INFINITY MUTUAL FUNDS INC, 497, 1996-05-20

INFINITY MUTUAL FUNDS INC
497, 1996-05-20

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THE INFINITY MUTUAL FUNDS, INC.
ALPHA GOVERNMENT SECURITIES PORTFOLIO
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MAY 1, 1996

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
Alpha Government Securities Portfolio (the "Portfolio") of The Infinity Mutual
Funds, Inc. (the "Fund"), dated May 1, 1996, as it may be revised from time to
time. To obtain a copy of the Portfolio's Prospectus, please write to the Fund
at 3435 Stelzer Road, Columbus, Ohio 43219- 3035. This Statement of Additional
Information relates only to the Portfolio and not to any of the Fund's other
portfolios.

BEA Associates (the "Adviser") serves as the Portfolio's investment
adviser.

Concord Holding Corporation (the "Administrator") serves as the Portfolio's
administrator.

Concord Financial Group, Inc. (the "Distributor"), a wholly-owned
subsidiary of the Administrator, serves as the distributor of the Portfolio's
shares.

TABLE OF CONTENTS
Page

Investment Objective and Management Policies..............B-2
Management of the Fund....................................B-6
Management Arrangements...................................B-8
Purchase and Redemption of Shares.........................B-13
Determination of Net Asset Value..........................B-14
Yield Information.........................................B-16
Portfolio Transactions....................................B-16
Information About the Portfolio...........................B-17
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors.................B-18
Financial Statements......................................B-20

<PAGE>

INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

The following information supplements and should be read in conjunction
with the section in the Portfolio's Prospectus entitled "Description of the
Portfolio."

Repurchase Agreements. The Portfolio may enter into repurchase agreements.
The Fund's custodian or sub-custodian employed in connection with third-party
repurchase transactions will have custody of, and will hold in a segregated
account, securities acquired by a Portfolio under a repurchase agreement. In
connection with its third-party repurchase transactions, the Fund will employ
only eligible sub-custodians which meet the requirements set forth in Section
17(f) of the Investment Company Act of 1940, as amended (the "1940 Act"), and
the rules thereunder. Repurchase agreements are considered by the staff of the
Securities and Exchange Commission to be loans by the Portfolio. In an attempt
to reduce the risk of incurring a loss on a repurchase agreement, the Portfolio
will enter into repurchase agreements only with domestic banks (including
foreign branches and subsidiaries of domestic banks) with total assets in excess
of one billion dollars or primary government securities dealers reporting to the
Federal Reserve Bank of New York, with respect to securities in which the
Portfolio may invest or government securities regardless of their remaining
maturities, and will require that additional securities be deposited with it if
the value of the securities purchased should decrease below resale price. The
Adviser will monitor on an ongoing basis the value of the collateral to assure
that it always equals or exceeds the repurchase price. The Portfolio will
consider on an ongoing basis the creditworthiness of the institutions with which
it enters into repurchase agreements.

Reverse Repurchase Agreements. The Portfolio may enter into reverse
repurchase agreements. The Portfolio will maintain in a segregated custodial
account cash, cash equivalents or U.S. Government securities or, except for the
U.S. Treasury Portfolio, other high quality liquid debt securities equal to the
aggregate amount of its reverse repurchase obligations, plus accrued interest,
in certain cases, in accordance with releases promulgated by the Securities and
Exchange Commission. The Securities and Exchange Commission views reverse
repurchase agreement transactions as collateralized borrowings, and, pursuant to
the 1940 Act, each Portfolio must maintain continuous asset coverage (that is,
total assets including borrowings, less liabilities exclusive of borrowings) of
300% of the amount borrowed. If the 300% asset coverage should decline as a
result of market fluctuations or other reasons, the Portfolio may be required to
sell some of its portfolio holdings within three days to reduce the debt and
restore the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time.

Illiquid Securities. Where a substantial market of qualified institutional
buyers has developed for certain restricted securities purchased by the
Portfolio pursuant to Rule 144A under the Securities Act of 1933, as amended,
the Fund intends to treat such securities as liquid securities in accordance
with procedures approved by the Fund's Board. Because it is not possible to
predict with assurance how the market for specific restricted securities sold
pursuant to Rule 144A will develop, the Fund's Board has directed the Adviser to
monitor carefully the Portfolio's investments in such securities with particular
regard to trading activity, availability of reliable price information and other
relevant information. To the extent that, for a period of time, qualified
institutional buyers cease purchasing restricted securities pursuant to Rule
144A, the Portfolio's investing in such securities may have the effect of
increasing the level of illiquidity in its investment portfolio during such
period.

Forward Commitments. Securities purchased on a forward commitment or
when-issued basis are subject to changes in value (generally changing in the
same way, i.e., appreciating when interest rates decline and depreciating when
interest rates rise) based upon the public's perception of the creditworthiness
of the issuer and changes, real or anticipated, in the level of interest rates.
Securities purchased on a forward commitment or when- issued basis may expose
the Portfolio to risks because they may experience such fluctuations prior to
their actual delivery. Purchasing securities on a when-issued basis can involve
the additional risk that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the transaction itself.
Purchasing securities on a forward commitment or when-issued basis when the
Portfolio is fully or almost fully invested may result in greater potential
fluctuation in the value of the Portfolio's net assets and its net asset value
per share.

Lending Portfolio Securities. To a limited extent, the Portfolio may lend
its portfolio securities to brokers, dealers and other financial institutions,
provided it receives cash collateral which at all times is maintained in an
amount equal to at least 100% of the current market value of the securities
loaned. By lending its portfolio securities, the Portfolio can increase its
income through the investment of the cash collateral. For the purposes of this
policy, the Fund considers collateral consisting of U.S. Government securities
to be the equivalent of cash. Such loans may not exceed 33-1/3% of the
Portfolio's total assets. From time to time, the Fund may pay a part of the
interest earned from the investment of collateral received for securities loaned
to the borrower or a third party which is unaffiliated with the Fund, and which
is acting as a "placing broker," in an amount determined by the Board of
Directors to be reasonable and based solely on services rendered.

The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Portfolio making the loan must receive at least 100% cash collateral from
the borrower; (2) the borrower must increase such collateral whenever the market
value of the securities rises above the level of such collateral; (3) the
Portfolio must be able to terminate the loan at any time; (4) the Portfolio must
receive reasonable interest on the loan, as well as any interest or other
distributions payable on the loaned securities, and any increase in market
value; and (5) the Portfolio may pay only reasonable custodian fees in
connection with the loan. These conditions may be subject to future
modification.

Investment Restrictions

The Fund has adopted the following restrictions as fundamental policies
which apply to the Portfolio. These restrictions cannot be changed without
approval by the holders of a majority (as defined in the 1940 Act) of the
outstanding voting shares of the Portfolio. The Portfolio may not:

1. Purchase common stocks, preferred stocks, warrants or other equity
securities, or purchase corporate bonds or debentures, state bonds, municipal
bonds or industrial revenue bonds (except through the purchase of debt
obligations referred to above and in the Portfolio's Prospectus).

2. Borrow money, except (i) from banks for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of the Portfolio's
total assets (including the amount borrowed) based on the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made (while borrowings exceed 5% of the value of the Portfolio's
total assets, the Portfolio will not make any additional investments) and (ii)
in connection with the entry into reverse repurchase agreements. At no time may
total borrowings exceed 33-1/3% of the value of the Portfolio's total assets.

3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
(i) to secure borrowings for temporary or emergency purposes and (ii) in
connection with the purchase of securities on a forward commitment basis and the
entry into reverse repurchase agreements.

4. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), other than in connection with the entry into certain reverse
repurchase agreements.

5. Sell securities short or purchase securities on margin.

6. Write or purchase put or call options or combinations thereof.

7. Act as underwriter of securities of other issuers. The Portfolio may not
enter into repurchase agreements providing for settlement in more than seven
days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 10% of its net assets would be so invested.

8. Purchase or sell real estate, real estate investment trust securities,
commodities, or oil and gas interests.

9. Make loans to others, except through the purchase of debt obligations
and through repurchase agreements referred to in the Portfolio's Prospectus, and
except that the Portfolio may lend its portfolio securities in an amount not to
exceed 33-1/3% of the value of its total assets. Any loans of portfolio
securities will be made according to guidelines established by the Securities
and Exchange Commission and the Fund's Directors.

10. Invest in companies for the purpose of exercising control.

11. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.

12. Invest more than 25% of its total assets in the securities of issuers
in any single industry, provided that there shall be no such limitation on
investments in obligations issued or guaranteed by the U.S. Government.

If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values or
assets will not constitute a violation of that restriction.

The Fund may make commitments more restrictive than the restrictions listed
above so as to permit the sale of Portfolio shares in certain states. Should the
Fund determine that a commitment is no longer in the best interests of the
Portfolio and its shareholders, the Fund reserves the right to revoke the
commitment by terminating the sale of the Portfolio's shares in the state
involved.

MANAGEMENT OF THE FUND

Directors and officers of the Fund, together with information as to their
principal business occupations during at least the last five years, are shown
below. Each Director who is deemed to be an "interested person" of the Fund, as
defined in the 1940 Act, is indicated by an asterisk.

Directors of the Fund

*WILLIAM B. BLUNDIN, Chairman of the Board of Directors. An
employee of the Administrator. Mr. Blundin also is an
officer of other investment companies administered by
the Administrator or its affiliates and President and
Chief Executive Officer of Vista Broker/Dealer
Services, Inc. and BNY Hamilton Distributors, Inc.,
registered broker/dealers. He is 58 years old and his
address is 125 West 55th Street, New York, New York
10019.

NORMA A. COLDWELL, Director. International Economist and Consultant;
Executive Vice President of Coldwell Financial Consultants;
Trustee and Treasurer of Meridian House International
(International Education and Cultural Group); Member of the
Board of Advisors of Meridian International Center and
Emerging Capital Markets, S.A. (Montevideo, Uruguay); formerly
Chief International Economist of Riggs National Bank,
Washington, D.C. She is 70 years old and her address is 3330
Southwestern Boulevard, Dallas, Texas 75225.

RICHARD H. FRANCIS, Director. Former Executive Vice President
and Chief Financial Officer of Pan American World
Airways, Inc. (currently, debtor-in-possession under
the U.S. Bankruptcy Code), March 1988 to October 1991;
Senior Vice President and Chief Financial Officer of
American Standard Inc., 1960 to March 1988. Mr.
Francis is a director of Allendale Mutual Insurance and
The Indonesia Fund, Inc. He is 63 years old and his
address is 40 Grosvenor Road, Short Hills, New Jersey
07078.

WILLIAM W. McINNES, Director. Private investor. From July 1978
to February 1993, he was Vice President--Finance and
Treasurer of Hospital Corp. of America. He is also a
director of Gulf South Medical Supply and Diversified
Trust Co. He is 47 years old and his address is 116
30th Avenue South, Nashville, Tennessee 37212.

ROBERT A. ROBINSON, Director. Private investor. Since 1991,
President Emeritus, and from 1968 to 1991, President of
The Church Pension Group, NYC. From 1956 to 1966,
Senior Vice President of Colonial Bank & Trust Co. He
is also a director of Mariner Institutional Funds,
Inc., Mariner Tax-Free Institutional Funds, Inc., UST
Master Funds, UST Master Tax Exempt Funds, H.B. and
F.H. Bugher Foundation, Morehouse-Barlow Co.
Publishers, The Canterbury Cathedral Trust in America,
The Living Church Foundation and Hoosac School. He is
70 years old and his address is 2 Hathaway Common, New
Canaan, Connecticut 06840.

Officers of the Fund

GEORGE O. MARTINEZ, President and Secretary. Senior Vice President
and Director of Legal and Compliance Services with BISYS Fund
Services, Inc., an affiliate of the Administrator, since April
1995, and an officer of other investment companies
administered by the Administrator or its affiliates. Prior
thereto, he was Vice President and Associate General Counsel
with Alliance Capital Management L.P. He is 36 years old and
his address is 3435 Stelzer Road, Columbus, Ohio 43219.

JEFFREY C. CUSICK, Vice President and Assistant Secretary. An employee
of BISYS Fund Services, Inc., since July 1995, and an officer
of other investment companies administered by the
Administrator or its affiliates. From September 1993 to July
1995, he was Assistant Vice President and, from 1989 to
September 1993, he was Manager--Client Services, of Federated
Administrative Services. He is 37 years old and his address is
3435 Stelzer Road, Columbus, Ohio 43219.

WILLIAM TOMKO, Vice President. An employee of BISYS Fund
Services, Inc. and an officer of other investment
companies administered by the Administrator or its
affiliates. He is 37 years old and his address is 3435
Stelzer Road, Columbus, Ohio 43219.

ANN E. BERGIN, Vice President. An employee of the Administrator
and an officer of other investment companies
administered by the Administrator or its affiliates.
She is 35 years old and her address is 125 West 55th
Street, New York, New York 10019.

MARTIN R. DEAN, Treasurer. An employee of BISYS Fund Services, Inc.,
since May 1994, and an officer of other investment companies
administered by the Administrator or its affiliates. Prior
thereto, he was a Senior Manager of KPMG Peat Marwick LLP. He
is 32 years old and his address is 3435 Stelzer Road,
Columbus, Ohio 43219.

ROBERT L. TUCH, Assistant Secretary. An employee of BISYS Fund
Services, Inc., since June 1991, and an officer of other
investment companies administered by the Administrator or its
affiliates. From July 1990 to June 1991, he was Vice President
and Associate General Counsel with National Securities
Research Corp. Prior thereto, he was an Attorney with the
Securities and Exchange Commission. He is 44 years old and his
address is 3435 Stelzer Road, Columbus, Ohio 43219.

ALAINA METZ, Assistant Secretary. An employee of BISYS Fund
Services, Inc. and an officer of other investment
companies administered by the Administrator or its
affiliates. She is 28 years old and her address is
3435 Stelzer Road, Columbus, Ohio 43219.

Directors and officers of the Fund, as a group, owned less
than 1% of the Portfolio's shares of Common Stock outstanding on April 1, 1996.

The Fund does not pay any remuneration to its officers and
Directors other than fees and expenses to those Directors who are not directors,
officers or employees of the Adviser or Administrator or any of their
affiliates. The aggregate amount of compensation paid to each such Director by
the Fund for year ended December 31, 1995 was as follows:

Total Compensation
Aggregate From Fund and Fund
Compensation from Complex Paid to
Name of Board Member Fund* Board Member*
--------------------------------- ---------------------------- -----------------------------

Norma A. Coldwell $11,250 $11,250

Richard H. Francis $10,000 $10,000

William W. McInnes $ 7,500 $ 7,500

Robert A. Robinson $ 2,500 $ 2,500

----------------------
</TABLE>
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $6,434 for all Directors as a group.

MANAGEMENT ARRANGEMENTS

The following information supplements and should be read in conjunction
with the section in the Portfolio's Prospectus entitled "Management of the
Portfolio."

Investment Advisory Agreement. The Adviser provides investment advisory
services pursuant to the Investment Advisory Agreement (the "Advisory
Agreement") dated March 31, 1995, with the Fund. The Advisory Agreement is
subject to annual approval by (i) the Fund's Board of Directors or (ii) vote of
a majority (as defined in the 1940 Act) of the Portfolio's outstanding voting
securities, provided that in either event the continuance also is approved by a
majority of the Directors who are not "interested persons" (as defined in the
1940 Act) of the Fund or the Adviser, by vote cast in person at a meeting called
for the purpose of voting on such approval. Shareholders approved the Advisory
Agreement on March 31, 1995. The Advisory Agreement is terminable without
penalty, on 60 days' notice, by the Fund's Board of Directors or by vote of the
holders of a majority of the Portfolio's outstanding voting securities, or, on
not less than 90 days' notice, by the Adviser. The Advisory Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act).

The Adviser is a New York general partnership comprised of Credit Suisse
Capital Corporation ("CSCC"), an indirect, wholly-owned subsidiary of Credit
Suisse, and Basic Appraisals, Inc. (formerly known as BEA Associates, Inc.). The
Adviser is majority-owned by CSCC and is governed by a board of directors, which
is controlled by CSCC, and an executive committee which runs its day-to-day
affairs and advisory activities.

The following persons are directors, executive committee members and/or
senior officers of the Adviser: Mark Arnold, Chief Operating Officer, Director,
Co-Chairman of Executive Committee and Managing Director; Emilio Bassini, Chief
Financial Officer, Executive Committee Member and Managing Director; Peter
Bosshard, Vice Chairman of the Board of Directors and Executive Committee
Member; Hans Geiger, Director; Jeffrey A. Geller, Executive Committee Member and
Managing Director; John B. Hurford, Vice Chairman of Executive Committee and
Managing Director; Hermann Maurer, Director; Michael F. Orr, Director; William
W. Priest, Jr., Chief Executive Officer, Secretary, Director, Co-Chairman of
Executive Committee and Managing Director; Daniel Regoletti, Director; William
R. Wirth, Chairman of the Board of Directors and Executive Committee Member; and
Albert L. Zesiger, Honorary Chairman of Executive Committee and Managing
Director.

The Adviser provides investment advisory services in accordance with the
stated policies of the Portfolio, subject to the approval of the Fund's Board of
Directors. The Adviser provides the Portfolio with Investment Officers who are
authorized by the Fund's Board of Directors to execute purchases and sales of
securities. The Chief Investment Officer of the Portfolio is Mark Silverstein
who is an employee of the Adviser. The Adviser also maintains a research
department with a professional staff of portfolio managers and securities
analysts who provide research services for the Portfolio as well as for other
funds advised by the Adviser. All purchases and sales are reported for the
Board's review at the meeting subsequent to such transactions.

As compensation for its services, the Portfolio pays the Adviser a monthly
fee at the annual rate of .10 of 1% of the value of the Portfolio's average
daily net assets. For the fiscal years ended December 31, 1993, 1994 and 1995,
the Portfolio paid the Adviser $48,358, $59,727 and $49,823, respectively.

Prior to March 31, 1995, Infinity Advisers, Inc. served as the Portfolio's
investment manager and received an annual fee of $4,000 from the Portfolio.
Prior to such date, the Adviser served as the Portfolio's sub-investment
adviser.

Administration Agreement. The Administrator provides certain administrative
services pursuant to the Administration Agreement (the "Administration
Agreement") dated March 29, 1995, with the Fund. The Administration Agreement
will continue until December 31, 1997 and thereafter is subject to annual
approval by (i) the Fund's Board of Directors or (ii) vote of a majority (as
defined in the 1940 Act) of the Portfolio's outstanding voting securities,
provided that in either event the continuance also is approved by a majority of
the Directors who are not "interested persons" (as defined in the 1940 Act) of
the Fund or the Administrator, by vote cast in person at a meeting called for
the purpose of voting such approval. The Administration Agreement was last
approved by the Fund's Board of Directors, including a majority of the Directors
who are not "interested persons" of any party to the Administration Agreement,
at a meeting held on January 26, 1995. The Administration Agreement is
terminable without penalty, at any time if for cause, by the Fund's Board of
Directors or by vote of the holders of a majority of thePortfolio's outstanding
voting securities, or, on not less than 90 days' notice, by the Administrator.
The Administration Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).

As compensation for its services, the Portfolio has agreed to pay the
Administrator a monthly fee based on the Portfolio's assets as shown below:

Portfolio's Average
Annual Rate Daily Net Assets
----------- ----------------
.13% Less than $200 million
.12% $200 million to less than $300 million
.11% $300 million to less than $350 million
.10% $350 million and over

For the fiscal years ended December 31, 1993, 1994 and 1995, the
administration fees payable by the Portfolio to the Administrator amounted to
$63,043, $77,644 and $64,007, respectively; however, pursuant to undertakings,
the Administrator reduced its fees for such periods by $24,247, $29,863 and
$24,939, respectively, resulting in net fees paid by the Portfolio to the
Administrator of $38,796, $47,781 and $39,068, respectively.

Shareholder Services Agreement. Certain financial institutions (which may
include banks) may provide shareholder services as described in the Prospectus
pursuant to a Shareholder Services Agreement (the "Shareholder Services
Agreement") with the Fund. The Shareholder Services Agreement is subject to
annual approval by (i) the Fund's Board of Directors or (ii) vote of a majority
(as defined in the 1940 Act) of the Portfolio's outstanding voting securities,
provided that in either event the continuance also is approved by a majority of
the Directors who are not "interested persons" (as defined in the 1940 Act) of
the Fund or such institution, by vote cast in person at a meeting called for the
purpose of voting such approval. The Board of Directors, including a majority of
the Directors who are not "interested persons" of any party to the Shareholder
Services Agreement, last approved the Shareholder Services Agreement at a
meeting held on October 25, 1995. The Shareholder Services Agreement is
terminable without penalty, on 60 days' notice, by the Fund's Board of Directors
or by vote of the holders of a majority of the Portfolio's outstanding voting
securities, or, on not less than 90 days' notice, by such institution. The
Shareholder Services Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act). To date, the Fund has entered into a
Shareholder Services Agreement with one financial institution.

As compensation for its services and any expenses assumed, the Portfolio
has agreed to pay such financial institutions a monthly fee at the annual rate
of .45 of 1% of the average daily value of the Portfolio's shares owned by
shareholders who are clients of the financial institution. For the fiscal year
ended December 31, 1993, no fees were paid by the Portfolio pursuant to an
undertaking by the financial institution. For the fiscal years ended December
31, 1994 and 1995, $268,767 and $221,563, respectively, was payable pursuant to
the Shareholder Services Agreement; however, the financial institution waived
$242,254 and $148,311, respectively, of such amounts, resulting in net fees paid
by the Portfolio of $26,513 for fiscal 1994 and $73,252 for fiscal 1995 pursuant
to the Shareholder Services Agreement to the financial institution.

Distribution Agreement. The Distributor acts as the exclusive distributor
of the Portfolio's shares on a best efforts basis pursuant to a Distribution
Agreement (the "Distribution Agreement") dated March 29, 1995 with the Fund.
Shares are sold on a continuous basis by the Distributor as agent, although the
Distributor is not obliged to sell any particular amount of shares. No
compensation is payable by the Portfolio to the Distributor for its distribution
services. The term and termination provisions of the Distribution Agreement are
substantially similar to those of the Administration Agreement with the
Administrator discussed above.

Expenses. All expenses incurred in the operation of the Fund are borne by
the Fund, except to the extent specifically assumed by others. The expenses
borne by the Fund include: organizational costs, taxes, interest, brokerage fees
and commissions, if any, fees of Directors who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of the
Adviser or Administrator or any of their affiliates, Securities and Exchange
Commission fees, state Blue Sky qualification fees, advisory, administration and
other shareholder services fees, charges of custodians, transfer and dividend
disbursing agents' fees, certain insurance premiums, industry association fees,
auditing and legal expenses, costs of calculating the net asset value of the
Portfolio's shares, costs of maintaining corporate existence, costs of
independent pricing services, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
shareholders' reports and corporate meetings, costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders, and any extraordinary expenses.
Expenses attributable to the Portfolio are charged against the assets of the
Portfolio; other expenses of the Fund are allocated among the Fund's portfolios
on the basis determined by the Board of Directors, including, but not limited
to, proportionately in relation to the net assets of each portfolio.

The Adviser and Administrator have agreed that if, in any fiscal year, the
aggregate expenses of the Portfolio, exclusive of taxes, brokerage, interest on
borrowings and (with the prior written consent of the necessary state securities
commissions) extraordinary expenses, but including the investment advisory and
administration fees, exceed the expense limitation of any state having
jurisdiction over the Portfolio, the Fund may deduct from the payment to be made
to the Adviser and/or Administrator under their respective Agreements, or the
Adviser and/or Administrator will bear, such excess expense to the extent
required by state law. Such deduction or payment, if any, will be estimated
daily, and reconciled and effected or paid, as the case may be, on a monthly
basis.

PURCHASE AND REDEMPTION OF SHARES

The following information supplements and should be read in conjunction
with the sections in the Portfolio's Prospectus entitled "How to Buy Shares" and
"How to Redeem Shares."

"Sweep" Program. The Portfolio's shares may be purchased through the
"sweep" program established by certain financial institutions under which a
portion of their customers' accounts may be automatically invested in the
Portfolio. The customer becomes the beneficial owner of specific shares of the
Fund which may be purchased, redeemed and held by the financial institution in
accordance with the customer's instructions and may fully exercise all rights as
a shareholder. The shares will be held by BISYS Fund Services, Inc. (the
"Transfer Agent") in book-entry form. A statement with regard to the customer's
shares is generally supplied to the customer monthly, and confirmations of all
transactions for the account of the customer ordinarily are available to the
customer promptly on request. In addition, each customer is sent proxies,
periodic reports and other information from the Fund with regard to shares of
the Portfolio. The customer's shares are fully assignable and may be encumbered
by the customer. The "sweep" agreement can be terminated by the customer at any
time, without affecting its beneficial ownership of the shares.

To obtain the benefits of this service, a customer typically is required to
maintain a minimum balance subject to a monthly maintenance fee, or a higher
minimum balance for which no monthly fee would be imposed. In either case, a
penalty fee is imposed if the minimum should not be maintained. In general, the
automatic investment in the Portfolio's shares occurs on the same day that
withdrawals are made by the financial institution, at the next determined net
asset value after the order is received.

All agreements which relate to the service are with the financial
institution. Neither the Distributor nor the Fund is a party to any of those
agreements and no part of the compensation received by the financial institution
flows to the Fund or to the Distributor or to any of their affiliates, either
directly or indirectly. Further information concerning this program and any
related charges or fees is provided by the financial institution prior to any
purchase of the Portfolio's shares. Any fees charged by the financial
institution effectively reduces the Portfolio's yield for those customers.

Terms of Purchase. The Fund reserves the right to reject any purchase order
and to change the amount of the minimum investment and subsequent purchases in
the Portfolio.

Using Federal Funds. The Transfer Agent or the Fund may attempt to notify
the investor upon receipt of checks drawn on banks that are not members of the
Federal Reserve System as to the possible delay in conversion into Federal Funds
and may attempt to arrange for a better means of transmitting the money.

Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the calendar
year the account is closed or during the following calendar year, provided that
the information on the old Account Application is still applicable.

Stock Certificates; Signatures. Any certificate representing Portfolio
shares to be redeemed must be submitted with the redemption request. Written
redemption requests must be signed by each shareholder, including each holder of
a joint account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Fund's
Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
If the signature is guaranteed by a broker or dealer, such broker or dealer must
be a member of a clearing corporation and maintain net capital of at least
$100,000. Guarantees must be signed by an authorized signatory of the guarantor
and "Signature-Guaranteed" should appear with the signature.

Suspension of Redemptions. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the New York Stock Exchange
is closed (other than customary weekend and holiday closing), (b) when trading
in the markets the Portfolio ordinarily utilizes is restricted, or when an
emergency exists as determined by the Securities and Exchange Commission so that
disposal of the Portfolio's investments or determination of its net asset value
is not reasonably practicable, or (c) for such other periods as the Securities
and Exchange Commission by order may permit to protect the Portfolio's
shareholders.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in conjunction
with the section in the Portfolio's Prospectus entitled "How to Buy Shares."

Amortized Cost Pricing. The valuation of the Portfolio's investment
securities is based upon their amortized cost which does not take into account
unrealized capital gains or losses. This involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if it sold the
instrument.

The Board of Directors has established, as a particular responsibility
within the overall duty of care owed to the Portfolio's investors, procedures
reasonably designed to stabilize the Portfolio's price per share as computed for
the purpose of sales and redemptions at $1.00. Such procedures include review of
the Portfolio's investment holdings by the Board of Directors, at such intervals
as it deems appropriate, to determine whether the Portfolio's net asset value
calculated by using available market quotations or market equivalents deviates
from $1.00 per share based on amortized cost. In such review, investments for
which market quotations are readily available will be valued at the most recent
bid price or yield equivalent for such securities or for securities of
comparable maturity, quality and type, as obtained from one or more of the major
market makers for the securities to be valued. Other investments and assets will
be valued at fair value as determined in good faith by the Board of Directors.

The extent of any deviation between the Portfolio's net asset value based
upon available market quotations or market equivalents and $1.00 per share based
on amortized cost will be examined by the Board of Directors. If such deviation
exceeds 1/2 of 1%, the Board of Directors promptly will consider what action, if
any, will be initiated. In the event the Board of Directors determines that a
deviation exists which may result in material dilution or other unfair results
to investors or existing shareholders, it has agreed to take such corrective
action as it regards as necessary and appropriate, including: selling portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding dividends or paying distributions from
capital or capital gains; redeeming shares in kind; or establishing a net asset
value per share by using available market quotations or market equivalents.

New York Stock Exchange and Custodian Closings. The holidays (as observed)
on which the New York Stock Exchange and the Custodian are closed currently are:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas Day.

YIELD INFORMATION

The following information supplements and should be read in conjunction
with the section in the Portfolio's Prospectus entitled "Yield Information."

For the seven-day period ended December 31, 1995, the Portfolio's "yield"
and "effective yield," net of absorbed expenses, was 4.77 and 4.88%,
respectively. The Portfolio's yield and effective yield for such period without
the absorption of certain expenses would have been 4.42% and 4.51%,
respectively. Yield is computed in accordance with a standardized method which
involves determining the net change in the value of a hypothetical pre-existing
Portfolio account having a balance of one share at the beginning of a seven
calendar day period for which yield is to be quoted, dividing the net change by
the value of the account at the beginning of the period to obtain the base
period return, and analyzing the results (i.e., multiplying the base period
return by 365/7). The net change in the value of the account reflects the value
of additional shares purchased with dividends declared on the original share and
any such additional shares and fees that may be charged to shareholder accounts,
in proportion to the length of the base period and the Portfolio's average
account size, but does not include realized gains and losses or unrealized
appreciation and depreciation. Effective annualized yield is computed by adding
1 to the base period return (calculated as described above), raising that sum to
a power equal to 365 divided by 7, and subtracting 1 from the result.

