INFINITY MUTUAL FUNDS INC /MD/, 485APOS, 1999-03-02

INFINITY MUTUAL FUNDS INC /MD/
485APOS, 1999-03-02

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Securities Act File No. 33-34080
Investment Company Act File No. 811-6076
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/

Pre-Effective Amendment No. ____ / /

Post-Effective Amendment No. 47 /X/

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/

Amendment No. 47 /X/

(Check appropriate box or boxes)

THE INFINITY MUTUAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)

3435 Stelzer Road, Columbus, Ohio 43219
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (614) 470-8000

Robert L. Tuch, Esq.
3435 Stelzer Road
Columbus, Ohio 43219
(Name and Address of Agent for Service)

copy to:

Stuart H. Coleman, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982

It is proposed that this filing will become effective (check appropriate
box)

___ immediately upon filing pursuant to paragraph (b)

___ on (date) pursuant to paragraph (b)

_X_ 60 days after filing pursuant to paragraph (a)(i)

___ on (date) pursuant to paragraph (a)(i)

___ 75 days after filing pursuant to paragraph (a)(ii)

___ on (date) pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

___ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>

ISG FUNDS

PROSPECTUS

DG CLASS
____________, 1999

ISG EQUITY FUNDS

o International Equity Fund
o Small-Cap Opportunity Fund
o Large-Cap Equity Fund

ISG FIXED INCOME FUNDS

o Government Income Fund
o Limited Term U.S. Government Fund

ISG TAX-EXEMPT FIXED INCOME FUND

o Municipal Income Fund

ISG MONEY MARKET FUNDS

o Prime Money Market Fund
o Treasury Money Market Fund

MANAGED BY
FIRST AMERICAN NATIONAL BANK

AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED THE SHARES DESCRIBED IN THIS PROSPECTUS OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS
COMMITTING A CRIME.
<PAGE>

TABLE OF CONTENTS

CAREFULLY REVIEW THIS IMPORTANT SECTION
TO LEARN ABOUT EACH FUND'S GOAL, MAIN
INVESTMENT STRATEGIES AND RISKS, PAST
PERFORMANCE, AND FEES.

DESCRIPTION OF THE FUNDS - OBJECTIVES,
RISK/RETURN AND EXPENSES
__ OVERVIEW

ISG EQUITY FUNDS
__ INTERNATIONAL EQUITY FUND
__ SMALL-CAP OPPORTUNITY FUND
__ LARGE-CAP EQUITY FUND

ISG FIXED INCOME FUNDS
__ GOVERNMENT INCOME FUND
__ LIMITED TERM U.S. GOVERNMENT FUND

ISG TAX-EXEMPT FIXED INCOME FUND
__ MUNICIPAL INCOME FUND

ISG MONEY MARKET FUNDS
__ PRIME MONEY MARKET FUND
__ TREASURY MONEY MARKET FUND

REVIEW THIS SECTION FOR ADDITIONAL
INFORMATION ON INVESTMENT STRATEGIES AND
RISKS.
ADDITIONAL INVESTMENT STRATEGIES AND RISKS
__ EQUITY FUNDS
__ FIXED INCOME FUNDS
__ TAX-EXEMPT FIXED INCOME FUND
__ MONEY MARKET FUNDS
__ APPLICABLE TO ALL FUNDS

REVIEW THIS SECTION FOR DETAILS ON THE
PEOPLE AND ORGANIZATIONS WHO OVERSEE THE
FUNDS.
FUND MANAGEMENT
__ THE INVESTMENT ADVISER
__ PORTFOLIO MANAGERS
__ THE ADMINISTRATOR AND DISTRIBUTOR

REVIEW THIS SECTION FOR DETAILS ON HOW
SHARES ARE VALUED, HOW TO PURCHASE, SELL
AND EXCHANGE SHARES, RELATED CHARGES AND
PAYMENTS OF DIVIDENDS AND DISTRIBUTIONS.

