and in the Statement of Additional Information.

FOREIGN SECURITIES

The Equity Funds and the Balanced Fund may invest in securities of foreign
issuers. Investment in securities of foreign issuers involves certain risks not
ordinarily associated with investments in securities of domestic issuers. Such
risks include fluctuations in foreign exchange rates, difficulties in
predicting international trade patterns, political, social and economic
instability in the country of the issuer, foreign trading practices (including
higher trading commissions, custodial charges and delayed settlements), foreign
withholding and income taxation, the
<PAGE> 7
possible establishment of exchange controls or the adoption of other foreign
governmental restrictions (which might adversely affect the payment of
principal and interest), difficulty in obtaining and enforcing judgments
against foreign issuers, and the possible imposition of exchange controls or
other foreign government laws or restrictions. With respect to certain
countries, there is also the possibility of expropriation of assets,
nationalization of assets, limits on removal of currency or other assets,
confiscatory taxation, political or social instability or diplomatic
developments which could adversely affect investments in those countries.

Foreign companies generally are not subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to U.S.
domestic companies. There is generally less government regulation of
securities exchanges, brokers and listed companies. Confiscatory taxation or
diplomatic developments could also affect investment in some countries. In
addition, foreign branches of U.S. banks, foreign banks and foreign issuers may
be subject to less stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those applicable to
domestic branches of U.S. banks and U.S. domestic issuers.

PENNSYLVANIA TAX-FREE BOND FUND

This Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940. Investment return on a non-diversified
portfolio typically is dependent upon the performance of a smaller number of
securities relative to the number held in a diversified portfolio.
Consequently, the change in value of any one security may affect the overall
value of a non-diversified portfolio more than it would a diversified
portfolio, and thereby subject its net asset value per share to greater
fluctuation. In addition, a non-diversified portfolio may be more susceptible
to economic, political and regulatory developments affecting the portfolio's
investment sector than a diversified investment portfolio with similar
objectives would be.

Because the Fund will normally invest 80% or more of its net assets in
Pennsylvania Municipal Obligations, it is more susceptible to factors affecting
Pennsylvania issuers than is a comparable municipal bond fund not concentrated
in the obligations of issuers located in a single state. Pennsylvania
tax-exempt issuers may be adversely affected by local political and economic
conditions and developments within Pennsylvania. Although the General Fund of
the Commonwealth (the principal operating fund of the Commonwealth) experienced
deficits in fiscal 1990 and 1991, tax increases and spending decreases have
resulted in surpluses in the last three years; as of June 30, 1994, the General
Fund had a surplus of $892.9 million. The deficit in the Commonwealth's
unreserved/undesignated funds also has been eliminated, and there was a surplus
of $79.2 million at June 30, 1994. However, rising unemployment, a relatively
high proportion of persons 65 and older, and court ordered increases in
healthcare reimbursement rates continue to place increased pressures on the tax
resources of the Commonwealth and its municipalities. In addition, certain
litigation is pending against the Commonwealth that could adversely affect its
ability to pay debt service. See the Statement of Additional Information for
further discussion of investment considerations associated with Pennsylvania
Municipal Obligations.

General obligations of Pennsylvania are currently rated "AA-" by S&P and
Fitch and "A1" by Moody's. There can be no assurance that the economic
conditions on which these ratings are based will continue or that particular
bond issues may not be adversely affected by changes in economic, political or
other conditions.

(5) THE SECTION ENTITLED "GOVERNMENT AND RELATED OBLIGATIONS" UNDER "OTHER
INVESTMENT POLICIES" ON PAGE 23 IS REPLACED WITH THE FOLLOWING TWO SECTIONS:

GOVERNMENT AND RELATED OBLIGATIONS

The Funds may invest in Treasury bills, notes and bonds and other
obligations issued or guaranteed by the U.S. Treasury. The Funds may also
acquire repurchase agreements secured by U.S. Treasury obligations. The Funds
(except the U.S. Treasury Fund) may also invest in other obligations issued or
guaranteed by agencies or instrumentalities of the U.S. Government. These
obligations may differ from U.S. Treasury obligations in their interest rates,
maturities, and times of issuance.

Obligations of certain agencies and instrumentalities of the U.S.
Government, such as the Government National Mortgage Association and the
Export-Import Bank of the United States, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, may borrow from the Treasury in its discretion; others,
such as those of the Student Loan Marketing Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Federal Farm Credit Banks or
the Federal Home Loan Mortgage Corporation, are supported only by the credit of
the
<PAGE> 8
instrumentality. No assurance can be given that the U.S. Government will
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law. The obligations of
such agencies and instrumentalities will be purchased only when the Investment
Advisor deems the credit risk with respect thereto to be minimal.

"STRIPPED" SECURITIES

Each Fund may invest in "stripped" securities, which are U.S. Treasury
bonds and notes the unmatured interest coupons of which have been separated
from the underlying principal obligation. Stripped securities are zero coupon
obligations that are normally issued at a discount to their "face value," and
may exhibit greater price volatility than ordinary debt securities because of
the manner in which their principal and interest are returned to investors.
The U.S. Treasury Fund may only invest in stripped securities issued by the
U.S. Treasury and recorded in the Federal Reserve book-entry record keeping
system. A number of securities firms and banks have stripped the interest
coupons and resold them in custodian receipt programs with proprietary names
such as Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual
on Treasuries ("CATS"). Privately-issued stripped securities such as TIGRS and
CATS are not themselves guaranteed by the U.S. Government, but the future
payment of principal or interest on U.S. Treasury obligations which they
represent is so guaranteed. Such securities will be purchased only when the
Investment Advisor deems the credit risk with respect thereto to be minimal.

(6) THE SECTION ENTITLED "OTHER INVESTMENT POLICIES - SPECIAL RISKS AND
CONSIDERATIONS" ON PAGES 32 AND 33 IS ELIMINATED.

(7) THE SECOND AND THIRD PARAGRAPHS OF THE SECTION ENTITLED "TAXES -
PENNSYLVANIA STATE TAX" ON PAGES 38 AND 39 ARE ELIMINATED AND REPLACED WITH THE
FOLLOWING:

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

Shareholders of the Tax-Free, U.S. Treasury Securities and Pennsylvania
Tax-Free Bond Funds are not subject to the county personal property tax imposed
on residents of Pennsylvania by the Act of June 17, 1913, P.L. 507, as amended,
to the extent that a Fund is comprised of Pennsylvania Municipal Obligations
and Federal Obligations.

(8) THE FIRST SENTENCE OF THE SECTION ENTITLED "MANAGEMENT OF THE COMPANY -
CUSTODIANS AND TRANSFER AGENT" ON PAGE 43 IS ELIMINATED AND REPLACED WITH THE
FOLLOWING:

Citibank, N.A. serves as custodian for each Fund other than the
International Equity Fund. CoreStates Bank, N.A. is expected to replace
Citibank, N.A. as custodian for these Funds on or about March 7, 1996.

PLEASE RETAIN FOR FUTURE REFERENCE

CON-A-001-03
<PAGE> 9
CONESTOGA FAMILY OF FUNDS

SUPPLEMENT DATED FEBRUARY 27, 1996 TO THE
PROSPECTUS DATED FEBRUARY 21, 1995

INSTITUTIONAL SHARES

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

Meridian Bancorp, Inc., the parent corporation of Meridian
Investment Company ("MIC"), the investment adviser to Conestoga Family of Funds
(the "Company"), has agreed to merge with CoreStates Financial Corp (the
"Merger"). Because the Merger will result in a change in control of MIC, the
existing investment advisory and sub-advisory agreements for the Company will,
by their terms, automatically terminate upon the Merger. The Merger is expected
to take place on or about April 1, 1996.

If shareholders of the Company approve the Agreement,
substantially all of the assets and liabilities of the Funds will be
transferred to the corresponding investment portfolio of CoreFunds, and the
Company's shareholders will become shareholders of CoreFunds. The Agreement
provides that each holder of Institutional Shares of a Fund will hold,
immediately after the reorganization, Institutional Shares of the corresponding
investment portfolio of CoreFunds with the same aggregate net asset value as
immediately before the reorganization.

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

<PAGE> 10
THE FOLLOWING INFORMATION REPLACES THE SECTION ENTITLED "EXPENSE SUMMARY" IN
THE INSTITUTIONAL SHARE PROSPECTUS ON PAGES 4 AND 5:

EXPENSE SUMMARY

The purpose of the following table is to assist a potential purchaser
of Institutional Shares of a Fund in understanding the various costs and
expenses that an investor in such Shares of the Fund will bear directly or
indirectly.

<TABLE>
<CAPTION>
Conestoga Conestoga Conestoga
Money Equity Conestoga Balanced
Market Funds Funds Bond Funds Fund
------------ -------- ---------- ---------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) . . . . . . 0% 0% 0% 0%
Maximum Sales Load Imposed on Reinvested Dividends 0% 0% 0% 0%
Deferred Sales Load . . . . . . . . . . . . . . . 0% 0% 0% 0%
Redemption Fees . . . . . . . . . . . . . . . . . 0% 0% 0% 0%
Exchange Fee . . . . . . . . . . . . . . . . . . . 0% 0% 0% 0%
</TABLE>

<TABLE>
<CAPTION>
U.S. Treasury International
ANNUAL FUND OPERATING EXPENSES Cash Management Tax-Free Securities Equity Equity
(as a percentage of average net assets) Fund Fund Fund Fund Fund
-------------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Advisory Fees After Fee Waivers(1). . . .20% .16% .27% .74% 1.00%
Other Expenses After Reimbursements(2). .36% .30% .35% .31% .88%
---- ---- ----- ------ -----
Total Fund Operating Expenses . . . . . .56% .46% .62% 1.05% 1.88%
==== ==== ===== ====== =====
</TABLE>

<TABLE>
<CAPTION>
Pennsylvania
Special Intermediate Tax-Free Short-Term
Equity Bond Income Bond Income Balanced
Fund Fund Fund Fund Fund Fund
-------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees After Fee Waivers(1). .05% .34% .25% .00% .29% .49%
Other Expenses After Reimburse-
ments(2) . . . . . . . . . . . . .35% .37% .39% .51% .34% .33%
---- ----- ----- ----- ----- -----
Total Fund Operating Expenses . . . .40% .71% .64% .51% .63% .82%
==== ===== ===== ===== ===== =====
</TABLE>

(2) "Other Expenses After Reimbursements" include administration fees payable at
the maximum annual rate of .17% of each Fund's average daily net assets.
Before May 1, 1995, administration fees were payable at the rate of .20% of
each Fund's average net assets pursuant to an administration agreement with a
prior administrator. (See "MANAGEMENT OF THE FUND -- Investment Advisor and
Administrator and Distributor.")
<PAGE> 11
EXAMPLE

You would pay the following expenses on a $1,000 investment, assuming:

(1) a 5% annual return;

(2) redemption at the end of each time period; and

(3) the imposition of a maximum sales load at the beginning of the
period.

<TABLE>
<CAPTION>
Cash U.S. Treasury International Special
Management Tax-Free Securities Equity Equity Equity
Fund Fund Fund Fund Fund Fund
------ ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
1 Year . . . . . . $6 $5 $6 $11 $19 $4
3 Years . . . . . . 18 15 20 33 59 13
5 Years . . . . . . 31 26 35 58 N/A 22
10 Years . . . . . 70 58 77 128 N/A 51

<CAPTION>
Intermediate Pennsylvania Short-Term
Bond Income Tax-Free Income Balanced
Fund Fund Bond Fund Fund Fund
------ ------ ---------- ------ --------
<S> <C> <C> <C> <C> <C>
1 Year . . . . . . $7 $7 $5 $6 $8
3 Years . . . . . . 23 20 16 20 26
5 Years . . . . . . 40 36 29 N/A N/A
10 Years . . . . . 88 80 64 N/A N/A
</TABLE>

THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. THE ABOVE FIGURES WITH RESPECT TO THE SPECIAL EQUITY FUND ARE
ESTIMATES FOR THE CURRENT YEAR ONLY. ACTUAL EXPENSES FOR EACH FUND MAY BE
GREATER OR LESSER THAN THOSE SHOWN.

The Expense Summary reflects the annual operating expenses of each Fund (except
the Special Equity Fund) incurred during the last fiscal year. The annual
operating expenses have been restated with respect to the Special Equity Fund
to reflect various projected fee and expense rates for the current fiscal year.
Without fee waivers and expense reimbursements by the Investment Advisor and/or
administrator, Total Fund Operating Expenses for the Cash Management Fund, the
Tax-Free Fund, the U.S. Treasury Securities Fund, the Equity Fund, the
International Equity Fund, the Special Equity Fund, the Bond Fund, the
Intermediate Income Fund, the Pennsylvania Tax-Free Bond Fund, the Short-Term
Income Fund and the Balanced Fund would be .76%, .70%, .77%, 1.10%, 1.88%,
1.97%, 1.12%, 1.13%, 1.25%, 1.08%, and 1.08%, respectively, for the current
fiscal year. There may be a charge of $7.00 for each redemption paid by wire.
See "MANAGEMENT OF THE FUND-Expenses" for a more complete discussion of the
shareholder transaction expenses and annual operating expenses of the Funds.

The information in the foregoing fee tables and examples relates only to the
Institutional Shares of each Fund. Each of the Company's eleven Funds also
offers another class of Shares known as Retail Shares. The Institutional
Shares and Retail Shares of each Fund are subject to the same expenses except
that Institutional Shares are not subject to a Rule 12b-1 fee and the
Institutional Shares of the Equity, International Equity, Special Equity, Bond,
Intermediate Income, Pennsylvania Tax-Free Bond, Short-Term Income and Balanced
Funds are not sold with a sales charge.
<PAGE> 12
THE FOLLOWING FINANCIAL HIGHLIGHTS REPLACE THOSE INCLUDED IN THE
INSTITUTIONAL SHARE PROSPECTUS ON PAGES 5 THROUGH 9:

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
For a Share Outstanding Throughout the Period

INSTITUTIONAL
1995(1) 15.00 0.19 2.87 (0.19) (0.80) 17.07 22.00%
PRIOR CLASS
1994 15.39 0.11 0.22 (0.11) (0.61) 15.00 2.21%
1993 13.93 0.14 1.89 (0.14) (0.43) 15.39 14.90%
1992 13.08 0.19 1.02 (0.19) (0.17) 13.93 9.27%
1991 8.95 0.26 4.13 (0.26) __ 13.08 49.37%
1990(2) 10.00 0.14 (1.05) (0.14) __ 8.95 (9.22)%

SPECIAL EQUITY FUND
- -------------------

INSTITUTIONAL
1995(1) 9.37 0.12 2.12 (0.12) (0.07) 11.42 24.44%
PRIOR CLASS
1994(3) 10.00 0.06 (0.63) (0.06) __ 9.37 (5.72)%

INTERNATIONAL EQUITY FUND
- -------------------------

INSTITUTIONAL
1995(4) 10.00 ___ 1.01 ___ ___ 11.01 10.10%

BALANCED FUND

INSTITUTIONAL
1995(5) 10.00 0.12 0.37 (0.11) ___ 10.38 4.89%

BOND FUND
- ---------

INSTITUTIONAL
1995(1) 9.81 0.61 0.71 (0.58) ___ 10.55 13.87%
PRIOR CLASS
1994 11.18 0.53 (1.04) (0.52) (0.34) 9.81 (4.75)%
1993 10.89 0.56 0.54 (0.56) (0.25) 11.18 10.63%
1992 10.65 0.70 0.32 (0.68) (0.10) 10.89 9.82%
1991 9.96 0.78 0.69 (0.78) ___ 10.65 15.16%
1990(2) 10.00 0.50 (0.04) (0.50) ___ 9.96 4.64%
<CAPTION>
For a Share Outstanding Throughout the Period

INSTITUTIONAL
1995(1) 378,352 1.05% 1.44% 1.10% 1.44% 119%
PRIOR CLASS
1994 50,128 1.49% 0.75% 1.51% 0.73% 35%
1993 45,677 1.20% 0.94% 1.41% 0.73% 24%
1992 28,103 0.92% 1.47% 1.23% 1.17% 39%
1991 12,830 0.54% 2.30% 1.48% 1.36% 68%
1990(2) 5,982 0.65% 2.29% 1.59% 1.35% 43%

SPECIAL EQUITY FUND
- -------------------

INSTITUTIONAL
1995(1) 57,396 0.32% 1.14% 1.97% (0.51)% 129%
PRIOR CLASS
1994(3) 10,069 0.15% 1.06% 2.10% (0.89)% 39%

INTERNATIONAL EQUITY FUND
- -------------------------

INSTITUTIONAL
1995(4) 13,372 1.88% (0.10)% 1.88% (0.10)% 23%

BALANCED FUND

INSTITUTIONAL
1995(5) 38,494 0.82% 3.66% 1.07% 3.41% 65%

BOND FUND
- ---------

INSTITUTIONAL
1995(1) 194,442 0.71% 6.09% 1.12% 5.68% 352%
PRIOR CLASS
1994 23,377 1.01% 5.07% 1.60% 4.48% 232%
1993 27,346 0.88% 5.16% 1.49% 4.55% 158%
1992 15,180 0.46% 6.78% 1.24% 6.01% 99%
1991 7,255 0.47% 7.71% 1.41% 6.78% 47%
1990(2) 4,593 0.68% 7.75% 1.62% 6.81% 23%
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>

Net
Realized and Distributions
Net Asset Unrealized Dividends from
Value Net Gains from Net Realized Net Asset
Beginning Investment (Losses) on Investment Capital Value End Total
of Period Income Investments Income Gains of Period Return*
<S> <C> <C> <C> <C> <C> <C>
INTERMEDIATE INCOME FUND
- ------------------------

INSTITUTIONAL
1995(1) 10.27 0.57 0.42 (0.55) ___ 10.71 9.92%
PRIOR CLASS
1994 11.01 0.50 (0.61) (0.49) (0.14) 10.27 (0.97)%
1993 10.87 0.53 0.21 (0.53) (0.07) 11.01 6.99%
1992 10.61 0.65 0.29 (0.64) (0.04) 10.87 9.11%
1991 10.12 0.77 0.50 (0.77) (0.01) 10.61 12.94%
1990(2) 10.00 0.48 0.12 (0.48) ___ 10.12 6.10%

SHORT-TERM INCOME FUND
- ----------------------
INSTITUTIONAL
1995(4) 10.00 0.25 0.03 (0.23) ___ 10.05 2.87%

PENNSYLVANIA TAX-FREE BOND FUND
- -------------------------------

INSTITUTIONAL
1995(1) 9.56 0.47 0.67 (0.46) (0.01) 10.23 12.30%
PRIOR CLASS
1994 10.48 0.46 (0.85) (0.46) (0.07) 9.56 (3.90)%
1993 9.77 0.45 0.70 (0.44) -- 10.48 11.94%
1992(6) 10.00 -- (0.23) -- -- 9.77 (2.28)%

CASH MANAGEMENT FUND
- --------------------

INSTITUTIONAL
1995(1) 1.00 0.05 ___ (0.05) ___ 1.00 5.43%
PRIOR CLASS
1994 1.00 0.03 (0.03) ___ ___ 1.00 3.41%
1993 1.00 0.03 (0.03) ___ ___ 1.00 2.80%
1992 1.00 0.04 (0.04) ___ ___ 1.00 3.79%
1991 1.00 0.06 (0.06) ___ ___ 1.00 6.22%
1990(7) 1.00 0.07 (0.07) ___ ___ 1.00 7.59%

U.S. TREASURY SECURITIES FUND
- -----------------------------

INSTITUTIONAL
1995(1) 1.00 0.05 ___ (0.05) ___ 1.00 5.27%
PRIOR CLASS
1994 1.00 0.03 (0.03) ___ ___ 1.00 3.07%
1993 1.00 0.03 (0.03) ___ ___ 1.00 2.57%
1992 1.00 0.04 (0.04) ___ ___ 1.00 3.64%
1991 1.00 0.06 (0.06) ___ ___ 1.00 5.96%
1990(7) 1.00 0.07 (0.07) ___ ___ 1.00 7.44%

TAX-FREE FUND
- -------------

INSTITUTIONAL
1995(1) 1.00 0.03 ___ (0.03) ___ 1.00 3.43%
PRIOR CLASS
1994 1.00 0.02 (0.02) ___ ___ 1.00 2.21%
1993 1.00 0.02 (0.02) ___ ___ 1.00 1.97%
1992 1.00 0.03 (0.03) ___ ___ 1.00 2.88%
1991 1.00 0.04 (0.04) ___ ___ 1.00 4.44%
1990(7) 1.00 0.05 (0.05) ___ ___ 1.00 5.31%

INSTITUTIONAL
1995(1) 138,243 0.64% 5.72% 1.15% 5.21% 260%
PRIOR CLASS
1994 21,247 0.90% 4.66% 1.64% 3.92% 170%
1993 24,047 0.78% 4.89% 1.50% 4.17% 90%
1992 16,718 0.47% 6.31% 1.24% 5.57% 53%
1991 7,116 0.40% 7.69% 1.34% 6.76% 33%
1990(2) 3,986 0.75% 7.42% 1.69% 6.48% 39%

SHORT-TERM INCOME FUND
- ----------------------
INSTITUTIONAL
1995(4) 36,059 0.63% 5.43% 1.08% 4.98% 40%

PENNSYLVANIA TAX-FREE BOND FUND
- -------------------------------

INSTITUTIONAL
1995(1) 5,977 0.51% 4.64% 1.65% 3.50% 15%
PRIOR CLASS
1994 7,008 0.38% 4.61% 1.57% 3.42% 37%
1993 5,883 0.51% 4.35% 1.63% 3.23% 50%
1992(6) 3,405 2.67% 0.52% 3.41% (0.22%) 31%

CASH MANAGEMENT FUND
- --------------------

INSTITUTIONAL
1995(1) 234,520 0.56% 5.32% 0.79% 5.09% N/A
PRIOR CLASS
1994 140,545 0.71% 3.32% 0.99% 3.05% N/A
1993 215,223 0.65% 2.75% 0.87% 2.53% N/A
1992 113,096 0.48% 3.76% 0.70% 3.55% N/A
1991 151,166 0.49% 5.84% 0.79% 5.54% N/A
1990(7) 39,061 0.42% 7.95% 0.75% 7.62% N/A

U.S. TREASURY SECURITIES FUND
- -----------------------------

INSTITUTIONAL
1995(1) 444,529 0.62% 5.14% 0.78% 4.98% N/A
PRIOR CLASS
1994 325,379 0.72% 3.03% 0.97% 2.78% N/A
1993 257,934 0.66% 2.55% 0.87% 2.33% N/A
1992 340,904 0.46% 3.65% 0.69% 3.44% N/A
1991 341,931 0.51% 5.61% 0.79% 5.32% N/A
1990(7) 106,771 0.38% 7.73% 0.79% 7.32% N/A

TAX-FREE FUND
- -------------

INSTITUTIONAL
1995(1) 60,509 0.46% 3.37% 0.83% 3.00% N/A
PRIOR CLASS
1994 54,904 0.37% 2.22% 1.05% 1.53% N/A
1993 46,239 0.45% 1.95% 0.96% 1.44% N/A
1992 46,295 0.33% 2.83% 0.73% 2.45% N/A
1991 45,647 0.43% 4.37% 0.87% 3.93% N/A
1990(7) 24,167 0.31% 5.57% 0.91% 4.97% N/A
</TABLE>

*Total Return figures do not reflect applicable sales loads.

(2) Commenced operations on February 28, 1990. All ratios for the period
have been annualized.

(3) Commenced operations on March 15, 1994. All ratios for the period have
been annualized.

(4) Commenced operations on May 15, 1995. All ratios for the period have
been annualized.

(5) Commenced operations on June 26, 1995. All ratios for the period have
been annualized.
<PAGE> 14
(6) Commenced operations on September 21, 1992. All ratios for the period
have been annualized.

(7) Commenced operations on November 27, 1989. All ratios for the period
have been annualized.

THE THIRD AND FOURTH SENTENCES OF THE SECOND PARAGRAPH OF THE SECTION ENTITLED
"OTHER INVESTMENT POLICIES-SPECIAL RISKS AND CONSIDERATIONS" ON PAGE 28 ARE
ELIMINATED AND REPLACED WITH THE FOLLOWING:

Although the General Fund of the Commonwealth (the principal operating fund
of the Commonwealth) experienced deficits in fiscal 1990 and 1991, tax
increases and spending decreases have resulted in surpluses in the last three
years; as of June 30, 1994, the General Fund had a surplus of $892.9 million.
The deficit in the Commonwealth's unreserved/undesignated funds also has been
eliminated, and there was a surplus of $79.2 million at June 30, 1994.

THE SECOND AND THIRD PARAGRAPHS OF THE SECTION ENTITLED "TAXES-PENNSYLVANIA
STATE TAX" ON PAGE 34 ARE ELIMINATED AND REPLACED WITH THE FOLLOWING:

Shareholders of the Tax-Free, U.S. Treasury Securities and Pennsylvania
Tax-Free Bond Funds are not subject to the county personal property tax imposed
on residents of Pennsylvania by the Act of June 17, 1913, P.L.507, as amended,
to the extent that a Fund is comprised of Pennsylvania Municipal Obligations
and Federal Obligations.

THE FIRST SENTENCE OF THE SECTION ENTITLED "MANAGEMENT OF THE COMPANY -
CUSTODIANS AND TRANSFER AGENT" ON PAGE 38 IS ELIMINATED AND REPLACED WITH THE
FOLLOWING:

PLEASE RETAIN FOR FUTURE REFERENCE

CON-A-002-02
<PAGE> 15

RETAIL SHARES
Cash Management Fund
Tax-Free Fund
U.S. Treasury Securities Fund
Equity Fund
Special Equity Fund
Bond Fund
Intermediate Income Fund
Pennsylvania Tax-Free Bond Fund
Balanced Fund
Short-Term Income Fund
International Equity Fund

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

PROSPECTUS
FEBRUARY 21, 1995

------------------------------------------------------
<PAGE> 16

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.................................................................. 2
Expense Summary..................................................................... 4
Financial Highlights................................................................ 5
Investment Objectives and Policies.................................................. 10
How to Purchase and Redeem Shares................................................... 15
Valuation of Shares................................................................. 22
Dividends........................................................................... 23
Other Investment Policies........................................................... 23
Investment Restrictions............................................................. 33
Taxes............................................................................... 35
Performance Information............................................................. 39
Management of the Company........................................................... 41
General Information................................................................. 44
</TABLE>
[MERIDIAN INNVESTMENT COMPANY LOGO]
INVESTMENT ADVISOR

SEI FINANCIAL SERVICES COMPANY
DISTRIBUTOR

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

CON-F-001-01

<PAGE> 17

CONESTOGA FAMILY OF FUNDS
RETAIL SHARES
680 East Swedesford Road For information,
Wayne, Pennsylvania 19087-1658 call (800) 344-2716

Conestoga Family of Funds (the "Company") is an open-end management investment
company. This Prospectus describes the eleven separate investment portfolios
(the "Funds") which are offered by the Company, each of which is advised by
Meridian Investment Company (the "Investment Advisor"). These Funds enable the
Company to meet a wide range of investment needs. This Prospectus relates to a
separate series of shares (the "Retail Shares") of each of the Funds.

MONEY MARKET FUNDS

THE CONESTOGA CASH MANAGEMENT FUND'S investment objective is to seek current
income with liquidity and stability of principal.

THE CONESTOGA TAX-FREE FUND'S investment objective is to seek current income
which is exempt from regular federal income tax with liquidity and stability of
principal.

THE CONESTOGA U.S. TREASURY SECURITIES FUND'S investment objective is to seek
current income with liquidity and stability of principal.

EQUITY FUNDS

THE CONESTOGA EQUITY FUND seeks capital growth by investing principally in a
diversified portfolio of common stocks.

THE CONESTOGA INTERNATIONAL EQUITY FUND'S investment objective is to seek
long-term growth of capital.

THE CONESTOGA SPECIAL EQUITY FUND seeks capital growth by investing
principally in a diversified portfolio of common stocks.

BOND FUNDS

THE CONESTOGA BOND (FORMERLY THE INCOME) FUND'S investment objective is to
seek to maximize long-term total return by investing principally in a
diversified portfolio of debt securities.

THE CONESTOGA INTERMEDIATE INCOME (FORMERLY THE LIMITED MATURITY) FUND has a
primary investment objective of seeking current income by investing principally
in a diversified portfolio of debt securities with remaining or expected
maturities of ten years or less, and a secondary objective of seeking capital
growth.

THE CONESTOGA PENNSYLVANIA TAX-FREE BOND FUND'S investment objective is to
seek a high level of current income consistent with the preservation of capital,
which income is exempt from federal individual income tax and, to the extent
possible, from Pennsylvania state and local personal income tax, and is not a
tax preference item under the federal alternative minimum tax.

THE CONESTOGA SHORT-TERM INCOME FUND'S investment objective is to seek
consistent current income with relative stability of principal by investing
principally in a diversified portfolio of investment grade debt securities.

BALANCED FUND

THE BALANCED FUND'S investment objective is to seek a balance of capital
appreciation and current income consistent with the preservation of capital.

The Investment Advisor is located in Malvern, Pennsylvania. Marvin & Palmer
Associates, Inc. is the sub-investment advisor to the International Equity Fund.
SEI Financial Management Corporation acts as the Company's administrator and SEI
Financial Services Company acts as the Company's distributor. FUND SHARES ARE
NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE
INVESTMENT ADVISOR OR ANY OF ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED BY,
GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENTAL AGENCY. EACH OF THE CASH MANAGEMENT, TAX-FREE AND U.S. TREASURY
SECURITIES FUNDS SEEKS TO MAINTAIN ITS NET ASSET VALUE PER SHARE AT $1.00 FOR
PURPOSES OF PURCHASES AND REDEMPTIONS, ALTHOUGH THERE CAN BE NO ASSURANCE THAT
IT WILL BE ABLE TO DO SO ON A CONTINUOUS BASIS. INVESTMENT IN ANY FUND INVOLVES
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

This Prospectus sets forth concisely the information about Retail Shares of
the Funds that a prospective investor ought to know before investing. Investors
should read this Prospectus and retain it for future reference. The Statement of
Additional Information bears the same date as this Prospectus, is incorporated
by reference in its entirety into this Prospectus, and is available upon request
without charge by writing to the Company at its address or by calling the
Company at the telephone number shown above.
------------------------

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.
------------------------

The date of this Prospectus is February 21, 1995.

<PAGE> 18

PROSPECTUS SUMMARY

<TABLE>
<S> <C>
Shares Offered................ Units of Beneficial Interest of a separate class (the
"Retail Shares") of each Fund.
Offering Price and
Sale Charge................. The public offering price of Retail Shares of each Fund is
equal to its net asset value per Share which, with respect
to the Cash Management, Tax-Free and U.S. Treasury
Securities Funds (the "Money Market Funds"), the Company
will seek to maintain at $1.00 and, with respect to the
Equity, Special Equity, International Equity, Bond,
Intermediate Income, Pennsylvania Tax-Free Bond, Short-Term
Income and Balanced Funds (the "Non-Money Market Funds"),
includes a sales charge.
Minimum Purchase.............. $1,000 minimum initial investment with no minimum subsequent
investment.
Investment Objectives......... MONEY MARKET FUNDS: The CASH MANAGEMENT FUND and the U.S.
TREASURY SECURITIES FUND will each seek current income with
liquidity and stability of principal. The TAX-FREE FUND will
seek current income which is exempt from regular federal
income tax with liquidity and stability of principal.
EQUITY FUNDS: The EQUITY FUND and the SPECIAL EQUITY FUND
will each seek capital growth by investing primarily in a
diversified portfolio of common stocks. The INTERNATIONAL
EQUITY FUND will seek long-term growth of capital.
BOND FUNDS: The BOND FUND will seek to maximize long-term
total return by investing principally in a diversified
portfolio of debt securities. The INTERMEDIATE INCOME FUND
has a primary investment objective of seeking current income
by investing principally in a diversified portfolio of debt
securities with expected or remaining maturities of ten
years or less, and a secondary objective of seeking capital
growth. The investment objective of the PENNSYLVANIA
TAX-FREE BOND FUND is to seek a high level of current income
consistent with the preservation of capital, which income is
exempt from federal individual income tax and, to the extent
possible, from Pennsylvania state and local personal income
tax, and is not a tax preference item under the federal
alternative minimum tax. Shares of the Pennsylvania Tax-Free
Bond Fund will be exempt from Pennsylvania personal property
taxes. The SHORT-TERM INCOME FUND'S investment objective is
to seek consistent current income with relative stability of
principal by investing principally in a diversified
portfolio of investment grade debt securities.
BALANCED FUND: The BALANCED FUND'S investment objective is
to seek a balance of capital appreciation and current income
consistent with the preservation of capital.
Investment Policies........... MONEY MARKET FUNDS: The CASH MANAGEMENT FUND invests
principally in short-term high-quality money market
instruments. The TAX-FREE FUND invests principally in
short-term high-quality municipal obligations the interest
on which is exempt from regular federal income tax and not
treated as a specific tax preference item under the federal
alternative minimum tax. The U.S. TREASURY SECURITIES FUND
invests exclusively in short-term obligations issued or
guaranteed by the U.S. Treasury and in repurchase agreements
secured by U.S. Treasury instruments.
</TABLE>

<PAGE> 19

<TABLE>
<S> <C>
EQUITY FUNDS: The EQUITY FUND will normally invest at least
80% of its total assets in common stocks. The SPECIAL EQUITY
FUND will normally invest in common stocks of domestic
companies that the Investment Advisor expects will
experience growth in earnings and price. The INTERNATIONAL
EQUITY FUND will normally invest at least 65% of its total
assets in an internationally diversified portfolio of equity
securities which trade in markets other than the United
States.
BOND FUNDS: The BOND FUND will normally invest at least 80%
of its total assets in debt securities of all types. The
INTERMEDIATE INCOME FUND will normally invest at least 80%
of its total assets in debt securities of all types with
maximum expected or remaining maturities of ten years or
less. The PENNSYLVANIA TAX-FREE BOND FUND will invest
substantially all of its assets (but in no event less than
80%) in investment grade municipal securities the interest
on which is exempt from federal individual income tax and
from Pennsylvania state and local personal income tax, and
is not treated as a specific tax preference item under the
federal alternative minimum tax. The SHORT-TERM INCOME FUND
will invest principally in investment grade debt securities
of all types with maximum expected or remaining maturities
of three years or less. The Fund will normally have an
average dollar-weighted portfolio maturity of approximately
one year.
BALANCED FUND: The BALANCED FUND will normally invest at all
times at least 30% of the value of its total assets in
fixed-income securities and no more than 70% in equity
securities.
Investment Risks and
Characteristics............. Funds investing in debt and equity securities are subject to
market risk. Market risk is the possibility that prices of
securities held by a Fund will decline over a short or even
extended period. Stock markets tend to be cyclical, with
periods of generally declining prices. The cycles will
affect the value of a fund investing in equity securities.
Funds investing in equity securities of foreign companies
also will be subject to the risks of fluctuations in the
values of foreign currencies relative to the U.S. dollar and
other risks, including future political and economic
developments and the possible imposition of exchange
controls or other foreign governmental laws or restrictions.
Funds investing in debt securities are subject to market
risk caused by fluctuations in interest rates and are
subject to the risk that particular issuers will be unable
to meet their obligations. See "Investment Objectives and
Policies" and "Other Investment Policies" in the Prospectus
and "Investments, Policies and Restrictions" in the
Statement of Additional Information.
Dividends and Capital Gains... Dividends from net income are generally declared and paid
annually with respect to the International Equity Fund,
quarterly with respect to the Equity Fund, the Special
Equity Fund and the Balanced Fund and monthly with respect
to the Bond Funds. Dividends from net income are declared
daily and paid monthly with respect to the Money Market
Funds. Net realized capital gains are distributed at least
annually.
Investment Advisor............ Meridian Investment Company. Marvin & Palmer Associates,
Inc. (the "Sub-advisor") serves as the sub-advisor for the
International Equity Fund.
Distributor................... SEI Financial Services Company.
</TABLE>

<PAGE> 20

EXPENSE SUMMARY

The purpose of the following table is to assist a potential purchaser of
Retail Shares of a Fund in understanding the various costs and expenses that an
investor in such Shares of the Fund will bear directly or indirectly.

<TABLE>
<CAPTION>
CONESTOGA CONESTOGA CONESTOGA
MONEY EQUITY CONESTOGA BALANCED
MARKET FUNDS FUNDS BOND FUNDS FUND
------------ ------------ ---------- -------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)............................................. 0% 2.0% 2.0% 2.0%
Maximum Sales Load Imposed on Reinvested Dividends............ 0% 0% 0% 0%
Deferred Sales Load........................................... 0% 0% 0% 0%
Redemption Fees............................................... 0% 0% 0% 0%
Exchange Fee.................................................. 0% 0% 0% 0%
</TABLE>

<TABLE>
<CAPTION>
U.S.
CASH TREASURY INTERNATIONAL
MANAGEMENT TAX-FREE SECURITIES EQUITY EQUITY
FUND FUND FUND FUND FUND
---------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees After Fee Waivers(1)............... .34% .25% .32% .74% 1.00%
12b-1 Fees After Fee Waivers(2).................. .25% .08% .25% .40% .40%
Other Expenses After Reimbursements(3)........... .25% .32% .25% .27% .92%
----- ----- ----- ----- ------
Total Fund Operating Expenses.................... .84% .65% .82% 1.41% 2.32%
=========== =========== ============ ========== ===========
</TABLE>

<TABLE>
<CAPTION>
PENNSYLVANIA
SPECIAL INTERMEDIATE TAX-FREE SHORT-TERM
EQUITY BOND INCOME BOND INCOME BALANCED
FUND FUND FUND FUND FUND FUND
------- ---------- ------------ ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees After Fee Waivers(1)....... .50% .40% .40% .25% .50% .75%
12b-1 Fees After Fee Waivers(2).......... .40% .32% .39% .00% .40% .40%
Other Expenses After Reimbursements(3)... .39% .28% .25% .59% .37% .48%
------- ----- ----- ----- ----- ------
Total Fund Operating Expenses............ 1.29% 1.00% 1.04% .84% 1.27% 1.63%
====== =========== =========== ============ ========== ===========
</TABLE>

- ---------

(1) Advisory Fees are payable at the maximum annual rates of .40%, .40%, .40%,
.74%, 1.00%, 1.50%, .74%, .74%, .74%, .74% and .75% of the average daily net
assets of the Cash Management Fund, the Tax-Free Fund, the U.S. Treasury
Securities Fund, the Equity Fund, the International Equity Fund, the Special
Equity Fund, the Bond Fund, the Intermediate Income Fund, the Pennsylvania
Tax-Free Bond Fund, the Short-Term Income Fund and the Balanced Fund,
respectively.

(2) 12b-1 fees are payable at the annual rate of .40%. Long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charges permitted by the rules of National Association of Securities
Dealers, Inc. ("NASD") for investment companies without 12b-1 fees. Does not
include other fees which certain financial or other institutions may charge
certain customers in connection with their accounts. (See "MANAGEMENT OF THE
FUND -- Distribution and Services Plan.").

(3) "Other Expenses After Reimbursements" include administrative fees. Until
April 30, 1995, administration fees will equal .20% of each Fund's average
net assets. Effective May 1, 1995, an Administration Agreement with a new
Administrator provides that administration fees will not exceed .17% of each
Fund's average net assets. (See "MANAGEMENT OF THE FUND -- Investment
Advisor and Administrator and Distributor.")

EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming: (1) a
5% annual return; (2) redemption at the end of each time period; and (3)
the imposition of a maximum sales load at the beginning of the period.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Cash Management Fund.................... $ 9 $27 $47 $104
Tax-Free Fund........................... $ 7 $21 $36 $ 81
U.S. Treasury Securities Fund........... $ 8 $26 $46 $101
Equity Fund............................. $ 34 $64 $96 $186
International Equity Fund............... $ 43 $91
Special Equity Fund..................... $ 36 $60 $89 $173
Bond Fund............................... $ 30 $51 $74 $140
Intermediate Income Fund................ $ 30 $52 $76 $145
Pennsylvania Tax-Free Bond Fund......... $ 28 $46 $66 $122
Short-Term Income Fund.................. $ 33 $59
Balanced Fund........................... $ 36 $70
</TABLE>

<PAGE> 21

THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. THE INTERNATIONAL EQUITY, SHORT-TERM INCOME AND BALANCED FUNDS
ARE NEW. THE ABOVE FIGURES WITH RESPECT TO EACH FUND ARE ESTIMATES FOR THE
CURRENT YEAR ONLY. ACTUAL EXPENSES FOR EACH FUND MAY BE GREATER OR LESSER THAN
THOSE SHOWN.

The Expense Summary has been restated with respect to the Cash Management,
Tax-Free, U.S. Treasury Securities, Equity, Bond, Intermediate Income and
Pennsylvania Tax-Free Bond Funds to reflect various projected fee and expense
rates for the fiscal year ending October 31, 1995. The Special Equity Fund did
not commence investment operations until March 15, 1994. The International
Equity, Short-Term Income and Balanced Funds are expected to commence operations
shortly after the effective date of this Prospectus. Without fee waivers and
expense reimbursements by the Investment Advisor, Total Fund Operating Expenses
for the Cash Management Fund, the Tax-Free Fund, the U.S. Treasury Securities
Fund, the Equity Fund, the International Equity Fund, the Special Equity Fund,
the Bond Fund, the Intermediate Income Fund, the Pennsylvania Tax-Free Bond
Fund, the Short-Term Income Fund and the Balanced Fund would be 1.10%, 1.17%,
1.10%, 1.43%, 2.37%, 2.29%, 1.44%, 1.44%, 2.46%, 1.56%, and 1.68%, respectively,
for the fiscal year or period ending October 31, 1995. Certain of the fee
waivers and expense reimbursements reflected in the Expense Summary are based
upon informal commitments of the Investment Advisor in connection with the
implementation of the Company's multiple class structure to waive or reimburse
certain expenses until February 1996; there can be no assurance that such
commitments will continue thereafter. There may be a charge of $7.00 for each
redemption paid by wire. See "MANAGEMENT OF THE FUND -- Expenses" for a more
complete discussion of the shareholder transaction expenses and annual operating
expenses of the Funds.

The information in the foregoing fee tables and examples relates only to the
Retail Shares of each Fund. Each of the Company's eleven Funds also offer
another class of Shares known as Institutional Shares. The Institutional Shares
and Retail Shares of each Fund are subject to the same expenses except that
Institutional Shares are not subject to a Rule 12b-1 fee and the Institutional
Shares of the Equity, International Equity, Special Equity, Bond, Intermediate
Income, Pennsylvania Tax-Free Bond, Short-Term Income and Balanced Funds are not
sold with a sales charge.

FINANCIAL HIGHLIGHTS

The "Financial Highlights" in the following tables supplements the Company's
financial statements contained in the Statement of Additional Information and
sets forth certain historic investment results of Shares of each Fund that had
commenced investment operations prior to the date of this Prospectus. The
Company's financial statements and the data reported in "Financial Highlights"
for the years ended October 31, 1994, 1993, 1992 and 1991 and period ended
October 31, 1990 with respect to the Cash Management, Tax-Free, U.S. Treasury
Securities, Equity, Bond and Intermediate Income Funds, the years ended October
31, 1994 and 1993 and period ended October 31, 1992 with respect to the
Pennsylvania Tax-Free Bond Fund, and the period ended October 31, 1994 with
respect to the Special Equity Fund were audited by the Company's independent
auditors, whose report thereon is incorporated by reference in the Statement of
Additional Information. Further information about the performance of the Company
is contained in the Company's annual report which may be obtained without
charge.

The information in the following tables is not necessarily indicative of
future results with respect to the Retail Shares. See the "EXPENSE SUMMARY."

<PAGE> 22

CASH MANAGEMENT FUND
(For a Fund Share Outstanding Throughout the Years and Period presented.)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, NOVEMBER 27, 1989
-------------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991 1990(1)
-------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------
INVESTMENT ACTIVITIES
Net Investment Income....................... 0.034 0.028 0.037 0.060 0.073
-------- -------- -------- -------- -------
DISTRIBUTIONS
Net Investment Income....................... (0.034) (0.028) (0.037) (0.060) (0.073)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =================
TOTAL RETURN.................................. 3.41% 2.80% 3.79% 6.22% 7.59%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)........... $140,545 $215,223 $113,096 $151,166 $39,061
Ratio of Expenses to Average Net Assets..... 0.71% 0.65% 0.48% 0.49% 0.42%(2)
Ratio of Net Investment Income to Average
Net Assets................................ 3.32% 2.75% 3.76% 5.84% 7.95%(2)
Ratio of Expenses to Average Net Assets*.... 0.99% 0.87% 0.70% 0.79% 0.75%(2)
Ratio of Net Investment Income to Average
Net Assets*............................... 3.05% 2.53% 3.55% 5.54% 7.62%(2)
</TABLE>

- ---------
* During the periods the investment advisory, administration and/or shareholder
servicing plan fees were voluntarily reduced. If such voluntary fee
reductions had not occurred the ratios would have been as indicated.

(1) Period from commencement of operations.

(2) Annualized.

TAX-FREE FUND
(For a Fund Share Outstanding Throughout the Years and Period presented.)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, NOVEMBER 27, 1989
---------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991 1990(1)
------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net Investment Income........................... 0.022 0.020 0.028 0.044 0.052
------- ------- ------- ------- -------
Distributions
Net Investment Income........................... (0.022) (0.020) (0.028) (0.044) (0.052)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =================
TOTAL RETURN...................................... 2.21% 1.97% 2.88% 4.44% 5.31%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)............... $54,904 $46,239 $46,295 $45,647 $24,167
Ratio of Expenses to Average Net Assets......... 0.37% 0.45% 0.33% 0.43% 0.31%(2)
Ratio of Net Investment Income to Average
Net Assets.................................... 2.22% 1.95% 2.83% 4.37% 5.57%(2)
Ratio of Expenses to Average Net Assets*........ 1.05% 0.96% 0.73% 0.87% 0.91%(2)
Ratio of Net Investment Income to Average
Net Assets*................................... 1.53% 1.44% 2.45% 3.93% 4.97%(2)
</TABLE>

(1) Period from commencement of operations.

(2) Annualized.

<PAGE> 23

U.S. TREASURY SECURITIES FUND
(For a Fund Share Outstanding Throughout the Years and Period presented.)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, NOVEMBER 27, 1989
-------------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991 1990(1)
-------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES
Net Investment Income....................... 0.030 0.025 0.036 0.058 0.073
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net Investment Income....................... (0.030) (0.025) (0.036) (0.058) (0.073)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =================
TOTAL RETURN.................................. 3.07% 2.57% 3.64% 5.96% 7.44%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)........... $325,379 $257,934 $340,904 $341,931 $ 106,771
Ratio of Expenses to Average Net Assets..... 0.72% 0.66% 0.46% 0.51% 0.38%(2)
Ratio of Net Investment Income to Average
Net Assets................................ 3.03% 2.55% 3.65% 5.61% 7.73%(2)
Ratio of Expenses to Average Net Assets*.... 0.97% 0.87% 0.69% 0.79% 0.79%(2)
Ratio of Net Investment Income to Average
Net Assets*............................... 2.78% 2.33% 3.44% 5.32% 7.32%(2)
</TABLE>

(1) Period from commencement of operations.

(2) Annualized.

EQUITY FUND
(For a Fund Share Outstanding Throughout the Years and Period presented.)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, FEBRUARY 28, 1990
-------------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991 1990(1)
-------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.......... $ 15.39 $ 13.93 $ 13.08 $ 8.95 $ 10.00
-------- -------- -------- -------- -------
INVESTMENT ACTIVITIES
Net Investment Income....................... 0.11 0.14 0.19 0.26 0.14
Net Realized and Unrealized Gains (Losses)
on Investments............................ 0.22 1.89 1.02 4.13 (1.05)
-------- -------- -------- -------- -------
Total from Investment Activities........ 0.33 2.03 1.21 4.39 (0.91)
DISTRIBUTIONS
Net Investment Income....................... (0.11) (0.14) (0.19) (0.26) (0.14)
Net Realized Gains.......................... (0.61) (0.43) (0.17)
-------- -------- -------- -------- -------
Total Distributions..................... (0.72) (0.57) (0.36) (0.26) (0.14)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD................ $ 15.00 $ 15.39 $ 13.93 $ 13.08 $ 8.95
======== ======== ======== ======== =================
TOTAL RETURN.................................. 2.21% 14.90% 9.27% 49.37% (9.22)%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)........... $ 50,128 $ 45,677 $ 28,103 $ 12,830 $ 5,982
Ratio of Expenses to Average Net Assets..... 1.49% 1.20% 0.92% 0.54% 0.65%(2)
Ratio of Net Investment Income to Average
Net Assets................................ 0.75% 0.94% 1.47% 2.30% 2.29%(2)
Ratio of Expenses to Average Net Assets*.... 1.51% 1.41% 1.23% 1.48% 1.59%(2)
Ratio of Net Investment Income to Average
Net Assets*............................... 0.73% 0.73% 1.17% 1.36% 1.35%(2)
Portfolio Turnover Rate....................... 35.41% 23.68% 38.90% 68.15% 42.78%
</TABLE>

(1) Period from commencement of operations.

(2) Annualized.

<PAGE> 24

SPECIAL EQUITY FUND
(For a Fund Share Outstanding Throughout the Period presented.)

<TABLE>
<CAPTION>
MARCH 15, 1994 TO
OCTOBER 31,
1994(1)
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......................................................... $ 10.00
-------
INVESTMENT ACTIVITIES
Net Investment Income...................................................................... 0.06
Net Realized and Unrealized Gains (Losses) on Investments.................................. (0.63)
-------
Total from Investment Activities....................................................... (0.57)
DISTRIBUTIONS
Net Investment Income...................................................................... (0.06)
Net Realized Gains.........................................................................
-------
Total Distributions.................................................................... (0.06)
-------
NET ASSET VALUE, END OF PERIOD............................................................... $ 9.37
=================
TOTAL RETURN................................................................................. (5.72)%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000).......................................................... $10,069
Ratio of Expenses to Average Net Assets.................................................... 0.15%(2)
Ratio of Net Investment Income to Average Net Assets....................................... 1.06%(2)
Ratio of Expenses to Average Net Assets*................................................... 2.10%(2)
Ratio of Net Investment Income to Average Net Assets*...................................... (0.89)%(2)
Portfolio Turnover Rate...................................................................... 38.70%
</TABLE>

- ---------
* During the periods the investment advisory, administration, and/or
shareholder servicing plan fees were voluntarily reduced. If such voluntary
fee reductions had not occurred the ratios would have been as indicated.

(1) Period from commencement of operations.

(2) Annualized.