Yields will fluctuate and are not necessarily representative of future
results. The investor should remember that yield is a function of the type and
quality of the instruments held, their maturity and operating expenses. An
investor's principal in the Portfolio is not guaranteed. See "Determination of
Net Asset Value" for a discussion of the manner in which the Portfolio's price
per share is determined.

PORTFOLIO TRANSACTIONS

Portfolio securities ordinarily are purchased directly from the issuer or
an underwriter or a market maker for the securities. Usually no brokerage
commissions are paid for such purchases. Purchases from underwriters of
portfolio securities include a concession paid by the issuer to the underwriter
and the purchase price paid to market makers for the securities may include the
spread between the bid and asked price. No brokerage commissions have been paid
by the Portfolio to date.

Transactions are allocated to various dealers by the Portfolio's investment
personnel in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected to act on an agency basis for
research, statistical or other services to enable the Adviser to supplement its
own research and analysis with the views and information of other securities
firms.

Research services furnished by brokers through which the Portfolio effects
securities transactions may be used by the Adviser in advising other funds or
accounts it advises and, conversely, research services furnished to the Adviser
by brokers in connection with other funds or accounts the Adviser advises may be
used by the Adviser in advising the Portfolio. Although it is not possible to
place a dollar value on these services, it is the opinion of the Adviser that
the receipt and study of such services should not reduce the overall expenses of
its research department.

INFORMATION ABOUT THE PORTFOLIOS

The following information supplements and should be read in conjunction
with the section in the Portfolio's Prospectus entitled "General Information."

The Portfolio share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Shares have no preemptive, subscription or conversion rights and are freely
transferable.

The Portfolio will send annual and semi-annual financial statements to all
its shareholders.

As of April 20, 1996, the following shareholders beneficially owned,
directly or indirectly, 5% or more of the Portfolio's outstanding shares:

Percent of
Total Shares
Name and Address Outstanding

The Bank of New York as agent for 20.71%
Twin Laboratories Inc.
2120 Smithtown Avenue
Ronkonkoma, New York 11779

The Bank of New York as agent for 8.66%
Shearson Shopco Malls Ltd.
1250 Broadway
New York, New York 10001

The Bank of New York as agent for 8.34%
St. John's Riverside Hospital
967 North Broadway
Yonkers, New York 10701

The Bank of New York as agent for 8.22%
United Methodist Development
475 Riverside Drive
New York, New York 10115

The Bank of New York as agent for 7.52%
4 World Trade Center
New York, New York 10048

The Bank of New York as agent for 6.06%
Hicks Nurseries Inc.
P.O. Box 648
Westbury, New York 11590

The Bank of New York as agent for 5.41%
Festo Corporation
395 Moreland Road
Hauppauge, New York 11788

A shareholder who beneficially owns, directly or indirectly, more than 25%
of the Portfolio's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Portfolio.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS

The Bank of New York, 90 Washington Street, New York, New York 10286, acts
as custodian of the Portfolio's investments. BISYS Fund Services Ohio, Inc., an
affiliate of the Administrator, 3435 Stelzer Road, Columbus, Ohio 43219, acts as
the Fund's transfer and dividend disbursing agent (the "Transfer Agent"). Under
the transfer agency agreement with the Fund, the Transfer Agent maintains
shareholder account records for the Fund, handles certain communications between
shareholders and the Fund and pays dividends and distributions payable by the
Fund. For these services, the Transfer Agent receives a monthly fee compiled on
the basis of the number of shareholder accounts it maintains for the Fund during
the month, and is reimbursed for certain out-of-pocket expenses. Neither The
Bank of New York nor BISYS Fund Services Ohio, Inc. has any part in determining
the investment policies of the Portfolio or which securities are to be purchased
or sold by the Portfolio.

Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-2696,
as counsel for the Fund, has rendered its opinion as to certain legal matters
regarding the due authorization and valid issuance of the shares of Common Stock
being sold pursuant to the Portfolio's Prospectus.

KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154,
independent auditors, have been selected as the Portfolio's auditors.

<PAGE>

FINANCIAL STATEMENTS

The Portfolios' Annual Report to Shareholders for the fiscal year ended
December 31, 1995 is a separate document supplied with this Statement of
Additional Information, and the financial statements, accompanying notes and
report of independent auditors appearing therein are incorporated by reference
in this Statement of Additional Information.

THE INFINITY MUTUAL FUNDS, INC.
BEA SHORT DURATION PORTFOLIO
BEA CLIENT SHARES, BEA INVESTOR SHARES AND BEA SERVICE SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MAY 1, 1996

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
BEA Short Duration Portfolio (the "Portfolio") of The Infinity Mutual Funds,
Inc. (the "Fund"), dated May 1, 1996, as it may be revised from time to time. To
obtain a copy of the Portfolio's Prospectus, please write to the Fund at 3435
Stelzer Road, Columbus, Ohio 43219-3035. This Statement of Additional
Information relates only to the Portfolio and not to any of the Fund's other
portfolios.

BEA Associates (the "Adviser") serves as the Portfolio's investment
adviser.

Concord Holding Corporation (the "Administrator") serves as the
Portfolio's administrator.

Concord Financial Group, Inc. (the "Distributor"), a wholly-owned
subsidiary of the Administrator, serves as the distributor of the Portfolio's
shares.

TABLE OF CONTENTS
Page

Investment Objective and Management Policies...............B-2
Management of the Fund.....................................B-14
Management Arrangements....................................B-17
Purchase and Redemption of Shares..........................B-21
Determination of Net Asset Value...........................B-23
Performance Information....................................B-25
Dividends, Distributions and Taxes.........................B-26
Portfolio Transactions.....................................B-27
Information About the Portfolio............................B-28
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors..................B-31
Appendix...................................................B-32
Financial Statements.......................................B-37

<PAGE>

INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "Description
of the Portfolio."

Portfolio Securities

Bank Obligations. Domestic commercial banks organized under Federal
law are supervised and examined by the Comptroller of the Currency and are
required to be members of the Federal Reserve System and to have their deposits
insured by the Federal Deposit Insurance Corporation (the "FDIC"). Domestic
banks organized under state law are supervised and examined by state banking
authorities but are members of the Federal Reserve System only if they elect to
join. In addition, state banks whose certificates of deposit ("CDs") may be
purchased by the Portfolio are insured by the Bank Insurance Fund administered
by the FDIC (although such insurance may not be of material benefit to the
Portfolio, depending upon the principal amount of the CDs of each bank held by
the Portfolio) and are subject to Federal examination and to a substantial body
of Federal law and regulation. As a result of Federal and state laws and
regulations, domestic branches of domestic banks, among other things, are
generally required to maintain specified levels of reserves, and are subject to
other supervision and regulation designed to promote financial soundness.

Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by Federal and state
regulation as well as governmental action in the country in which the foreign
bank has its head office. In addition, Federal branches licensed by the
Comptroller of the Currency and branches licensed by certain states ("State
Branches") may be required to: (1) pledge to the regulator, by depositing assets
with a designated bank within the state, a certain percentage of their assets as
fixed from time to time by the appropriate regulatory authority; and (2)
maintain assets within the state in an amount equal to a specified percentage of
the aggregate amount of liabilities of the foreign bank payable at or through
all of its agencies or branches within the state. The deposits of Federal and
State Branches generally must be insured by the FDIC if such branches take
deposits of less than $100,000.

In view of the foregoing factors associated with the purchase of CDs
and TDs issued by foreign branches of domestic banks, by foreign subsidiaries of
domestic banks, by foreign branches of foreign banks or by domestic branches of
foreign banks, the Adviser carefully evaluates such investments on a
case-by-case basis.

The Portfolio may invest in short-term corporate obligations
denominated in U.S. and foreign currencies that are originated, negotiated and
structured by a syndicate of lenders ("Co-Lenders") consisting of commercial
banks, thrift institutions, insurance companies, finance companies or other
financial institutions one or more of which administers the security on behalf
of the syndicate (the "Agent Bank"). Co- Lenders may sell such securities to
third parties called "Participants." The Portfolio may invest in such securities
either by participating as a Co-Lender at origination or by acquiring an
interest in the security from a Co-Lender or a Participant (collectively,
"participation interests"). Co-Lenders and Participants interposed between the
Fund and the corporate borrower (the "Borrower"), together with Agent Banks, are
referred herein as "Intermediate Participants." The Portfolio also may purchase
a participation interest in a portion of the rights of an Intermediate
Participant, which would not establish any direct relationship between the
Portfolio and the Borrower. In such cases, the Portfolio would be required to
rely on the Intermediate Participant that sold the participation interest not
only for the enforcement of the Portfolio's rights against the Borrower but also
for the receipt and processing of payments due to the Portfolio under the
security. Because it may be necessary to assert through an Intermediate
Participant such rights as may exist against the Borrower, in the event the
Borrower fails to pay principal and interest when due, the Portfolio may be
subject to delays, expenses and risks that are greater than those that would be
involved if the Portfolio could enforce its rights directly against the
Borrower. Moreover, under the terms of a participation interest, the Portfolio
may be regarded as a creditor of the Intermediate Participant (rather than of
the Borrower), so that the Fund may also be subject to the risk that the
Intermediate Participant may become insolvent. Similar risks may arise with
respect to the Agent Bank if, for example, assets held by the Agent Bank for the
benefit of the Portfolio were determined by the appropriate regulatory authority
or court to be subject to the claims of the Agent Bank's creditors. In such
cases, the Portfolio might incur certain costs and delays in realizing payment
in connection with the participation interest or suffer a loss of principal
and/or interest. Further, in the event of the bankruptcy or insolvency of the
Borrower, the obligation of the Borrower to repay the loan may be subject to
certain defenses that can be asserted by such Borrower as a result of improper
conduct by the Agent Bank or Intermediate Participant.

Repurchase Agreements. The Portfolio will enter into repurchase
agreements only with domestic banks (including foreign branches and subsidiaries
of domestic banks), foreign banks or broker/dealers, or primary government
securities dealers reporting to the Federal Reserve Bank of New York, with
respect to securities in which the Fund may invest or government securities
regardless of their remaining maturities, and will require that additional
securities be deposited with it if the value of the securities purchased should
decrease below resale price. The Fund's custodian or sub-custodian employed in
connection with third-party repurchase transactions will have custody of, and
will hold in a segregated account, securities acquired by the Portfolio under a
repurchase agreement. In connection with its third-party repurchase
transactions, the Fund will employ only eligible sub-custodians which meet the
requirements set forth in Section 17(f) of the Investment Company Act of 1940,
as amended (the "1940 Act") and the rules thereunder. Repurchase agreements are
considered by the staff of the Securities and Exchange Commission to be loans by
the Portfolio. The Adviser will monitor on an ongoing basis the value of the
collateral to assure that it always equals or exceeds the repurchase price. The
Portfolio will consider on an ongoing basis the creditworthiness of the
institutions with which it enters into repurchase agreements.

Municipal Obligations. Municipal obligations are classified as general
obligation bonds, revenue bonds and notes. General obligation bonds are secured
by the issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenue derived from
a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source, but not from the
general taxing power. Industrial development bonds, in most cases, are revenue
bonds and generally do not carry the pledge of the credit of the issuing
municipality, but generally are guaranteed by the corporate entity on whose
behalf they are issued. Notes are short-term instruments which are obligations
of the issuing municipalities or agencies and are sold in anticipation of a bond
sale, collection of taxes or receipt of other revenues. Municipal obligations
include municipal lease/purchase agreements which are similar to installment
purchase contracts for property or equipment issued by municipalities. Municipal
obligations bear fixed, floating or variable rates of interest, which are
determined in some instances by formulas under which the municipal obligation's
interest rate will change directly or inversely to changes in interest rates or
an index, or multiples thereof, in many cases subject to a maximum and minimum.
Certain municipal obligations are subject to redemption at a date earlier than
their stated maturity pursuant to call options, which may be separated from the
related municipal obligation and purchased and sold separately. The Portfolio
will invest in municipal obligations, the ratings of which correspond with the
ratings of other permissible Portfolio investments.

Convertible Securities. The Portfolio also may purchase convertible
securities. In general, the market value of a convertible security is the higher
of its "investment value" (i.e., its value as a fixed-income security) or its
"conversion value" (i.e., the value of the underlying shares of common stock if
the security is converted). As a fixed-income security, the market value of a
convertible security generally increases when interest rates decline and
generally decreases when interest rates rise. However, the price of a
convertible security also is influenced by the market value of the security's
underlying common stock. Thus, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer.

Investment Company Securities. The Portfolio may invest in securities
issued by other investment companies which principally invest in securities of
the type in which the Portfolio invests. Under the 1940 Act, the Portfolio's
investments in such securities, subject to certain exceptions, currently are
limited to (i) 3% of the total voting stock of any one investment company, (ii)
5% of the Portfolio's total assets with respect to anyone investment company and
(iii) 10% of the Portfolio's total assets in the aggregate. Investments in the
securities of other investment companies may involve duplication of advisory
fees and certain other expenses.

Mortgage-Related Securities

Government Agency Securities. Mortgage-related securities issued by
the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.

Government Related Securities. Mortgage-related securities issued by
the Federal National Mortgage Association ("FNMA") include FNMA Guaranteed
Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are
solely the obligations of the FNMA and are not backed by or entitled to the full
faith and credit of the Untied States. The FNMA is a government-sponsored
organization owned entirely by private stockholders. Fannie Maes are guaranteed
as to timely payment of principal and interest by FNMA.

Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also
known as "Freddie Macs" or "PCs"). The FHLMC is a corporate instrumentality of
the United States created pursuant to an Act of Congress, which is owned
entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the
United States or by any Federal Home Loan Bank and do not constitute a debt or
obligation of the United States or of any Federal Home Loan Bank. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by the
FHLMC. The FHLMC guarantees either ultimate collection or timely payment of all
principal payments on the underlying mortgage loans. When the FHLMC does not
guarantee timely payment of principal, FHLMC may remit the amount due on account
of its guarantee of ultimate payment of principal at any time after default on
an underlying mortgage, but in no event later than one year after it becomes
payable.

Illiquid Securities. Where a substantial market of qualified
institutional buyers has developed for certain restricted securities purchased
by the Portfolio pursuant to Rule 144A under the Securities Act of 1933, as
amended, the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board. Because it is not
possible to predict with assurance how the market for specific restricted
securities sold pursuant to Rule 144A will develop, the Fund's Board has
directed the Adviser to monitor carefully each Portfolio's investments in such
securities with particular regard to trading activity, availability of reliable
price information and other relevant information. To the extent that, for a
period of time, qualified institutional buyers cease purchasing restricted
securities pursuant to Rule 144A, the Portfolio's investing in such securities
may have the effect of increasing the level of illiquidity in its investment
portfolio during such period.

Management Policies. The Portfolio engages in the following practices
in furtherance of its objective.

Leveraging. The Portfolio may borrow for investment purposes. The 1940
Act requires the Portfolio to maintain continuous asset coverage (that is, total
assets including borrowings, less liabilities exclusive of borrowings) of 300%
of the amount borrowed. If the 300% asset coverage should decline as a result of
market fluctuations or other reasons, the Portfolio may be required to sell some
of its portfolio holdings within three days to reduce the debt and restore the
300% asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. The Portfolio also may be required
to maintain minimum average balances in connection with such borrowings or to
pay a commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.

In certain types of repurchase agreements, there is no agreed upon
repurchase date and interest payments are calculated daily, often based on the
prevailing overnight repurchase rate. The Portfolio will maintain in a
segregated custodial account cash or U.S. Government securities or other high
quality liquid debt securities at least equal to the aggregate amount of its
reverse repurchase obligations, plus accrued interest, in certain cases, in
accordance with releases promulgated by the Securities and Exchange Commission.
The Securities and Exchange Commission views reverse repurchase transactions as
collateralized borrowings by the Portfolio. These agreements, which are treated
as if reestablished each day, are expected to provide the Portfolio with a
flexible borrowing tool.

Options Transactions. The Portfolio may engage in options
transactions, such as purchasing or writing covered call or put options. The
principal reason for writing covered call options is to realize, through the
receipt of premiums, a greater return than would be realized on the Portfolio's
securities alone. In return for a premium, the writer of a covered call option
forfeits the right to any appreciation in the value of the underlying security
above the strike price for the life of the option (or until a closing purchase
transaction can be effected). Nevertheless, the call writer retains the risk of
a decline in the price of the underlying security. Similarly, the principal
reason for writing covered put options is to realize income in the form of
premiums. The writer of a covered put option accepts the risk of a decline in
the price of the underlying security. The size of the premiums that the
Portfolio may receive may be adversely affected as new or existing institutions,
including other investment companies, engage in or increase their option-writing
activities.

Options written ordinarily will have expiration dates between one and
nine months from the date written. The exercise price of the options may be
below, equal to or above the market values of the underlying securities at the
time the options are written. In the case of call options, these exercise prices
are referred to as "in-the-money," "at-the-money" and "out-of-the- money,"
respectively. The Portfolio may write (a) in-the-money call options when the
Adviser expects that the price of the underlying security will remain stable or
decline moderately during the option period, (b) at-the-money call options when
the Adviser expects that the price of the underlying security will remain stable
or advance moderately during the option period and (c) out-of-the-money call
options when the Adviser expects that the premiums received from writing the
call option plus the appreciation in market price of the underlying security up
to the exercise price will be greater than the appreciation in the price of the
underlying security alone. In these circumstances, if the market price of the
underlying security declines and the security is sold at this lower price, the
amount of any realized loss will be offset wholly or in part by the premium
received. Out-of-the- money, at-the-money and in-the-money put options (the
reverse of call options as to the relation of exercise price to market price)
may be utilized in the same market environments that such call options are used
in equivalent transactions.

So long as the Portfolio's obligation as the writer of an option
continues, the Portfolio may be assigned an exercise notice by the broker-dealer
through which the option was sold, requiring the Portfolio to deliver, in the
case of a call, or take delivery of, in the case of a put, the underlying
security against payment of the exercise price. This obligation terminates when
the option expires or the Portfolio effects a closing purchase transaction. The
Portfolio can no longer effect a closing purchase transaction with respect to an
option once it has been assigned an exercise notice.

While it may choose to do otherwise, the Portfolio generally will
purchase or write only those options for which the Adviser believes there is an
active secondary market so as to facilitate closing transactions. There is no
assurance that sufficient trading interest to create a liquid secondary market
on a securities exchange will exist for any particular option or at any
particular time, and for some options no such secondary market may exist. A
liquid secondary market in an option may cease to exist for a variety of
reasons. In the past, for example, higher than anticipated trading activity or
order flow, or other unforeseen events, at times have rendered certain clearing
facilities inadequate and resulted in the institution of special procedures,
such as trading rotations, restrictions on certain types of orders or trading
halts or suspensions in one or more options. There can be no assurance that
similar events, or events that otherwise may interfere with the timely execution
of customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. If as a covered call option
writer the Portfolio is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise or it
otherwise covers its position.

Futures Contracts and Options on Futures Contracts. Upon exercise of
an option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of options on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the time of
sale, there are no daily cash payments to reflect changes in the value of the
underlying contract; however, the value of the option does change daily and that
change would be reflected in the net asset value of the Portfolio.

Foreign Currency Transactions. If the Portfolio enters into a foreign
currency transaction, it will deposit, if required by applicable regulations,
with the Fund's custodian cash or readily marketable securities in a segregated
account of the Portfolio in an amount at least equal to the value of the
Portfolio's total assets committed to the consummation of the forward contract.
If the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account so that the value of
the account will equal the amount of the Portfolio's commitment with respect to
the contract.

At or before the maturity of a forward contract, the Portfolio either
may sell a portfolio security and make delivery of the currency, or retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Portfolio will obtain, on the
same maturity date, the same amount of the currency which it is obligated to
deliver. If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio, at the time of execution of the
offsetting transaction, will incur a gain or loss to the extent movement has
occurred in forward contract prices. Should forward prices decline during the
period between the Portfolio's entering into a forward contract for the sale of
a currency and the date it enters into an offsetting contract for the purchase
of the currency, the Portfolio will 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 Portfolio will suffer a
loss to the extent the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell.

The cost to the Portfolio of engaging in currency transactions varies
with factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because transactions in currency
exchange usually are conducted on a principal basis, no fees or commissions are
involved. The use of forward currency exchange contracts does not eliminate
fluctuations in the underlying prices of the securities, but it does establish a
rate of exchange that can be achieved in the future. If a devaluation generally
is anticipated, the Portfolio may not be able to contract to sell the currency
at a price above the devaluation level it anticipates. The requirements for
qualification as a regulated investment company under the Internal Revenue Code
of 1986, as amended (the "Code"), may cause the Portfolio to restrict the degree
to which it engages in currency transactions. See "Dividends, Distributions and
Taxes."

Future Developments. The Portfolio may take advantage of opportunities
in the area of options and futures contracts and options on futures contracts
and any other derivative investments which are not presently contemplated for
use by the Portfolio or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with the
Portfolio's investment objective and legally permissible for the Portfolio.
Before entering into such transactions or making any such investment, the
Portfolio will provide appropriate disclosure in its prospectus.

Lending Portfolio Securities. To a limited extent, the Portfolio may
lend its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value of
the securities loaned. By lending its portfolio securities, the Portfolio can
increase its income through the investment of the cash collateral. For the
purposes of this policy, the Fund considers collateral consisting of U.S.
Government securities or irrevocable letters of credit issued by banks whose
securities meet the standards for investment by the Portfolio to be the
equivalent of cash. Such loans may not exceed 33-1/3% of the Portfolio's total
assets. From time to time, the Fund may pay a part of the interest earned from
the investment of collateral received for securities loaned to the borrower or a
third party which is unaffiliated with the Fund, and which is acting as a
"placing broker," in an amount determined by the Board of Directors to be
reasonable and based solely on services rendered.

The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned: (1)
the Portfolio must receive at least 100% cash collateral from the borrower; (2)
the borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Portfolio must be
able to terminate the loan at any time; (4) the Portfolio must receive
reasonable interest on the loan, as well as any interest or other distributions
payable on the loaned securities, and any increase in market value; and (5) the
Portfolio may pay only reasonable custodian fees in connection with the loan.
These conditions may be subject to future modification.

Short-Selling. The Portfolio may engage in short- selling. Until the
Portfolio replaces a borrowed security in connection with a short sale, the
Portfolio will: (a) maintain daily a segregated account, containing cash, cash
equivalents or U.S. Government securities, at such a level that the amount
deposited in the account plus the amount deposited with the broker as collateral
always equals the current value of the security sold short; or (b) otherwise
cover its short position.

Investment Restrictions

The Fund has adopted investment restrictions numbered 1 through 7 as
fundamental policies of the Portfolio. These restrictions cannot be changed
without approval by the holders of a majority (as defined in the 1940 Act) of
the outstanding voting shares of the Portfolio. Investment restrictions numbered
8 through 12 are not fundamental policies and may be changed by a vote of a
majority of the Directors at any time. The Portfolio may not:

1. Invest in commodities, except that the Portfolio may purchase and
sell options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.

2. Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Portfolio may purchase
and sell securities that are secured by real estate or issued by companies that
invest or deal in real estate. In particular, the Portfolio may purchase
mortgage-backed securities and real estate investment trust securities.

3. Borrow money, except to the extent permitted under the Act. For
purposes of this investment restriction, the entry into options, forward
contracts, futures contracts, including those relating to indexes, and options
on futures contracts or indexes shall not constitute borrowing.

4. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, the Portfolio may
lend its securities in an amount not to exceed 33-1/3% of the value of its total
assets. Any loans of portfolio securities will be made according to guidelines
established by the Securities and Exchange Commission and the Fund's Board of
Directors.

5. Act as an underwriter of securities of other issuers, except to the
extent the Fund may be deemed an underwriter under the Securities Act of 1933,
as amended, by virtue of disposing of portfolio securities.

6. Invest more than 25% of its assets in the securities of issuers in
any single industry, provided there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

7. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act). The Portfolio's investments permitted under Investment
Restriction Nos. 1, 3, 9 and 10 are not considered senior securities for
purposes of this investment restriction.

8. Invest in the securities of a company for the purpose of exercising
management or control, but the Portfolio will vote the securities it owns in its
portfolio as a shareholder in accordance with its views.

9. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with writing covered put and call
options and the purchase of securities on a when-issued or forward commitment
basis and collateral and initial or variation margin arrangements with respect
to options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.

10. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Portfolio's Prospectus and this Statement of
Additional Information.

11. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if, in
the aggregate, more than 15% of the value of the Portfolio's net assets would be
so invested.

12. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.

In addition, the Portfolio has adopted the following policies as
non-fundamental policies: (a) the Portfolio will not purchase securities on
margin, but the Portfolio may obtain such short-term credit as may be necessary
for the clearance of purchases and sales of securities; (b) other than in
connection with short sales against-the-box, the dollar amount of short sales at
any one time will not exceed 25% of the net assets of the Portfolio, and the
value of securities of any one issuer in which the Portfolio is short will not
exceed the lesser of 2% of the value of the Portfolio's net assets or 2% of the
securities of any class of any single issuer. In addition, such short sales will
be made only in those securities which are fully listed on a national securities
exchange; (c) the Portfolio will not purchase warrants, valued at the lower of
cost or market, in excess of 5% of the value of the Portfolio's net assets.
Included in such amount, but not to exceed 2% of the value of the Portfolio's
net assets, are warrants which are not listed on the New York or American Stock
Exchange. Warrants acquired by the Portfolio in units or attached to securities
are not subject to such restrictions; and (d) the Portfolio will not invest in
real estate limited partnership interests.

The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Portfolio shares in certain states.
Should the Fund determine that a commitment is no longer in the best interests
of the Portfolio and its shareholders, the Fund reserves the right to revoke the
commitment by terminating the sale of Portfolio shares in the state involved.

MANAGEMENT OF THE FUND

Directors and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below. Each Director who is an "interested person" of the Fund, as defined
in the 1940 Act, is indicated by an asterisk.

Directors of the Fund

*WILLIAM B. BLUNDIN, Chairman of the Board of Directors. An Employee of
the Administrator. Mr. Blundin also is an officer of other
investment companies administered by the Administrator or its
affiliates and President and Chief Executive Officer of Vista
Broker/Dealer Services, Inc. and BNY Hamilton Distributors,
Inc., registered broker/dealers. He is 58 years old and his
address is 125 West 55th Street, New York, New York 10019.

RICHARD H. FRANCIS, Director. Former Executive Vice President
and Chief Financial Officer of Pan American World
Airways, Inc. (currently, debtor-in-possession under the
U.S. Bankruptcy Code), March 1988 to October 1991;
Senior Vice President and Chief Financial Officer of
American Standard Inc., 1960 to March 1988. Mr. Francis
is a director of Allendale Mutual Insurance and The
Indonesia Fund, Inc. He is 63 years old and his address
is 40 Grosvenor Road, Short Hills, New Jersey 07078.

ROBERT A. ROBINSON, Director. Private investor. Since 1991,
President Emeritus, and from 1968 to 1991, President of
The Church Pension Group, NYC. From 1956 to 1966,
Senior Vice President of Colonial Bank & Trust Co. He
is also a director of Mariner Institutional Funds, Inc.,
Mariner Tax-Free Institutional Funds, Inc., UST Master
Funds, UST Master Tax Exempt Funds, H.B. and F.H. Bugher
Foundation, Morehouse-Barlow Co. Publishers, The
Canterbury Cathedral Trust in America, The Living Church
Foundation and Hoosac School. He is 70 years old and
his address is 2 Hathaway Common, New Canaan,
Connecticut 06840.

Officers of the Fund

GEORGE O. MARTINEZ, President and Secretary. Senior Vice President
and Director of Legal and Compliance Services with BISYS Fund
Services, Inc., an affiliate of the Administrator, since April
1995, and an officer of other investment companies
administered by the Administrator or its affiliates. Prior
thereto, he was Vice President and Associate General Counsel
with Alliance Capital Management, L.P. He is 36 years old and
his address is 3435 Stelzer Road, Columbus, Ohio 43219.

WILLIAM TOMKO, Vice President. An employee of BISYS Fund Services,
Inc., an affiliate of the Administrator, and an officer of
other investment companies administered by the Administrator
or its affiliates. He is 37 years old and his address is
3435 Stelzer Road, Columbus, Ohio 43219.

For so long as the Portfolio Distribution Plan described in the
section captioned "Management Arrangements--Distribution Plan" remains in
effect, the Directors of the Fund who are not "interested persons" of the Fund,
as defined in the 1940 Act, will be selected and nominated by the Directors who
are not "interested persons" of the Fund.

Directors and officers of the Fund, as a group, owned less than 1% of
the Portfolio's shares of Common Stock outstanding on April 1, 1996.

The Fund does not pay any remuneration to its officers and Directors
other than fees and expenses to those Directors who are not directors, officers
or employees of the Adviser or Administrator or any of their affiliates. The
aggregate amount of compensation paid to each such Director by the Fund for year
ended December 31, 1995 was as follows:

Total Compensation
Aggregate From Fund and
Name of Board Compensation from Fund Complex Paid
Member Fund* to Board Member*

Norma A. Coldwell $11,250 $11,250
Richard H. Francis $10,000 $10,000
William W. McInnes $ 7,500 $ 7,500
Robert A. Robinson $ 2,500 $ 2,500

</TABLE>

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

* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $6,434 for all Directors as a group.

MANAGEMENT ARRANGEMENTS

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "Management
of the Portfolio."

Investment Advisory Agreement. The Adviser provides investment
advisory services pursuant to the Investment Advisory Agreement (the
"Agreement") dated December 21, 1990, as amended, with the Fund. The Agreement
is subject to annual approval by (i) the Fund's Board of Directors or (ii) vote
of a majority (as defined in the 1940 Act) of the outstanding voting securities
of the Portfolio, provided that in either event the continuance also is approved
by a majority of the Board of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Adviser, by vote cast in person at a
meeting called for the purpose of voting on such approval. The Board of
Directors, including a majority of the Directors who are not "interested
persons" of any party to the Agreement, last approved the Agreement at a meeting
held on October 25, 1995. Shareholders approved the Agreement on November 30,
1992. The Agreement is terminable without penalty, on 60 days' notice, by the
Fund's Board of Directors or by vote of the holders of a majority of the
Portfolio's shares, or, on not less than 90 days' notice, by the Adviser. The
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act). Prior to December 21, 1990, the Portfolio's investment
adviser was BEA Associates, Inc., the predecessor of the Adviser.