SHAREHOLDER INFORMATION
__ PRICING OF FUND SHARES
__ PURCHASING AND ADDING TO YOUR SHARES
__ SELLING YOUR SHARES
__ EXCHANGING YOUR SHARES
__ GENERAL POLICIES ON SELLING SHARES
__ DISTRIBUTION ARRANGEMENTS/SALES CHARGES
__ DIVIDENDS, DISTRIBUTIONS AND TAXES

REVIEW THIS SECTION FOR RECENT FINANCIAL
INFORMATION.
FINANCIAL HIGHLIGHTS
__ EQUITY FUNDS
__ FIXED INCOME FUNDS
__ TAX-EXEMPT FIXED INCOME FUND
__ MONEY MARKET FUNDS

WHERE TO LEARN MORE ABOUT
THE FUNDS
BACK COVER

<PAGE>

OVERVIEW

THE FUNDS DG Class Shares of eight ISG Funds are
offered by this prospectus. Each ISG Fund has
its own investment strategy and risk/return
profile. The differences in strategy among
the Funds determine the types of securities
in which each Fund invests and can be
expected to affect the degree of risk each
Fund is subject to and its yield or return.
Because you could lose money by investing in
a Fund, be sure to read all risk disclosure
carefully before investing.

You should be aware that ISG Funds:

o Are not bank deposits
o Are not guaranteed, endorsed or insured
by any bank, financial institution or
government entity such as the Federal
Deposit Insurance Corporation
o Are not guaranteed to achieve their
stated goals

INFORMATION ON EACH FUND'S RECENT STRATEGIES
AND HOLDINGS CAN BE FOUND IN THE CURRENT
ANNUAL/SEMI-ANNUAL REPORT (SEE BACK COVER).

WHO MAY WANT TO
INVEST?
EQUITY FUNDS--These Funds seek capital
appreciation and invest primarily in
equity securities, including common
stocks, preferred stocks and
convertible securities.

Consider investing in these Funds if you are:

o seeking a long-term goal such as retirement

o looking to add a growth component to your
portfolio

o willing to accept higher risks of investing
in the stock markets in exchange for
potentially higher long-term returns

These Funds may not be appropriate if you
are:

o pursuing a short-term goal or investing
emergency reserves

o uncomfortable with an investment that will
go up and down in value

FIXED INCOME FUNDS--These Funds seek current
income and invest primarily in
fixed income securities, such
as U.S. Government securities,
or corporate, bank and
commercial obligations.

Consider investing in these Funds if you are:

o looking to add a monthly income component
to your portfolio

o seeking higher potential returns than those
offered by money markets

o willing to accept the risks of price and
dividend fluctuations

These Funds may not be appropriate if you
are:

o investing emergency reserves

o uncomfortable with an investment that will
go up and down in value

TAX-EXEMPT FIXED INCOME FUND--This Fund seeks
tax-exempt income and
invests primarily in Municipal
Obligations which are exempt from
Federal income tax.

Consider investing in this Fund if you are:

o looking to reduce taxes on investment
income

o seeking monthly tax-exempt dividends

o willing to accept the risks of price and
dividend fluctuations

This Fund may not be appropriate if you are:

o investing through a tax-exempt retirement
plan

o uncomfortable with an investment that will
go up and down in value

OVERVIEW

MONEY MARKET FUNDS--These Funds seek current
income and liquidity and
invest primarily in short-term
securities and will seek to
maintain a stable price
of $1.00 per share.

Consider investing in these Funds if you are:

o seeking preservation of capital

o investing short-term reserves

o willing to accept lower potential returns
in exchange for a higher degree of safety

These Funds may not be appropriate if you
are:

o seeking high total returns

o pursuing a long-term goal or investing for
retirement

<PAGE>

DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES

INTERNATIONAL EQUITY FUND
TICKER SYMBOL:
DG CLASS - _____

INVESTMENT OBJECTIVE The Fund seeks to provide investors with
capital appreciation.

PRINCIPAL INVESTMENT The Fund invests primarily in equity
STRATEGIES securities of large non-U.S. companies (i.e.,
incorporated or organized outside the United
States).