BOND FUND
(For a Fund Share Outstanding Throughout the Years and Period presented.)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, FEBRUARY 28, 1990
--------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991 1990(1)
------- ------- ------- ------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 11.18 $ 10.89 $ 10.65 $ 9.96 $ 10.00
------- ------- ------- ------ ------
INVESTMENT ACTIVITIES
Net Investment Income......................... 0.53 0.56 0.70 0.78 0.50
Net Realized and Unrealized Gains (Losses) on
Investments................................. (1.04) 0.54 0.32 0.69 (0.04)
------- ------- ------- ------ ------
Total from Investment Activities.......... (0.51) 1.10 1.02 1.47 0.46
------- ------- ------- ------ ------
DISTRIBUTIONS
Net Investment Income......................... (0.52) (0.56) (0.68) (0.78) (0.50)
Net Realized Gains............................ (0.34) (0.25) (0.10)
------- ------- ------- ------ ------
Total Distributions....................... (0.86) (0.81) (0.78) (0.78) (0.50)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD.................. $ 9.81 $ 11.18 $ 10.89 $10.65 $ 9.96
======= ======= ======= ====== ================
TOTAL RETURN.................................... (4.75)% 10.63% 9.82% 15.16% 4.64%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)............. $23,377 $27,346 $15,180 $7,255 $ 4,593
Ratio of Expenses to Average Net Assets....... 1.01% 0.88% 0.46% 0.47% 0.68%(2)
Ratio of Net Investment Income to Average
Net Assets.................................. 5.07% 5.16% 6.78% 7.71% 7.75%(2)
Ratio of Expenses to Average Net Assets*...... 1.60% 1.49% 1.24% 1.41% 1.62%(2)
Ratio of Net Investment Income to Average
Net Assets*................................. 4.48% 4.55% 6.01% 6.78% 6.81%(2)
Portfolio Turnover Rate......................... 231.88% 158.51% 99.03% 47.30% 22.57%
</TABLE>

(1) Period from commencement of operations.

(2) Annualized.

<PAGE> 25

INTERMEDIATE INCOME FUND
(For a Fund Share Outstanding Throughout the Years and Period presented.)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, FEBRUARY 28, 1990
--------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991 1990(1)
------- ------- ------- ------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $11.01 $ 10.87 $ 10.61 $10.12 $ 10.00
------- ------- ------- ------ ------
INVESTMENT ACTIVITIES
Net Investment Income......................... 0.50 0.53 0.65 0.77 0.48
Net Realized and Unrealized Gains (Losses) on
Investments................................. (0.61) 0.21 0.29 0.50 0.12
------- ------- ------- ------ ------
Total from Investment Activities.......... (0.11) 0.74 0.94 1.27 0.60
------- ------- ------- ------ ------
DISTRIBUTIONS
Net Investment Income......................... (0.49) (0.53) (0.64) (0.77) (0.48)
Net Realized Gains............................ (0.14) (0.07) (0.04) (0.01)
------- ------- ------- ------ ------
Total Distributions....................... (0.63) (0.60) (0.68) (0.78) (0.48)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD.................. $ 10.27 $ 11.01 $ 10.87 $10.61 $ 10.12
======= ======= ======= ====== ================
TOTAL RETURN.................................... (0.97%) 6.99% 9.11% 12.94% 6.10%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)............. $21,247 $24,047 $16,718 $7,116 $ 3,986
Ratio of Expenses to Average Net Assets....... 0.90% 0.78% 0.47% 0.40% 0.75%(2)
Ratio of Net Investment Income to Average
Net Assets.................................. 4.66% 4.89% 6.31% 7.69% 7.42%(2)
Ratio of Expenses to Average Net Assets*...... 1.64% 1.50% 1.24% 1.34% 1.69%(2)
Ratio of Net Investment Income to Average
Net Assets*................................. 3.92% 4.17% 5.57% 6.76% 6.48%(2)
Portfolio Turnover Rate......................... 170.23% 90.17% 53.28% 32.94% 39.36%
</TABLE>

(1) Period from commencement of operations.

(2) Annualized.

PENNSYLVANIA TAX-FREE BOND FUND
(For a Fund Share Outstanding Throughout the Year and Period presented.)

<TABLE>
<CAPTION>
SEPTEMBER 21,
YEAR ENDED 1992 TO
OCTOBER 31, OCTOBER 31,
1994 1993 1992(1)
------ ----------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...................................... $10.48 $ 9.77 $ 10.00
------ ----------- ------
INVESTMENT ACTIVITIES
Net Investment Income................................................... 0.46 0.45 --
Net Realized and Unrealized Gains (Losses) on Investments............... (0.85) 0.70 (0.23)
------ ----------- ------
Total from Investment Activities.................................... (0.39) 1.15 (0.23)
------ ----------- ------
DISTRIBUTIONS
Net Investment Income................................................... (0.46) (0.44)
Net Realized Gains...................................................... (0.07)
------ ----------- ------
Total Distributions................................................. (0.53) (0.44)
------ ----------- ------
NET ASSET VALUE, END OF PERIOD............................................ $ 9.56 $ 10.48 $ 9.77
====== =========== =============
TOTAL RETURN.............................................................. (3.90)% 11.94% (2.28)%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)....................................... $7,008 $ 5,883 $ 3,405
Ratio of Expenses to Average Net Assets................................. 0.38% 0.51% 2.67%(2)
Ratio of Net Investment Income to Average Net Assets.................... 4.61% 4.35% 0.52%(2)
Ratio of Expenses to Average Net Assets*................................ 1.57% 1.63% 3.41%(2)
Ratio of Net Investment Income to Average Net Assets*................... 3.42% 3.23% (0.22)%(2)
Portfolio Turnover Rate................................................... 37.23% 50.19% 31.37%
</TABLE>

(1) Period from commencement of operations.

(2) Annualized.

<PAGE> 26

INVESTMENT OBJECTIVES AND POLICIES

MONEY MARKET FUNDS

THE CONESTOGA CASH MANAGEMENT FUND

The investment objective of the Cash Management Fund is to seek current income
with liquidity and stability of principal. The Cash Management Fund will invest
only in those obligations which are considered by the Investment Advisor to
present minimal credit risk and which at the time of purchase are rated of a
high quality, i.e., rated in the highest rating category by a nationally
recognized statistical rating organization ("Rating Organization") in the case
of commercial paper; or rated in one of the two highest rating categories by a
Rating Organization in the case of bonds; or which are unrated at the time of
purchase but are determined to be of comparable quality by the Investment
Advisor pursuant to guidelines approved by the Company's Board of Trustees. All
securities or instruments in which the Cash Management Fund invests have
remaining maturities of 397 days or less, although instruments subject to
repurchase agreements may bear longer maturities. The average dollar-weighted
maturity of the securities in the Cash Management Fund will not exceed 90 days.
Obligations purchased by the Cash Management Fund are limited to U.S.
dollar-denominated obligations which the Board of Trustees has determined
present minimal credit risks.

THE CONESTOGA U.S. TREASURY SECURITIES FUND

The U.S. Treasury Securities Fund invests exclusively in short-term
obligations issued or guaranteed by the U.S. Treasury and in repurchase
agreements secured by U.S. Treasury instruments. All securities or instruments
in which the U.S. Treasury Securities Fund invests have remaining maturities of
397 days or less, although instruments subject to repurchase agreements may bear
longer maturities. The average dollar-weighted maturity of the securities in the
U.S. Treasury Securities Fund will not exceed 90 days. Obligations purchased by
the U.S. Treasury Securities Fund are limited to U.S. dollar-denominated
obligations which the Board of Trustees has determined present minimal credit
risks.

To the extent permitted by state and local law, in addition to being suitable
for individuals, institutions, custody and certain trust accounts, the U.S.
Treasury Securities Fund offers an economical and convenient vehicle for the
investment of available cash by state and local governments, their political
subdivisions, agencies, instrumentalities and public authorities, as well as by
trustees and others, of proceeds of tax-exempt bond issues, whether or not
subject to arbitrage limitations or rebate requirements under the Internal
Revenue Code of 1986 as amended. Potential investors should consult their legal
advisors to determine whether or not their state and local statutes, regulations
and applicable governing instruments (such as bond indentures and resolutions)
permit such investors to purchase Shares in the U.S. Treasury Securities Fund.
The U.S. Treasury Securities Fund offers the advantages of liquidity,
diversification and combined investing power, thereby avoiding the generally
greater expense of executing a large number of small transactions. Moreover,
investment in the U.S. Treasury Securities Fund relieves the investor of many
management and administrative burdens associated with the direct purchase and
sale of U.S. Treasury securities. These include selection of investments;
surveying the market for the best terms at which to buy and sell; scheduling and
monitoring maturities and reinvestments; receipt, delivery and safekeeping of
securities; and recordkeeping.

THE CONESTOGA TAX-FREE FUND

The investment objective of the Tax-Free Fund is to seek current income which
is exempt from regular federal income tax with liquidity and stability of
principal. The assets of the Tax-Free Fund will be primarily invested in
high-quality bonds and notes issued by, or on behalf of, states (including the
District of Columbia), territories, and possessions of the United States and
their respective authorities, agencies, instrumentalities, and political
subdivisions, the interest on which is exempt from regular federal income tax
and is not treated as a specific tax preference item under the federal
alternative minimum tax ("Municipal Obligations"), and which have remaining
maturities of 397 days or less. The average dollar-weighted maturity of the
securities in the Tax-Free Fund will not exceed 90 days. As a matter of
fundamental policy, under normal market conditions, at least 80% of the Tax-Free
Fund's total assets will be invested in Municipal Obligations.

The Tax-Free Fund may invest in private activity bonds (e.g., bonds issued by
industrial development

<PAGE> 27

authorities) that are issued by or on behalf of public authorities to finance
various privately-operated facilities. Private activity bonds are included in
the term "Municipal Obligations" only if the interest paid thereon is exempt
from regular federal income tax and is not treated as a specific tax preference
item under the federal alternative minimum tax for either individuals or
corporations. See "TAXES."

Under normal market conditions, the Tax-Free Fund may invest up to 20% of its
total assets in obligations, the interest on which is either subject to regular
federal income taxation or is treated as a specific tax preference item under
the federal alternative minimum tax ("Taxable Obligations"). If deemed
appropriate for temporary defensive purposes, the Tax-Free Fund may increase its
holdings in Taxable Obligations to over 20% of its total assets and may also
hold uninvested cash reserves pending investment. When the Fund is so invested,
its investment objective may not be achieved. Uninvested cash reserves will not
earn income. Taxable Obligations may include obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities (some of which may be
subject to repurchase agreements), certificates of deposit and banker's
acceptances of selected banks, private activity bonds and commercial paper
meeting the Tax-Free Fund's quality standards (as described below) for
tax-exempt commercial paper. These obligations are described further in the
Statement of Additional Information.

The Tax-Free Fund will invest only in those Municipal Obligations which are
considered by the Investment Advisor to present minimal credit risks and which
at the time of purchase are rated high quality, i.e., rated in one of the two
highest rating categories assigned by a Rating Organization in the case of
bonds; rated in the highest rating category assigned by a Rating Organization in
the case of notes, variable rate demand notes and tax-exempt commercial paper;
or which are unrated at the time of purchase but are determined to be of
comparable quality by the Investment Advisor pursuant to guidelines approved by
the Company's Board of Trustees. Municipal Obligations may be purchased in
reliance upon a rating only where the Rating Organization is not affiliated with
the issuer or guarantor of the Municipal Obligations. If a security is subject
to a demand feature, the security must receive both a short-term and a long-term
high quality rating or must be determined to be of comparable quality by the
Investment Advisor; except that where the demand feature is considered to be
"unconditional" under the Investment Company Act of 1940, the security may be
acquired solely in reliance on a short-term high quality rating or a
determination of comparable quality by the Investment Advisor. The applicable
Municipal Obligations ratings are described in the Appendix to the Statement of
Additional Information.

The Tax-Free Fund is not intended to constitute a balanced investment program
and is not designed for investors seeking capital appreciation or maximum
tax-exempt income irrespective of fluctuations in principal. Investment in the
Tax-Free Fund would not be appropriate for tax-deferred plans, such as IRA or
Keogh plans. Investors should consult a tax or other financial advisor to
determine whether investment in the Tax-Free Fund would be appropriate.

EQUITY FUNDS

THE CONESTOGA EQUITY FUND

The investment objective of the Equity Fund is to seek capital growth by
investing principally in a diversified portfolio of common stocks of companies
with large, medium or small capitalizations. The Equity Fund will normally
invest at least 80% of the value of its total assets in common stocks. The Fund
may also invest up to 20% of the value of its total assets in securities
convertible into common stocks, preferred stocks, corporate bonds, notes,
warrants, and short-term obligations (with maturities of 18 months or less) such
as commercial paper (including variable amount master demand notes), banker's
acceptances, certificates of deposit, repurchase agreements, obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities, and
demand and time deposits of domestic and foreign banks and savings and loan
associations. During temporary defensive periods, the Fund has the ability to
hold up to 100% of its total assets in short-term obligations including domestic
bank certificates of deposit, banker's acceptances and repurchase agreements
secured by U.S. Government securities.

Stocks held by the Equity Fund may be listed on a national securities exchange
or may be unlisted securities with an established over-the-counter market. The
Investment Advisor has developed a quantitative process which evaluates stocks
in a number of ways, including the ratios of market price to book value, recent
changes in market price, return on equity, price to earnings ratios, dividend
paying abilities, and liquidity. The Investment Advisor

<PAGE> 28

believes that its quantitative approach reduces subjectivity in the stock
selection process.

Equity securities such as those in which the Equity Fund may invest are more
volatile and carry more risk than some other forms of investment. Depending upon
the performance of the Fund's investments, the net asset value per Share of the
Fund may decrease instead of increase.

THE CONESTOGA INTERNATIONAL EQUITY FUND

The investment objective of the International Equity Fund is to seek long-term
growth of capital. Under normal market conditions, the Fund will invest at least
65% of its total assets in an internationally diversified portfolio of equity
securities which trade in markets other than the United States. Generally, these
securities will be issued by companies (i) domiciled in countries other than the
United States, or (ii) that derive at least 50% of either their revenues or
their pre-tax income from activities outside of the United States. Equity
securities include for this purpose common and preferred stock, securities
(bonds and preferred stock) convertible into common stock, warrants and
securities representing underlying international securities such as American
Depositary Receipts, or ADRs, and European Depositary Receipts, or EDRs. The
Fund may also hold depositary or custodial receipts representing beneficial
interests in any of the foregoing securities.

The Fund may invest in securities of issuers with large, medium or small
capitalizations in any country, including, but not limited to, Argentina,
Australia, Austria, Belgium, Canada, Chile, Colombia, Denmark, Finland, France,
Germany, Hong Kong, India, Ireland, Israel, Italy, Japan, South Korea, Malaysia,
Mexico, the Netherlands, New Zealand, Norway, Peru, the Philippines, Singapore,
Spain, Sweden, Switzerland, Taiwan, Thailand, the United Kingdom and Venezuela.
Normally, the Fund will invest at least 65% of its total assets in securities
traded in at least three foreign countries, including the countries listed
above. It is possible, although not currently anticipated, that up to 35% of the
Fund's assets could be invested in U.S. companies.

Initial emphasis in the selection of investments is expected to be placed on
selection of countries in which to invest, followed by selection of industries
or sectors within or across countries and by selection of individual stocks
corresponding to the industries or sectors selected. Investments are expected to
be made primarily in developed markets and larger capitalization companies.
However, the Fund also may invest in emerging markets where smaller
capitalization companies are the norm.

Under normal market conditions, it is expected that the Fund will be fully
invested in equity securities and related hedging instruments (except for
short-term investments of cash for liquidity purposes and pending investment).
However, during temporary defensive periods, the Fund may invest up to 100% of
its total assets in short-term obligations (with maturities of 12 months or
less) consisting of commercial paper (including variable amount master demand
notes), bankers' acceptances, certificates of deposit, repurchase and reverse
repurchase agreements, and demand and time deposits of domestic or foreign banks
and savings and loan associations, and in money market mutual funds.

THE CONESTOGA SPECIAL EQUITY FUND

The investment objective of the Special Equity Fund is to seek capital growth
by investing principally in a diversified portfolio of common stocks. The
Special Equity Fund will normally invest in common stocks of domestic companies
that the Investment Advisor expects will experience growth in earnings and
price. The Fund may invest up to 35% of its total assets in foreign securities.
The Fund may also purchase securities convertible into common stocks, preferred
stocks, notes, warrants, and, for daily case management purposes, short-term
obligations (with maturities of 18 months or less) such as commercial paper
(including variable amount master demand notes), banker's acceptances,
certificates of deposit, repurchase agreements, obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, and demand and time
deposits of domestic and foreign banks and savings and loan associations. During
temporary defensive periods, the Fund has the ability to hold up to 100% of its
total assets in short-term obligations, including domestic bank certificates of
deposit, banker's acceptances and repurchase agreements secured by U.S.
Government securities. The Investment Advisor's quantitative process described
above under "The Conestoga Equity Fund" will be utilized for the Special Equity
Fund.

Many of the companies in which the Special Equity Fund invests will be small
and medium capitalized companies. Small capitalized companies are those
organizations with "stock market capitalizations" between $100 million and $1
billion

<PAGE> 29

and medium capitalized companies are those organizations with stock market
capitalizations between $1 billion and $5 billion. "Stock market
capitalizations" means the total number of common shares outstanding multiplied
by the market price per share.

The Special Equity Fund will normally purchase the securities of small and
medium capitalized companies across a wide range of industry sectors. These
securities may be traded over-the-counter or listed on an exchange and may or
may not pay dividends. Small and medium capitalized companies may be more
vulnerable than larger, more established organizations to adverse business or
economic developments. In particular, small capitalized companies may have
limited product lines, markets and financial resources and may be dependent upon
a relatively small management group. Accordingly, equity securities such as
those in which the Fund may invest are more volatile and carry more risk than
some other forms of investment. Depending upon the performance of the Fund's
investments, the net asset value per Share of the Fund may decrease instead of
increase.

BOND FUNDS

THE CONESTOGA BOND FUND

The investment objective of the Bond Fund is to seek to maximize long-term
total return by investing principally in a diversified portfolio of debt
securities. The Bond Fund will normally invest at least 80% of the value of its
total assets in debt securities of all types. Debt securities include domestic
and foreign bonds, debentures, notes, equipment lease and trust certificates,
asset-backed and mortgage-backed securities, and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. In
addition, a portion of the Fund may from time to time be invested in first
mortgage loans and participation certificates in pools of mortgages issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, in
preferred stocks, and in debt securities which are convertible into, or
exchangeable for, common stocks, common stock obtained upon the conversion or
exchange of such securities, and short-term money market instruments and money
market funds. Some of the securities in which the Fund invests may have warrants
or options attached.

THE CONESTOGA INTERMEDIATE INCOME FUND

The Intermediate Income Fund has a primary investment objective of seeking
current income by investing principally in a diversified portfolio of debt
securities with expected or remaining maturities of ten years or less, and a
secondary objective of seeking capital growth. The Fund will normally have an
average dollar-weighted portfolio maturity of three to ten years. The Fund will
normally invest at least 80% of the value of its total assets in debt securities
of all types. Debt securities include domestic and foreign bonds, debentures,
notes, equipment lease and trust certificates, asset-backed and mortgage-backed
securities, and obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. In addition, a portion of the Fund may from time
to time be invested in first mortgage loans and participation certificates in
pools of mortgages issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, in preferred stocks, and in debt securities which are
convertible into, or exchangeable for, common stocks, common stock obtained upon
the conversion or exchange of such securities, and short-term money market
instruments and money market funds. Some of the securities in which the Fund
invests may have warrants or options attached.

THE CONESTOGA PENNSYLVANIA TAX-FREE
BOND FUND

The investment objective of the Pennsylvania Tax-Free Bond Fund is to seek a
high level of current income consistent with the preservation of capital, which
income is exempt from federal individual income tax and from Pennsylvania state
and local personal income tax, and is not a tax preference item under the
federal alternative minimum tax. Shares of the Fund will be exempt from
Pennsylvania personal property taxes. To achieve this objective, the Fund
anticipates that it will invest primarily in Pennsylvania Municipal Obligations
(as defined below). Under normal market conditions, the Fund will invest
substantially all of its total assets (but in no event less than 80%) in
investment grade municipal securities issued by the Commonwealth of Pennsylvania
and its political subdivisions, agencies, instrumentalities and authorities
("Pennsylvania Municipal Obligations"), the interest on which, in the opinion of
bond counsel to the issuer, is exempt from federal individual income tax and
Pennsylvania state and local personal income tax, and is not treated as a
specific tax preference item under the federal alternative

<PAGE> 30

minimum tax. During temporary defensive periods, the Fund may invest without
limitation in other types of securities. These securities may include other
types of bonds, notes, variable rate demand notes and commercial paper, provided
such securities are rated within the relevant categories applicable to the
Pennsylvania Municipal Obligations, or if unrated, are of comparable quality as
determined by the Investment Advisor at the time of purchase. Other debt
obligations, such as bank obligations, may be included. Since the Fund's
purchases will be limited to investment grade securities, it will not acquire
lower quality securities which would carry higher yields and also greater risk.

Pennsylvania Municipal Obligations acquired by the Pennsylvania Tax-Free Bond
Fund will be investment grade at the time of purchase -- that is, obligations
rated in one of the four highest rating categories assigned by a Rating
Organization in the case of bonds; rated "Duff 1," "Duff 2," or "Duff 3" by D&P,
"F-1" or "F-2" by Fitch, "SP-1" or "SP-2" by S&P, or "MIG-1" or "MIG-2" by
Moody's in the case of notes; rated "Duff 1," "Duff 2," or "Duff 3" by D&P,
"F-1" or "F-2" by Fitch, or "VMIG-1" or "VMIG-2" by Moody's in the case of
variable rate demand notes; or rated "Duff 1," "Duff 2," or "Duff 3" by D&P,
"F-1" or "F-2" by Fitch, "A-1" or "A-2" by S&P, or "Prime-1" or "Prime-2" by
Moody's in the case of tax-exempt commercial paper. Unrated obligations acquired
by the Fund will be determined by the Investment Advisor to be of comparable
quality at the time of purchase to rated obligations that may be acquired by the
Fund. Obligations rated in the lowest of the top four rating categories ("BBB"
by D&P, Fitch, or S&P, or "Baa" by Moody's) 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. Subsequent to its purchase by the Fund, an issue
of Pennsylvania Municipal Obligations may cease to be rated, or its rating may
be reduced below the minimum rating required for purchase by the Fund. The
Investment Advisor will consider such an event in determining whether the Fund
should continue to hold the obligation. See "Appendix A" to the Statement of
Additional Information for a description of these rating designations.

THE CONESTOGA SHORT-TERM INCOME FUND

The investment objective of the Short-Term Income Fund is to seek consistent
current income with relative stability of principal by investing principally in
a diversified portfolio of investment grade debt securities. Under normal
conditions, the Fund's portfolio securities will have maximum expected or
remaining maturities of three years or less. The Fund will normally have an
average dollar-weighted portfolio maturity of approximately one year.

The Fund will invest principally in debt securities, including bonds,
debentures, notes, equipment lease and trust certificates, asset-backed and
mortgage-backed securities, and obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. The Fund may invest up to 35%
of its total assets in U.S. dollar denominated international debt securities for
which the primary trading market is in the United States ("Yankee Bonds").

BALANCED FUND

THE CONESTOGA BALANCED FUND

The investment objective of the Balanced Fund is to seek a balance of capital
appreciation and current income consistent with the preservation of capital. The
Fund seeks to achieve its objective through a policy of diversified investment
in fixed income and equity securities. Equity securities will be selected on the
basis of the potential for capital appreciation; current income will not be a
significant consideration. Fixed income securities will be selected in an effort
to maximize total return with respect to the fixed income portion of the Fund's
portfolio. An investor should not consider an investment in the Fund to be a
complete investment program.

The Fund's policy is to invest at all times at least 30% of the value of its
total assets in fixed-income securities and no more than 70% in equity
securities. The actual percentage of assets invested in fixed-income and equity
securities will vary from time to time depending of the judgment of the
Investment Advisor as to the general market and economic conditions, trends and
yields, interest rates and fiscal and monetary developments. The Fund will not
purchase a security if as a result less than 30% of its total assets will be in
fixed-income securities (including short-term obligations, long-term debt
securities, and convertible debt securities and

<PAGE> 31

preferred stocks to the extent their value is attributable to their fixed income
characteristics).

During temporary, defensive periods, the Fund may invest up to 100% of its
total assets in short-term obligations (with maturities of 12 months or less)
consisting of commercial paper (including variable amount master demand notes),
bankers' acceptances, certificates of deposit, repurchase and reverse repurchase
agreements, and demand and time deposits of domestic or foreign banks and
savings and loan associations, and in money market mutual funds.

Stocks held by the Balanced Fund may be listed on a national securities
exchange or may be unlisted securities with an established over-the-counter
market. The Investment Advisor has developed a quantitative process which
evaluates stocks in a number of ways, including the ratios of market price to
book value, recent changes in market price, return on equity, price to earnings
ratios, dividend paying abilities, and liquidity. The Investment Advisor
believes that its quantitative approach reduces subjectivity in the stock
selection process.

Fixed income securities include both debt securities and preferred stocks,
which may be convertible into, or exchangeable for, common stocks. Debt
securities include domestic and foreign bonds, Yankee Bonds, debentures, notes,
equipment lease and trust certificates, asset-backed and mortgage-backed
securities, obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, first mortgage loans and participation
certificates in pools of mortgages issued or guaranteed by the U.S. Government
or its agencies or instrumentalities. Some of the securities in which the Fund
invests may have warrants or options attached.

GENERAL

The investment objective of each of the Cash Management Fund, U.S. Treasury
Securities Fund, Tax-Free Fund, Equity Fund, Special Equity Fund, Bond Fund,
Intermediate Income Fund and Pennsylvania Tax-Free Bond Fund is fundamental and
may not be changed without a vote of the holders of a majority of the
outstanding voting securities of the Fund. The investment objective of each of
the International Equity Fund, Short-Term Income Fund and Balanced Fund may be
changed by the Board of Trustees of the Company.

HOW TO PURCHASE AND REDEEM SHARES

DISTRIBUTOR

Retail Shares of each Fund are sold on a continuous basis by the Company's
distributor, SEI Financial Services Company (the "Distributor"), and may be
purchased directly by mail, by telephone or by wire. The principal office of the
Distributor is 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658. Retail
Shares may also be purchased through a broker-dealer who has established a
dealer agreement with the Distributor. The minimum initial purchase is $1,000;
however, there is no minimum subsequent purchase. The minimum may be waived if
purchases are made in connection with qualified pension plans, payroll savings
plans or other employer plans. (But see "PURCHASING SHARES -- Auto Invest Plan"
below for minimum investment requirements under that plan.) Purchasers will pay
the sum of the next calculated net asset value per Share of a Fund selected
after the Distributor's agent's receipt of an order to purchase Shares plus a
sales charge (see "PURCHASING RETAIL SHARES -- Sales Charges" below).

PURCHASES OF RETAIL SHARES

Retail Shares may also be purchased through procedures established by the
Distributor in connection with the requirements of qualified accounts maintained
by or on behalf of certain persons ("Customers") by the Investment Advisor, its
related companies or their correspondents ("Entities"). With respect to the
Money Market Funds, these procedures may include instructions under which a
Customer's account is "swept" automatically no less frequently than weekly and
amounts in excess of a minimum amount agreed upon by an Entity and its Customer
are invested by the Distributor in Shares of one or more of the Money Market
Funds depending upon the type of account or the instructions of the Customer.

Retail Shares of a Fund sold to an Entity acting in a fiduciary, advisory,
custodial, or other similar capacity on behalf of Customers will normally be
held of record by Entity. With respect to Retail Shares so sold, it is the
responsibility of the holder of record to transmit purchase or redemption orders

<PAGE> 32

to the Distributor and to deliver funds for the purchase thereof on a timely
basis.

PURCHASE BY MAIL

To purchase Retail Shares of a Fund by mail, complete an Account Registration
Form and return it along with a check or money order made payable to the
appropriate Fund to:

The Conestoga Family of Funds
P.O. Box 1912
Boston, MA 02105

An Account Registration Form can be obtained by calling the Company at (800)
344-2716.

PURCHASE BY TELEPHONE OR BY WIRE

To purchase Retail Shares of a Fund by telephone or by wire, your Account
Registration Form must have been previously received by the Distributor. To
place an order by telephone or by wire call the Company's toll-free number (800)
344-2716. Payment for Retail Shares ordered by telephone may be made by check
and must be received by the Distributor at the address above within seven
calendar days of the telephone order. If payment for the Retail Shares is not
received within seven days, or if a check timely received does not clear, the
purchase may be cancelled and the investor could be liable for any losses or
fees incurred. When purchasing Retail Shares by wire, contact the Distributor
for wire instructions.

OTHER INFORMATION REGARDING PURCHASES

MONEY MARKET FUNDS: Retail Shares of these Funds are purchased at the net
asset value per Share of each such Fund (see "VALUATION OF SHARES") next
determined after receipt by the Distributor of an order in good form to purchase
Retail Shares. An order to purchase Retail Shares will be deemed to have been
received by the Distributor only when federal funds with respect thereto are
available to the Company's custodian for investment. Federal funds are monies
credited to a bank's account with a Federal Reserve Bank. Payment for an order
to purchase Retail Shares which is transmitted by federal funds wire will be
available the same day for investment by the Company's custodian, if received
prior to noon. Payments transmitted by other means (such as by check drawn on a
member of the Federal Reserve System) will normally be converted into federal
funds within two banking days after receipt. The Company strongly recommends
that investors of substantial amounts use federal funds to purchase Retail
Shares.

Purchases of Retail Shares of the Money Market Funds will be effected only on
a Business Day (as defined in "VALUATION OF SHARES") of the Company. An order
received prior to a Valuation Time on any Business Day will be executed at the
net asset value determined as of the next Valuation Time on the date of receipt.
An order received after the last Valuation Time on any Business Day will be
executed at the net asset value determined as of the next Valuation Time on the
next Business Day of the Company. In the case of an order placed through a
broker-dealer, it is the responsibility of the broker-dealer to transmit the
order to the Distributor promptly. Retail Shares purchased before 12:00 noon,
(Eastern Time) begin earning dividends on the same Business Day. All Retail
Shares continue to earn dividends through the day before their redemption.

There is no sales charge imposed by the Company in connection with the
purchase of Retail Shares in the Money Market Funds. Sales charges apply to
Retail Share purchases of the other Funds.

EQUITY, BOND AND BALANCED FUNDS: Purchases of Retail Shares in the Non-Money
Market Funds will be effected only on a Business Day. The purchase price will be
the net asset value per share (see "VALUATION OF SHARES"), plus the applicable
sales charge, as determined on the Business Day the order is received in good
form by the Distributor, but only if the Distributor receives the order in good
form by 4:00 P.M. Eastern Time. Otherwise, the price will be determined as of
4:00 P.M. Eastern Time on the next Business Day. In the case of an order for
purchase of Retail Shares placed through a broker-dealer, it is the
responsibility of the broker-dealer to transmit the order to the Distributor by
4:00 P.M. Eastern Time. If the broker-dealer fails to do so, the investor's
right to that day's closing price must be settled between the investor and the
broker-dealer.

ALL FUNDS: The minimum investment is $1,000 for the initial purchase of Retail
Shares by an investor. There is no minimum investment for subsequent purchases.
The minimum may be waived if purchases are made in connection with qualified
pension plans or other employer plans. (But see "HOW TO PURCHASE AND REDEEM
SHARES -- Auto Invest Plan" below for minimum investment requirements under that
plan.)

<PAGE> 33
the Entities. This Prospectus should be read in conjunction with any such
information so received from the Entities.

The Company reserves the right to reject any order for the purchase of its
Retail Shares in whole or in part.

Every Shareholder will receive a confirmation of each transaction in its
account, which will also show the total number of Retail Shares of a Fund owned
by the Shareholder. Confirmation of purchases and redemptions of Retail Shares
of the Funds by the Investment Advisor or one of its affiliates or their
correspondents on behalf of a Customer will be sent to the Investment Advisor or
the affiliate. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Retail Shares of the Funds will not be
issued.

SALES CHARGES

The public offering price of Retail Shares of the Non-Money Market Funds
equals the sum of the net asset value per Share of the applicable Fund plus a
sales load in accordance with the table below. SEI Financial Services Company
receives this sales charge as Distributor. The Distributor will act only on its
own behalf as principal if it chooses to enter into selling agreements with
selected dealers or others, and in such event, the Distributor may reallow the
sales charge as dealer discounts and brokerage commissions as follows:

<TABLE>
<CAPTION>
DEALER
DISCOUNTS
SALES SALES AND BROKERAGE
CHARGE AS CHARGE AS COMMISSIONS
% OF NET % OF AS % OF
AMOUNT OFFERING OFFERING
INVESTED PRICE PRICE
--------- --------- --------------
<S> <C> <C> <C>
Less than
$50,000..... 2.04% 2.00% 1.80%
$50,000 but
less than
$250,000.... 1.52 1.50 1.35
$250,000 but
less than
$500,000.... 1.27 1.25 1.13
$500,000 but
less than
$1,000,000... 1.01 1.00 0.90
$1,000,000 or
more........ 0.50 0.50 0.45
</TABLE>

The Distributor, in its sole discretion, may pay certain dealers all or part
of the portion of the sales charge it receives. However, a broker or dealer who
receives a reallowance in excess of 90% of the sales charge may be deemed to be
an "underwriter" as that term is defined in Section 2(11) of the Securities Act
of 1933, as amended. The Distributor, at its expense, will also provide
additional compensation to dealers in connection with sales of Retail Shares of
the Funds. Compensation will include financial assistance to dealers in
connection with conferences, sales or training programs for their employees,
seminars for the public, advertising campaigns regarding the Funds, and/or other
dealer-sponsored special events. In some instances, this compensation will be
made available only to certain dealers whose representatives have sold a
significant amount of Retail Shares. Compensation will include payment for
travel expenses, including lodging, incurred in connection with trips taken by
invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. Compensation will also include the following types of non-cash
compensation offered through sales contests: (i) vacation trips, including the
provision of travel arrangements and lodging at luxury resorts at an exotic
location, (ii) tickets for entertainment events (such as concerts, cruises and
sporting events) and (iii) merchandise (such as clothing, trophies, clocks and
pens). Dealers may not use sales of Retail Shares to qualify for this
compensation to the extent such may be prohibited by the laws of any state or
any self-regulatory agency, such as the National Association of Securities
Dealers, Inc. None of the aforementioned compensation is paid for by any Fund or
its Shareholders.

From time to time, dealers who receive dealer discounts and brokerage
commissions from the Distributor may reallow all or a portion of such dealer
discounts and brokerage commissions to other dealers or brokers.

SALES CHARGE WAIVERS

The following classes of investors may purchase Retail Shares of the Non-Money
Market Funds with no sales charge:

(1) Existing Shareholders of the applicable Fund upon the automatic
reinvestment of dividend and capital gain distributions;

(2) Trustees of the Company and officers, directors, employees and retired
employees of the Investment Advisor and its affiliates, SEI Financial
Services Company and its affiliates, and spouses and minor children of
each of the foregoing;

17
<PAGE> 34

(3) Investors for whom the Investment Advisor or one of its affiliates
(except a Conestoga IRA (as defined below)), acts in a fiduciary,
advisory, custodial, agency or similar capacity and for whom purchases
are made through such accounts;

(4) Investors who purchase Retail Shares of the applicable Fund through a
payroll deduction plan, a 401(k) plan, a 403(b) plan or other similar
retirement plans which by its terms permits purchases of such Shares;

(5) Investors investing in a Conestoga Fund direct individual retirement
account (a "Conestoga IRA") may make both initial and subsequent
purchases without a sales charge if the initial purchase is funded in
whole or in part by assets directly transferred to the Conestoga IRA
from a distribution made by a qualified retirement plan maintained
through the asset management affiliates of Meridian Bancorp, Inc.;

(6) Employees (and their spouses and children under the age of 21) of any
broker-dealer with which the Distributor enters into a dealer
agreement to sell shares of the Funds; and

(7) Orders placed on behalf of other investment companies distributed by
the Distributor or any of its affiliates.

The Distributor may change or eliminate the foregoing waivers at any time. The
Distributor may also periodically waive the sales charge for all investors with
respect to any Fund.

DIRECTED DIVIDEND OPTION

A Shareholder may elect to have all income dividends and capital gains
distributions from a Fund paid by check, reinvested in shares of the Fund or, if
eligible, reinvested in shares of another Fund (collectively, the "Directed
Dividend Option"), without the payment of a sales charge. A reinvestment may not
be made in another Fund, however, unless the shareholder holds the minimum
number of shares in such other Fund and, if this test is met, the entire
directed dividend (100%) must be reinvested into such other Fund. In addition,
this option is available only if the shares in the other Fund have the same
Shareholder registration.

The Directed Dividend Option may be modified or terminated by the Company at
any time after notice to participating Shareholders. Participation in the
Directed Dividend Option may be terminated or changed by the Shareholder at any
time by writing the Distributor.

CONESTOGA IRAS

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

All Conestoga IRA distribution requests must be made in writing to SEI
Financial Services Company. Any additional deposits to a Conestoga IRA must
distinguish the type and year of the contribution.

For more information on a Conestoga IRA call the Company at (800) 344-2716.
Investment in Retail Shares of the Tax-Free Fund, the Pennsylvania Tax-Free Bond
Fund or any tax-exempt mutual fund would not be appropriate for any of the
Conestoga IRAs. Shareholders are advised to consult a tax advisor on Conestoga
IRA contribution and withdrawal requirements and restrictions.

LETTERS OF INTENT

An investor may obtain a reduced sales charge by means of a written Letter of
Intent which expresses the investor's intention to purchase Retail Shares of the
Non-Money Market Funds sold with a sales load at a specified total public
offering price within a designated 13-month period. Each purchase of Retail
Shares under a Letter of Intent will be made at the net asset value plus the
sales charge applicable at the time of such purchase, assuming the purchase of
the total dollar amount indicated in the Letter of Intent.

A Letter of Intent is not a binding obligation upon the investor to purchase
the full amount indicated. The minimum initial investment under a Letter of
Intent is 5% of such amount. Retail Shares purchased with the first 5% of such
amount will be held in escrow (although registered in the name of the investor)
to secure payment of the higher sales

<PAGE> 35

charge applicable to the Retail Shares actually purchased if the full amount
indicated is not purchased. Escrowed Retail Shares will be involuntarily
redeemed to pay the additional sales charge, if necessary. Dividends on escrowed
Retail Shares, whether paid in cash or reinvested in additional Retail Shares,
are not subject to escrow. The escrowed Retail Shares may not be redeemed or
transferred by the investor until all purchases pursuant to the Letter of Intent
have been made or the higher sales charge has been paid. When the full amount
indicated has been purchased, the escrow will be released. To the extent that an
investor purchases more than the dollar amount indicated on the Letter of Intent
and qualifies for a further reduced sales charge, the sales charge will be
recalculated based on the entire amount purchased during the 13-month period.
Any reduction in sales charges will be used to purchase additional Retail Shares
of the Fund for the investor's account.

A Letter of Intent may include purchases of Retail Shares made not more than
90 days prior to the date the investor signs a Letter of Intent; however, the
13-month period during which the Letter of Intent is in effect will begin on the
date of the earliest purchase to be included. All such adjustments will be made
at the conclusion of the Letter of Intent period at the then current net asset
value. To receive the correct public offering price, Shareholders must, at the
time of purchase, give the Distributor sufficient information to permit
confirmation of qualification.

For further information about Letters of Intent, interested investors should
contact the Company at (800) 344-2716. This program, however, may be modified or
eliminated at any time or from time to time by the Company without notice.

AUTO INVEST PLAN

The Auto Invest Plan enables Shareholders of any of the Funds to make regular
monthly or quarterly purchases of Retail Shares through automatic deductions
from their bank accounts. With Shareholder authorization, State Street Bank and
Trust Company (the "Transfer Agent") will deduct the amount specified from the
Shareholder's bank account which will automatically be invested in Retail Shares
at the public offering price on the dates of the deduction. The required minimum
initial investment when opening an account using the Auto Invest Plan is $100;
the minimum amount for subsequent investments in a Fund is $50. To participate
in the Auto Invest Plan, Shareholders should complete the appropriate section of
the account application which can be acquired by calling (800) 344-2716. For a
Shareholder to change the Auto Invest instructions, the request must be made in
writing to the Distributor.

CONCURRENT PURCHASES

For purposes of qualifying for a reduced sales charge, investors have the
privilege of combining concurrent purchases of the Non-Money Market Funds. For
example, if a shareholder concurrently invested $20,000 in one of these eight
Funds and a total of $30,000 in one or more of the other Funds, the sales charge
would be that applicable to a $50,000 purchase as shown in the table above.

RIGHTS OF ACCUMULATION

Pursuant to the right of accumulation, investors are permitted to purchase
Retail Shares at the public offering price applicable to the total of (a) the
dollar amount of all of the Non-Money Market Funds then being purchased plus (b)
an amount equal to the then current net asset value of the purchaser's combined
holdings of the Retail Shares of all eight of such Funds. To receive the correct
public offering price pursuant to the right of accumulation, Shareholders must,
at the time of purchase, give the Distributor sufficient information to permit
confirmation of qualification.

EXCHANGE PRIVILEGE

The Company offers an exchange program whereby Shareholders who have paid a
sales load on purchases of Retail Shares of the Non-Money Market Funds are
entitled to exchange those Retail Shares for Retail Shares of another Non-Money
Market Fund at the net asset value per Share. As a result, no additional sales
load will be incurred with respect to such an exchange. Shareholders may also
exchange Retail Shares of the Money Market Funds (each a "no-load Fund") for
Retail Shares of another Money Market Fund at the net asset value per Share
without payment of a sales load. Shareholders who wish to move all or part of
their investments from a Money Market Fund to a Non-Money Market Fund will be
required to use the procedures described herein with respect to purchases and
redemptions of Retail Shares. If, however, Retail Shares of a Money Market Fund
were acquired by a previous exchange from Retail Shares of a Non-Money Market
Fund, then such

<PAGE> 36

Retail Shares of the Money Market Fund may be exchanged for Retail Shares of a
Non-Money Market Fund without payment of any additional load or sales charge. To
receive the correct public offering price, Shareholders must, at the time of
purchase, give the Distributor sufficient information to permit confirmation of
qualification. The foregoing exchange privilege may be exercised only once
during a calendar year and only upon written authorization by the Shareholder
and may be modified or terminated by the Company at any time.

The Retail Shares exchanged must have a current value of at least $1,000.
Share exchanges will only be permitted where the Retail Shares to be acquired
may legally be sold in the investor's state of residence. An exchange is
considered to be a sale of Retail Shares for federal income tax purposes on
which a Shareholder may realize a capital gain or loss. A Shareholder may
telephone an exchange request by calling (800) 344-2716 or by providing written
instructions to the Distributor. An investor should consult the Distributor for
further information regarding exchanges. During periods of significant economic
or market change, telephone exchanges may be difficult to complete. If a
Shareholder is unable to contact the Distributor by telephone, a Shareholder may
also mail the exchange request to the Distributor at the address listed under
"Redeeming Shares -- By Mail." The Company reserves the right to modify or
terminate the exchange privilege described above at any time and to reject any
exchange request. Any Shareholder who wishes to make an exchange should obtain
and review the current prospectus of the Fund in which he or she wishes to
invest before making the exchange.

The Company's exchange privilege is not intended to afford shareholders a way
to speculate on short-term movements in the market. Accordingly, in order to
prevent excessive use of the exchange privilege that may potentially disrupt the
management of the Company and increase transaction costs, the Company has
established a policy of limiting or preventing future exchanges by a Shareholder
if there is excessive exchange activity. Exchange activity will not be deemed
excessive if limited to four substantive exchange redemptions from a Fund during
any calendar year.

REDEMPTION OF SHARES

With respect to the Non-Money Market Funds, Shareholders may redeem their
Retail Shares without charge on any day that net asset value is calculated (see
"VALUATION OF SHARES"). Redemptions will be effected at the net asset value per
share next determined after receipt of a redemption request. Redemptions may be
requested by mail or by telephone.

With respect to the Money Market Funds, Retail Shares may ordinarily be
redeemed by mail or by telephone. However, all or part of a Customer's Retail
Shares may be redeemed in accordance with instructions and limitations
pertaining to his or her account at an Entity. For example, if a Customer has
agreed with an Entity to maintain a minimum balance in his or her account with
the Entity, and the balance in that account falls below that minimum, the
Customer may be obliged to redeem, or the Entity may redeem for and on behalf of
the Customer, all or part of the Customer's Retail Shares of a Fund to the
extent necessary to maintain the required minimum balance. There may be no
notice period affording shareholders an opportunity to increase the account
balance in order to avoid an involuntary redemption by an Entity.

REDEMPTION BY MAIL

A written request for redemption must be submitted to the Distributor. The
Distributor's address is: SEI Financial Services Company, 680 East
Swedesford Road, Wayne, Pennsylvania 19087-1658. The Distributor may require a
signature guarantee by an eligible guarantor institution. For purposes of this
policy, the term "eligible guarantor institution" shall include banks, brokers,
dealers, credit unions, securities exchanges and associations, clearing agencies
and savings associations as those terms are defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended. The Distributor reserves the right
to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000. The signature guarantee requirement will be waived
if all of the following conditions apply: (1) the redemption check is payable to
the Shareholder(s) of record and (2) the redemption check is mailed to the
Shareholder(s) at the address of record or the proceeds are either mailed or
wired to a commercial bank account previously designated on the Account
Registration Form. There is no charge for having redemption requests mailed to a
designated bank account.

<PAGE> 37

Account changes may also require a signature guarantee. Please call the
Company at (800) 344-2716 for more information.

REDEMPTION BY TELEPHONE

Retail Shares may be redeemed by telephone if the Account Registration Form
reflects that the Shareholder has that capability. The Shareholder may have the
proceeds mailed to his or her address or mailed or sent electronically to a
commercial bank account previously designated on the Account Registration Form.
Under most circumstances, payments will be transmitted on the next Business Day.
Electronic redemption requests may be made by the Shareholder by telephone to
the Company at (800) 344-2716. The Distributor may reduce the amount of a
electronic redemption by the Fund's custodian's then-current electronic
redemption charge. This charge, if applied, is presently $7.00 for each wire
redemption. There is no charge for having payment of redemption requests mailed
to a designated bank account. For telephone redemptions, call the Distributor at
(800) 344-2716. It is not necessary for Shareholders to confirm telephone
redemption requests in writing. During periods of significant economic or market
change, telephone redemptions may be difficult to complete. If a Shareholder is
unable to contact the Company by telephone, a Shareholder may also mail the
redemption request to the Distributor at the address listed above under
"Redemption By Mail." Neither the Distributor, the Transfer Agent, the
Investment Advisor nor the Company will be liable for any losses, damages,
expenses and/or costs arising out of any telephone transactions (including
exchanges and redemptions) effected in accordance with the Funds' telephone
transaction procedures, upon instructions reasonably believed to be genuine.
Each Fund will employ procedures designed to provide reasonable assurance that
instructions communicated by telephone are genuine; if these procedures are not
followed, a Fund may be liable for any losses due to unauthorized or fraudulent
instructions. These procedures include recording all phone conversations,
sending confirmations to Shareholders within 72 hours of the telephone
transaction, verifying the account name and a Shareholder's account number or
tax identification number and sending redemption proceeds only to the address of
record or to a previously authorized bank account. If, due to temporary adverse
conditions, Shareholders are unable to effect telephone transactions, they may
also mail redemption requests to the Company.

REDEMPTION BY CHECK

Free check writing is available with respect to the Money Market Funds. With
this service, a Shareholder may write an unlimited amount of checks per month in
the amount of $1,000 or more. To establish this checkwriting service after
opening an account in a Fund, a Shareholder must contact the Distributor by
telephone or mail to obtain an Account Registration Form. To obtain checks, a
Shareholder must complete the Signature Card that accompanies the Account
Registration Form. A Shareholder will receive the dividends and distributions
declared on the shares to be redeemed up to the day that a check is presented
for payment. Upon 30 days' prior written notice to Shareholders, the check
writing privilege may be modified or terminated. An investor may not close an
account in one of the Funds by writing a check.

AUTO WITHDRAWAL PLAN

The Auto Withdrawal Plan enables Shareholders of a Fund to make regular
monthly or quarterly redemptions of Retail Shares. With Shareholder
authorization, the Transfer Agent will automatically redeem Retail Shares at the
net asset value on the dates of the withdrawal and have the amount specified
transferred to the Shareholder as designated on their Account Registration Form.
The required minimum withdrawal is $100. To participate in the Auto Withdrawal
Plan, Shareholders should complete the appropriate section of the Account
Registration Form, which can be obtained by calling (800) 344-2716. Purchases of
additional shares concurrent with withdrawals are ordinarily disadvantageous to
Shareholders because of tax liabilities and sales charges. For a Shareholder to
change the Auto Withdrawal instructions, the request must be made in writing to
the Distributor.

OTHER INFORMATION REGARDING REDEMPTION OF
RETAIL SHARES

<PAGE> 38

upon redemption of Retail Shares in the Non-Money Market Funds if received by
the Distributor before 4:00 P.M., Eastern Time, on a Business Day or, if
received after 4:00 P.M., Eastern Time, within two Business Days or (b)same day
payments upon redemption of Retail Shares in the Money Market Funds if the
request for redemption is received by the Distributor before 12:00 noon, Eastern
Time, on a Business Day or, if the request for redemption is received after
12:00 noon, Eastern Time, to honor requests for payment on the next Business
Day; unless it would be disadvantageous in the opinion of the Investment
Advisor, to the Fund to sell or liquidate portfolio securities in an amount
sufficient to satisfy requests for payments in that manner.

At various times a Fund may be requested to redeem Retail Shares for which it
has not yet received good payment. In such circumstances, the forwarding of
proceeds may be delayed for up to fifteen days until payment has been collected
for the purchase of such Retail Shares. Such delay may be avoided if Retail
Shares are purchased by wire transfer of federal funds. The Funds intend to pay
cash for all Retail Shares redeemed, but under abnormal conditions which make
payment in cash unwise, payment may be made wholly or partly in portfolio
securities at their then current market value equal to the redemption price. In
such cases, an investor may incur brokerage costs in converting such securities
to cash.

Due to relatively high cost of handling small investments, the Company
reserves the right to involuntarily redeem, at net asset value, the Retail
Shares of any Shareholder if, because of redemptions of Retail Shares (and not
solely as a result of market price movements) by or on behalf of the
Shareholder, the account of such Shareholder has a value of less than $1,000.
Before the Company exercises its right to redeem such Retail Shares and to send
the proceeds to the Shareholder, the Shareholder will be given notice that the
value of the Retail Shares in his or her account is less than the minimum amount
and will be allowed 60 days to make an additional investment in an amount which
will increase the value of the account to at least $500. In addition, the
Company reserves the right to redeem, at net asset value, Retail Shares of any
Shareholder to cover any loss resulting from the failure of the Distributor to
receive payment within the time permitted for Retail Shares purchased by
telephone order.

See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION --
Matters Affecting Redemption" and "Net Asset Value" in the Statement
of Additional Information for examples of when the Company may
suspend the right of redemption or redeem Retail Shares involuntarily if it
appears appropriate to do so in light of the Company's responsibilities under
the Investment Company Act of 1940.