The Adviser is a New York general partnership comprised of Credit
Suisse Capital Corporation ("CSCC"), an indirect, wholly-owned subsidiary of
Credit Suisse, and Basic Appraisals, Inc. (formerly known as BEA Associates,
Inc.). The Adviser is majority-owned by CSCC and is governed by a board of
directors, which is controlled by CSCC, and an executive committee which runs
its day-to-day affairs and advisory activities.

The following persons are directors, executive committee members
and/or senior officers of the Adviser: Mark Arnold, Chief Operating Officer,
Director, Co-Chairman of Executive Committee and Managing Director; Emilio
Bassini, Chief Financial Officer, Executive Committee Member and Managing
Director; Peter Bosshard, Vice Chairman of the Board of Directors and Executive
Committee Member; Hans Geiger, Director; Jeffrey A. Geller, Executive Committee
Member and Managing Director; John B. Hurford, Vice Chairman of Executive
Committee and Managing Director; Hermann Maurer, Director; Michael F. Orr,
Director; William W. Priest, Jr., Chief Executive Officer, Secretary, Director,
Co-Chairman of Executive Committee and Managing Director; Daniel Regoletti,
Director; William R. Wirth, Chairman of the Board of Directors and Executive
Committee Member; and Albert L. Zesiger, Honorary Chairman of Executive
Committee and Managing Director.

The Adviser provides investment advisory services in accordance with
the stated policies of the Portfolio, subject to the approval of the Fund's
Board of Directors. The Adviser provides the Portfolio with Investment Officers
who are authorized by the Board of Directors to execute purchases and sales of
securities. The Chief Investment Officer is Mark Silverstein. The Adviser also
maintains a research department with a professional staff of portfolio managers
and securities analysts who provide research services for the Portfolio as well
as for other funds advised by the Adviser. All purchases and sales are reported
for the Board's review at the meeting subsequent to such transactions.

As compensation for the Adviser's services, the Portfolio has agreed
to pay the Adviser a monthly fee at the annual rate of .15 of 1% of the value of
the Portfolio's average daily net assets. For the fiscal years ended December
31, 1993, 1994 and 1995, the advisory fees paid to the Adviser by the Portfolio
amounted to $221,912, $231,749 and $177,405, respectively.

Administration Agreement. The Administrator provides certain
administrative services pursuant to the Administration Agreement (the
"Administration Agreement") dated March 29, 1995, with the Fund. The
Administration Agreement will continue until December 31, 1997 and thereafter is
subject to annual approval by (i) the Fund's Board of Directors or (ii) vote of
a majority (as defined in the 1940 Act) of the outstanding voting securities of
the Portfolio, provided that in either event the continuance also is approved by
a majority of the Directors who are not "interested persons" (as defined in the
1940 Act) of the Fund or the Administrator, by vote cast in person at a meeting
called for the purpose of voting such approval. The Administration Agreement was
last approved by the Fund's Board of Directors, including a majority of the
Directors who are not "interested persons" of any party to the Administration
Agreement, at a meeting held on January 26, 1995. The Administration Agreement
is terminable without penalty, at any time if for cause, by the Fund's Board of
Directors or by vote of the holders of a majority of the Portfolio's outstanding
voting securities, or, on not less than 90 days' notice, by the Administrator.
The Administration Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).

As compensation for the Administrator's services, the Portfolio has
agreed to pay the Administrator a monthly fee at the annual rate of .12 of 1% of
the value of the Portfolio's average daily net assets. For the fiscal years
ended December 31, 1993, 1994 and 1995, the administration fees paid to the
Administrator amounted to $177,530, $185,399 and $141,924, respectively.

Distribution Agreement. The Distributor acts as the exclusive
distributor of the Portfolio's shares on a best efforts basis pursuant to a
Distribution Agreement (the "Distribution Agreement") dated March 29, 1995 with
the Fund. Shares are sold on a continuous basis by the Distributor as agent,
although the Distributor is not obliged to sell any particular amount of shares.
No compensation is payable by the Portfolio to the Distributor for its
distribution services. The term and termination provisions of the Distribution
Agreement are substantially similar to those of the Administration Agreement
with the Administrator discussed above.

Special Investors Services Plan. (Applicable only with respect to the
BEA Investor and BEA Service Shares). The Fund has adopted a Special Investors
Services Plan (the "Special Services Plan") pursuant to which the Fund has
agreed to pay one or more financial institutions, securities dealers and other
industry professionals, including BEA Associates, a fee at the annual rate of up
to .15% of the value of the average daily net assets of the BEA Investor Class
and BEA Service Class for certain services provided to the beneficial holders of
BEA Investor Shares and BEA Service Shares.

A quarterly report of the amounts expended under the Special Services
Plan, and the purposes for which such expenditures were incurred, must be made
to the Directors for their review. In addition, the Special Services Plan
provides that it may not be amended without approval of the Board of Directors,
and by the Directors who are neither "interested persons" (as defined in the
1940 Act) of the Fund nor have any direct or indirect financial interest in the
operation of the Special Services Plan, by vote cast in person at a meeting
called for the purpose of considering such amendments. The Special Services Plan
is subject to annual approval by such vote cast in person at a meeting called
for the purpose of voting on the Special Services Plan. The Special Services
Plan was last so approved on October 25, 1995. The Special Services Plan is
terminable at any time by vote of a majority of the Directors who are not
"interested persons" and who have no direct or indirect financial interest in
the operation of the Special Services Plan.

For the fiscal year ended December 31, 1995, the Portfolio incurred
pursuant to the Special Services Plan $3,629 with respect to the BEA Service
Class and $48,379 with respect to the BEA Investor Class, of which $29,848 was
waived with respect to the BEA Investor Class.

Distribution Plan. (Applicable only with respect to the BEA Service
Shares). Rule 12b-1 (the "Rule") adopted by the Securities and Exchange
Commission under the 1940 Act provides, among other things, that an investment
company may bear expenses of distributing its shares only pursuant to a plan
adopted in accordance with the Rule. The Fund's Directors have adopted such a
plan (the "Distribution Plan") with respect to the BEA Service Shares. The
Fund's Directors believe that there is a reasonable likelihood that the
Distribution Plan will benefit the Portfolio and the holders of its BEA Service
Shares. In some states, banks or other institutions effecting transactions in
BEA Service Shares may be required to register as dealers pursuant to state law.

A quarterly report of the amounts expended under the Distribution
Plan, and the purposes for which such expenditures were incurred, must be made
to the Directors for their review. In addition, the Distribution Plan provides
that it may not be amended to increase materially the costs which holders of the
BEA Service Shares may bear for distribution pursuant to the Distribution Plan
without approval of such shareholders and that other material amendments of the
Distribution Plan must be approved by the Board of Directors, and by the
Directors who are neither "interested persons" (as defined in the 1940 Act) of
the Fund nor have any direct or indirect financial interest in the operation of
the Distribution Plan or in the related Distribution Plan agreements, by vote
cast in person at a meeting called for the purpose of considering such
amendments. The Distribution Plan and related agreements are subject to annual
approval by such vote cast in person at a meeting called for the purpose of
voting on the Distribution Plan. The Distribution Plan was last so approved on
October 25, 1995. The Distribution Plan is terminable at any time by vote of a
majority of the Directors who are not "interested persons" and who have no
direct or indirect financial interest in the operation of the Distribution Plan
or in the Distribution Plan agreements or by vote of a majority of the holders
of BEA Service Shares. A Distribution Plan agreement is terminable without
penalty, at any time, by such vote of the Directors, upon not more than 60 days'
written notice to the parties to such agreement or by vote of the holders of a
majority of the Portfolio's BEA Service Shares. A Distribution Plan agreement
will terminate automatically in the event of its assignment (as defined in the
1940 Act).

For the fiscal year ended December 31, 1995, the Portfolio incurred
$6,047 pursuant to the Distribution Plan with respect to the BEA Service Class.

Expenses. All expenses incurred in the operation of the Fund are borne
by the Fund, except to the extent specifically assumed by others. The expenses
borne by the Fund include: organizational costs, taxes, interest, brokerage fees
and commissions, if any, fees of Directors who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of the
Adviser or Administrator or any of their affiliates, Securities and Exchange
Commission fees, state Blue Sky qualification fees, advisory and administration
fees, Special Services Plan and Distribution Plan fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, auditing and legal expenses, costs of maintaining
corporate existence, costs of independent pricing services, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of calculating the net asset value of the Portfolio's shares,
costs of shareholders' reports and corporate meetings, costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders, and any extraordinary
expenses. Expenses attributable to the Portfolio are charged against the assets
of the Portfolio; other expenses of the Fund are allocated among the portfolios
on the basis determined by the Board of Directors, including, but not limited
to, proportionately in relation to the net assets of each portfolio.

The Adviser and Administrator have agreed that if, in any fiscal year,
the aggregate expenses of the Portfolio, exclusive of taxes, brokerage, interest
on borrowings and (with the prior written consent of the necessary state
securities commissions) extraordinary expenses, but including the administration
fees, exceed the expense limitation of any state having jurisdiction over the
Portfolio, the Fund may deduct from the payment to be made to the Administrator
under the Administration Agreement, or the Adviser and/or Administrator will
bear, such excess expense to the extent required by state law. Such deduction or
payment, if any, will be estimated daily, and reconciled and effected or paid,
as the case may be, on a monthly basis.

PURCHASE AND REDEMPTION OF SHARES

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "How to Buy
Shares" and "How to Redeem Shares."

"Sweep" Program. Portfolio shares may be purchased through the "sweep"
program established for certain customers of the Adviser under which a portion
of such customers' accounts with the Adviser may be automatically invested in
the Portfolio. The customer becomes the beneficial owner of specific shares
which may be purchased, redeemed and held by the Adviser in accordance with the
customer's instructions and may fully exercise all rights as a shareholder. The
shares will be held by BISYS Fund Services, Inc. (the "Transfer Agent") in
book-entry form. A statement with regard to the customer's shares is generally
supplied to the customer monthly, and confirmations of all transactions for the
account of the customer ordinarily are available to the customer promptly on
request. In addition, each customer is sent proxies, periodic reports and other
information from the Fund with regard to shares of the Portfolio. The customer's
shares are fully assignable and may be encumbered by the customer. The "sweep"
agreement can be terminated by the customer at any time, without affecting its
beneficial ownership of the shares.

To obtain the benefits of this service, a customer typically is
required to maintain a minimum balance subject to a monthly maintenance fee, or
a higher minimum balance for which no monthly fee would be imposed. In either
case, a penalty fee is imposed if the minimum should not be maintained. In
general, the automatic investment in the Portfolio's shares occurs on the same
day that withdrawals are made by the Adviser, at the next determined net asset
value after the order is received.

All agreements which relate to the service are with the Adviser.
Neither the Distributor nor the Fund is a party to any of those agreements and
no part of the compensation received by the Adviser flows to the Fund or to the
Distributor or to any of their affiliates, either directly or indirectly.
Further information concerning this program and any related charges or fees is
provided by the Adviser prior to any purchase of the Portfolio's shares. Any
fees charged by the Adviser effectively reduces the Portfolio's yield for those
customers.

Terms of Purchase. The Fund reserves the right to reject any purchase
order and to change the amount of the minimum investment and subsequent
purchases in the Portfolio.

Using Federal Funds. The Transfer Agent or the Fund may attempt to
notify the investor upon receipt of checks drawn on banks that are not members
of the Federal Reserve System as to the possible delay in conversion into
Federal Funds and may attempt to arrange for a better means of transmitting the
money.

Redemption Commitment. The Portfolio has committed itself to pay in
cash all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Portfolio's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such amount, the
Board of Directors reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Portfolio to the detriment of the
existing shareholders. In this event, the securities would be valued in the same
manner as the Portfolio is valued. If the recipient sold such securities,
brokerage charges would be incurred.

Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closing), (b) when
trading in the markets the Portfolio normally utilizes is restricted, or when an
emergency exists as determined by the Securities and Exchange Commission so that
disposal of the Portfolio's investments or determination of its net asset value
is not reasonably practicable, or (c) for such other periods as the Securities
and Exchange Commission by order may permit to protect the Portfolio's
shareholders.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "How to Buy
Shares."

Valuation of Portfolio Securities. Substantially all of the
Portfolio's investments (including short-term investments) are valued each
business day by one or more independent pricing services (the "Service")
approved by the Board of Directors. Securities valued by the Service for which
quoted bid prices in the judgment of the Service are readily available and are
representative of the bid side of the market are valued at the mean between the
quoted bid prices (as obtained by the Service from dealers in such securities)
and asked prices (as calculated by the Service based upon its evaluation of the
market for such securities). Other investments valued by the Service are carried
at fair value as determined by the Service, based on methods which include
consideration of: yields or prices of securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. Short-term investments are not valued by the Service and are carried
at amortized cost, which approximate value. Other investments that are not
valued by the Service are valued at the average of the most recent bid and asked
prices in the market in which such investments are primarily traded, or at the
last sales price for securities traded primarily on an exchange or the national
securities market. In the absence of reported sales of investments traded
primarily on an exchange or the national securities market, the average of the
most recent bid and asked prices is used. Bid price is used when no asked price
is available. Any assets or liabilities initially expressed in terms of foreign
currency will be translated into dollars at the midpoint of the New York
interbank market spot exchange rate as quoted on the day of such translation by
the Federal Reserve Bank of New York or if no such rate is quoted on such date,
at the exchange rate previously quoted by the Federal Reserve Bank of New York
or at such other quoted market exchange rate as may be determined to be
appropriate by the Adviser. Expenses and fees, including the management fee, are
accrued daily and taken into account for the purpose of determining the net
asset value of Portfolio shares.

Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors will
review the method of valuation on a current basis. In making their good faith
valuation of restricted securities, the Directors generally will take the
following factors into consideration: restricted securities which are, or are
convertible into, securities of the same class of securities for which a public
market exists usually will be valued at market value less the same percentage
discount at which purchased. This discount will be revised periodically by the
Board of Directors if the Directors believe that it no longer reflects the value
of the restricted securities. Restricted securities not of the same class as
securities for which a public market exists usually will be valued initially at
cost. Any subsequent adjustment from cost will be based upon considerations
deemed relevant by the Board of Directors.

New York Stock Exchange and Custodian Closings. The holidays (as
observed) on which the New York Stock Exchange and Custodian are closed
currently are: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans
Day, Thanksgiving Day and Christmas Day.

PERFORMANCE INFORMATION

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "Performance
Information."

Current yield is computed pursuant to a formula which operates as
follows: The amount of the Portfolio's expenses accrued for the 30-day period
(net of reimbursements) is subtracted from the amount of the dividends and
interest earned by the Portfolio during the period. That result is then divided
by the product of: (a) the average daily number of shares outstanding during the
period that were entitled to receive dividends, and (b) the maximum offering
price per share on the last day of the period less any undistributed earned
income per share reasonably expected to be declared as a dividend shortly
thereafter. The quotient is then added to 1, and that sum is raised to the 6th
power, after which 1 is subtracted. The current yield is then arrived at by
multiplying the result by 2. Current yield for the 30-day period ended December
31, 1995 was 5.51% for the BEA Client Shares, 6.01% for the BEA Service Shares
and 5.33% for the BEA Investor Shares. Current yield without the absorption of
certain expenses would have been 4.90% for the BEA Service Shares and 5.20% for
the BEA Investor Shares for the same period.

Average annual total return is calculated by determining the ending
redeemable value of an investment purchased at net asset value per share with a
hypothetical $1,000 payment made at the beginning of the period (assuming the
reinvestment of dividends and distributions), dividing by the amount of the
initial investment, taking the "n"th root of the quotient (where "n" is the
number of years in the period) and subtracting 1 from the result. The average
annual total return for the 1 year and 3 year and 22 day periods ended December
31, 1995 for BEA Client Shares was 8.30% and 5.49%, respectively. The average
annual total return for the 1 year and 3 year and two day periods ended December
31, 1995 for BEA Service Shares was 7.67% and 4.93%, respectively. The average
annual total return for the 1 year and 2 year and 58 day periods ended December
31, 1995 for BEA Investor Shares was 8.21% and 5.39%, respectively.

Total return is calculated by subtracting the amount of the
Portfolio's net asset value per share at the beginning of a stated period from
the net asset value per share at the end of the period (after giving effect to
the reinvestment of dividends and distributions during the period), and dividing
the result by the net asset value per share at the beginning of the period. The
total return for the BEA Client Shares for the period December 10, 1992
(commencement of operations under the Portfolio's current investment objective
and management policies) through December 31, 1995 was 17.76%. The total return
for the BEA Service Shares for the period December 29, 1992 (date of initial
offering) through December 31, 1995 was 15.56%. The total return for the BEA
Investor Shares for the period November 4, 1993 (date of initial offering)
through December 31, 1995 was 11.98%.

DIVIDENDS, DISTRIBUTION AND TAXES

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "Dividends,
Distributions and Taxes."

It is expected that the Portfolio will continue to qualify as a
"regulated investment company" under the Code, as long as such qualification is
in the best interests of its shareholders. Qualification as a regulated
investment company relieves the Portfolio from any liability for Federal income
taxes to the extent its earnings are distributed in accordance with the
applicable provisions of the Code. The term "regulated investment company" does
not imply the supervision of management or investment practices or policies by
any government agency.

Dividends from net investment income, together with distributions from
any realized short-term securities gains, generally are taxable as ordinary
income whether or not reinvested. Distributions from net realized long-term
securities gains (i.e., "capital gain distributions") generally are taxable as
long-term capital gains to a shareholder who is a citizen or resident of the
United States, regardless of the length of time the shareholder has held his
shares. Capital gain distributions are also taxable to citizens or residents of
the United States regardless whether such amounts are paid in cash or
reinvested.

Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the aggregate net asset value of his shares
below the cost of his investment. Such a dividend or distribution would be a
return on investment in an economic sense, although taxable as stated above. In
addition, the Code provides that if a shareholder holds shares of the Portfolio
for six months or less and has received a capital gain distribution with respect
to such shares, any loss incurred on the sale of such shares will be treated as
a long-term capital loss to the extent of the capital gain distribution
received.

Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gain or loss
realized from the disposition of non-U.S. dollar denominated securities
(including debt instruments, certain financial futures and options, and certain
preferred stock) may be treated as ordinary income or loss under Section 988 of
the Code.

Under Section 1256 of the Code, gain or loss realized by the Portfolio
from certain financial futures and options transactions (other than those taxed
under Section 988 of the Code) will be treated as 60% long-term capital gain or
loss and 40% short-term capital gain or loss. Gain or loss will arise upon the
exercise or lapse of such futures and options as well as from closing
transactions. In addition, any such futures or options remaining unexercised at
the end of the Portfolio's taxable year will be treated as sold for their then
fair market value, resulting in additional gain or loss to the Portfolio
characterized in the manner described above.

Offsetting positions held by the Portfolio involving financial futures
and options may constitute "straddles." Straddles are defined to include
"offsetting positions" in actively traded personal property. The tax treatment
of straddles is governed by Section 1092 of the Code, which, in certain
circumstances, overrides or modifies the provisions of Sections 988 and 1256. If
the Portfolio was treated as entering into straddles by reason of its futures or
options transactions, such straddles could be characterized as "mixed straddles"
if the futures or options transactions comprising such straddles were governed
by Section 1256. The Portfolio may make one or more elections with respect to
"mixed straddles." Depending upon which election is made, if any, the results to
the Portfolio may differ. If no election is made, to the extent the straddle
rules apply to positions established by the Portfolio, losses realized by the
Portfolio will be deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle rules, short-term capital loss
on straddle positions may be recharacterized as long-term capital loss, and
long-term capital gain may be recharacterized as short-term capital gain.

Investment by the Portfolio in securities issued or acquired at a
discount, or providing for deferred interest or for payment of interest in the
form of additional obligations could under special tax rules affect the amount,
timing and character of distributions to shareholders by causing the Portfolio
to recognize income prior to the receipt of cash payments. For example, the
Portfolio could be required to accrue a portion of the discount (or deemed
discount) at which the securities were issued each year and to distribute such
income in order to maintain its qualification as a regulated investment company.
In such case, the Portfolio may have to dispose of securities which it might
otherwise have continued to hold in order to generate cash to satisfy these
distribution requirements.

PORTFOLIO TRANSACTIONS

The Adviser supervises the placement of orders on behalf of the
Portfolio for the purchase or sale of investment securities. Allocation of
brokerage transactions, including their frequency, is made in the best judgment
of the Adviser and in a manner deemed fair and reasonable to shareholders. The
primary consideration is prompt execution of orders at the most favorable net
price. Subject to this consideration, the brokers selected include those that
supplement the Adviser's research facilities with statistical data, investment
information, economic facts and opinions. Information so received is in addition
to and not in lieu of services required to be performed by the Adviser and the
Adviser's fee is not reduced as a consequence of the receipt of such
supplemental information. Such information may be useful to the Adviser in
serving both the Portfolio and other clients which it advises and, conversely,
supplemental information obtained by the placement of business of other clients
may be useful to the Adviser in carrying out its obligation to the Portfolio.
Brokers also are selected because of their ability to handle special executions
such as are involved in large block trades or broad distributions, provided the
primary consideration is met. Large block trades, in certain cases, may result
from two or more clients the Adviser might advise being engaged simultaneously
in the purchase or sale of the same security. Certain of the Portfolio's
transactions in securities of foreign issuers may not benefit from the
negotiated commission rates available to the Portfolio for transactions in
securities of domestic issuers. Foreign exchange transactions are made with
banks or institutions in the interbank market at prices reflecting a mark-up or
markdown and/or commission. When transactions are executed in the
over-the-counter market, the Portfolio will deal with the primary market makers
unless a more favorable price or execution otherwise is obtainable. No brokerage
commissions have been paid by the Portfolio to date.

Portfolio turnover may vary from year to year, as well as within a
year. High turnover rates are likely to result in comparatively greater
brokerage expenses. The overall reasonableness of brokerage commissions paid is
evaluated by the Adviser based upon its knowledge of available information as to
the general level of commissions paid by other institutional investors for
comparable services.

INFORMATION ABOUT THE PORTFOLIO

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "General
Information."

Each Portfolio share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Shares have no preemptive, subscription or conversion rights and are freely
transferable.

Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise, to the holders of the outstanding voting securities of an investment
company, such as the Fund, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each portfolio affected by such matter. Rule 18f-2 further provides that a
portfolio shall be deemed to be affected by a matter unless it is clear that the
interests of each portfolio in the matter are identical or that the matter does
not affect any interest of such portfolio. However, the Rule exempts the
election of directors from the separate voting requirements of the Rule.

The Portfolio will send annual and semi-annual financial statements to
all its shareholders.

As of April 20, 1996, the following shareholders beneficially owned,
directly or indirectly, 5% or more of the Portfolio's outstanding shares:

Percent of
Total BEA Client Shares
Name and Address Outstanding

American Electric 16.64%
Power Special
Investment Account
c/o BEA Associates
1 Citicorp Center
153 East 53rd Street
New York, New York 10022

Columbia University 14.41%
c/o BEA Associates
1 Citicorp Center
153 East 53rd Street
New York, New York 10022

General Mills, Inc. 13.81%
c/o BEA Associates
1 Citicorp Center
153 East 53rd Street
New York, New York 10022

The Cherokee Corporation 13.18%
Thrift Profit Sharing
c/o BEA Associates
1 Citicorp Center
153 East 53rd Street
New York, New York 10022

Uniroyal Holding Corporate 12.02%
Cash Financial Futures
c/o BEA Associates
1 Citicorp Center
153 East 53rd Street
New York, New York 10022

Massachusetts Medical 6.28%
Malpractice
c/o BEA Associates
1 Citicorp Center
153 East 53rd Street
New York, New York 10022

Mark IV Industries, Inc. 6.13%
c/o BEA Associates
1 Citicorp Center
153 East 53rd Street
New York, New York 10022

CDU Holding Inc. 6.02%
Liquidating Trust
c/o BEA Associates
1 Citicorp Center
153 East 53rd Street
New York, New York 10022

Exide Corp. 5.48%
Master Retirement Trust
c/o BEA Associates
1 Citicorp Center
153 East 53rd Street
New York, New York 10022

Percent of
Total BEA Investor Shares
Name and Address Outstanding

Asphalt Green Inc. Swim Center 100.00%
c/o BEA Associates
1 Citicorp Center
153 East 53rd Street
New York, New York 10022

Percent of Total
BEA Service Shares
Name and Address Outstanding

BISYS Fund Services Ohio, Inc. 100.00%
3435 Stelzer Road
Columbus, Ohio 43219

A shareholder who beneficially owns, directly or indirectly, more than
25% of the Portfolio's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Portfolio.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS

The Bank of New York, 90 Washington Street, New York, New York 10286,
acts as custodian of the Portfolio's investments. BISYS Fund Services Ohio,
Inc., an affiliate of the Administrator, 3435 Stelzer Road, Columbus, Ohio
43219, acts as the Fund's transfer and dividend disbursing agent (the "Transfer
Agent"). Under the transfer agency agreement with the Fund, the Transfer Agent
maintains shareholder account records for the Fund, handles certain
communications between shareholders and the Fund and pays dividends and
distributions payable by the Fund. For these services, the Transfer Agent
receives a monthly fee compiled on the basis of the number of shareholder
accounts it maintains for the Fund during the month, and is reimbursed for
certain out-of-pocket expenses. Neither The Bank of New York nor BISYS Fund
Services Ohio, Inc. has any part in determining the investment policies of the
Portfolio or which securities are to be purchased or sold by the Portfolio.

Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
of Common Stock being sold pursuant to the Portfolio's Prospectus.

KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154,
independent auditors, have been selected as the Portfolio's auditors.

<PAGE>

APPENDIX

Description of certain ratings assigned by Standard & Poor's Ratings
Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch Investors
Service, L.P. ("Fitch") and Duff & Phelps Credit Rating Co. ("Duff"):

S&P

Bond Ratings

AAA

Bonds rated AAA have the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.

Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories.

BBB

Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they 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
bonds in this category than for bonds in higher rated categories.

S&P's letter ratings may be modified by the addition of a plus (+) or
minus (-) sign designation, which is used to show relative standing within the
major rating categories, except in the AAA (Prime Grade) category.

Commercial Paper Rating

The designation A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with a
plus sign (+) designation. Capacity for timely payment on issues with an A-2
designation is strong. However, the relative degree of safety is not as high as
for issues designated A-1.

Moody's

Bond Ratings

Aaa

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

Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are 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.

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

Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category. The
modifier 1 indicates a ranking for the security in the higher end of a rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates a ranking in the lower end of a rating category.

Commercial Paper Rating

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

Fitch

Bond Ratings

The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The ratings take
into consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.

AAA

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

Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.

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

BBB

Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have 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.

Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category.

Short-Term Ratings

Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.

Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.

F-1+

Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1

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

Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.

Duff

Bond Ratings

AAA

Bonds rated AAA are considered highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

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

Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.

BBB

Bonds rated BBB are considered to have below average protection
factors but still considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.

Plus (+) and minus (-) signs are used with a rating symbol (except
AAA) to indicate the relative position of a credit within the rating category.

Commercial Paper Rating

The rating Duff-1 is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by ample asset
protection. Risk factors are minor. Paper rated Duff-2 is regarded as having
good certainty of timely payment, good access to capital markets and sound
liquidity factors and company fundamentals. Risk factors are small.

<PAGE>

FINANCIAL STATEMENTS

The Portfolios' Annual Report to Shareholders for the fiscal year
ended December 31, 1995 is a separate document supplied with this Statement of
Additional Information, and the financial statements, accompanying notes and
report of independent auditors appearing therein are incorporated by reference
in this Statement of Additional Information.

<PAGE>

THE INFINITY MUTUAL FUNDS, INC.
CORRESPONDENT CASH RESERVES MONEY MARKET PORTFOLIO
INSTITUTIONAL SHARES AND RETAIL SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MAY 1, 1996

This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus for the Institutional Shares and Retail Shares, as the case may be,
of Correspondent Cash Reserves Money Market Portfolio (the "Portfolio") of The
Infinity Mutual Funds, Inc. (the "Fund"), dated May 1, 1996, as it may be
revised from time to time. To obtain a copy of the Portfolio's Prospectus for
the Institutional Shares or Retail Shares, as the case may be, please write to
the Fund at 3435 Stelzer Road, Columbus, Ohio 43219-3035. This Statement of
Additional Information relates only to the Portfolio and not to any of the
Fund's other portfolios.

Mitchell Hutchins Asset Management Inc. (the "Adviser") serves as the
Portfolio's investment adviser.

Concord Holding Corporation (the "Administrator") serves as the
Portfolio's administrator.

Concord Financial Group, Inc. (the "Distributor"), a wholly-owned
subsidiary of the Administrator, serves as the distributor of the Portfolio's
shares.

TABLE OF CONTENTS
Page

Investment Objective and Management Policies...........B-2
Management of the Fund.................................B-10
Management Arrangements................................B-13
Purchase and Redemption of Shares......................B-17
Determination of Net Asset Value.......................B-17
Yield Information......................................B-18
Portfolio Transactions.................................B-19
Information About the Portfolio........................B-20
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors..............B-20
Appendix...............................................B-22
Financial Statements...................................B-25

INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "Description
of the Portfolio."