In choosing stocks for the Fund, the Fund's
Sub-Adviser, Lazard Asset Management, looks
for established companies in economically
developed countries that it believes are
undervalued based on their return on total
capital or equity. The Sub-Adviser attempts
to identify undervalued securities through
traditional measures of value, including low
price to earnings ratio, high yield,
unrecognized assets, potential for management
change and the potential to improve
profitability.

The Sub-Adviser focuses on individual stock
selection (a "bottom-up" approach) rather
than on forecasting stock market trends (a
"top-down" approach).

The percentage of the Fund's assets invested
in particular geographic sectors may shift
from time to time in accordance with the
judgment of the Adviser and Sub-Adviser.
Ordinarily, the Fund invests in at least
three different foreign countries.

PRINCIPAL INVESTMENT The Fund's performance will be influenced by
RISKS political, social and economic factors
affecting companies in foreign countries.
Like the stocks of U.S. companies, the
securities of foreign issuers fluctuate in
price, often based on factors unrelated to
the issuers' value, and such fluctuations can
be pronounced. Unlike investing in U.S.
companies, foreign securities include special
risks such as exposure to currency
fluctuations, a lack of adequate company
information, political instability, and
differing auditing and legal standards. As a
result, you could lose money by investing in
the Fund, particularly if there is a sudden
decline in the share prices of the Fund's
holdings or an overall decline in the stock
markets of the foreign countries in which the
Fund is invested.

The Fund expects to invest primarily in the
stocks of companies located in developed
foreign countries. However, the Fund may
invest up to 25% of its assets in companies
located, or doing significant business in
emerging markets. These countries have
economic structures that are generally less
diverse and mature, and political systems
that are less stable, than those of developed
countries. As a result, their markets are
more volatile, but may provide higher rates
of return to investors.

Value stocks involve the risk that they may
never reach what the Sub-Adviser believes is
their full market value. They also may
decline in price, even though in theory they
are already underpriced.

PERFORMANCE BAR CHART AND TABLE
The bar chart and YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
table on this page CLASS A SHARES
show how the
International Equity
Fund has performed
and how its
performance has [CHART TO BE FILED BY AMENDMENT]
varied from year to
year. The bar chart
shows how the
performance of the
Fund's Class A
shares has varied
from year to year.
The table below
compares the
performance of Class
A shares over time The bar chart above does not reflect any
to that of the applicable sales charges which would reduce
Morgan Stanley returns.
Capital
International --------------------------------------------------
Europe, Australia, Best quarter: Q_ 199_ ____%
Far East ("EAFE") Worst Quarter: Q_ 199_ ____%
Index, a widely --------------------------------------------------
recognized,
unmanaged index of
foreign securities
representing major
non-U.S. stock
markets. Both the
bar chart and the
table assume the
reinvestment of
dividends and
distributions.
Class A shares are
not offered by this
prospectus. However, except
to the extent Class A and DG Class
shares have different expenses,
DG Class shares should have
substantially similar annual
returns to Class A shares since each
class invests in the same portfolio of
securities. Of course, past
performance does not
indicate how the
Fund will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)

Inception Past Past 5 Past 10 Since
Date Year Years Years Inception
Class A
(without sales __/__/__ _____% _____% N/A _____%
charge imposed)

EAFE INDEX _____% _____% N/A _____%

FEES AND EXPENSES

As an investor in the Shareholder
International Equity Transaction
Fund, you pay certain Fees (fees
fees and expenses, paid by you DG CLASS
which are described in directly) SHARES
the tables.
Shareholder
transaction fees are Maximum sales
paid from your charge (load)
account. Annual Fund on purchases None
operating expenses are
paid out of Fund
assets, and are
reflected in the
share price.
-----------------------------------------------------
Maximum deferred
sales charge None
(CDSC)

Annual Fund
Operating Expenses DG CLASS
(fees paid from SHARES
Fund assets)
------------------------------------------------------
Management Fee 1.00%
------------------------------------------------------
Distribution (12b-1) Fee .25%
------------------------------------------------------
Shareholder .15%
Services Fee
------------------------------------------------------
Other Expenses ___%
------------------------------------------------------
Total Annual Fund
Operating ___%
Expenses
-------------------------------------------------------
Fee Waiver And
Expense ___%
Reimbursement
------------------------------------------------------
Net Expenses(1) ___%
------------------------------------------------------

- - --------------
(1) The expenses noted above reflect an agreement by the Adviser to
maintain total fund operating expenses for DG Class shares at no more than
___% until May 1, 2000, when DG Class shares automatically convert to Class
A shares. The expenses noted above do not reflect any other fee waivers or
expense reimbursement arrangements that are or were in effect.