VALUATION OF SHARES

The net asset value of each of the Money Market Funds is determined, and the
Retail Shares of each such Fund are priced, as of 12:00 noon and the close of
regular trading on the New York Stock Exchange ("NYSE") (generally, 4:00 P.M.,
Eastern Time) on each Business Day of the Company. The net asset value of each
of the Non-Money Market Funds is determined, and the Retail Shares of each such
Fund are priced, as of the close of regular trading on the NYSE (generally, 4:00
P.M., Eastern Time) on each Business Day. Each time the net asset value of a
Fund is determined and its Retail Shares priced is referred to as a "Valuation
Time." As used herein, a "Business Day" constitutes any day on which the NYSE is
open for trading and the Federal Reserve Bank of Philadelphia is open, except
days on which there are not sufficient changes in the value of the Fund's
portfolio securities that the Fund's net asset value might be materially
affected, or days during which no Shares are tendered for redemption and no
orders to purchase Shares are received. Currently, either the NYSE or the
Federal Reserve Bank of Philadelphia is closed on the customary national
business holidays of New Year's Day, Martin Luther King, Jr., Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran's
Day, Thanksgiving Day and Christmas Day. Net asset value per Share for purposes
of pricing sales and redemptions is calculated by dividing the value of all
securities and other assets belonging to the Retail Shares of a Fund less the
liabilities charged to such class of such Fund by the number of its outstanding
Retail Shares.

The assets in the Money Market Funds are each valued based upon the amortized
cost method. Pursuant to the rules and regulations of the Securities and
Exchange Commission regarding the use of the

<PAGE> 39

amortized cost method, the Money Market Funds will each maintain a
dollar-weighted average portfolio maturity of 90 days or less. Although the
Company seeks to maintain the net asset value per Retail Share of the Money
Market Funds at $1.00 each, there can be no assurance that net asset value will
not vary.

The net asset value per Retail Share of the Non-Money Market Funds will
fluctuate as the value of the investment portfolio of each Fund changes. The
securities in these Funds will be valued at market value. If market quotations
are not available, the securities will be valued by a method which the Board of
Trustees believes accurately reflects fair value. For further information about
valuation of investments, see the Statement of Additional Information.

DIVIDENDS

MONEY MARKET FUNDS: The net income of each of these Funds is declared daily
as a dividend to the respective Shareholders of each such Fund at the close of
business on the day of declaration. Dividends are paid monthly, and a
Shareholder's dividends will automatically be reinvested in additional full and
fractional Retail Shares of such Fund at net asset value as of the date of
payment, unless the Shareholder elects to receive dividends in cash or directs
such dividends to another Fund (see "How To Purchase And Redeem
Shares -- Directed Dividend Option"). Reinvested dividends receive the same tax
treatment as dividends paid in cash. In the case of redemptions, dividends will
be paid in cash not later than seven Business Days after a Shareholder's
complete redemption of his or her Retail Shares in the Cash Management, Tax Free
and U.S. Treasury Securities Funds. Such election, or any revocation thereof,
must be made in writing to the Transfer Agent at The BFDS Building, 2 Heritage
Drive, Quincy, MA 02171, and will become effective with respect to dividends
paid after its receipt by the Transfer Agent.

NON-MONEY MARKET FUNDS: The net income of the International Equity Fund is
generally declared annually, the net income of each of the Equity, the Special
Equity and the Balanced Funds is generally declared quarterly, and the net
income of each of the Bond, Intermediate Income, Pennsylvania Tax-Free Bond and
Short-Term Income Funds (collectively, the "Bond Funds") is generally declared
monthly, as a dividend to the respective Shareholders at the close of business
on the record date. Dividends are generally paid annually with respect to the
International Equity Fund, quarterly with respect to the Equity, Special Equity
and Balanced Funds, and monthly with respect to the Bond Funds. Distributable
net realized capital gains are distributed at least annually. A Shareholder will
automatically receive all income dividends and capital gain distributions from
the Fund in additional full and fractional Shares of the Fund at net asset value
as of the date of payment, unless the Shareholder elects to receive dividends or
distributions in cash. Such election, or any revocation thereof, must be made in
writing to the Transfer Agent at The BFDS Building, 2 Heritage Drive, Quincy, MA
02171, and will become effective with respect to dividends and distributions
having record dates after its receipt by the Transfer Agent.

OTHER INVESTMENT POLICIES

GOVERNMENT AND RELATED OBLIGATIONS

The Funds may invest in Treasury bills, notes and bonds and other obligations
issued or guaranteed by the U.S. Treasury, as well as "stripped" U.S. Treasury
obligations such as Treasury Receipts representing either future interest or
principal payments. Stripped securities are issued at a discount to their "face
value," and may exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal and interest are returned to
investors. The Funds may also acquire repurchase agreements secured by U.S.
Treasury obligations.

The Funds (except the U.S. Treasury Fund) may also invest in other obligations
issued or guaranteed by the agencies or instrumentalities of the U.S.
Government. These obligations may differ from U.S. Treasury obligations in their
interest rates, maturities, and times of issuance. These Funds may also purchase
interests in U.S. Treasury securities (such as TIGRs and CATS). TIGRs and CATS
are not issued by the U.S. Treasury. Participations

<PAGE> 40

other than those issued or guaranteed by the U.S. are not obligations of the
U.S. Government.

Obligations of certain agencies and instrumentalities of the U.S. Government,
such as the Government National Mortgage Association and the Export-Import Bank
of the United States, are supported by the full faith and credit of the U.S.
Treasury; others, such as those of the Federal National Mortgage Association,
may borrow from the Treasury in its discretion; others, such as those of the
Student Loan Marketing Association, are supported by the discretionary authority
of the U.S. Government to purchase the agency's obligations; still others, such
as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage
Corporation, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government will provide financial support
to U.S. Government-sponsored agencies or instrumentalities if it is not
obligated to do so by law. The obligations of such agencies and
instrumentalities and stripped securities will only be purchased when the
Investment Advisor deems the credit risk with respect thereto to be minimal.

BANKER'S ACCEPTANCES

The Cash Management Fund may invest in banker's acceptances guaranteed by
domestic and foreign banks if, at the time of investment, the guarantor bank has
capital, surplus, and undivided profits in excess of $100,000,000 (as of the
date of its most recently published financial statements) and the bank, its
parent or holding company is rated "A/B" or better at the time of investment by
Thomson BankWatch, Inc., or unrated at the time of purchase but are determined
to be institutions of comparable quality by the Investment Advisor pursuant to
guidelines approved by the Company's Board of Trustees. For a description of the
rating symbols of Thomson BankWatch, Inc., see Appendix "A" to the Statement of
Additional Information.

CERTIFICATES OF DEPOSIT AND TIME DEPOSITS

The Cash Management Fund may invest in certificates of deposit and time
deposits of domestic and foreign banks and savings and loan associations if (a)
at the time of investment the depositary institution has capital, surplus, and
undivided profits in excess of $100,000,000 (as of the date of its most recently
published financial statements) and the depositary institution, its parent or
holding company is rated "A/B" or better at the time of investment by Thomson
BankWatch, Inc., (b) the principal amount of the instrument is insured in full
by the FDIC or the Federal Savings and Loan Insurance Corporation, or (c) which
are unrated at the time of purchase but are determined to be at comparable
quality by the Investment Advisor pursuant to guidelines approved by the
Company's Board of Trustees.

The Funds (except the U.S. Treasury Securities Fund) may invest in Eurodollar
Certificates of Deposits ("ECDs") which are U.S. dollar-denominated certificates
of deposit issued by offices of foreign and domestic banks located outside the
United States; Eurodollar Time Deposits ("ETDs") which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits ("CTDs") which are essentially the same as ETDs
except they are issued by Canadian offices of Canadian banks; and Yankee
Certificates of Deposit ("Yankee CDs") which are certificates of deposit issued
by a U.S. branch of a foreign bank denominated in U.S. dollars and held in the
United States.

The Cash Management Fund will not invest in excess of 10% of its total assets
in time deposits, including ETDs and CTDs but not including certificates of
deposit, with maturities in excess of seven days which are subject to penalties
upon early withdrawal.

COMMERCIAL PAPER

The Funds (except the U.S. Treasury Securities Fund) may invest in short-term
promissory notes issued by corporations (including variable amount master demand
notes). In the case of the Cash Management and the Tax-Free Funds, such
instruments must at the time of purchase (1) have received the highest
short-term rating by at least two Rating Organizations, (2) have received the
highest short-term rating by the only rating agencies to have rated the notes,
or (3) are unrated, but are determined to be of comparable quality pursuant to
guidelines adopted by the Board of Trustees. Instruments may be purchased in
reliance upon a rating only when the rating organization is not affiliated with
the issuer or guarantor of the instrument. For a description of the rating
symbols used in this paragraph, see the Appendix to the Statement of Additional
Information. The Funds (except the U.S. Treasury Securities Fund) may also
invest in foreign commercial paper which is U.S.

<PAGE> 41

dollar-denominated commercial paper issued by a foreign corporation or a foreign
counterpart of a U.S. corporation.

ZERO COUPON OBLIGATIONS

The Cash Management, Bond, Intermediate Income, Short-Term and Balanced Funds
may invest in zero coupon obligations, which have greater price volatility than
coupon obligations and which will not result in the payment of interest until
maturity, provided that immediately after any purchase not more than 5% of the
value of the net assets of the respective Fund would be invested in such
obligations.

FOREIGN SECURITIES

The Equity Funds and the Balanced Fund may invest in securities of foreign
issuers by acquiring both sponsored and unsponsored American Depositary Receipts
("ADRs"). ADRs are receipts issued by a bank or trust company in the United
States evidencing ownership of underlying securities of a foreign issuer.
Unsponsored ADRs are organized independently and without the cooperation of the
issuer of the underlying securities. As a result, available information
concerning the issuer may not be as current as for sponsored ADRs, and the
prices of unsponsored ADRs may be more volatile than if such instruments were
sponsored by the issuer. The Equity Funds may also invest in securities issued
by foreign branches of U.S. banks and foreign banks, in Canadian commercial
paper, and in Europaper (U.S. dollar-denominated commercial paper of a foreign
issuer). As stated above, certain Funds may invest in ECDs, ETDs, CTDs, and
Yankee CDs. The Cash Management Fund may also acquire securities issued by
foreign branches of U.S. banks, foreign banks, or other foreign issuers only
when the Investment Advisor believes that the risks associated with such
instruments are minimal. The Bond, Intermediate Income, Short-Term Income and
Balanced Funds may invest in Yankee Bonds.

For many foreign securities, U.S. dollar-denominated American Depositary
Receipts, or ADRs, which are traded in the United States on exchanges or
over-the-counter, are issued by domestic banks. ADRs represent the right to
receive securities of foreign issuers deposited in a domestic bank or a
correspondent bank. ADRs do not eliminate the risk inherent in investing in the
securities of foreign issuers. However, by investing in ADRs rather than
directly in stock of foreign issuers, the Fund can avoid currency risks during
the settlement period for either purchases or sales. In general, there is a
large, liquid market in the United States for many ADRs. The information
available for ADRs is subject to the accounting, auditing and financial
reporting standards of the domestic market or exchange on which they are traded,
which standards are more uniform and more exacting than those to which many
foreign issuers may be subject. The Fund may also invest in European Depositary
Receipts, or EDRs, which are receipts evidencing an arrangement with a European
bank similar to that for ADRs and are designed for use in the European
securities markets. EDRs are not necessarily denominated in the currency of the
underlying security.

Certain ADRs and EDRs, typically those denominated as unsponsored, require the
holders thereof to bear most of the costs of such facilities while issuers of
sponsored facilities normally pay more of the costs thereof. The depositary of
an unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited securities
or to pass through the voting rights to facility holders in respect to the
deposited securities, whereas the depositary of a sponsored facility typically
distributes shareholder communications and passes through the voting rights.

Investment in securities of foreign issuers involves certain risks not
ordinarily associated with investments in securities of domestic issuers. Such
risks include fluctuations in foreign exchange rates, difficulties in predicting
international trade patterns, political, social and economic instability in the
country of the issuer, foreign trading practices (including higher trading
commissions, custodial charges and delayed settlements), foreign withholding and
income taxation, the possible establishment of exchange controls or the adoption
of other foreign governmental restrictions (which might adversely affect the
payment of principal and interest), difficulty in obtaining and enforcing
judgments against foreign issuers, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. With respect to
certain countries, there is also the possibility of expropriation of assets,
nationalization of assets, limits on removal of currency or other assets,
confiscatory taxation, political or social instability or diplomatic
developments which could adversely affect investments in those countries.

<PAGE> 42

Foreign companies generally are not subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to U.S.
domestic companies. There is generally less government regulation of securities
exchanges, brokers and listed companies abroad than in the U.S. Confiscatory
taxation or diplomatic developments could also affect investment in those
countries. In addition, foreign branches of U.S. banks, foreign banks and
foreign issuers may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic branches of U.S. banks and U.S. domestic issuers.

FOREIGN CURRENCY TRANSACTIONS

The value of the assets of the International Equity Fund as measured in U.S.
dollars may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations, and the Fund may incur costs in
connection with conversions between various currencies. The Fund will conduct
its foreign currency exchange transactions either on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign currency exchange market, or through
forward contracts to purchase or sell foreign currencies. A forward foreign
currency exchange contract ("forward currency contracts") involves an obligation
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These forward currency contracts are
traded directly between currency traders (usually large commercial banks) and
their customers. The Fund may enter into forward currency contracts in order to
hedge against adverse movements in exchange rates between currencies.

For example, when the International Equity Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may want to
establish the U.S. dollar cost or proceeds, as the case may be. By entering into
a forward currency contract in U.S. dollars for the purchase or sale of the
amount of foreign currency involved in an underlying security transaction, the
Fund can help to protect itself against a possible loss between trade and
settlement dates resulting from an adverse change in the relationship between
the U.S. dollar and such foreign currency. Additionally, for example, when the
Fund believes that a foreign currency may suffer a substantial decline against
the U.S. dollar, it may enter into a forward currency sale contract to sell an
amount of that foreign currency approximating the value of some or all of the
Fund's portfolio securities or other assets denominated in such foreign
currency, or when the Fund believes that the U.S. dollar may suffer a
substantial decline against a foreign currency, it may enter into a forward
currency purchase contract to buy that foreign currency for a fixed U.S. dollar
amount. However, these contracts tend to limit potential gains which might
result from positive changes in currency relationships. The Fund may also hedge
its foreign currency exchange rate risk by engaging in currency financial
futures and options transactions. The forecasting of short-term currency market
movement is extremely difficult and whether short-term hedging strategies would
be successful is highly uncertain.

The International Equity Fund does not intend to enter into such forward
contracts if the Fund would have more than 15% of the value of its total assets
committed to such contracts on a regular or continuous basis. In addition, the
Fund does not intend to enter into forward currency contracts or maintain a net
exposure in such contracts where it would be obligated to deliver an amount of
foreign currency in excess of the value of its portfolio securities or other
assets denominated in that currency.

For further information about the characteristics, risks and possible benefits
of option, futures and foreign currency transactions, see "Investment
Objectives, Policies and Restrictions" in the Statement of Additional
Information.

OPTIONS

<PAGE> 43

which it has written a call option. In order to close out a call option it has
written, a Fund will enter into a "closing purchase transaction" -- the purchase
of a call option on the same security with the same exercise price and
expiration date as the call option which the Fund previously wrote on a
particular security. When a portfolio security subject to a call option is sold,
a Fund will effect a closing purchase transaction to close out any existing call
option on that security. If a Fund is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the
option expires or the Fund delivers the underlying security upon exercise. Under
normal conditions, it is not expected that the underlying value of portfolio
securities subject to such options would exceed 50% of the net assets of a Fund.

The International Equity Fund, as part of its option transactions, also may,
for hedging purposes, purchase index put and call options and write index
options. As with options on individual securities, the Fund will write only
covered index call options. Through the writing or purchase of index options,
the Fund can seek to achieve many of the same objectives as through the use of
options on individual securities. Options on securities indices are similar to
options on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the securities index upon which the option is based
is greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. Price movements in securities which the Fund owns
or intends to purchase would not be expected to correlate directly with
movements in the level of an index and, therefore, the Fund bears the risk of a
loss on an index option that is not completely offset by movements in the price
of such securities. Because index options are settled in cash, a call writer
cannot determine the amount of its settlement obligations in advance and, unlike
call writing on specific securities, cannot provide in advance for, or cover,
its potential settlement obligations by acquiring and holding the underlying
securities. The Fund may be required to segregate assets or provide an initial
margin to cover index options that would require it to pay cash upon exercise.

The Cash Management Fund and the Tax-Free Fund may acquire "puts" with respect
to obligations held in their portfolios. Under a put, a Fund would have the
right to sell a specified obligation within a specified period of time at a
specified price. A put would be sold, transferred, or assigned only with the
underlying obligation. A Fund will acquire puts solely to facilitate portfolio
liquidity, shorten the maturity of the underlying obligations, or permit the
investment of the Fund's assets at a more favorable rate of return. The
aggregate price of a security subject to a put may be higher than the price
which otherwise would be paid for the security without such an option, thereby
increasing the security's cost and reducing its yield.

FUTURES CONTRACTS

The International Equity Fund may also enter into contracts for the future
delivery of securities and futures contracts based on a specific security, class
of securities, or an index, purchase or sell options on any such futures
contracts and engage in related closing transactions. A futures contract on a
securities index is an agreement obligating either party to pay, and entitling
the other party to receive, while the contract is outstanding, cash payments
based on the level of a specified securities index.

The International Equity Fund may engage in such futures contracts in an
effort to hedge against market risks. For example, when interest rates are
expected to rise or market values of portfolio securities are expected to fall,
the Fund can seek through the sale of futures contracts to offset a decline in
the value of its portfolio securities. When interest rates are expected to fall
or market values are expected to rise, the Fund, through the purchase of such
contracts, can attempt to secure better rates or prices for the Fund than might
later be available in the market when it effects anticipated purchases.

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

Aggregate initial margin deposits for futures contracts, and premiums paid for
related options, may not exceed 5% of the market value of the International
Equity Fund's total assets, and the value of securities that are the subject of
such futures and options (both for receipt and delivery) may not exceed 33 1/3%
of the market value of the Fund's total assets. Futures transactions will be
limited to the extent necessary to maintain the Fund's qualification as a
regulated investment company.

<PAGE> 44

Futures transactions involve brokerage costs and require the International
Equity Fund to segregate assets to cover contracts that would require it to
purchase securities. The Fund may lose the expected benefit of futures
transactions if interest rates, exchange rates or securities prices move in an
unanticipated manner. Such unanticipated changes may also result in poorer
overall performance than if the Fund had not entered into any futures
transactions. In addition, the value of the Fund's futures positions may not
prove to be effectively correlated with the value of its portfolio securities,
which would limit the value of the Fund's hedge against interest rate, exchange
rate and/or market risk, and would give rise to additional risks. There is no
assurance of liquidity in the secondary market for purposes of closing out
futures positions.

MUNICIPAL OBLIGATIONS

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

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

Municipal Obligations may include rated and unrated variable and floating rate
tax-exempt notes, which may have a stated maturity in excess of 397 days but
which will, in such event, be subject to a demand feature that will permit a
Fund to demand payment of the principal of the note either (i) at any time upon
not more than 30 days' notice or (ii) at specified intervals not exceeding 397
days and upon no more than 30 days' notice. There may be no active secondary
market with respect to a particular variable or floating rate note.
Nevertheless, the periodic readjustments of their interest rates tend to assure
that their value to a Fund will approximate their par value. Variable and
floating rate notes for which no readily available market exists will not be
purchased in an amount which, together with all other illiquid securities held
by the Fund, exceed 10% of the Tax-Free Fund's total assets or 15% of the
Pennsylvania Tax-Free Bond Fund's total assets unless such notes are subject to
a demand feature that will permit a Fund to demand payment of the principal
within seven days after demand by the Fund.

Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from regular federal income tax are rendered by
bond counsel to the respective issuers at the time of issuance. Neither the
Funds nor the Investment Advisor will review the proceedings relating to the
issuance of Municipal Obligations or the bases for such opinions.

The Tax-Free Fund may invest more than 25% of its assets in Municipal
Obligations which are related in such a way that an economic, business, or
political development or change affecting one such security would likewise
affect the other Municipal Obligations. Examples of such securities are
obligations the payment of which is dependent upon similar types of projects or
projects located in the same state. Such investments would be made only if
deemed necessary or appropriate by the Tax-Free Fund's Investment Advisor. To
the extent that the Tax-Free Fund's assets are concentrated in Municipal
Obligations that are so related, the Tax-Free Fund will be subject to the
peculiar risks presented by such Municipal Obligations, such as negative
developments in a particular industry or state, to a greater extent than it
would be if the Tax-Free Fund's assets were not so concentrated.

REPURCHASE AGREEMENTS

<PAGE> 45

date of their most recently published financial statements) or registered
broker-dealers which the Investment Advisor (and/or the Sub-advisor with respect
to the International Equity Fund) deems creditworthy pursuant to guidelines
approved by the Company's Board of Trustees, subject to the seller's agreement
to repurchase such securities at a mutually agreed-upon date and price. The
repurchase price would generally equal the price paid by a Fund plus interest
negotiated on the basis of current short-term rates, which may be more or less
than the rate on the underlying portfolio securities. The seller under a
repurchase agreement will be required to maintain the value of collateral held
pursuant to the agreement at not less than 102% of the repurchase price
(including accrued interest). The Investment Advisor will monitor the value of
the collateral on an ongoing basis to ensure that the required value is
maintained. In addition, securities subject to repurchase agreements will be
held in a segregated account. If the seller were to default on its repurchase
obligation or become insolvent, a Fund would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities by the Fund were delayed pending court action. Securities
subject to repurchase agreements will be held by the Company's custodian or
another qualified custodian or in the Federal Reserve/Treasury book-entry
system. Repurchase agreements are considered to be loans by a Fund under the
Investment Company Act of 1940.

An increase in interest rates will generally reduce the value of the
investments in each Fund and a decline in interest rates will generally increase
the value of those investments. Depending upon the prevailing market conditions,
the Investment Advisor (and/or the Sub-advisor with respect to the International
Equity Fund) may purchase debt securities at a discount from face value, which
produces a yield greater than the coupon rate. Conversely, if debt securities
are purchased at a premium over face value, the yield will be lower than the
coupon rate. In making investment decisions, the Investment Advisor (and/or the
Sub-advisor with respect to the International Equity Fund) will consider many
factors other than current yield, including the preservation of capital, the
potential for realizing capital appreciation, maturity, and yield to maturity.

INVESTMENT COMPANIES

In connection with the management of its daily cash position, each of the
Funds may invest up to 5% of the value of its total assets in the shares of a
money market fund. However, no more than 10% of a Fund's total assets may be
invested in the securities of money market mutual funds in the aggregate.
Securities of other investment companies will be acquired by a Fund within the
limits prescribed by the Investment Company Act of 1940. As a shareholder of
another investment company, a Fund would bear along with other shareholders, its
pro rata portion of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the advisory and other expenses
that the Fund bears directly in connection with its own operations. However, in
order to avoid the imposition of additional fees as a result of investments by a
Fund in Shares of the Money Market Funds or other portfolios served by the
Investment Advisor ("acquired fund"), the Investment Advisor will reduce its
fees to the investing Fund by an amount based on the fee formula charged to the
acquired Fund.

"WHEN-ISSUED" SECURITIES

Each Fund may also purchase debt securities on a "when-issued" basis.
"When-issued" securities are new securities purchased for delivery beyond the
normal settlement date at a stated price and yield thereby involving the risk
that the yield obtained in the transaction will be less than that available in
the market when delivery takes place. A Fund will generally not pay for such
securities and no income accrues on the securities until they are received.
Securities purchased on a "when-issued" basis are recorded as an asset when
purchased and are thereafter subject to changes in value based upon changes in
the general level of interest rates. Each Fund expects that commitments to
purchase "when-issued" securities will not exceed 25% of the value of its total
assets under normal market conditions, and that commitments by each Fund to
purchase "when-issued" securities will not exceed 60 days. If commitments to
purchase "when-
issued" securities ever exceeded 25% of the value of its assets, a Fund's
liquidity and the Investment Advisor's (and/or Sub-advisor's with respect to the
International Equity Fund) ability to manage it might be adversely affected. In
"when-issued" transactions, a Fund relies on the seller to complete the
transaction; the seller's failure to do so may cause the Fund to miss a price or
yield considered to

<PAGE> 46

be advantageous. While purchases may be considered a form of leverage, a Fund
does not intend to purchase "when-issued" securities for speculative purposes
but only for the purpose of acquiring portfolio securities.

SHORT-TERM TRADING AND PORTFOLIO TURNOVER

The Equity Funds, the Bond Funds and the Balanced Fund may engage in the
technique of short-term trading. Such trading involves the selling of securities
held for a short time, ranging from several months to less than a day. The
object of such short-term trading is to increase the potential for capital
appreciation and/or income of a Fund in order to take advantage of what the
Investment Advisor (and/or the Sub-advisor with respect to the International
Equity Fund) believes are changes in market, industry, or individual company
conditions or outlook. Any such trading would increase a Fund's turnover rate
and its transaction costs.

Portfolio turnover may vary greatly from year to year as well as within a
particular year. High turnover rates will generally result in higher brokerage
commissions and other transaction costs to the Fund. Distributions resulting
from any net short-term capital gains are considered ordinary income for
federal income tax purposes. (See "TAXES.")

REVERSE REPURCHASE AGREEMENTS

Each Fund may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the investment restrictions described
below. Pursuant to such agreements, a Fund would sell portfolio securities to
financial institutions such as banks or broker-dealers, and agree to repurchase
them at a mutually agreed-upon date and price. At the time a Fund enters into a
reverse repurchase agreement, it will place in a segregated custodial account
assets such as U.S. Government securities or other liquid high-grade debt
obligations consistent with the Fund's investment restrictions having a value
equal to the repurchase price (including accrued interest), and will
subsequently monitor the account to ensure that such equivalent value is
maintained. Reverse repurchase agreements involve the risk that the market value
of the securities sold by a Fund may decline below the price at which such Fund
is obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings by a Fund under the Investment Company Act of 1940.

ILLIQUID SECURITIES

The Non-Money Market Funds may each invest up to 15% and the Money Market
Funds may each invest up to 10% of the value of their respective net assets in
illiquid securities, including repurchase agreements with remaining maturities
in excess of seven days (except that the Bond Fund, the Intermediate Income Fund
and the Equity Fund will not acquire repurchase agreements with maturities in
excess of seven days if such investment, together with other investments in such
Fund which are not readily marketable, exceeds 10% of such Fund's total assets),
time deposits with maturities in excess of seven days, non-negotiable time
deposits, and other securities which are not readily marketable. This limitation
on illiquid securities also includes restricted securities, except those that
may be purchased by institutional buyers under Rule 144A and for which a liquid
trading market exists, as determined by the Company's Board of Trustees or the
Investment Advisor. See the Statement of Additional Information for further
discussion of Rule 144A securities.

ASSET-BACKED SECURITIES

The Cash Management, Bond, Intermediate Income, Short-Term Income and Balanced
Funds may purchase asset-backed securities. Like other debt securities,
asset-backed securities (i.e., securities backed by mortgages, installment sales
contracts, credit card receivables or other assets) are subject to declines in
market value during periods of rising interest rates. However, due to the
possibility of prepayment of the underlying obligations, asset-backed securities
have less potential for capital appreciation than other debt securities of
comparable maturities during periods of declining interest rates. As a result,
asset-backed securities may be less effective than other fixed income securities
as a means of locking in attractive interest rates for the long term.
Asset-backed securities purchased at a premium to par may subject the these
Funds to losses equal to any unamortized premium if such obligations are repaid
prior to their scheduled maturities. The Cash Management, Bond, Intermediate
Income, Short-Term Income and Balanced Funds will invest only in
privately-issued asset-backed securities which are readily marketable and rated
at the time of purchase in the two highest rating categories assigned by a
Rating Organization. For a

<PAGE> 47

description of rating symbols see Appendix "A" to the Statement of Additional
Information.

MORTGAGE-BACKED SECURITIES

The Bond, Intermediate Income, Short-Term Income and Balanced Funds may
purchase mortgage-backed securities. The investment objective of the
Intermediate Income Fund permits it to purchase mortgage-backed and certain
other securities with stated maturities in excess of ten years if the expected
maturities are ten years or less. The average life of mortgage-backed securities
varies with the maturities of the underlying mortgage instruments, which have
maximum maturities of 40 years. The average life is likely to be substantially
less than the original maturity of the mortgage pools underlying the securities
as the result of mortgage prepayments. The rate of such prepayments, and hence
the average life of the certificates, will be a function of current market
interest rates and current conditions in the relevant housing markets. Estimated
average life will be determined by the Investment Advisor, and such securities
may be purchased by the Intermediate Income Fund if the estimated average life
is determined to be 6 years or less. Various independent mortgage-backed
securities dealers publish average remaining life data using proprietary models
and, in making such determinations for the Intermediate Income Fund, the
Investment Advisor will rely on such data except to the extent such data are
deemed unreliable by the Investment Advisor. The Investment Advisor might deem
data unreliable which appeared to present a significantly different average
remaining expected life for a security than data relating to the average
remaining life of comparable securities as provided by other independent
mortgage-backed securities dealers.

The Bond, Intermediate Income and Balanced Funds will invest only in
privately-issued mortgage-backed securities which are readily marketable and
rated at the time of purchase in the two highest rating categories assigned by a
Rating Organization. For a description of rating symbols see Appendix "A" to the
Statement of Additional Information.

CORPORATE OBLIGATIONS

The Non-Money Market Funds also may invest in bonds, notes and debentures of
U.S. corporate issuers. Such obligations, in the case of debentures, will
represent unsecured promises to pay, in the case of notes and bonds, may be
secured by mortgages on real property or security interests in personal property
and will vary in their interest rates, maturities and times of issuance. These
Funds will invest in corporate debt securities only if they are rated at the
time of purchase within the four highest rating groups assigned by a Rating
Organization or, if unrated, which the Investment Advisor (and/or the
Sub-advisor with respect to the International Equity Fund) deems to be of
comparable quality. Such securities are considered high or medium-grade
securities. Debt obligations rated in the fourth highest rating group have some
speculative characteristics and repayment of principal and interest are more
likely to be adversely affected by adverse economic conditions or changing
circumstances than are obligations in the higher rated categories.

SHORT-TERM OBLIGATIONS

The Non-Money Market Funds may each ordinarily hold some short-term
obligations (with maturities of 18 months or less) such as domestic and foreign
commercial paper (including variable amount master demand notes), banker's
acceptances, certificates of deposit and demand and time deposits of domestic
and foreign branches of U.S. banks and foreign banks, and repurchase agreements.

STAND-BY COMMITMENTS

The Pennsylvania Tax-Free Bond Fund may acquire stand-by commitments with
respect to Pennsylvania Municipal Obligations held in its portfolio. Under a
"stand-by commitment," a dealer agrees to purchase, at the Fund's option,
specified municipal obligations at a price equal to their amortized cost value
plus accrued interest. The Fund will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.

MUNICIPAL NOTES

Municipal notes in which the Pennsylvania Tax-Free Bond Fund may invest
include project notes, demand notes, and short-term municipal obligations
(including tax anticipation notes, revenue anticipation notes, construction loan
notes and short-term discount notes and tax-exempt commercial paper) rated in
the highest rating category assigned by a Rating Organization.

MUNICIPAL LEASES

The Pennsylvania Tax-Free Bond Fund may invest in municipal leases and
participations therein.

<PAGE> 48

These are obligations in the form of a lease or installment purchase which is
issued by state and local governments to acquire equipment and facilities. Bonds
from such obligations are generally exempt from local and state taxes in the
state of issuance. "Participations" in such leases are undivided interests in a
portion of the total obligation. Participations entitle their holders to receive
a pro rata share of all payments under the lease. A trustee is usually
responsible for administering the terms of the Participation and enforcing the
participants' rights in the underlying lease.

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

Municipal leases represent a relatively new type of financing. In certain
instances the tax-exempt status of the obligations will not be subject to the
legal opinion of a nationally recognized "bond counsel," as is customarily
required in larger issues of Pennsylvania obligations. However, in all cases the
Pennsylvania Tax-Free Bond Fund will require that a municipal lease purchased by
the Fund be covered by a legal opinion (typically from the issuer's counsel) to
the effect that, as of the effective date of such lease, the lease is the valid
and binding obligation of the governmental issuer.

Certain municipal lease obligations may be deemed illiquid for the purpose of
the Pennsylvania Tax-Free Bond Fund's investment of up to 15% of the value of
its net assets in illiquid securities. In determining the liquidity of municipal
lease obligations, the Investment Advisor will consider a variety of factors,
including the following guidelines which have been adopted by the Board of
Trustees: (1) the frequency of trades and quotes for the obligation; (2) the
number of dealers willing to purchase or sell the obligation and the number of
other potential buyers; (3) the willingness of dealers to undertake to make a
market in the security; (4) the nature of the marketplace trades; (5) the
general creditworthiness of the municipality and the importance of the property
covered by the lease to the municipality; and (6) the likelihood that the
marketability of the obligation will be maintained throughout the time the
obligation is held by the Fund.

SPECIAL RISKS AND CONSIDERATIONS

The Pennsylvania Tax-Free Bond Fund is classified as a non-diversified
investment company under the Investment Company Act of 1940. Investment return
on a non-diversified portfolio typically is dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio. Consequently, the change in value of any one security may affect the
overall value of a nondiversified portfolio more than it would a diversified
portfolio, and thereby subject the market-based net asset value per share of the
nondiversified portfolio to greater fluctuation. In addition, a non-diversified
portfolio may be more susceptible to economic, political and regulatory
developments than a diversified investment portfolio with similar objectives
would be.

Because the Fund will normally invest 80% or more of its net assets in
Pennsylvania Municipal Obligations, it is more susceptible to factors affecting
Pennsylvania issuers than is a comparable municipal bond fund not concentrated
in the obligations of issuers located in a single state. Pennsylvania tax-exempt
issuers may be adversely affected by local political and economic conditions and
developments within Pennsylvania. Although the General Fund of the Commonwealth
(the principal operating fund of the Commonwealth) experienced deficits in
fiscal 1990 and 1991, tax increases and spending decreases helped return the
General Fund balance to a surplus at June 30, 1992 of $87.5 million and at June
30, 1993 of $698.9 million. The deficit in the Commonwealth's unre
served/undesignated funds also has been eliminated, and there was a surplus of
$64.4 million at June 30, 1993. However, rising unemployment, a relatively high
proportion of persons 65 and older, and court ordered increases in healthcare
reimbursement rates continue to place increased pressures on the tax resources
of the Commonwealth and its municipalities. In addition, certain litigation is
pending against the Commonwealth that could adversely affect its ability to pay
debt service. See

<PAGE> 49

the Statement of Additional Information for further discussion of investment
considerations associated with Pennsylvania Municipal Obligations.

General obligations of Pennsylvania are currently rated "AA-" by S&P and Fitch
and "A1" by Moody's. There can be no assurance that the economic conditions on
which these ratings are based will continue or that particular bond issues may
not be adversely affected by changes in economic, political or other conditions.

INVESTMENT RESTRICTIONS

The Funds are subject to a number of fundamental investment restrictions that
may be changed only by a vote of a majority of the outstanding Shares (as
defined in the Statement of Additional Information) of each Fund.

MONEY MARKET FUNDS

CASH MANAGEMENT FUND

The Cash Management Fund may not:

1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of the Cash
Management Fund's total assets would be invested in such issuer, except that up
to 25% of the value of the Cash Management Fund's total assets may be invested
without regard to such 5% limitation. (Regulations prohibit investments in
excess of the 5% limitation in more than one issuer or for more than three
business days after purchase.)

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

CASH MANAGEMENT AND U.S. TREASURY
SECURITIES FUNDS

The Cash Management and U.S. Treasury Securities Funds may not:

1. Borrow money or issue senior securities, except that each Fund may borrow
from banks and enter into reverse repurchase agreements for temporary purposes
in amounts up to 10% of the value of its total assets at the time of such
borrowing; or mortgage, pledge, or hypothecate any assets, except in connection
with any such borrowing and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the value of such Fund's total assets at the time of
its borrowing. Neither Fund will purchase securities while its borrowings
(including reverse repurchase agreements) exceed 5% of the total assets of such
Fund.

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

U.S. TREASURY SECURITIES FUND

The U.S. Treasury Securities Fund may not purchase securities other than
short-term obligations issued or guaranteed by the U.S. Treasury, and repurchase
agreements secured by U.S. Treasury obligations.

TAX-FREE FUND

The Tax-Free Fund may not:

1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in such issuer (except that up to 25% of the value of the
Tax-Free Fund's total assets may be invested without regard to such 5%
limitation). For purposes of this limitation, a security is considered to be

<PAGE> 50

issued by the government entity (or entities) whose assets and revenues back the
security; with respect to a private activity bond that is backed only by the
assets and revenues of a non-governmental user, a security is considered to be
issued by such non-governmental user.

2. Purchase any securities which would cause 25% or more of the Tax-Free
Fund's total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry; provided that this limitation shall not apply to Municipal Obligations
or governmental guarantees of Municipal Obligations; and provided, further, that
for the purpose of this limitation only, private activity bonds that are backed
only by the assets and revenues of a non-governmental user shall not be deemed
to be Municipal Obligations.

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

NON-MONEY MARKET FUNDS

The Equity Funds, the Bond Fund and the Intermediate Income, Short-Term Income
and Balanced Funds may not:

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

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

3. Borrow money or issue senior securities, except that such Funds may borrow
from banks or enter into reverse repurchase agreements for temporary purposes in
amounts up to 10% of the value of their respective total assets at the time of
such borrowing; or mortgage, pledge, or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the total assets of such Fund
at the time of its borrowing. Such Funds will not purchase securities while
their borrowings (including reverse repurchase agreements) exceed 5% of their
respective total assets.

4. Make loans, except that such Funds may purchase or hold debt instruments
and lend portfolio securities in accordance with their respective investment
objectives and policies, and may enter into repurchase agreements.

For the purposes of Investment Restriction 2 above, each of the Equity Funds
treats, as a matter of non-fundamental policy that may be changed without a vote
of shareholders, all supranational organizations as a single industry and each
foreign government (and all of its agencies) as a separate industry.

The Pennsylvania Tax-Free Bond Fund may not:

<PAGE> 51

total assets would be invested in the securities of any one issuer, except that
up to 50% of the value of the Fund's total assets may be invested without regard
to this 5% limitation, provided, however, that not more than 25% of the Fund's
total assets may be invested in securities of one issuer. For purposes of this
limitation, a security is considered to be issued by the governmental entity (or
entities) whose assets and revenues back the security, or with respect to a
private activity bond that is backed only by the assets and revenues of a
non-governmental user, a security is considered to be issued by such non-
governmental user. In accordance with regulations promulgated by the Securities
and Exchange Commission, the guarantor of a guaranteed security may be
considered to be an issuer in connection with such guarantee.

2. Purchase any securities which would cause more than 25% of the value of its
total assets at the time of purchase to be invested in municipal obligations
with similar characteristics (such as private activity bonds where the payment
of principal and interest is the ultimate responsibility of issuers in the same
industry, pollution control revenue bonds, housing finance agency bonds or
hospital bonds) or the securities of issuers conducting their principal business
activities in the same industry, provided that there is no limitation with
respect to obligations issued or guaranteed by the U.S. Government, other
governmental issuers of municipal bonds, and their respective agencies,
authorities, instrumentalities or political subdivisions.

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

4. Make loans, except that (i) the Fund may purchase or hold debt instruments
in accordance with its investment objective and policies, and may enter into
repurchase agreements with respect to portfolio securities, and (ii) the Fund
may lend portfolio securities against collateral consisting of cash or
securities which are consistent with the Fund's permitted investments, where the
value of the collateral is equal at all times to at least 100% of the value of
the securities loaned.

***

Certain additional investment restrictions, and information about the Fund's
investments, are in the Statement of Additional Information.

TAXES

FEDERAL INCOME TAXES

Each of the Funds of the Company is treated as a separate entity for federal
tax purposes and intend to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"). Such qualification
generally relieves a Fund of liability for federal income taxes to the extent
the Fund's earnings are distributed in accordance with the Code.

The following discussion summarizes some of the important federal tax
considerations generally affecting the Fund and its Shareholders and is not
intended as a substitute for careful tax planning. Accordingly, investors in the
Fund should consult their tax advisors with specific reference to their own tax
situation. Shareholders are also advised to consult their tax advisors
concerning state and local taxes, which may differ from the federal income taxes
discussed.

<PAGE> 52

each of the Money Market Funds (before deduction of dividends paid). Such
dividends will be taxable as ordinary income to the respective Shareholders of
the Cash Management and U.S. Treasury Securities Funds who are not currently
exempt from federal income taxes, whether such dividends are received in cash or
reinvested in additional shares. Federal income taxes for distributions to
individual retirement accounts and qualified retirement plans are deferred under
the Code. Because all of the net investment income of the Cash Management and
U.S. Treasury Securities Funds are expected to be derived from earned interest,
it is anticipated that no part of any distribution will be eligible for the
dividends received deduction for corporations.

For the Tax-Free Fund, qualification as a regulated investment company under
the Code for a taxable year requires, among other things, that it distribute to
its Shareholders an amount equal to at least the sum of 90% of its
exempt-interest income, net of certain deductions, and 90% of its investment
company taxable income (if any) for such year. Certain dividends derived from
exempt-interest income (known as exempt-interest dividends) may be treated by
the Tax-Free Fund's Shareholders as items of interest excludable from their
federal gross income. (Shareholders who may be treated as a "substantial user"
or a "related person" to such user under the Code are advised to consult a tax
advisor with respect to whether exempt-interest dividends retain the exclusion.)
However, such dividends may be taxable to Shareholders under state or local law
as ordinary income, even though all or a portion of the distributions may be
derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such taxes. A percentage of the interest on indebtedness
incurred by a Shareholder to purchase or carry Retail Shares of the Tax-Free
Fund, equal to the percentage of the total non-capital gain dividends
distributed among the Shareholder's taxable year that is tax-exempt dividends,
will not be deductible for federal income tax purposes. It should be noted that,
upon the sale or exchange of Retail Shares of the Tax-Free Fund, if the
Shareholder has not held such Shares for more than six months, any loss on the
sale or exchange of those shares will be disallowed to the extent of tax-exempt
dividends received with respect to the Shares.

If the Tax-Free Fund should hold certain private activity bonds issued after
August 7, 1986, Shareholders must include, as an item of tax preference, the
portion of dividends paid by the Tax-Free Fund that is attributable to interest
on such bonds in their federal alternative minimum taxable income for purposes
of determining liability (if any) for the federal alternative minimum tax
applicable to individuals and the federal alternative minimum tax and the
environmental tax applicable to corporations. Corporations must also take all
exempt-interest dividends into account in determining certain adjustments for
federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed on the excess of the corporation's
modified federal alternative minimum taxable income over $2,000,000.
Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.

To the extent dividends paid to Shareholders of the Tax-Free Fund are derived
from taxable income (for example, from interest on certificates of deposit or
repurchase agreements) or from long-term or short-term capital gains, such
dividends will be subject to federal income tax.

The U.S. Treasury Securities Fund, the Cash Management Fund and the Tax-Free
Fund do not expect to realize any long-term capital gains and, therefore, do not
foresee paying any "capital gain dividends" as described in the Code.

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

Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made to them each year.

<PAGE> 53

long-term capital loss), subject to certain adjustments and excluding the excess
of any net long-term capital gain for the taxable year over the net short-term
capital loss, if any, for such year. The policy of the Fund is to distribute as
dividends substantially all of its investment company taxable income each year.
With respect to the Equity Funds, the dividends received deduction for
corporations will apply to such ordinary income distributions to the extent of
the total qualifying dividends received by a Fund from domestic corporations for
the taxable year. Because substantially all of the net investment income of the
Bond, Intermediate Income, Short-Term Income and Balanced Funds are expected to
be derived from earned interest, it is anticipated that no part of any
distributions from such Funds will be eligible for the dividends received
deduction for corporations.

Distribution by each of the Equity Funds, the Bond Fund and the Intermediate
Income, Short-Term Income and Balanced Funds of the excess of net long-term
capital gain over net short-term capital loss is taxable to Shareholders as
long-term capital gain, regardless of how long the Shareholder has held the
Retail Shares and whether such gains are received in cash or reinvested in
additional Retail Shares. Such distributions are not eligible for the dividends
received deduction for corporations.

Dividends declared by a fund in October, November or December of any year
payable to Shareholders of record on a specified date in such months will be
deemed to have been received by Shareholders and paid by the Funds on December
31 of such year if such dividends are actually paid during January of the
following year.

Investors considering buying Retail Shares on or just before the record date
of a dividend should be aware that the amount of the forthcoming dividend
payment, although in effect a return of capital, will be taxable.

A taxable gain or loss may be realized by a Shareholder upon his or her
redemption, transfer or exchange of Retail Shares of any of the Non-Money Market
Funds depending upon the tax basis and their price at the time of redemption,
transfer, or exchange. Generally, a Shareholder may include sales charges
incurred upon the purchase of Fund Shares in his or her tax basis for such
Shares for the purpose of determining gain or loss on a redemption, transfer or
exchange of such Shares. However, if the Shareholder effects an exchange of such
Shares for Shares of another Fund within 90 days of the purchase and is able to
reduce the sales charges applicable to new Shares (by virtue of the Company's
exchange privilege), the amount equal to such reduction may not be included in
the tax basis of the Shareholder's exchanged Shares but may be included (subject
to the same limitation) in the tax basis of the new Shares.

Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made each year.

THE PENNSYLVANIA TAX-FREE BOND FUND: Qualification as a regulated investment
company under the Code for a taxable year requires, among other things, that the
Pennsylvania Tax-Free Bond Fund distribute to its Shareholders an amount equal
to at least 90% of its tax-exempt income and at least 90% of its investment
company taxable income (if any) for each taxable year. In general, the
Pennsylvania Tax-Free Bond Fund's investment company taxable income will be its
taxable income, including dividends, interest and short-term capital gains (the
excess of net short-term capital gain over net long-term capital loss), subject
to certain adjustments and excluding the excess of any net long-term capital
gain for the taxable year over the net short-term capital loss, if any, for such
year. The policy of the Pennsylvania Tax-Free Bond Fund is to distribute as
dividends substantially all of its investment company taxable income each year.
If, at the close of each quarter of its taxable year, at least 50% of the value
of the Fund's total assets is invested in obligations exempt from federal income
tax, the Fund will be eligible to pay dividends that are excludable by
shareholders from gross income for federal income tax purposes ("exempt interest
dividends"), unless under the circumstances applicable to the particular
Shareholder the exclusion would be disallowed. (See Statement of Additional
Information--"Taxes"). The total amount of exempt interest dividends paid by the
Fund to Shareholders with respect to any taxable year cannot exceed the amount
of federally tax-exempt interest received by the Fund during the year less any
expenses allocable to such interest. The Pennsylvania Tax-Free Bond Fund,
however, does not expect to realize significant long-term capital gains and,
therefore, does not foresee paying significant "capital gains dividends" as
described in the Code.

A percentage of the interest on indebtedness incurred or continued to purchase
or carry Retail Shares of the Pennsylvania Tax-Free Bond Fund, equal to the
percentage of the total non-capital gain

<PAGE> 54

dividends distributed during the Shareholder's taxable year that is exempt
interest dividends, will not be deductible for federal income tax purposes. It
should be noted that, upon the sale or exchange of Shares of the Pennsylvania
Tax-Free Bond Fund, if the Shareholder has not held such Retail Shares for more
than six months, any loss on the sale or exchange of those Retail Shares will be
disallowed to the extent of the tax-exempt dividends received with respect to
the Retail Shares.

A taxable gain or loss may be realized by a Shareholder upon his or her
redemption, transfer or exchange of Retail Shares of the Pennsylvania Tax-Free
Bond Fund depending upon the tax basis of such shares when purchased and their
price at the redemption, transfer, or exchange. Generally, a Shareholder may
include sales charges incurred upon the purchase of Retail Shares in his or her
tax basis for such Shares for the purpose of determining gain or loss on a
redemption, transfer or exchange of such shares. However, if the Shareholder
effects an exchange of such shares for shares of another Fund within 90 days of
the purchase and is able to reduce the sales charges applicable to new shares
(by virtue of the Company's exchange privilege), the amount equal to such
reduction may not be included in the tax basis of the Shareholder's exchanged
Shares but may be included (subject to the same limitation) in the tax basis of
the new Shares.

If the Pennsylvania Tax-Free Bond Fund should hold certain private activity
bonds issued after August 7, 1986, Shareholders must include, as an item of tax
preference, the portion of dividends paid by the Fund that is attributable to
interest on such bonds in their federal alternative minimum taxable income for
purposes of determining liability (if any) for the 26-28% alternative minimum
tax applicable to individuals and the 20% alternative minimum tax and the
environment tax applicable to corporations. Corporations must also take all
exempt-interest dividends into account in determining certain adjustments for
federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed at the rate of .12% on the excess of
the corporation's modified federal alternative minimum taxable income over
$2,000,000. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.

Dividends declared by the Pennsylvania Tax-Free Bond Fund in October, November
or December of any year payable to Shareholders of record on a specified date in
such months will be deemed to have been received by Shareholders and paid by the
Fund on December 31 of such year if such dividends are actually paid during
January of the following year.

Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made to them each year.

PENNSYLVANIA STATE TAX

Under current Pennsylvania law, shareholders of the Tax-Free, U.S. Treasury
Securities and Pennsylvania Tax-Free Bond Funds will not be subject to
Pennsylvania Personal Income Tax on distributions from the Funds attributable to
interest income from Pennsylvania Municipal Obligations or from obligations of
the United States, its territories and certain of its agencies and
instrumentalities ("Federal Obligations"). However, Pennsylvania Personal Income
Tax will apply to distributions from the Funds attributable to gain realized on
the disposition of any investment, including Pennsylvania Municipal Obligations
or Federal Obligations, or to interest income from investments other than
Pennsylvania Municipal Obligations or Federal Obligations. Shareholders also
will be subject to the Pennsylvania Personal Income tax on any gain they realize
on the disposition of shares in one of the Funds.

Distributions attributable to interest or gain from Pennsylvania Municipal
Obligations or Federal Obligations are not currently subject to the Philadelphia
School District Net Income Tax. However, it is anticipated that rules similar to
those described above for the Pennsylvania Personal Income Tax ultimately will
be applied, and a recently enacted Pennsylvania statute specifically authorized
local taxation of gains on Pennsylvania Municipal Obligations and Federal
Obligations. Accordingly, there can be no assurance that distributions made by
the Tax-Free, U.S. Treasury Securities and Pennsylvania Tax-Free Bond Funds that
are attributable to such gains will be exempt from the Philadelphia School
District Net Income Tax, except that gains attributable to any investment held
for more than six months will continue to be exempt. A shareholder's gain on the
disposition of a share in one of the Funds that he has held for more than six
months will not be subject to the Philadelphia School District Net Income Tax.

<PAGE> 55

Shareholders of the Tax-Free, U.S. Treasury Securities and Pennsylvania
Tax-Free Bond Funds are not subject to any of the personal property taxes
currently in effect in Pennsylvania to the extent that a Fund is comprised of
Pennsylvania Municipal Obligations and Federal Obligations. The taxes referred
to include the county personal property tax imposed on residents of Pennsylvania
by the Act of June 17, 1913, P.L. 507, as amended, and the additional personal
property taxes imposed on Pittsburgh residents by the School District of
Pittsburgh under the Act of June 20, 1947, P.L. 733, as amended, and by the City
of Pittsburgh under Ordinance No. 599 of December 28, 1967.