Portfolio Securities. Domestic commercial banks organized under
Federal law are supervised and examined by the Comptroller of the Currency and
are required to be members of the Federal Reserve System and to have their
deposits insured by the Federal Deposit Insurance Corporation (the "FDIC").
Domestic banks organized under state law are supervised and examined by state
banking authorities but are members of the Federal Reserve System only if they
elect to join. In addition, state banks whose certificates of deposit ("CDs")
may be purchased by the Portfolio are insured by the Bank Insurance Fund
administered by the FDIC (although such insurance may not be of material benefit
to the Portfolio, depending upon the principal amount of the CDs of each bank
held by the Portfolio) and are subject to Federal examination and to a
substantial body of Federal law and regulation. As a result of Federal and state
laws and regulations, domestic branches of domestic banks, among other things,
are generally required to maintain specified levels of reserves, and are subject
to other supervision and regulation designed to promote financial soundness.

Obligations of foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic and foreign branches of foreign
banks, such as CDs and time deposits ("TDs"), may be general obligations of the
parent banks in addition to the issuing branch, or may be limited by the terms
of a specific obligation or governmental regulation. Such obligations are
subject to different risks than are those of domestic banks. These risks include
foreign economic and political developments, foreign governmental restrictions
that may adversely affect payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding and other taxes on interest
income. Foreign branches and subsidiaries are not necessarily subject to the
same or similar regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing and
financial recordkeeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank or about a foreign
bank than about a domestic bank. The Portfolio's investment in obligations of
foreign subsidiaries of domestic banks are subject, to the extent required by
the Investment Company Act of 1940, as amended (the "1940 Act"), to the
limitations on investing in the securities of other investment companies.

Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by Federal or state regulation
as well as governmental action in the country in which the foreign bank has its
head office. In addition, Federal branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State Branches") may be
required to: (1) pledge to the regulator, by depositing assets with a designated
bank within the state, a certain percentage of their assets as fixed from time
to time by the appropriate regulatory authority; and (2) maintain assets within
the state in an amount equal to a specified percentage of the aggregate amount
of liabilities of the foreign bank payable at or through all of its agencies or
branches within the state. The deposits of Federal and State Branches generally
must be insured by the FDIC if such branches take deposits of less than
$100,000.

The Portfolio may invest in short-term corporate obligations that are
originated, negotiated and structured by a syndicate of lenders ("Co-Lenders")
consisting of commercial banks, thrift institutions, insurance companies,
finance companies or other financial institutions one or more of which
administers the security on behalf of the syndicate (the "Agent Bank").
Co-Lenders may sell such securities to third parties called "Participants." The
Portfolio may invest in such securities either by participating as a Co-Lender
at origination or by acquiring an interest in the security from a Co-Lender or a
Participant (collectively, "participation interests"). Co-Lenders and
Participants interposed between the Fund and the corporate borrower (the
"Borrower"), together with Agent Banks, are referred to herein as "Intermediate
Participants." The Portfolio also may purchase a participation interest in a
portion of the rights of an Intermediate Participant, which would not establish
any direct relationship between the Portfolio and the Borrower. In such cases,
the Portfolio would be required to rely on the Intermediate Participant that
sold the participation interest not only for the enforcement of the Portfolio's
rights against the Borrower but also for the receipt and processing of payments
due to the Portfolio under the security. Because it may be necessary to assert
through an Intermediate Participant such rights as may exist against the
Borrower, in the event the Borrower fails to pay principal and interest when
due, the Portfolio may be subject to delays, expenses and risks that are greater
than those that would be involved if the Portfolio could enforce its rights
directly against the Borrower. Moreover, under the terms of a participation
interest, the Portfolio may be regarded as a creditor of the Intermediate
Participant (rather than of the Borrower), so that the Fund also may be subject
to the risk that the Intermediate Participant may become insolvent. Similar
risks may arise with respect to the Agent Bank if, for example, assets held by
the Agent Bank for the benefit of the Portfolio were determined by the
appropriate regulatory authority or court to be subject to the claims of the
Agent Bank's creditors. In such cases, the Portfolio might incur certain costs
and delays in realizing payment in connection with the participation interest or
suffer a loss of principal and/or interest. Further, in the event of the
bankruptcy or insolvency of the Borrower, the obligation of the Borrower to
repay the loan may be subject to certain defenses that can be asserted by such
Borrower as a result of improper conduct by the Agent Bank or Intermediate
Participant. In addition, insurance companies are affected by economic and
financial conditions and are subject to extensive government regulation,
including rate regulation. The property and casualty industry is cyclical, being
subject to dramatic swings in profitability which can be affected by natural
catastrophes and other disasters. Individual companies may be exposed to
material risks, including reserve inadequacy, latent health exposure and
inability to collect from their reinsurance carriers.

Under normal circumstances, and as a matter of fundamental policy, the
Portfolio will "concentrate" at least 25% of its assets in debt instruments
issued by domestic and foreign companies engaged in the banking industry,
including bank holding companies. Such investments may include CDs, TDs,
bankers' acceptances and obligations issued by bank holding companies, as well
as repurchase agreements entered into with banks (as distinct from non-bank
dealers) in accordance with the policies set forth in "Repurchase Agreements"
below. During periods when the Adviser determines that the Portfolio should be
in a temporary defensive position, the Portfolio may invest less than 25% of its
total assets in the banking industry; during such times the Portfolio's assets
will be invested in accordance with its other investment policies. The Adviser
may determine that the adoption of a temporary defensive position with respect
to issuers in the banking industry is appropriate on the basis of such factors
as political, economic, market or regulatory developments adversely affecting
that industry as compared to the industries of other issuers of securities
available for investment by the Portfolio.

Repurchase Agreements. The Portfolio may enter into repurchase
agreements. The Fund's custodian or sub-custodian employed in connection with
third-party repurchase transactions will have custody of, and will hold in a
segregated account, securities acquired by the Portfolio under a repurchase
agreement. In connection with its third-party repurchase transactions, the Fund
will employ only eligible sub-custodians which meet the requirements set forth
in Section 17(f) of the 1940 Act and the rules thereunder. Repurchase agreements
are considered by the staff of the Securities and Exchange Commission to be
loans by the Portfolio. In an attempt to reduce the risk of incurring a loss on
a repurchase agreement, the Portfolio will enter into repurchase agreements only
with domestic banks (including foreign branches and subsidiaries of domestic
banks) with total assets in excess of one billion dollars or primary government
securities dealers reporting to the Federal Reserve Bank of New York, with
respect to securities in which the Portfolio may invest or government securities
regardless of their remaining maturities, and will require that additional
securities be deposited with it if the value of the securities purchased should
decrease below resale price. The Adviser will monitor on an ongoing basis the
value of the collateral to assure that it always equals or exceeds the
repurchase price. The Portfolio will consider on an ongoing basis the
creditworthiness of the institutions with which it enters into repurchase
agreements.

Reverse Repurchase Agreements. The Portfolio may enter into reverse
repurchase agreements. The Portfolio will maintain in a segregated custodial
account cash, cash equivalents or U.S. Government securities or other high
quality liquid debt securities equal to the aggregate amount of its reverse
repurchase obligations, plus accrued interest, in certain cases, in accordance
with releases promulgated by the Securities and Exchange Commission. The
Securities and Exchange Commission views reverse repurchase agreement
transactions as collateralized borrowings, and, pursuant to the 1940 Act, the
Portfolio must maintain continuous asset coverage (that is, total assets
including borrowings, less liabilities exclusive of borrowings) of 300% of the
amount borrowed. If the 300% asset coverage should decline as a result of market
fluctuations or other reasons, the Portfolio may be required to sell some of its
portfolio holdings within three days to reduce the debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time.

Lending Portfolio Securities. To a limited extent, the Portfolio may
lend its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value of
the securities loaned. By lending its portfolio securities, the Portfolio can
increase its income through the investment of the cash collateral. For the
purposes of this policy, the Fund considers collateral consisting of U.S.
Government securities or irrevocable letters of credit issued by banks whose
securities meet the standards for investment by the Portfolio to be the
equivalent of cash. Such loans may not exceed 33-1/3% of the Portfolio's total
assets. From time to time, the Fund may pay a part of the interest earned from
the investment of collateral received for securities loaned to the borrower or a
third party which is unaffiliated with the Fund, and which is acting as a
"placing broker," in an amount determined by the Board of Directors to be
reasonable and based solely on services rendered.

Illiquid Securities. The Portfolio will not invest more than 10% of
the value of its net assets in illiquid securities. The term "illiquid
securities" for this purpose means securities that cannot be disposed of within
seven days in the ordinary course of business at approximately the amount at
which the Portfolio has valued the securities and includes, among other things,
restricted securities other than those the Adviser has determined to be liquid
pursuant to guidelines established by the Fund's Board of Directors and
repurchase agreements maturing in more than seven days. Commercial paper issues
in which the Portfolio may invest include securities issued by major
corporations without registration under the Securities Act of 1933, as amended
("1933 Act"), in reliance on the exemption from such registration afforded by
Section 3(a)(3) thereof and commercial paper issued in reliance on the so-called
"private placement" exemption from registration which is afforded by Section
4(2) of the 1933 Act ("Section 4(2) paper"). Section 4(2) paper is restricted as
to disposition under the Federal securities laws in that any resale must
similarly be made in an exempt transaction. Section 4(2) paper ordinarily is
resold to other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity.

In recent years a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities and
corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.

To facilitate the increased size and liquidity of the institutional
markets for unregistered securities, the Securities and Exchange Commission
adopted Rule 144A under the 1933 Act. Rule 144A establishes a "safe harbor" from
the registration requirements of the 1933 Act for resales of certain securities
to qualified institutional buyers. Section 4(2) paper that is issued by a
company that files reports under the Securities Exchange Act of 1934, as
amended, generally is eligible to be sold in reliance on the safe harbor of Rule
144A. Pursuant to Rule 144A, the institutional restricted securities markets may
provide both readily ascertainable values for restricted securities and the
ability to liquidate an investment in order to satisfy share redemption orders
on a timely basis. An insufficient number of qualified institutional buyers
interested in purchasing certain restricted securities held by the Portfolio,
however, could affect adversely the marketability of such portfolio securities
and the Portfolio might be unable to dispose of such securities promptly or at
reasonable prices. It is anticipated that the market for certain restricted
securities will expand further as a result of Rule 144A and the development of
automated systems for the trading, clearance and settlement of unregistered
securities, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc.

The Fund's Board of Directors has the ultimate responsibility for
determining whether specific securities are liquid or illiquid. The Fund's
Directors have delegated the function of making day-to-day determinations of
liquidity to the Adviser, pursuant to guidelines approved by the Board. The
Adviser takes into account a number of factors in reaching liquidity decisions,
including (1) the frequency of trades for the security, (2) the number of
dealers that make quotes for the security, (3) the number of dealers that have
undertaken to make a market in the security, (4) the number of other potential
purchasers and (5) the nature of the security and how trading is effected (e.g.,
the time needed to sell the security, how offers are solicited and the mechanics
of transfer). The Adviser will monitor the liquidity of restricted securities
held by the Portfolio and report periodically on such decisions to the Board of
Directors.

Investment Restrictions

The Fund has adopted the following restrictions as fundamental
policies which apply to the Portfolio. These restrictions cannot be changed
without approval by the holders of a majority (as defined in the 1940 Act) of
the outstanding voting shares of the Portfolio. The Portfolio may not:

1. Purchase common stocks, preferred stocks, warrants or other equity
securities.

2. Borrow money, except (i) from banks for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of the Portfolio's
total assets (including the amount borrowed) based on the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made (while such borrowings exceed 5% of the value of the
Portfolio's total assets, the Portfolio will not make any additional
investments) and (ii) in connection with the entry into reverse repurchase
agreements. At no time may total borrowings exceed 33-1/3% of the value of the
Portfolio's total assets.

3. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except (i) to secure borrowings for temporary or emergency purposes and (ii) in
connection with the purchase of securities on a forward commitment basis and the
entry into reverse repurchase agreements.

4. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act), other than in connection with the entry into certain reverse
repurchase agreements.

5. Sell securities short or purchase securities on margin.

6. Write or purchase put or call options or combinations thereof.

7. Act as underwriter of securities of other issuers. The Portfolio
may not enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid, if, in the
aggregate, more than 10% of its net assets would be so invested.

8. Purchase or sell real estate, real estate investment trust
securities, commodities, or oil and gas interests.

9. Make loans to others, except through the purchase of debt
obligations and through repurchase agreements referred to in the Portfolio's
Prospectus, and except that the Portfolio may lend its portfolio securities in
an amount not to exceed 33-1/3% of the value of its total assets. Any loans of
portfolio securities will be made according to guidelines established by the
Securities and Exchange Commission and the Fund's Directors.

10. Invest in companies for the purpose of exercising control.

11. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of assets.

12. Invest more than 5% of its assets in the obligations of any one
issuer, except that up to 25% of the value of the Portfolio's total assets may
be invested without regard to any such limitation (subject to provisions of Rule
2a-7), provided that not more than 10% of its assets may be invested in
securities issued or guaranteed by any single guarantor of obligations held by
the Portfolio. Notwithstanding the foregoing, to the extent required by the
rules of the Securities and Exchange Commission, the Portfolio will not invest
more than 5% of its assets in the obligations of any one bank.

13. Invest less than 25% of its total assets in securities issued by
banks or invest more than 25% of its assets in the securities of issuers in any
other industry, provided that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Notwithstanding the foregoing, for temporary defensive
purposes the Portfolio may invest less than 25% of its assets in bank
obligations.

The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Portfolio shares in certain states.
Should the Fund determine that a commitment is no longer in the best interests
of the Portfolio and its shareholders, the Fund reserves the right to revoke the
commitment by terminating the sale of Portfolio shares in the state involved.

MANAGEMENT OF THE FUND

Directors and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below. Each Director who is an "interested person" of the Fund, as defined
in the 1940 Act, is indicated by an asterisk.

Directors of the Fund

ROBERT A. ROBINSON, Director. Private investor. Since 1991,
President Emeritus, and from 1968 to 1991, President of
The Church Pension Group, NYC. From 1956 to 1966,
Senior Vice President of Colonial Bank & Trust Co. He
is also a director of Mariner Institutional Funds,
Inc., Mariner Tax-Free Institutional Funds, Inc., UST
Master Funds, UST Master Tax Exempt Funds, H.B. and
F.H. Bugher Foundation, Morehouse-Barlow Co.
Publishers, The Canterbury Cathedral Trust in America,
The Living Church Foundation and Hoosac School. He is 70 years
old and his address is 2 Hathaway Common, New Canaan,
Connecticut 06840.

Officers of the Fund

GEORGE O. MARTINEZ, President and Secretary. Senior Vice President
and Director of Legal and Compliance Services with BISYS Fund
Services, Inc., an affiliate of the Administrator, since April
1995, and an officer of other investment companies
administered by the Administrator or its affiliates. Prior
thereto, he was Vice President and Associate General Counsel
with Alliance Capital Management, L.P. He is 36 years old and
his address is 3435 Stelzer Road, Columbus, Ohio 43219.

WILLIAM TOMKO, Vice President. An employee of BISYS Fund Services,
Inc. and an officer of other investment companies administer
by the Administrator or its affiliates. He is 37 years old
and his address is 3435 Stelzer Road, Columbus, Ohio 43219.

ROBERT L. TUCH, Assistant Secretary. An employee of BISYS Fund
Services, Inc., since June 1991, and an officer of
other investment companies administered by the
Administrator or its affiliates. From July 1990 to
June 1991, he was Vice President and Associate General
Counsel with National Securities Research Corp. Prior
thereto, he was an Attorney with the Securities and Exchange
Commission. He is 44 years old and his address is 3435 Stelzer
Road, Columbus, Ohio 43219.

For so long as the Portfolio's plan described in the section captioned
"Management Arrangements--Distribution Plan" remains in effect, the Directors of
the Fund who are not "interested persons" of the Fund, as defined in the 1940
Act, will be selected and nominated by the Directors who are not "interested
persons" of the Fund.

Directors and officers of the Fund, as a group, owned less than 1% of
the Portfolio's shares outstanding on April 1, 1996.

The Fund does not pay any remuneration to its officers and Directors
other than fees and expenses to those Directors who are not directors, officers
or employees of the Adviser or Administrator or any of their affiliates. The
aggregate amount of compensation paid to each such Director by the Fund for year
ended December 31, 1995 was as follows:

Total Compensation
Aggregate From Fund and Fund
Compensation from Complex Paid to
Name of Board Member Fund* Board Member*
----------------------------------- ---------------------------- ----------------------------

Norma A. Coldwell $11,250 $11,250

Richard H. Francis $10,000 $10,000

William W. McInnis $ 7,500 $ 7,500

Robert A. Robinson $ 2,500 $ 2,500

---------------------
</TABLE>

* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $6,434 for all Directors as a group.

MANAGEMENT ARRANGEMENTS

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "Management
of the Portfolio."

Investment Advisory Agreement. The Adviser provides investment
advisory services pursuant to the Investment Advisory Agreement (the
"Agreement") dated October 30, 1990 with the Fund. The Agreement is subject to
annual approval by (i) the Fund's Board of Directors or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the
Portfolio, provided that in either event the continuance also is approved by a
majority of the Directors who are not "interested persons" (as defined in the
1940 Act) of the Fund or the Adviser, by vote cast in person at a meeting called
for the purpose of voting on such approval. The Board of Directors, including a
majority of the Directors who are not "interested persons" of any party to the
Agreement, last approved the Agreement at a meeting held on October 25, 1995.
Shareholders approved the Agreement on December 20, 1991. The Agreement is
terminable without penalty, on 60 days' notice, by the Fund's Board of Directors
or by vote of the holders of a majority of the Portfolio's shares, or, on not
less than 90 days' notice, by the Adviser. The Agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).

The Adviser is a wholly-owned subsidiary of PaineWebber Incorporated
("PaineWebber"), which in turn is a wholly-owned subsidiary of Paine Webber
Group Inc. ("PW Group"), a publicly owned financial services holding company.

The Adviser provides investment advisory services in accordance with
the stated policies of the Portfolio, subject to the approval of the Fund's
Board of Directors. The Adviser provides the Portfolio with Investment Officers
who are authorized by the Board of Directors to execute purchases and sales of
securities. The Portfolio's Chief Investment Officers are Susan P. Messina and
Dennis L. McCauley. The Adviser also maintains a research department with a
professional staff of portfolio managers and securities analysts who provide
research services for the Portfolio as well as for other funds advised by the
Adviser. All purchases and sales are reported for the Board's review at the
meeting subsequent to such transactions.

As compensation for its services, the Portfolio has agreed to pay the
Adviser a monthly fee at the annual rate of .10 of 1% of the value of the
Portfolio's average daily net assets. For the fiscal years ended December 31,
1993, 1994 and 1995, the advisory fees paid to the Adviser amounted to $533,282,
$430,353 and $644,228, respectively. In addition, pursuant to the terms of a
Special Management Services Agreement among the Fund, the Adviser and the
Administrator described in the Portfolio's Prospectus, the Portfolio has agreed
to pay the Adviser and the Administrator each a monthly fee at the annual rate
of .05 of 1% of the value of the average daily net assets represented by the
Retail Shares. With respect to the Retail Shares only, the fee payable to the
Adviser under the agreement for such fiscal years amounted to $164,405, $189,112
and $306,186, respectively; however, pursuant to an undertaking, the Adviser
waived the fee in its entirety for the fiscal years ended December 31, 1993,
1994 and 1995.

Administration Agreement. The Administrator provides certain
administrative services pursuant to the Administration Agreement (the
"Administration Agreement") dated March 29, 1995, with the Fund. The
Administration Agreement will continue until December 31, 1997 and thereafter is
subject to annual approval by (i) the Fund's Board of Directors or (ii) vote of
a majority (as defined in the 1940 Act) of the outstanding voting securities of
the Portfolio, provided that in either event the continuance also is approved by
a majority of the Directors who are not "interested persons" (as defined in the
1940 Act) of the Fund or the Administrator, by vote cast in person at a meeting
called for the purpose of voting such approval. The Administration Agreement was
last approved by the Fund's Board of Directors, including a majority of the
Directors who are not "interested persons" of any party to the Administration
Agreement, at a meeting held on January 26, 1995. The Administration Agreement
is terminable without penalty, at any time if for cause, by the Fund's Board of
Directors or by vote of the holders of a majority of the Portfolio's outstanding
voting securities, or, on not less than 90 days' notice, by the Administrator.
The Administration Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act).

As compensation for its services, the Portfolio has agreed to pay the
Administrator a monthly fee at the annual rate of .10 of 1% of the value of the
Portfolio's average daily net assets. For the fiscal years ended December 31,
1993, 1994 and 1995, the Portfolio paid the Administrator $533,282, $430,353 and
$644,228, respectively. In addition, pursuant to the terms of the Special
Management Services Agreement described above, with respect to the Retail Shares
only, the fee payable to the Administrator under the agreement for such fiscal
years amounted to $164,405, $189,112 and $306,186, respectively; however,
pursuant to an undertaking, the Administrator waived the fee in its entirety for
the fiscal years ended December 31, 1993, 1994 and 1995.

Distribution Agreement. The Distributor acts as the exclusive
distributor of the Portfolio's shares on a best efforts basis pursuant to a
Distribution Agreement (the "Distribution Agreement") dated March 29, 1995, with
the Fund. Shares are sold on a continuous basis by the Distributor as agent,
although the Distributor is not obliged to sell any particular amount of shares.
No compensation is payable by the Portfolio to the Distributor for its
distribution services. The term and termination provisions of the Distribution
Agreement are substantially similar to those of the Administration Agreement
with the Administrator discussed above.

Distribution Plan. (Applicable only with respect to the Retail
Shares). Rule 12b-1 (the "Rule") adopted by the Securities and Exchange
Commission under the 1940 Act provides, among other things, that an investment
company may bear expenses of distributing its shares only pursuant to a plan
adopted in accordance with the Rule. Because some or all of the fees paid to
Securities Firms (as defined in the Portfolio's Prospectus) in connection with
services provided to holders of the Retail Shares could be deemed to be payment
of distribution expenses, the Fund's Directors have adopted such a plan (the
"Plan"). The Fund's Directors believe that there is a reasonable likelihood that
the Plan will benefit the Fund and the holders of the Retail Shares. In some
states, banks or other institutions effecting transactions in Portfolio shares
may be required to register as dealers pursuant to state law.

A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, the Plan provides that it may not be
amended to increase materially the costs which the holders of the Retail Shares
may bear for distribution pursuant to the Plan without approval of the holders
of the Retail Shares and that other material amendments of the Plan must be
approved by the Board of Directors, and by the Directors who are neither
"interested persons" (as defined in the 1940 Act) of the Fund nor have any
direct or indirect financial interest in the operation of the Plan or in the
related Plan Agreement between the Fund and Correspondent Services Corporation
[CSC], by vote cast in person at a meeting called for the purpose of considering
such amendments. The Plan and the Plan Agreement are subject to annual approval
by such vote cast in person at a meeting called for the purpose of voting on the
Plan. The Plan and Plan Agreement were so approved on November 1, 1994. Holders
of the Portfolio's Retail Shares approved the Plan on December 20, 1991. The
Plan is terminable at any time by vote of a majority of the Directors who are
not "interested persons" and who have no direct or indirect financial interest
in the operation of the Plan or in the Plan Agreement or by vote of a majority
of the Retail Shares. The Plan Agreement is terminable without penalty, at any
time, by such vote of the Directors, upon not more than 60 days' written notice
to Correspondent Services Corporation [CSC] or by vote of the holders of a
majority of the Retail Shares. The Plan Agreement will terminate automatically
in the event of its assignment (as defined in the 1940 Act).

For the fiscal year ended December 31, 1995, with respect to the
Retail Shares only, the amount payable pursuant to the Plan to Correspondent
Services Corporation [CSC], an affiliate of the Adviser, amounted to $3,674,240;
however, pursuant to an undertaking, the amount was reduced by $489,900,
resulting in a net amount paid by the Portfolio on behalf of the Retail Shares
only of $3,184,340 pursuant to the Plan.

Expenses. All expenses incurred in the operation of the Fund are borne
by the Fund, except to the extent specifically assumed by others. The expenses
borne by the Fund include: organizational costs, taxes, interest, brokerage fees
and commissions, if any, fees of Directors who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of the
Adviser or Administrator or any of their affiliates, Securities and Exchange
Commission fees, state Blue Sky qualification fees, advisory fees,
administration fees, charges of custodians, transfer and dividend disbursing
agents' fees, certain insurance premiums, industry association fees, auditing
and legal expenses, costs of maintaining corporate existence, costs of
independent pricing services, costs attributable to investor services
(including, without limitation, tele- phone and personnel expenses), costs of
calculating the net asset value of the Portfolio's shares, costs of
shareholders' reports and corporate meetings, costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders, and any extraordinary expenses.
Expenses attributable to the Portfolio are charged against the assets of the
Portfolio; other expenses of the Fund are allocated among the portfolios on the
basis determined by the Board of Directors, including, but not limited to,
proportionately in relation to the net assets of each portfolio.

The Adviser and Administrator have agreed that if in any fiscal year
the aggregate expenses of the Portfolio, exclusive of taxes, brokerage, interest
on borrowings and (with the prior written consent of the necessary state
securities commissions) extraordinary expenses, but including the advisory and
administration fees, exceed the expense limitation of any state having
jurisdiction over the Portfolio, the Fund may deduct from the payment to be made
to the Administrator under the Administration Agreement, or the Adviser and/or
Administrator will bear, such excess expense to the extent required by state
law. Such deduction or payment, if any, will be estimated daily, and reconciled
and effected or paid, as the case may be, on a monthly basis.

PURCHASE AND REDEMPTION OF SHARES

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "How to Buy
Shares" and "How to Redeem Shares."

Terms of Purchase. The Fund reserves the right to reject any purchase
order and to change the amount of the minimum investment and subsequent
purchases in the Portfolio.

Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closing), (b) when
trading in the markets the Portfolio ordinarily utilizes is restricted, or when
an emergency exists as determined by the Securities and Exchange Commission so
that disposal of the Portfolio's investments or determination of its net asset
value is not reasonably practicable, or (c) for such other periods as the
Securities and Exchange Commission by order may permit to protect the
Portfolio's shareholders.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "How to Buy
Shares."

The extent of any deviation between the Portfolio's net asset value
based upon available market quotations or market equivalents and $1.00 per share
based on amortized cost will be examined by the Board of Directors. If such
deviation exceeds 1/2 of 1%, the Board of Directors promptly will consider what
action, if any, will be initiated. In the event the Board of Directors
determines that a deviation exists which may result in material dilution or
other unfair results to investors or existing shareholders, it has agreed to
take such corrective action as it regards as necessary and appropriate,
including: selling portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding dividends
or paying distributions from capital or capital gains; redeeming shares in kind;
or establishing a net asset value per share by using available market quotations
or market equivalents.

New York Stock Exchange and Custodian Closings. The holidays (as
observed) on which the New York Stock Exchange and the Custodian are closed
currently are: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans
Day, Thanksgiving Day and Christmas Day.

YIELD INFORMATION

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "Yield
Information."

For the seven-day period ended December 31, 1995, the yield and
effective yield of the Portfolio's Institutional Shares was 5.42% and 5.56%,
respectively. For the same period, the yield and effective yield of the
Portfolio's Retail Shares, net of absorbed expenses, was 4.96% and 5.07%,
respectively. The yield and effective yield of the Portfolio's Retail Shares
without the absorption of certain expenses would have been 4.78% and 4.89%,
respectively, for the same period. Yield for the Institutional Shares and Retail
Shares is computed separately in accordance with a standardized method which
involves determining the net change in the value of a hypothetical pre-existing
Portfolio account having a balance of one share at the beginning of a seven
calendar day period for which yield is to be quoted, dividing the net change by
the value of the account at the beginning of the period to obtain the base
period return, and annualizing the results (i.e., multiplying the base period
return by 365/7). The net change in the value of the account reflects the value
of additional shares purchased with dividends declared on the original share and
any such additional shares and fees that may be charged to shareholder accounts,
in proportion to the length of the base period and the Portfolio's average
account size, but does not include realized gains and losses or unrealized
appreciation and depreciation. Effective annualized yield is computed by adding
1 to the base period return (calculated as described above), raising that sum to
a power equal to 365 divided by 7, and subtracting 1 from the result.

PORTFOLIO TRANSACTIONS

Portfolio securities ordinarily are purchased directly from the issuer
or an underwriter or a market maker for the securities. Usually no brokerage
commissions are paid for such purchases. Purchases from underwriters of
portfolio securities include a concession paid by the issuer to the underwriter
and the purchase price paid to market makers for the securities may include the
spread between the bid and asked price. No brokerage commissions have been paid
by the Portfolio to date.

Transactions are allocated to various dealers by the Portfolio's
investment personnel in their best judgment. The primary consideration is prompt
and effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected to act on an agency basis for
research, statistical or other services to enable the Adviser to supplement its
own research and analysis with the views and information of other securities
firms.

Research services furnished by brokers through which the Portfolio
effects securities transactions may be used by the Adviser in advising other
funds or accounts it advises and, conversely, research services furnished to the
Adviser by brokers in connection with other funds or accounts the Adviser
advises may be used by the Adviser in advising the Portfolio. Although it is not
possible to place a dollar value on these services, it is the opinion of the
Adviser that the receipt and study of such services should not reduce the
overall expenses of its research department.

INFORMATION ABOUT THE PORTFOLIO

The following information supplements and should be read in
conjunction with the section in the Portfolio's Prospectus entitled "General
Information."

Each Portfolio share has one vote and, when issued and paid
for in accordance with the terms of the offering, is fully paid and
non-assessable. Shares have no preemptive, subscription or conversion rights and
are freely transferable.

As of April 20, 1996, the following shareholders beneficially owned,
directly or indirectly, 5% or more of the Portfolio's outstanding Institutional
Shares:

Percent of Total
Institutional Shares
Name and Address Outstanding

Saxon & Co. 58.28%
F/B/O PNC Taxable Stiff Account
200 Stephans Drive
Lester, PA 19113

Saxon & Co. 41.72%
c/o PNC Bank
P.O. Box 7780-1888
Philadelphia, PA 19182

A shareholder who beneficially owns, directly or indirectly, more than
25% of the Portfolio's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Portfolio.