EXPENSE EXAMPLE

Use the example at right to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It illustrates the amount of
fees and expenses you would pay, assuming the following:

o $10,000 investment
o 5% annual return
o no changes in the Fund's operating expenses

Because actual returns and operating
expenses will be different,
this example is for comparison only.

INTERNATIONAL 1 3 5 10
EQUITY FUND Year Years Years Years

DG CLASS SHARES $____ $____ $____ $____

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

DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES

SMALL-CAP OPPORTUNITY FUND

TICKER SYMBOL:
DG CLASS - _____

INVESTMENT OBJECTIVE The Fund seeks to provide investors with
capital appreciation.

PRINCIPAL INVESTMENT The Fund invests primarily in equity
STRATEGIES securities of U.S. companies with market
capitalizations of less than $1 billion.

In choosing stocks for the Fund, the Fund's
Sub-Adviser, Womack Asset Management, seeks
investment opportunities in smaller, well
managed U.S. companies whose shares are
undervalued relative to the companies' growth
potential. The Sub-Adviser employs a
fundamental growth-oriented approach with
technical analysis to discern potential and
risk.

The Sub-Adviser focuses on individual stock
selection (a "bottom-up" approach) rather
than on forecasting stock market trends (a
"top-down" approach). The Sub-Adviser
considers, among other factors:

o projected earnings growth
o relative price strength
o fundamental value
o trading opportunities

PRINCIPAL INVESTMENT While stocks and other equity securities have
RISKS historically been a leading choice of
long-term investors, they do fluctuate in
price, often based on factors unrelated to
the issuers' value, and such fluctuations can
be pronounced. The value of your investment
in the Fund will fluctuate in response to
movements in the stock market and the
activities of individual portfolio companies.
As a result, you could lose money by
investing in the Fund, particularly if there
is a sudden decline in share prices of the
Fund's holdings or an overall decline in the
stock market.

The Fund invests in small-cap companies which
carry additional risks. Smaller companies
typically have more limited product lines,
markets and financial resources, and have
less predictable earnings than larger
companies and their securities trade less
frequently and in more limited volume than
those of larger, more established companies.
As a result, small-cap stocks and thus the
Fund's shares may fluctuate significantly
more in value than larger-cap stocks and
funds that focus on them.

Over time, growth companies are expected to
increase their earnings at an above-average
rate. If these expectations are not met, the
stock price can fall inordinately--even if
earnings show an absolute increase.

PERFORMANCE BAR CHART AND TABLE

The bar chart and YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
table on this page CLASS A SHARES
show how the
Small-Cap Opportunity
Fund has performed
and how its
performance has [CHART TO BE FILED BY AMENDMENT]
varied from year to
year. The bar chart
shows how the
performance of the
Fund's Class A
shares has varied
from year to year.
The table below
compares the
performance of Class
A shares over time The bar chart above does not reflect any
to that of the applicable sales charges which would reduce
Russell 2000 Index, a widely returns.
recognized, ________________________________________________
unmanaged index of Best quarter: Q_ 199_ ______%
smaller Worst Quarter: Q_ 199_ ______%
capitalization _________________________________________________
common stocks.
Both the bar chart
and the table
assume the
reinvestment of
dividends and
distributions.
Class A shares are
not offered by this
prospectus. However,
except to the extent
Class A and DG Class shares have
different expenses, DG Class
shares should have substantially similar annual
returns to Class A shares since
each class invests in the same portfolio of
securities. Of course, past performance does not
indicate how the
Fund will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)