PERFORMANCE INFORMATION

MONEY MARKET FUNDS: Seven-day yields are computed for each of the Cash
Management, Tax-Free and U.S. Treasury Securities Funds by determining the net
change in the value of a hypothetical pre-existing account in each such Fund
which has a balance of one Retail Share at the beginning of the period, dividing
the net change by the value of the account at the beginning of the period to
obtain the base period return, and multiplying the base period return by 365/7.
The net change in the value of an account in each such Fund includes the value
of additional Retail Shares purchased with dividends from the original Retail
Share and dividends declared on the original Share and any such additional
Retail Shares, net of all fees charged to all Shareholder accounts in proportion
to the length of the base period and such Fund's average account size, but does
not include gains and losses or unrealized appreciation and depreciation. In
addition, these Funds may use effective annualized yield quotations computed on
a compounded basis by adding 1 to the base period return (calculated as
described above), raising that sum to a power equal to 365/7, and subtracting 1
from the result.

The Tax-Free Fund may also present its "taxable equivalent yield" and "taxable
equivalent effective yield" with respect to its Retail Shares which reflect the
amount of income subject to federal income taxation that a taxpayer in a stated
tax bracket would have to earn in order to obtain the same after-tax income as
that derived from the yield and effective yield, respectively, of the Tax-Free
Fund. The taxable equivalent yield and taxable equivalent effective yield will
be significantly higher than the yield and effective yield of the Tax-Free Fund.

From time to time, performance information for the Funds showing their average
annual total return, aggregate total return and yield may be presented in
advertisements, sales literature and in reports to Shareholders. The Funds'
performance information may be quoted and compared to those of other mutual
funds with similar investment objectives and to stock or other relevant indices.
For example, the yields of these Funds may be compared to the IBC/Donoghue's
Money Fund Average, which is an average compiled by IBC/Donoghue's Money Fund
Report of Holliston, MA 01746, a widely recognized independent publication that
monitors the performance of money market funds, to the average yields reported
by the Bank Rate Monitor from money market deposit accounts offered by the 50
leading banks and thrift institutions in the top six standard metropolitan
statistical areas, or to data prepared by Lipper Analytical Services, Inc., as
well as to yield data as reported in publications such as Money Magazine,
Forbes, Barron's, The Wall Street Journal, The New York Times, Business Week,
American Banker, Fortune, Institutional Banker, Institutional Investor, Ibbotson
Associates, Inc., Morningstar, Inc., CDA/Wiesenberger, Pensions and Investments,
U.S.A. Today and local newspapers. In addition to yield information, general
information about these Funds that appears in a publication such as those
mentioned above may also be quoted or reproduced in advertisements or in reports
to Shareholders. Reports to shareholders may contain performance information on
any fund of the Company.

Yields will fluctuate and any quotation of yield should not be considered as
representative of the future performance of any Fund. Since yields fluctuate,
yield data cannot necessarily be used to compare an investment in these Funds'
Shares with bank deposits, savings accounts, and similar investment alternatives
which often provide an agreed or guaranteed fixed yield for a stated period of
time. Shareholders should remember that performance and yield are generally
functions of kind and quality of the investments held in a portfolio, portfolio
maturity, operating expenses, and market conditions. Any fees charged by an
affiliate of the Investment Advisor or correspondents thereof with respect to
customer accounts in investing in shares of these Funds will not be included in
yield calculations; such fees, if charged, would reduce the actual yield from
that quoted.

<PAGE> 56

NON-MONEY MARKET FUNDS: From time to time performance information with
respect to Retail Shares for these Funds showing each Fund's average annual
total return, aggregate total return and yield may be presented in
advertisements, sales literature and in reports to Shareholders. Such
performance figures are based on historical earnings and are not intended to
indicate future performance. Average annual total return will be calculated on
an annual basis (with respect to the International Equity, Short-Term Income and
Balanced Funds, for certain periods since the establishment of such Fund), and
will, unless otherwise noted, reflect the imposition of the maximum sales
charge. For the information of Shareholders not subject to a sales charge, the
Funds may also publish average annual total returns which include no sales
charge. Average annual total return is measured by comparing the value of an
investment in a Fund at the beginning of the relevant period to the redemption
value of the investment at the end of the period (assuming immediate
reinvestment of any dividends or capital gains distributions) and annualizing
the result. Aggregate total return is calculated similarly, however, the
resulting difference is not annualized. Yield will be computed by dividing such
Fund's net investment income per share earned during a recent 30-day period by
such Fund's per share maximum offering price (reduced by any undeclared earned
income expected to be paid shortly as a dividend) on the last day of the period
and annualizing the result.

Quotations of total return will reflect the maximum sales load charged by a
Fund, except that the Fund may also provide, in conjunction with such
quotations, additional quotations that do not reflect a sales charge when the
quotations are being provided to investors who are exempt from the sales charges
described in this Prospectus. Similarly, a Fund may provide yield quotations in
investor communications (other than advertisements) based on a share's net asset
value (rather than its maximum offering price) per share on the last day of the
period covered by the yield computation. Because these additional quotations
will not reflect the maximum sales charge payable by non-exempt investors, such
performance quotations will be higher than the performance quotations computed
in the manner described in the preceding paragraph.

The Pennsylvania Tax-Free Bond Fund may also quote its "taxable equivalent
yield" which demonstrates the level of taxable yield necessary to produce an
after-tax equivalent to the Fund's tax-free yield. It is calculated by
increasing the Fund's yield (calculated as above) by the amount necessary to
reflect the payment of federal and Pennsylvania income taxes at a stated tax
rate. The taxable equivalent yield will always be higher than the Fund's yield.

Investors may also judge the performance of a Fund, by comparing it to the
performance of other mutual funds with comparable investment objectives and
policies through various mutual fund or market indices such as those prepared by
Dow Jones & Co., Inc. and Standard & Poor's Ratings Group, Division of McGraw
Hill and to data prepared by Lipper Analytical Services, Inc. Comparisons may
also be made to indices or data published in Money Magazine, Forbes, Barron's,
The Wall Street Journal, The New York Times, Business Week, American Banker,
Fortune, Institutional Banker, Institutional Investor, Ibbotson Associates,
Inc., Morningstar, Inc., CDA/Wiesenberger, Pensions and Investments, U.S.A.
Today and local newspapers. In addition to yield information, general
information about these Funds that appears in a publication such as those
mentioned above may also be quoted or reproduced in advertisements or in reports
to Shareholders. Reports to Shareholders may contain performance information on
any Fund of the Company.

Yield and total return are functions of the type and quality of instruments
held in the portfolio, operating expenses, and market conditions. Consequently,
current yields and total return will fluctuate and are not necessarily
representative of future results. Any fees charged by an affiliate of the
Investment Advisor or a correspondent thereof with respect to customer accounts
for investing in shares of the Fund will not be included in performance
calculations; such fees, if charged, would reduce the actual yield and total
return from that quoted.

<PAGE> 57

MANAGEMENT OF THE COMPANY

TRUSTEES

Overall responsibility for management of the Company rests with its Board of
Trustees, who are elected by the Shareholders of the Company's Funds. The
Statement of Additional Information contains the names of and general background
information concerning each trustee.

INVESTMENT ADVISOR

Meridian Investment Company (the "Investment Advisor") is the investment
advisor of the Company. Located in Malvern, Pennsylvania, the Investment Advisor
is a subsidiary of Meridian Bancorp, Inc., a regional multi-bank holding company
with assets over $14 billion, providing a full array of financial and asset
management, commercial banking, and real estate services. As of November 1,
1994, the Investment Advisor managed and advised a total of $5.0 billion in a
variety of balanced, equity and fixed-income portfolios.

Subject to the general supervision of the Company's Board of Trustees and in
accordance with the investment objectives and restrictions of each Fund, the
Investment Advisor manages the Funds, makes decisions with respect to and places
orders for all purchases and sales of the Funds' investment securities, and
maintains the Funds' records relating to such purchases and sales.

The following individuals serve as portfolio managers for the Funds and are
primarily responsible for the day-to-day management of the portfolios:

Craig A. Moyer, CFA, is a Senior Vice President and Senior Fixed Income
Manager. Mr. Moyer has been with Meridian Investment Company (or a predecessor)
since 1977. Mr. Moyer began his investment career in 1974 and obtained his B.A.
from Pennsylvania State University. Mr. Moyer has been a part of the Fixed
Income Unit overseeing the Bond Funds since their inception. Mr. Moyer currently
manages the Intermediate Income Fund and the Balanced Fund.

Cathy L. Rahab is an Assistant Vice President and Portfolio Manager with
Meridian Investment Company. Ms. Rahab began her investment career in 1986 and
obtained her B.S. in Business Administration from Villanova University. Ms.
Rahab joined the Fixed Income Unit in July of 1994. Mr. Rahab currently manages
the Money Market Funds and the Short-Term Income Fund.

Christine M. Frampton is an Investment Officer and Fixed Income Portfolio
Manager with Meridian Investment Company since April 1990. Ms. Frampton began
her investment career with Merrill Lynch & Co. in 1987 and obtained her B.A.
from University of Delaware and M.B.A. from St. Joseph's University. Ms.
Frampton has been part of the Fixed Income Unit overseeing the Bond Funds since
September, 1992. Ms. Frampton currently manages the Pennsylvania Tax-Free Fund.

Joseph E. Stocke, CFA, is a Senior Vice President and Senior Equity Manager.
Mr. Stocke has been with Meridian Investment Company (or a predecessor) since
1983. Mr. Stocke began his investment career in 1982 and obtained his B.S. in
Economics attending The Wharton School, and University of Pennsylvania and
completed graduate courses at New York University. Mr. Stocke has been part of
the Equity Unit overseeing the Equity Fund and the Special Equity Fund since
their inception. Mr. Stocke currently manages the Balanced Fund.

Leslie M. Varrelman is a Vice President and Fixed Income Manager and has been
with Meridian Investment Company since January 1994. Previously Ms. Varrelman
was Vice President of CoreStates Investment Advisers where she managed the
commingled fixed income funds and managed the Limited Maturity Products area.
Ms. Varrelman obtained her B.S. in Business Administration from Juniata College
in 1981. Ms. Varrelman currently manages the Bond Fund.

For the services provided and expenses assumed pursuant to its investment
advisory agreement with the Company, the Investment Advisor is entitled to
receive a fee from the Fund, computed daily and paid monthly, at an annual rate
equal to the lesser of (a) (i) .40% of the average daily net assets of each of
the Cash Management, Tax-Free and U.S. Treasury Securities Funds, (ii) .74% of
the average daily net assets of each of the Equity, Bond, Intermediate Income,
Pennsylvania Tax-Free Bond and Short Term Income Funds, (iii) .75% of the
average daily net assets of the Balanced Fund, (iv) 1.00% of the average daily
net assets of the International Equity Fund and (v) 1.50% of the average daily
net assets of the Special Equity Fund, or (b) such fee as may from time to time
be agreed upon in writing by a Fund and the Investment Advisor in advance of the
period to which the fee relates. See "Expense

<PAGE> 58

Summary." The maximum investment advisory fees payable by the Special Equity,
Balanced and International Equity Funds respectively, are higher than the
investment advisory fees paid by most comparable mutual funds.

SUB-ADVISOR

Marvin & Palmer Associates, Inc., 1201 N. Market Street, Suite 2300,
Wilmington, Delaware 19801-1165, is Sub-advisor for the International Equity
Fund under an agreement with the Advisor (the "Sub-advisory Agreement"). The
Sub-advisor is responsible for the investment and reinvestment of the
International Equity Fund's assets and the placement of brokerage transactions
in connection therewith. For its services under the Sub-advisory Agreement, the
Sub-advisor is paid a monthly fee by the Investment Advisor calculated on an
annual basis equal to .75% of the first $100 million of International Equity
Fund's average daily net assets, .70% of the second $100 million of
International Equity Fund's average daily net assets, .65% of the third $100
million of International Equity Fund's average daily net assets, and .60% of
International Equity Fund's average daily net assets in excess of $300 million.

The Sub-advisor, a privately held company, was founded in 1986 by David F.
Marvin and Stanley Palmer. The stock of the Sub-advisor is owned by Messrs.
Marvin and Palmer and twenty other holders. The Sub-advisor is engaged in the
management of global, non-United States and emerging markets equity portfolios
for institutional accounts. At September 30, 1994, the Sub-advisor managed a
total of $2.8 billion in investments for 47 institutional investors.

The following five individuals will share the management of International
Equity Fund on behalf of the Sub-advisor:

David F. Marvin, CFA, is chairman of the Sub-advisor and founded the firm
together with Mr. Palmer in 1986. Before founding the Subadvisor, Mr. Marvin was
Vice president in charge of DuPont Corporation's $10 billion internally-managed
pension fund. Prior to that Mr. Marvin was Associate Portfolio Manager, and the
Head Portfolio Manager, for Investors Diversified Services' IDS Stock Fund. Mr.
Marvin started in the investment business in 1965 as a security analyst for
Chicago Title & Trust Company. He received his M.B.A. from Northwestern
University and his B.S. from the University of Illinois, and is a Chartered
Financial Analyst and a member of the Financial Analysts Federation.

Stanley Palmer, CFA, is President of the Sub-advisor and co-founder of the
firm. Mr. Palmer was Equity Portfolio Manager for DuPont Corporation from 1978
through 1986, an analyst and portfolio manager at Investors Diversified Services
from 1971 through 1978, and an analyst at Harris Trust & Savings Bank from 1964
through 1971. He received his M.B.A. from the University of Iowa and his
B.S. from Gustavus Adolphus College, and is a Chartered Financial Analyst and a
member of the Financial Analysts Federation.

Terry B. Mason is a Vice President and Portfolio Manager of the Sub-advisor.
Before joining the Sub-advisor, Mr. Mason was employed for 14 years by DuPont
Corporation,the last five as international equity analyst and international
trader. He received his M.B.A. from Widener University and his B.A. from
Glassboro State College.

Jay F. Middleton is a portfolio manager for the Sub-advisor and joined the
firm in 1989. He received his B.A. from Wesleyan University.

Todd D. Marvin is a portfolio manager for the Sub-advisor and joined the firm
in 1991. Before joining the Sub-advisor, Mr. Marvin was employed by Oppenheimer
& Company as an analyst in investment banking. Mr. Marvin received his B.A. from
Wesleyan University.

ADMINISTRATOR AND DISTRIBUTOR

SEI Financial Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), provides the Company with administrative
services, including fund accounting, regulatory reporting, necessary office
space, equipment, personnel and facilities. SEI Financial Services Company (the
"Distributor"), a wholly-owned subsidiary of SEI, serves as distributor.

Effective May 1, 1995, the Administrator will receive a fee, which is
calculated daily and paid monthly, at a maximum annual rate of 0.17% of the
average daily net assets of each Fund. Until April 30, 1995, the current
administrator will receive administration fees equal to .20% of the average
daily net assets of each Fund.

<PAGE> 59

CUSTODIANS AND TRANSFER AGENT

Citibank, N.A. serves as custodian for each Fund other than the International
Equity Fund. The Bank of New York serves as custodian for the International
Equity Fund. The Administrator also serves as Transfer Agent for the Company.
State Street Bank and Trust Company serves as the Sub-Transfer Agent for the
Company pursuant to an agreement with the Administrator.

DISTRIBUTION AND SERVICES PLAN

Rule 12b-1 adopted by the SEC under the 1940 Act permits an investment company
to pay directly or indirectly expenses associated with the distribution of its
shares in accordance with a plan adopted by an investment company's trustees and
approved by its shareholders. Pursuant to such Rule, with respect to Retail
Shares of the International Equity, Short-Term Income and Balanced Funds, and
subject to shareholder approval with respect to Retail Shares of each of the
other Funds, the Company has adopted a Distribution and Services Plan (the
"Distribution Plan"). Pursuant to the Distribution Plan, each Fund is be
authorized to pay or reimburse the distributor for certain expenses that are
incurred in connection with shareholder and distribution Services.

Payments under the Distribution Plan are calculated daily and paid monthly at
an annual rate not to exceed .40% of the average daily net asset value of Retail
Shares of each Fund. Such amount may be used by the Distributor to pay (i) banks
and their affiliates (including Meridian Bank and its affiliates), and other
institutions, including broker-dealers (collectively "Shareholder
Organizations") in connection with providing administrative support services to
the holders of a Fund's Retail Shares or (ii) financial institutions and
industry professionals (such as insurance companies, investment counsellors,
accountants and estate planning firms (but not including banks and savings and
loan associations)), broker-dealers, and the Distributor's affiliates and
subsidiaries (collectively, "Participating Organizations") in connection with
providing distribution services and for expenses assumed in connection with such
services. Payments pursuant to the Distribution Plan are used (i) to compensate
organizations for providing distribution assistance relating to Retail Shares,
(ii) for promotional activities intended to result in the sale of Retail Shares
such as to pay for the preparation, printing and distribution of prospectuses to
other than current shareholders, (iii) printing and distributing advertising and
sales literature and reports to shareholders used in connection with this sale
of a Fund's Retail Shares, and (iv) personnel and communicative equipment used
in servicing shareholder accounts and prospective shareholder inquiries.

Fees paid pursuant to the Distribution Plan are accrued daily and paid
monthly, and are charged as expenses of Retail Shares of a Fund as accrued.

The services provided by Shareholder Organizations may include processing
purchase, exchange, and redemption requests from Customers and placing orders
with the Transfer Agent; processing dividend and distribution payments from a
Fund on behalf of Customers; providing information periodically to Customers
showing their ownership of shares; providing sub-accounting with respect to
Shares beneficially owned by Customers or the information necessary for
sub-accounting; responding to inquiries from Customers concerning their
investment in shares; arranging for bank wires; and providing such other similar
services as may be reasonably requested.

The Company understands that Shareholder Organizations may charge fees to
their Customers who are the owners of shares in connection with their Customer
accounts. These fees would be in addition to any amounts which may be received
by a Shareholder Organization under its Servicing Agreement with the Company.
The Servicing Agreements require, however, a Shareholder Organization to
disclose to its Customers any compensation payable to the Shareholder
Organization by the Company and any other compensation payable by the Customers
in connection with the investment of their assets in shares. Customers of
Shareholder Organizations should read this Prospectus in light of the terms
governing their accounts with their Shareholder Organizations.

The services provided by Participating Organizations may include aggregating
and placing purchase exchange and redemption orders directly with the Company's
Transfer Agent, engaging in advertising with respect to a fund's Retail Shares,
preparing, printing and distributing a fund prospectus, reports and sales
literature, and such other similar services as the Distributor may reasonably
request to the extent that Participating Organization is permitted to do so
under applicable statutes, rules or regulations. A participating organization
may from time to time also undertake to perform administration

<PAGE> 60

support services similar to those identified above with respect to Shareholder
Organizations.

Conflict of interest restrictions may apply to the receipt by Shareholder
Organizations of compensation from the Company in connection with the investment
of fiduciary assets in shares. Shareholder Organizations, including banks
regulated by the Comptroller of the Currency, the Federal Reserve Board, or the
FDIC, and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor, or state securities
commissions, are urged to consult their legal advisers before investing such
assets in shares.

EXPENSES

The Investment Advisor and the Administrator each bear all expenses in
connection with the performance of their services as investment advisor and
administrator, respectively, other than the cost of securities (including
brokerage commissions) purchased for the Company. Each Fund of the Company will
bear expenses relating to its respective operations including the following:
taxes; interest; brokerage fees and commissions; fees and travel expenses of the
Trustees of the Company; Securities and Exchange Commission fees; state
securities qualification expenses; costs of preparing and printing prospectuses
for regulatory purposes and for distribution to current Shareholders; outside
auditing and legal expenses; advisory and administration fees; fees and
out-of-pocket expenses of the custodian and transfer agent; expenses incurred
for pricing securities owned by each respective Fund; insurance premiums; costs
of maintenance of the Company's existence; costs of Shareholders' reports and
meetings; proxy solicitation expenses; costs of Board of Trustees meetings and
any extraordinary expenses incurred in each Fund's operation. The holders of
Retail Shares of a Fund will not bear the cost of any activity primarily
intended to result in the distribution of its Shares; such costs will be borne
by the Distributor.

BANKING LAWS

Future changes in federal or state statutes and regulations relating to
permissible activities of banks or bank holding companies and their subsidiaries
and affiliates as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations could change the
manner in which the Investment Advisor may continue to perform investment
advisory services for the Company. See the Statement of Additional Information
- -- "Banking Laws" for further discussion.

GENERAL INFORMATION

DESCRIPTION OF THE COMPANY AND ITS SHARES

The Company was organized as a Massachusetts trust with transferrable Shares
on August 1, 1989. The Company consists of eleven portfolios, each having two
classes of shares, Institutional Shares and Retail Shares: the Cash Management
Fund; the Tax-Free Fund; the U.S. Treasury Securities Fund; the Equity Fund; the
International Equity Fund; the Special Equity Fund; the Bond Fund; the
Intermediate Income Fund; the Pennsylvania Tax-Free Bond Fund; the Short-Term
Income Fund and the Balanced Fund. Each Share represents an equal proportionate
interest in a Fund with other Shares of the same class, and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
that Fund as are declared at the discretion of the Board of Trustees. Shares
have a par value of $.001 per Share and do not have preemptive or conversion
rights.

Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for any fractional shares held. Shareholders will
vote in the aggregate and not by class except as otherwise expressly required by
law. For example, Shareholders of the Funds will vote in the aggregate with
other shareholders of the Company with respect to the election of Trustees and
the ratification of the selection of independent accountants. Shareholders of a
Fund will vote as a Fund, however, and not in the aggregate with other
shareholders of the Company, for purposes of approval of that Fund's investment
advisory agreement. Voting rights are not cumulative and, accordingly, holders
of more than 50% of the aggregate Shares of the Company may elect all of the
Trustees.

As of November 1, 1994, Meridian Bancorp, Inc. indirectly possessed or shared
power to dispose or vote with respect to more than 25% of the outstanding shares
of the Company and therefore may be

<PAGE> 61

considered to be a controlling person of the Company for purposes of the Act.

Annual meetings of Shareholders are not required by the Agreement and
Declaration of Trust, the Investment Company Act of 1940 or other authority
except, under certain circumstances, to elect Trustees, amend the Agreement and
Declaration of Trust, approve investment advisory and distribution agreements,
ratify the selection of accountants and to satisfy certain other requirements.
Shareholders owning not less than 10% of the outstanding shares of the Company
entitled to vote may cause the Board of Trustees to call a special meeting of
Shareholders. At such a meeting, a quorum of Shareholders (constituting a
majority of votes attributable to all outstanding Shares of the Company), by
majority vote, has the power to remove one or more Trustees. To the extent
required by law, the Company will assist in Shareholder communication in such
matters.

MULTIPLE CLASSES OF SHARES

In addition to Retail Shares, the Company also offers Institutional Shares of
the Funds, under an exemptive order granted by the Securities and Exchange
Commission. Institutional Shares are sold through procedures that are
established by the Distributor to bank trust departments purchasing
Institutional Shares on behalf of the fiduciary, advisory, agency, custody or
other similar accounts maintained by, or on behalf of, their customers.
Institutional Shares are not sold subject to a sales charge and do not bear
expenses under the Distribution Plan pertaining to Retail Shares. In addition,
Retail Shares may bear additional retail transfer agency expenses. A sales
person or other person entitled to receive compensation for selling or servicing
the shares may receive different compensation with respect to one particular
class of shares over another in the same Fund. For further details regarding
eligibility requirements for the purchase of Institutional Shares, call the
Company at (800) 344-2716.

The amount of dividends payable with respect to Institutional Shares will
exceed dividends on Retail Shares as a result of the 12b-1 fees applicable to
Retail Shares.

MISCELLANEOUS

Shareholders will receive unaudited mid-year reports and audited annual
reports describing the investment operations of all of the Company's Funds. The
Company may include information in its Annual Reports and Semi-Annual Reports to
Shareholders that (i) describes general economic trends, (ii) describes general
trends within the financial services industry or the mutual fund industry, (iii)
describes past or anticipated portfolio holdings for Funds within the Company or
(iv) describes investment management strategies for such Funds. Such information
is provided to inform Shareholders of the activities of a Fund for the most
recent fiscal year or half-year and to provide the views of the Advisor and/or
Company officers regarding expected trends and strategies.

As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to" a Fund means the consideration received by the Company
upon the issuance or sale of Shares in that Fund, together with all income,
earnings, profits, and proceeds derived from the investment thereof including
any proceeds from the sale, exchange, or liquidation of such investments, and
any funds or payments derived from any reinvestment of such proceeds, and any
general assets of the Company not readily identified as belonging to a
particular Fund that are allocated to that Fund by the Company's Board of
Trustees. The Board of Trustees may allocate such general assets in any manner
it deems fair and equitable. It is anticipated that the factor that will be used
by the Board of Trustees in making allocations of general assets to particular
Funds will be the relative net assets of the respective Funds at the time of
allocation. Assets belonging to a particular Fund are charged with the direct
liabilities and expenses in respect of that Fund, and with a share of the
general liabilities and expenses of the Company not readily identified as
belonging to a particular Fund that are allocated to that Fund in proportion to
the relative net asset values of the respective Funds at the time of allocation.
The allocations of general assets and general liabilities and expenses of the
Company to particular Funds will be determined in accordance with generally
accepted accounting principles. Determinations by the Board of Trustees of the
Company as to the timing of the allocation of general liabilities and expenses
and as to the timing and allocable portion of any general assets with respect to
a particular Fund are conclusive.

<PAGE> 62

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

Inquiries regarding the Fund may be directed in writing to the Company at 680
East Swedesford Road, Wayne, PA 19087-1658, or by calling toll-free (800)
344-2716.

<PAGE> 63

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<PAGE> 64

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<PAGE> 65

INSTITUTIONAL SHARES
Cash Management Fund
Tax-Free Fund
U.S. Treasury Securities Fund
Equity Fund
Special Equity Fund
Bond Fund
Intermediate Income Fund
Pennsylvania Tax-Free Bond Fund
Balanced Fund
Short-Term Income Fund
International Equity Fund

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

PROSPECTUS
FEBRUARY 21, 1995

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

<PAGE> 66

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................................................................... 2
Expense Summary....................................................................... 4
Financial Highlights.................................................................. 5
Investment Objectives and Policies.................................................... 10
How to Purchase and Redeem Shares..................................................... 15
Valuation of Shares................................................................... 18
Dividends............................................................................. 18
Other Investment Policies............................................................. 19
Investment Restrictions............................................................... 28
Taxes................................................................................. 31
Performance Information............................................................... 34
Management of the Company............................................................. 36
General Information................................................................... 39
</TABLE>

[MERIDIAN Investment Company LOGO]
INVESTMENT ADVISOR

SEI FINANCIAL SERVICES COMPANY
DISTRIBUTOR

CON-F-002-01

<PAGE> 67

CONESTOGA FAMILY OF FUNDS
INSTITUTIONAL SHARES

<TABLE>
<S> <C>
680 East Swedesford Road For information,
Wayne, Pennsylvania 19087-1658 call (800) 344-2716.
</TABLE>

MONEY MARKET FUNDS

THE CONESTOGA CASH MANAGEMENT FUND'S investment objective is to seek current
income with liquidity and stability of principal.

THE CONESTOGA TAX-FREE FUND'S investment objective is to seek current income
which is exempt from regular federal income tax with liquidity and stability of
principal.

THE CONESTOGA U.S. TREASURY SECURITIES FUND'S investment objective is to seek
current income with liquidity and stability of principal.

EQUITY FUNDS

THE CONESTOGA EQUITY FUND seeks capital growth by investing principally in a
diversified portfolio of common stocks.

THE CONESTOGA INTERNATIONAL EQUITY FUND'S investment objective is to seek
long-term growth of capital.

THE CONESTOGA SPECIAL EQUITY FUND seeks capital growth by investing
principally in a diversified portfolio of common stocks.

BOND FUNDS

THE CONESTOGA BOND (FORMERLY THE INCOME) FUND'S investment objective is to
seek to maximize long-term total return by investing principally in a
diversified portfolio of debt securities.

BALANCED FUND

THE BALANCED FUND'S investment objective is to seek a balance of capital
appreciation and current income consistent with the preservation of capital.

This Prospectus sets forth concisely the information about Institutional
Shares of the Funds that a prospective investor ought to know before investing.
Investors should read this Prospectus and retain it for future reference. The
Statement of Additional Information bears the same date as this Prospectus, is
incorporated by reference in its entirety into this Prospectus, and is available
upon request without charge by writing to the Company at its address or by
calling the Company at the telephone number shown above.
------------------------

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

The date of this Prospectus is February 21, 1995.

<PAGE> 68

PROSPECTUS SUMMARY

<TABLE>
<S> <C>
Shares Offered................ Units of Beneficial Interest of a separate class (the
"Institutional Shares") of each Fund.
Offering Price and
Sales Charge................ The public offering price of Institutional Shares of each
Fund is equal to its net asset value per Share which, with
respect to the Cash Management, Tax-Free and U.S. Treasury
Securities Funds, the Company will seek to maintain at
$1.00.
Minimum Purchase.............. $1,000 minimum initial investment with no minimum subsequent
investment.
Investment Objectives......... MONEY MARKET FUNDS: the CASH MANAGEMENT FUND and the U.S.
TREASURY SECURITIES FUND will each seek current income with
liquidity and stability of principal. The TAX-FREE FUND will
seek current income which is exempt from regular federal
income tax with liquidity and stability of principal.
EQUITY FUNDS: The EQUITY FUND and the SPECIAL EQUITY FUND
will each seek capital growth by investing primarily in a
diversified portfolio of common stocks. The INTERNATIONAL
EQUITY FUND will seek long-term growth of capital.
BOND FUNDS: The BOND FUND will seek to maximize long-term
total return by investing principally in a diversified
portfolio of debt securities. The INTERMEDIATE INCOME FUND
has a primary investment objective of seeking current income
by investing principally in a diversified portfolio of debt
securities with expected or remaining maturities of ten
years or less, and a secondary objective of seeking capital
growth. The investment objective of the PENNSYLVANIA
TAX-FREE BOND FUND is to seek a high level of current income
consistent with the preservation of capital, which income is
exempt from federal individual income tax and, to the extent
possible, from Pennsylvania state and local personal income
tax, and is not a tax preference item under the federal
alternative minimum tax. Shares of the Pennsylvania Tax-Free
Bond Fund will be exempt from Pennsylvania personal property
taxes. The SHORT-TERM INCOME FUND'S investment objective is
to seek consistent current income with relative stability of
principal by investing principally in a diversified
portfolio of investment grade debt securities.
BALANCED FUND: The BALANCED FUND'S investment objective is
to seek a balance of capital appreciation and current income
consistent with the preservation of capital.
Investment Policies........... MONEY MARKET FUNDS: The CASH MANAGEMENT FUND invests
principally in short-term high-quality money market
instruments. The TAX-FREE FUND invests principally in
short-term high-quality municipal obligations the interest
on which is exempt from regular federal income tax and not
treated as a specific tax preference item under the federal
alternative minimum tax. The U.S. TREASURY SECURITIES FUND
invests exclusively in short-term obligations issued or
guaranteed by the U.S. Treasury and in repurchase agreements
secured by U.S. Treasury instruments.
</TABLE>

<PAGE> 69

<PAGE> 70

EXPENSE SUMMARY

The purpose of the following table is to assist a potential purchaser of
Institutional Shares of a Fund in understanding the various costs and expenses
that an investor in such Shares of the Fund will bear directly or indirectly.

<TABLE>
<CAPTION>
CONESTOGA CONESTOGA CONESTOGA
MONEY EQUITY CONESTOGA BALANCED
MARKET FUNDS FUNDS BOND FUNDS FUND
------------ ------------- ---------- -------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)............................................ 0% 0% 0% 0%
Maximum Sales Load Imposed on Reinvested Dividends........... 0% 0% 0% 0%
Deferred Sales Load.......................................... 0% 0% 0% 0%
Redemption Fees.............................................. 0% 0% 0% 0%
Exchange Fee................................................. 0% 0% 0% 0%
</TABLE>

<TABLE>
<CAPTION>
CASH U.S. TREASURY INTERNATIONAL
MANAGEMENT TAX-FREE SECURITIES EQUITY EQUITY
FUND FUND FUND FUND FUND
---------- ------------ ------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES EQUITY (as a
percentage of average net assets)
Advisory Fees After Fee Waivers(1).............. .34% .25% .32% .74% 1.00%
Other Expenses After Reimbursements(2).......... .25% .32% .25% .27% .92%
----- ----- ----- ---------- ------
Total Fund Operating Expenses................... .59% .57% .57% 1.01% 1.92%
=========== =========== ============ ========== ===========
</TABLE>

<TABLE>
<CAPTION>
PENNSYLVANIA
SPECIAL INTERMEDIATE TAX-FREE SHORT-TERM
EQUITY BOND INCOME BOND INCOME BALANCED
FUND FUND FUND FUND FUND FUND
------- ---------- ------------ ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees After Fee Waivers(1)...... .50% .40% .40% .25% .50% .75%
Other Expenses After
Reimbursements(2)..................... .39% .28% .28% .59% .37% .48%
------- ----- ----- ----- ----- ------
Total Fund Operating Expenses........... .89% .68% .68% .84% .87% 1.23%
====== =========== =========== ============ ========== ===========
</TABLE>

- ---------

(2) "Other Expenses" After Reimbursements include administration fees. Until
April 30, 1995, administration fees will equal .20% of each Fund's net
assets. Effective May 1, 1995, an Administration Agreement with a new
Administrator provides that administration fees will not exceed .17% of each
Fund's average assets. (See "MANAGEMENT OF THE FUND -- Investment Advisor
and Administrator and Distributor.")

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Cash Management Fund.................... $ 6 $19 $33 $ 74
Tax-Free Fund........................... $ 6 $18 $32 $ 71
U.S. Treasury Securities Fund........... $ 6 $18 $32 $ 71
Equity Fund............................. $ 10 $32 $56 $124
International Equity Fund............... $ 19 $60
Special Equity Fund..................... $ 9 $28 $49 $110
Bond Fund............................... $ 7 $22 $38 $ 85
Intermediate Income Fund................ $ 7 $22 $38 $ 85
Pennsylvania Tax-Free Bond Fund......... $ 9 $27 $47 $104
Short-Term Income Fund.................. $ 9 $28
Balanced Fund........................... $ 13 $39
</TABLE>

<PAGE> 71

The Expense Summary has been restated with respect to the Cash Management,
Tax-Free, U.S. Treasury Securities, Equity, Bond, Intermediate Income and
Pennsylvania Tax-Free Bond Funds to reflect various projected fee and expense
rates for the fiscal year ending October 31, 1995. The Special Equity Fund did
not commence investment operations until March 15, 1994. The International
Equity, Short-Term Income and Balanced Funds are expected to commence operations
shortly after the effective date of this Prospectus. Without fee waivers and
expense reimbursements by the Investment Advisor, Total Fund Operating Expenses
for the Cash Management Fund, the Tax-Free Fund, the U.S. Treasury Securities
Fund, the Equity Fund, the International Equity Fund, the Special Equity Fund,
the Bond Fund, the Intermediate Income Fund, the Pennsylvania Tax-Free Bond
Fund, the Short-Term Income Fund and the Balanced Fund would be .70%, .77%,
.70%, 1.06%, 1.97%, 1.94%, 1.07%, 1.07%, 2.06%, 1.16%, and 1.28%, respectively,
for the fiscal year or period ending October 31, 1995. Certain of the fee
waivers and expense reimbursements reflected in the Expense Summary are based
upon informal commitments of the Investment Advisor in connection with the
implementation of the Company's multiple class structure to waive or reimburse
certain expenses until February 1996; there can be no assurance that such
commitments will continue thereafter. There may be a charge of $7.00 for each
redemption paid by wire. See "MANAGEMENT OF THE FUND -- Expenses" for a more
complete discussion of the shareholder transaction expenses and annual operating
expenses of the Funds.

The information in the foregoing fee tables and examples relates only to the
Institutional Shares of each Fund. Each of the Company's eleven Funds also offer
another class of Shares known as Retail Shares. The Institutional Shares and
Retail Shares of each Fund are subject to the same expenses except that
Institutional Shares are not subject to a Rule 12b-1 fee and the Institutional
Shares of the Equity, International Equity, Special Equity, Bond, Intermediate
Income, Pennsylvania Tax-Free Bond, Short-Term Income and Balanced Funds are not
sold with a sales charge.

FINANCIAL HIGHLIGHTS

The "Financial Highlights" in the following tables supplements the Company's
financial statements contained in the Statement of Additional Information and
sets forth certain historic investment results of Shares of each Fund that had
commenced investment operations prior to the date of this Prospectus. The
Company's financial statements and the data reported in "Financial Highlights"
for years ended October 31, 1994, 1993, 1992 and 1991 and period ended October
31, 1990 with respect to the Cash Management, Tax-Free, U.S. Treasury
Securities, Equity, Bond and Intermediate Income Funds, the year ended October
31, 1994 and 1993 and period ended October 31, 1992 with respect to the
Pennsylvania Tax-Free Bond Fund and the period ended October 31, 1994 with
respect to the Special Equity Fund were audited by the Company's independent
auditors, whose report thereon is incorporated by reference in the Statement of
Additional Information. Further information about the performance of the Company
is contained in the Company's annual report which may be obtained without
charge.

<PAGE> 72

CASH MANAGEMENT FUND
(For a Fund Share Outstanding Throughout the Years and Period presented.)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,(1) NOVEMBER 27, 1989
-------------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991 1990(1)
-------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------
INVESTMENT ACTIVITIES
Net Investment Income........................ 0.034 0.028 0.037 0.060 0.073
-------- -------- -------- -------- -------
DISTRIBUTIONS
Net Investment Income........................ (0.034) (0.028) (0.037) (0.060) (0.073)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =================
TOTAL RETURN................................... 3.41% 2.80% 3.79% 6.22% 7.59%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)............ $140,545 $215,223 $113,096 $151,166 $39,061
Ratio of Expenses to Average Net Assets...... 0.71% 0.65% 0.48% 0.49% 0.42%(2)
Ratio of Net Investment Income to Average
Net Assets................................. 3.32% 2.75% 3.76% 5.84% 7.95%(2)
Ratio of Expenses to Average Net Assets*..... 0.99% 0.87% 0.70% 0.79% 0.75%(2)
Ratio of Net Investment Income to Average
Net Assets*................................ 3.05% 2.53% 3.55% 5.54% 7.62%(2)
</TABLE>

- ---------
* During the periods the investment advisory, administration and/or
shareholder servicing plan fees were voluntarily reduced. If such voluntary
fee reductions had not occurred the ratios would have been as indicated.

(1) Period from commencement of operations.

(2) Annualized.

TAX-FREE FUND
(For a Fund Share Outstanding Throughout the Years and Period presented.)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, NOVEMBER 27, 1989
-------------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991 1990(1)
-------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------
INVESTMENT ACTIVITIES
Net Investment Income........................ 0.022 0.020 0.028 0.044 0.052
-------- -------- -------- -------- -------
DISTRIBUTIONS
Net Investment Income........................ (0.022) (0.020) (0.028) (0.044) (0.052)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =================
TOTAL RETURN................................... 2.21% 1.97% 2.88% 4.44% 5.31%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)............ $ 54,904 $ 46,239 $ 46,295 $ 45,647 $24,167
Ratio of Expenses to Average Net Assets...... 0.37% 0.45% 0.33% 0.43% 0.31%(2)
Ratio of Net Investment Income to Average
Net Assets................................. 2.22% 1.95% 2.83% 4.37% 5.57%(2)
Ratio of Expenses to Average Net Assets*..... 1.05% 0.96% 0.73% 0.87% 0.91%(2)
Ratio of Net Investment Income to Average
Net Assets*................................ 1.53% 1.44% 2.45% 3.93% 4.97%(2)
</TABLE>

- ---------
* During the periods the investment advisory, administration and/or
shareholder servicing plan fees were voluntarily reduced. If such voluntary
fee reductions had not occurred the ratios would have been as indicated.

(1) Period from commencement of operations.

(2) Annualized.

<PAGE> 73

U.S. TREASURY SECURITIES FUND
(For a Fund Share Outstanding Throughout the Years and Period presented.)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, NOVEMBER 27, 1989
-------------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991 1990(1)
-------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES
Net Investment Income........................ 0.030 0.025 0.036 0.058 0.073
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net Investment Income........................ (0.030) (0.025) (0.036) (0.058) (0.073)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =================
TOTAL RETURN................................... 3.07% 2.57% 3.64% 5.96% 7.44%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)............ $325,379 $257,934 $340,904 $341,931 $ 106,771
Ratio of Expenses to Average Net Assets...... 0.72% 0.66% 0.46% 0.51% 0.38%(2)
Ratio of Net Investment Income to Average
Net Assets................................. 3.03% 2.55% 3.65% 5.61% 7.73%(2)
Ratio of Expenses to Average Net Assets*..... 0.97% 0.87% 0.69% 0.79% 0.79%(2)
Ratio of Net Investment Income to Average
Net Assets*................................ 2.78% 2.33% 3.44% 5.32% 7.32%(2)
</TABLE>

- ---------
* During the periods the investment advisory, administration and/or
shareholder servicing plan fees were voluntarily reduced. If such voluntary
fee reductions had not occurred the ratios would have been as indicated.

(1) Period from commencement of operations.

(2) Annualized.

EQUITY FUND
(For a Fund Share Outstanding Throughout the Years and Period presented.)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, FEBRUARY 28, 1990
-------------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991 1990(1)
-------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........... $ 15.39 $ 13.93 $ 13.08 $ 8.95 $ 10.00
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES
Net Investment Income........................ 0.11 0.14 0.19 0.26 0.14
Net Realized and Unrealized Gains (Losses) on
Investments................................ 0.22 1.89 1.02 4.13 (1.05)
-------- -------- -------- -------- --------
Total from Investment Activities......... 0.33 2.03 1.21 4.39 (0.91)
-------- -------- -------- -------- --------
DISTRIBUTIONS
Net Investment Income........................ (0.11) (0.14) (0.19) (0.26) (0.14)
Net Realized Gains........................... (0.61) (0.43) (0.17)
-------- -------- -------- -------- --------
Total Distributions...................... (0.72) (0.57) (0.36) (0.26) (0.14)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD................. $ 15.00 $ 15.39 $ 13.93 $ 13.08 $ 8.95
======== ======== ======== ======== =================
TOTAL RETURN................................... 2.21% 14.90% 9.27% 49.37% (9.22)%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)............ $ 50,128 $ 45,677 $ 28,103 $ 12,830 $ 5,982
Ratio of Expenses to Average Net Assets...... 1.49% 1.20% 0.92% 0.54% 0.65%(2)
Ratio of Net Investment Income to Average
Net Assets................................. 0.75% 0.94% 1.47% 2.30% 2.29%(2)
Ratio of Expenses to Average Net Assets*..... 1.51% 1.41% 1.23% 1.48% 1.59%(2)
Ratio of Net Investment Income to Average
Net Assets*................................ 0.73% 0.73% 1.17% 1.36% 1.35%(2)
Portfolio Turnover Rate........................ 35.41% 23.68% 38.90% 68.15% 42.78%
</TABLE>

- ---------
* During the periods the investment advisory, administration and/or
shareholder servicing plan fees were voluntarily reduced. If such voluntary
fee reductions had not occurred the ratios would have been as indicated.

(1) Period from commencement of operations.

(2) Annualized.

<PAGE> 74

SPECIAL EQUITY FUND
(For a Fund Share Outstanding Throughout the Period presented.)

<TABLE>
<CAPTION>
MARCH 15, 1994 TO
OCTOBER 31,
1994(1)
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......................................................... $ 10.00
-------
INVESTMENT ACTIVITIES
Net Investment Income...................................................................... 0.06
Net Realized and Unrealized Gains (Losses) on Investments.................................. (0.63)
-------
Total from Investment Activities....................................................... (0.57)
-------
DISTRIBUTIONS
Net Investment Income...................................................................... (0.06)
Net Realized Gains.........................................................................
-------
Total Distributions.................................................................... (0.06)
-------
NET ASSET VALUE, END OF PERIOD............................................................... $ 9.37
=================
TOTAL RETURN................................................................................. (5.72)%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000).......................................................... $10,069
Ratio of Expenses to Average Net Assets.................................................... 0.15%(2)
Ratio of Net Investment Income to Average Net Assets....................................... 1.06%(2)
Ratio of Expenses to Average Net Assets*................................................... 2.10%(2)
Ratio of Net Investment Income to Average Net Assets*...................................... (0.89)%(2)
Portfolio Turnover Rate...................................................................... 38.70%
</TABLE>

- ---------
* During the periods the investment advisory, administration and/or
shareholder servicing plan fees were voluntarily reduced. If such voluntary
fee reductions had not occurred the ratios would have been as indicated.

(1) Period from commencement of operations.

(2) Annualized.

BOND FUND
(For a Fund Share Outstanding Throughout the Years and Period presented.)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, FEBRUARY 28, 1990
--------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991 1990(1)
------- ------- ------- ------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................ $ 11.18 $ 10.89 $ 10.65 $ 9.96 $ 10.00
------- ------- ------- ------ ------
INVESTMENT ACTIVITIES
Net Investment Income............................. 0.53 0.56 0.70 0.78 0.50
Net Realized and Unrealized Gains (Losses) on
Investments..................................... (1.04) 0.54 0.32 0.69 (0.04)
------- ------- ------- ------ ------
Total from Investment Activities.............. (0.51) 1.10 1.02 1.47 0.46
------- ------- ------- ------ ------
DISTRIBUTIONS
Net Investment Income............................. (0.52) (0.56) (0.68) (0.78) (0.50)
Net Realized Gains................................ (0.34) (0.25) (0.10)
------- ------- ------- ------ ------
Total Distributions........................... (0.86) (0.81) (0.78) (0.78) (0.50)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD...................... $ 9.81 $ 11.18 $ 10.89 $10.65 $ 9.96
======= ======= ======= ====== =================
TOTAL RETURN........................................ (4.75)% 10.63% 9.82% 15.16% 4.64%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)................. $23,377 $27,346 $15,180 $7,255 $ 4,593
Ratio of Expenses to Average Net Assets........... 1.01% 0.88% 0.46% 0.47% 0.68%(2)
Ratio of Net Investment Income to Average
Net Assets...................................... 5.07% 5.16% 6.78% 7.71% 7.75%(2)
Ratio of Expenses to Average Net Assets*.......... 1.60% 1.49% 1.24% 1.41% 1.62%(2)
Ratio of Net Investment Income to Average
Net Assets*..................................... 4.48% 4.55% 6.01% 6.78% 6.81%(2)
Portfolio Turnover Rate............................. 231.88% 158.51% 99.03% 47.30% 22.57%
</TABLE>

- ---------
* During the periods the investment advisory, administration and/or
shareholder servicing plan fees were voluntarily reduced. If such voluntary
fee reductions had not occurred the ratios would have been as indicated.

(1) Period from commencement of operations.

(2) Annualized.

<PAGE> 75

INTERMEDIATE INCOME FUND
(For a Fund Share Outstanding Throughout the Years and Period presented.)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, FEBRUARY 28, 1990
--------------------------------------------- TO OCTOBER 31,
1994 1993 1992 1991 1990(1)
------- ------- ------- ------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................ $ 11.01 $ 10.87 $ 10.61 $10.12 $ 10.00
------- ------- ------- ------ ------
INVESTMENT ACTIVITIES
Net Investment Income............................. 0.50 0.53 0.65 0.77 0.48
Net Realized and Unrealized Gains (Losses) on
Investments..................................... (0.61) 0.21 0.29 0.50 0.12
------- ------- ------- ------ ------
Total from Investment Activities.............. (0.11) 0.74 0.94 1.27 0.60
------- ------- ------- ------ ------
DISTRIBUTIONS
Net Investment Income............................. (0.49) (0.53) (0.64) (0.77) (0.48)
Net Realized Gains................................ (0.14) (0.07) (0.04) (0.01)
------- ------- ------- ------ ------
Total Distributions........................... (0.63) (0.60) (0.68) (0.78) (0.48)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD...................... $ 10.27 $ 11.01 $ 10.87 $10.61 $ 10.12
======= ======= ======= ====== =================
TOTAL RETURN........................................ (0.97)% 6.99% 9.11% 12.94% 6.10%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)................. $21,247 $24,047 $16,718 $7,116 $ 3,986
Ratio of Expenses to Average Net Assets........... 0.90% 0.78% 0.47% 0.40% 0.75%(2)
Ratio of Net Investment Income to Average
Net Assets...................................... 4.66% 4.89% 6.31% 7.69% 7.42%(2)
Ratio of Expenses to Average Net Assets*.......... 1.64% 1.50% 1.24% 1.34% 1.69%(2)
Ratio of Net Investment Income to Average
Net Assets*..................................... 3.92% 4.17% 5.57% 6.76% 6.48%(2)
Portfolio Turnover Rate............................. 170.23% 90.17% 53.28% 32.94% 39.36%
</TABLE>

- ---------
* During the periods the investment advisory, administration and/or
shareholder servicing plan fees were voluntarily reduced. If such voluntary
fee reductions had not occurred the ratios would have been as indicated.

(1) Period from commencement of operations.

(2) Annualized.

PENNSYLVANIA TAX-FREE BOND FUND
(For a Fund Share Outstanding Throughout the Year and Period presented.)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 21, 1992
OCTOBER 31, TO OCTOBER 31,
1994 1993 1992(1)
------ ---------------- -------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................ $10.48 $ 9.77 $ 10.00
------ ------ ------
INVESTMENT ACTIVITIES
Net Investment Income......................................... 0.46 0.45
Net Realized and Unrealized Gains (Losses) on Investments..... (0.85) 0.70 (0.23)
------ ------ ------
Total from Investment Activities.......................... (0.39) 1.15 (0.23)
------ ------ ------
DISTRIBUTIONS
Net Investment Income......................................... (0.46) (0.44)
Net Realized Gains............................................ (0.07)
------ ------ ------
Total Distributions....................................... (0.53) (0.44)
------ ------ ------
NET ASSET VALUE, END OF PERIOD.................................. $ 9.56 $10.48 $ 9.77
====== ================ ===================
TOTAL RETURN.................................................... (3.90)% 11.94% (2.28)%
RATIOS/SUPPLEMENTARY DATA
Net Assets at End of Period (000)............................. $7,008 $5,883 $ 3,405
Ratio of Expenses to Average Net Assets....................... 0.38% 0.51% 2.67%(2)
Ratio of Net Investment Income to Average Net Assets.......... 4.61% 4.35% 0.52%(2)
Ratio of Expenses to Average Net Assets*...................... 1.57% 1.63% 3.41%(2)
Ratio of Net Investment Income to Average Net Assets*......... 3.42% 3.23% (0.22)%(2)
Portfolio Turnover Rate......................................... 37.23% 50.19% 31.37%
</TABLE>

- ---------
* During the periods the investment advisory, administration and/or
shareholder servicing plan fees were voluntarily reduced. If such voluntary
fee reductions had not occurred the ratios would have been as indicated.

(1) Period from commencement of operations.

(2) Annualized.