The Portfolio will send annual and semi-annual financial statements to
all its shareholders.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS

The Bank of New York, 90 Washington Street, New York, New York 10286,
acts as custodian of the Portfolio's investments. BISYS Fund Services Ohio,
Inc., an affiliate of the Administrator, 3435 Stelzer Road, Columbus, Ohio
43219, acts as the Fund's transfer and dividend disbursing agent (the "Transfer
Agent"). Under the transfer agency agreement with the Fund, the Transfer Agent
maintains shareholder account records for the Fund, handles certain
communications between shareholders and the Fund and pays dividends and
distributions payable by the Fund. For these services, the Transfer Agent
receives a monthly fee compiled on the basis of the number of shareholder
accounts it maintains for the Fund during the month, and is reimbursed for
certain out-of-pocket expenses. Neither The Bank of New York nor BISYS Fund
Services Ohio, Inc. has any part in determining the investment policies of the
Portfolio or which securities are to be purchased or sold by the Portfolio.

Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
of Common Stock being sold pursuant to the Portfolio's Prospectus.

KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154,
independent auditors, have been selected as the Portfolio's auditors.

<PAGE>

APPENDIX

Description of the two highest commercial paper, bond and other short-
and long-term rating categories assigned by Standard & Poor's Ratings Group
("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Service,
L.P. ("Fitch"), Duff & Phelps Credit Rating Co. ("Duff"), IBCA Inc. and IBCA
Limited ("IBCA"), and Thomson BankWatch, Inc. ("BankWatch"):

Commercial Paper and Short-Term Ratings

The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be evidenced
by leading market positions in well established industries, high rates of return
of funds employed, conservative capitalization structures with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issues rated Prime-2 (P-2) have a strong capacity for repayment of short-term
promissory obligations. This ordinarily will be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

The rating Fitch-1 (Highest Grade) is the highest commercial paper
rating assigned by Fitch. Paper rated Fitch-1 is regarded as having the
strongest degree of assurance for timely payment. The rating Fitch-2 (Very Good
Grade) is the second highest commercial paper rating assigned by Fitch which
reflects an assurance of timely payment only slightly less in degree than the
strongest issues.

The designation A1 by IBCA indicates that the obligation is supported
by a very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.

The rating TBW-1 is the highest short-term rating assigned by
BankWatch; the rating indicates that the degree of safety regarding timely
repayment of principal and interest is very strong. The rating TBW-2 is the
second highest short-term rating assigned by BankWatch; while the degree of
safety regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated TBW-1.

Bond and Long-Term Ratings

Bonds rated AAA are considered by S&P to be the highest grade
obligations and possess an extremely strong capacity to pay principal and
interest. Bonds rated AA by S&P are judged by S&P to have a very strong capacity
to pay principal and interest, and in the majority of instances, differ only in
small degrees from issues rated AAA.

Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Bonds rated Aa by Moody's are judged by Moody's to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than Aaa bonds because
margins of protection may not be as large or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger. Moody's applies numerical modifiers
1, 2 and 3 in the Aa rating category. The modifier 1 indicates a ranking for the
security in the higher end of this rating category, the modifier 2 indicates a
mid-range ranking, and the modifier 3 indicates a ranking in the lower end of
the rating category.

Bonds rated AAA by Fitch are judged by Fitch to be strictly high
grade, broadly marketable, suitable for investment by trustees and fiduciary
institutions and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type of market.

Bonds rated AAA by Duff are considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than U.S.
Treasury debt. Bonds rated AA are considered to be of high credit quality with
strong protection factors. Risk is modest but may vary slightly from time to
time because of economic conditions.

Obligations rated AAA by IBCA have 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 significantly. Obligations
for which there is a very low expectation of investment risk are rated AA by
IBCA. 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.

International and U.S. Bank Ratings

An IBCA bank rating represents IBCA's current assessment of the
strength of the bank and whether such bank would receive support should it
experience difficulties. In its assessment of a bank, IBCA uses a dual rating
system comprised of Legal Ratings and Individual Ratings. In addition, IBCA
assigns banks Long- and Short-Term Ratings as used in the corporate ratings
discussed above. Legal Ratings, which range in gradation from 1 through 5,
address the question of whether the bank would receive support provided by
central banks or shareholders if it experienced difficulties, and such ratings
are considered by IBCA to be a prime factor in its assessment of credit risk.
Individual Ratings, which range in gradations from A through E, represent IBCA's
assessment of a bank's economic merits and address the question of how the bank
would be viewed if it were entirely independent and could not rely on support
from state authorities or its owners.

<PAGE>

FINANCIAL STATEMENTS

The Portfolios' Annual Report to Shareholders for the fiscal year
ended December 31, 1995 is a separate document supplied with this Statement of
Additional Information, and the financial statements, accompanying notes and
report of independent auditors appearing therein are incorporated by reference
in this Statement of Additional Information.

<PAGE>

THE INFINITY MUTUAL FUNDS, INC.
ValueStar Funds
PRIME MONEY MARKET PORTFOLIO
U.S. TREASURY MONEY MARKET PORTFOLIO
TRUST SHARES AND INVESTOR SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MAY 1, 1996

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
ValueStar Prime Money Market Portfolio and U.S. Treasury Money Market Portfolio
(the "Portfolios") of The Infinity Mutual Funds, Inc. (the "Fund"), dated May 1,
1996, as it may be revised from time to time. To obtain a copy of the
Portfolios' Prospectus, please write to the Fund at 3435 Stelzer Road, Columbus,
Ohio 43219-3035. This Statement of Additional Information relates only to the
Portfolios and not to any of the Fund's other portfolios.

First American National Bank (the "Adviser") serves as each
Portfolio's investment adviser. Barnett Banks and Trust Company,
N.A. (the "Sub-Adviser") serves as the Prime Portfolio's sub-
investment adviser.

BISYS Fund Services Limited Partnership (the "Administrator") serves as
each Portfolio's administrator.

Concord Financial Group, Inc. (the "Distributor"), an
affiliate of the Administrator, serves as the distributor of each
Portfolio's shares.

TABLE OF CONTENTS
Page

Investment Objectives and Management Policies............... B-2
Management of the Fund...................................... B-9
Management Arrangements..................................... B-12
Purchase and Redemption of Shares........................... B-16
Determination of Net Asset Value............................ B-18
Yield Information........................................... B-19
Portfolio Transactions...................................... B-20
Information About the Portfolios............................ B-21
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors................... B-22
Appendix.................................................... B-23
Financial Statements........................................ B-26

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

The following information supplements and should be read in
conjunction with the section in the Portfolios' Prospectus entitled "Description
of the Portfolios."

Portfolio Securities. (Prime Portfolio only). Domestic
commercial banks organized under Federal law are supervised and examined by the
Comptroller of the Currency and are required to be members of the Federal
Reserve System and to have their deposits insured by the Federal Deposit
Insurance Corporation (the "FDIC"). Domestic banks organized under state law are
supervised and examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. In addition, state banks
whose certificates of deposit ("CDs") may be purchased by the Portfolio are
insured by the Bank Insurance Fund administered by the FDIC (although such
insurance may not be of material benefit to the Prime Portfolio, depending upon
the principal amount of the CDs of each bank held by such Portfolio) and are
subject to Federal examination and to a substantial body of Federal law and
regulation. As a result of Federal and state laws and regulations, domestic
branches of domestic banks, among other things, are generally required to
maintain specified levels of reserves, and are subject to other supervision and
regulation designed to promote financial soundness.

Obligations of foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic and foreign branches of foreign
banks, such as CDs and time deposits ("TDs"), may be general obligations of the
parent banks in addition to the issuing branch, or may be limited by the terms
of a specific obligation or governmental regulation. Such obligations are
subject to different risks than are those of domestic banks. These risks include
foreign economic and political developments, foreign governmental restrictions
that may adversely affect payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding and other taxes on interest
income. Foreign branches and subsidiaries are not necessarily subject to the
same or similar regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing and
financial recordkeeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank or about a foreign
bank than about a domestic bank. If a domestic bank with deposits insured by the
FDIC becomes insolvent, unsecured deposits and other general obligations of such
bank's foreign branches will be subordinated to the receivership expenses of the
FDIC and such bank's domestic deposits and would be subject to the loss of
principal to a greater extent than such bank's domestic branch deposits. The
Prime Portfolio's investment in obligations of foreign subsidiaries of domestic
banks are subject, to the extent required by the Investment Company Act of 1940,
as amended (the "1940 Act"), to the limitations on investing in the securities
of other investment companies.

Obligations of United States branches of foreign banks may be
general obligations of the parent bank in addition to the issuing branch, or may
be limited by the terms of a specific obligation and by Federal and state
regulation as well as governmental action in the country in which the foreign
bank has its head office. In addition, Federal branches licensed by the
Comptroller of the Currency and branches licensed by certain states ("State
Branches") may be required to: (1) pledge to the regulator, by depositing assets
with a designated bank within the state, a certain percentage of their assets as
fixed from time to time by the appropriate regulatory authority; and (2)
maintain assets within the state in an amount equal to a specified percentage of
the aggregate amount of liabilities of the foreign bank payable at or through
all of its agencies or branches within the state. The deposits of Federal and
State Branches generally must be insured by the FDIC if such branches take
deposits of less than $100,000.

In view of the foregoing factors associated with the purchase
of CDs and TDs issued by foreign branches of domestic banks, by foreign
subsidiaries of domestic banks, by foreign branches of foreign banks or by
domestic branches of foreign banks, the Sub-Adviser carefully evaluates such
investments on a case-by-case basis pursuant to procedures established by the
Fund's Board of Directors.

The Prime Portfolio may invest in short-term U.S. dollar
denominated corporate obligations that are originated, negotiated and structured
by a syndicate of lenders ("Co-Lenders") consisting of commercial banks, thrift
institutions, insurance companies, finance companies or other financial
institutions one or more of which administers the security on behalf of the
syndicate (the "Agent Bank"). Co-Lenders may sell such securities to third
parties called "Participants." The Prime Portfolio may invest in such securities
either by participating as a Co-Lender at origination or by acquiring an
interest in the security from a Co- Lender or a Participant (collectively,
"participation interests"). Co-Lenders and Participants interposed between the
Fund and the corporate borrower (the "Borrower"), together with Agent Banks, are
referred herein as "Intermediate Participants." The Prime Portfolio also may
purchase a participation interest in a portion of the rights of an Intermediate
Participant, which would not establish any direct relationship between the Prime
Portfolio and the Borrower. In such cases, the Prime Portfolio would be required
to rely on the Intermediate Participant that sold the participation interest not
only for the enforcement of the Prime Portfolio's rights against the Borrower
but also for the receipt and processing of payments due to the Prime Portfolio
under the security. Because it may be necessary to assert through an
Intermediate Participant such rights as may exist against the Borrower, in the
event the Borrower fails to pay principal and interest when due, the Prime
Portfolio may be subject to delays, expenses and risks that are greater than
those that would be involved if the Portfolio could enforce its rights directly
against the Borrower. Moreover, under the terms of a participation interest, the
Prime Portfolio may be regarded as a creditor of the Intermediate Participant
(rather than of the Borrower), so that the Fund may also be subject to the risk
that the Intermediate Participant may become insolvent. Similar risks may arise
with respect to the Agent Bank if, for example, assets held by the Agent Bank
for the benefit of the Prime Portfolio were determined by the appropriate
regulatory authority or court to be subject to the claims of the Agent Bank's
creditors. In such cases, the Prime Portfolio might incur certain costs and
delays in realizing payment in connection with the participation interest or
suffer a loss of principal and/or interest. Further, in the event of the
bankruptcy or insolvency of the Borrower, the obligation of the Borrower to
repay the loan may be subject to certain defenses that can be asserted by such
Borrower as a result of improper conduct by the Agent Bank or Intermediate
Participant.

Under normal circumstances, and as a matter of fundamental
policy, the Prime Portfolio will "concentrate" at least 25% of its assets in
debt instruments issued by domestic and foreign companies engaged in the banking
industry, including bank holding companies. Such investments may include CDs,
TDs, bankers' acceptances and obligations issued by bank holding companies, as
well as repurchase agreements entered into with banks (as distinct from non-bank
dealers) in accordance with the policies set forth in "Repurchase Agreements"
below. During periods when the Sub-Adviser determines that the Prime Portfolio
should be in a temporary defensive position, the Portfolio may invest less than
25% of its total assets in the banking industry; during such times the Prime
Portfolio's assets will be invested in accordance with its other investment
policies. The Sub-Adviser may determine that the adoption of a temporary
defensive position with respect to issuers in the banking industry is
appropriate on the basis of such factors as political, economic, market or
regulatory developments adversely affecting that industry as compared to the
industries of other issuers of securities available for investment by the Prime
Portfolio.

Investment Company Securities. (Both Portfolios). Each Portfolio
may invest in securities issued by other investment companies which principally
invest in securities of the type in which such Portfolio invests. Under the 1940
Act, each Portfolio's investments in such securities, subject to certain
exceptions, currently are limited to (i) 3% of the total voting stock of any one
investment company, (ii) 5% of the Portfolio's net assets with respect to anyone
investment company and (iii) 10% of the Portfolio's net assets in the aggregate.
Investments in the securities of other investment companies may involve
duplication of advisory fees and certain other expenses.

Repurchase Agreements. (Both Portfolios). Each Portfolio may
enter into repurchase agreements. The Fund's custodian or sub-custodian employed
in connection with third-party repurchase transactions will have custody of, and
will hold in a segregated account, securities acquired by a Portfolio under a
repurchase agreement. In connection with its third-party repurchase
transactions, the Fund will employ only eligible sub-custodians which meet the
requirements set forth in Section 17(f) of the 1940 Act and the rules
thereunder. Repurchase agreements are considered by the staff of the Securities
and Exchange Commission to be loans by the Portfolio entering into them. In an
attempt to reduce the risk of incurring a loss on a repurchase agreement, each
Portfolio will enter into repurchase agreements only with domestic banks
(including foreign branches and subsidiaries of domestic banks) with total
assets in excess of one billion dollars or primary government securities dealers
reporting to the Federal Reserve Bank of New York, with respect to securities in
which such Portfolio may invest or government securities regardless of their
remaining maturities, and will require that additional securities be deposited
with it if the value of the securities purchased should decrease below resale
price. The Adviser and, with respect to the Prime Portfolio, the Sub-Adviser
will monitor on an ongoing basis the value of the collateral to assure that it
always equals or exceeds the repurchase price. Each Portfolio will consider on
an ongoing basis the creditworthiness of the institutions with which it enters
into repurchase agreements.

Reverse Repurchase Agreements. (Both Portfolios). Each Portfolio
may enter into reverse repurchase agreements. Each Portfolio will maintain in a
segregated custodial account cash, cash equivalents or U.S. Government
securities or, except for the U.S. Treasury Portfolio, other high quality liquid
debt securities equal to the aggregate amount of its reverse repurchase
obligations, plus accrued interest, in certain cases, in accordance with
releases promulgated by the Securities and Exchange Commission. The Securities
and Exchange Commission views reverse repurchase agreement transactions as
collateralized borrowings, and, pursuant to the 1940 Act, each Portfolio must
maintain continuous asset coverage (that is, total assets including borrowings,
less liabilities exclusive of borrowings) of 300% of the amount borrowed. If the
300% asset coverage should decline as a result of market fluctuations or other
reasons, the Portfolio may be required to sell some of its portfolio holdings
within three days to reduce the debt and restore the 300% asset coverage, even
though it may be disadvantageous from an investment standpoint to sell
securities at that time.

Illiquid Securities. Where a substantial market of qualified
institutional buyers has developed for certain restricted securities purchased
by a Portfolio pursuant to Rule 144A under the Securities Act of 1933, as
amended, the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board. Because it is not
possible to predict with assurance how the market for specific restricted
securities sold pursuant to Rule 144A will develop, the Fund's Board has
directed the Adviser and the Sub-Adviser to monitor carefully each Portfolio's
investments in such securities with particular regard to trading activity,
availability of reliable price information and other relevant information. To
the extent that, for a period of time, qualified institutional buyers cease
purchasing restricted securities pursuant to Rule 144A, the Portfolio's
investing in such securities may have the effect of increasing the level of
illiquidity in its investment portfolio during such period.

Forward Commitments. Securities purchased on a forward commitment
or when-issued basis are subject to changes in value (generally changing in the
same way, i.e., appreciating when interest rates decline and depreciating when
interest rates rise) based upon the public's perception of the creditworthiness
of the issuer and changes, real or anticipated, in the level of interest
rates. Securities purchased on a forward commitment or when-issued basis may
expose the Portfolio to risks because they may experience such fluctuations
prior to their actual delivery. Purchasing securities on a when-issued basis can
involve the additional risk that the yield available in the market when the
delivery takes place actually may be higher than that obtained in the
transaction itself. Purchasing securities on a forward commitment or when-
issued basis when the Portfolio is fully or almost fully invested may result in
greater potential fluctuation in the value of the Portfolio's net assets and its
net asset value per share.

Lending Portfolio Securities. (Both Portfolios). To a limited
extent, each Portfolio may lend its portfolio securities to brokers, dealers and
other financial institutions, provided it receives cash collateral which at all
times is maintained in an amount equal to at least 100% of the current market
value of the securities loaned. By lending its portfolio securities, each
Portfolio can increase its income through the investment of the cash collateral.
For the purposes of this policy, the Fund considers collateral consisting of
U.S. Government securities to be the equivalent of cash. Such loans may not
exceed 33-1/3% of the Portfolio's total assets. From time to time, the Fund may
pay a part of the interest earned from the investment of collateral received for
securities loaned to the borrower or a third party which is unaffiliated with
the Fund, and which is acting as a "placing broker," in an amount determined by
the Board of Directors to be reasonable and based solely on services rendered.

The Securities and Exchange Commission currently requires that
the following conditions must be met whenever portfolio securities are loaned:
(1) the Portfolio must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Portfolio must be
able to terminate the loan at any time; (4) the Portfolio must receive
reasonable interest on the loan, as well as any interest or other distributions
payable on the loaned securities, and any increase in market value; and (5) the
Portfolio may pay only reasonable custodian fees in connection with the loan.
These conditions may be subject to future modification.

Investment Restrictions. Each Portfolio has adopted investment
restrictions numbered 1 through 7 as fundamental policies and the Prime
Portfolio has adopted investment restrictions numbered 13 and 14 and the U.S.
Treasury Portfolio has adopted investment restriction number 15 as additional
fundamental policies. These restrictions cannot be changed, as to a Portfolio,
without approval by the holders of a majority (as defined in the 1940 Act) of
the outstanding voting shares of such Portfolio. Investment restrictions
numbered 8 through 12 are not fundamental policies and may be changed by vote of
a majority of the Fund's Directors at any time. Neither Portfolio may:

1. Invest in commodities, except that each Portfolio may
purchase and sell options, forward contracts, futures contracts, including those
relating to indexes, and options on futures contracts or indexes.

2. Purchase, hold or deal in real estate, or oil, gas or
other mineral leases or exploration or development programs, but each Portfolio
may purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate.

3. Borrow money, except that the Portfolio may borrow up to
33-1/3% of its total assets. For purposes of this investment restriction, a
Portfolio entry into options, forward contracts, futures contracts, including
those relating to indexes, and options on futures contracts or indexes shall not
constitute borrowing.

4. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, each Portfolio
may lend its securities in an amount not to exceed 33-1/3% of the value of its
total assets. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and the Fund's
Board of Directors.

5. Act as an underwriter of securities of other issuers,
except to the extent the Fund may be deemed an underwriter under the Securities
Act of 1933, as amended, by virtue of disposing of portfolio securities.

6. Issue any senior security (as such term is defined
in Section 18(f) of the 1940 Act). The Portfolio's investments
permitted under Investment Restriction Nos. 1, 3, 9 and 10 are not
considered senior securities for purposes of this investment
restriction.

7. Purchase securities on margin, but each Portfolio may make
margin deposits in connection with transactions in options, forward contracts,
futures contracts, including those relating to indexes, and options on futures
contracts or indexes.

8. Invest in the securities of a company for the purpose of
exercising management or control, but each Portfolio will vote the securities it
owns in its portfolio as a shareholder in accordance with its views.

9. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with writing covered put and call
options and the purchase of securities on a when-issued or forward commitment
basis and collateral and initial or variation margin arrangements with respect
to options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.

10. Purchase, sell or write puts, calls or combinations
thereof, except as described in the Portfolio's Prospectus and this
Statement of Additional Information.

11. Enter into repurchase agreements providing for settlement
in more than seven days after notice or purchase securities which are illiquid,
if, in the aggregate, more than 10% of the value of the Portfolio's net assets
would be so invested.

12. Invest in securities of other investment companies,
except to the extent permitted under the 1940 Act.

The following investment restrictions numbered 13 and 14 apply
only to the Prime Portfolio. The Prime Portfolio may not:

13. Invest more than 5% of its assets in the obligations of
any one issuer, except that up to 25% of the value of the Prime Portfolio's
total assets may be invested without regard to any such limitation, provided
that not more than 10% of its assets may be invested in securities issued or
guaranteed by any single guarantor of obligations held by the Prime Portfolio.

14. Invest less than 25% of its total assets in securities
issued by banks or invest more than 25% of its assets in the securities of
issuers in any other industry, provided that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. Notwithstanding the foregoing, for temporary
defensive purposes the Prime Portfolio may invest less than 25% of its assets in
bank obligations.

The following investment restriction number 15 applies
only to the U.S. Treasury Portfolio. The U.S. Treasury Portfolio
may not:

15. Invest more than 25% of its total assets in the
securities of issuers in any single industry, provided that there
shall be no such limitation on investments in obligations issued or
guaranteed by the U.S. Government.

If a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting from a change
in values or assets will not constitute a violation of that restriction.

The Fund may make commitments more restrictive than the
restrictions listed above so as to permit the sale of shares of a Portfolio in
certain states. Should the Fund determine that a commitment is no longer in the
best interest of the Portfolio, and its shareholders, the Fund reserves the
right to revoke the commitment by terminating the sale of such Portfolio's
shares in the state involved.

MANAGEMENT OF THE FUND

Directors and officers of the Fund, together with information
as to their principal business occupations during at least the last five years,
are shown below. Each Director who is an "interested person" of the Fund, as
defined in the 1940 Act, is indicated by an asterisk.

Directors of the Fund

*WILLIAM B. BLUNDIN, Chairman of the Board of Directors. An employee of
Concord Holding Corporation, an affiliate of the
Administrator. Mr. Blundin also is an officer of other
investment companies administered by the Administrator or its
affiliates and President and Chief Executive Officer of Vista
Broker/Dealer Services, Inc. and BNY Hamilton Distributors,
Inc., registered broker/dealers. He is 58 years old and his
address is 125 West 55th Street, New York, New York 10019.

NORMA A. COLDWELL, Director. International Economist and Consultant;
Executive Vice President of Coldwell Financial Consultants;
Trustee and Treasurer of Meridian House International
(International Education and Cultural Group); Member of the
Board of Advisors of Meridian International Center and
Emerging Capital Markets, S.A. (Montevideo, Uruguay);
formerly, Chief International Economist of Riggs National
Bank, Washington, D.C. She is 70 years old and her address is
3330 Southwestern Boulevard, Dallas, Texas 75225.

RICHARD H. FRANCIS, Director. Former Executive Vice President
and Chief Financial Officer of Pan American World
Airways, Inc. (currently, debtor-in-possession under the
U.S. Bankruptcy Code), March 1988 to October 1991; Senior
Vice President and Chief Financial Officer of American
Standard Inc., 1960 to March 1988. Mr. Francis is a
director of Allendale Mutual Insurance and The Indonesia
Fund, Inc. He is 63 years old and his address is 40
Grosvenor Road, Short Hills, New Jersey 07078.

WILLIAM W. McINNES, Director. Private investor. From July 1978
to February 1993, he was Vice-President--Finance and
Treasurer of Hospital Corp. of America. He is also a
director of Gulf South Medical Supply and Diversified
Trust Co. He is 47 years old and his address is 116 30th
Avenue South, Nashville, Tennessee 37212.

ROBERT A. ROBINSON, Director. Private investor. Since 1991,
President Emeritus, and from 1968 to 1991, President of The
Church Pension Group, NYC. From 1956 to 1966, Senior Vice
President of Colonial Bank & Trust Co. He is also a
director of Mariner Institutional Funds, Inc., Mariner Tax-
Free Institutional Funds, Inc., UST Master Funds, UST
Master Tax Exempt Funds, H.B. and F.H. Bugher Foundation,
Morehouse-Barlow Co. Publishers, The Canterbury Cathedral
Trust in America, The Living Church Foundation and Hoosac
School. He is 70 years old and his address is 2 Hathaway
Common, New Canaan, Connecticut 06840.

Officers of the Fund

GEORGE O. MARTINEZ, President and Secretary. Senior Vice President
and Director of Legal and Compliance Services with BISYS
Fund Services, Inc., the Administrator's general partner,
since April 1995, and an officer of other investment
companies administered by the Administrator or its affiliates.
Prior thereto, he was Vice President and Associate General
Counsel with Alliance Capital Management, L.P. He is 36 years
old and his address is 3435 Stelzer Road, Columbus, Ohio
43219.

WILLIAM TOMKO, Vice President. An employee of BISYS Fund Services,
Inc. and an officer of other investment companies
administered by the Administrator or its affiliates. He is
37 years old and his address is 3435 Stelzer Road,
Columbus, Ohio 43219.

ANN E. BERGIN, Vice President. An employee of Concord Holding
Corporation, an affiliate of the Administrator, and an
officer of other investment companies administered by the
Administrator or its affiliates. She is 35 years old and
her address is 125 West 55th Street, New York, New York
10019.

ALAINA METZ, Assistant Secretary. An employee of BISYS Fund
Services, Inc. and an officer of other investment companies
administered by the Administrator or its affiliates. She
is 28 years old and her address is 3435 Stelzer Road,
Columbus, Ohio 43219.

For so long as the Shareholder Services Plan described in the
section captioned "Management Arrangements--Shareholder Services Plan" remains
in effect, the Directors of the Fund who are not "interested persons" of the
Fund, as defined in the 1940 Act, will be selected and nominated by the
Directors who are not "interested persons" of the Fund.

Directors and officers of the Fund, as a group, owned less
than 1% of either Portfolio's shares of common stock outstanding on April 1,
1996.

Total Compensation
Aggregate From Fund and
Name of Board Compensation from Fund Complex Paid
Member Fund* to Board Member*

Norma A. Coldwell $11,250 $11,250
Richard H. Francis $10,000 $10,000
William W. McInnes $ 7,500 $ 7,500
Robert A. Robinson $ 2,500 $ 2,500

------------------------------
</TABLE>

* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $6,434 for all Directors as a group.

MANAGEMENT ARRANGEMENTS

The following information supplements and should be read in
conjunction with the section in the Portfolios' Prospectus entitled "Management
of the Portfolios."

Investment Advisory Agreement. The Adviser provides investment
advisory services pursuant to the Investment Advisory Agreement (the
"Agreement") dated February 15, 1994 with the Fund. As to each Portfolio, the
Agreement is subject to annual approval by (i) the Fund's Board of Directors or
(ii) vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of such Portfolio, provided that in either event the continuance also
is approved by a majority of the Board of Directors who are not "interested
persons" (as defined in the 1940 Act) of the Fund or the Adviser, by vote cast
in person at a meeting called for the purpose of voting on such approval. The
Agreement was last approved by the Fund's Board of Directors, including a
majority of the directors who are not "interested persons" of any party to the
Agreement, at a meeting held on October 25, 1995. As to each Portfolio, the
Agreement is terminable without penalty, on 60 days' notice, by the Fund's Board
of Directors or by vote of the holders of a majority of such Portfolio's shares,
or, on not less than 90 days' notice, by the Adviser. The Agreement will
terminate automatically, as to the relevant Portfolio, in the event of its
assignment (as defined in the 1940 Act).

As compensation for the Adviser's services, the Fund has agreed
to pay the Adviser a monthly investment advisory fee at the annual rate of .25
of 1% of the value of each Portfolio's average daily net assets less, in the
case of the Prime Portfolio, any amount payable by the Fund to the Sub-Adviser.
For the period March 29, 1994 (commencement of operations of each Portfolio)
through December 31, 1994, and for the fiscal year ended December 31, 1995,
$50,754 and $64,959, respectively, was payable by the Prime Portfolio and
$183,801 and $358,127, respectively, was payable by the U.S. Treasury Portfolio
pursuant to the Agreement. The Adviser waived $7,046 and $19,089 of such fees
payable for the period ended December 31, 1994 by the Prime Portfolio and U.S.
Treasury Portfolio, respectively, resulting in net fees being paid to the
Adviser of $43,708 by the Prime Portfolio and $164,712 by the U.S. Treasury
Portfolio during the fiscal period ended December 31, 1994.

Sub-Investment Advisory Agreement. The Adviser has engaged the
Sub-Adviser to provide investment advisory assistance and day-to-day management
of the Prime Portfolio's investments pursuant to the Sub-Investment Advisory
Agreement (the "Sub-Advisory Agreement") among the Fund, the Adviser and the
Sub-Adviser dated February 15, 1994. The fees payable to the Sub-Adviser for its
services are paid by the Fund. The Sub-Advisory Agreement is subject to annual
approval by (a) the Fund's Board of Directors or (b) vote of a majority (as
defined in the 1940 Act) of the Prime Portfolio's outstanding voting securities,
provided that in either event the continuance also is approved by a majority of
the Fund's Directors who are not "interested persons" (as defined in the 1940
Act) of any party to the Sub-Advisory Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. The Sub- Advisory
Agreement was last approved by the Fund's Board of Directors who are not
"interested persons" of any party to the Sub-Advisory Agreement, at a meeting
held on October 25, 1995. The Sub-Advisory Agreement may be terminated without
penalty (i) by the Fund's Board of Directors or by vote of the holders of a
majority of the Prime Portfolio's shares, upon written notice to the
Sub-Adviser, (ii) by the Adviser (but only upon the approval of the Fund's Board
of Directors) upon 60 days' written notice to the Sub-Adviser, or (iii) by the
Sub-Adviser upon not less than 90 days' written notice to the Fund and the
Adviser. The Sub-Advisory Agreement also will terminate automatically in the
event of its assignment (as defined in the 1940 Act). In addition, if the Fund's
Agreement with the Adviser is terminated for any reason (whether by the Fund, by
the Adviser or by operation of law), the Sub-Advisory Agreement will terminate
upon the effective date of such termination of the Investment Advisory
Agreement.