Inception Past Past 5 Past 10 Since
Date Year Years Years Inception
Class A
(with 3.50% sales __/__/__ _____% _____% N/A _____%
charge imposed)

RUSSELL 2000 INDEX _____% _____% N/A _____%

FEES AND EXPENSES

As an investor in the Shareholder
Small-Cap Opportunity Transaction
Fund, you pay certain Fees (fees
fees and expenses, paid by you DG CLASS
which are described in directly) SHARES
the tables.
Shareholder transaction
fees are paid from your Maximum sales
account. Annual Fund charge (load)
operating expenses are on purchases 3.50%(1)
paid out of Fund
assets, and are
reflected in the share
price. ----------------------------------------------------
Maximum deferred
sales charge None(2)
(CDSC)

Annual Fund
Operating
Expenses DG CLASS
(fees paid from SHARES
Fund assets)
-----------------------------------------------------
Management Fee .95%
-----------------------------------------------------
Distribution (12b-1) Fee .25%
-----------------------------------------------------
Shareholder .15%
Services Fee
-----------------------------------------------------
Other Expenses ____%
-----------------------------------------------------

Total Annual Fund
Operating ___%
Expenses
------------------------------------------------------
Fee Waiver And
Expense ____%
Reimbursement
------------------------------------------------------
Net Expenses(3) ____%
------------------------------------------------------

- - --------

(1) Sales charges may be reduced depending upon the amount invested or, in
certain circumstances, waived. See "Distribution Arrangements."

(2) Shares bought as part of an investment of $1 million or more are not
subject to an initial sales charge, but may be charged a CDSC of up to .50%
if sold within one year of purchase. See "Distribution Arrangements."

(3) The expenses noted above reflect an agreement by the Adviser to maintain
total fund operating expenses for DG Class shares at no more than ___%
until May 1, 2000, when DG Class shares automatically convert to Class A
shares. The expenses noted above do not reflect any other fee waivers or
expense reimbursement arrangements that are or were in effect.

<PAGE>

EXPENSE EXAMPLE

o $10,000 investment
o 5% annual return
o no changes in the Fund's operating expenses

Because actual returns and operating expenses will be different,
this example is for comparison only.

SMALL-CAP 1 3 5 10
OPPORTUNITY FUND Year Years Years Years

DG CLASS SHARES $____ $____ $____ $____
- - --------------------------------

<PAGE>

DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES

LARGE-CAP EQUITY FUND
TICKER SYMBOL:
DG CLASS - _____

INVESTMENT OBJECTIVE The Fund seeks to provide investors with
long-term capital appreciation and, as a
secondary objective, current income.

PRINCIPAL INVESTMENT The Fund invests primarily in equity
STRATEGIES securities of large U.S. companies with
market capitalizations over $1 billion that
the Adviser believes have the potential to
provide capital appreciation and growth of
income.

In choosing stocks for the Fund, the
Adviser's strategy is to select well managed
U.S. companies that have demonstrated
sustained patterns of profitability, strong
balance sheets, and the potential to achieve
predictable, above-average earnings growth.
The Adviser seeks to diversify the Fund's
portfolio within the various economic sectors
typically comprising, what the Adviser
believes to be, the classic growth segments
of the U.S. economy: Technology, Consumer
Non-Durables, Health Care, Business Equipment
and Services, Retail, and Capital Goods.

The Fund invests for long-term growth rather
than short-term profits.

PRINCIPAL INVESTMENT While stocks and other equity securities have
RISKS historically been a leading choice of
long-term investors, they do fluctuate in
price, often based on factors unrelated to
the issuers' value, and such fluctuations can
be pronounced. The value of your investment
in the Fund will fluctuate in response to
movements in the stock market and the
activities of individual portfolio companies.
As a result, you could lose money by
investing in the Fund, particularly if there
is a sudden decline in the share prices of
the Fund's holdings or an overall decline in
the stock market.

While the Fund's investment in stocks of
larger U.S. companies may limit the overall
downside risk of the Fund over time, the Fund
may produce more modest gains than riskier
stock funds as a trade-off for this
potentially lower risk.