<PAGE> 76

INVESTMENT OBJECTIVES AND POLICIES

MONEY MARKET FUNDS

THE CONESTOGA CASH MANAGEMENT FUND

THE CONESTOGA U.S. TREASURY SECURITIES FUND

THE CONESTOGA TAX-FREE FUND

The Tax-Free Fund may invest in private activity bonds (e.g., bonds issued by
industrial development authorities) that are issued by or on behalf of public

<PAGE> 77

authorities to finance various privately-operated facilities. Private activity
bonds are included in the term "Municipal Obligations" only if the interest paid
thereon is exempt from regular federal income tax and is not treated as a
specific tax preference item under the federal alternative minimum tax for
either individuals or corporations. See "TAXES."

The Tax-Free Fund will invest only in those Municipal Obligations which are
considered by the Investment Advisor to present minimal credit risks and which
at the time of purchase are rated high quality, i.e., rated in one of the two
highest rating categories assigned by a Rating Organization in the case of
bonds; rated in the highest rating category assigned by a Rating Organization in
the case of notes, variable rate demand notes and tax-exempt commercial paper;
or which are unrated at the time of purchase but are determined to be of
comparable quality by the Investment Advisor pursuant to guidelines approved by
the Company's Board of Trustees. Municipal Obligations may be purchased in
reliance upon a rating only where the Rating Organization is not affiliated with
the issuer or guarantor of the Municipal Obligations. If a security is subject
to a demand feature, the security must receive both a short-term and a long-term
high quality rating or must be determined to be of comparable quality by the
Investment Advisor; except that where the demand feature is considered to be
"unconditional" under the Investment Company Act of 1940, the security may be
acquired solely in reliance on a short-term high quality rating or a
determination of comparable quality by the Investment Advisor. The applicable
Municipal Obligations ratings are described in Appendix "A" to the Statement of
Additional Information.

EQUITY FUNDS

THE CONESTOGA EQUITY FUND

<PAGE> 78

abilities, and liquidity. The Investment Advisor believes that its quantitative
approach reduces subjectivity in the stock selection process.

THE CONESTOGA INTERNATIONAL EQUITY FUND

The Fund may invest in securities of issuers with large, medium or small
capitalizations in any country, including but not limited to, Argentina,
Australia, Austria, Belgium, Canada, Chile, Colombia, Denmark, Finland, France,
Germany, Hong Kong, India, Ireland, Israel, Italy, Japan, South Korea, Malaysia,
Mexico, the Netherlands, New Zealand, Norway, Peru, the Philippines, Singapore,
Spain, Sweden, Switzerland, Taiwan, Thailand, the United Kingdom and Venezuela.
Normally, the Fund will invest at least 65% of its total assets in securities
traded in at least three foreign countries, including the countries listed
above. It is possible, although not currently anticipated, that up to 35% of the
Fund's assets could be invested in U.S. companies.

Under normal market conditions, it is expected that the Fund will be fully
invested in equity securities and related hedging instruments (except for
short-term investments of cash for liquidity purposes and pending investment).
However, during temporary defensive periods, the Fund may invest up to 100% of
its total assets in short-term obligations (with maturities of 12 months or
less) consisting of commercial paper (including variable amount master demand
notes), banker's acceptances, certificates of deposit, repurchase and reverse
repurchase agreements, and demand and time deposits of domestic or foreign banks
and savings and loan associations, and in money market mutual funds.

THE CONESTOGA SPECIAL EQUITY FUND

Many of the companies in which the Special Equity Fund invests will be small
and medium

<PAGE> 79

capitalized companies. Small capitalized companies are those organizations with
"stock market capitalizations" between $100 million and $1 billion and medium
capitalized companies are those organizations with stock market capitalizations
between $1 billion and $5 billion. "Stock market capitalizations" means the
total number of common shares outstanding multiplied by the market price per
share.

BOND FUNDS

THE CONESTOGA BOND FUND

The investment objective of the Bond Fund is to seek to maximize long-term
total return by investing principally in a diversified portfolio of debt
securities. The Bond Fund will normally invest at least 80% of the value of its
total assets in debt securities of all types. Debt securities include domestic
and foreign bonds, debentures, notes, equipment lease and trust certificates,
asset-backed and mortgage-backed securities, and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. In
addition, a portion of the Fund may from time to time be invested in first
mortgage loans and participation certificates in pools of mortgages issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, in
preferred stocks, and in debt securities which are convertible into, or
exchangeable for, common stocks, common stock obtained upon the conversion or
exchange of such securities, and short-term money market instruments and Money
Market Funds. Some of the securities in which the Fund invests may have warrants
or options attached.

THE CONESTOGA INTERMEDIATE INCOME FUND

The Intermediate Income Fund has a primary investment objective of seeking
current income by investing principally in a diversified portfolio of debt
securities with expected or remaining maturities of ten years or less, and a
secondary objective of seeking capital growth. The Fund will normally have an
average dollar-weighted portfolio maturity of three to ten years. The Fund will
normally invest at least 80% of the value of its total assets in debt securities
of all types. Debt securities include domestic and foreign bonds, debentures,
notes, equipment lease and trust certificates, asset-backed and mortgage-backed
securities, and obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. In addition, a portion of the Fund may from time
to time be invested in first mortgage loans and participation certificates in
pools of mortgages issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, in preferred stocks, and in debt securities which are
convertible into, or exchangeable for, common stocks, common stock obtained upon
the conversion or exchange of such securities, and short-term money market
instruments and Money Market Funds. Some of the securities in which the Fund
invests may have warrants or options attached.

THE CONESTOGA PENNSYLVANIA TAX-FREE
BOND FUND

<PAGE> 80

the issuer, is exempt from federal individual income tax and Pennsylvania state
and local personal income tax, and is not treated as a specific tax preference
item under the federal alternative minimum tax. During temporary defensive
periods, the Fund may invest without limitation in other types of securities.
These securities may include other types of bonds, notes, variable rate demand
notes and commercial paper, provided such securities are rated within the
relevant categories applicable to the Pennsylvania Municipal Obligations, or if
unrated, are of comparable quality as determined by the Investment Advisor at
the time of purchase. Other debt obligations, such as bank obligations, may be
included. Since the Fund's purchases will be limited to investment grade
securities, it will not acquire lower quality securities which would carry
higher yields and also greater risk.

Pennsylvania Municipal Obligations acquired by the Pennsylvania Tax-Free Bond
Fund will be investment grade at the time of purchase -- that is, obligations
rated in one of the four highest rating categories assigned by a Rating
Organization in the case of bonds; rated "Duff 1," "Duff 2," or "Duff 3" by
D&P, "F-1" or "F-2" by Fitch, "SP-1" or "SP-2" by S&P, or "MIG-1" or "MIG-2" by
Moody's in the case of notes; rated "Duff 1," "Duff 2," or "Duff 3" by D&P,
"F-1" or "F-2" by Fitch, or "VMIG-1" or "VMIG-2" by Moody's in the case of
variable rate demand notes; or rated "Duff 1," "Duff 2," or "Duff 3" by D&P,
"F-1" or "F-2" by Fitch, "A-1" or "A-2" by S&P, or "Prime-1" or "Prime-2" by
Moody's in the case of tax-exempt commercial paper. Unrated obligations
acquired by the Fund will be determined by the Investment Advisor to be of
comparable quality at the time of purchase to rated obligations that may be
acquired by the Fund. Obligations rated in the lowest of the top four rating
categories ("BBB" by D&P, Fitch, or S&P, or "Baa" by Moody's) 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. Subsequent to its purchase
by the Fund, an issue of Pennsylvania Municipal Obligations may cease to be
rated, or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Investment Advisor will consider such an event in
determining whether the Fund should continue to hold the obligation. See
"Appendix A" to the Statement of Additional Information for a description of
these rating designations.

THE CONESTOGA SHORT-TERM INCOME FUND

BALANCED FUND

THE CONESTOGA BALANCED FUND

<PAGE> 81

of its total assets will be in fixed-income securities (including short-term
obligations, long-term debt securities, and convertible debt securities and
preferred stocks to the extent their value is attributable to their fixed income
characteristics).

During temporary defensive periods, the Fund may invest up to 100% of its
total assets in short-term obligations (with maturities of 12 months or less)
consisting of commercial paper (including variable amount master demand notes),
banker's acceptances, certificates of deposit, repurchase and reverse repurchase
agreements, and demand and time deposits of domestic or foreign banks and
savings and loan associations, and in money market mutual funds.

GENERAL

HOW TO PURCHASE AND REDEEM SHARES

DISTRIBUTOR

Institutional Shares of each Fund are sold on a continuous basis by the
Company's distributor, SEI Financial Services Company (the "Distributor") in
connection with the requirements of qualified accounts maintained by or on
behalf of certain persons ("Customers") by the Investment Advisor, its related
companies or their correspondents ("Entities"). With respect to the Cash
Management, Tax-Free and U.S. Treasury Securities Funds (collectively, the
"Money Market Funds"), these procedures may include instructions under which a
Customer's account is "swept" automatically no less frequently than weekly and
amounts in excess of a minimum amount agreed upon by an Entity and its Customer
are invested by the Distributor in Shares of one or more of the Money Market
Funds depending upon the type of account or the instructions of the Customer.
The principal office of the Distributor is 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658.

Institutional Shares of a Fund sold to an Entity acting in a fiduciary,
advisory, custodial, or other similar capacity on behalf of Customers will
normally be held of record by the Entity. With respect to Institutional Shares
so sold, it is the responsibility of the holder of record to transmit purchase
or redemption orders to the Distributor and to deliver funds for the purchase
thereof on a timely basis. Beneficial ownership of Institutional Shares of the
Funds will be recorded by the Entities and reflected in the account statements
provided to Customers. Entities may exercise voting authority for those
Institutional Shares for which they had been granted authority by the Customer.
The minimum initial purchase is $1,000; however, there is no minimum subsequent
purchase. The minimum may be waived if purchases are made in connection with
qualified pension plans, payroll savings plans or other employer plans.
Purchasers will pay the sum of the next calculated net asset value per Share of
a Fund selected after the Distributor's agent's receipt of an order to purchase
Shares.

<PAGE> 82

OTHER INFORMATION REGARDING PURCHASES

MONEY MARKET FUNDS: Institutional Shares of these Funds are purchased at the
net asset value per Share of each such Fund (see "VALUATION OF SHARES") next
determined after receipt by the Distributor of an order in good form to purchase
Institutional Shares. An order to purchase Institutional Shares will be deemed
to have been received by the Distributor only when federal funds with respect
thereto are available to the Company's custodian for investment. Federal funds
are monies credited to a bank's account with a Federal Reserve Bank. Payment for
an order to purchase Institutional Shares which is transmitted by federal funds
wire will be available the same day for investment by the Company's custodian,
if received prior to noon. Payments transmitted by other means (such as by check
drawn on a member of the Federal Reserve System) will normally be converted into
federal funds within two banking days after receipt. The Company strongly
recommends that investors of substantial amounts use federal funds to purchase
Institutional Shares.

Purchases of Institutional Shares of the Money Market Funds will be effected
only on a Business Day (as defined in "VALUATION OF SHARES") of the Company. An
order received prior to a Valuation Time on any Business Day will be executed at
the net asset value determined as of the next Valuation Time on the date of
receipt. An order received after the last Valuation Time on any Business Day
will be executed at the net asset value determined as of the next Valuation Time
on the next Business Day of the Company. Institutional Shares purchased before
12:00 noon, (Eastern Time) begin earning dividends on the same Business Day. All
Institutional Shares continue to earn dividends through the day before their
redemption.

EQUITY, BOND AND BALANCED FUNDS: Purchases of Institutional Shares in these
Funds (the "Non-Money Market Funds") will be effected only on a Business Day.
The purchase price will be the net asset value per share (see "VALUATION OF
SHARES") as determined on the Business Day the order is received in good form by
the Distributor, but only if the Distributor receives the order in good form by
4:00 P.M. Eastern Time. Otherwise, the price will be determined as of 4:00 P.M.
Eastern Time on the next Business Day.

ALL FUNDS: The minimum investment is $1,000 for the initial purchase of
Institutional Shares by an investor. There is no minimum investment for
subsequent purchases. The minimum may be waived if purchases are made in
connection with qualified pension plans or other employer plans.

Depending upon the terms of a particular Customer account, an Entity may
charge its Customers account fees for services provided in connection with
investment in the Funds. Information concerning these services and any charges
will be provided by the Entities. This Prospectus should be read in conjunction
with any such information so received from the Entities.

The Company reserves the right to reject any order for the purchase of its
Institutional Shares in whole or in part.

Every Shareholder will receive a confirmation of each transaction in its
account, which will also show the total number of Institutional Shares of a Fund
owned by the Shareholder. Confirmation of purchases and redemptions of
Institutional Shares of the Funds by the Investment Advisor or one of its
affiliates or their correspondents on behalf of a Customer will be sent to the
Investment Advisor or the affiliate. Shareholders may rely on these statements
in lieu of certificates. Certificates representing Institutional Shares of the
Funds will not be issued.

EXCHANGE PRIVILEGE

Shareholders may exchange Institutional Shares of various Funds for
Institutional Shares of all or any of the Company's other Funds at respective
net asset values, provided that the Shareholder making the exchange is eligible
on the date of exchange to purchase Institutional Shares and the exchange is
made in states where it is legally authorized. An exchange is considered a sale
of shares and will result in a capital gain or loss for federal income tax
purposes. To receive the public offering price, Shareholders must, at the time
of purchase, give the Distributor sufficient information to permit confirmation
of qualification.

An Entity should notify the Company of its desire to make an exchange on
behalf of its Customer, and the Distributor will furnish the shareholder with
the prospectus of the appropriate class of shares of the Fund and the
appropriate authorization form.

The Institutional Shares exchanged must have a current value of at least
$1,000. A Shareholder may make an exchange request by calling

<PAGE> 83

(800) 344-2716 or by providing written instructions to the Distributor. An
investor should consult the Distributor for further information regarding
exchanges. During periods of significant economic or market change, telephone
exchanges may be difficult to complete.

REDEMPTION OF SHARES

Shareholders may redeem their Institutional Shares on any day that net asset
value is calculated (see "VALUATION OF SHARES"). Redemptions will be effected at
the net asset value per share next determined after receipt of a redemption
request. Redemptions may be requested by mail or by telephone. However, all or
part of a Customer's Institutional Shares may be redeemed in accordance with
instructions and limitations pertaining to his or her account at an Entity. For
example, if a Customer has agreed with an Entity to maintain a minimum balance
in his or her account with the Entity, and the balance in that account falls
below that minimum, the Customer may be obliged to redeem, or the Entity may
redeem for and on behalf of the Customer, all or part of the Customer's
Institutional Shares of a Fund to the extent necessary to maintain the required
minimum balance. There may be no notice period affording shareholders an
opportunity to increase the account balance in order to avoid an involuntary
redemption by an Entity.

REDEMPTION BY MAIL

OTHER INFORMATION REGARDING REDEMPTION OF
INSTITUTIONAL SHARES

All redemption orders are effected at the net asset value per share next
determined after a properly completed redemption order has been received, as
described above. The proceeds paid upon redemption of Institutional Shares in a
Fund may be more or less than the amount invested. Payment to Shareholders for
Institutional Shares redeemed will normally be made within seven days after
receipt by the Distributor of the request for redemption. To the extent
possible, however, the Company will attempt to honor requests from Shareholders
for (a) next day payments upon redemption of Institutional Shares in the
Non-Money Market Funds if received by the Distributor before 4:00 P.M., Eastern
Time, on a Business Day or, if received after 4:00 P.M., Eastern Time, within
two Business Days or (b) same day payments upon redemption of Institutional
Shares in the Money Market Funds if the request for redemption is received by
the Distributor before 12:00 noon, Eastern Time, on a Business Day or, if the
request for redemption is received after 12:00 noon, Eastern Time, to honor
requests for payment on the next Business Day; unless it would be
disadvantageous in the opinion of the Investment Advisor to the Fund to sell or
liquidate portfolio securities in an amount sufficient to satisfy requests for
payments in that manner.

At various times a Fund may be requested to redeem Institutional Shares for
which it has not yet received good payment. In such circumstances, the
forwarding of proceeds may be delayed for up to fifteen days until payment has
been collected for the purchase of such Institutional Shares. Such delay may be
avoided if Institutional Shares are purchased by wire transfer of federal funds.
The Funds intend to pay cash for all Institutional Shares redeemed, but under
abnormal conditions which make payment in cash unwise, payment may be made
wholly or partly in portfolio securities at their then current market value
equal to the redemption price. In such cases, an investor may incur brokerage
costs in converting such securities to cash.

See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION -- Matters Affecting
Redemption" and "Net Asset Value" in the Statement of Additional Information for
examples of when the Company may suspend the right of redemption or redeem
Institutional Shares involuntarily if it appears appropriate to do so in light
of the Company's responsibilities under the Investment Company Act of 1940.

<PAGE> 84

VALUATION OF SHARES

The net asset value of each of the Money Market Funds is determined, and the
Institutional Shares of each such Fund are priced, as of 12:00 noon and the
close of regular trading on the New York Stock Exchange ("NYSE") (generally,
4:00 P.M., Eastern Time) on each Business Day of the Company. The net asset
value of each of the Non-Money Market Funds is determined, and the Shares of
each such Fund are priced, as of the close of regular trading on the NYSE
(generally 4:00 P.M., Eastern Time) on each Business Day. Each time the net
asset value of a Fund is determined and its Institutional Shares priced is
referred to as a "Valuation Time." As used herein, a "Business Day" constitutes
any day on which the NYSE is open for trading and the Federal Reserve Bank of
Philadelphia is open, except days on which there are not sufficient changes in
the value of the Fund's portfolio securities that the Fund's net asset value
might be materially affected, or days during which no Shares are tendered for
redemption and no orders to purchase Shares are received. Currently, either the
NYSE or the Federal Reserve Bank of Philadelphia is closed on the customary
national business holidays of New Year's Day, Martin Luther King, Jr.,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day. Net asset value
per Share for purposes of pricing sales and redemptions is calculated by
dividing the value of all securities and other assets belonging to the
Institutional Shares of a Fund less the liabilities charged to such class of
such Fund by the number of its outstanding Institutional Shares.

The assets in the Money Market Funds are each valued based upon the amortized
cost method. Pursuant to the rules and regulations of the Securities and
Exchange Commission regarding the use of the amortized cost method, the Money
Market Funds will each maintain a dollar-weighted average portfolio maturity of
90 days or less. Although the Company seeks to maintain the net asset value per
Institutional Share of the Money Market Funds at $1.00 each, there can be no
assurance that net asset value will not vary.

The net asset value per Institutional Share of the Non-Money Market Funds will
fluctuate as the value of the investment portfolio of each Fund changes. The
securities in these Funds will be valued at market value. If market quotations
are not available, the securities will be valued by a method which the Board of
Trustees believes accurately reflects fair value. For further information about
valuation of investments, see the Statement of Additional Information.

DIVIDENDS

MONEY MARKET FUNDS: The net income of each of these Funds is declared daily as
a dividend to the respective Shareholders of each such Fund at the close of
business on the day of declaration. Dividends are paid monthly, and a
Shareholder's dividends will automatically be reinvested in additional full and
fractional Institutional Shares of such Fund at net asset value as of the date
of payment, unless the Shareholder elects to receive dividends in cash or
directs such dividends to another Fund (see "How To Purchase And Redeem
Shares--Directed Dividend Option"). Reinvested dividends receive the same tax
treatment as dividends paid in cash. In the case of redemptions, dividends will
be paid in cash not later than seven Business Days after a Shareholder's
complete redemption of his or her Institutional Shares in the Cash Management,
Tax-Free and U.S. Treasury Securities Funds. Such election, or any revocation
thereof, must be made in writing to the Transfer Agent, at State Street Bank and
Trust Company, (the "Transfer Agent") at The BFDS Building, 2 Heritage Drive,
Quincy, MA 02171, and will become effective with respect to dividends paid after
its receipt by the Transfer Agent.

<PAGE> 85

gains are distributed at least annually. A Shareholder will automatically
receive all income dividends and capital gain distributions from the Fund in
additional full and fractional Shares of the Fund at net asset value as of the
date of payment, unless the Shareholder elects to receive dividends or
distributions in cash. Such election, or any revocation thereof, must be made in
writing to the Transfer Agent at The BFDS Building, 2 Heritage Drive, Quincy, MA
02171, and will become effective with respect to dividends and distributions
having record dates after its receipt by the Transfer Agent.

OTHER INVESTMENT POLICIES

GOVERNMENT AND RELATED OBLIGATIONS

Obligations of certain agencies and instrumentalities of the U.S. Government,
such as the Government National Mortgage Association and the Export-Import Bank
of the United States, are supported by the full faith and credit of the U.S.
Treasury; others, such as those of the Federal National Mortgage Association,
may borrow from the Treasury in its discretion; others, such as those of the
Student Loan Marketing Association, are supported by the discretionary authority
of the U.S. Government to purchase the agency's obligations; still others, such
as those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage
Corporation, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government will provide financial support
to U.S. Government-sponsored agencies or instrumentalities if it is not
obligated to do so by law. The obligations of such agencies and
instrumentalities and stripped securities will only be purchased when the
Investment Advisor deems the credit risk with respect thereto to be minimal.

BANKER'S ACCEPTANCES

CERTIFICATES OF DEPOSIT AND TIME DEPOSITS

The Funds (except the U.S. Treasury Securities Fund) may invest in Eurodollar
Certificates of

<PAGE> 86

Deposits ("ECDs") which are U.S. dollar-denominated certificates of deposit
issued by offices of foreign and domestic banks located outside the United
States; Eurodollar Time Deposits ("ETDs") which are U.S. dollar-denominated
deposits in a foreign branch of a U.S. bank or a foreign bank; Canadian Time
Deposits ("CTDs") which are essentially the same as ETDs except they are issued
by Canadian offices of Canadian banks; and Yankee Certificates of Deposit
("Yankee CDs") which are certificates of deposit issued by a U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States.

COMMERCIAL PAPER

The Funds (except the U.S. Treasury Securities Fund) may invest in short-term
promissory notes issued by corporations (including variable amount master demand
notes). In the case of the Cash Management and Tax-Free Funds, such instruments
at the time of purchase (1) have received the highest short-term rating by at
least two Rating Organizations, (2) have received the highest short-term rating
by the only rating agencies to have rated the notes, or (3) are unrated, but are
determined to be of comparable quality pursuant to guidelines adopted by the
Board of Trustees. Instruments may be purchased in reliance upon a rating only
when the rating organization is not affiliated with the issuer or guarantor of
the instrument. For a description of the rating symbols used in this paragraph,
see the Appendix to the Statement of Additional Information. The Funds (except
the U.S. Treasury Securities Fund) may also invest in foreign commercial paper
("FCP") which is U.S. dollar-denominated commercial paper issued by a foreign
corporation or a foreign counterpart of a U.S. corporation.

ZERO COUPON OBLIGATIONS

FOREIGN SECURITIES

<PAGE> 87

EDRs, which are receipts evidencing an arrangement with a European bank similar
to that for ADRs and are designed for use in the European securities markets.
EDRs are not necessarily denominated in the currency of the underlying security.

Foreign companies generally are not subject to uniform accounting, auditing
and financial reporting standards comparable to those applicable to U.S.
domestic companies. There is generally less government regulation of securities
exchanges, brokers and listed companies abroad than in the U.S. Confiscatory
taxation or diplomatic developments could also affect investment in those
countries. In addition, foreign branches of U.S. banks, foreign banks and
foreign issuers may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic branches of U.S. banks and U.S. domestic issuers.

FOREIGN CURRENCY TRANSACTIONS

<PAGE> 88

However, these contracts tend to limit potential gains which might result from
positive changes in currency relationships. The Fund may also hedge its foreign
currency exchange rate risk by engaging in currency financial futures and
options transactions. The forecasting of short-term currency market movement is
extremely difficult and whether short-term hedging strategies would be
successful is highly uncertain.

OPTIONS

The Equity Funds and the Balanced Fund may also purchase put and call options
on securities and the International Equity Fund may purchase put and call
options on foreign currencies, in each case for the purposes of hedging against
market risks related to its portfolio securities and/or adverse movements in
exchange rates between currencies, as applicable. Purchasing options is a
specialized investment technique that entails a substantial risk of a complete
loss of the amounts paid as premiums to writers of options. These Funds may also
engage in writing call options from time to time as the Investment Advisor
(and/or the Sub-advisor with respect to the International Equity Fund) deems
appropriate. These Funds will write only covered call options (options on
securities owned by the Funds). These Funds will forego any capital appreciation
above the exercise price on securities on which it has written a call option. In
order to close out a call option it has written, a Fund will enter into a
"closing purchase transaction"--the purchase of a call option on the same
security with the same exercise price and expiration date as the call option
which the Fund previously wrote on a particular security. When a portfolio
security subject to a call option is sold, a Fund will effect a closing purchase
transaction to close out any existing call option on that security. If a Fund is
unable to effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or the Fund delivers the underlying
security upon exercise. Under normal conditions, it is not expected that the
underlying value of portfolio securities subject to such options would exceed
50% of the net assets of a Fund.

<PAGE> 89

investment of the Fund's assets at a more favorable rate of return. The
aggregate price of a security subject to a put may be higher than the price
which otherwise would be paid for the security without such an option, thereby
increasing the security's cost and reducing its yield.

FUTURES CONTRACTS

Aggregate initial margin deposits for futures contracts, and premiums paid for
related options, may not exceed 5% of the market value of the International
Equity Fund's total assets, and the value of securities that are the subject of
such futures and options (both for receipt and delivery) may not exceed 33-1/3%
of the market value of the Fund's total assets. Futures transactions will be
limited to the extent necessary to maintain the Fund's qualification as a
regulated investment company.

MUNICIPAL OBLIGATIONS

<PAGE> 90

particular variable or floating rate note. Nevertheless, the periodic
readjustments of their interest rates tend to assure that their value to a Fund
will approximate their par value. Variable and floating rate notes for which no
readily available market exists will not be purchased in an amount which,
together with all other illiquid securities held by the Fund, exceed 10% of the
Tax-Free Fund's total assets or 15% of the Pennsylvania Tax-Free Bond Fund's
total assets unless such notes are subject to a demand feature that will permit
a Fund to demand payment of the principal within seven days after demand by the
Fund.

REPURCHASE AGREEMENTS

Securities held by each Fund may be subject to repurchase agreements. There is
no limit on a Fund's investments in repurchase agreements. Under the terms of a
repurchase agreement, a Fund would acquire securities from financial
institutions such as banks insured by the Federal Deposit Insurance Corporation
with capital, surplus, and undivided profits in excess of $100,000,000 (as of
the date of their most recently published financial statements) or registered
broker-dealers which the Investment Advisor (and/or the Sub-advisor with respect
to the International Equity Fund) deems creditworthy pursuant to guidelines
approved by the Company's Board of Trustees, subject to the seller's agreement
to repurchase such securities at a mutually agreed-upon date and price. The
repurchase price would generally equal the price paid by a Fund plus interest
negotiated on the basis of current short-term rates, which may be more or less
than the rate on the underlying portfolio securities. The seller under a
repurchase agreement will be required to maintain the value of collateral held
pursuant to the agreement at not less than 102% of the repurchase price
(including accrued interest). The Investment Advisor will monitor the value of
the collateral on an ongoing basis to ensure that the required value is
maintained. In addition, securities subject to repurchase agreements will be
held in a segregated account. If the seller were to default on its repurchase
obligation or become insolvent, a Fund would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities by the Fund were delayed pending court action. Securities
subject to repurchase agreements will be held by the Company's custodian or
another qualified custodian or in the Federal Reserve/Treasury book-entry
system. Repurchase agreements are considered to be loans by a Fund under the
Investment Company Act of 1940.

<PAGE> 91

INVESTMENT COMPANIES

"WHEN-ISSUED" SECURITIES

Each Fund may also purchase debt securities on a "when-issued" basis.
"When-issued" securities are new securities purchased for delivery beyond the
normal settlement date at a stated price and yield thereby involving the risk
that the yield obtained in the transaction will be less than that available in
the market when delivery takes place. A Fund will generally not pay for such
securities and no income accrues on the securities until they are received.
Securities purchased on a "when-issued" basis are recorded as an asset when
purchased and are thereafter subject to changes in value based upon changes in
the general level of interest rates. Each Fund expects that commitments to
purchase "when-issued" securities will not exceed 25% of the value of its total
assets under normal market conditions, and that commitments by each Fund to
purchase "when-issued" securities will not exceed 60 days. If commitments to
purchase "when-issued" securities ever exceeded 25% of the value of its assets,
a Fund's liquidity and the Investment Advisor's (and/or Sub-advisor's with
respect to the International Equity Fund) ability to manage it might be
adversely affected. In "when-issued" transactions, a Fund relies on the seller
to complete the transaction; the seller's failure to do so may cause the Fund to
miss a price or yield considered to be advantageous. While purchases may be
considered a form of leverage, a Fund does not intend to purchase "when-issued"
securities for speculative purposes but only for the purpose of acquiring
portfolio securities.

SHORT-TERM TRADING AND PORTFOLIO TURNOVER

REVERSE REPURCHASE AGREEMENTS

<PAGE> 92

agreements are considered to be borrowings by a Fund under the Investment
Company Act of 1940.

ILLIQUID SECURITIES

ASSET-BACKED SECURITIES

The Cash Management, Bond, Intermediate Income, Short-Term Income and Balanced
Funds may purchase asset-backed securities. Like other debt securities,
asset-backed securities (i.e., securities backed by mortgages, installment sales
contracts, credit card receivables or other assets) are subject to declines in
market value during periods of rising interest rates. However, due to the
possibility of prepayment of the underlying obligations, asset-backed securities
have less potential for capital appreciation than other debt securities of
comparable maturities during periods of declining interest rates. As a result,
asset-backed securities may be less effective than other fixed income securities
as a means of locking in attractive interest rates for the long term.
Asset-backed securities purchased at a premium to par may subject these Funds to
losses equal to any unamortized premium if such obligations are repaid prior to
their scheduled maturities. The Cash Management, Bond, Intermediate Income, and
Balanced Funds will invest only in privately-issued asset-backed securities
which are readily marketable and rated at the time of purchase in the two
highest rating categories assigned by a Rating Organization. For a description
of rating symbols see Appendix "A" to the Statement of Additional Information.

MORTGAGE-BACKED SECURITIES

CORPORATE OBLIGATIONS

<PAGE> 93

real property or security interests in personal property and will vary in their
interest rates, maturities and times of issuance. These Funds will invest in
corporate debt securities only if they are rated at the time of purchase within
the four highest rating groups assigned by a Rating Organization or, if unrated,
which the Investment Advisor (and/or the Sub-advisor with respect to the
International Equity Fund) deems to be of comparable quality. Such securities
are considered high or medium-grade securities. Debt obligations rated in the
fourth highest rating group have some speculative characteristics and repayment
of principal and interest are more likely to be adversely affected by adverse
economic conditions or changing circumstances than are obligations in the higher
rated categories.

SHORT-TERM OBLIGATIONS

STAND-BY COMMITMENTS

MUNICIPAL NOTES

MUNICIPAL LEASES

The Pennsylvania Tax-Free Bond Fund may invest in municipal leases and
participations therein. These are obligations in the form of a lease or
installment purchase which is issued by state and local governments to acquire
equipment and facilities. Bonds from such obligations are generally exempt from
local and state taxes in the state of issuance. "Participations" in such leases
are undivided interests in a portion of the total obligation. Participations
entitle their holders to receive a pro rata share of all payments under the
lease. A trustee is usually responsible for administering the terms of the
Participation and enforcing the participants' rights in the underlying lease.

<PAGE> 94

have been adopted by the Board of Trustees: (1) the frequency of trades and
quotes for the obligation; (2) the number of dealers willing to purchase or sell
the obligation and the number of other potential buyers; (3) the willingness of
dealers to undertake to make a market in the security; (4) the nature of the
marketplace trades; (5) the general creditworthiness of the municipality and the
importance of the property covered by the lease to the municipality; and (6) the
likelihood that the marketability of the obligation will be maintained
throughout the time the obligation is held by the Fund.

SPECIAL RISKS AND CONSIDERATIONS

The Pennsylvania Tax-Free Bond Fund is classified as a non-diversified
investment company under the Investment Company Act of 1940. Investment return
on a non-diversified portfolio typically is dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio. Consequently, the change in value of any one security may affect the
overall value of a non-diversified portfolio more than it would a diversified
portfolio, and thereby subject the market-based net asset value per share of the
non-diversified portfolio to greater fluctuation. In addition, a non-diversified
portfolio may be more susceptible to economic, political and regulatory
developments than a diversified investment portfolio with similar objectives
would be.

Because the Fund will normally invest 80% or more of its net assets in
Pennsylvania Municipal Obligations, it is more susceptible to factors affecting
Pennsylvania issuers than is a comparable municipal bond fund not concentrated
in the obligations of issuers located in a single state. Pennsylvania tax-exempt
issuers may be adversely affected by local political and economic conditions and
developments within Pennsylvania. Although the General Fund of the Commonwealth
(the principal operating fund of the Commonwealth) experienced deficits in
fiscal 1990 and 1991, tax increases and spending decreases helped return the
General Fund balance to a surplus at June 30, 1992 of $87.5 million and at June
30, 1993 of $698.9 million. The deficit in the Commonwealth's
unreserved/undesignated funds also has been eliminated, and there was a surplus
of $64.4 million at June 30, 1993. However, rising unemployment, a relatively
high proportion of persons 65 and older, and court ordered increases in
healthcare reimbursement rates continue to place increased pressures on the tax
resources of the Commonwealth and its municipalities. In addition, certain
litigation is pending against the Commonwealth that could adversely affect its
ability to pay debt service. See the Statement of Additional Information for
further discussion of investment considerations associated with Pennsylvania
Municipal Obligations.

General obligations of Pennsylvania are currently rated "AA-" by S&P and Fitch
and "A1" by Moody's. There can be no assurance that the economic conditions on
which these ratings are based will continue or that particular bond issues may
not be adversely affected by changes in economic, political or other conditions.

INVESTMENT RESTRICTIONS

MONEY MARKET FUNDS

CASH MANAGEMENT FUND

The Cash Management Fund may not:

<PAGE> 95

limitation with respect to obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, domestic bank certificates of
deposit or banker's acceptances, and repurchase agreements secured by bank
instruments or obligations of the U.S. Government or its agencies or
instrumentalities; (b) wholly-owned finance companies will be considered to be
in the industries of their parents if their activities are primarily related to
financing the activities of their parents; and (c) utilities will be divided
according to their services. For example, gas, gas transmission, electric and
gas, electric, and telephone will each be considered a separate industry.

CASH MANAGEMENT AND U.S. TREASURY
SECURITIES FUNDS

The Cash Management and U.S. Treasury Securities Funds may not:

U.S. TREASURY SECURITIES FUND

TAX-FREE FUND

The Tax-Free Fund may not:

1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of its total assets
would be invested in such issuer (except that up to 25% of the value of the
Tax-Free Fund's total assets may be invested without regard to such 5%
limitation). For purposes of this limitation, a security is considered to be
issued by the government entity (or entities) whose assets and revenues back the
security; with respect to a private activity bond that is backed only by the
assets and revenues of a non-governmental user, a security is considered to be
issued by such non-governmental user.

NON-MONEY MARKET FUNDS

The Equity Funds, the Bond Fund and the Intermediate Income, Short-Term Income
and Balanced Funds may not:

<PAGE> 96

total assets of each such Fund may be invested without regard to such
limitations. There is no limit to the percentage of assets that may be invested
in U.S. Treasury bills, notes, or other obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.

The Pennsylvania Tax-Free Bond Fund may not:

1. Purchase securities of any one issuer (other than obligations issued or
guaranteed by the U.S. Government, the Commonwealth of Pennsylvania, and their
agencies, authorities, instrumentalities or political subdivisions) if
immediately thereafter more than 5% of the value of the Fund's total assets
would be invested in the securities of any one issuer, except that up to 50% of
the value of the Fund's total assets may be invested without regard to this 5%
limitation, provided, however, that not more than 25% of the Fund's total assets
may be invested in securities of one issuer. For purposes of this limitation, a
security is considered to be issued by the governmental entity (or entities)
whose assets and revenues back the security, or with respect to a private
activity bond that is backed only by the assets and revenues of a
non-governmental user, a security is considered to be issued by such non-
governmental user. In accordance with regulations promulgated by the Securities
and Exchange Commission, the guarantor of a guaranteed security may be
considered to be an issuer in connection with such guarantee.

<PAGE> 97

of the Fund's total assets at the time of such borrowing. The Fund will not
purchase securities while borrowings (including reverse repurchase agreements)
in excess of 5% of its total assets are outstanding.

* * *

Certain additional investment restrictions, and information about the Fund's
investments, are in the Statement of Additional Information.

TAXES

FEDERAL INCOME TAXES

MONEY MARKET FUNDS: For each of the Money Market Funds, qualification as a
regulated investment company under the Code requires, among other things, that
each Fund distribute to its Shareholders an amount equal to at least 90% of its
investment company taxable income and at least 90% of its tax-exempt income net
of certain deductions for each taxable year. In general, the investment company
taxable income of a Fund will be its taxable income, including interest, subject
to certain adjustments and excluding the excess of any net long-term capital
gain for the taxable year over the net short-term capital loss, if any, for such
year. The Company contemplates declaring as dividends 100% of the investment
company taxable income of each of the Money Market Funds (before deduction of
dividends paid). Such dividends will be taxable as ordinary income to the
respective Shareholders of the Cash Management and U.S. Treasury Securities
Funds who are not currently exempt from federal income taxes, whether such
dividends are received in cash or reinvested in additional shares. Federal
income taxes for distributions to individual retirement accounts and qualified
retirement plans are deferred under the Code. Because all of the net investment
income of the Cash Management and U.S. Treasury Securities Funds are expected to
be derived from earned interest, it is anticipated that no part of any
distribution will be eligible for the dividends received deduction for
corporations.

For the Tax-Free Fund, qualification as a regulated investment company under
the Code for a taxable year requires, among other things, that it distribute to
its Shareholders an amount equal to at least the sum of 90% of its
exempt-interest income, net of certain deductions, and 90% of its investment
company taxable income (if any) for such year. Certain dividends derived from
exempt-interest income (known as exempt-interest dividends) may be treated by
the Tax-Free Fund's Shareholders as items of interest excludable from their
federal gross income. (Shareholders who may be treated as a "substantial user"
or a "related person" to such user under the Code are advised to consult a tax
advisor with respect to whether exempt-interest dividends retain the exclusion.)
However, such dividends may be taxable to Shareholders under state or local law
as ordinary income, even though all or a portion of the distributions may be
derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such taxes. A percentage of the interest on indebtedness
incurred by a Shareholder to purchase or carry Institutional Shares of the
Tax-Free Fund, equal to the percentage of the total non-capital gain dividends
distributed among the Shareholder's taxable year that is tax-exempt

<PAGE> 98

dividends, will not be deductible for federal income tax purposes. It should be
noted that, upon the sale or exchange of Institutional Shares of the Tax-Free
Fund, if the Shareholder has not held such Shares for more than six months, any
loss on the sale or exchange of those shares will be disallowed to the extent of
tax-exempt dividends received with respect to the Shares.

Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made to them each year.

THE EQUITY FUNDS, THE BOND FUND AND THE INTERMEDIATE INCOME, SHORT-TERM INCOME
AND BALANCED FUNDS: Qualification as a regulated investment company under the
Code for a taxable year requires, among other things, that each of these Funds
distribute to its Shareholders an amount equal to at least 90% of its investment
company taxable income and at least 90% of its tax-exempt income net of certain
deductions for each taxable year. In general, each such Fund's investment
company taxable income will be its taxable income, including dividends, interest
and short-term capital gains (the excess of net short-term capital gain over net
long-term capital loss), subject to certain adjustments and excluding the excess
of any net long-term capital gain for the taxable year over the net short-term
capital loss, if any, for such year. The policy of the Fund is to distribute as
dividends substantially all of its investment company taxable income each year.
With respect to the Equity Funds, the dividends received deduction for
corporations will apply to such ordinary income distributions to the extent of
the total qualifying dividends received by a Fund from domestic corporations for
the taxable year. Because substantially all of the net investment income of the
Bond, Intermediate Income, Short-Term Income and Balanced Funds are expected to
be derived from earned interest, it is anticipated that no part of any
distributions from such Funds will be eligible for the dividends received
deduction for corporations.

Distribution by each of the Equity Funds, the Bond Fund and the Intermediate
Income, Short-Term Income and Balanced Funds of the excess of net long-term
capital gain over net short-term capital loss is taxable to Shareholders as
long-term capital gain, regardless of how long the Shareholder has held the
Institutional Shares and whether such gains are received in cash or reinvested
in additional Institutional Shares. Such distributions are not eligible for the
dividends received deduction for corporations.

Investors considering buying Institutional Shares on or just before the record
date of a dividend

<PAGE> 99

should be aware that the amount of the forthcoming dividend payment, although in
effect a return of capital, will be taxable.

A taxable gain or loss may be realized by a Shareholder upon his or her
redemption, transfer or exchange of Institutional Shares of any of the Non-Money
Market Funds depending upon the tax basis and their price at the time of
redemption, transfer, or exchange. Generally, a Shareholder may include sales
charges incurred upon the purchase of Fund Shares in his or her tax basis for
such Shares for the purpose of determining gain or loss on a redemption,
transfer or exchange of such Shares. However, if the Shareholder effects an
exchange of such Shares for Shares of another Fund within 90 days of the
purchase and is able to reduce the sales charges applicable to new Shares (by
virtue of the Company's exchange privilege), the amount equal to such reduction
may not be included in the tax basis of the Shareholder's exchanged Shares but
may be included (subject to the same limitation) in the tax basis of the new
Shares.

Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made each year.

THE PENNSYLVANIA TAX-FREE BOND FUND: Qualification as a regulated investment
company under the Code for a taxable year requires, among other things, that the
Pennsylvania Tax-Free Bond Fund distribute to its Shareholders an amount equal
to at least 90% of its tax-exempt income and at least 90% of its investment
company taxable income (if any) for each taxable year. In general, the
Pennsylvania Tax-Free Bond Fund's investment company taxable income will be its
taxable income, including dividends, interest and short-term capital gains (the
excess of net short-term capital gain over net long-term capital loss), subject
to certain adjustments and excluding the excess of any net long-term capital
gain for the taxable year over the net short-term capital loss, if any, for such
year. The policy of the Pennsylvania Tax-Free Bond Fund is to distribute as
dividends substantially all of its investment company taxable income each year.
If, at the close of each quarter of its taxable year, at least 50% of the value
of the Fund's total assets is invested in obligations exempt from federal income
tax, the Fund will be eligible to pay dividends that are excludable by
shareholders from gross income for federal income tax purposes ("exempt interest
dividends"), unless under the circumstances applicable to the particular
Shareholder the exclusion would be disallowed. (See Statement of Additional
Information -- "Taxes"). The total amount of exempt interest dividends paid by
the Fund to Shareholders with respect to any taxable year cannot exceed the
amount of federally tax-exempt interest received by the Fund during the year
less any expenses allocable to such interest. The Pennsylvania Tax-Free Bond
Fund, however, does not expect to realize significant long-term capital gains
and, therefore, does not foresee paying significant "capital gains dividends" as
described in the Code.

A percentage of the interest on indebtedness incurred or continued to purchase
or carry Institutional Shares of the Pennsylvania Tax-Free Bond Fund, equal to
the percentage of the total non-capital gain dividends distributed during the
Shareholder's taxable year that is exempt interest dividends, will not be
deductible for federal income tax purposes. It should be noted that, upon the
sale or exchange of Shares of the Pennsylvania Tax-Free Bond Fund, if the
Shareholder has not held such Institutional Shares for more than six months, any
loss on the sale or exchange of those Institutional Shares will be disallowed to
the extent of the tax-exempt dividends received with respect to the
Institutional Shares.

A taxable gain or loss may be realized by a Shareholder upon his or her
redemption, transfer or exchange of Institutional Shares of the Pennsylvania
Tax-Free Bond Fund depending upon the tax basis of such shares when purchased
and their price at the redemption, transfer, or exchange. Generally, a
Shareholder may include sales charges incurred upon the purchase of
Institutional Shares in his or her tax basis for such Shares for the purpose of
determining gain or loss on a redemption, transfer or exchange of such shares.
However, if the Shareholder effects an exchange of such shares for shares of
another Fund within 90 days of the purchase and is able to reduce the sales
charges applicable to new shares (by virtue of the Company's exchange
privilege), the amount equal to such reduction may not be included in the tax
basis of the Shareholder's exchanged Shares but may be included (subject to the
same limitation) in the tax basis of the new Shares.

<PAGE> 100

the Fund that is attributable to interest on such bonds in their federal
alternative minimum taxable income for purposes of determining liability (if
any) for the 26-28% alternative minimum tax applicable to individuals and the
20% alternative minimum tax and the environment tax applicable to corporations.
Corporations must also take all exempt-interest dividends into account in
determining certain adjustments for federal alternative minimum and
environmental tax purposes. The environmental tax applicable to corporations is
imposed at the rate of .12% on the excess of the corporation's modified federal
alternative minimum taxable income over $2,000,000. Shareholders receiving
Social Security benefits should note that all exempt-interest dividends will be
taken into account in determining the taxability of such benefits.

Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made to them each year.

PENNSYLVANIA STATE TAX

PERFORMANCE INFORMATION

<PAGE> 101

purchased with dividends from the original Institutional Share and dividends
declared on the original Share and any such additional Institutional Shares, net
of all fees charged to all Shareholder accounts in proportion to the length of
the base period and such Fund's average account size, but does not include gains
and losses or unrealized appreciation and depreciation. In addition, these Funds
may use effective annualized yield quotations computed on a compounded basis by
adding 1 to the base period return (calculated as described above), raising that
sum to a power equal to 365/7, and subtracting 1 from the result.

The Tax-Free Fund may also present its "taxable equivalent yield" and "taxable
equivalent effective yield" with respect to its Institutional Shares which
reflect the amount of income subject to federal income taxation that a taxpayer
in a stated tax bracket would have to earn in order to obtain the same after-tax
income as that derived from the yield and effective yield, respectively, of the
Tax-Free Fund. The taxable equivalent yield and taxable equivalent effective
yield will be significantly higher than the yield and effective yield of the
Tax-Free Fund.

From time to time, performance information for the Funds showing their average
annual total return, aggregate total return and yield may be presented in
advertisements, sales literature and in reports to Shareholders. The Funds'
performance information may be quoted and compared to those of other mutual
funds with similar investment objectives and to stock or other relevant indices.
For example, the yields of these Funds may be compared to the IBC/Donoghue's
Money Fund Average, which is an average compiled by IBC/Donoghue's MONEY FUND
REPORT of Holliston, MA 01746, a widely recognized independent publication that
monitors the performance of money market funds, to the average yields reported
by the Bank Rate Monitor from money market deposit accounts offered by the 50
leading banks and thrift institutions in the top six standard metropolitan
statistical areas, or to data prepared by Lipper Analytical Services, Inc., as
well as to yield data as reported in publications such as Money Magazine,
Forbes, Barron's, The Wall Street Journal, The New York Times, Business Week,
American Banker, Fortune, Institutional Banker, Institutional Investor, Ibbotson
Associates, Inc., Morningstar, Inc., CDA/Wiesenberger, Pensions and Investments,
U.S.A. Today and local newspapers. In addition to yield information, general
information about these Funds that appears in a publication such as those
mentioned above may also be quoted or reproduced in advertisements or in reports
to Shareholders. Reports to shareholders may contain performance information on
any fund of the Company.

NON-MONEY MARKET FUNDS: From time to time performance information with respect
to Institutional Shares for these Funds showing each Fund's average annual total
return, aggregate total return and yield may be presented in advertisements,
sales literature and in reports to Shareholders. Such performance figures are
based on historical earnings and are not intended to indicate future
performance. Average annual total return will be calculated on an annual basis
(with respect to the International Equity, Short-Term Income and Balanced Funds,
for certain periods since the establishment of such Fund), and will, unless
otherwise noted, reflect the imposition of the maximum sales charge. For the
information of Shareholders not subject to a sales charge, the Funds may also
publish average annual total returns which include no sales charge. Average
annual total return is measured by comparing the value of an investment in a
Fund at the beginning of the relevant period to the redemption value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions) and annualizing the result. Aggregate
total return is calculated similarly, however, the resulting difference is not
annualized. Yield will be computed by dividing such Fund's net investment income
per share earned during a recent 30-day period by such

<PAGE> 102

Fund's per share maximum offering price (reduced by any undeclared earned income
expected to be paid shortly as a dividend) on the last day of the period and
annualizing the result.

MANAGEMENT OF THE COMPANY

TRUSTEES

INVESTMENT ADVISOR

<PAGE> 103

The following individuals serve as portfolio managers for the Funds and are
primarily responsible for the day-to-day management of the portfolios:

Cathy L. Rahab is an Assistant Vice President and Portfolio Manager with
Meridian Investment Company. Ms. Rahab began her investment career in 1986 and
obtained her B.S. in Business Administration from Villanova University. Ms.
Rahab joined the Fixed Income Unit in July of 1994. Ms. Rahab currently manages
the Money Market Funds and the Short-Term Income Fund.

For the services provided and expenses assumed pursuant to its investment
advisory agreement with the Company, the Investment Advisor is entitled to
receive a fee from the Fund, computed daily and paid monthly, at an annual rate
equal to the lesser of (a) (i) .40% of the average daily net assets of each of
the Cash Management, Tax-Free and U.S. Treasury Securities Funds, (ii) .74% of
the average daily net assets of each of the Equity, Bond, Intermediate Income,
Pennsylvania Tax-Free Bond and Short-Term Income Funds, (iii) .75% of the
average daily net assets of the Balanced Fund, (iv) 1.00% of the average daily
net assets of the International Equity Fund and (v) 1.50% of the average daily
net assets of the Special Equity Fund, or (b) such fee as may from time to time
be agreed upon in writing by a Fund and the Investment Advisor in advance of the
period to which the fee relates. See "Expense Summary." The maximum investment
advisory fees payable by the Special Equity Fund, the Balanced Fund and the
International Equity Fund, respectively, are higher than the investment advisory
fees paid by most comparable mutual funds.

SUB-ADVISOR

Marvin & Palmer Associates, Inc., 1201 N Market Street, Suite 2300,
Wilmington, Delaware 19801-1165, is Sub-advisor for the International Equity
Fund under an agreement with the Advisor (the "Sub-advisory Agreement"). The
Sub-advisor is responsible for the investment and reinvestment of the
International Equity Fund's assets and the placement of brokerage transactions
in connection therewith. For its services under the Sub-advisory Agreement, the
Sub-advisor is paid a monthly fee by the Investment Advisor calculated on an
annual basis equal to .75% of the first $100 million of International Equity
Fund's average daily net assets, .70% of the second $100 million of
International Equity Fund's average daily net assets, .65% of the third $100
million of International Equity Fund's average daily net assets, and .60% of
International Equity Fund's average daily net assets in excess of $300 million.

The Sub-advisor, a privately held company, was founded in 1986 by David F.
Marvin and Stanley Palmer. The stock of the Sub-advisor is owned by Messrs.
Marvin and Palmer and twenty other

<PAGE> 104

holders. The Sub-advisor is engaged in the management of global, non-United
States and emerging markets equity portfolios for institutional accounts. At
September 30, 1994, the Sub-advisor managed a total of $2.8 billion in
investments for 47 institutional investors.