The Sub-Adviser provides investment advisory services in
accordance with the stated policies of the Prime Portfolio, subject to the
approval of the Fund's Board of Directors. The Sub-Adviser provides the Prime
Portfolio with investment personnel who are authorized by the Board of Directors
to execute purchases and sales of securities. The Sub-Adviser also maintains a
research department with a professional staff of portfolio managers and
securities analysts who provide research services for the Prime Portfolio as
well as for other funds advised by the Sub-Adviser. All purchases and sales are
reported for the Board's review at the meeting subsequent to such transactions.

As compensation for the Sub-Adviser's services, the Fund has
agreed to pay the Sub-Adviser a monthly sub-investment advisory fee at the
annual rate of .15 of 1% of the value of the Prime Portfolio's average daily net
assets. For the period March 29, 1994 (commencement of operations of the Prime
Portfolio) through December 31, 1994 and for the fiscal year ended December 31,
1995, $76,130 and $97,438, respectively, was payable by the Prime Portfolio
pursuant to the Sub-Advisory Agreement. The Sub-Adviser waived $10,274 of such
fee payable for the period ended December 31, 1994, resulting in a net fee being
paid to the Sub-Adviser of $65,856 by the Prime Portfolio during the fiscal
period ended December 31, 1994.

Administration Agreement. The Administrator provides certain
administrative services pursuant to the Administration Agreement (the
"Administration Agreement") dated April 25, 1996 with the Fund. As to each
Portfolio, the Administration Agreement will continue until April 25, 2001 and
thereafter is subject to annual approval by (i) the Fund's Board of Directors or
(ii) vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of such Portfolio, provided that in either event the continuance also
is approved by a majority of the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Administrator, by vote cast in
person at a meeting called for the purpose of voting such approval. The
Administration Agreement was last approved by the Fund's Board of Directors,
including a majority of the Directors who are not "interested persons" of any
party to the Administration Agreement, at a meeting held on April 25, 1996. As
to each Portfolio, the Administration Agreement is terminable without penalty,
at any time if for cause, by the Fund's Board of Directors or by vote of the
holders of a majority of such Portfolio's outstanding voting securities, or, on
not less than 90 days' notice, by the Administrator. The Administration
Agreement will terminate automatically, as to the relevant Portfolio, in the
event of its assignment (as defined in the 1940 Act).

As compensation for the Administrator's services, the Fund has
agreed to pay the Administrator a monthly administration fee at the annual rate
of .10 of 1% of the value of each Portfolio's average daily net assets. For the
period March 29, 1994 (commencement of operations of each Portfolio) through
December 31, 1994 and for the fiscal year ended December 31, 1995, $50,754 and
$64,959, respectively, was payable to Concord Holding Corporation, an affiliate
of the Administrator and the Portfolios' administrator during such periods, by
the Prime Portfolio and $73,520 and $143,251, respectively, was payable to
Concord Holding Corporation as administrator by the U.S. Treasury Portfolio
pursuant to an Administration Agreement with Concord Holding Corporation which
was terminated on April 25, 1996. Concord Holding Corporation waived $7,046 and
$7,767 of such fees payable for the period ended December 31, 1994 by the Prime
Portfolio and U.S. Treasury Portfolio, respectively, resulting in net fees being
paid to Concord Holding Corporation of $43,708 by the Prime Portfolio and
$65,753 by the U.S. Treasury Portfolio during the fiscal period ended December
31, 1994.

Distribution Agreement. The Distributor acts as the exclusive
distributor of each Portfolio's shares on a best efforts basis pursuant to a
Distribution Agreement (the "Distribution Agreement") dated March 29, 1995 with
the Fund. Shares are sold on a continuous basis by the Distributor as agent,
although the Distributor is not obliged to sell any particular amount of shares.
No compensation is payable by the Fund to the Distributor for its distribution
services.

Shareholder Services Plan. (Applicable only with respect to
the Investor Shares). The Fund's Directors have adopted a shareholder services
plan (the "Plan") with respect to the Investor Shares pursuant to which each
Portfolio pays the Distributor for the provision of certain services to the
holders of Investor Shares at an annual rate of .25% of the value of each
Portfolio's Investor Shares. The Fund's Directors believe that there is a
reasonable likelihood that the Plan will benefit each Portfolio and the holders
of its Investor Shares. In some states, certain institutions effecting
transactions in Investor Shares may be required to register as dealers pursuant
to state law.

A quarterly report of the amounts expended under the Plan, and
the purposes for which such expenditures were incurred, must be made to the
Directors for their review. In addition, the Plan provides that material
amendments of the Plan must be approved by the Board of Directors, and by the
Directors who are neither "interested persons" (as defined in the 1940 Act) of
the Fund nor have any direct or indirect financial interest in the operation of
the Plan or in the related Plan agreements, by vote cast in person at a meeting
called for the purpose of considering such amendments. The Plan and related
agreements are subject to annual approval by such vote of the Directors cast in
person at a meeting called for the purpose of voting on the Plan. The Plan was
last so approved on October 25, 1995. The Plan is terminable at any time by vote
of a majority of the Directors who are not "interested persons" and who have no
direct or indirect financial interest in the operation of the Plan or in the
Plan agreements. A Plan agreement is terminable without penalty, at any time, by
such vote of the Directors. A Plan agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).

For the fiscal year ended December 31, 1995, the Distributor
waived receipt of $162,474 payable by the Prime Portfolio and $358,053 payable
by the U.S. Treasury Portfolio with respect to Investor Shares pursuant to the
Plan.

Expenses. All expenses incurred in the operation of the Fund
are borne by the Fund, except to the extent specifically assumed by others. The
expenses borne by the Fund include: organizational costs, taxes, interest,
brokerage fees and commissions, if any, fees of Directors who are not officers,
directors, employees or holders of 5% or more of the outstanding voting
securities of the Adviser, Sub- Adviser or Administrator or any of their
affiliates, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory and administration fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, auditing and legal expenses, costs of maintaining
corporate existence, costs of independent pricing services, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of calculating the net asset value of each Portfolio's shares,
costs of shareholders' reports and corporate meetings, costs of preparing and
printing certain prospectuses and statements of additional information, and any
the assets of that Portfolio; other expenses of the Fund are allocated among the
Portfolios on the basis determined by the Board of Directors, including, but not
limited to, proportionately in relation to the net assets of each Portfolio.

PURCHASE AND REDEMPTION OF SHARES

The following information supplements and should be read in
conjunction with the section in the Portfolios' Prospectus entitled "How to Buy
Shares" and "How to Redeem Shares."

Terms of Purchase. The Fund reserves the right to reject any
purchase order and to change the amount of the minimum investment and subsequent
purchases in the Portfolios.

"Sweep" Program. Each Portfolio's shares may be purchased
through the "sweep" program established by certain financial institutions under
which a portion of their customers' accounts may be automatically invested in
the Portfolio. The customer becomes the beneficial owner of specific shares of
the Portfolio which may be purchased, redeemed and held by the financial
institution in accordance with the customer's instructions and may fully
exercise all rights as a shareholder. The shares will be held by Supervised
Service Company, Inc. (the "Transfer Agent") in book-entry form. A statement
with regard to the customer's shares is generally supplied to the customer
monthly, and confirmations of all transactions for the account of the customer
ordinarily are available to the customer promptly on request. In addition, each
customer is sent proxies, periodic reports and other information from the Fund
with regard to shares of the Portfolios. The customer's shares are fully
assignable and may be encumbered by the customer. The "sweep" agreement can be
terminated by the customer at any time, without affecting its beneficial
ownership of the shares.

To obtain the benefits of this service, a customer typically
is required to maintain a minimum balance subject to a monthly maintenance fee,
or a higher minimum balance for which no monthly fee would be imposed. In either
case, a penalty fee is imposed if the minimum should not be maintained. In
general, the automatic investment in a Portfolio's shares occurs on the same day
that withdrawals are made by the financial institution, at the next determined
net asset value after the order is received.

All agreements which relate to the service are with the
financial institution. Neither the Distributor nor the Fund is a party to any of
those agreements and no part of the compensation received by the financial
institution flows to the Fund or to the Distributor or to any of their
affiliates, either directly or indirectly. Further information concerning this
program and any related charges or fees is provided by the financial institution
prior to any purchase of a Portfolio's shares. Any fees charged by the financial
institution effectively reduces the Portfolio's yield for those customers.

Using Federal Funds. The Transfer Agent or the Fund may
attempt to notify the investor upon receipt of checks drawn on banks that are
not members of the Federal Reserve System as to the possible delay in conversion
into Federal Funds and may attempt to arrange for a better means of transmitting
the money.

Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.

Stock Certificates; Signatures. Any certificate representing
Portfolio shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including each
holder of a joint account, and each signature must be guaranteed. Signatures on
endorsed certificates submitted for redemption also must be guaranteed. The
Fund's Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP") and the
Stock Exchanges Medallion Program. Signature-guarantees may not be provided by
notaries public. If the signature is guaranteed by a broker or dealer, such
broker or dealer must be a member of a clearing corporation and maintain net
capital of at least $100,000. Guarantees must be signed by an authorized
signatory of the guarantor and "Signature-Guaranteed" must appear with the
signature.

Redemption Commitment. Each Portfolio has committed itself to
pay in cash all redemption requests by any shareholder of record, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value of
such Portfolio's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such amount, the
Board of Directors reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Portfolio to the detriment of the
existing shareholders. In this event, the securities would be valued in the same
manner as the Portfolio is valued. If the recipient sold such securities,
brokerage charges would be incurred.

Suspension of Redemptions. The right of redemption may be
suspended or the date of payment postponed (a) during any period when the New
York Stock Exchange is closed (other than customary weekend and holiday
closing), (b) when trading in the markets the Portfolio normally utilizes is
restricted, or when an emergency exists as determined by the Securities and
Exchange Commission so that disposal of the Portfolio's investments or
determination of its net asset value is not reasonably practicable, or (c) for
such other periods as the Securities and Exchange Commission by order may permit
to protect the Portfolio's shareholders.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in
conjunction with the section in the Portfolios' Prospectus entitled "How to Buy
Shares."

Amortized Cost Pricing. The valuation of each Portfolio's
investment securities is based upon their amortized cost which does not take
into account unrealized capital gains or losses. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
would receive if it sold the instrument.

The Board of Directors has agreed, as a particular
responsibility within the overall duty of care owed to the Portfolios'
investors, to establish procedures reasonably designed to stabilize each
Portfolio's price per share as computed for the purpose of sales and redemptions
at $1.00. Such procedures include review of each Portfolio's investment holdings
by the Board of Directors, at such intervals as it deems appropriate, to
determine whether such Portfolio's net asset value calculated by using available
market quotations or market equivalents deviates from $1.00 per share based on
amortized cost. In such review, investments for which market quotations are
readily available will be valued at the most recent bid price or yield data for
such securities or for securities of comparable maturity, quality and type, as
obtained from one or more of the major market makers for the securities to be
valued. Other investments and assets will be valued at fair value as determined
in good faith by the Board of Directors.

The extent of any deviation between a Portfolio's net asset
value based upon available market quotations or market equivalents and $1.00 per
share based on amortized cost will be examined by the Board of Directors. If
such deviation exceeds 1/2 of 1%, the Board of Directors promptly will consider
what action, if any, will be initiated. In the event the Board of Directors
determines that a deviation exists which may result in material dilution or
other unfair results to investors or existing shareholders, it has agreed to
take such corrective action as it regards as necessary and appropriate,
including: selling portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity; withholding dividends
or paying distributions from capital or capital gains; redeeming shares in kind;
or establishing a net asset value per share by using available market quotations
or market equivalents.

New York Stock Exchange and Custodian Closings. The holidays
(as observed) on which the New York Stock Exchange and the Custodian are closed
currently are: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans
Day, Thanksgiving Day and Christmas Day.

YIELD INFORMATION

The following information supplements and should be read in
conjunction with the section in the Portfolios' Prospectus entitled "Yield
Information."

For the seven-day period ended December 31, 1995, the Prime
Portfolio's yield was 5.26% and its effective yield was 5.39%. The U.S. Treasury
Portfolio's yield for such period was 5.12% and its effective yield was 5.24%.
These yield figures reflect the absorption of certain expenses and/or waiver of
fees, without which the yield and effective yield for the seven-day period ended
December 31, 1995 would have been 5.01% and 5.13%, respectively, for the Prime
Portfolio and 4.87% and 4.98%, respectively, for the U.S. Treasury Portfolio.
Yield will be computed in accordance with a standardized method which involves
determining the net change in the value of a hypothetical pre-existing Portfolio
account having a balance of one share at the beginning of a seven calendar day
period for which yield is to be quoted, dividing the net change by the value of
the account at the beginning of the period to obtain the base period return, and
annualizing the results (i.e., multiplying the base period return by 365/7). The
net change in the value of the account reflects the value of additional shares
purchased with dividends declared on the original share and any such additional
shares and fees that may be charged to shareholder accounts, in proportion to
the length of the base period and the Portfolio's average account size, but does
not include realized gains and losses or unrealized appreciation and
depreciation. Effective annualized yield is computed by adding 1 to the base
period return (calculated as described above), raising that sum to a power equal
to 365 divided by 7, and subtracting 1 from the result.

Yields will fluctuate and are not necessarily representative
of future results. The investor should remember that yield is a function of the
type and quality of the instruments held, their maturity and operating expenses.
An investor's principal in the Portfolio is not guaranteed. See "Determination
of Net Asset Value" for a discussion of the manner in which each Portfolio's
price per share is determined.

From time to time, advertising materials for a Portfolio may
refer to or discuss current or past business, political, economic or financial
conditions, such as U.S. monetary or fiscal policies and actual or proposed tax
legislation. In addition, from time to time, advertising materials for a
Portfolio may include information concerning retirement and investing for
retirement, average life expectancy and pension and social security benefits.

PORTFOLIO TRANSACTIONS

Portfolio securities ordinarily are purchased directly from the
issuer or an underwriter or a market maker for the securities. Usually no
brokerage commissions are paid for such purchases. Purchases from underwriters
of portfolio securities include a concession paid by the issuer to the
underwriter and the purchase price paid to market makers for the securities may
include the spread between the bid and asked price. No brokerage commissions
have been paid by either Portfolio to date.

Transactions are allocated to various dealers by each
Portfolio's investment personnel in their best judgment. The primary
consideration is prompt and effective execution of orders at the most favorable
price. Subject to that primary consideration, dealers may be selected to act on
an agency basis for research, statistical or other services to enable the
Adviser and/or Sub-Adviser to supplement their own research and analysis with
the views and information of other securities firms.

To the extent any research services are furnished by brokers
through which each Portfolio effects securities transactions, the Adviser and,
with respect to the Prime Portfolio, the Sub-Adviser may use such information in
advising other funds or accounts they advise and, conversely, to the extent any
research services are furnished to the Adviser and/or Sub-Adviser by brokers in
connection with other funds or accounts the Adviser or Sub-Advisers advise, the
Adviser and/or Sub-Adviser also may use such information in advising the
Portfolios. Although it is not possible to place a dollar value on these
services, if they are provided, it is the opinion of each Adviser that the
receipt and study of any such services should not reduce the overall expenses of
its research department.

INFORMATION ABOUT THE PORTFOLIOS

The following information supplements and should be read in
conjunction with the section in the Portfolios' Prospectus entitled "General
Information."

Each Portfolio share has one vote and, when issued and paid
for in accordance with the terms of the offering, is fully paid and
non-assessable. Shares have no preemptive, subscription or conversion rights and
are freely transferable.

Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted under the provisions of the 1940 Act or applicable
state law or otherwise, to the holders of the outstanding voting securities of
an investment company, such as the Fund, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each portfolio affected by such matter. Rule 18f-2 further
provides that a portfolio shall be deemed to be affected by a matter unless it
is clear that the interests of each portfolio in the matter are identical or
that the matter does not affect any interest of such portfolio. However, the
Rule exempts the election of directors from the separate voting requirements of
the Rule.

Each Portfolio will send annual and semi-annual financial
statements to all its shareholders.

As of April 20, 1996, the following shareholders beneficially
owned, directly or indirectly, 5% or more of the indicated Portfolio's
outstanding shares:

Percent of
Total Investor
Name and Address Shares Outstanding

PRIME PORTFOLIO:

First American Trust Company 99.12%
Attn: Cash Management
800 First American Center
Nashville, TN 37237

U.S. TREASURY PORTFOLIO:

First American Trust Company 99.05%
Attn: Cash Management
800 First American Center
Nashville, TN 37237

A shareholder who beneficially owns, directly or indirectly,
more than 25% of a Portfolio's voting securities may be deemed a "control
person" (as defined in the 1940 Act) of the Portfolio.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS

The Bank of New York, 90 Washington Street, New York, New
York 10286, acts as custodian of each Portfolio's investments. BISYS Fund
Services Ohio, Inc., an affiliate of the Administrator, 3435 Stelzer Road,
Columbus, Ohio 43219, acts as the Fund's transfer and dividend disbursing agent
(the "Transfer Agent"). Under the transfer agency agreement with the Fund, the
Transfer Agent maintains shareholder account records for the Fund, handles
certain communications between shareholders and the Fund and pays dividends and
distributions payable by the Fund. For these services, the Transfer Agent
receives a monthly fee compiled on the basis of the number of shareholder
accounts it maintains for the Fund during the month, and is reimbursed for
certain out-of-pocket expenses. Neither The Bank of New York nor BISYS Fund
Services Ohio, Inc. has any part in determining the investment policies of
either Portfolio or which securities are to be purchased or sold by a Portfolio.

Stroock & Stroock & Lavan, 7 Hanover Square, New York, New
York 10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
of Common Stock being sold pursuant to the Portfolios' Prospectus.

KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York
10154, independent auditors, have been selected as each Portfolio's auditors.

<PAGE>
APPENDIX

Description of the two highest commercial paper, bond and other
short- and long-term rating categories assigned by Standard & Poor's Ratings
Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch Investors
Service, L.P. ("Fitch"), Duff & Phelps Credit Rating Co. ("Duff"), IBCA Inc. and
IBCA Limited ("IBCA"), and Thomson BankWatch, Inc. ("BankWatch"):

Commercial Paper and Short-Term Ratings

The rating Prime-1 (P-1) is the highest commercial paper
rating assigned by Moody's. Issuers of P-1 paper must have a superior capacity
for repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high rates
of return of funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and well
established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 (P-2) have a strong capacity for
repayment of short-term promissory obligations. This ordinarily will be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

The rating Fitch-1 (Highest Grade) is the highest commercial
paper rating assigned by Fitch. Paper rated Fitch-1 is regarded as having the
strongest degree of assurance for timely payment. The rating Fitch-2 (Very Good
Grade) is the second highest commercial paper rating assigned by Fitch which
reflects an assurance of timely payment only slightly less in degree than the
strongest issues.

The rating Duff-1 is the highest commercial paper rating
assigned by Duff. Paper rated Duff-1 is regarded as having very high certainty
of timely payment with excellent liquidity factors which are supported by ample
asset protection. Risk factors are minor. Paper rated Duff-2 is regarded as
having good certainty of timely payment, good access to capital markets and
sound liquidity factors and company fundamentals. Risk factors are small.

The designation A1 by IBCA indicates that the obligation is
supported by a very strong capacity for timely repayment. Those obligations
rated A1+ are supported by the highest capacity for timely repayment.
Obligations rated A2 are supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.

The rating TBW-1 is the highest short-term obligation rating
assigned by BankWatch. Obligations rated TBW-1 are regarded as having the
strongest capacity for timely repayment. Obligations rated TBW-2 are supported
by a strong capacity for timely repayment, although the degree of safety is not
as high as for issues rated TBW-1.

Bond and Long-Term Ratings

Bonds rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Bonds rated Aa by Moody's are judged by Moody's to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than Aaa bonds because
margins of protection may not be as large or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger. Moody's applies numerical modifiers
1, 2 and 3 in the Aa rating category. The modifier 1 indicates a ranking for the
security in the higher end of this rating category, the modifier 2 indicates a
mid-range ranking, and the modifier 3 indicates a ranking in the lower end of
the rating category.

Bonds rated AAA by Fitch are judged by Fitch to be strictly
high grade, broadly marketable, suitable for investment by trustees and
fiduciary institutions and liable to but slight market fluctuation other than
through changes in the money rate. The prime feature of an AAA bond is a showing
of earnings several times or many times interest requirements, with such
stability of applicable earnings that safety is beyond reasonable question
whatever changes occur in conditions. Bonds rated AA by Fitch are judged by
Fitch to be of safety virtually beyond question and are readily salable, whose
merits are not unlike those of the AAA class, but whose margin of safety is less
strikingly broad. The issue may be the obligation of a small company, strongly
secured but influenced as to rating by the lesser financial power of the
enterprise and more local type of market.

Bonds rated AAA are judged by Duff to be of the highest credit
quality with negligible risk factors; only slightly more than U.S. Treasury
debt. Bonds rated AA are judged by Duff to be of high credit quality with strong
protection factors. Risk is modest but may vary slightly from time to time
because of economic conditions.

International and U.S. Bank Ratings

An IBCA bank rating represents IBCA's current assessment of
the strength of the bank and whether such bank would receive support should it
experience difficulties. In its assessment of a bank, IBCA uses a dual rating
system comprised of Legal Ratings and Individual Ratings. In addition, IBCA
assigns banks Long- and Short-Term Ratings as used in the corporate ratings
discussed above. Legal Ratings, which range in gradation from 1 through 5,
address the question of whether the bank would receive support provided by
central banks or shareholders if it experienced difficulties, and such ratings
are considered by IBCA to be a prime factor in its assessment of credit risk.
Individual Ratings, which range in gradations from A through E, represent IBCA's
assessment of a bank's economic merits and address the question of how the bank
would be viewed if it were entirely independent and could not rely on support
from state authorities or its owners.

In addition to its ratings of short-term obligations,
BankWatch assigns a rating to each issuer it rates, in gradations of A through
E. BankWatch examines all segments of the organization, including, where
applicable, the holding company, member banks or associations, and other
subsidiaries. In those instances where financial disclosure is incomplete or
untimely, a qualified rating (QR) is assigned to the institution. BankWatch also
assigns, in the case of foreign banks, a country rating which represents an
assessment of the overall political and economic stability of the country in
which the bank is domiciled.

<PAGE>
FINANCIAL STATEMENTS

The Portfolios' Annual Report to Shareholders for the fiscal year
ended December 31, 1995 is a separate document supplied with this Statement of
Additional Information, and the financial statements, accompanying notes and
report of independent auditors appearing therein are incorporated by reference
in this Statement of Additional Information.

<PAGE>

THE INFINITY MUTUAL FUNDS, INC.
ValueStar Funds
CAPITAL GROWTH PORTFOLIO
SHORT-INTERMEDIATE DURATION BOND PORTFOLIO
INVESTMENT GRADE BOND PORTFOLIO
TENNESSEE TAX EXEMPT BOND PORTFOLIO
TRUST SHARES AND INVESTOR SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MAY 1, 1996

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of the
ValueStar Capital Growth Portfolio, Short-Intermediate Duration Bond Portfolio,
Investment Grade Bond Portfolio and Tennessee Tax Exempt Bond Portfolio (each, a
"Portfolio" and collectively, the "Portfolios") of The Infinity Mutual Funds,
Inc. (the "Fund"), dated May 1, 1996, as it may be revised from time to time. To
obtain a copy of the Portfolios' Prospectus, please write to the Fund at 3435
Stelzer Road, Columbus, Ohio 43219-3035. This Statement of Additional
Information relates only to the Portfolios and not to any of the Fund's other
portfolios.

First American National Bank (the "Adviser") serves as each Portfolio's
investment adviser.

BISYS Fund Services Limited Partnership (the "Administrator") serves as
each Portfolio's administrator.

Concord Financial Group, Inc. (the "Distributor"), an
affiliate of the Administrator, serves as the distributor of each
Portfolio's shares.

TABLE OF CONTENTS
Page
Investment Objectives and Management Policies......................... B-2
Management of the Fund................................................ B-17
Management Arrangements............................................... B-20
Purchase and Redemption of Shares..................................... B-23
Determination of Net Asset Value...................................... B-26
Performance Information............................................... B-27
Dividends, Distributions and Taxes.................................... B-29
Portfolio Transactions................................................ B-31
Information About the Portfolios...................................... B-33
Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors............................. B-34
Appendix.............................................................. B-35
Financial Statements.................................................. B-41

INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES

The following information supplements and should be read in
conjunction with the sections in the Portfolios' Prospectus entitled
"Description of the Portfolios" and "Appendix."

Portfolio Securities

Bank Obligations. Domestic commercial banks organized under
Federal law are supervised and examined by the Comptroller of the Currency and
are required to be members of the Federal Reserve System and to have their
deposits insured by the Federal Deposit Insurance Corporation (the "FDIC").
Domestic banks organized under state law are supervised and examined by state
banking authorities but are members of the Federal Reserve System only if they
elect to join. In addition, state banks whose certificates of deposit ("CDs")
may be purchased by the Portfolio are insured by the Bank Insurance Fund
administered by the FDIC (although such insurance may not be of material benefit
to the Portfolio, depending upon the principal amount of the CDs of each bank
held by the Portfolio) and are subject to Federal examination and to a
substantial body of Federal law and regulation. As a result of Federal and state
laws and regulations, domestic branches of domestic banks, among other things,
are generally required to maintain specified levels of reserves, and are subject
to other supervision and regulation designed to promote financial soundness.

Obligations of foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic branches of foreign banks, such as
CDs and time deposits ("TDs"), may be general obligations of the parent banks in
addition to the issuing branch, or may be limited by the terms of a specific
obligation or governmental regulation. Such obligations are subject to different
risks than are those of domestic banks. These risks include foreign economic and
political developments, foreign governmental restrictions that may adversely
affect payment of principal and interest on the obligations, foreign exchange
controls and foreign withholding and other taxes on interest income. Foreign
branches and subsidiaries are not necessarily subject to the same or similar
regulatory requirements that apply to domestic banks, such as mandatory reserve
requirements, loan limitations, and accounting, auditing and financial
recordkeeping requirements. In addition, less information may be publicly
available about a foreign branch of a domestic bank or about a foreign bank than
about a domestic bank. If a domestic bank with deposits insured by the FDIC
becomes insolvent, unsecured deposits and other general obligations of such
bank's foreign branches will be subordinated to the receivership expenses of the
FDIC and such bank's domestic deposits and would be subject to the loss of
principal to a greater extent than such bank's domestic branch deposits.

Obligations of United States branches of foreign banks may be
general obligations of the parent bank in addition to the issuing branch, or may
be limited by the terms of a specific obligation and by Federal and state
regulation as well as governmental action in the country in which the foreign
bank has its head office. In addition, Federal branches licensed by the
Comptroller of the Currency and branches licensed by certain states ("State
Branches") may be required to: (1) pledge to the regulator, by depositing assets
with a designated bank within the state, a certain percentage of their assets as
fixed from time to time by the appropriate regulatory authority; and (2)
maintain assets within the state in an amount equal to a specified percentage of
the aggregate amount of liabilities of the foreign bank payable at or through
all of its agencies or branches within the state. The deposits of Federal and
State Branches generally must be insured by the FDIC if such branches take
deposits of less than $100,000.

In view of the foregoing factors associated with the purchase
of CDs and TDs issued by foreign branches of domestic banks, by foreign
subsidiaries of domestic banks, or by domestic branches of foreign banks, the
Adviser carefully evaluates such investments on a case-by-case basis.

Each Portfolio may purchase CDs issued by banks, savings and
loan associations and similar thrift institutions with less than $1 billion in
assets, which are members of the FDIC, provided such Portfolio purchases any
such CD in a principal amount of not more than $100,000, which amount would be
fully insured by the Bank Insurance Fund or the Savings Association Insurance
Fund administered by the FDIC. Interest payments on such a CD are not insured by
the FDIC. No Portfolio will own more than one such CD per such issuer.

Repurchase Agreements. Each Portfolio may enter into
repurchase agreements. The Fund's custodian or sub-custodian employed in
connection with third-party repurchase transactions will have custody of, and
will hold in a segregated account, securities acquired by a Portfolio under a
repurchase agreement. In connection with its third-party repurchase
transactions, the Fund will employ only eligible sub-custodians that meet the
requirements set forth in Section 17(f) of the Investment Company Act of 1940,
as amended (the "1940 Act"). Repurchase agreements are considered by the staff
of the Securities and Exchange Commission to be loans by the Portfolio entering
into them. In an attempt to reduce the risk of incurring a loss on a repurchase
agreement, each Portfolio will enter into repurchase agreements only with
registered or unregistered securities dealers or banks with total assets in
excess of one billion dollars or primary government securities dealers reporting
to the Federal Reserve Bank of New York, with respect to securities of the type
in which such Portfolio may invest or government securities regardless of their
remaining maturities, and will require that additional securities be deposited
with it if the value of the securities purchased should decrease below resale
price. The Adviser will monitor on an ongoing basis the value of the collateral
to assure that it always equals or exceeds the repurchase price. Each Portfolio
will consider on an ongoing basis the creditworthiness of the institutions with
which it enters into repurchase agreements.