PERFORMANCE BAR CHART AND TABLE

The bar chart and YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
table on this page CLASS A SHARES
show how the
Large-Cap Equity Fund has
performed and how
its performance has
varied from year to [CHART TO BE FILED BY AMENDMENT]
year. The bar chart
shows how the
performance of the
Fund's Class A
shares has varied
from year to year.
The table below
compares the
performance of Class
A shares over time
to that of the S&P The bar chart above does not reflect any
500(R)Index, a applicable sales charges which would
widely recognized, reduce returns.
unmanaged index of
common stocks. _________________________________________________
Both the bar chart Best quarter: Q_ 199_ ______%
and the table Worst quarter Q_ 199_ ______%
assume the _________________________________________________
reinvestment of
dividends and
distributions.

Class A shares are
not offered by this
prospectus.
However, except to
the extent Class A
and DG Class shares
have different
expenses, DG Class
shares should have
substantially
similar annual
returns to Class A
shares since each
class invests in
the same portfolio
of securities. Of
course, past
performance does not
indicate how the
Fund will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)

Inception Past Past 5 Past 10 Since
Date Year Years Years Inception
Class A
(with 3.50% sales __/__/__ _____% _____% N/A _____%
charge imposed)

S&P 500(R) INDEX _____% _____% N/A _____%

FEES AND EXPENSES

As an investor in the Shareholder
Large-Cap Equity Fund, you pay Transaction
certain fees and expenses, Fees (fees
which are described in paid by you DG CLASS
the tables. Shareholder directly) SHARES
transaction fees are paid
from your account. Annual
Fund operating expenses Maximum sales
are paid out of Fund charge (load)
assets, and are reflected on purchases 3.50%(1)
in the share price.
-------------------------------------------
Maximum
deferred None(2)
sales charge
(CDSC)

Annual Fund
Operating DG CLASS
Expenses SHARES
(fees paid
from
Fund assets)
-------------------------------------------
Management .75%
Fee
-------------------------------------------
Distribution (12b-1) Fee .25%
-------------------------------------------
Shareholder .15%
Services Fee
-------------------------------------------
Other ____%
Expenses
-------------------------------------------
Total Annual
Fund ____%
Operating
Expenses
-------------------------------------------
Fee Waiver
and Expense
Reimbursement ____%
-------------------------------------------
Net Expenses3 ____%
-------------------------------------------
- - ---------------

(1) Sales charges may be reduced depending upon the amount invested or, in
certain circumstances, waived. See "Distribution Arrangements."

EXPENSE EXAMPLE

o $10,000 investment
o 5% annual return
o no changes in the Fund's operating expenses

Because actual returns and operating expenses will be different, this example is
for comparison only.

LARGE-CAP EQUITY 1 3 5 10
FUND Year Years Years Years

DG CLASS SHARES $____ $____ $____ $____
- - --------------------------------

<PAGE>

DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
GOVERNMENT INCOME FUND

TICKER SYMBOL:
DG CLASS - _____

INVESTMENT OBJECTIVE The Fund seeks to provide investors with
current income.

PRINCIPAL INVESTMENT The Fund invests primarily in securities
STRATEGIES issued or guaranteed as to payment of
principal and interest by the U.S.
Government, its agencies or
instrumentalities.

The Fund also may enter into repurchase
agreements and, for additional yield, invest
in corporate bonds, mortgage-related
securities, asset-backed securities and bank
obligations.

PRINCIPAL INVESTMENT Prices of fixed income securities, including
RISKS U.S. Government securities, tend to move
inversely with changes in interest rates.
While a rise in rates may allow the Fund to
invest for higher yields, the most immediate
effect is usually a drop in the prices of
such securities, and therefore in the Fund's
share price as well. A security backed by the
U.S. Government is guaranteed only as to
timely payment of interest and principal when
held to maturity. Neither the market value of
such securities nor the Fund's share price is
guaranteed. As a result, the value of your
investment in the Fund will fluctuate and you
could lose money by investing in the Fund.