The following five individuals will share the management of International
Equity Fund on behalf of the Sub-advisor:

David F. Marvin, CFA, is chairman of the Sub-advisor and founded the firm
together with Mr. Palmer in 1986. Before founding the Sub-advisor, Mr. Marvin
was Vice president in charge of DuPont Corporation's $10 billion
internally-managed pension fund. Prior to that Mr. Marvin was Associate
Portfolio Manager, and the Head Portfolio Manager, for Investors Diversified
Services' IDS Stock Fund. Mr. Marvin started in the investment business in 1965
as a security analyst for Chicago Title & Trust Company. He received his M.B.A.
from Northwestern University and his B.S. from the University of Illinois, and
is a Chartered Financial Analyst and a member of the Financial Analysts
Federation.

Stanley Palmer, CFA, is President of the Sub-advisor and co-founder of the
firm. Mr. Palmer was Equity Portfolio Manager for DuPont Corporation from 1978
through 1986, an analyst and portfolio manager at Investors Diversified Services
from 1971 through 1978, and an analyst at Harris Trust & Savings Bank from 1964
through 1971. He received his M.B.A. from the University of Iowa and his B.S.
from Gustavus Adolphus College, and is a Chartered Financial Analyst and a
member of the Financial Analysts Federation.

Terry B. Mason is a Vice President and Portfolio Manager of the Sub-advisor.
Before joining the Sub-advisor, Mr. Mason was employed for 14 years by DuPont
Corporation, the last five as international equity analyst and international
trader. He received his M.B.A. from Widener University and his B.A. from
Glassboro State College.

Jay F. Middleton is a portfolio manager for the Sub-advisor and joined the
firm in 1989. He received his B.A. from Wesleyan University.

ADMINISTRATOR AND DISTRIBUTOR

SEI Financial Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Corporation ("SEI") provides the Company with administrative
services, including fund accounting, regulatory reporting, necessary office
space, equipment, personnel and facilities. SEI Financial Services Company (the
"Distributor"), a wholly-owned subsidiary of SEI, serves as distributor.

Effective May 1, 1995, the Administrator will receive a fee, which is
calculated daily and paid monthly, at a maximum annual rate of 0.17% of the
average daily net assets of each Fund. Until April 30, 1995, the current
administrator will receive administrative fees equal to .20% of the average
daily net assets of each Fund.

CUSTODIANS AND TRANSFER AGENT

Citibank, N.A. serves as custodian for each Fund other than the International
Equity Fund. The Bank of New York serves as custodian for the International
Equity Fund. The Administrator also serves as the Transfer Agent for the
Company. State Street Bank and Trust Company serves as Sub-Transfer Agent for
the Company pursuant to an agreement with the Administrator.

EXPENSES

<PAGE> 105

Company's existence; costs of Shareholders' reports and meetings; proxy
solicitation expenses; costs of Board of Trustees meetings and any extraordinary
expenses incurred in each Fund's operation. The holders of Institutional Shares
of a Fund will not bear the cost of any activity primarily intended to result in
the distribution of its Shares; such costs will be borne by the Distributor.

BANKING LAWS

Future changes in federal or state statutes and regulations relating to
permissible activities of banks or bank holding companies and their subsidiaries
and affiliates as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations could change the
manner in which the Investment Advisor may continue to perform investment
advisory services for the Company. See the Statement of Additional
Information--"Banking Laws" for further discussion.

GENERAL INFORMATION

DESCRIPTION OF THE COMPANY AND ITS SHARES

As of November 1, 1994, Meridian Bancorp, Inc. indirectly possessed or shared
power to dispose or vote with respect to more than 25% of the outstanding shares
of the Company and therefore may be considered to be a controlling person of the
Company for purposes of the Act.

MULTIPLE CLASSES OF SHARES

In addition to Institutional Shares, the Company also offers Retail Shares of
the Funds, under an exemptive order granted by the Securities and Exchange
Commission. Retail Shares are offered to the general public through procedures
established by the Distributor to Customers satisfying the minimum purchase
requirements of $1,000. Retail Shares (other than those of the Money Market
Funds) are sold subject to a front-end sales load of up to 2.00% and bear a Rule
12b-1 fee of up to

<PAGE> 106

0.40%. All of the Retail Shares bear their respective Rule 12b-1 fee expenses
under a Distribution and Service Plan pertaining only to such Retail Shares that
has been adopted pursuant to Rule 12b-1 under the 1940 Act. A salesperson or
other person entitled to receive compensation for selling or servicing the
shares may receive different compensation with respect to one particular class
of shares over another in the same Fund. For further details regarding the
purchase of Retail Shares call the Company at (800) 344-2716.

The amount of dividends payable with respect to Institutional Shares will
exceed dividends on Retail Shares as a result of the 12b-1 fees applicable to
Retail Shares.

MISCELLANEOUS

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

Inquiries regarding the Fund may be directed in writing to the Company at 680
East Swedesford Road, Wayne, PA 19087-1658 or by calling toll-free (800)
344-2716.

40
<PAGE> 107
Statement of Additional Information

February 27, 1996

This Statement of Additional Information, which applies to Retail and
Institutional Shares of the Conestoga Cash Management Fund, the Conestoga
Tax-Free Fund, the Conestoga U.S. Treasury Securities Fund, the Conestoga
Equity Fund, the Conestoga International Equity Fund, the Conestoga Special
Equity Fund, Conestoga Bond (formerly the Income Fund) Fund, the Conestoga
Intermediate Income (formerly the Limited Maturity Fund) Fund, the Conestoga
Pennsylvania Tax-Free Bond Fund, the Conestoga Short-Term Income Fund, and the
Conestoga Balanced Fund (the "Funds") is meant to be read in conjunction with
the Prospectuses dated February 21, 1995 (as supplemented February 27, 1996)
with respect to Retail and Institutional Shares of the Funds (collectively, the
"Prospectuses" and individually a "Prospectus"), and is incorporated by
reference in its entirety into the Prospectuses. Because this Statement of
Additional Information is not itself a prospectus, no investment in Retail or
Institutional Shares of any Fund should be made solely upon the information
contained herein. Copies of each Prospectus may be obtained by writing
Conestoga Family of Funds at 680 East Swedesford Road, Wayne, Pennsylvania
19087-1658 or by telephoning (800) 344-2716.

CON-F-003-03

<PAGE> 108
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Additional Information on Portfolio Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Special Risks and Considerations with respect to the Pennsylvania Tax-Free Bond . . . . . . . . . . . . . . 22
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Valuation of the Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Calculation of Offering Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Matters Affecting Purchase and Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

ADDITIONAL INFORMATION CONCERNING TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

MANAGEMENT OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Investment Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Sub-advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Banking Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Fund Accountant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Distribution and Services Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Custodians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>

<PAGE> 109
THE COMPANY

Conestoga Family of Funds (the "Company") is an open-end management
investment company. This Statement of Additional Information relates to Retail
and Institutional Shares in each of the Company's eleven separate investment
portfolios: three Money Market Funds: the Cash Management Fund; the U.S.
Treasury Securities Fund and the Tax-Free Fund, and the eight Non-Money Market
Funds: the Equity Fund; the International Equity Fund; the Special Equity Fund;
the Bond Fund (formerly the Income Fund); the Intermediate Income Fund
(formerly the Limited Maturity Fund); the Pennsylvania Tax-Free Bond Fund; the
Short-Term Income Fund and the Balanced Fund. Each of the Funds with the
exception of the Pennsylvania Tax-Free Bond Fund, is a diversified investment
portfolio. Retail and Institutional Shares of each Fund are described in the
applicable Prospectus. No investment in shares of a Fund should be made
without first reading the applicable Prospectus. Much of the information
contained in this Statement of Additional Information expands on subjects
discussed in the Prospectuses. Capitalized terms not otherwise defined herein
are defined in the Prospectuses.

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

PORTFOLIO TRANSACTIONS

Subject to the general control of the Company's Board of Trustees, the
Company's investment advisor, Meridian Investment Company (the "Investment
Advisor"), is responsible for, makes decisions with respect to and places
orders for all purchases and sales of portfolio securities for the Funds.
Marvin & Palmer Associates, Inc. (the "Sub-advisor"), subject to the
supervision of both the Board of Trustees and the Investment Advisor, will
assist the Investment Advisor in providing a continuous investment program for
the International Equity Fund, including investment research and management
with respect to all securities and other investments (including cash
equivalents) of the Fund and shall determine from time to time which securities
and other investments will be purchased, retained or sold for the Fund. The
Sub-advisor does not provide sub-advisory services for any other Fund.

The Investment Advisor (and/or Sub-advisor with respect to the
International Equity Fund) places all orders for purchases and sales of
portfolio securities for the Funds either directly with the issuer or with
dealers. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers may include the spread between the bid
and asked prices. Transactions on U.S. stock exchanges involve the payment

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<PAGE> 110
of negotiated brokerage commissions, while transactions in foreign securities
generally involve the payment of fixed brokerage commissions, which are
generally higher than those in the United States. Transactions in the
over-the-counter market are generally principal transactions with dealers and
the costs of such transactions involve dealer spreads rather than brokerage
commissions. The Company, where possible, will deal directly with dealers who
make a market in the securities involved except in those circumstances where
better price and execution are available elsewhere. Debt securities purchased
and sold by the Funds are generally traded in the over-the-counter market on a
net basis (i.e., without commission) through dealers, or otherwise involve
transactions directly with the issuer of an instrument. The Funds may
participate if and when practicable, in bidding for the purchase of portfolio
securities directly from an issuer in order to take advantage of the lower
purchase price available to members of a bidding group. A Fund will engage in
this practice, however, only when the Investment Advisor (and/or Sub-advisor
with respect to the International Equity Fund) believes such practice to be in
the Fund's interests.

In making portfolio investments, the Investment Advisor (and/or
Sub-advisor with respect to the International Equity Fund) seeks to obtain the
best net price and the most favorable execution of orders. The Investment
Advisor (and/or Sub-advisor with respect to the International Equity Fund) may
purchase and sell portfolio securities to and from brokers and dealers who
provide brokerage and research services (within the meaning of Section 28(e) of
the Securities Exchange Act of 1934) to or for the benefit of the Funds and/or
other accounts over which the Investment Advisor (or Sub-advisor, if
applicable) or any of their affiliates exercise investment discretion. To the
extent that the execution and price offered by more than one dealer are
comparable, the Investment Advisor may, in its discretion, effect transactions
in portfolio securities with dealers who provide the Investment Advisor with
research advice or other services. The Sub-advisor is authorized to pay a
broker or dealer who provides brokerage and research services a commission for
executing a portfolio transaction for the International Equity Fund which is in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction if the Sub-advisor determines in good faith that
such commission was 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 Sub-advisor's overall responsibilities to
the International Equity Fund and to the Company.

Supplemental research information so received is in addition to, and
not in lieu of, services required to be performed by the Sub-advisor and does
not reduce the advisory fees payable to the Investment Advisor by the
International Equity Fund. The

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Trustees will periodically review the commissions paid by the International
Equity Fund to consider whether the commissions paid over representative
periods of time appear to be reasonable in relation to the benefits inuring to
the Fund. It is possible that certain of the supplemental research or other
services received will primarily benefit one or more other investment companies
or other accounts for which investment discretion is exercised. Conversely,
the International Equity Fund may be the primary beneficiary of the research or
services received as a result of portfolio transactions effected for such other
account or investment company.

The Company is required to identify any securities of its "regular
brokers or dealers" which the Company has acquired during its most recent
fiscal year. As of October 31, 1995 the Bond Fund held debt securities of:
Bear Stearns Co., Inc. in the amount of $1,638,000, Prudential Securities, Inc.
in the amount of $2,419,000 and PaineWebber in the amount of $1,267,000; the
Intermediate Income Fund held debt securities of: Bear Stearns Co., Inc. in the
amount of $709,000 and PaineWebber in the amount of $892,000; the Short-Term
Income Fund held debt securities of Smith Barney in the amount of $599,000 and
the Balanced Fund held debt securities of Bear Stearns Co., Inc. in the amount
of $175,000.

Investment decisions for the Funds are made independently from those
for other customers who may be advised by the Investment Advisor (and/or
Sub-advisor with respect to the International Equity Fund). Such other
customers may invest in the same securities as the Funds. When purchases or
sales of the same security are made on the same day on behalf of such other
customers, transactions are averaged as to price, and available investments
allocated as to amount, in a manner which the Investment Advisor (and/or
Sub-advisor with respect to the International Equity Fund) believes to be
equitable to each customer, including the Funds. In some instances, this
investment procedure may adversely affect the price paid or received by the
Fund or the size of the position obtained for the Funds. To the extent
permitted by law, the Investment Advisor (and/or Sub-advisor with respect to
the International Equity Fund) may aggregate the securities to be sold or
purchased for the Funds with those to be sold or purchased for such other
customers in order to obtain best execution. The Funds will not execute
portfolio transactions through, acquire portfolio securities issued by, make
savings or time deposits in or enter into repurchase agreements with the
Investment Advisor, the Sub-advisor, SEI Financial Management Corporation or
any affiliated person -- as such term is defined in the Investment Company Act
of 1940 (the "Act") of any of them, except to the extent permitted by the Act.
For the fiscal year ended October 31, 1993 the Equity Fund was the only
portfolio to pay brokerage commissions, and it paid $52,330 in brokerage
commissions, all of

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which were subject to the Investment Advisor's internal allocation procedure
which takes into account research services provided in selecting broker-dealers
through which transactions are executed. For the fiscal year ended October 31,
1994, the Equity Fund, Special Equity Fund, Limited Maturity Fund, Income Fund
and Tax-Free Fund were the only portfolios to pay brokerage commissions, and
such Funds paid $57,817, $27,351, $59.00, $231.00 and $204.00 respectively, in
brokerage commissions, all of which were subject to the Investment Advisor's
internal allocation procedure which takes into account research services
provided in selecting broker-dealers through which transactions are executed.
For the fiscal year ended October 31, 1995 (and the period from commencement of
operations (May 15, 1995 with respect to the International Equity and
Short-Term Bond Funds and June 26, 1995 with respect to the Balanced Fund) to
October 31, 1995 with respect to the International Equity Short-Term Bond and
Balanced Funds), the Equity Fund, Bond Fund, Intermediate Income Fund, Special
Equity Fund, International Equity Fund, Short-Term Income Fund and Balanced
Fund were the only portfolios to pay brokerage commissions, and such Funds paid
$724,061, $11,886, $7,631, $153,016, $51,844, $863 and $16,642, respectively,
in brokerage commissions all of which were subject to the Investment Advisor's
internal allocation procedure which takes into account research services
provided in selecting broker-dealers through which transactions are executed.

PORTFOLIO TURNOVER

The portfolio turnover rate for each Fund is calculated by dividing
the lesser of a Fund's purchases or sales of portfolio securities for the year
by the monthly average value of the portfolio securities. The calculation
excludes all securities, including options, whose maturities at the time of
acquisition were one year or less. Because the Money Market Funds invest only
in short-term instruments, their portfolio turnover is expected to be zero for
regulatory reporting purposes. Although it is difficult to predict portfolio
turnover, it is presently estimated that the annual turnover rates for each of
the International Equity, Special Equity and Short-Term Income Funds will
generally not exceed 300%. The annual portfolio turnover rate for each of the
equity and fixed income portions of the Balanced Fund will also generally not
exceed 300%. For the fiscal year ended October 31, 1994, the portfolio
turnover rate of each of the Equity, Special Equity, Bond, Intermediate Income
and Pennsylvania Tax-Free Bond Funds was 35%, 39%, 231%, 170% and 37%,
respectively. For the fiscal year ended October 31, 1995, the portfolio
turnover rate of each of the Equity, Special Equity, Bond, Intermediate Income
and Pennsylvania Tax-Free Bond Funds was 119%, 129%, 352%, 260% and 15%,
respectively. The variation in portfolio turnover rates over the past two years
with respect to the Equity, Special Equity, Bond and Intermediate Income Funds
is due to the conversion of certain collective trust funds. Additionally, the
variation in portfolio turnover rates over the past two years with respect to
the Equity and Special

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<PAGE> 113
Equity Funds also is due to compliance with the "Short-short" test for
qualification as a regulated investment company (as described on page B-34),
and with respect to the Intermediate Income Fund is due to market conditions.
The portfolio turnover rate for the International Equity, Short-Term Income and
Balanced Funds for the period from commencement of operations (May 15, 1995 for
the International Equity and Short-Term Income Funds and June 26, 1995 for the
Balanced Fund) through October 31, 1995 was 23%, 40% and 65%, respectively.
Portfolio turnover rates may vary greatly from year to year as well as within a
particular year. Portfolio turnover will not be a limiting factor in making
investment decisions.

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS

The following policies supplement the investment objective and
policies of each Fund as set forth in the Prospectus.

BANKER'S ACCEPTANCES AND CERTIFICATES OF DEPOSIT. All of the Funds of
the Company except the U.S. Treasury Securities Fund may invest in banker's
acceptances, certificates of deposit, and demand and time deposits. Banker's
acceptances are negotiable drafts or bills of exchange typically drawn by an
importer or exporter to pay for specific merchandise, which are "accepted" by a
bank, meaning, in effect, that the bank unconditionally agrees to pay the face
value of the instrument on maturity. Banker's acceptances invested in by the
International Equity Fund will be those guaranteed by domestic and foreign
banks having, at the time of investment, capital, surplus, and undivided
profits in excess of $100,000,000 (as of the date of their most recently
published financial statements). Certificates of deposit are negotiable
certificates issued against funds deposited in a commercial bank or savings and
loan association for a definite period of time and earning a specified return.
Certificates of deposit and time deposits will be those of domestic and foreign
banks and savings and loan associations, if (a) at the time of investment the
depository institution has capital, surplus, and undivided profits in excess of
$100,000,000 (as of the date of its most recently published financial
statements), or (b) the principal amount of the instrument is insured in full
by the Federal Deposit Insurance Corporation. The International Equity Fund
may also invest in Eurodollar Certificates of Deposit, which are U.S. dollar
denominated certificates of deposit issued by offices of foreign and domestic
banks located outside the United States; Yankee Certificates of Deposit, which
are certificates of deposit issued by a U.S. branch of a foreign bank
denominated in U.S. dollars and held in the United States; Eurodollar Time
Deposits, which are U.S. dollar denominated deposits in a foreign branch of a
U.S. bank or a foreign bank; and Canadian Time Deposits, which are basically
the same as Eurodollar Time Deposits except they are issued by Canadian offices
of major Canadian banks.

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

The Equity, International Equity, Special Equity, Bond, Intermediate
Income, Short-Term Income and Balanced Funds may purchase commercial paper
consisting of issues rated, at the time of purchase within one of the two
highest categories by a nationally recognized statistical rating organization
(a "NRSRO") (e.g. "A-2" or better by Standard & Poor's Ratings Group, Division
of McGraw Hill ("S&P" or "Standard & Poor") or "Prime-2" or better by Moody's
Investors Service, Inc. ("Moody's")) or, if not rated, found by the Investment
Advisor (and/or Sub-advisor with respect to the International Equity Fund)
under guidelines approved by the Company's Board of Trustees to be of
comparable quality to instruments that are rated high quality by a NRSRO that
is neither controlling, controlled by, or under common control with the issuer
of, or any issuer, guarantor, or provider of credit support for, the
instruments. The Cash Management and Tax-Free Funds may invest in commercial
paper which is rated "A-I" or better by S&P or "Prime-I" by Moody's, or if not
rated, determined to be of comparable quality by the Investment Advisor
pursuant to guidelines approved by the Board of Trustees. The Pennsylvania
Tax-Free Bond Fund may purchase commercial paper rated (at the time of
purchase) "A-1" by S&P, "Prime-1" by Moody's, "Duff 1" by D&P or "F-1+" by
Fitch's or, when deemed advisable by the Investment Advisor, "high quality"
issues rated "A-2" by S&P, "Prime 2" by Moody's, "Duff 2" by D&P or "F-2" by
Fitch's. For a description of the rating symbols of S&P, Fitch's and Moody's
used in this paragraph, see Appendix "A".

The Cash Management, Equity, International Equity, Special Equity,
Bond, Intermediate Income, Short-Term Income and Balanced Funds may also invest
in Canadian Commercial Paper, which is U.S. dollar-denominated commercial paper
issued by a Canadian corporation or a Canadian counterpart of a U.S.
corporation, and in Europaper which is U.S. dollar-denominated commercial paper
of a foreign issuer.

VARIABLE AMOUNT DEMAND NOTES. Variable amount master demand notes, in
which the Cash Management, Equity, International Equity, Special Equity, Bond,
Intermediate Income, Pennsylvania Tax-Free Bond, Short-Term Income and Balanced
Funds may invest, are unsecured demand notes that permit the indebtedness
thereunder to vary and provide for periodic adjustments in the interest rate
according to the terms of the instrument. They are also referred to as
variable rate demand notes. Because these notes are direct lending
arrangements between a Fund and the issuer, they are not normally traded.
Although there may be no secondary market in the notes, the Fund may demand
payment of

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principal and accrued interest at any time or during specified periods not
exceeding one year, depending upon the instrument involved, and may resell the
notes at any time to a third party. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of a variable amount
master demand note if the issuer defaulted on its payment obligations or during
periods when such Fund is not entitled to exercise its demand rights, and the
Fund could, for this or other reasons, suffer a loss to the extent of the
default. While the notes are not typically rated by credit rating agencies,
issuers of variable amount master demand notes must satisfy the same criteria
as set forth above for commercial paper. The Investment Advisor (and/or
Sub-advisor with respect to the International Equity Fund) will consider the
earning power, cash flow, and other liquidity ratios of the issuers of such
notes and will continuously monitor their financial status and ability to meet
payment on demand. Where necessary to ensure that a note is of "high quality,"
a Fund will require that the issuer's obligation to pay the principal of the
note be backed by an unconditional bank letter or line of credit, guarantee or
commitment to lend. In determining dollar-weighted average portfolio maturity,
a variable amount master demand note will be deemed to have a maturity equal to
the period of time remaining until the principal amount can be recovered from
the issuer through demand.

VARIABLE AND FLOATING RATE NOTES. Each Fund (except the International
Equity Fund) may acquire variable and floating rate notes, subject to its
investment objective, policies and restrictions. A variable rate note is one
whose terms provide for the readjustment of its interest rate on set dates and
which, upon such readjustment, can reasonably be expected to have a market
value that approximates its par value. A floating rate note is one whose terms
provide for the readjustment of its interest rate whenever a specified interest
rate changes and which, at any time, can reasonably be expected to have a
market value that approximates its par value. Such notes are frequently not
rated by an NRSRO; however, unrated variable and floating rate notes purchased
by a Fund will be determined by the Investment Advisor under guidelines
approved by the Company's Board of Trustees to be of comparable quality, at the
time of purchase, to rated instruments eligible for purchase under a Fund's
investment policies. In making such determinations, the Investment Advisor
will consider the earning power, cash flow and other liquidity ratios of the
issuers of such notes (such issuers include financial, merchandising, bank
holding and other companies) and will continuously monitor their financial
condition. Although there may be no active secondary market with respect to a
particular variable or floating rate note purchased by a Fund, it may resell
the note at any time to a third party. The absence of an active secondary
market, however, could make it difficult for a Fund to dispose of a variable or
floating rate note in the event the issuer of the note defaulted on its payment

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obligations and the Fund could, as a result or for other reasons, suffer a loss
to the extent of the default. Variable or floating rate notes may be secured
by bank letters of credit.

Variable or floating rate notes purchased by the Cash Management,
Tax-Free and U.S. Treasury Securities Funds may have maturities of more than 13
months, as follows:

1. A note that is issued or guaranteed by the United States
Government or any agency thereof which has a variable rate of interest
readjusted no less frequently than 13 months will be deemed by a Fund to have a
maturity equal to the period remaining until the next readjustment of the
interest rate.

2. A variable rate note, the principal amount of which is scheduled
on the face of the instrument to be paid in 13 months or less, will be deemed
by a Fund to have a maturity equal to the period remaining until the next
readjustment of the interest rate.

3. A variable rate note that is subject to a demand feature will be
deemed by a Fund to have a maturity equal to the longer of the period remaining
until the next readjustment of the interest rate or the period remaining until
the principal amount can be recovered through demand.

4. A floating rate note that is subject to a demand feature will be
deemed by a Fund to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.

As used above, a note is "subject to a demand feature" where a Fund is
entitled to receive the principal amount of the note either at any time on no
more than 30 days' notice or at specified intervals not exceeding 13 months and
upon no more than 30 days' notice.

LENDING PORTFOLIO SECURITIES. In order to generate additional income,
the Equity, International Equity, Special Equity, Bond, Intermediate Income,
Short-Term Income and Balanced Funds may, from time to time, lend their
respective portfolio securities to broker-dealers, banks, or institutional
borrowers of securities. There is no limit on the amount of securities which a
Fund may lend, except that the International Equity Fund may lend portfolio
securities up to one-third of the value of its total assets. A Fund must
receive at least 100% collateral in the form of cash or U.S. Government
securities. This collateral will be valued daily by the Investment Advisor
(and/or Sub-advisor with respect to the International Equity Fund). Should the
market value of the loaned securities increase, the borrower will be required
to furnish additional collateral to the applicable Fund. During the time
portfolio securities are on

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loan, the borrower will pay a Fund any dividends or interest received on such
securities. Loans are subject to termination by a Fund or the borrower at any
time. While a Fund does not have the right to vote securities that are on
loan, it intends to terminate the loan and regain the right to vote if that is
considered important with respect to the investment. A Fund will enter into
loan agreements only with broker-dealers, banks, or other institutions that the
Investment Advisor (and/or Sub-advisor with respect to the International Equity
Fund) has determined are creditworthy pursuant to guidelines approved by the
Company's Board of Trustees.

FOREIGN INVESTMENT. All of the Funds except the U.S. Treasury
Securities and Pennsylvania Tax-Free Bond Funds may, subject to their
respective investment objectives and policies, invest in certain obligations or
securities of foreign issuers. Investments in securities issued by foreign
branches of U.S. banks, foreign banks, or other foreign issuers, including
American Depositary Receipts ("ADRs"), European Depositary Receipts and
securities purchased on foreign securities exchanges, may subject the Funds to
investment risks that differ in some respects from those related to investment
in obligations of U.S. domestic issuers or in U.S. securities markets. Such
risks include future adverse political and economic developments, possible
seizure, nationalization, or expropriation of foreign investments, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, and the adoption of other foreign
governmental restrictions.

Additional risks include currency exchange risks, less publicly
available information, the risk that companies may not be subject to the
accounting, auditing and financial reporting standards and requirements of U.S.
companies, the risk that foreign securities markets may have less volume and
therefore many securities traded in these markets may be less liquid and their
prices more volatile than U.S. securities, and the risk that custodian and
brokerage costs may be higher. Foreign issuers of securities or obligations
are often subject to accounting treatment and engage in business practices
different from those respecting domestic issuers of similar securities or
obligations. Foreign branches of U.S. banks and foreign banks may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks.

Fixed commissions on foreign securities exchanges are generally higher
than negotiated commissions on U.S. exchanges, although the Funds endeavor to
achieve the most favorable net results on their portfolio transactions.
Foreign markets also have different clearance and settlement procedures, and in
certain markets there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to conduct
such transactions. Such delays in

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settlement could result in temporary periods when a portion of the assets of a
Fund is uninvested and no return is earned thereon. The inability of a Fund to
make intended security purchases due to settlement problems could cause the
Fund to miss attractive investment opportunities. Losses to a Fund due to
subsequent declines in the value of portfolio securities, or losses arising out
of the Fund's inability to fulfill a contact to sell such securities, could
result in potential liability to the Fund.

Individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.

In many instances, foreign debt securities may provide higher yields
than securities of domestic issuers which have similar maturities and quality.
Under certain market conditions these investments may be less liquid than the
securities of U.S. corporations and are certainly less liquid than securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
Finally, in the event of a default of any such foreign debt obligations, it may
be more difficult for a Fund to obtain or to enforce a judgment against the
issuers of such securities. If a security is denominated in foreign currency,
the value of the security to a Fund will be affected by changes in currency
exchange rates and in exchange control regulations, and costs will be incurred
in connection with conversions between currencies. A change in the value of
any foreign currency against the U.S. dollar will result in a corresponding
change in the U.S. dollar value of a Fund's securities denominated in that
currency. Such changes will also affect a Fund's income and distributions to
shareholders. In addition, although a Fund will receive income on foreign
securities in such currencies the Fund will be required to compute and
distribute its income in U.S. dollars. Therefore, if the exchange rate for any
such currency declines materially after a Fund's income has been accrued and
translated into U.S. dollars, the Fund could be required to liquidate portfolio
securities to make required distributions. Similarly, if an exchange rate
declines between the time a Fund incurs expenses in U.S. dollars and the time
such expenses are paid, the amount of such currency required to be converted
into U.S. dollars in order to pay such expenses in U.S. dollars will be
greater.

The International Equity Fund may invest in debt securities
denominated in the ECU, which is a "basket" consisting of specified amounts of
the currencies of certain of the twelve member states of the European
Community. 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. Such adjustments

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may adversely affect holders of ECU-denominated obligations or the
marketability of such securities. European governments and supranationals, in
particular, issue ECU-denominated obligations.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The International
Equity Fund may enter into forward foreign currency exchange contracts.

The Fund will comply with applicable Securities and Exchange
Commission announcements requiring it to segregate assets to cover the
International Equity Fund's commitments with respect to such contracts. At the
present time, these announcements generally require a fund with a long position
in a forward foreign currency contract to establish with its custodian a
segregated account containing cash or liquid high grade debt securities equal
to the purchase price of the contract, and require a fund with a short position
in a forward foreign currency contract to establish with its custodian a
segregated account containing cash or liquid high grade debt securities that,
when added to any margin deposit, equal the market value of the currency
underlying the forward contract. These requirements will not apply where the
position has been "covered" by entering into an offsetting position. The Fund
generally will not enter into a forward contract with a term longer than one
year.

It is impossible to forecast with precision the market value of
portfolio securities at the expiration of a forward currency contract.
Accordingly, it may be necessary for the Fund to purchase additional currency
on the spot market (and bear the expense of such purchase) if the market value
of the security is less than the amount of foreign currency the Fund is
obligated to deliver when a decision is made to sell the security and make
delivery of the foreign currency in settlement of a forward contract.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security if its market value
exceeds the amount of foreign currency the Fund is obligated to deliver.

If the Fund retains the portfolio security and engages in an
offsetting transaction, the Fund will incur a gain or a loss (as described
below) to the extent that there has been movement in forward currency contract
prices. If the Fund engages in an offsetting transaction, it may subsequently
enter into a new forward currency contract to sell the foreign currency.
Should forward prices decline during the period between the Fund's entering
into a forward currency contract for the sale of foreign currency and the date
it enters into an offsetting contract for the purchase of the foreign currency,
the Fund would realize a gain to the extent the price of the currency it has
agreed to sell exceeds the price of the currency it has agreed to purchase.
Should forward prices increase, the Fund would suffer a loss to the extent the
price of the currency it has agreed to purchase

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exceeds the price of the currency it has agreed to sell. Although such
contracts tend to minimize the risk of loss due to a decline in the value of
the hedged currency, they also tend to limit any potential gain which might
result should the value of such currency increase. The Fund will have to
convert its holdings of foreign currencies into U.S. dollars from time to time.
Foreign exchange dealers realize a profit based on the difference, or "spread"
between the prices at which they are buying and selling various currencies.

FOREIGN CURRENCY OPTIONS. The International Equity Fund may buy and
sell foreign currency options. A foreign currency option provides the option
buyer with the right to buy or sell a stated amount of foreign currency at the
exercise price at a specified date or during the option period. A call option
gives its owner the right, but not the obligation, to buy the currency, while a
put option gives its owner the right, but not the obligation, to sell the
currency. The option seller (writer) is obligated to fulfill the terms of the
option sold if it is exercised. However, either seller or buyer may close its
position during the option period in the secondary market for such options at
any time prior to expiration.

A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect the Fund against an adverse
movement in the value of a foreign currency, it does not limit the gain which
might result from a favorable movement in the value of such currency. For
example, if the Fund were holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against a
decline in the value of the currency, it would not have to exercise its put.
Similarly, if the Fund has entered into a contract to purchase a security
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in the value of the currency but instead the currency had
depreciated in value between the date of purchase and the settlement date, the
Fund would not have to exercise its call but could acquire in the spot market
the amount of foreign currency needed for settlement.

FOREIGN CURRENCY FUTURES TRANSACTIONS. As part of its financial
futures transactions, the International Equity Fund may use foreign currency
futures contracts and options on such futures contracts. Through the purchase
or sale of such contracts, the Fund may be able to achieve many of the same
objectives as through forward foreign currency exchange contracts more
effectively and possibly at a lower cost.

Unlike forward foreign currency exchange contracts, foreign currency
futures contracts and options on foreign currency futures contracts are
standardized as to amount and delivery

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period and may be traded on boards of trade and commodities exchanges or
directly with a dealer which makes a market in such contracts and options. It
is anticipated that such contracts may provide greater liquidity and lower cost
than forward foreign currency exchange contracts.

REGULATORY RESTRICTIONS. When purchasing a futures contract or
writing a put option or entering into a forward currency exchange purchase, the
International Equity Fund may be required to maintain in a segregated account
cash or liquid high-grade securities equal to the value of such contracts.

ZERO COUPON OBLIGATIONS. As discussed in the Prospectus, certain of
the Funds may invest in zero coupon obligations, provided that immediately
after any purchase, not more than 5% of the value of the net assets of the
respective Fund is invested in such obligations.

Although this type of security pays no interest to holders prior to
maturity, federal income tax regulations require each Fund to recognize as
interest income a portion of the bond's discount each year. This income must
then be distributed to shareholders along with other income earned by that
Fund. To the extent that any shareholders in a Fund elect to receive their
dividends in cash rather than reinvest such dividends in additional Fund
shares, cash to make these distributions will have to be provided from either
the assets of the particular Fund or other sources such as proceeds of sales of
Fund shares and/or sales of portfolio securities. In such cases, such Fund
will not be able to purchase additional income producing securities with the
cash used to make such distributions and its current income may ultimately be
reduced as a result.

REVERSE REPURCHASE AGREEMENTS. As discussed in the Prospectus, each
of the Funds may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with such Fund's investment restrictions.
Pursuant to a reverse repurchase agreement, a Fund would sell portfolio
securities to a financial institution such as a bank or broker-dealer, and
agree to repurchase the securities at a mutually agreed-upon date and price.
Each Fund intends to enter into reverse repurchase agreements only to avoid
selling securities during unfavorable market conditions to meet redemptions.
At the time a Fund enters into a reverse repurchase agreement, it will place in
a segregated custodial account assets such as U.S. Government securities or
other liquid, high grade debt obligations consistent with the Fund's investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price at which a

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Fund is obligated to repurchase such securities. Reverse repurchase agreements
are considered to be borrowings by a Fund under the Investment Company Act of
1940.

ASSET-BACKED SECURITIES. The Cash Management Fund, Bond Fund and the
Intermediate Income, Short-Term Income and Balanced Funds may invest in
asset-backed securities, including mortgage-backed securities representing an
undivided ownership interest in a pool of mortgages, such as certificates of
the Government National Mortgage Association ("GNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). These certificates are in most cases
pass-through instruments, through which the holder receives a share of all
interest and principal payments from the mortgages underlying the certificate,
net of certain fees. The average life of a mortgage-backed security varies
with the underlying mortgage instruments, which have maximum maturities of 40
years. The average life is likely to be substantially less than the original
maturity of the mortgage pools underlying the securities as the result of
prepayments, mortgage refinancings or foreclosure. Mortgage prepayment rates
are affected by factors including the level of interest rates, general economic
conditions, the location and age of the mortgage and other social and
demographic conditions. Such prepayments are passed through to the registered
holder with the regular monthly payments of principal and interest and have the
effect of reducing future payments. Due to the GNMA guarantee, foreclosures
impose no risk to principal investments.

The Cash Management Fund, Bond Fund and the Intermediate Income and
Balanced Funds may also invest in non-mortgage backed securities including
interests in pools of receivables, such as motor vehicle installment purchase
obligations and credit card receivables. Such securities are generally issued
as pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities may also be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owning such assets and issuing such debt. Non-mortgage backed
securities are not issued or guaranteed by the U.S. Government or its agencies
or instrumentalities; however, the payment of principal and interest on such
obligations may be guaranteed up to certain amounts and for a certain time
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities.

The purchase of non-mortgage backed securities raises considerations
peculiar to the financing of the instruments underlying such securities. For
example, most organizations that issue asset-backed securities relating to
motor vehicle installment purchase obligations perfect their interests in the

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respective obligations only by filing a financing statement and by having the
servicer of the obligations, which is usually the originator, take custody
thereof. In such circumstances, if the servicer were to sell the same
obligations to another party, in violation of its duty not to do so, there is a
risk that such party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. Also, although most such
obligations grant a security interest in the motor vehicle being financed, in
most states the security interest in a motor vehicle must be noted on the
certificate of title to perfect such security interest against competing claims
of other parties. Due to the large number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the obligations
underlying the asset-backed securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
the asset-backed securities. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on those securities. In addition, various state and federal
laws give the motor vehicle owner the right to assert against the holder of the
owner's obligation certain defenses such owner would have against the seller of
the motor vehicle. The assertion of such defenses could reduce payments on the
related asset-backed securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances owed on the credit card,
thereby reducing the amounts paid on such receivables. In addition, unlike
most other asset-backed securities, credit card receivables are unsecured
obligations of the cardholder.

The development of non-mortgage backed securities is at an early stage
compared to mortgage backed securities. While the market for asset-backed
securities is becoming increasingly liquid, the market for mortgage backed
securities issued by certain private organizations and non-mortgage backed
securities is not as well developed as that for mortgage backed securities
guaranteed by government agencies or instrumentalities. The Investment Advisor
intends to limit its purchases of mortgage backed securities issued by certain
private organizations and non-mortgage backed securities to securities that are
readily marketable at the time of purchase.

MUNICIPAL OBLIGATIONS. The Tax-Free Fund may invest in Municipal
Obligations which include debt obligations issued by governmental entities to
obtain funds for various public purposes, such as the construction of a wide
range of public facilities, the refunding of outstanding obligations, the
payment of general operating expenses and the extension of loans to other
public institutions and facilities. Private activity bonds that

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are issued by or on behalf of public authorities to finance various
privately-operated facilities are included within the term Municipal
Obligations if the interest paid thereon is exempt from regular federal income
tax and not treated as a specific tax preference item for individuals or
corporations for purposes of the federal alternative minimum tax. Opinions
relating to the validity of Municipal Obligations and to the exemption of
interest thereon from federal income tax are rendered by bond counsel to the
respective issuing authorities at the time of issuance. Neither the Tax-Free
Fund nor the Investment Advisor will review the proceedings relating to the
issuance of Municipal Obligations or the basis for such opinions. As used in
this Statement of Additional Information, the term "private activity bonds"
also includes industrial development revenue bonds issued pursuant to the
Internal Revenue Code of 1954, as amended.

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

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

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Among other types of Municipal Obligations, the Tax-Free Fund may
purchase short-term General Obligation Notes, Tax Anticipation Notes, Bond
Anticipation Notes, Revenue Anticipation Notes, Tax-Exempt Commercial Paper,
Construction Loan Notes and other forms of short-term loans. Such instruments
are issued with a short-term maturity in anticipation of the receipt of tax
funds, the proceeds of bond placements or other revenues. In addition, the
Tax-Free Fund may invest in other types of tax-exempt instruments such as
municipal bonds and private activity bonds, provided they have remaining
maturities of 13 months or less at the time of purchase.

The payment of principal and interest on most securities purchased by
the Tax-Free Fund will depend upon the ability of the issuers to meet their
obligations. The District of Columbia, each state, each of their political
subdivisions, agencies, instrumentalities and authorities and each multi-state
agency of which a state is a member is a separate "issuer" as that term is used
in this Statement of Additional Information and the Prospectus. The
non-governmental user of facilities financed by private activity bonds is also
considered to be an "issuer."

WHEN-ISSUED SECURITIES. Each Fund may purchase debt securities on a
"when-issued" or delayed delivery basis (i.e., for delivery beyond the normal
settlement date at a stated price and yield). When a Fund agrees to purchase
securities on a "when-issued" basis, the custodian will set aside cash or high
grade liquid portfolio securities equal to the amount of the commitment in a
segregated account. Normally, the custodian will set aside portfolio
securities to satisfy the purchase commitment, and in such a case a Fund may be
required subsequently to place additional assets in the segregated account in
order to ensure that the value of the account remains equal to the amount of
the Fund's commitment. It may be expected that a Fund's net assets will
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash. In addition, because a
Fund will set aside cash or liquid portfolio securities to satisfy its purchase
commitments in the manner described above, the Fund's liquidity and the ability
of the Investment Advisor (and/or Sub-advisor with respect to the International
Equity Fund) to manage it might be affected in the event its commitments to
purchase "when-issued" securities ever exceeded 25% of the value of its assets.

When a Fund engages in "when-issued" transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in a
Fund incurring a loss or missing an opportunity to obtain a price considered to
be advantageous. Each Fund reserves the right to sell these securities before
the settlement date if it is deemed advisable.

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OPTIONS TRADING. As described in the Prospectuses, the Equity,
International Equity, Special Equity and Balanced Funds may purchase put and
call options listed on a national securities exchange and issued by the Options
Clearing Corporation in an amount not exceeding 5% of its net assets. Such
options may relate to particular securities, foreign currencies, or to various
interest rate or stock indices.

Options trading is a highly specialized activity which entails greater
than ordinary investment risks. Regardless of how much the market price of the
underlying security or index increases or decreases, the option buyer's risk is
limited to the amount of the original investment for the purchase of the
option. However, options may be more volatile than the underlying instruments,
and therefore, on a percentage basis, an investment in options may be subject
to greater fluctuation than an investment in the underlying instruments
themselves. A listed call option for a particular security gives the purchaser
of the option the right to buy from a clearing corporation, and a writer has
the obligation to sell to the clearing corporation, the underlying security or
foreign currency at the stated exercise price at any time prior to the
expiration of the option, regardless of the market price or exchange rate of
the security or foreign currency. The premium paid to the writer is in
consideration for undertaking the obligations under the option contract. A
listed put option gives the purchaser the right to sell to a clearing
corporation the underlying security or foreign currency at the stated exercise
price at any time prior to the expiration date of the option, regardless of the
market price or exchange rate of the security or foreign currency. In contrast
to an option on a particular security, an option on an interest rate or stock
index provides the holder with the right to make or receive a cash settlement
upon exercise of the option. The amount of this settlement will be equal to the
difference between the closing price of the index at the time of exercise and
the exercise price of the option expressed in dollars, times a specified
multiple.

The Equity, International Equity, Special Equity and Balanced Funds
will write call options only if they are "covered." The International Equity
Fund will also write covered index call options. In the case of a call option
on a security, the option is "covered" if a Fund owns the security underlying
the call or has an absolute and immediate right to acquire that security
without additional cash consideration (or, if additional cash consideration is
required, cash or cash equivalents in such amount as are held in a segregated
account by its custodian) upon conversion or exchange of other securities held
by it. For a call option on an index, the option is covered if a Fund
maintains with its custodian cash or cash equivalents equal to the contract
value. A call option is also covered if a Fund holds a call on the same
security or index as the call written

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where the exercise price of the call held is (i) equal to or less than the
exercise price of the call written, or (ii) greater than the exercise price of
the call written provided the difference is maintained by the Fund in cash or
cash equivalents in a segregated account with its custodian.

When a Fund purchases a put or call option, the premium paid by it is
recorded as an asset of the Fund. When a Fund writes an option, an amount
equal to the net premium (the premium less the commission) received by the Fund
is included in the liability section of such Fund's statement of assets and
liabilities as a deferred credit. The amount of this asset or deferred credit
will be subsequently marked-to-market to reflect the current value of the
option purchased or written. The current value of the traded option is the
last sale price or, in the absence of a sale, the average of the closing bid
and asked prices. If an option purchased by a Fund expires unexercised the
Fund realizes a loss equal to the premium paid. If a Fund enters into a
closing sale transaction on an option purchased by it, the Fund will realize a
gain if the premium received by such Fund on the closing transaction is more
than the premium paid to purchase the option, or a loss if it is less. If an
option written by a Fund expires on the stipulated expiration date or if the
Fund enters into a closing purchase transaction, it will realize a gain (or
loss if the cost of a closing purchase transaction exceeds the net premium
received when the option is sold) and the deferred credit related to such
option will be eliminated. If an option written by a Fund is exercised, the
proceeds of the sale will be increased by the net premium originally received
and the Fund will realize a gain or loss.

As noted previously, there are several risks associated with
transactions in options on securities, currencies and indexes. For example,
there are significant differences between the securities and options markets
that could result in an imperfect correlation between these markets, causing a
given transaction not to achieve its objectives. A decision as to whether,
when and how to use options involves the exercise of skill and judgment, and
even a well-conceived transaction may be unsuccessful to some degree because of
market behavior or unexpected events.

ILLIQUID SECURITIES. The SEC has adopted Rule 144A which allows for a
broader institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A in effect permits
resales of certain securities to qualified institutional buyers. Investments
in Rule 144A securities could have the effect of increasing the level of
illiquidity of a Fund during any period that qualified institutional buyers
were no longer interested in purchasing these securities. Rule 144A
securities, and certain privately-placed commercial paper, will not be deemed
to be illiquid

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securities if the Investment Advisor (and/or Sub-advisor with respect to the
International Equity Fund) has determined, in accordance with guidelines
established by the Board of Trustees, that an adequate trading market exists
for such securities. Rule 144A securities will, however, be deemed to be
"restricted securities" for purpose of the Funds' investment policies and
restrictions.

PENNSYLVANIA MUNICIPAL SECURITIES. The Pennsylvania Tax-Free Bond
Fund may invest in Pennsylvania Municipal Securities which include debt
obligations issued by governmental entities to obtain funds for various public
purposes, such as the construction of a wide range of public facilities, the
refunding of outstanding obligations, the payment of general operating expenses
and the extension of loans to other public institutions and facilities.
Private activity bonds that are issued by or on behalf of public authorities to
finance various privately-operated facilities are included within the term
Pennsylvania Municipal Securities if the interest paid thereon is exempt from
regular federal income tax and is not treated as a specific tax preference item
for individuals or corporations for purposes of the federal alternative minimum
tax. Opinions relating to the validity of and to the exemption of interest
thereon from federal income tax are rendered by bond counsel to the respective
issuing authorities at the time of issuance. Neither the Fund nor the
Investment Advisor will review the proceedings relating to the issuance of
Pennsylvania Municipal Securities or the basis for such opinions. As used in
this Statement of Additional Information, the term "private activity bonds"
also includes industrial development revenue bonds issued pursuant to the
Internal Revenue Code of 1986, as amended.

As described in the Prospectus, the two principal classifications of
Pennsylvania Municipal Securities which may be held by the Pennsylvania
Tax-Free Bond Fund are "general obligation" and "revenue" bonds. The Fund may
also acquire "moral obligation" bonds, which are normally issued by special
purpose authorities. There are, of course, variations in the quality of
Pennsylvania Municipal Securities both within a particular classification and
between classifications, and the yields on Pennsylvania Municipal Securities
depend upon a variety of factors, including general money market conditions,
the financial condition of the issuer, general conditions of the municipal bond
market, the size of a particular offering, the maturity of the obligation and
the rating of the issue. The ratings of Moody's, S&P, D&P and Fitch's
represent their opinions as to the quality of the Pennsylvania Municipal
Securities. It should be emphasized, however, that ratings are general and are
not absolute standards of quality, and Pennsylvania Municipal Securities with
the same maturity, interest rate and rating may have different yields, while
Pennsylvania Municipal Securities of the same maturity and interest rate with
different ratings may

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have the same yield. Subsequent to purchase by the Fund, an issue of
Pennsylvania Municipal Securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Fund. The
Investment Advisor will consider such an event in determining whether the Fund
should continue to hold the obligation.

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

Among other types of Pennsylvania Municipal Securities, the
Pennsylvania Tax-Free Bond Fund may purchase short-term General Obligation
Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation
Notes, Tax-Exempt Commercial Paper, Construction Loan Notes and other forms of
short-term loans. Such instruments are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues.

The payment of principal and interest on most securities purchased by
the Pennsylvania Tax-Free Bond Fund will depend upon the ability of the issuers
to meet their obligations. The Commonwealth of Pennsylvania and each of its
political subdivisions, agencies, instrumentalities and authorities is a
separate "issuer" as that term is used in this Statement of Additional
Information and the Fund's Prospectus. The non-governmental user of facilities
financed by private activity bonds is also considered to be an "issuer."

STAND-BY COMMITMENTS. The Pennsylvania Tax-Free Bond Fund may acquire
stand-by commitments with respect to the Pennsylvania Municipal Securities held
by it. Under a stand-by commitment, a dealer or bank agrees to purchase from
the Fund, at the Fund's option, specified municipal obligations at their
amortized cost value to the Fund plus accrued interest, if any. Stand-by
commitments may be sold, transferred or assigned by the Fund only with the
underlying instrument.

The Pennsylvania Tax-Free Bond Fund expects that stand-by commitments
will generally be available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the Fund may pay for a
stand-by commitment either separately in cash or by paying a higher price for
portfolio

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securities which are acquired subject to the commitment (thus reducing the
yield to maturity otherwise available for the same securities). Where the Fund
paid any consideration directly or indirectly for a stand-by commitment, its
cost would be reflected as unrealized depreciation for the period during which
the commitment was held by the Fund.

The Pennsylvania Tax-Free Bond Fund intends to enter into stand-by
commitments only with dealers, banks and broker-dealers which, in the
Investment Advisor's opinion, present minimal credit risks. The Fund's
reliance upon the credit of these dealers, banks and broker-dealers will be
secured by the value of the underlying municipal obligations that are subject
to the commitment. In evaluating the creditworthiness of the issuer of a
stand-by commitment, the Investment Advisor will review periodically the
issuer's assets, liabilities, contingent claims and other relevant financial
information.

The Pennsylvania Tax-Free Bond Fund will acquire stand-by commitments
solely to facilitate portfolio liquidity and does not intend to exercise its
rights thereunder for trading purposes. Stand-by commitments acquired by the
Fund will be valued at zero in determining net asset value.

SPECIAL RISKS AND CONSIDERATIONS WITH RESPECT TO THE PENNSYLVANIA TAX-FREE BOND
FUND

The concentration of investments in Pennsylvania Municipal Securities
by the Pennsylvania Tax-Free Bond Fund raises special investment
considerations. In particular, changes in the economic condition and
governmental policies of the Commonwealth of Pennsylvania and its
municipalities could adversely affect the value of the Fund and its portfolio
securities. This section briefly describes current economic trends in
Pennsylvania.

Pennsylvania has historically been dependent on heavy industry
although recent declines in the coal, steel and railroad industries have led to
diversification of the Commonwealth's economy. Recent sources of economic
growth in Pennsylvania are in the service sector, including trade, medical and
health services, education and financial institutions. Agriculture continues
to be an important component of the Commonwealth's economic structure, with
nearly one-third of the Commonwealth's total land area devoted to cropland,
pasture and farm woodlands.