Illiquid Securities. Where a substantial market of qualified
institutional buyers has developed for certain restricted securities purchased
by the Fund pursuant to Rule 144A under the Securities Act of 1933, as amended,
the Fund intends to treat such securities as liquid securities in accordance
with procedures approved by the Fund's Board. Because it is not possible to
predict with assurance how the market for specific restricted securities sold
pursuant to Rule 144A will develop, the Fund's Board has directed the Adviser to
monitor carefully each Portfolio's investments in such securities with
particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that, for a period of
time, qualified institutional buyers cease purchasing restricted securities
pursuant to Rule 144A, a Portfolio's investing in such securities may have the
effect of increasing the level of illiquidity in its investment portfolio during
such period.

Forward Commitments. Securities purchased on a forward commitment
or when-issued basis are subject to changes in value (generally changing in the
same way, i.e., appreciating when interest rates decline and depreciating when
interest rates rise) based upon the public's perception of the creditworthiness
of the issuer and changes, real or anticipated, in the level of interest rates.
Securities purchased on a forward commitment or when-issued basis may expose the
Portfolio to risks because they may experience such fluctuations prior to their
actual delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself.
Purchasing securities on a forward commitment or when- issued basis when the
Portfolio is fully or almost fully invested may result in greater potential
fluctuation in the value of the Portfolio's net assets and its net asset value
per share.

Mortgage-Related Securities. (Investment Grade Bond Portfolio,
Capital Growth Portfolio and Short-Intermediate Duration Bond Portfolio)

Government Agency Securities--Mortgage-related securities issued by the
Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.

Government Related Securities--Mortgage-related securities issued by the Federal
National Mortgage Association ("FNMA") include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of the FNMA and are not backed by or entitled to the full faith and
credit of the Untied States. The FNMA is a government-sponsored organization
owned entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of principal and interest by FNMA.

Mortgage-related securities issued by the Federal Home Loan
Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "PCs"). The FHLMC is a corporate
instrumentality of the United States created pursuant to an Act of Congress,
which is owned entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Bank and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying mortgage loans. When
the FHLMC does not guarantee timely payment of principal, FHLMC may remit the
amount due on account of its guarantee of ultimate payment of principal at any
time after default on an underlying mortgage, but in no event later than one
year after it becomes payable.

Private Entity Securities--These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Timely payment
of principal and interest on mortgage-related securities backed by pools created
by non-governmental issuers often is supported partially by various forms of
insurance or guarantees, including individual loan, title, pool and hazard
insurance. The insurance and guarantees are issued by government entities,
private insurers and the mortgage poolers. There can be no assurance that the
private insurers or mortgage poolers can meet their obligations under the
policies, so that if the issuers default on their obligations the holders of the
security could sustain a loss. No insurance or guarantee covers the Portfolio or
the price of the Portfolio's shares. Mortgage- related securities issued by
non-governmental issuers generally offer a higher rate of interest than
government-agency and government-related securities because there are no direct
or indirect government guarantees of payment.

Standard & Poor's Depositary Receipts. (Capital Growth
Portfolio) These securities, commonly referred to as "spiders," represent an
interest in a fixed portfolio of common stocks designed to track the price and
dividend yield performance of the Standard & Poor's 500 Index or the Standard &
Poor's MidCap 400 Index, as the case may be.

Municipal Obligations. (Investment Grade Bond Portfolio,
Short-Intermediate Duration Bond Portfolio and Tennessee Tax Exempt Bond
Portfolio) The term "Municipal Obligations" generally includes debt obligations
issued to obtain funds for various public purposes, including the construction
of a wide range of public facilities such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets and water and sewer
works. Other public purposes for which Municipal Obligations may be issued
include refunding outstanding obligations, obtaining funds for general operating
expenses and lending such funds to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide for the construction,
equipment, repair or improvement of privately operated housing facilities,
sports facilities, convention or trade show facilities, airport, mass transit,
industrial, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity, or
sewage or solid waste disposal; the interest paid on such obligations may be
exempt from Federal income tax, although current tax laws place substantial
limitations on the size of such issues. There are, of course, variations in the
security of Municipal Obligations, both within a particular classification and
between classifications.

Floating and variable rate demand notes and bonds are tax
exempt obligations ordinarily having stated maturities in excess of one year,
but which permit the holder to demand payment of principal at any time, or at
specified intervals. The issuer of such obligations ordinarily has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders thereof. The interest rate on a
floating rate demand obligation is based on a known lending rate, such as a
bank's prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable rate demand obligation is adjusted
automatically at specified intervals.

The yields on Municipal Obligations are dependent on a variety
of factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a particular
offering, maturity of the obligation and rating of the issue. The imposition of
the advisory and administration fees, as well as other operating expenses, will
have the effect of reducing the yield to investors.

The Tennessee Tax Exempt Bond Portfolio may invest up to 5% of
the value of its total assets in municipal lease obligations or installment
purchase contract obligations (collectively, "lease obligations"). Lease
obligations have special risks not ordinarily associated with Municipal
Obligations. Although lease obligations do not constitute general obligations of
the municipality for which the municipality's taxing power is pledged, a lease
obligation ordinarily is backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. Certain lease
obligations in which the Tennessee Tax Exempt Bond Portfolio may invest may
contain "non-appropriation" clauses which provide that the municipality has no
obligation to make lease payments in future years unless money is appropriated
for such purpose on a yearly basis. Although "non-appropriation" lease
obligations are secured by the leased property, disposition of the leased
property in the event of foreclosure might prove difficult. In addition, no
assurance can be given as to the liquidity of certain lease obligations. The
staff of the Securities and Exchange Commission currently considers certain
lease obligations to be illiquid. The Fund's Board of Directors has established
guidelines for the Adviser to determine the liquidity and appropriate valuation
of lease obligations based on factors which include: (1) the frequency of trades
and quotes for the lease obligation or similar securities; (2) the number of
dealers willing to purchase or sell the lease obligation or similar securities
and the number of other potential buyers; (3) the willingness of dealers to
undertake to make a market in the security or similar securities; and (4) the
nature of the marketplace trades, including the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of transfer.

The Tennessee Tax Exempt Bond Portfolio will purchase tender
option bonds only when it is satisfied that the custodial and tender option
arrangements, including the fee payment arrangements, will not adversely affect
the tax exempt status of the underlying Municipal Obligations and that payment
of any tender fees will not have the effect of creating taxable income for the
Portfolio. Based on the tender option bond agreement, the Portfolio expects to
be able to value the tender option bond at par; however, the value of the
instrument will be monitored to assure that is valued at fair value.

Ratings of Municipal Obligations. Subsequent to its purchase
by a Portfolio, an issue of rated Municipal Obligations may cease to be rated or
its rating may be reduced below the minimum required for purchase by the
Portfolio. Neither event will require the sale of such Municipal Obligations by
the Portfolio, but the Adviser will consider such event in determining whether
the Portfolio should continue to hold the Municipal Obligations. To the extent
that the ratings given by Moody's, S&P or Fitch for Municipal Obligations may
change as a result of changes in such organizations or their rating systems, the
Portfolio will attempt to use comparable ratings as standards for its
investments in accordance with the investment policies contained in the relevant
Portfolio's Prospectus and this Statement of Additional Information. The ratings
of Moody's, S&P and Fitch represent their opinions as to the quality of the
Municipal Obligations which they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute standards
of quality. Although these ratings may be an initial criterion for selection of
portfolio investments, the Adviser also will evaluate these securities and the
creditworthiness of the issuers of such securities based upon financial and
other available information.

The average distribution of investments (at value) in
Municipal Obligations by ratings for the fiscal year ended December 31, 1995,
computed on a monthly basis, for the Tennessee Tax Exempt Bond Portfolio was as
follows:

<TABLE>
<CAPTION>
Moody's Standard
Investors Fitch Investors & Poor's
Service, Inc. Service, L.P. Ratings Group Percentage
("Moody's") ("Fitch") ("S&P") of Value

Management Policies

Options Transactions. (Capital Growth Portfolio) The Capital
Growth Portfolio may engage in options transactions, such as purchasing or
writing covered call or put options. The principal reason for the Portfolio
writing covered call options is to realize, through the receipt of premiums, a
greater return than would be realized on its portfolio securities alone. In
return for a premium, the writer of a covered call option forfeits the right to
any appreciation in the value of the underlying security above the strike price
for the life of the option (or until a closing purchase transaction can be
effected). Nevertheless, the call writer retains the risk of a decline in the
price of the underlying security. Similarly, the principal reason for writing
covered put options is to realize income in the form of premiums. The writer of
a covered put option accepts the risk of a decline in the price of the
underlying security. The size of the premiums that the Portfolio may receive may
be adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option-writing activities.

Options written ordinarily will have expiration dates between
one and nine months from the date written. The exercise price of the options may
be below, equal to or above the market values of the underlying securities at
the time the options are written. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money" and "out-of-the-
money," respectively. The Portfolio may write (a) in-the-money call options when
the Adviser expects that the price of the underlying security will remain stable
or decline moderately during the option period, (b) at-the-money call options
when the Adviser expects that the price of the underlying security will remain
stable or advance moderately during the option period and (c) out- of-the-money
call options when the Adviser expects that the premiums received from writing
the call option plus the appreciation in market price of the underlying security
up to the exercise price will be greater than the appreciation in the price of
the underlying security alone. In these circumstances, if the market price of
the underlying security declines and the security is sold at this lower price,
the amount of any realized loss will be offset wholly or in part by the premium
received. Out-of-the- money, at-the-money and in-the-money put options (the
reverse of call options as to the relation of exercise price to market price)
may be utilized in the same market environments that such call options are used
in equivalent transactions.

So long as the Portfolio's obligation as the writer of an
option continues, it may be assigned an exercise notice by the broker-dealer
through which the option was sold, requiring it to deliver, in the case of a
call, or take delivery of, in the case of a put, the underlying security against
payment of the exercise price. This obligation terminates when the option
expires or the Portfolio effects a closing purchase transaction. The Portfolio
can no longer effect a closing purchase transaction with respect to an option
once it has been assigned an exercise notice.

While it may choose to do otherwise, the Portfolio generally
will purchase or write only those options for which the Adviser believes there
is an active secondary market so as to facilitate closing transactions. There is
no assurance that sufficient trading interest to create a liquid secondary
market on a securities exchange will exist for any particular option or at any
particular time, and for some options no such secondary market may exist. A
liquid secondary market in an option may cease to exist for a variety of
reasons. In the past, for example, higher than anticipated trading activity or
order flow, or other unforeseen events, at times have rendered certain clearing
facilities inadequate and resulted in the institution of special procedures,
such as trading rotations, restrictions on certain types of orders or trading
halts or suspensions in one or more options. There can be no assurance that
similar events, or events that otherwise may interfere with the timely execution
of customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. If, as a covered call option
writer, the Portfolio is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise or it
otherwise covers its position.

The Portfolio intends to treat options in respect of specific
securities that are not traded on a national securities exchange and the
securities underlying covered call options written by the Portfolio as illiquid
securities.

The Portfolio will purchase options only to the extent
permitted by the policies of state securities authorities in states where units
of the Portfolio are qualified for offer and sale.

Stock Index Options. (Capital Growth Portfolio) The Capital
Growth Portfolio may purchase and write put and call options on stock indexes to
the extent of 15% of the value of its net assets. Options on stock indexes are
similar to options on stock except that (a) the expiration cycles of stock index
options are monthly, while those of stock options are currently quarterly, and
(b) the delivery requirements are different. Instead of giving the right to take
or make delivery of a stock at a specified price, an option on a stock index
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount, if any, by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of exercise, multiplied by
(ii) a fixed "index multiplier." Receipt of this cash amount will depend upon
the closing level of the stock index upon which the option is based being
greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. The amount of cash received will be equal to such
difference between the closing price of the index and the exercise price of the
option expressed in dollars times a specified multiple. The writer of the option
is obligated, in return for the premium received, to make delivery of this
amount. The writer may offset its position in stock index options prior to
expiration by entering into a closing transaction on an exchange or it may let
the option expire unexercised.

Futures Contracts and Options on Futures Contracts. (Capital
Growth Portfolio and Tennessee Tax Exempt Bond Portfolio) Upon exercise of an
option, the writer of the option delivers to the holder of the option the
futures position and the accumulated balance in the writer's futures margin
account, which represents the amount by which the market price of the futures
contract exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract. The potential loss
related to the purchase of options on futures contracts is limited to the
premium paid for the option (plus transaction costs). Because the value of the
option is fixed at the time of sale, there are no daily cash payments to reflect
changes in the value of the underlying contract; however, the value of the
option does change daily and that change would be reflected in the net asset
value of the Portfolio.

Future Developments. Each Portfolio may take advantage of
opportunities in the area of options and futures contracts and options on
futures contracts and any other derivative investments which are not presently
contemplated for use by such Portfolio or which are not currently available but
which may be developed, to the extent such opportunities are both consistent
with its investment objective and legally permissible for the Portfolio. Before
entering into such transactions or making any such investment, the Portfolio
will provide appropriate disclosure in its prospectus.

Lending Portfolio Securities. To a limited extent, each Portfolio
may lend its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value of
the securities loaned. By lending its portfolio securities, a Portfolio can
increase its income through the investment of the cash collateral. For purposes
of this policy, each Portfolio considers collateral consisting of U.S.
Government securities to be the equivalent of cash. From time to time, a
Portfolio may return to the borrower or a third party which is unaffiliated with
the Fund, and which is acting as a "placing broker," a part of the interest
earned from the investment of collateral received for securities loaned.

The Securities and Exchange Commission currently requires that
the following conditions must be met whenever portfolio securities are loaned:
(1) the Portfolio must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Portfolio must be
able to terminate the loan at any time; (4) the Portfolio must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; (5) the Portfolio may pay only reasonable custodian fees in connection
with the loan; and (6) while voting rights on the loaned securities may
pass to the borrower, the Fund's Board of Directors must terminate the loan and
regain the right to vote the securities if a material event adversely affecting
the investment occurs. These conditions may be subject to future modification.

Investment Considerations and Risk Factors

Investing in Tennessee Municipal Obligations. (Tennessee Tax
Exempt Bond Portfolio) Investors in the Tennessee Tax Exempt Bond Portfolio
should consider carefully the special risks inherent in such Portfolio's
investment in Tennessee Municipal Obligations. These risks result from the
financial condition of the State of Tennessee. The following information
constitutes only a brief summary, does not purport to be a complete description,
and is based on information drawn from official statements relating to
securities offerings of the State of Tennessee (the "State") and various local
agencies, available as of the date of the Statement of Additional Information.
While the Fund has not independently verified such information, it has no reason
to believe that such information is not correct in all material respects.

In 1978, the voters of the State of Tennessee approved an
amendment to the State Constitution requiring that (1) the total expenditures of
the State for any fiscal year shall not exceed the State's revenues and
reserves, including the proceeds of debt obligations issued to finance capital
expenditures and (2) in no year shall the rate of growth of appropriations from
State tax revenues exceed the estimated rate of growth of the State's economy.
In the past the Governor and the General Assembly have had to restrict
expenditures to comply with the State Constitution.

The Constitution of the State of Tennessee requires a balanced
budget. As required by law, the legislature enacted a balanced budget for fiscal
year 1994-95. Beginning January 1, 1994, the State of Tennessee received a
waiver from the Federal government to replace Medicaid with the new program,
TennCare. TennCare was implemented to help control the increasing cost of health
care and to provide insurance coverage not only to previous Medicaid eligible
individuals but also to uninsured Tennesseans. Due principally to inaccurate
funding assumptions with respect to TennCare program, the fiscal ended June 30,
1995 had an estimated budgetary shortfall of $126 million.

Despite the budgetary concerns caused by the costs associated
with implementing TennCare, the economic outlook for Tennessee remains
favorable. The State's economic diversity has improved substantially over the
last eleven years. Investments announced in new and expanding business exceeded
$1 billion in each of those years and exceeded $2 billion in the last two years.
The $3.2 billion in announced capital investments in 1989 was the single largest
year and exceeded the $2.78 billion in 1985 when Saturn Corporation chose
Tennessee for its plant site. This growth created 23,800 new jobs in Tennessee
for the year ended June 1994.

The Tennessee General Assembly enacted a balanced budget for
fiscal year 1994-95. The budget included a two percent salary increase for State
employees, public higher education employees and teachers in the public school
system effective on July 1, 1994, and another two percent salary increase
effective on October 1, 1994. The revenue estimates were officially revised at
March 1 when the budget for the fiscal year 1995-96 was presented to the General
Assembly.

Actual revenue collections for fiscal year 1994-95 through
January 1995 reflected increases of 9.68% for the sales tax and 17.45% for the
combined excise tax and franchise tax. Total growth in collections, excluding
the health services tax, is 9.07%. Expenditures for TennCare (a recently
implemented managed care program for Tennessee's poor and uninsured, under a
Medicaid waiver), the housing of state prisoners, institutional operating costs
in prisons, the children's plan and some other services were in excess of the
original budgeted amounts for fiscal year 1994-95. Supplemental appropriations
were accommodated within the revised revenue estimates and a proposal to use
one-time reserves. The recommended budget for 1995-96 continues the funding of
improvements in the Basic Education Program for public schools and begins
funding teacher salary equalization. It funds TennCare and the Administration's
proposed crime legislation. The revenue estimates for fiscal year 1995-96
assumed a 6.3% growth in the sales tax, and a 5.0% growth in the excise and
franchise taxes. The assumed growth in all collections by the Department of
Revenue is 5.08%. The Revenue Fluctuation Reserve was reduced to $101.4 million
at June 30, 1994 due to accrued liabilities in the children's plan and other
programs. The new budget maintains the reserve at $101.4 million for fiscal
years 1994-95 and 1995-96.

On March 22, 1993, the Tennessee Supreme Court affirmed a lower
court decision that funding for the pubic school system in Tennessee is
unconstitutional because citizens in more affluent school districts receive
greater educational funding. The case was remanded to the trial court for
further proceedings with respect to the State's providing additional funding to
less affluent school systems. After substantial subsequent litigation, the
Tennessee Supreme Court issued on February 16, 1995, an opinion approving the
State's plan set forth in the Educational Improvement Act of 1992 with the
modification that the plan should also include a provision to equalize teachers'
salaries in the same way that other expenditures were to be equalized under the
program. The result of this decision may be that the State must provide
additional funding to less affluent school systems. Currently, the general
obligation ratings for the State are Aaa by Moody's, AA+ by S&P and AAA by
Fitch.

Lower Rated Securities. (Capital Growth Portfolio) The Capital
Growth Portfolio is permitted to invest in securities rated as low as Ba by
Moody's or BB by S&P, Fitch or Duff & Phelps Credit Rating Co. ("Duff"). Such
securities, though higher yielding, are characterized by risk. See "Description
of the Portfolios-- Investment Considerations and Risk Factors--Lower Rated
Securities" in the Prospectus for a discussion of certain risks and the
"Appendix" for a general description of Moody's, S&P, Fitch and Duff ratings.
Although ratings may be useful in evaluating the
safety of interest and principal payments, they do not evaluate the market value
risk of these securities. The Portfolio will rely on the Adviser's judgment,
analysis and experience in evaluating the creditworthiness of an issuer.

Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities and will fluctuate over time. These securities are considered
by S&P, Moody's, Fitch and Duff, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation and generally will involve more credit risk than
securities in the higher rating categories.

Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with the higher rated securities.
For example, during an economic downturn or a sustained period of rising
interest rates, highly leveraged issuers of these securities may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations also may be affected adversely by
specific corporate developments, forecasts, or the unavailability of additional
financing. The risk of loss because of default by the issuer is significantly
greater for the holders of these securities because such securities generally
are unsecured and often are subordinated to other creditors of the issuer.

Because there is no established retail secondary market for many
of these securities, the Portfolio anticipates that such securities could be
sold only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these securities does exist, it generally
is not as liquid as the secondary market for higher rated securities. The lack
of a liquid secondary market may have an adverse impact on market price and
yield and the Portfolio's ability to dispose of particular issues when necessary
to meet its liquidity needs or in response to a specific economic event such as
a deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Portfolio to obtain accurate market quotations for purposes of valuing its
securities and calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable, objective data may be
available.

These securities may be particularly susceptible to economic
downturns. It is likely that an economic recession could disrupt severely the
market for such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn could
adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default for
such securities.

The Portfolio may acquire these securities during an initial
offering. Such securities may involve special risks because they are new issues.
The Portfolio does not have any arrangement with any persons concerning the
acquisition of such securities, and the Adviser will review carefully the credit
and other characteristics pertinent to such new issues.

The credit risk factors pertaining to lower rated securities also
apply to lower rated zero coupon securities. Such zero coupon securities carry
an additional risk in that, unlike securities which pay interest throughout the
period to maturity, the Portfolio will realize no cash until the cash payment
date unless a portion of such securities are sold and, if the issuer defaults,
the Portfolio may obtain no return at all on its investment. See "Dividends,
Distributions and Taxes."

Investment Restrictions

Each Portfolio has adopted investment restrictions numbered 1
through 8 as fundamental policies. These restrictions cannot be changed, as to a
Portfolio, without approval by the holders of a majority (as defined in the 1940
Act) of such Portfolio's outstanding voting securities. Investment restrictions
numbered 9 through 14 are not fundamental policies and may be changed by vote of
a majority of the Fund's Directors at any time. No Portfolio may:

2. Purchase, hold or deal in real estate, or oil, gas or other
mineral leases or exploration or development programs, but each Portfolio may
purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate.

3. Borrow money, except that the Portfolio may borrow up to
33-1/3% of the value of its total assets. For purposes of this investment
restriction, a Portfolio's entry into options, forward contracts, futures
contracts, including those relating to indexes, and options on futures contracts
or indexes shall not constitute borrowing.

4. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, each Portfolio
may lend its portfolio securities in an amount not to exceed 33-1/3% of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange Commission
and the Fund's Board of Directors.

5. Act as an underwriter of securities of other issuers, except
to the extent the Portfolio may be deemed an underwriter under the Securities
Act of 1933, as amended, by virtue of disposing of portfolio securities, and
except that the Tennessee Tax Exempt Bond Portfolio, Short-Intermediate Duration
Bond Portfolio and Investment Grade Bond Portfolio each may bid separately or as
part of a group for the purchase of Municipal Obligations directly from an
issuer for its own portfolio to take advantage of the lower purchase price
available.

6. Invest more than 25% of its assets in the securities of
issuers in any single industry, provided that, in the case of the Tennessee Tax
Exempt Bond Portfolio, there shall be no such limitation on the purchase of tax
exempt municipal obligations and, in the case of each Portfolio, there shall be
no limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

7. Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act), except to the extent the activities permitted in
Investment Restriction Nos. 1, 3, 10 and 11 may be deemed to give rise to a
senior security.

8. Purchase securities on margin, but each Portfolio may make
margin deposits in connection with transactions in options, forward contracts,
futures contracts, including those relating to indexes, and options on futures
contracts or indexes.

9. Invest in the securities of a company for the purpose of
exercising management or control, but each Portfolio will vote the securities it
owns as a shareholder in accordance with its views.

10. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued or forward commitment basis and the
deposit of assets in escrow in connection with writing covered put and call
options and collateral and initial or variation margin arrangements with respect
to options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.

11. Purchase, sell or write puts, calls or combinations thereof,
except as may be described in the Portfolios' Prospectus and this Statement of
Additional Information.

12. Purchase securities of any company having less than three
years' continuous operations (including operations of any predecessors) if such
purchase would cause the value of the Portfolio's investments in all such
companies to exceed 5% of the value of its total assets.

13. Enter into repurchase agreements providing for settlement in
more than seven days after notice or purchase securities which are illiquid, if,
in the aggregate, more than 10% of the value of the Portfolio's net assets would
be so invested.

14. Purchase securities of other investment companies, except to
the extent permitted under the 1940 Act.

For purposes of Investment Restriction No. 6, industrial
development bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together as an
"industry."

If a percentage restriction is adhered to at the time of
investment, a later change in percentage resulting from a change in values or
assets will not constitute a violation of such restriction.

MANAGEMENT OF THE FUND

Directors and officers of the Fund, together with information as
to their principal business occupations during at least the last five years, are
shown below. Each Director who is an "interested person" of the Fund, as defined
in the 1940 Act, is indicated by an asterisk.

Directors of the Fund

NORMA A. COLDWELL, Director. International Economist and Consultant;
Executive Vice President of Coldwell Financial Consultants;
Trustee and Treasurer of Meridian House International
(International Education and Cultural Group); Member of the
Board of Advisors of Meridian International Center and
Emerging Capital Markets, S.A. (Montevideo, Uruguay);
formerly, Chief International Economist of Riggs National
Bank, Washington, D.C. She is 70 years old and her address is
3330 Southwestern Boulevard, Dallas, Texas 75225.

RICHARD H. FRANCIS, Director. Former Executive Vice President
and Chief Financial Officer of Pan American World
Airways, Inc. (currently, debtor-in-possession under the
U.S. Bankruptcy Code), March 1988 to October 1991; Senior
Vice President and Chief Financial Officer of American
Standard Inc., 1960 to March 1988. Mr. Francis is a
director of Allendale Mutual Insurance and The Indonesia
Fund, Inc. He is 63 years old and his address is 40
Grosvenor Road, Short Hills, New Jersey 07078.

ROBERT A. ROBINSON, Director. Private investor. Since 1991,
President Emeritus, and from 1968 to 1991, President of The
Church Pension Group, NYC. From 1956 to 1966, Senior Vice
President of Colonial Bank & Trust Co. He is also a
director of Mariner Institutional Funds, Inc., Mariner Tax-
Free Institutional Funds, Inc., UST Master Funds, UST
Master Tax Exempt Funds, H.B. and F.H. Bugher Foundation,
Morehouse-Barlow Co. Publishers, The Canterbury Cathedral
Trust in America, The Living Church Foundation and Hoosac
School. He is 70 years old and his address is 2 Hathaway
Common, New Canaan, Connecticut 06840.

Officers of the Fund

GEORGE O. MARTINEZ, President and Secretary. Senior Vice President
and Director of Legal and Compliance Services with BISYS Fund
Services, Inc., the Administrator's general partner, since
April 1995, and an officer of other investment companies
administered by the Administrator or its affiliates. Prior
thereto, he was Vice President and Associate General Counsel
with Alliance Capital Management, L.P. He is 36 years old and
his address is 3435 Stelzer Road, Columbus, Ohio 43219.

WILLIAM TOMKO, Vice President. An employee of BISYS Fund Services,
Inc. and an officer of other investment companies
administered by the Administrator or its affiliates. He is
37 years old and his address is 3435 Stelzer Road,
Columbus, Ohio 43219.

ALAINA METZ, Assistant Secretary. An employee of BISYS Fund
Services, Inc. and an officer of other investment companies
administered by the Administrator or its affiliates. She
is 28 years old and her address is 3435 Stelzer Road,
Columbus, Ohio 43219.

For so long as the Distribution Plan described in the section
captioned "Management Arrangements--Distribution Plan" remains in effect, the
Directors of the Fund who are not "interested persons" of the Fund, as defined
in the 1940 Act, will be selected and nominated by the Directors who are not
"interested persons" of the Fund.

Directors and officers of the Fund, as a group, owned less
than 1% of any Portfolio's shares of common stock outstanding on April 1, 1996.

Aggregate Total Compensation From Fund
Name of Board Compensation from and Fund Complex Paid
Member Fund* to Board Member*

Norma A. Coldwell $11,250 $11,250

John H. Forsgren $10,000 $10,000

William W. McInnes $ 7,500 $ 7,500

Robert A. Robinson $ 2,500 $ 2,500

</TABLE>

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

* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $6,434 for all Directors as a group.

MANAGEMENT ARRANGEMENTS

The following information supplements and should be read in
conjunction with the section in the Portfolios' Prospectus entitled "Management
of the Portfolios."

Investment Advisory Agreement. The Adviser provides investment
advisory services pursuant to the Investment Advisory Agreement (the
"Agreement") dated February 15, 1994 with the Fund. As to each Portfolio, the
Agreement is subject to annual approval by (i) the Fund's Board of Directors or
(ii) vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of such Portfolio, provided that in either event the continuance also
is approved by a majority of the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Adviser, by vote cast in person at a
meeting called for the purpose of voting on such approval. The Agreement was
last approved by the Fund's Board of Directors, including a majority of the
Directors who are not "interested persons" of any party to the Agreement, at a
meeting held on October 25, 1995. As to each Portfolio, the Agreement is
terminable without penalty, on 60 days' notice, by the Fund's Board of Directors
or by vote of the holders of a majority of such Portfolio's shares, or, on not
less than 90 days' notice, by the Adviser. The Agreement will terminate
automatically, as to the relevant Portfolio, in the event of its assignment (as
defined in the 1940 Act).

As compensation for the Adviser's services, the Fund has
agreed to pay the Adviser a monthly investment advisory fee at the annual rate
of .50 of 1% of the value of Short-Intermediate Duration Bond Portfolio's,
Investment Grade Bond Portfolio's and Tennessee Tax Exempt Bond Portfolio's
average daily net assets and .65% of 1% of the value of the Capital Growth
Portfolio's average daily net assets. For the period March 28, 1994
(commencement of operations) through December 31, 1994 and for the fiscal year
ended December 31, 1995, $193,049 and $491,561, respectively, was payable by the
Short- Intermediate Duration Bond Portfolio and $326,848 and $463,502,
respectively, was payable by the Tennessee Tax Exempt Bond Portfolio pursuant to
the Agreement. The Adviser waived $49,660 and $55,056 of such fees payable for
the period ended December 31, 1994 by the Short-Intermediate Duration Bond
Portfolio and Tennessee Tax Exempt Bond Portfolio, respectively, resulting in
net fees being paid to the Adviser of $143,389 by the Short-Intermediate
Duration Bond Portfolio and $271,792 by the Tennessee Tax Exempt Bond Portfolio
during the fiscal period ended December 31, 1994.