The Fund's investments in corporate bonds
also are subject to credit risk, which is the
risk that the issuer of the security will
fail to make timely payments of interest or
principal, or otherwise honor its
obligations. Credit risk includes the
possibility that any of the Fund's
investments will have its credit rating
downgraded or will default.

The Fund's share price or yield also could be
hurt if the mortgage-related or asset-backed
securities in which it has invested are paid
off substantially earlier or later than
expected.

PERFORMANCE BAR CHART AND TABLE

The bar chart and YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
table on this page CLASS A SHARES
show how the
Government Income
Fund has performed
and how its
performance has [CHART TO BE FILED BY AMENDMENT]
varied from year to
year. The bar chart
shows how the
performance of the
Fund's Class A
shares has varied
from year to year.
The table below
compares the
performance of Class
A shares over time The bar chart above does not reflect any
to that of the applicable sales charges which would
Lehman Brothers reduce returns.
Government/Corporate
Bond Index, a ________________________________________________
recognized, Best quarter: Q_ 199_ _____%
unmanaged index of Worst quarter: Q_ 199_ _____%
U.S. Government and
investment grade
corporate bonds.
Both the bar chart
and the table assume
the reinvestment of
dividends and
distributions.
Class A shares are
not offered by this
prospectus. However,
except to the extent Class A
and DG Class shares have
different expenses, DG Class
shares should have substantially similar annual
returns to Class A shares since
each class invests in the same
portfolio of securities.
Of course, past performance does not
indicate how the
Fund will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)

Inception Past Past 5 Past 10 Since
Date Year Years Years Inception
Class A
(with 2.00% sales __/__/__ _____% _____% N/A _____%
charge imposed)

LEHMAN GOV'T/CORP _____% _____% N/A _____%
BOND INDEX

FEES AND EXPENSES

As an investor in the Shareholder
Government Income Fund, Transaction
you pay certain fees and Fees (fees
expenses, which are paid by you DG CLASS
described in the tables. directly) SHARES
Shareholder transaction
fees are paid from your
account. Annual Fund Maximum sales
operating expenses are charge (load)
paid out of Fund assets, on purchases 2.00%(1)
and are reflected in the
share price.
---------------------------------------------
Maximum deferred
sales charge None(2)
(CDSC)

Annual Fund
Operating
Expenses DG CLASS
(fees paid from SHARES
Fund assets)
---------------------------------------------
Management Fee .60%
---------------------------------------------
Distribution
(12b-1) Fee .25%
---------------------------------------------
Shareholder .15%
Services Fee
---------------------------------------------
Other Expenses ____%
---------------------------------------------
Total Annual Fund
Operating ____%
Expenses
---------------------------------------------
Fee Waiver And
Expense ____%
Reimbursement
---------------------------------------------
Net Expenses(3) ____%
---------------------------------------------
- - ----------------

(1) Sales charges may be reduced depending upon the amount invested or, in
certain circumstances, waived. See "Distribution Arrangements."

EXPENSE EXAMPLE

o $10,000 investment
o 5% annual return
o no changes in the Fund's operating expenses

Because actual returns and operating expenses will be different,
this example is for comparison only.

GOVERNMENT 1 3 5 10
INCOME FUND Year Years Years Years

DG CLASS SHARES $____ $____ $____ $____

DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES

LIMITED TERM U.S. GOVERNMENT FUND
TICKER SYMBOL:
DG CLASS - _____

INVESTMENT OBJECTIVE The Fund seeks to provide investors with high
current income without assuming undue risk.

PRINCIPAL INVESTMENT The Fund invests in securities issued or
STRATEGIES guaranteed as to payment of principal and
interest by the U.S. Government, its agencies
or instrumentalities, and enters into
repurchase agreements in respect of such
securities.

In choosing U.S. Government securities for
the Fund, the Adviser follows a controlled
duration strategy which limits how much the
Fund's portfolio duration will differ from
its benchmark--the Merrill Lynch Government 1
to 5 Year Bond Index. Typically, the Fund
will have a portfolio duration between one
and four years and a dollar weighted average
portfolio life between one and five years,
depending on market conditions. Duration is
an indication of how sensitive a bond or
mutual fund portfolio may be to changes in
interest rates. Generally speaking, the
longer a fund's duration, the more it will
react to interest rate fluctuations and the
greater its long-term risk/return potential.