Since 1986, Pennsylvania's average annual unemployment rate has been
slightly below the national average. The average unemployment rate from 1981
through 1991 was 5.4% in the Commonwealth as compared with 5.5% in the United
States as a whole.

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The Commonwealth utilizes the fund method of accounting and over 120
funds have been established for purposes of recording receipts and
disbursements of the Commonwealth, of which the General Fund is the largest.
Most of the Commonwealth's operating and administrative expenses are payable
from the General Fund. The major tax sources for the General Fund are the
sales tax, the personal income tax and the corporate net income tax. Although
the General Fund experienced deficits in fiscal 1990 and 1991, tax increases
and spending decreases have resulted in surpluses the last three years; as of
June 30, 1994, the General Fund had a surplus of $892.9 million.

The constitution of the Commonwealth provides that operating budget
appropriations of the Commonwealth may not exceed the estimated revenues and
available surplus in the fiscal year for which funds are appropriated. Annual
budgets are enacted for the General Fund (the principal operating fund of the
Commonwealth) and for certain special revenue funds which together represent
the majority of expenditures of the Commonwealth.

Current constitutional provisions permit the Commonwealth to issue the
following types of debt: (i) electorate approved debt, (ii) debt for capital
projects subject to an aggregate debt limit of 1.75 times the annual average
tax revenues of the preceding five fiscal years, (iii) tax anticipation notes
payable in the fiscal year of issuance and (iv) debt to suppress insurrection
or rehabilitate areas affected by disaster. Certain state-created agencies
issue debt supported by assets of, or revenues derived from, the various
projects financed, and the debt of such agencies is not an obligation of the
Commonwealth, although some of the agencies are indirectly dependent on
Commonwealth appropriations.

Certain litigation is pending against the Commonwealth that could
adversely affect the ability of the Commonwealth to pay debt service on its
obligations including suits relating to the following matters: (a) the
American Civil Liberties Union ("ACLU") has filed suit in federal court
demanding additional funding for child welfare services; the Commonwealth
settled a similar suit in the Commonwealth Court of Pennsylvania and is seeking
the dismissal of the federal suit, inter alia, because of that settlement.
After its earlier denial was reversed by the Third Circuit Court of Appeals,
the district court has granted class certification to the ACLU, and the parties
are proceeding with discovery (no available estimates of potential liability);
(b) in 1987, the Supreme Court of Pennsylvania held the statutory scheme for
county funding of the judicial system to be in conflict with the constitution
of the Commonwealth, but stayed judgment pending enactment by the legislature
of funding consistent with the opinion, and the legislature has yet to consider
legislation implementing the judgment; in 1992, a new action in mandamus was
filed seeking to compel the Commonwealth

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to comply with the original decision; (c) litigation has been filed in both
state and federal court by an association of rural and small schools and
several individual school districts and parents challenging the
constitutionality of the Commonwealth's system for funding local school
districts -- the federal case has been stayed pending resolution of the state
case and the state case is in the pre-trial stage (no available estimate of
potential liability); and (d) Envirotest/Synterra Partners ("Envirotest") has
filed suit against the Commonwealth asserting that it sustained damages in
excess of $350 million, as a result of investments it made in reliance on a
contract to conduct emissions testing before the emissions testing program was
suspended. Envirotest has entered into a "standstill" agreement with the
Commonwealth pursuant to which the partners will attempt to resolve
Envirotest's claims (no available estimates of potential liability).

Local government units in the Commonwealth of Pennsylvania (which
include, among other things, counties, cities, boroughs, towns, townships,
school districts and other municipally created units such as industrial
development authorities and municipality authorities, including water and sewer
authorities) are permitted to issue debt for capital projects: (i) in any
amount so long as the debt has been approved by the voters of the local
government unit; or (ii) without electoral approval if the aggregate
outstanding principal amount of debt of the local government unit is not in
excess of 100% of its borrowing base (in the case of a school district of the
first class), 300% of its borrowing base (in the case of a county) or 250% of
its borrowing base (in the case of all other local government units); or (iii)
without electoral approval and without regard to the limit described in (ii) in
any amount in the case of certain subsidized debt and self-liquidating debt
(defined to be debt with no claim on taxing power, secured solely by revenues
from a specific source which have been projected to be sufficient to pay debt
service on the related debt). Lease rental debt may also be issued, in which
case the total debt limits described in section (ii) (taking into account all
existing lease rental debt in addition to all other debt) are increased. The
borrowing base for a local government unit is the average of total revenues for
the three fiscal years preceding the borrowing. The risk of investing in debt
issued by any particular local government unit depends, in the case of general
obligation bonds secured by tax revenues, on the credit-worthiness of that
issuer or, in the case of revenue bonds, on the revenue producing ability of
the project being financed, and not directly on the credit-worthiness of the
Commonwealth of Pennsylvania as a whole.

The City of Philadelphia (the "City") has experienced severe financial
difficulties which for a time impaired its access to public credit markets.
The City experienced a series of General Fund deficits for Fiscal Years 1988
through 1992. The City has

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no legal authority to issue deficit reduction bonds on its own behalf, but
state legislation was enacted to create an Intergovernmental Cooperation
Authority (the "Authority") to provide fiscal oversight for Pennsylvania cities
(primarily Philadelphia) suffering recurring financial difficulties. The
Authority is broadly empowered to assist cities in avoiding defaults and
eliminating deficits by encouraging the adoption of sound budgetary practices
and issuing bonds. In order for the Authority to issue bonds on behalf of the
City, the City and the Authority entered into an intergovernmental cooperative
agreement providing the Authority with certain oversight powers with respect to
the fiscal affairs of the City. Philadelphia is currently operating under a
five year plan approved by the Authority on April 17, 1995 with technical
modifications officially incorporated on July 18, 1995. The audited balance
of the city's General Fund as of June 30, 1994 was $15.4 million and
preliminary unaudited financial statements as of June 30, 1995 project a
surplus of approximately $59.6 million.

The Authority's power to issue further bonds to finance a capital
project or deficit expired on December 31, 1994. The Authority may continue to
issue debt to finance a cash flow deficit until December 31, 1996, and its
ability to refund existing debt is unrestricted.

The foregoing information as to certain Pennsylvania risk factors
constitutes only a brief summary, does not purport to be a complete description
of Pennsylvania risk factors and is principally drawn from official statements
relating to securities offerings of the Commonwealth of Pennsylvania that have
come to the Fund's attention and were available as of the date of this
Statement of Additional Information.

INVESTMENT RESTRICTIONS

The following investment restrictions, in addition to those set forth
in the Prospectus, are fundamental and may not be changed without the
affirmative vote of the holders of a "majority of the outstanding shares" of
the Fund (as defined in each Prospectus under "General Information - -
Miscellaneous").

None of the Funds may:

1. Make investments for the purpose of exercising control or
management.

2. Purchase or sell real estate, provided that the Funds may invest
in securities secured by real estate or interests therein or issued by
companies or investment trusts which invest in real estate or interests
therein.

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3. Purchase or sell commodities or commodity contracts, or invest
in oil, gas or mineral exploration or development programs.

4. Sell securities short or purchase any securities on margin, except
that the Funds may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of investments (portfolio shares with respect
to the Pennsylvania Tax-Free Bond Fund).

None of the Cash Management, Tax-Free, U.S. Treasury Securities,
Equity, International Equity, Special Equity, Bond, Intermediate Income,
Short-Term Income or Balanced Funds may:

1. Act as an underwriter of securities, except insofar as the
Funds may be deemed to be underwriters under the Securities Act of 1933 in
selling its securities.

The Cash Management, Tax-Free, U.S. Treasury Securities, Equity, Bond
and Intermediate Income Funds may not:

1. Enter into repurchase agreements with maturities in excess of
seven days if such investment, together with other instruments in such Fund
which are not readily marketable, exceeds 10% of such Fund's total assets.

The Cash Management, Tax-Free and U.S. Treasury Securities Funds may
not:

1. Acquire any other investment company or investment company
security except in connection with a merger, consolidation, reorganization or
acquisition of assets.

The Bond and Intermediate Income Fund may not:

1. Enter into repurchase agreements with maturities in excess of
seven days if such investment, together with other instruments in the
Intermediate Income Fund and the Bond Fund, respectively, which are not readily
marketable, exceeds 10% of the total assets of the Intermediate Income Fund or
the Bond Fund respectively.

2. Acquire any other investment company or investment company
security except in connection with a merger, consolidation, reorganization or
acquisition of assets, and except that the Intermediate Income Fund and the
Bond Fund may invest in collateralized mortgage obligations issued by issuers
which may be deemed to be an investment company under the Investment Company
Act of 1940, provided that immediately after any purchase not more than 5% of
the value of the total assets of such Fund would be invested in such issuer and
not more than 10%

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of the value of the total assets of such Fund would be invested in all such
issuers.

The Cash Management Fund may not:

1. Write or sell puts, calls, straddles, spreads or combinations
thereof except that the Cash Management Fund may acquire puts with respect to
obligations in its portfolio and sell those puts in conjunction with a sale of
those obligations.

The Pennsylvania Tax-Free Bond Fund may not:

1. Invest more than 10% of the value of its net assets in
restricted securities.

2. Write or sell puts, calls, straddles, spreads, or combinations
thereof except that the Fund may acquire stand-by commitments with respect to
its Pennsylvania Municipal Securities.

3. Act as an underwriter of securities within the meaning of the
Securities Act of 1933, except insofar as the Fund might be deemed to be an
underwriter upon disposition of portfolio securities acquired within the
limitation on purchases of restricted securities and except to the extent that
the purchase of obligations directly from the issuer thereof in accordance with
the Fund's investment objective, policies and limitation may be deemed to be
underwriting.

The Tax-Free Fund also has a non-fundamental investment policy that it
will not make loans, except that it may enter into repurchase agreements.

* * *

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

If a percentage restriction is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in asset
value will not constitute a violation of such restriction.

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VALUATION

The net asset value per share of each class of shares in a particular
Fund is calculated by dividing the total value of all portfolio securities and
other assets belonging to the Fund that are attributable to the class, less the
value of any liabilities charged to such Fund that are attributable to the
class, by the total number of shares outstanding in the class. The net asset
value per share for each Fund and for each class of shares within a Fund is
calculated separately. Assets belonging to a particular Fund consist of the
consideration received upon the issuance or sale of shares, irrespective of
class, together with all income, earnings, profits and proceeds derived from
the investment thereof, including any proceeds from the sale, exchange or
liquidation of such investments, any funds or payments derived from any
reinvestment of such proceeds, and a portion of any general assets of the
Company not belonging to a particular portfolio. Assets belonging to a
particular Fund are charged with the direct liabilities of that Fund and with a
share of the general liabilities of the Company allocated on a daily basis in
proportion to the relative net assets of the Company's other investment
portfolios. The liabilities that are charged to a Fund are borne by each share
of the Fund, except for payments that are borne solely by Retail Shares
pursuant to the Distribution and Services Plan applicable to such shares as
described in the prospectus for such Retail Shares, and transfer agency
expenses which may vary between Institutional Shares and Retail Shares.
Subject to the provisions of the Agreement and Declaration of Trust,
determinations by the Board of Trustees as to the direct and allocable
expenses, and the allocable portion of any general assets, with respect to a
particular Fund or share class are conclusive.

VALUATION OF THE MONEY MARKET FUNDS

As stated in the Prospectuses, computing their net asset value of
shares for purposes of sales and redemptions, these Funds use the amortized
cost method of valuation. Under this method, such Funds value each of their
portfolio securities at cost on the date of purchase and thereafter assume a
constant proportionate accretion of any discount or amortization of any premium
until maturity of the security. As a result, the value of a portfolio security
for purposes of determining net asset value normally does not change in
response to fluctuating interest rates. While the amortized cost method seems
to provide certainty in portfolio valuation, it may result in valuations for
such Funds' securities which are higher or lower than the market value of such
securities.

In connection with their use of amortized cost valuation, each such
Fund limits the dollar-weighted average maturity of its

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portfolio to not more than 90 days and does not purchase any instrument with a
remaining maturity of more than 13 months with certain exceptions. The
Company's Board of Trustees has also established procedures, pursuant to rules
promulgated by the Securities and Exchange Commission, that are intended to
stabilize the net asset value per share of each such Fund for purposes of sales
and redemptions at $1.00. Such procedures include the determination at such
intervals as the Board deems appropriate, of the extent, if any, to which each
such Fund's net asset value per share calculated by using available market
quotations deviates from $1.00 per share. In the event such deviation exceeds
1/2 of 1% with respect to any of the Funds, the Board will promptly consider
what action, if any, should be initiated. If the Board believes that the
amount of any deviation from the $1.00 amortized cost price per share of a Fund
may result in material dilution or other unfair results to investors or
existing shareholders, it will take such steps as it considers appropriate to
eliminate or reduce to the extent reasonably practicable any such dilution or
unfair results. These steps may include selling portfolio instruments prior to
maturity; shortening the Fund's average portfolio maturity; withholding or
reducing dividends; redeeming shares in kind; or utilizing a net asset value
per share determined by using available market quotations.

VALUATION OF THE NON-MONEY MARKET FUNDS

Equity securities are valued at the last reported sales prices on the
day of valuation if such prices are readily available, otherwise at the last
quoted bid prices on that day. Debt securities with remaining maturities in
excess of sixty days are valued at the last quoted bid prices on the day of
valuation. Debt securities with remaining maturities of sixty days or less are
valued at amortized cost. Other Securities for which quotations are not
readily available are valued at their fair market value under procedures
established by, and under the supervision of, the Company's Board of Trustees.

With respect to the International Equity Fund, investments which are
primarily traded on a domestic exchange (including securities traded through
the National Market System) are valued at the last sale price on that exchange
or, if there is no recent sale, the last current bid price; portfolio
securities which are primarily traded on foreign securities exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, except that when an event subsequent to the time where
value was so established is likely to have changed such value, then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees. Securities trading in
over-the-counter markets in European and Pacific Basin countries is

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normally completed well before 4:00 p.m., Eastern time. In addition, European
and Pacific Basin securities trading may not take place on all Business Days.
Furthermore, trading takes place in Japanese markets on certain Saturdays and
in various foreign markets on days which are not considered to be Business
Days. The calculation of the net asset value of a Fund investing in foreign
securities may not take place contemporaneously with the determination of the
prices of portfolio securities used in such calculation. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and 4:00 p.m., Eastern time, and at other times may not be reflected
in the calculation of net asset value of a Fund. A security which is listed or
traded on more than one exchange shall be valued at the quotation on the
exchange determined to be the primary market for such security; investments in
foreign debt securities having a maturity of 60 days or less shall be valued
based upon the amortized cost method; all other foreign securities are valued
at the last current bid quotation if market quotations are available, or at
fair value as determined in accordance with policies established by the Board
of Trustees. For valuation purposes, quotations of foreign securities in
foreign currency shall be converted to U.S. dollars equivalent at the
prevailing market rate on the day of conversion.

Among the factors that will be considered, if they apply, in valuing
portfolio securities held by the Equity, International Equity, Special Equity,
Bond, Intermediate Income, Pennsylvania Tax-Free Bond Fund, Short-Term Income
and Balanced Funds are the existence of restrictions upon the sale of the
security by the Fund, the absence of a market for the security, the extent of
any discount in acquiring the security, the estimated time during which the
security will not be freely marketable, the expenses of registering or
otherwise qualifying the security for public sale, underwriting commissions if
underwriting would be required to effect a sale, the current yields on
comparable securities for debt obligations traded independently of any equity
equivalent, changes in the financial condition and prospects of the issuer, and
any other factors affecting fair market value. In making valuations, opinions
of counsel may be relied upon as to whether or not securities are restricted
securities and as to the legal requirements for public sale.

The Company may use one or more pricing services to value certain
portfolio securities where the prices provided are believed to reflect the fair
market values of such securities. A pricing service would normally consider
such factors as yield, risk, quality, maturity, type of issue, trading
characteristics, special circumstances and other factors it deems relevant in
determining valuations for normal institutionalized trading units of debt
securities and would not rely exclusively on quoted prices. The methods used
by the pricing services and the valuations so established will be reviewed from
time to time by

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the Investment Advisor (and/or Sub-advisor with respect to the International
Equity Fund) under the general supervision of the Company's Board of Trustees.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

CALCULATION OF OFFERING PRICE

Retail Shares of the Non-Money Market Funds are sold with a maximum
sales charge of 2%.

An illustration of the computation of the offering price per share of
Retail Shares of such Funds, using the value of such Funds' net assets and
number of outstanding securities at the close of business on October 31, 1995,
and the maximum 2.0% sales charge is as follows:

<TABLE>
<CAPTION>
Penn- Interna-
Intermediate Special sylvania tional Short-
Income Bond Equity Equity Tax-Free Equity Balanced Term Income
Fund Fund Fund Fund Bond Fund Fund Fund Fund
------------ -------- ------ ------- --------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets . . . . . . . $1,229,481 $1,373,305 $6,590,598 $733,982 $819,607 $8,805 $69,340 $11,356

Outstanding
Securities . . . . . . 114,722 130,046 385,955 64,279 80,106 758 6,176 1,131

Net Asset Value
Per Share . . . . . . $10.72 $10.56 $17.08 $11.42 $10.23 $10.99 $10.39 $10.04

Sales charge (2% of the
offering price) . . . $0.22 $0.22 $0.35 $0.23 $0.21 $0.22 $0.21 $0.20

Offering to Public . . . $10.94 $10.78 $17.43 $11.65 $10.44 $11.21 $10.60 $10.24
</TABLE>

Institutional Shares of each Fund are sold without a sales load.

No sales load is charged on the reinvestment of dividends or distributions, or
in connection with certain share exchanges with respect to Retail Shares as
described in the Prospectus describing Retail Shares under "Purchasing Shares
- -- Exchange Privilege." With regard to other circumstances wherein the sales
load may be waived or reduced, see the Prospectus describing Retail Shares
under "Purchasing Shares -- Sales Charge Waivers; Letters of Intent; Concurrent
Purchases; and Rights of Accumulation."

MATTERS AFFECTING PURCHASE AND REDEMPTION

Retail and Institutional Shares in each of the Funds are sold on a
continuous basis by the Distributor, and the Distributor has agreed to use
appropriate efforts to solicit all

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purchase orders. Institutional Shares may be purchased through procedures
established by the Distributor in connection with the requirements of qualified
accounts maintained by or on behalf of certain persons by the Investment
Advisor, its affiliates or their correspondents. Individuals may not purchase
Institutional Shares directly. Retail Shares may be purchased through
financial institutions and industry professionals (such as insurance companies,
investment counselors, accountants and estate planning associations but not
including banks and savings and loan associations), broker-dealers, and the
Distributor's affiliates and subsidiaries.

The Company may suspend the right of redemption or postpone the date
of payment for shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Securities and Exchange Commission, (b) the Exchange is closed for other
than customary weekend and holiday closings, (c) the Securities and Exchange
Commission has by order permitted such suspension, or (d) an emergency exists
as determined by the Securities and Exchange Commission.

The Company may redeem shares involuntarily if redemption appears
appropriate in light of the Company's responsibilities under the Act.

If the Board of Trustees determines that conditions exist which make
payment of redemption proceeds wholly in cash unwise or undesirable, the
Company may make payment wholly or partly in securities or other property.
Such redemptions will only be made in "readily marketable" securities. In such
an event, a Shareholder would incur transaction costs in selling the securities
or other property. Each Fund may commit that it will pay all redemption
requests by a Shareholder of record in cash, limited in amount with respect to
each Shareholder during any ninety-day period to the lesser of $250,000 or 1%
of the net asset value of the Fund at the beginning of such period.

ADDITIONAL INFORMATION CONCERNING TAXES

GENERAL

The following summarizes certain additional federal tax considerations
generally affecting the Funds and their Shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of a Fund or its Shareholders, and the discussion here and in the
Prospectuses is not intended as a substitute for careful tax planning. This
discussion is based on federal tax laws and regulations which are in effect on
the date of this Statement of Additional Information. Such laws and
regulations

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may be changed by legislative or administrative action. Potential investors
should consult their tax advisors with specific reference to their own tax
situation.

Each Fund of the Company is treated as a separate corporate entity
under the Internal Revenue Code of 1986, as amended (the "Code"), and intends
to qualify as a regulated investment company. By following this policy, each
Fund expects to eliminate or reduce to a nominal amount the federal income
taxes to which it is subject. If for any taxable year a Fund does not qualify
for the special federal tax treatment afforded regulated investment companies,
all of the Fund's taxable income would be subject to tax at regular corporate
rates (without any deduction for distributions to shareholders). In such
event, the Fund's dividend distributions to Shareholders (including, in the
case of the Tax Free Fund and the Pennsylvania Tax-Free Bond Fund, amounts
derived from interest on Municipal Obligations) would be taxable as ordinary
income, to the extent of the current and accumulated earnings and profits of
the particular Fund, and would be eligible for the dividends received deduction
in the case of corporate Shareholders.

Qualification as a regulated investment company under the Code
requires, among other things, that each Fund distribute to its Shareholders an
amount equal to at least the sum of 90% of its investment company taxable
income and 90% of its tax-exempt interest income (if any), net of certain
deductions for a taxable year. In addition, each Fund must satisfy certain
requirements with respect to the source of its income for a taxable year. At
least 90% of the gross income of each Fund must be derived from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currencies, and other income
(including, but not limited to, gains from options, futures, or forward
contracts) derived with respect to a Fund's business of investing in such
stock, securities or currencies. The Treasury Department may by regulation
exclude from qualifying income foreign currency gains that are not directly
related to a Fund's principal business of investing in stock or securities, or
options and futures with respect to stock or securities. Any income derived by
a Fund from a partnership or trust is treated for this purpose as derived with
respect to the Fund's business of investing in stock, securities or currencies
only to the extent that such income is attributable to items of income which
would have been qualifying income if realized by the Fund in the same manner as
by the partnership or trust.

A Fund will not be treated as a regulated investment company under the
Code if 30% or more of the Fund's gross income for a taxable year is derived
from gains realized on the sale or other disposition of the following
investments held for less than three months: (1) stock and securities (as
defined in section 2(a)(36)

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of the Investment Company Act of 1940); (2) options, futures and forward
contracts (other than those on foreign currencies); and (3) foreign currencies
(and options, futures and forward contracts on foreign currencies) that are not
directly related to a Fund's principal business of investing in stock and
securities (and options and futures with respect to stocks and securities) (the
"Short-short" test). Interest (including original issue discount and accrued
market discount) received by a Fund upon maturity or disposition of a security
held for less than three months will not be treated as gross income derived
from the sale or other disposition of such security within the meaning of this
requirement. However, income that is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose. With respect to covered call options, if the
call is exercised by the holder, the premium and the price received on exercise
constitute the proceeds of sale, and the difference between the proceeds and
the cost of the securities subject to the call is capital gain or loss.
Premiums from expired call options written by a Fund and net gains from closing
purchase transactions are treated as short-term capital gains for federal
income tax purposes, and losses on closing purchase transactions are short-term
capital losses.

Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to a Shareholder as long-term capital gain,
regardless of how long the Shareholder has held the distributing Fund's Shares
and whether such distribution is received in cash or additional Fund Shares.
The Fund will designate such distributions as capital gain dividends in a
written notice mailed to Shareholders within 60 days after the close of the
Fund's taxable year. Shareholders should note that, upon the sale or exchange
of Fund Shares, if the Shareholder has not held such Shares for more than six
months, any loss on the sale or exchange of those Shares will be treated as
long-term capital loss to the extent of the capital gain dividends received
with respect to the Shares.

Ordinary income of individuals is taxable at a maximum nominal rate of
39.6%, but because of limitations on itemized deductions otherwise allowable
and the phase-out of personal exemptions, the maximum effective marginal rate
of tax for some taxpayers may be higher. An individual's long-term capital
gains are taxable at a maximum nominal rate of 28%. For corporations,
long-term capital gains and ordinary income are both taxable at a maximum
nominal rate of 35% (or at a maximum effective marginal rate of 39% in the case
of corporations having taxable income between $100,000 and $335,000).

A 4% non-deductible excise tax is imposed on regulated, investment
companies that fail to currently distribute specified percentages of their
ordinary taxable income and capital gain net

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income (excess of capital gains over capital losses). Each Fund intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and any capital gain net income prior to the end of each calendar year
to avoid liability for this excise tax.

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

TAXATION OF CERTAIN FINANCIAL INSTRUMENTS

With respect to the Equity, International Equity, Special Equity,
Bond, Intermediate Income and Balanced Funds, some investments may be subject
to special rules which govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules include
the following: (1) the acquisition of, or becoming the obligor under, a bond
or other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (2) the accruing of certain trade receivables
and payables; and (3) the entering into or acquisition of any forward contract,
futures contract, option or similar financial instrument. The disposition of a
currency other than the U.S. dollar by a U.S. taxpayer is also treated as a
transaction subject to the special currency rules. However, foreign
currency-related regulated futures contracts and non-equity options are
generally not subject to the special currency rules if they are or would be
treated as sold for their fair market value at year-end under the
mark-to-market rules (described below), unless an election is made to have such
currency rules apply. With respect to transactions covered by the special
rules, foreign currency gain or loss is calculated separately from any gain or
loss on the underlying transaction and is normally taxable as ordinary gain or
loss. A taxpayer may elect to treat as capital gain or loss foreign currency
gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not part of a straddle. The Treasury Department has issued
regulations under which certain transactions subject to the special currency
rules that are part of a "section 988 hedging transaction" are not subject to
the mark-to-market or loss deferral rules under the Code. It is

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<PAGE> 144
anticipated that some of the non-U.S. dollar denominated investments and
foreign currency contracts that the Fund may make or may enter into will be
subject to the special currency rules described above. Gain or loss
attributable to the foreign currency component of transactions engaged in by a
Fund which are not subject to the special currency rules (such as foreign
equity investments other than certain preferred stocks) will be treated as
capital gain or loss and will not be segregated from the gain or loss on the
underlying transaction.

Generally, futures contracts held by a Fund at the close of the Fund's
taxable year will be treated for Federal income tax purposes as sold for their
fair market value on the last business day of such year, a process known as
"mark-to-market." Forty percent of any gain or loss resulting from such
constructive sale will be treated as short-term capital gain or loss and 60% of
such gain or loss will be treated as long-term capital gain or loss without
regard to the length of time the Fund holds the futures contract ("the 40%-60%
rule"). The amount of any capital gain or loss actually realized by a Fund in
a subsequent sale or other disposition of those futures contacts will be
adjusted to reflect any capital gain or loss taken into account by the Fund in
a prior year as a result of the constructive sale of the contacts. With respect
to futures contracts to sell, which will be regarded as parts of a "mixed
straddle" because their values fluctuate inversely to the values of specific
securities held by the Fund, losses as to such contracts to sell will be
subject to certain loss deferral rules which limited the amount of loss
currently deductible on either part of the straddle to the amount thereof which
exceeds the unrecognized gain (if any) with respect to the other part of the
straddle, and to certain wash sales regulations. Under short sales rules,
which will also be applicable, the holding period of the securities forming
part of the straddle will (if they have not been held for the long-term holding
period) be deemed not to begin prior to termination of the straddle. With
respect to certain futures contracts, deductions for interest and carrying
charges will not be allowed. Notwithstanding the rules described above, with
respect to futures contracts to sell which are properly identified as such, a
Fund may make an election which will exempt (in whole or in part) those
identified futures contracts from being treated for Federal income tax purposes
as sold on the last business day of the Fund's taxable year, but gains and
losses will be subject to such short sales, wash sales, loss deferral rules and
the requirement to capitalize interest and carrying charges. Under temporary
regulations, a Fund would be allowed (in lieu of the foregoing) to elect either
(1) to offset gains or losses from positions which are part of a mixed straddle
by separately identifying each mixed straddle to which such treatment applies,
or (2) to establish a mixed straddle account for which gains and losses would
be recognized and offset on a periodic basis during the taxable year. Under
either election, the 40%-60% rule will

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apply to the net gain or loss attributable to the futures contracts, but in the
case of a mixed straddle account election, no more than 50% of any net gain may
be treated as long-term and no more than 40% of any net loss may be treated as
short-term. Options on futures contracts generally receive federal tax
treatment similar to that described above.

Under the Short-short test described above, less than 30% of a
company's gross income must be derived from certain investments held for less
than three months. With respect to futures contracts and other financial
instruments subject to the mark-to-market rules, the Internal Revenue Service
(the "Service") has ruled in private letter rulings issued to other regulated
investment companies that a gain realized from such a futures contract or
financial instrument will be treated as being derived from a security held for
three months or more (regardless of the actual period for which the contract or
instrument is held) if the gain arises as a result of a constructive sale under
the mark-to-market rules,and will be treated as being derived from a security
held for less than three months only if the contract or instrument is
terminated (or transferred) during the taxable year (other than reason of
mark-to-market) and less than three months have elapsed between the date the
contract or instrument is acquired and the termination date. Although private
letter rulings are binding on the service only with respect to the taxpayers to
which they are issued, management believes the service would take the same
position with respect to the Funds. In determining whether the 30% test is met
for a taxable year, increases and decreases in the value of each Fund's futures
contracts and other investments that qualify as part of a "designated hedge,"
as defined in the Code, may be netted.

Certain foreign currency contracts entered into by a Fund may be
subject to the "mark-to-market" process, but gain or loss will be treated as
100% ordinary income or loss. To receive such federal income tax treatment, a
foreign currency contract must meet the following conditions: (1) the contract
must require delivery of a foreign currency of a type in which regulated
futures contracts are traded or upon which the settlement value of the
contracts depends; (2) the contract must be entered into at arm's length at a
price determined by reference to the price in the interbank market; and (3) the
contract must be traded in the interbank market. The Treasury Department has
broad authority to issue regulations under the provisions respecting foreign
currency contracts. As of that date of this Statement of Additional
Information, the Treasury has not issued any such regulations. Foreign
currency contracts entered into by the Fund may result in the creation of one
or more straddles for federal income tax purposes, in which case certain loss
deferral, short sales, and wash sales rules and the requirement to capitalize
interest and carrying charges may apply.

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<PAGE> 146
SPECIAL CONSIDERATIONS PERTAINING TO THE TAX-FREE AND PENNSYLVANIA TAX-FREE
BOND FUNDS

The policy of the Tax-Free Fund is to pay to its Shareholders each
year as exempt-interest dividends substantially all the Fund's Municipal
Securities interest income net of certain deductions and the policy of the
Pennsylvania Tax-Free Bond Fund is to pay to its Shareholders each year as
exempt-interest dividends substantially all the Fund's Pennsylvania Municipal
Securities interest income net of certain deductions. Exempt-interest
dividends generally may be treated by the Shareholders as items of interest
excludable from their gross income under Section 103(a) of the Code. An
exempt-interest dividend is any dividend or part thereof (other than a capital
gain dividend) paid by the Tax-Free and Pennsylvania Tax-Free Bond Funds and
designated as an exempt-interest dividend in a written notice mailed to
Shareholders no later than 60 days after the close of each Fund's taxable year.
However, the aggregate amount of dividends so designated by such Funds cannot
exceed the excess of the amount of interest exempt from tax under Section 103
of the Code received by either Fund during the taxable year over any amounts
disallowed as deductions under Sections 265 and 171(a)(2) of the Code.
Moreover, with respect to the Pennsylvania Tax-Free Bond Fund, while such
dividends and interest are exempt from regular federal income tax, they may be
subject to the federal alternative minimum tax (currently imposed at the rate
of 26-28% in the case of non-corporate taxpayers and at the rate of 20% in the
case of corporate taxpayers), in two circumstances. First, exempt interest
dividends derived from certain "private activity" bonds issued after August 7,
1986, generally will constitute an item of tax preference for both corporate
and non-corporate taxpayers. The Pennsylvania Tax-Free Bond Fund intends, when
possible, to avoid investing in such "private activity" bonds. Second, exempt
interest dividends derived from all bonds, regardless of the date of issue,
must be taken into account by corporate taxpayers in determining certain
adjustments for the federal alternative minimum tax and the environmental tax.
Receipt of exempt interest dividends may result in collateral federal income
tax consequences to certain other taxpayers, including financial institutions,
property and casualty insurance companies, individual recipients of Social
Security or Railroad Retirement benefits, and foreign corporations engaged in
trade or business in the United States. Prospective investors should consult
their own tax advisors as to such consequences.

The percentage of the total dividends paid for any taxable year which
qualifies as exempt-interest dividends will be the same for all Shareholders
receiving dividends from either the Tax-Free or Pennsylvania Tax-Free Bond
Funds during such year, regardless of the period for which the Shares were
held. In order for each such Fund to pay exempt-interest dividends for any

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<PAGE> 147
taxable year, at the close of each quarter of its taxable year at least 50% of
the aggregate value of their respective assets must consist of exempt-interest
obligations.

Interest on indebtedness incurred by a shareholder to purchase or
carry shares of either of the Tax-Free and Pennsylvania Tax-Free Bond Funds
generally is not deductible for federal income tax purposes.

Shareholders who may be treated as a "substantial user" or a "related
person" to such user with respect to facilities financed through any "private
activity" obligations held by the Funds are advised to consult their tax
advisors with respect to whether exempt-interest dividends would retain the
exclusion under Section 103(a). A "substantial user" is defined under U.S.
Treasury Regulations to include a non-exempt person who regularly uses a part
of such facilities in his trade or business and whose gross revenues derived
with respect to the facilities financed by the issuance of bonds are more than
5% of the total revenues derived by all users of such facilities, who occupies
more than 5% of the usable area of such facilities or for whom such facilities
or a part thereof were specifically constructed, reconstructed or acquired. A
"related person" includes certain related natural persons, affiliated
corporations, partners and partnerships and S corporations and their
shareholders.

The Tax-Free and Pennsylvania Tax-Free Bond Funds will distribute
substantially all of their investment company taxable income, if any, for each
taxable year. In general, each such Fund's investment company taxable income
will be its taxable income subject to certain adjustments and excluding the
excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. Each such Fund will be taxed
on any undistributed investment company taxable income. To the extent such
income is distributed by either Fund (whether in cash or additional Shares), it
will be taxable to shareholders as ordinary income. It is not expected that
any such distributions will be eligible for the dividends received deduction
for corporations.

TAXABLE EQUIVALENT YIELD TABLE
TAX EXEMPT VERSUS TAXABLE SECURITIES

The tables below show the effect of the tax status of bonds on
the taxable equivalent yield received by their holders under the regular
Federal income tax and the Pennsylvania personal income tax laws in existence
for tax year 1996. They give the approximate yield a taxable security must
earn at various income brackets to produce after-tax yields equivalent to those
of tax exempt bonds yielding 4%, 4.5%, 5%, 5.5%, 6%, 6.5% and 7.0%.

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<PAGE> 148

1995 Federal TAX EXEMPT YIELD
Taxable Approximate ------------------------------------------------------------
Income Bracket Combined 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0%
---------------- Federal & PA ---- ---- ---- ---- ---- ---- ----
Joint Return Single Return Marginal Tax Rate Taxable Equivalent Yield
---------------- ----------------- ----------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 - 40,100 0 - 24,000 17.380% 4.841% 5.447% 6.052% 6.657% 7.262% 7.867% 8.473%
40,101 - 96,900 24,001 - 58,150 30.016% 5.716% 6.430% 7.144% 7.859% 8.573% 9.288% 10.002%
96,901 - 147,700 58,151- 121,300 32.932% 5.964% 6.710% 7.455% 8.201% 8.946% 9.692% 10.437%
147,701 - 263,750 121,301 - 263,750 37.792% 6.430% 7.234% 8.038% 8.841% 9.645% 10.449% 11.253%
OVER 263,750 OVER 263,750 41.291% 6.813% 7.665% 8.517% 9.368% 10.220% 11.072% 11.923%
</TABLE>

Equivalent yields are based on a fixed $1,000 investment with all taxes
deducted from income. The 4 mill county intangible personal property tax,
which is applicable in most counties, is not considered in these tables. The
4.96% Philadelphia school district investment income tax is also not considered
in these tables. While it is expected that the Pennsylvania Tax-Free Bond Fund
will invest primarily in obligations exempt from taxes, other income received
by the Fund may be taxable. Yields shown are for illustration purposes only
and are not meant to represent the Fund's actual yield.

NOTE:

The income amount shown is income subject to Federal income tax reduced by
adjustments to income, exemptions, and itemized deductions (including the
deduction for state and local income taxes). If the standard deduction is
taken for Federal income tax purposes, the taxable equivalent yield required to
equal a specified tax-exempt yield is at least as great as that shown in the
tables. It should also be noted that the interest earned on certain "private
activity bonds" issued after August 7, 1986, while exempt from the regular
Federal income tax, is treated as a tax preference item which could subject the
recipient to the Federal alternative minimum tax. It is assumed in these
tables that the investor is not subject to the Federal alternative minimum tax.
Where applicable, investors should consider that the benefit of certain
itemized deductions and the benefit of personal exemptions are limited in the
case of higher income individuals. For 1996, taxpayers with adjusted gross
income in excess of approximately a $117,950 threshold amount are subject to an
overall limitation on certain itemized deductions, requiring a reduction equal
to the lesser of (i) 3% of adjusted gross income in excess of the $117,950
threshold or (ii) 80% of the amount of such itemized deductions otherwise
allowable. The benefit of each personal exemption is phased out at the rate of
two percentage points for each $2,500 (or fraction thereof) of adjusted gross
income in the exemption phase-out zone. For single taxpayers the range of
adjusted gross income in the exemption phase-out zone is estimated to be from
$117,950 to $240,451 and for married taxpayers filing a joint return, the range
is estimated to be from $176,950 to $299,451. The Federal tax brackets, the
threshold amount at which itemized deductions

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<PAGE> 149
are subject to reduction, and the range over which personal exemptions are
phased out will be further adjusted for inflation for each year after 1996.

MANAGEMENT OF THE COMPANY

TRUSTEES

The Company will be managed by the Trustees in accordance with the
laws of the Commonwealth of Massachusetts governing trusts with transferrable
shares. There are currently five Trustees, three of whom are not "interested
persons" of the Company within the meaning of that term under the Investment
Company Act of 1940. The Board of Trustees, in turn, elects the officers of
the Company to supervise actively its day-to-day operations.

The Trustees of the Company, their addresses, their ages and their
principal occupations during the past five years, are as follows:

<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATIONS
NAME AND ADDRESS AGE WITH THE COMPANY DURING PAST 5 YEARS
- ---------------- --- ---------------- -----------------------
<S> <C> <C> <C>
Thomas J. Taylor 56 Chairman and Consultant; Trustee, Community
1015 Darby Drive Trustee Heritage Fund
Yardley, PA 19067

*Dominic S. Genuardi, Sr. 72 Trustee Retired; Chief Executive
805 East Germantown Pike Officer, Genuardi Supermarkets,
Norristown, PA 19401 Inc. until October 1990.

*Steven I. Gross 49 Trustee Managing Partner, Gross &
2655 Philmont Avenue Company (certified public
Huntingdon Valley, PA 19006 accountants).

Robert C. Kingston 67 Trustee Consultant; Member of the
1603 River Farm Drive Special Operations Policy
Alexandria, VA 22308 Group of the Secretary of Defense; Director,
Vinnell Corporation; Founder, Military
Professional Resources, Inc.

Dale E. Smith 65 Trustee Retired; President
230 West Washington Square Farm Journal, Inc. until
Philadelphia, PA 19106 November 1995
</TABLE>

- ----------------------------
* May be deemed to be an "interested person" of the Company as defined
in the Investment Company Act of 1940.

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<PAGE> 150
The Trustees of the Company receive fees and expenses for each
meeting of the Board of Trustees they attend. Each Trustee is entitled to
compensation at the rate of $4,000 per year, plus $1,500 for each meeting
attended in person and $250.00 for each meeting held by conference telephone,
plus all out-of-pocket expenses incurred as a trustee. The Chairman of the
Board of Trustees is entitled to additional compensation at the rate of $2,500
per year. For the fiscal year ended October 31, 1995, the Company paid total
compensation of $64,949 to persons serving as Trustees.

The Audit Committee of the Board of Trustees is comprised of Messrs.
Gross and Taylor and is chaired by Mr. Gross. Each member of the Audit
Committee receives a fee of $1,500 for each meeting of the Committee attended
in person, except that no fee shall be paid for meetings that are held in
conjunction with meetings of the Board of Trustees.

The following table provides information concerning the compensation
of each of the Company's Trustees for services rendered during the Company's
last fiscal year ended October 31, 1995:

<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL
AGGREGATE BENEFITS ACCRUED COMPENSATION
COMPENSATION AS PART OF FROM COMPANY
NAME OF PERSON FROM COMPANY COMPANY EXPENSES AND FUND COMPLEX
-------------- ------------ ---------------- ----------------
<S> <C> <C> <C>
Dominic S. Genuardi, Sr. . . . . . . . . $10,000 None Not Applicable(1)
Steven I. Gross . . . . . . . . . . . . . $13,000 None Not Applicable(1)
Robert C. Kingston . . . . . . . . . . . $10,000 None Not Applicable(1)
Dale E. Smith . . . . . . . . . . . . . . $10,000 None Not Applicable(1)
Thomas J. Taylor . . . . . . . . . . . . $13,000 None Not Applicable(1)
</TABLE>

- --------------------------
(1) The Company is not part of a fund complex.

OFFICERS

The officers of the Company, their ages and their principal
occupations during the past five years are as follows:

<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION
NAME AND ADDRESS Age WITH THE COMPANY DURING PAST 5 YEARS
- ---------------- --- ---------------- --------------------
<S> <C> <C> <C>
David G. Lee 43 President and Senior Vice President of Administrator and
the Chief Executive the Distributor since 1993. Vice President of the
Officer Administrator and the Distributor since 1991. President of
Sierra Trust Funds prior to 1991.
</TABLE>

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<PAGE> 151
<TABLE>
<S> <C> <C> <C>
Sandra K. Orlow 42 Vice President Vice President and Assistant
and Assistant Secretary of the Administrator
Secretary and Distributor since 1983.

Robert B. Carroll 35 Vice President Vice President, Assistant
and Assistant Secretary of SEI, the
Secretary Administrator and Distributor,
since 1994. United States Securities and Exchange Commission,
Division of Investment Management, 1990-1994. Associate,
McGuire, Woods, Battle and Boothe (law firm) before 1990.

Kathryn L. Stanton 37 Vice President Vice President, Assistant Secretary
and Assistant of SEI, the Administrator and
Secretary Distributor, since 1994. Associate,
Morgan, Lewis & Bockius (law firm) 1989-1994.

Kevin P. Robins 34 Vice President Senior Vice President, General
and Assistant Counsel and Secretary of SEI, the
Secretary Administrator and Distributor since
1994. Vice President of SEI, the Administrator and Distributor
1992-1994. Associate, Morgan, Lewis & Bockius (law firm),
1988-1992.

Joseph Lydon 36 Vice President Director of Business
and Assistant Administration of Fund Resources
Secretary for SEI since April 1995; prior
thereto, Vice President - Dreman Value Management, LP and
President - Dreman Financial Services, Inc.

Todd Cipperman 29 Vice President Vice President, Legal Department -
and Assistant SEI since 1995. Associate, Dewey
Secretary Ballantine (law firm), 1994-1995.
Associate, Winston & Strawn (law firm), 1991-1994.

Stephen G. Meyer 30 Controller Vice President and Controller -
and Chief Fund Resources, a division of SEI.
Accounting Director - Internal Audit and Risk
and Financial Management - SEI, 1992 to March 1995.
Officer Coopers & Lybrand, Senior Associate, 1990 to 1992.

Henry S. Hilles, Jr. 56 Secretary Partner in the law firm of Drinker Biddle & Reath, Philadelphia,
Pennsylvania.

Christine Trecroci 25 Assistant From March, 1994 to present,
Secretary employee of SEI Corporation.

Michael T. Zelinsky 37 Assistant Blue Sky Supervisor; Legal
Secretary Department - SEI, since October
1995. Legal Assistant, Clark, Ladner, Fortenbaugh & Young (law
firm), 1994-1995. Legal Assistant, Seward & Kissel (law firm),
1993-1994.
</TABLE>

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<PAGE> 152
Each officer other than Mr. Hilles may be reached at 680 East
Swedesford Road, Wayne, Pennsylvania 19087-1658. Mr. Hilles may be reached at
1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496. The officers of
the Company receive no compensation directly from the Company for performing
the duties of their offices. Each officer other than Mr. Hilles is an employee
of SEI Corporation.

As of December 6, 1995, the trustees and officers as a group owned
34.31% and 16.00% of the outstanding Retail Shares of the Company's Cash
Management and Pennsylvania Tax-Free Bond Funds, respectively. As of the same
date, the trustees and officers of the Company collectively owned less than 1%
of the outstanding Retail and Institutional Shares of each of the Company's
other investment portfolios.

INVESTMENT ADVISOR

Meridian Investment Company serves as the Company's Investment
Advisor. Its principal offices are located at 55 Valley Stream Parkway,
Malvern, Pennsylvania 19355. The Investment Advisor is a subsidiary of
Meridian Bancorp, Inc. The Investment Advisor has been engaged in providing
investment management and advice to trusts and other customers since February
1985, but prior to the Company's commencement of operations had not previously
served as an investment advisor to a registered management investment company.

The Investment Advisor manages each of the Company's portfolios and is
responsible for all purchases and sales of each Fund's portfolio securities.
For the advisory services provided and expenses assumed by it, the Investment
Advisor is entitled to receive a fee, computed daily and payable monthly, based
on each Fund's average net assets at an annual rate equal to the lesser of (i)
.40% for each of the Cash Management, Tax-Free and U.S. Treasury Securities
Funds; .74% for each of the Equity, Bond, Intermediate Income and Pennsylvania
Tax-Free Bond Funds; 1.50% for the Special Equity Fund; .75% for the Balanced
Fund; .74% for the Short-Term Income Fund; and 1.00% for the International
Equity Fund, or (ii) such fee as may from time to time be agreed upon in
writing by a Fund and the Investment Advisor in advance of the period to which
the fee relates. In addition, the Investment Advisor has agreed that if, in
any fiscal year, the expenses borne by any Fund exceed the applicable expense
limitations imposed by the securities regulations of any state in which Shares
of such Fund are registered or qualified for sale to the public, the Investment
Adviser will reimburse such Fund for any excess up to the amount of its fee
under the Investment Advisory Agreement, provided, however, that
notwithstanding the foregoing, the Investment Adviser shall reimburse the Funds
for such excess expenses regardless of the amount of the fees paid to it during
such fiscal year to the extent that the securities regulations of

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<PAGE> 153
any state having jurisdiction over the Company so require. Unless otherwise
required by law, such reimbursement would be accrued and paid on the same basis
that the advisory fee is accrued and paid by each Fund. To the Company's
knowledge, of the expense limitations in effect on the date of this Statement
of Additional Information, none is more restrictive than two and one-half
percent (2-1/2%) of the first $30 million of a Fund's average net assets, two
percent (2%) of the next $70 million of the average net assets and one and
one-half percent (1-1/2%) of the remaining average net assets determined at
least monthly.

For the services provided and expenses assumed by the Investment
Advisor, the Company paid the Investment Advisor, net of voluntary fee
reductions for the fiscal years ended October 31, 1993, October 31, 1994 and
October 31, 1995, advisory fees of $406,337, $321,336 and $396,730,
respectively, with respect to the Cash Management Fund; $63,747, $64,860 and
$101,789, respectively, with respect to the Tax-Free Fund; $855,490, $794,672
and $1,001,613, respectively, with respect to the U.S. Treasury Securities
Fund; $208,264, $349,644 and $1,503,062, respectively, with respect to the
Equity Fund; $52,947, $64,219 and $340,406, with respect to the Bond Fund; and
$54,314, $55,664 and $186,351, respectively, with respect to the Intermediate
Income Fund. Net of voluntary fee reductions, the Company paid no advisory
fees to the Investment Advisor with respect to services provided and expenses
assumed by it on behalf of the Pennsylvania Tax-Free Bond Fund for the fiscal
years ended October 31, 1993, October 31, 1994 and October 31, 1995. Net of
voluntary fee reductions, the Company paid the Investment Advisor, for the
period from March 15, 1994 (commencement of operations) to October 31, 1994 and
for the fiscal year ended October 31, 1995 advisory fees of $0 and $0,
respectively, with respect to the Special Equity Fund.

Net of voluntary fee reductions, the Company paid the Investment
Advisor, for the period from commencement of operations (May 15, 1995 for the
International Equity and Short-Term Income Funds and June 26, 1995 for the
Balanced Fund) to October 31, 1995, advisory fees of $51,367, $52,531 and
$59,629, with respect to the International Equity, Short-Term Income and
Balanced Funds, respectively.

For the fiscal years ended October 31, 1993, October 31, 1994 and
October 31, 1995, the Investment Advisor voluntarily reduced its fees in the
amount of: $243,803, $243,475 and $396,801, respectively, with respect to the
Cash Management Fund; $148,744, $151,339 and $157,594, respectively, with
respect to the Tax-Free Fund; $513,293, $476,803 and $455,645, respectively,
with respect to the U.S. Treasury Securities Fund; $72,302, $7,814 and $0,
respectively, with respect to the Equity Fund; $104,028, $125,789 and $409,293,
respectively, with respect to the Bond Fund; and $106,637, $109,045 and
$365,144, respectively, with respect to the Intermediate Income Fund. For the
fiscal years ended October 31,

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<PAGE> 154
1993, October 31, 1994 and October 31, 1995, the Investment Advisor voluntarily
reduced its fees in the amount of $41,232, $56,761 and $39,045, respectively,
with respect to the Pennsylvania Tax-Free Bond Fund. For the period from March
15, 1994 (commencement of operations) to October 31, 1994 and for the fiscal
year ended October 31, 1995 the Investment Advisor voluntarily reduced its fees
in the amount of $87,643 and $465,879, respectively, with respect to the
Special Equity Fund.

For the period from commencement of operations (May 15, 1995 for the
International Equity and Short-Term Income Funds and June 27, 1995 for the
Balanced Fund) to October 31, 1995, the Investment Advisor voluntarily reduced
its fees in the amount of $0, $82,113 and $29,815 with respect to the
International Equity, Short-Term Income and Balanced Funds, respectively.

SUB-ADVISOR

Marvin & Palmer Associates, Inc., 1201 N. Market Street, Suite 2300,
Wilmington, Delaware 19801-1165, serves as the Sub-advisor with respect to the
International Equity Fund under an agreement with the Investment Advisor (the
"Sub-advisory Agreement"). The Sub-advisor, a privately-held company, was
founded in 1986 by David F. Marvin and Stanley Palmer. The Sub-advisor is
engaged in the management of Non-U.S. global (including emerging markets)
equity portfolios for institutional accounts.