Administration Agreement. The Administrator provides certain
administrative services pursuant to the Administration Agreement (the
"Administration Agreement") dated April 25, 1996 with the Fund. As to each
Portfolio, the Administration Agreement will continue until April 25, 2001 and
thereafter is subject to annual approval by (i) the Fund's Board of Directors or
(ii) vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of such Portfolio, provided that in either event the continuance also
is approved by a majority of the Directors who are
not "interested persons" (as defined in the 1940 Act) of the Fund or the
Administrator, by vote cast in person at a meeting called for the purpose of
voting such approval. The Administration Agreement was last approved by the
Fund's Board of Directors, including a majority of the Directors who are not
"interested persons" of any party to the Administration Agreement, at a meeting
held on April 25, 1996. As to each Portfolio, the Administration Agreement is
terminable without penalty, at any time if for cause, by the Fund's Board of
Directors or by vote of the holders of a majority of such Portfolio's
outstanding voting securities, or, on not less than 90 days' notice, by the
Administrator. The Administration Agreement will terminate automatically, as to
the relevant Portfolio, in the event of its assignment (as defined in the 1940
Act).

As compensation for the Administrator's services, the Fund has
agreed to pay the Administrator a monthly administration fee at the annual rate
of .15 of 1% of the value of each Portfolio's average daily net assets. For the
period March 28, 1994 (commencement of operations) through December 31, 1994 and
for the fiscal year ended December 31, 1995, $57,915 and $147,468, respectively,
was payable to Concord Holding Corporation, an affiliate of the Administrator
and the Portfolios' administrator during such periods, by the Short-
Intermediate Duration Bond Portfolio and $98,054 and $139,051, respectively, was
payable to Concord Holding Corporation as administrator by the Tennessee Tax
Exempt Bond Portfolio pursuant to an Administration Agreement with Concord
Holding Corporation which was terminated on April 25, 1996. Concord Holding
Corporation waived $13,997 and $16,134 of such fees payable for the period ended
December 31, 1994 by the Short-Intermediate Duration Bond Portfolio and
Tennessee Tax Exempt Bond Portfolio, respectively, resulting in net fees being
paid to Concord Holding Corporation of $43,918 by the Short-Intermediate
Duration Bond Portfolio and $81,920 by the Tennessee Tax Exempt Bond Portfolio
during the fiscal year ended December 31, 1994.

Distribution Agreement. The Distributor acts as the exclusive
distributor of each Portfolio's shares on a best efforts basis pursuant to a
Distribution Agreement (the "Distribution Agreement") dated March 29, 1995, with
the Fund. Shares are sold on a continuous basis by the Distributor as agent,
although the Distributor is not obliged to sell any particular amount of shares.
No compensation is payable by the Fund to the Distributor for its distribution
services.

For the period March 28, 1994 (commencement of operations) through December
31, 1994 and for the fiscal year ended December 31, 1995, the Distributor did
not retain any amounts from sales loads on shares of either the
Short-Intermediate Duration Bond Portfolio or the Tennessee Tax Exempt Bond
Portfolio.

Distribution Plan. (Applicable only with respect to the Investor
Shares) Rule 12b-1 (the "Rule") adopted by the Securities and Exchange
Commission under the 1940 Act provides, among other things, that an investment
company may bear expenses of distributing its shares only pursuant to a plan
adopted in accordance with the Rule. The Fund's Directors have adopted such a
plan (the "Distribution Plan") with respect to the Investor Shares pursuant to
which each Portfolio pays the Distributor for advertising, marketing and
distributing Investor Shares at an annual rate of .25% of the value of such
shares. The Fund's Directors believe that there is a reasonable likelihood that
the Distribution Plan will benefit each Portfolio and the holders of its
Investor Shares. In some states, certain institutions effecting transactions in
Investor Shares may be required to register as dealers pursuant to state law.

A quarterly report of the amounts expended under the
Distribution Plan, and the purposes for which such expenditures were incurred,
must be made to the Directors for their review. In addition, the Distribution
Plan provides that it may not be amended to increase materially the costs which
holders of the Investor Shares may bear for distribution pursuant to the
Distribution Plan without approval of such shareholders and that other material
amendments of the Distribution Plan must be approved by the Board of Directors,
and by the Directors who are neither "interested persons" (as defined in the
1940 Act) of the Fund nor have any direct or indirect financial interest in the
operation of the Distribution Plan or in the related Distribution Plan
agreements, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Distribution Plan and related agreements are
subject to annual approval by such vote of the Directors cast in person at a
meeting called for the purpose of voting on the Distribution Plan. The
Distribution Plan was last so approved on October 25, 1995. The Distribution
Plan is terminable at any time by vote of a majority of the Directors who are
not "interested persons" and who have no direct or indirect financial interest
in the operation of the Distribution Plan or in the Distribution Plan agreements
or by vote of the holders of a majority of the Investor Shares. A Distribution
Plan agreement is terminable without penalty, at any time, by such vote of the
Directors, upon not more than 60 days' written notice to the parties to such
agreement or by vote of the holders of a majority of the Portfolio's Investor
Shares. A Distribution Plan agreement will terminate automatically in the event
of its assignment (as defined in the 1940 Act).

For the fiscal year ended December 31, 1995, the Distributor
waived receipt of $245,780 payable by the Short- Intermediate Duration Bond
Portfolio and $231,751 payable by the Tennessee Tax Exempt Bond Portfolio with
respect to Investor Shares pursuant to the Distribution Plan.

Expenses. All expenses incurred in the operation of the Fund are
borne by the Fund, except to the extent specifically assumed by others. The
expenses borne by the Fund include: organizational costs, taxes, interest,
brokerage fees and commissions, if any, fees of Directors who are not officers,
directors, employees or holders of 5% or more of the outstanding voting
securities of the Adviser or Administrator or any of their affiliates,
Securities and Exchange Commission fees, state Blue Sky qualification fees,
advisory and administration fees, charges of custodians, transfer and dividend
disbursing agents' fees, certain insurance premiums, industry association fees,
auditing and legal expenses, costs of maintaining corporate existence, costs of
independent pricing services, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
calculating the net asset value of each Portfolio's shares, costs of
shareholders' reports and corporate meetings, costs of preparing and printing
certain prospectuses and statements of additional information, and any
extraordinary expenses. Expenses attributable to a Portfolio are charged against
the assets of that Portfolio; other expenses of the Fund are allocated among the
Portfolios on the basis determined by the Board of Directors, including, but not
limited to, proportionately in relation to the net assets of each Portfolio.

PURCHASE AND REDEMPTION OF SHARES

The following information supplements and should be read in
conjunction with the sections in the Portfolios' Prospectus entitled "How to Buy
Shares" and "How to Redeem Shares."

Terms of Purchase. The Fund reserves the right to reject any
purchase order and to change the amount of the minimum investment and subsequent
purchases in the Portfolios.

Sales Loads. (Applicable to Investor Shares Only) The scale of
sales loads applies to purchases of Investor Shares made by any "purchaser,"
which term includes an individual and/or spouse purchasing securities for his,
her or their own account or for the account of any minor children, or a trustee
or other fiduciary purchasing securities for a single trust estate or a single
fiduciary account trust estate or a single fiduciary account (including a
pension, profit-sharing or other employee benefit trust created pursuant to a
plan qualified under Section 401 of the Internal Revenue Code of 1986, as
amended (the "Code")) although more than one beneficiary is involved; or a group
of accounts established by or on behalf of the employees of an employer or
affiliated employers pursuant to an employee benefit plan or other program
(including accounts established pursuant to Sections 403(b), 408(k) and 457 of
the Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the purchases
are made through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.

Set forth below are examples of the method of computing the
offering price of the Investor Shares of the Short-Intermediate Duration Bond
Portfolio and Tennessee Tax Exempt Bond Portfolio. The examples assume a
purchase of Investor Shares of the Portfolio aggregating less than $100,000
subject to the current schedule of sales charges set forth in the Fund's
Prospectus at a price based
upon the net asset value of the Portfolio's Investor Shares on
December 31, 1995:

Short-Intermediate Duration Bond Portfolio:

Net Asset Value per Share $ 10.13

Per Share Sales Charge - 3.00%
of offering price (3.09% of
net asset value per share) $ 0.31

Per Share Offering Price to
the Public $ 10.44

Tennessee Tax Exempt Bond Portfolio:

Net Asset Value per Share $ 10.19

Per Share Sales Charge - 3.00%
of offering price (3.09% of
net asset value per share) $ 0.32

Per Share Offering Price to
the Public $ 10.51

Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.

Stock Certificates; Signatures. Any certificate representing
Portfolio shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including each
holder of a joint account, and each signature must be guaranteed. Signatures on
endorsed certificates submitted for redemption also must be guaranteed. The
Fund's Transfer Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP") and the
Stock Exchanges Medallion Program. Signature-guaranties may not be provided by
notaries public. If the signature is guaranteed by a broker or dealer, such
broker or dealer must be a member of a clearing corporation and maintain net
capital of at least $100,000. Guarantees must be signed by an authorized
signatory of the guarantor and "Signature-Guaranteed" must appear with the
signature.

Redemption Commitment. Each Portfolio has committed itself to pay
in cash all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of such
Portfolio's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such amount, the
Board of Directors reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Portfolio to the detriment of the
existing shareholders. In this event, the securities would be valued in the same
manner as the Portfolio is valued. If the recipient sold such securities,
brokerage charges would be incurred.

Suspension of Redemptions. The right of redemption may be
suspended or the date of payment postponed (a) during any period when the New
York Stock Exchange is closed (other than customary weekend and holiday
closing), (b) when trading in the markets the Portfolio normally utilizes is
restricted, or when an emergency exists as determined by the Securities and
Exchange Commission so that disposal of the Portfolio's investments or
determination of its net asset value is not reasonably practicable, or (c) for
such other periods as the Securities and Exchange Commission by order may permit
to protect the Portfolio's shareholders.

DETERMINATION OF NET ASSET VALUE

The following information supplements and should be read in
conjunction with the section in the Portfolios' Prospectus entitled "How to Buy
Shares."

General. Expenses and fees, including the advisory fee and fees
paid by Investor Shares pursuant to the Distribution Plan, are accrued daily and
taken into account for the purpose of determining the net asset value of
Portfolio shares.

Capital Growth Portfolio. The Portfolio's securities, including
covered call options written by the Portfolio, are valued at the last sale price
on the securities exchange or national securities market on which such
securities primarily are traded. Securities not listed on an exchange or
national securities market, or securities in which there were no transactions,
are valued at the average of the most recent bid and asked prices, except in the
case of open short positions where the asked price is used for valuation
purposes. Bid price is used when no asked price is available. Any assets or
liabilities initially expressed in terms of foreign currency will be translated
into dollars at the midpoint of the New York interbank market spot exchange rate
as quoted on the day of such translation by the Federal Reserve Bank of New York
or if no such rate is quoted on such date, at the exchange rate previously
quoted by the Federal Reserve Bank of New York or at such other quoted market
exchange rate as may be determined to be appropriate by the Adviser. Short-term
investments are carried at amortized cost, which approximates value. Any
securities or other assets for which recent market quotations are not readily
available are valued at fair value as determined in good faith by the Fund's
Board of Directors.

Restricted securities, as well as securities or other assets for
which market quotations are not readily available, or are not valued by a
pricing service approved by the Board of Directors, are valued at fair value as
determined in good faith by the Board of Directors. The Board of Directors will
review the method of valuation on a current basis. In making their good faith
valuation of restricted securities, the Directors generally will take the
following factors into consideration: restricted securities which are, or are
convertible into, securities of the same class of securities for which a public
market exists usually will be valued at market value less the same percentage
discount at which purchased. This discount will be revised periodically by the
Board of Directors if the Directors believe that it no longer reflects the value
of the restricted securities. Restricted securities not of the same class as
securities for which a public market exists usually will be valued initially at
cost. Any subsequent adjustment from cost will be based upon considerations
deemed relevant by the Board of Directors.

Investment Grade Bond Portfolio and Short-Intermediate Duration
Bond Portfolio. Each of these Portfolio's investments are valued each business
day using available market quotations or at fair value as determined by one or
more independent pricing services (collectively, the "Service") approved by the
Board of Directors. The Service may use available market quotations, employ
electronic data processing techniques and/or a matrix system to determine
valuations. The Service's procedures are reviewed by the Fund's officers under
the general supervision of the Board of Directors.

Tennessee Tax Exempt Bond Portfolio. The Tennessee Tax Exempt
Bond Portfolio's investments are valued by the Service. When, in the judgment of
the Service, quoted bid prices for investments are readily available and are
representative of the bid side of the market, these investments are valued at
the mean between the quoted bid prices (as obtained by the Service from dealers
in such securities) and asked prices (as calculated by the Service based upon
its evaluation of the market for such securities). Other investments (which
constitute a majority of the Portfolio's securities) are carried at fair value
as determined by the Service, based on methods which include consideration of:
yields or prices of municipal bonds of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions. The
Service may employ electronic data processing techniques and/or a matrix system
to determine valuations. The Service's procedures are reviewed by the Fund's
officers under the general supervision of the Board of Directors.

New York Stock Exchange Closing. The holidays (as observed) on
which the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.

PERFORMANCE INFORMATION

The following information supplements and should be read in
conjunction with the section in the Portfolios' Prospectus entitled "Performance
Information."

The Short-Intermediate Duration Bond Portfolio's yield, with
respect to Investor Shares, for the 30-day period ended December 31, 1995 was
5.02%. The Tennessee Tax Exempt Bond Portfolio's yield, with respect to Investor
Shares, for the 30-day period ended December 31, 1995 was 4.09%. Each
Portfolio's yield reflects the absorption of certain expenses and/or waiver of
fees, without which the yield for the 30-day period ended December 31, 1995
would have been 4.77% for the Short-Intermediate Duration Bond Portfolio and
3.84% for the Tennessee Tax Exempt Bond Portfolio. Current yield is computed
pursuant to a formula which operates as follows: The amount of the Portfolio's
expenses accrued for the 30- day period (net of reimbursements) is subtracted
from the amount of the dividends and interest earned by the Portfolio during the
period. That result is then divided by the product of: (a) the average daily
number of shares outstanding during the period that were entitled to receive
dividends, and (b) the maximum offering price per share on the last day of the
period less any undistributed earned income per share reasonably expected to be
declared as a dividend shortly thereafter. The quotient is then added to 1, and
that sum is raised to the 6th power, after which 1 is subtracted. The current
yield is then arrived at by multiplying the result by 2.

Based upon a combined 1995 Federal and Tennessee income tax rate
of 41.865%, the Tennessee Tax Exempt Bond Portfolio's tax equivalent yield for
the 30-day period ended December 31, 1995 was 7.04%. Absent the expense
absorption and fee waiver then in effect, the Portfolio's tax equivalent yield
for such period would have been 6.61%. Tax equivalent yield is computed by
dividing that portion of the current yield (calculated as described above) which
is tax exempt by 1 minus a stated tax rate and adding the quotient to that
portion, if any, of the yield of the Portfolio that is not tax exempt.

The tax equivalent yield quoted above represents the application
of the highest Federal and State of Tennessee marginal personal income tax rates
presently in effect. For Federal personal income tax purposes, a 39.60% tax rate
has been used. For Tennessee personal income tax purposes, a 6.00% tax rate has
been used. For the fiscal period ended December 31, 1995, 85% of the Tennessee
Tax Exempt Bond Portfolio's assets were invested in Tennessee Municipal
Obligations, which reduced the effect of the State's tax rate to 0.9%. The tax
equivalent figure, however, does not include the potential effect of any local
(including, but not limited to, county, district or city) taxes, including
applicable surcharges. In addition, there may be pending legislation which could
affect such stated tax rates or yield. Each investor should consult its tax
adviser, and consider its own factual circumstances and applicable tax laws, in
order to ascertain the relevant tax equivalent yield.

The average annual total return for the one-year period ended
December 31, 1995 and for the period from March 28, 1994 (commencement of
operations) through December 31, 1995 for Investor Shares was 7.86% and 4.64%,
respectively, for the Short-Intermediate Duration Bond Portfolio and 9.99% and
3.97%, respectively, for the Tennessee Tax Exempt Bond Portfolio. Average annual
total return is calculated by determining the ending redeemable value of an
investment purchased with a hypothetical $1,000 payment made at the beginning of
the period (assuming the reinvestment of dividends and distributions), dividing
by the amount of the initial investment, taking the "n"th root of the quotient
(where "n" is the number of years in the period) and subtracting 1 from the
result. A Class's average annual total return figures calculated in accordance
with such formula assume that in the case of the Investor Class the maximum
sales load has been deducted from the hypothetical initial investment at the
time of purchase.

The Short-Intermediate Duration Bond Portfolio's total return,
with respect to Investor Shares, for the period March 28, 1994 (commencement of
operations) through December 31, 1995 was 8.31%. The Tennessee Tax Exempt Bond
Portfolio's total return, with respect to Investor Shares, for the period March
28, 1994 (commencement of operations) through December 31, 1995 was 7.10%.
Total return is calculated by subtracting the amount of the maximum offering
price per share at the beginning of a stated period from the net asset value per
share at the end of the period (after giving effect to the reinvestment of
dividends and distributions during the period), and dividing the result by the
maximum offering price per share at the beginning of the period. Total return
also may be calculated based on the net asset value per share at the beginning
of the period of Investor Shares. In such cases, the calculation would not
reflect the deduction of the sales load with respect to Investor Shares, which,
if reflected, would reduce the performance quoted. Based on net asset value per
share, the total return for the Short- Intermediate Duration Bond Portfolio and
Tennessee Tax Exempt Bond Portfolio for the period from March 28, 1994
(commencement of operations) through December 31, 1995 was 11.66% and 10.41%,
respectively.

The Capital Growth Portfolio and the Investment Grade Bond
Portfolio had not commenced operations as of the date of the financial
statements, and, therefore, no performance data for such Portfolios is provided.

DIVIDENDS, DISTRIBUTION AND TAXES

The following information supplements and should be read in
conjunction with the section in the Portfolios' Prospectus entitled "Dividends,
Distributions and Taxes."

Management of the Fund believes that the Short-Intermediate
Duration Bond Portfolio and the Tennessee Tax Exempt Bond Portfolio have
qualified as a "regulated investment company" under the Code for the fiscal year
ended December 31, 1995. It is expected that the Capital Growth Portfolio and
Investment Grade Bond Portfolio will qualify as regulated investment companies
under the Code. Each Portfolio intends to continue to so qualify if such
qualification is in the best interests of its shareholders. To qualify as a
regulated investment company, the Portfolio must pay out to its shareholders at
least 90% of its net income (consisting of net investment income from tax exempt
obligations and net short-term capital gain), must derive less than 30% of its
annual gross income from gain on the sale of securities held for less than three
months, and must meet certain asset diversification and other requirements.
Qualification as a regulated investment company relieves the Portfolio from any
liability for Federal income taxes to the extent its earnings are distributed in
accordance with the applicable provisions of the Code. The term "regulated
investment company" does not imply the supervision of management or investment
practices or policies by any government agency.

Any dividend or distribution paid shortly after an investor's
purchase may have the effect of reducing the aggregate net asset value of his
shares below the cost of his investment. Such a distribution would be a return
on investment in an economic sense although taxable as stated in "Dividends,
Distributions and Taxes" in the Prospectus. In addition, the Code provides that
if a shareholder holds shares for six months or less and has received a capital
gain dividend with respect to such shares, any loss incurred on the sale of such
shares will be treated as a long-term capital loss to the extent of the capital
gain dividend received.

Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gains and losses. However, a portion of the gain or
loss realized from the disposition of non-U.S. dollar denominated securities
(including debt instruments, certain financial futures and options, and certain
preferred stock) may be treated as ordinary income or loss under Section 988 of
the Code.

Under Section 1256 of the Code, gain or loss realized by the
Portfolio from certain financial futures and options transactions (other than
those taxed under Section 988 of the Code) will be treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. Gain or loss will
arise upon the exercise or lapse of such futures and options as well as from
closing transactions. In addition, any such futures or options remaining
unexercised at the end of the Portfolio's taxable year will be treated as sold
for their then fair market value, resulting in additional gain or loss to the
Portfolio characterized in the manner described above.

Offsetting positions held by a Portfolio involving financial
futures and options may constitute "straddles." Straddles are defined to include
"offsetting positions" in actively traded personal property. The tax treatment
of straddles is governed by Section 1092 of the Code, which, in certain
circumstances, overrides or modifies the provisions of Sections 988 and 1256. If
the Portfolio was treated as entering into straddles by reason of its futures or
options transactions, such straddles could be characterized as "mixed straddles"
if the futures or options transactions comprising such straddles were governed
by Section 1256. The Portfolio may make one or more elections with respect to
"mixed straddles." Depending upon which election is made, if any, the results to
the Portfolio may differ. If no election is made, to the extent the straddle
rules apply to positions established by the Portfolio, losses realized by the
Portfolio will be deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle rules, short-term capital loss
on straddle positions may be recharacterized as long-term capital loss, and
long-term capital gain may be recharacterized as short-term capital gain.

Investment by a Portfolio in securities issued or acquired at a
discount, or providing for deferred interest or for payment of interest in the
form of additional obligations could under special tax rules affect the amount,
timing and character of distributions to shareholders by causing such Portfolio
to recognize income prior to the receipt of cash payments. For example, the
Portfolio could be required to accrue a portion of the discount (or deemed
discount) at which the securities were issued each year and to distribute such
income in order to maintain its qualification as a regulated investment company.
In such case, the Portfolio may have to dispose of securities which it might
otherwise have continued to hold in order to generate cash to satisfy these
distribution requirements.

Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gain or loss. However, all or a portion of the gain
realized from the disposition of market discount bonds will be treated as
ordinary income under Section 1276 of the Code. A market discount bond is
defined as any bond purchased by a Portfolio after April 30, 1993, and after its
original issuance, at a price below its face or accredited value. In addition,
all or a portion of the gain realized from engaging in "conversion transactions"
may be treated as ordinary income under Section 1258. "Conversion transactions"
are defined to include certain forward, futures, option and "straddle"
transactions, transactions marketed or sold to produce capital gains, or
transactions described in Treasury regulations to be issued in the future.

PORTFOLIO TRANSACTIONS

General. Transactions are allocated to various dealers by the
Portfolios' investment personnel in their best judgment. The primary
consideration is prompt and effective execution of orders at the most favorable
price. Subject to that primary consideration, dealers may be selected to act on
an agency basis for research, statistical or other services to enable the
Adviser to supplement its own research and analysis with the views and
information of other securities firms. No brokerage commissions have been paid
to date.

To the extent research services are furnished by brokers through
which the Portfolio effects securities transactions, the Adviser may use such
information in advising other funds or accounts it advises and, conversely, to
the extent research services are furnished to the Adviser by brokers in
connection with other funds or accounts the Adviser advises, the Adviser also
may use such information in advising the Portfolios. Although it is not possible
to place a dollar value on these services, if they are provided, it is the
opinion of the Adviser that the receipt and study of any such services should
not reduce the overall expenses of its research department.

Capital Growth Portfolio. Brokers also are selected because of
their ability to handle special executions such as are involved in large block
trades or broad distributions, provided the primary consideration is met. Large
block trades may, in certain cases, result from two or more clients the Adviser
might advise being engaged simultaneously in the purchase or sale of the same
security. Portfolio turnover may vary from year to year, as well as within a
year. It is anticipated that in any fiscal year, the turnover rate for the
Portfolio generally should be less than 100%. Higher turnover rates are likely
to result in comparatively greater brokerage expenses. The overall
reasonableness of brokerage commissions paid is evaluated by the Adviser based
upon its knowledge of available information as to the general level of
commissions paid by other institutional investors for comparable services.

When transactions are executed in the over-the-counter market,
the Adviser will deal with the primary market makers unless a more favorable
price or execution otherwise is obtainable.

The Fund's Board of Directors has determined, in accordance with
Section 17(e) of the 1940 Act and Rule 17e-1 thereunder, that any portfolio
transaction for the Portfolio may be executed by certain brokers that are
affiliates of the Adviser when such broker's charge for the transaction does not
exceed the usual and customary level.

Investment Grade Bond Portfolio, Short-Intermediate Duration Bond
Portfolio and Tennessee Tax Exempt Bond Portfolio. Purchases and sales of
portfolio securities usually are principal transactions. Portfolio securities
ordinarily are purchased directly from the issuer or from an underwriter or
market maker. Usually no brokerage commissions are paid by the Portfolio for
such purchases and sales. The prices paid to underwriters of newly-issued
securities usually include a concession paid by the issuer to the underwriter,
and purchases of securities from market makers may include the spread between
the bid and asked price.

INFORMATION ABOUT THE PORTFOLIOS

The following information supplements and should be read in
conjunction with the section in the Portfolios' Prospectus entitled "General
Information."

Each Portfolio share has one vote and, when issued and paid for
in accordance with the terms of the offering, is fully paid and non-assessable.
Shares have no preemptive, subscription or conversion rights and are freely
transferable.

Rule 18f-2 under the 1940 Act provides that any matter required
to be submitted under the provisions of the 1940 Act or applicable state law or
otherwise, to the holders of the outstanding voting securities of an investment
company, such as the Fund, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each portfolio affected by such matter. Rule 18f-2 further provides that a
portfolio shall be deemed to be affected by a matter unless it is clear that the
interests of each portfolio in the matter are identical or that the matter does
not affect any interest of such portfolio. However, the Rule exempts the
election of directors from the separate voting requirements of the Rule.

Each Portfolio will send annual and semi-annual financial
statements to all its shareholders.

As of April 20, 1996, the following shareholders beneficially
owned, directly or indirectly, 5% or more of the indicated Portfolio's
outstanding shares:

Percent of
Total Investor
Name and Address Shares Outstanding

SHORT-INTERMEDIATE DURATION BOND PORTFOLIO:

First American Trust Company 95.14%
Attn: Cash Management
800 First American Center
Nashville, TN 37237

TENNESSEE TAX EXEMPT BOND PORTFOLIO:

First American Trust Company 94.98%
Attn: Cash Management
800 First American Center
Nashville, TN 37237

A shareholder who beneficially owns, directly or indirectly, more
than 25% of a Portfolio's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Portfolio.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS

The Bank of New York, 90 Washington Street, New York, New York
10286, acts as custodian of each Portfolio's investments. BISYS Fund Services
Ohio, Inc., an affiliate of the Administrator, 3435 Stelzer Road, Columbus, Ohio
43219, acts as the Fund's transfer and dividend disbursing agent (the "Transfer
Agent"). Under the transfer agency agreement with the Fund, the Transfer Agent
maintains shareholder account records for the Fund, handles certain
communications between shareholders and the Fund and pays dividends and
distributions payable by the Fund. For these services, the Transfer Agent
receives a monthly fee compiled on the basis of the number of shareholder
accounts it maintains for the Fund during the month, and is reimbursed for
certain out-of-pocket expenses. Neither The Bank of New York nor
BISYS Fund Services Ohio, Inc. has any part in determining the
investment policies of any Portfolio or which securities are to
be purchased or sold by a Portfolio.

Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
of Common Stock being sold pursuant to the Portfolios' Prospectus.

KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154,
independent auditors, have been selected as each Portfolio's auditors.

<PAGE>
APPENDIX

Description of certain ratings assigned by Standard & Poor's
Ratings Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch
Investors Service, L.P. ("Fitch") and Duff & Phelps Credit Rating Co. ("Duff"):

S&P

Bond Ratings

AAA

Bonds rated AAA have the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.

Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.

BBB

Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they 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 bonds in this category than for bonds in higher rated categories.

Bonds rated BB have less near-term vulnerability to default than
other speculative grade debt. 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 payment.

S&P's letter ratings may be modified by the addition of a plus
(+) or minus (-) sign designation, which is used to show relative standing
within the major rating categories, except in the AAA (Prime Grade) category.

Commercial Paper Rating

Moody's

Bond Ratings

Aaa

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

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

Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

Moody's applies the numerical modifiers 1, 2 and 3 to show
relative standing within the major rating categories, except in the Aaa
category. The modifier 1 indicates a ranking for the security in the higher end
of a rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.

Commercial Paper Rating

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

Fitch

Bond Ratings

The ratings represent Fitch's assessment of the issuer's ability
to meet the obligations of a specific debt issue or class of debt. The ratings
take into consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.

AAA

Bonds rated AA are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.

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

BBB

Bonds rated BB are considered speculative. The obligor's ability
to pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service requirements.

Plus (+) and minus (-) signs are used with a rating symbol to
indicate the relative position of a credit within the rating category.

Short-Term Ratings

Fitch's short-term ratings apply to debt obligations that are
payable on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.

F-1+

Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely payment.

F-1

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

Good Credit Quality. Issues carrying this rating have a
satisfactory degree of assurance for timely payments, but the margin of safety
is not as great as the F-1+ and F-1 categories.

Duff

Bond Ratings

AAA

Bonds rated AAA are considered highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

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

Bonds rated A have protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.

BBB

Bonds rated BBB are considered to have below average protection
factors but still considered sufficient for prudent investment. Considerable
variability in risk exists during economic cycles.

Bonds rated BB are below investment grade but are deemed by Duff
as likely to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within the category.

Plus (+) and minus (-) signs are used with a rating symbol
(except AAA) to indicate the relative position of a credit within the rating
category.

Commercial Paper Rating

The rating Duff-1 is the highest commercial paper rating assigned
by Duff. Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by ample asset
protection. Risk factors are minor. Paper rated Duff-2 is regarded as having
good certainty of timely payment, good access to capital markets and sound
liquidity factors and company fundamentals. Risk factors are small.

<PAGE>
FINANCIAL STATEMENTS

The Portfolios' Annual Report to Shareholders for the fiscal year
ended December 31, 1995 is a separate document supplied with this Statement of
Additional Information, and the financial statements, accompanying notes and
report of independent auditors appearing therein are incorporated by reference
in this Statement of Additional Information.