Pursuant to the Sub-advisory Agreement, the Sub-advisor will assist
the Investment Advisor in providing a continuous investment program for the
International Equity Fund, including investment research and management with
the respect to all securities and investments and cash equivalents of such
Fund. The Sub-advisor will also prepare, subject to the Investment Advisor's
approval, lists of foreign countries for investment by the International Equity
Fund and determine from time to time what securities and other investments will
be purchased, retained or sold for the Fund and shall determine what portion of
the Fund's assets will be held in different currencies. The Sub-advisor shall
place orders for the purchase and sale of portfolio securities and will solicit
broker-dealers to execute transactions in accordance with the Fund's policies
and restrictions regarding brokerage allocations. Under the Sub-advisory
Agreement, the Sub-advisor is required, among other things, to furnish to the
Investment Advisor and the Board of Trustees such periodic and special reports
as they may request and attend regular business and investment related meetings
with the Investment Advisor and Board of Trustees if requested to do so. The
Sub-advisor will provide the Investment Advisor with foreign broker research, a
quarterly review of international economic and investment developments and
occasional analyses on international investment issues.

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For the services provided by the Sub-advisor pursuant to the
Sub-advisory Agreement, the Investment Advisor will pay to the Sub-advisor a
fee, payable monthly, at the annual rates of seventy-five one-hundredths of one
percent (0.75%) of the average of the first $100,000,000 of the daily net
assets of the International Equity Fund, seventy one-hundredths of one percent
(0.70%) of the average of the next $100,000,000 of such assets, sixty-five
one-hundredths of one percent (0.65%) of the average of the next $100,000,000
of such assets, and sixty one-hundredths of one percent (0.60%) of the average
of such assets in excess of $300,000,000.

BANKING LAWS

Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund Shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment advisor or custodian to such an investment company, or
from purchasing shares of such a company for and upon the order of customers.
The Investment Advisor is subject to such banking laws and regulations.

Future changes in legal requirements relating to the permissible
activities of banks and their affiliates, as well as further interpretations of
present requirements, could prevent the Investment Advisor from continuing to
perform investment advisory services for the Company. If the Investment
Advisor were prohibited from continuing to perform such services, it is
expected that the Company's Board of Trustees would recommend that the Company
enter into a new agreement with another qualified firm. Any new advisory
agreement would be subject to shareholder approval.

ADMINISTRATOR

Effective May 1, 1995, SEI Financial Management Corporation, a
wholly-owned subsidiary of SEI Corporation ("SEI"), serves as administrator
(the "Administrator") to the Company. The Administrator assists in supervising
all operations of each Fund, except those performed by the Investment Advisor
under the Investment Advisory Agreement, by the Sub-advisor under the
Sub-advisory Agreement, by SEI Financial Services Company under the
Distribution Agreement and by Citibank, N.A. or the Bank of New York under
their respective Custodian Agreements.

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Under the Administration Agreement, the Administrator has agreed to
maintain office facilities for the Company. The Administrator prepares annual
and semi-annual reports to the Securities and Exchange Commission, prepares
Federal and state tax returns, prepares filings with state securities
commissions, and generally assists in all aspects of the Company's operations
other than those discussed above. Under the Administration Agreement, the
Administrator also provides fund accounting and related accounting services.
The Administrator may delegate its responsibilities under the Administration
Agreement with the Company's written approval.

The Administrator is entitled to receive compensation for services
rendered to the Funds at an annual rate of .17% of the average daily net assets
of each portfolio, which is calculated daily and paid monthly. All subsequent
portfolios will be subject to a minimum annual fee of $60,000 (domestic
portfolios) and $80,000 (international portfolios). An additional minimum fee
of $15,000 for each class of shares in excess of two classes will be imposed on
all current and future portfolios.

For the period May 1, 1995 to October 31, 1995, the Company paid the
Administrator, net of voluntary fee reductions, administration fees of:
$177,675, $54,072, $294,903, $207,510, $142,251, $111,565, $5,506 and $33,209
with respect to the Cash Management, Tax-Free, U.S. Treasury Securities,
Equity, Bond, Intermediate Income, Pennsylvania Tax-Free Bond and Special
Equity Funds, respectively. For the same period, the Administrator voluntarily
reduced its fees in the amount of $0, $0, $34,332, $97,490, $7,609, $0, $0 and
$12,619 with respect to the Cash Management, Tax-Free, U.S. Treasury
Securities, Equity, Bond, Intermediate Income, Pennsylvania Tax-Free Bond and
Special Equity Funds, respectively.

For the period from commencement of operations (May 15, 1995 for the
International Equity and Short-Term Income Funds and June 26, 1995 for the
Balanced Fund) to October 31, 1995, the Company paid the Administrator, net of
voluntary fee reductions, administration fees of $8,732, $30,932 and $19,470
with respect to the International Equity, Short-Term Income and Balanced Funds,
respectively. For the same periods, the administrator voluntarily reduced its
fees in the amount of $0, $0 and $804 with respect to the International Equity,
Short-Term Income and Balanced Funds, respectively.

Prior to May 1, 1995, The Winsbury Company ("Winsbury") served as
administrator to the Company. For the fiscal years ended October 31, 1993,
October 31, 1994 and the period November 1, 1994 to April 30, 1995, the Company
paid Winsbury, net of voluntary fee reductions, administration fees of:
$325,070, $282,405 and $187,882, respectively, with respect to the Cash
Management Fund; $72,625, $24,865 and $31,152 respectively, with respect to the
Tax-

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Free Fund; and $684,392, $635,737 and $340,997 respectively, with respect to
the U.S. Treasury Securities Fund. For the same periods, Winsbury voluntarily
reduced its fees in the amount of $0, $0 and $0 respectively, with respect to
the Cash Management Fund; $33,620, $83,234 and $34,788 respectively, with
respect to the Tax-Free Fund; and $0, $0 and $282 respectively with respect to
the U.S. Treasury Securities Fund.

For the fiscal years ended October 31, 1993, October 31, 1994 and the
period November 1, 1994 to April 30, 1995 the Company paid Winsbury, net of
voluntary fee reductions, administration fees of: $68,252, $96,416 and $47,405
respectively, with respect to the Equity Fund; $17,277, $25,688 and $20,541
respectively, with respect to the Bond Fund; and $17,578, $22,266 and $12,956
respectively, with respect to the Intermediate Income Fund. For the same
periods, Winsbury voluntarily reduced its fees in the amount of: $7,577, $0
and $0 respectively, with respect to the Equity Fund; $25,149, $25,666 and
$5,774 respectively, with respect to the Bond Fund; and $25,922, $22,250 and
$4,823 respectively, with respect to the Intermediate Income Fund.

For the period September 21, 1992 (commencement of operations) to
October 31, 1992, the fiscal years ended October 31, 1993, October 31, 1994 and
the period November 1, 1994 to April 30, 1995 the Company paid Winsbury, net of
voluntary fee reductions, administration fees of $0, $0, $0 and $3,015,
respectively, with respect to the Pennsylvania Tax-Free Bond Fund. For the
same periods, Winsbury voluntarily reduced its fees in the amount of $252,
$11,114, $15,341 and $3,037 respectively, with respect to the Pennsylvania
Tax-Free Bond Fund.

For the period March 15, 1994 (commencement of operations) to October
31, 1994 and the period November 1, 1994 to April 30, 1995 the Company paid
Winsbury, net of voluntary fee reductions, administration fees of $0 and $4,808
with respect to the Special Equity Fund. For the same periods, Winsbury
voluntarily reduced its fees in the amount of $11,686 and $5,302 with respect
to the Special Equity Fund.

FUND ACCOUNTANT

As discussed above, the Administrator provides fund accounting and
related accounting services to the Company. Prior to May 1, 1995, BISYS Fund
Services Ohio, Inc. ("BISYS"), an affiliate of Winsbury served as fund
accountant to the Company pursuant to an accounting agreement.

For fiscal years ended October 31, 1992, October 31, 1993, October 31,
1994 and the period November 1, 1994 through April 30, 1995 the Company paid
BISYS, exclusive of out-of-pocket expenses, fund accounting fees of: $41,666,
$49,441, $42,684 and $29,326

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respectively with respect to the Cash Management Fund; $24,584, $41,126,
$41,355 and $20,741 respectively, with respect to the Tax-Free Fund; $114,889,
$103,193, $95,522 and $51,405 respectively, with respect to the U.S. Treasury
Securities Fund; $18,937, $34,954, $34,957 and $18,329 respectively, with
respect to the Equity Fund; $16,788, $38,671, $39,076 and $21,043 respectively,
with respect to the Bond Fund; and $15,526, $36,894, $37,837 and $20,032
respectively with respect to the Intermediate Income Fund. For the period
September 21, 1992 (commencement of operations) to October 31, 1992, the fiscal
years ended October 31, 1993, October 31, 1994 and the period November 1, 1994
through April 30, 1995 the Company paid BISYS, exclusive of out-of-pocket
expenses, fund accounting fees of $2,240, $23,140, $25,435 and $18,288
respectively, with respect to the Pennsylvania Tax-Free Bond Fund.

For the period March 15, 1994 (commencement of operations) to October
31, 1994 and the period November 1, 1994 through April 30, 1995 the Company
paid BISYS, exclusive of out-of-pocket expenses, fund accounting fees of
$20,759 and $16,775, respectively with respect to the Special Equity Fund.

TRANSFER AGENT

SEI Financial Management Corporation also serves as Fund Transfer
Agent pursuant to the Transfer Agent and Service Agreement. The Transfer Agent
has agreed to perform certain services including the following: (i) to issue
and redeem shares of the Company; (ii) to address and mail all communications
by the Company to its Shareholders, including reports to shareholders, dividend
and distribution notices, proxy materials for meetings of shareholders and
prospectuses; (iii) to maintain shareholder accounts; and (iv) to make periodic
reports to the Company's Board of Trustees concerning the Company's operations.
The Company shall pay the Transfer Agent an annual fee equal to .02% of the
total assets of the Fund, plus an annual fee of $25 per shareholder account and
all out-of-pocket expenses.

For the period May 1, 1995 to October 31, 1995, the Company paid the
Transfer Agent, exclusive of out of pocket expenses, fees of: $30,413, $10,697,
$53,019, $49,703, $24,337, $18,124, $888 and $7,479 with respect to the Cash
Management, Tax-Free, U.S. Treasury Securities, Equity, Bond, Intermediate
Income, Pennsylvania Tax-Free Bond and Special Equity Funds, respectively.

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Prior to May 1, 1995 BISYS served as transfer agent pursuant to a
Transfer Agent and Shareholder Service Agreement. For fiscal years ended
October 31, 1993, October 31, 1994 and the period November 1, 1994 through
April 30, 1995 the Company paid BISYS, exclusive of out-of-pocket expenses,
fees of: $14,453, $22,343 and $12,912 respectively, with respect to the Cash
Management Fund; $12,056, $20,557 and $12,139 respectively, with respect to the
Tax-Free Fund; $15,656, $22,575 and $10,079 respectively with respect to the
U.S. Treasury Securities Fund; $29,678, $55,781 and $35,939 respectively, with
respect to the Equity Fund; $16,426, $32,247 and $18,820 respectively, with
respect to the Bond Fund; and $21,844, $30,876 and $18,088 respectively, with
respect to the Intermediate Income Fund. For the fiscal years ended October
31, 1993, October 31, 1994 and the period November 1, 1994 through April 30,
1995, the Company paid BISYS, exclusive of out-of-pocket expenses, fees of
$10,081, $7,531 and $9,997 respectively, with respect to the Pennsylvania
Tax-Free Bond Fund.

For the period March 15, 1994 (commencement of operations) to October
31, 1994 and the period November 1, 1994 through April 30, 1995 the Company
paid BISYS, exclusive of out-of-pocket expenses, fees of $13,233 and $17,723
with respect to the Special Equity Fund.

The Company's agreement with BISYS required the Company to pay it a
reasonable fee in connection with the termination of its services as transfer
agent, which occurred on April 30, 1995.

DISTRIBUTOR

SEI Financial Services Company, a wholly-owned subsidiary of SEI,
serves as distributor (the "Distributor") to the Funds pursuant to the
Distribution Agreement.

For the period May 1, 1995 to October 31, 1995, the Distributor
received front-end sales charges in connection with Retail Share purchases of
the Equity Fund, Special Equity Fund, Bond Fund, Intermediate Income Fund, and
Pennsylvania Tax-Free Bond Fund in the amounts of $3,546, $1,330, $917, $839
and $854, respectively. Of these amounts, the Distributor retained $337, $150,
$102, $98 and $90, respectively, and the Investment Advisor and its affiliates
retained $3,207, $1,180, $816, $741 and $764, respectively.

For the period from commencement of operations (May 15, 1995 for the
International Equity Fund, May 17, 1995 for the Short-Term Income Fund and June
29, 1995 for the Balanced Fund) to October 31, 1995, the Distributor received
front-end sales charges in connection with Retail Share purchases of the
International Equity Fund, Short-Term Income Fund and Balanced Fund in the
amounts of $123, $22 and $831, respectively. Of these amounts, the

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Distributor retained $11, $18 and $86, respectively, and the Investment Advisor
and its affiliates retained $112, $4 and $745, respectively.

Prior to May 1, 1995, Winsbury served as distributor to the Company.
For the fiscal years ended October 31, 1993 and October 31, 1994 and the period
November 1, 1994 through April 30, 1995 Winsbury received front-end sales
charges in connection with Share purchases as follows: Equity Fund -- $21,600,
$12,836 and $2,365, respectively; Bond Fund -- $12,932, $5,986 and $1,104,
respectively; Intermediate Income Fund -- $11,372, $5,941 and $1,003,
respectively; and Pennsylvania Tax-Free Bond Fund -- $2,782, $1,795 and $333,
respectively. Of these amounts, Winsbury retained $1,944, $1,390 and $236,
respectively, and the Investment Advisor and its affiliates retained $19,656,
$11,446 and $2,129, respectively, with respect to the Equity Fund; Winsbury
retained $1,164, $648 and $100, respectively, and the Investment Advisor and
its affiliates retained $11,768, $5,338 and $993, respectively, with respect to
the Bond Fund; Winsbury retained $1,024, $590 and $100, respectively and the
Investment Advisor and its affiliates retained $10,348, $4,851 and $903,
respectively, with respect to the Intermediate Income Fund; and Winsbury
retained $250, $195 and $34, respectively, and the Investment Advisor and its
affiliates retained $2,532, $1,600 and $299, respectively, with respect to the
Pennsylvania Tax-Free Bond Fund;

For the period March 15, 1994 (commencement of operations) to October
31, 1994 and the period November 1, 1994 through April 30, 1995 Winsbury
received $2,578 and $475 in front-end sales charges in connection with Share
purchases with respect to the Special Equity Fund. Of these amounts, Winsbury
retained $279 and $47, respectively, and the Investment Advisor and its
affiliates retained $2,299 and $428, respectively.

DISTRIBUTION AND SERVICES PLAN

Under the Funds' Distribution and Services Plan (the "Distribution
Plan"), each Fund will pay a monthly distribution fee (also referred to as a
12b-1 fee) to the Distributor as compensation for its services in connection
with the Distribution Plan at an annual rate not to exceed .40% of the average
daily net assets of the Retail Shares of such Fund.

Payments of the fee by any Money Market Fund under the Distribution
Plan will be reduced to the extent necessary to ensure that the amount of such
fee and any other operating expenses that are accrued on any day with respect
to such Fund will not exceed the gross income accrued with respect to such Fund
on that day.

The Distribution Plan became operational with respect to the Retail
Shares of the Cash Management, Tax-Free, U.S. Treasury

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Securities, Equity, Bond, Intermediate Income, Pennsylvania Tax-Free Bond and
Special Equity Funds on February 21, 1995. Additionally, Retail Shares of the
International Equity, Short-Term Income and Balanced Funds were first offered
on May 15, 1995, May 17, 1995 and June 29, 1995, respectively. For the period
from February 21, 1995 through April 30, 1995, pursuant to the Distribution
Plan for Retail Shares, the Cash Management Fund paid Winsbury fees of $1,112,
of which $472, $0, $0 and $135 were retained by Winsbury, the Investment
Advisor, affiliates of Winsbury and affiliates of the Investment Advisor,
respectively; the Tax-Free Fund paid Winsbury fees of $174, of which $106, $0,
$0 and $51 were retained by Winsbury, the Investment Advisor, affiliates of
Winsbury and affiliates of the investment Advisor, respectively; the U.S.
Treasury Securities Fund paid Winsbury $136, of which $45, $0, $0 and $66 were
retained by Winsbury, the Investment Advisor, affiliates of Winsbury and
affiliates of the Investment Advisor, respectively; the Bond Fund paid Winsbury
fees of $366, of which $320, $0, $0 and $41 were retained by Winsbury, the
Investment Advisor, affiliates of Winsbury and affiliates of the Investment
Advisor, respectively; the Equity Fund, Intermediate Income Fund, Pennsylvania
Tax-Free Bond Fund and the Special Equity Fund paid Winsbury no fees for the
period from February 21, 1995 through April 30, 1995 pursuant to the
Distribution Plan for Retail Shares. For the period from May 1, 1995 or
commencement of operations through October 31, 1995, pursuant to the
Distribution Plan for Retail Shares, the Cash Management Fund paid the
Distributor fees of $4,358, of which $1,827, $0, $2,278 and $253 were retained
by the Distributor, the Investment Advisor, affiliates of the Distributor and
affiliates of the Investment Advisor, respectively; the Tax-Free Fund paid the
Distributor fees of $405, of which $52, $10, $151 and $192 were retained by the
Distributor, the Investment Advisor, affiliates of the Distributor and
affiliates of the Investment Advisor, respectively; the U.S. Treasury
Securities Fund paid the Distributor $6,860, of which $6,466, $0, $132 and $262
were retained by the Distributor, the Investment Advisor, affiliates of the
Distributor and affiliates of the Investment Advisor, respectively; the Equity
Fund paid the Distributor fees of $6,834, of which $1,900, $2, $3,734 and
$1,198 were retained by the Distributor, the Investment Advisor, affiliates of
the Distributor and affiliates of the Investment Advisor, respectively; the
Bond Fund paid the Distributor fees of $1,302, of which $277, $0, $612 and $413
were retained by the Distributor, the Investment Advisor, affiliates of the
Distributor and affiliates of the Investment Advisor, respectively; the
Intermediate Income Fund paid the Distributor fees of $1,395, of which $238,
$0, $761 and $396 were retained by the Distributor, the Investment Advisor,
affiliates of the Distributor and affiliates of the Investment Advisor,
respectively. The Pennsylvania Tax-Free Bond Fund, Special Equity Fund,
International Equity Fund, Short-Term Income Fund and Balanced Fund paid the
Distributor no fees for the period from May 1, 1995 or commencement of
operations through October 31, 1995 pursuant to the Distribution Plan for
Retail

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Shares. All of such amounts paid to the Distributor and Winsbury under the
Distribution Plan were paid as compensation to dealers for distribution
assistance. For the time periods indicated the Distributor and various broker
dealers waived $2,692, $2,838, $12,369, $5,296, $1,153, $1,073, $1,551, $1,288,
$2, $8 and $47, respectively, in fees under the Distribution Plan for the Cash
Management, Tax-Free, U.S. Treasury Securities, Equity, Bond, Intermediate
Income, Pennsylvania Tax-Free Bond, Special Equity, International Equity,
Short-Term Income and Balanced Funds. For the time period indicated, Winsbury
and various broker-dealers waived no fees under the Distribution Plan for the
Cash Management, Tax-Free, U.S. Treasury Securities, Equity, Bond, Intermediate
Income, Pennsylvania Tax-Free Bond and Special Equity Funds.

CUSTODIANS

Until on or about March 7, 1996 cash and securities owned by each
Fund, except the International Equity Fund, are held by Citibank, N.A.
("Citibank") as custodian. Citibank serves as custodian to such Funds pursuant
to the Custodian Agreement under which Citibank has agreed to: (i) maintain a
separate account or accounts in the name of each such Fund; (ii) make receipts
and disbursements as authorized by the Administrator on behalf of each such
Fund; (iii) collect and receive all income and other payments and distributions
on account of each such Fund's portfolio securities; and (iv) make periodic
reports to the Company's Board of Trustees concerning the Company's property
held in custody. Citibank may at its own expense, appoint sub-custodians on
behalf of the Company.

Effective on or about March 7, 1996, CoreStates Bank, N.A.
("CoreStates") serves as custodian to each of the Funds, except the
International Equity Fund. CoreStates serves as custodian to such Funds
pursuant to the Custodian Agreement under which CoreStates has agreed to: (i)
maintain a separate custodial account in the name of the Company to hold the
securities of the Company, (ii) credit for the account of the Company all
proceeds received and payable on assets maintained under the Custodian
Agreement, (iii) debit the account of the Company for cost of acquiring
securities received for the Company, (iv) endorse and collect all checks,
drafts or other orders for the payment of money received by CoreStates for the
account of or from the Company, and (v) perform other related services.
CoreStates may appoint sub-custodians on behalf of the Company.

Cash and securities owned by the International Equity Fund are held by
The Bank of New York ("BONY") as custodian. BONY serves as custodian to the
International Equity Fund pursuant to the Custodian Agreement under which BONY
has agreed to: (i) maintain a separate account in the name of this Fund; (ii)
make receipts and disbursements as authorized on behalf of this Fund; (iii)
collect

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and receive all income and other payments and distributions on account of this
International Equity Fund's securities; and (iv) make periodic reports to the
Company's Board of Trustees concerning the Company's property held in custody.
BONY may at its own expense, appoint foreign sub-custodians on behalf of the
Company.

COUNSEL

Drinker Biddle & Reath (of which Mr. Hilles, Secretary of the Company,
is a partner), 1345 Chestnut Street, Philadelphia, Pennsylvania 19107 are
counsel to the Company and will pass upon certain legal matters in connection
with the Shares offered hereby.

FINANCIAL STATEMENTS

The financial statements and related notes of the Company dated
October 31, 1995, which are incorporated by reference to the Company's October
31, 1995 Annual Report to Shareholders filed with the Securities and Exchange
Commission on December 27, 1995, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report thereon appears elsewhere therein, and
have been incorporated herein in reliance upon the report of said firm of
accountants given their authority as experts in auditing and accounting.
Coopers & Lybrand L.L.P. has offices at 2400 Eleven Penn Center, Philadelphia,
Pennsylvania 19103.

PERFORMANCE INFORMATION

GENERAL

From time to time, a Fund may include general comparative information,
such as statistical data regarding inflation, securities indices or the
features or performance of alternative investments, in advertisements, sales
literature and reports to shareholders. A Fund may also include calculations,
such as hypothetical compounding examples or tax-free compounding examples,
which describe hypothetical investment results in such communications. Such
performance examples will be based on an express set of assumptions and are not
indicative of the performance of any Fund. In addition, a Fund may include
charts comparing various tax-free yields versus taxable yield equivalents at
different income levels.

From time to time, the yield and total return of the Fund may be
quoted in advertisements, shareholder reports or other communications to
shareholders.

As explained in the prospectuses, the Company offers Institutional
Shares and Retail Shares of the Funds. Institutional Shares are sold through
procedures established by the Distributor to bank trust departments purchasing
Institutional Shares on behalf

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of the fiduciary, advisory, agency, custody or other similar accounts
maintained by, or on behalf of, their customers. Retail shares are offered to
the general public through procedures established by the Distributor to
Customers satisfying the minimum purchase requirement of $1,000. The Retail
Shares and Institutional Shares may have different sales charges and other
expenses, which may affect performance. Investors may call (800) 344-2716 to
obtain more information concerning Retail and Institutional Shares. Investors
may also obtain information concerning Retail and Institutional Shares from
their sales representative or any other person, such as a broker-dealer or bank
who offers Shares in the Funds.

YIELDS OF THE CASH MANAGEMENT, TAX-FREE, U.S. TREASURY SECURITIES AND
PENNSYLVANIA TAX-FREE BOND FUNDS

As summarized in the Prospectuses under the heading "Yield
Information," the yield of each of the Money Market Funds for a seven-day
period (the "base period") will be computed separately for each class by
determining the net change in value (calculated as set forth below) of a
hypothetical account having a balance of one share at the beginning of the
period, dividing the net change in account value by the value of the account at
the beginning of the base period to obtain the base period return, and
multiplying the base period return by 365/7 with the resulting yield figure
carried to the nearest hundredth of one percent. Net changes in value of a
hypothetical account will include the value of additional shares purchased with
dividends from the original share and dividends declared on both the original
share and any such additional shares, but will not include realized gains or
losses or unrealized appreciation or depreciation on portfolio investments.
Yield may also be calculated on a compound basis (the "effective yield") which
assumes that net income is reinvested in Fund Shares at the same rate as net
income is earned for the base period.

The Tax-Free and Pennsylvania Tax-Free Bond Funds may also advertise a
"taxable equivalent yield" and a "taxable equivalent effective yield." Taxable
equivalent yield will be computed by dividing that portion of each of the
Tax-Free and Pennsylvania Tax-Free Fund's yield which is tax-exempt by one
minus a stated income tax rate and adding the product to the portion, if any,
of the yield of a Fund that is not tax-exempt. The taxable equivalent
effective yield for Funds is computed by dividing that portion of the effective
yield of the each Fund which is tax-exempt by one minus a stated income tax
rate and adding the product to that portion, if any, of the effective yield of
each Fund that is not tax-exempt.

The yield and effective yield of each of the Money Market Funds and
the taxable equivalent yield and the taxable equivalent effective yield of the
Tax-Free and Pennsylvania Tax-Free Bond Funds will vary in response to
fluctuations in interest rates and

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in the expenses of each Fund. For comparative purposes the current and
effective yields should be compared to current and effective yields offered by
competing financial institutions for the same base period and calculated by the
methods described above.

For the seven-day period ended October 31, 1995, the yield of Retail
and Institutional Shares of the Cash Management Fund was 5.03% and 5.28%,
respectively, and the compounded effective yield was 5.16% and 5.42%,
respectively; the yield of Retail and Institutional Shares of the Tax-Free Fund
was 3.31% and 3.36%, respectively, the compounded effective yield was 3.36% and
3.41%, respectively, the taxable - equivalent yield was 5.48% and 5.56%,
respectively, and the taxable - equivalent effective yield was 5.56% and 5.64%,
respectively, assuming a federal marginal income tax rate of 39.6%; and the
yield of Retail and Institutional Shares of the U.S. Treasury Securities Fund
was 5.03% and 5.18%, respectively, and the compounded effective yield was 5.16%
and 5.31%, respectively. For the thirty-day period ended October 31, 1995, the
taxable-equivalent effective yield of the Retail and Institutional Shares of
the Pennsylvania Tax-Free Bond Fund was 7.14% and 7.28%, respectively, assuming
a federal marginal income tax rate of 39.6%. During these periods, investment
advisory and/or administration fees were voluntarily reduced; without these
voluntary reductions, all of the yields would have been lower than those quoted
above.

THE NON-MONEY MARKET FUNDS

YIELD CALCULATIONS. The yield for Retail and Institutional Shares of
each of the Non-Money Market Funds is calculated separately by dividing the net
investment income per share (as described below) earned by a class during a
30-day (or one month) period by the maximum offering price per share (including
the maximum sales load of 2.0% for Retail Shares) on the last day of the period
and annualizing the result on a semi-annual basis by adding one to the
quotient, raising the sum to the power of six, subtracting one from the result
and then doubling the difference. A Fund's net investment income per share
earned during the period with respect to a particular class is based on the
average daily number of shares outstanding in the class during the period
entitled to receive dividends and includes dividends and interest earned during
the period attributable to that class minus expenses accrued for the period
attributable to that class, net of reimbursements. This calculation can be
expressed as follows:

a-b 6
Yield = 2 [(------ + 1) -1]
cd

Where: a = dividends and interest earned during the period.

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b = expenses accrued for the period (net of
reimbursements).

c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends.

d = maximum offering price per share on the last
day of the period.

For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in that Fund. Interest earned on any
debt obligations held by a Fund is calculated by computing the yield to
maturity of each obligation held by that Fund based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last business day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and
dividing the result by 360 and multiplying the quotient by the market value of
the obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is held by that Fund. For purposes of this calculation, it is
assumed that each month contains 30 days. The maturity of an obligation with a
call provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date. With respect to debt
obligations purchased at a discount or premium, the formula generally calls for
amortization of the discount or premium. The amortization schedule will be
adjusted monthly to reflect changes in the market values of such debt
obligations.

Undeclared earned income will be subtracted from the net asset value
per share (variable "d" in the formula). Undeclared earned income is the net
investment income which, at the end of the base period, has not been declared
as a dividend, but is reasonably expected to be and is declared as a dividend
shortly thereafter.

Based on the foregoing calculations, for the one-month period ended
October 31, 1995, the yield of the Retail and Institutional Shares of the
Equity Fund was 1.08% and 1.35%, respectively, the yield of the Retail and
Institutional Shares of the Special Equity Fund was 0.87% and 0.88%,
respectively; the yield of the Retail and Institutional Shares of the Bond Fund
was 5.57% and 5.95%, respectively; the yield of the Retail and Institutional
Shares of the Intermediate Income Fund was 5.21% and 5.57%, respectively; and
the yield of the Retail and Institutional Shares of the Pennsylvania Tax-Free
Bond Fund was 4.31% and 4.40%, respectively; the yield of the Retail and
Institutional Shares of the Short-Term Income Fund was 4.93% and 5.24% and the
yield of the Retail and

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Institutional Shares of the Balanced Fund was 3.54% and 3.86%, respectively.
During these periods, investment advisory and/or administration fees were
voluntarily reduced; without these voluntary reductions, all of the yields
would have been lower than those quoted above.

TOTAL RETURN CALCULATIONS. The Funds compute their average annual
total returns separately for Retail and Institutional Shares by determining the
average annual compounded rates of return during specified periods that equate
the initial amount invested in a particular share class to the ending
redeemable value of such investment in the class. This is done by dividing the
ending redeemable value of a hypothetical $1,000 initial payment by $1,000 and
raising the quotient to a power equal to one divided by the number of years (or
fractional portion thereof) covered by the computation and subtracting one from
the result. This calculation can be expressed as follows:

Average Annual ERV (1/n)
Total Return = [(----) - 1]
P

Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.

P = hypothetical initial payment of $1,000.

n = period covered by the computation, expressed in
terms of years.

The Funds compute their aggregate total returns separately for Retail
and Institutional Shares by determining the aggregate compounded rates of
return during specified periods that likewise equate the initial amount
invested in a particular share class to the ending redeemable value of such
investment in the class. The formula for calculating aggregate total return is
as follows:

Aggregate ERV
Total Return = [(----) - 1]
P

Where: ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.

P = hypothetical initial payment of $1,000.

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The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions
on the reinvestment dates during the period. The ending redeemable value
(variable "ERV" in each formula) is determined by assuming complete redemption
of the hypothetical investment and the deduction of all nonrecurring charges at
the end of the period covered by the computations. In addition, a Fund's
average annual total return and aggregate total return quotations reflect the
deduction of the maximum sales charge in connection with the purchase of Retail
Shares of the non-money market funds. The non-money market funds may also
advertise total return data without reflecting sales charges in accordance with
the rules of the Securities and Exchange Commission. Quotations that do not
reflect such sales charges will, of course, be higher than quotations which do
reflect the sales charge.

Since performance will fluctuate, performance data for the Funds
should not be used to compare an investment in the Funds' shares with bank
deposits, savings accounts and similar investment alternatives which often
provide an agreed or guaranteed fixed yield for a stated period of time.
Shareholders should remember that performance is generally a function of the
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses and market conditions.

Based on the foregoing calculations, the average annual total return
for the one and five year periods ended October 31, 1995 and for the period
from November 27, 1989 (commencement of operations) to October 31, 1995 for
Retail Shares of the Cash Management Fund was 5.25%, 4.28% and 4.89%,
respectively; for Retail Shares of the U.S. Treasury Securities Fund was 5.16%,
4.06% and 4.68%; and for Retail Shares of the Tax-Free Fund was 3.39%, 2.97%
and 3.40%. The aggregate total return for Retail Shares of the Cash Management
Fund for the same periods was 5.25%, 26.55% and 32.69%, respectively; for
Retail Shares of the U.S. Treasury Securities Fund was 5.16%, 25.14% and
31.12%, respectively; and for Retail Shares of the Tax-Free Fund was 3.39%,
18.23% and 21.94%, respectively. The average annual total return for the one
and five year periods ended October 31, 1995 and for the period from February
28, 1990 (commencement of operations) to October 31, 1995 for Retail Shares of
the Equity Fund was 19.47%, 18.05% and 13.80%, respectively; for Retail Shares
of the Bond Fund was 11.55%, 8.25% and 8.10%, respectively; and for Retail
Shares of the Intermediate Income Fund was 7.69%, 7.04% and 7.31%,
respectively. The aggregate total return for Retail Shares of the Equity Fund
for the same periods was 19.47%, 65.71% and 108.25%, respectively; for Retail
Shares of the Bond Fund was 11.55%, 38.66% and 55.47%, respectively; and for
Retail Shares of the Intermediate Income Fund was 7.69%, 37.65% and 49.26%,
respectively. The average annual total return and the aggregate total return
for the one year period ended October 31, 1995 and for the period from
September 21, 1992 (commencement of operations) to October 31, 1995 for Retail
Shares

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of the Pennsylvania Tax-Free Bond Fund was 10.00% and 10.00%; 4.81% and 15.74%.
The average annual total return and the aggregate total return for the one year
period ended October 31, 1995 and for the period from March 15, 1994
(commencement of operations) to October 31, 1995 for Retail Shares of the
Special Equity Fund was 21.97% and 21.97%; and 8.97% and 15.03%. The average
annual total return and the aggregate total return for the period from the
commencement of operations (May 15, 1995 with respect to the International
Equity Fund, June 29, 1995 with respect to the Balanced Fund and May 17, 1995
with respect to the Short-Term Income Fund) to October 31, 1995 for Retail
Shares of the International Equity, Short-Term Income and Balanced Funds was
17.48% and 7.75%; 1.23% and 0.56%; and 9.72% and 3.20%. During these periods,
investment advisory and/or administration fees were voluntarily reduced;
without such voluntary fee reductions, the total returns would have been lower
than those stated.

Institutional Shares were first offered on February 21, 1995
("Offering Date"). Prior to the Offering Date all shares were classified as
Retail Shares. The average annual total return and the aggregate total return
for Institutional Shares of the Cash Management, U.S. Treasury Securities,
Tax-Free, Equity, Bond, Intermediate Income, Pennsylvania Tax-Free Bond and
Special Equity Funds for the period from the Offering Date to October 31, 1995
was 4.92% and 32.92%; 4.69% and 31.26%; 3.41% and 21.98%; 14.21% and 112.52%;
8.48% and 58.68%; 7.69% and 52.27%; 5.48% and 18.06% and 10.30% and 17.33%.
The average annual total return and the aggregate total return for
Institutional Shares of the International Equity Fund, Balanced Fund and
Short-Term Income Fund for the period from commencement of operations (May 15,
1995 with respect to the International Equity Fund, June 26, 1995 with respect
to the Balanced Fund and May 15, 1995 with respect to the Short-Term Income
Fund) to October 31, 1995 was 23.10% and 10.10%; 14.71% and 4.89%; and 6.31%
and 2.87%. During these periods, investment advisory and/or administration
fees were voluntarily reduced, without such voluntary fee reductions the total
returns would have been lower than those stated.

Additionally, the following average annual total returns and aggregate
total returns for the periods prior to the Offering Date were calculated using
a combination of Institutional Share and Retail Share data.

The average annual total return for the one and five year periods
ended October 31, 1995 for Institutional Shares of the Cash Management Fund was
5.43% and 4.32%, respectively; for Institutional Shares of the U.S. Treasury
Securities Fund was 5.27% and 4.09%, respectively; for Institutional Shares of
the Tax-Free Fund was 3.43% and 2.98%, respectively; for Institutional Shares
of the Equity Fund was 22.00% and 18.53%, respectively; for Institutional
Shares of the Bond Fund was 13.87% and 8.68%, respectively; and for
Institutional Shares of the Intermediate

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Income Fund was 9.92% and 7.49%, respectively. For the one year period ended
October 31, 1995, the average annual total return for Institutional Shares of
the Pennsylvania Tax-Free Bond Fund and Special Equity Fund was 12.30% and
24.44%, respectively.

The aggregate total return for the one and five year periods ended
October 31, 1995 for Institutional Shares of the Cash Management Fund was 5.43%
and 32.92%, respectively; for Institutional Shares of the U.S. Treasury
Securities Fund was 5.27% and 31.26%, respectively; for Institutional Shares of
the Tax-Free Fund was 3.43% and 21.98%, respectively; for Institutional Shares
of the Equity Fund was 22.00% and 112.52%, respectively; for Institutional
Shares of the Bond Fund was 13.87% and 58.73%, respectively; and for
Institutional Shares of the Intermediate Income Fund was 9.92% and 52.27%,
respectively. For the one year period ended October 31, 1995 the aggregate
total return for Institutional Shares of the Pennsylvania Tax-Free Bond Fund
and Special Equity Fund was 18.06% and 17.33%, respectively.

MISCELLANEOUS

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

The Company's Agreement and Declaration of Trust provides further that
no trustee, officer or agent of the Company shall be personally liable for or
on account of any contract, debt, tort, claim, damage, judgment or decree
arising out of or connected with the administration or preservation of the
trust estate or the conduct of any business of the Company, nor shall any
trustee or officer be personally liable to any person for any action or failure
to act except by reason of his or her own bad faith,

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willful misfeasance, gross negligence in the performance of his or her duties
or by reason of reckless disregard of his or her obligations and duties as
trustee or officer. It also provides that all persons having any claim against
the trustees, officers or the Company shall look solely to the trust property
for payment. With the exceptions stated, the Agreement and Declaration of
Trust provides that each trustee and officer is entitled to be indemnified
against all liabilities and expenses reasonably incurred by him or her in
connection with the defense or disposition of any proceeding in which he or she
may be involved or with which he or she may be threatened by reason of his or
her being or having been a trustee or officer. Employees of the Company are
similarly entitled to indemnification unless such person would not be entitled
to indemnification had he or she been a trustee or officer.

CERTAIN RECORD HOLDERS. As of December 6, 1995, the name, address and
percentage ownership of each investor that held of record or beneficially 5% or
more of the outstanding Retail Shares of the Cash Management Fund were as
follows: Dale E. Smith and Florence Smith, JTTEN, 8 Toft Woods Way, Media, PA
19063, 34.31%. As of December 6, 1995, the name, address and percentage
ownership of each investor that held of record or beneficially 5% or more of
the outstanding Retail Shares of the U.S. Treasury Securities Fund were as
follows: Plymouth Meeting Friends School, Germantown & Butler Pike, Plymouth
Meeting, PA, 33.40%; Meridian Trust Company custodian for John G. Fish rollover
IRA, 1009 Homeland Dr., Lancaster, PA 17601, 10.20%; Meridian Trust Company
custodian for Joyce A. Waldman rollover IRA, 640 American Ave., E309, King of
Prussia, PA 19406-4013, 5.61% and Karen J. Urban, 57 E. Ridge Street, Coaldale,
PA 18218, 5.57%. As of December 6, 1995, the name, address and percentage
ownership of each investor that held of record or beneficially 5% or more of
the outstanding Retail Shares of the Tax-Free Fund were as follows: Philip H.
Brown II and Margaret O. Brown JTWROS, 101 Grandview Rd., Springfield, PA
19064, 28.04%; Marietta E. Williams, RD 2, Box 141, Elverson, PA 19520,
22.59%; and Gregory J. Blazic and Lellus L. Blazic , JTTEN, P.O. Box 603,
Country Club Rd., Valley Forge, PA 19482-0603, 11.04%. As of December 6, 1995,
the name, address and percentage ownership of each investor that held of record
or beneficially 5% or more of the outstanding Retail Shares of the Equity Fund
were as follows: National Financial Services Corp for the Benefit of our
Customers, One World Financial Center, 200 Liberty St., 4th Floor, New York, NY
10281, 34.85%. As of December 6, 1995, the name, address and percentage
ownership of each investor that held of record or beneficially 5% or more of
the outstanding Retail Shares of the Bond Fund were as follows: National
Financial Services Corp for the Benefit of our Customers, One World Financial
Center, 200 Liberty St., 4th Floor, New York, NY 10281, 32.50%; Meridian Trust
Company, custodian for Shiras E. Holmes rollover IRA, 8761 Barkhurst Dr.,
Pittsburgh, PA 15237, 7.55%. As of December 6, 1995, the name, address and
percentage ownership of each investor

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that held of record or beneficially 5% or more of the outstanding Retail Shares
of the Intermediate Income Fund were as follows: National Financial Services
Corp, One World Financial Center, 200 Liberty St., 4th Floor, New York, NY
10281, 30.29%; Elissa A. Graner-Hoffman, 219 South Leh St., Allentown, PA
18104, 6.08%; and Meridian Trust Company, custodian for John G. Fish rollover
IRA, 1009 Homeland Dr., Lancaster, PA 17601, 9.24%. As of December 6, 1995,
the name, address and percentage ownership of each investor that held of record
or beneficially 5% or more of the outstanding Retail Shares of the Pennsylvania
Tax-Free Bond Fund were as follows: National Financial Services Corp for the
Benefit of our Customers, One World Financial Center, 200 Liberty St., 4th
Floor, New York, NY 10281, 21.34%; George W. Grosz and Dorothy M. Grosz
JTWROS, 533 S. Waterloo Rd., Devon, PA 19333, 5.75%; Lee B. Kirts and Celine
Kirts, JTWROS, 451 Knightsbridge Lane, Hatfield, PA 19440, 5.35%; Wayne R.
Huey, 73 Crestline Rd., Strafford, PA 19087, 5.04%; and Dale E. Smith and
Florence Smith, JTTEN, 8 Toft Woods Way, Media, PA 19063, 16.00%. As of
December 6, 1995, the name, address and percentage ownership of each investor
that held of record or beneficially 5% or more of the outstanding Retail Shares
of the Special Equity Fund were as follows: National Financial Services Corp
for the Benefit of our Customers, One World Financial Center, 200 Liberty St.,
4th Floor, New York, NY 10281, 29.29%; Meridian Trust Company, custodian for
Richard H. Babb rollover IRA, 613 Cherokee St., Emmaus, PA 18049, 5.14% and
State Street Bank & Trust Company, custodian for Bernard J. Daney rollover IRA,
121 Ponds Lane, Wilmington, DE, 7.23%.

As of December 6, 1995, the name, address and percentage ownership of
each investor that held of record or beneficially 5% or more of the outstanding
Retail Shares of the Short-Term Income Fund were as follows: Jenny E.
Yuninger, 12 Ocola Dr., Paradise, PA 17562, 97.36%. As of December 6, 1995,
the name, address and percentage ownership of each investor that held of record
or beneficially 5% or more of the outstanding Retail Shares of the Balanced
Fund were as follows: Meridian Asset Management Co., custodian for Darlene H.
Lathrop rollover IRA, 2403 Smith Lane, Wilmington, DE 19810, 8.55%; State
Street Bank & Trust Company, custodian for Roberta M. Merenda rollover IRA, 2
Cedar Hill Court, Voorhees, NJ 08043, 12.31%; State Street Bank & Trust
Company, custodian for Robert J. Merenda rollover IRA, 2 Cedar Hill Court,
Voorhees, NJ 08043, 24.51%; and State Street Bank & Trust Company, custodian
for Richard Detwiler rollover IRA, 22 S. Kenhorst Blvd., Shillington, PA 19807,
54.10%. As of December 6, 1995, the name, address and percentage ownership of
each investor that held of record or beneficially 5% or more of the outstanding
Retail Shares of the International Equity Fund were as follows: National
Financial Services Corp. for the Benefit of our Customers, One World Financial
Center, 200 Liberty St., 4th Floor, New York, NY 10281, 51.48%; Colette B.
Price and Kim D. Price, JTTEN, 2408 Welsh Rd., Mohnton, PA 19540, 7.98%;
Meridian Trust Company, custodian for Christopher D. Hogan rollover IRA, 711
Pass Road, Golfport, MS

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39501, 11.07%; Dawn T. Hogan, 1750 Peachtree Lane, Norristown, PA 19403,
10.86%; and Meridian Trust Company, custodian for Bridget A. Vargo rollover
IRA, 224 E. King Street, Apt. 108, Lancaster, PA 17602, 8.43%.

As of December 6, 1995, the name, address and percentage ownership of
each investor that held of record or beneficially 5% or more of the outstanding
Institutional Shares of the Cash Management Fund were as follows: MAM & Co.,
c/o Mark Medura MHO 330, P.O. Box 16006, Mail Code BB0425, Reading, PA
19612-6006, 99.96%. As of December 6, 1995, the name, address and percentage
ownership of each investor that held of record or beneficially 5% or more of
the outstanding Institutional Shares of the U.S. Treasury Securities Fund were
as follows: MAM & Co., c/o Mark Medura MHO 330, P.O. Box 16006, Mail Code
BB0425, Reading, PA 19612-6006, 64.60%; and The Bank of New York, One Wall
Street, 5th Floor, New York, NY 10286, 35.40%. As of December 6, 1995, the
name, address and percentage ownership of each investor that held of record or
beneficially 5% or more of the outstanding Institutional Shares of the Tax-Free
Fund were as follows: MAM & Co., c/o Mark Medura MHO 330, P.O. Box 16006, Mail
Code BB0425, Reading, PA 19612-6006, 100%. As of December 6, 1995, the name,
address and percentage ownership of each investor that held of record or
beneficially 5% or more of the outstanding Institutional Shares of the Equity
Fund were as follows: MAM & Co., c/o Kim Kutzer, P.O. Box 16004, Mail Code
BB0405, Reading, PA 19612-6004, 99.93%. As of December 6, 1995, the name,
address and percentage ownership of each investor that held of record or
beneficially 5% or more of the outstanding Institutional Shares of the Bond
Fund were as follows: MAM & Co., c/o Kim Kutzer, P.O. Box 16004, Mail Code
BB0405, Reading, PA 19612-6004, 95.19%. As of December 6, 1995, the name,
address and percentage ownership of each investor that held of record or
beneficially 5% or more of the outstanding Institutional Shares of the
Intermediate Income Fund were as follows: MAM & Co., c/o Kim Kutzer, P.O. Box
16004, Mail Code BB0405, Reading, PA 19612-6004, 96.24%. As of December 6,
1995, the name, address and percentage ownership of each investor that held of
record or beneficially 5% or more of the outstanding Institutional Shares of
the Pennsylvania Tax-Free Bond Fund were as follows: MAM & Co., c/o Kim
Kutzer, P.O. Box 16004, Mail Code BB0405, Reading, PA 19612-6004, 100%. As of
December 6, 1995, the name, address and percentage ownership of each investor
that held of record or beneficially 5% or more of the outstanding Institutional
Shares of the Special Equity Fund were as follows: MAM & Co., c/o Kim Kutzer,
P.O. Box 16006, Mail Code BB0405, Reading, PA 19612-6006, 99.84%. As of
December 6, 1995, the name, address and percentage ownership of each investor
that held of record or beneficially 5% or more of the outstanding Institutional
Shares of the Short-Term Income Fund were as follows: MAM & Co., c/o Kim
Kutzer, P.O. Box 16004, Mail Code BB0405, Reading, PA 19612-6004, 99.96%. As
of December 6, 1995, the name, address and percentage ownership of each
investor the held of record or

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beneficially 5% or more of the outstanding Institutional Shares of the Balanced
Fund were as follows: MAM & Co., c/o Kim Kutzer, P.O. Box 16004, Mail Code
BB0405, Reading, PA 19612-6004, 52.69%; and MAM & Co., c/o Kim Kutzer, P.O. Box
16006, Mail Code BB0405, Reading, PA 19612-6006, 47.25%. As of December 6,
1995, the name, address and percentage ownership of each investor that held of
record or beneficially 5% or more of the outstanding Institutional Shares of
the International Equity Fund were as follows: MAM & Co., c/o Kim Kutzer, P.O.
Box 16004, Mail Code BB0405, Reading, PA 19612-6004, 94.18%.

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APPENDIX A

COMMERCIAL PAPER RATINGS

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

"A-1" - Issue's degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted "A-1+."

"A-2" - Issue's capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues designated
"A-1."

"A-3" - Issue has an adequate capacity for timely payment. It
is, however, somewhat more vulnerable to the adverse effects of changes and
circumstances than an obligation carrying a higher designation.

"B" - Issue has only a speculative capacity for timely
payment.

"C" - Issue has a doubtful capacity for payment.

"D" - Issue is in payment default.

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

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

"Prime-2" - Issuer or related supporting institutions are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings

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

"Not Prime" - Issuer does not fall within any of the Prime
rating categories.

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

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

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

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

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

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

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

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

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

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

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

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

"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.

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

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

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

Thomson BankWatch short-term ratings assess the likelihood of
an untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one year or less which is issued by United
States commercial banks, thrifts and non-bank banks; non-United States banks;
and broker-dealers. The following summarizes the ratings used by Thomson
BankWatch:

"TBW-1" - This designation represents Thomson BankWatch's
highest rating category and indicates a very high degree of

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likelihood that principal and interest will be paid on a timely basis.

"TBW-2" - This designation indicates that while the degree of
safety regarding timely payment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."

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

"TBW-4" - This designation indicates that the debt is regarded
as non-investment grade and therefore speculative.

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

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

"A1" - Obligations are supported by a strong capacity for
timely repayment.

"A2" - Obligations are supported by a satisfactory capacity
for timely repayment, although such capacity may be susceptible to adverse
changes in business, economic or financial conditions.

"A3" - Obligations are supported by a satisfactory capacity
for timely repayment. Such capacity is more susceptible to adverse changes in
business, economic or financial conditions than for obligations in higher
categories.

"B" - Obligations for which the capacity for timely repayment
is susceptible to adverse changes in business, economic or financial
conditions.

"C" - Obligations for which there is an inadequate capacity to
ensure timely repayment.

"D" - Obligations which have a high risk of default or which
are currently in default.

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CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

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

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

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

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

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

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

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

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

"CCC" - Debt has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and

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

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

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

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

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

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

"r" - This rating is attached to highlight derivative, hybrid,
and certain other obligations that S & P believes may experience high
volatility or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or interest return
is indexed to equities, commodities, or currencies; certain swaps and options;
and interest only and principal only mortgage securities.

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

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

"Aa" - Bonds are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are

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generally known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in "Aaa" securities.

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

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

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

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

Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B" in its bond rating system. The modifier 1
indicates that the issuer 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 issuer ranks at the lower end of its generic rating
category.

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

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

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

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

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

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

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

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

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

"AA" - Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA." Because
bonds rated in the "AAA" and "AA" categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+."

"A" - Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to

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adverse changes in economic conditions and circumstances than bonds with higher
ratings.

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

"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" - Bonds that
possess one of these ratings are considered by Fitch to be speculative
investments. The ratings "BB" to "C" represent Fitch's assessment of the
likelihood of timely payment of principal and interest in accordance with the
terms of obligation for bond issues not in default. For defaulted bonds, the
rating "DDD" to "D" is an assessment of the ultimate recovery value through
reorganization or liquidation.

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

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

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

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

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

"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment of

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principal and interest is adequate, although adverse changes in business,
economic or financial conditions are more likely to lead to increased
investment risk than for obligations in higher categories.

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

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

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

"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and indicates that the ability
to repay principal and interest on a timely basis is extremely high.

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

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

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

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

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

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

MUNICIPAL NOTE RATINGS

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

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

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

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

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

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

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

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

"MIG-4"/"VMIG-4" - Loans bearing this designation are of
adequate quality, carrying specific risk but having protection

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commonly regarded as required of an investment security and not distinctly or
predominantly speculative.

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

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

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