PRINCIPAL INVESTMENT Prices of U.S. Government securities tend to
RISKS move inversely with changes in interest
rates. While a rise in rates may allow the
Fund to invest for higher yields, the most
immediate effect is usually a drop in the
prices of such securities, and therefore in
the Fund's share price as well. A security
backed by the U.S. Government is guaranteed
only as to timely payment of interest and
principal when held to maturity. Neither the
market value of such securities nor the
Fund's share price is guaranteed. As a
result, the value of your investment in the
Fund will fluctuate and you could lose money
by investing in the Fund.

PERFORMANCE BAR CHART AND TABLE

The bar chart and YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
table on this page CLASS A SHARES
show how the Limited
Term U.S.
Government Fund has
performed and how
its performance has [CHART TO BE FILED BY AMENDMENT]
varied from year to
year. The bar chart
shows how the
performance of the
Fund's Class A
shares has varied
from year to year.
The table below
compares the
performance of Class
A shares over time The bar chart above does not reflect any
to that of the applicable sales charges which would
Merrill Lynch 1 to 5 reduce returns.
Year Government
Bond Index, a _______________________________________________
recognized, Best quarter: Q_ 199_ _____%
unmanaged index of Worst quarter: Q_ 199_ _____%
short-term U.S.
Government
securities. Both
the bar chart and
the table assume the
reinvestment of
dividends and
distributions.
Class A shares are
not offered by this
prospectus. However,
except to the extent
Class A and DG Class shares have
different expenses, DG Class
shares should have substantially similar annual
returns to Class A shares since
each class invests in the
same portfolio of
securities. Of course, past
performance does not indicate how the Fund will
perform in the future.

AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)

Inception Past Past 5 Past 10 Since
Date Year Years Years Inception
Class A
(with 2.00% sales __/__/__ _____% _____% N/A _____%
charge imposed)

MERRILL LYNCH 1-5 _____% _____% N/A _____%
YEAR GOV'T BOND INDEX

FEES AND EXPENSES

As an investor in the Shareholder
Limited Term U.S. Transaction
Government Fund, you pay Fees (fees
certain fees and paid by you DG CLASS
expenses, which are directly) SHARES
described in the tables.
Shareholder transaction
fees are paid from your Maximum sales
account. Annual Fund charge (load)
operating expenses are on purchases 2.00%(1)
paid out of Fund assets,
and are reflected in the
share price. --------------------------------------------
Maximum deferred
sales charge None(2)
(CDSC)

Annual Fund
Operating
Expenses DG CLASS
(fees paid from A SHARES
Fund assets)
--------------------------------------------

Management Fee .50%
--------------------------------------------
Distribution
(12b-1) Fee .25%
--------------------------------------------
Shareholder .15%
Services Fee
--------------------------------------------
Other Expenses ____%
--------------------------------------------
Total Annual Fund
Operating ____%
Expenses
--------------------------------------------
Fee Waiver And
Expense ____%
Reimbursement
--------------------------------------------
Net Expenses(3) ____%
--------------------------------------------
- - --------------------

(1) Sales charges may be reduced depending upon the amount invested or, in
certain circumstances, waived. See "Distribution Arrangements."

EXPENSE EXAMPLE

o $10,000 investment
o 5% annual return
o no changes in the Fund's operating expenses

Because actual returns and operating expenses will be different,

LIMITED TERM 1 3 5 10
U.S. GOVERNMENT Year Years Years Years
FUND $____ $____ $____ $____

DG CLASS SHARES
- - --------------------------------

<PAGE>

DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES

MUNICIPAL INCOME FUND
TICKER SYMBOL:
DG CLASS - _____

INVESTMENT OBJECTIVE The Fund seeks to provide investors with
current income exempt from Federal income
tax.

PRINCIPAL INVESTMENT The Fund normally invests substantially all
STRATEGIES of its assets in municipal obligations, the
interest from which is exempt from Federal
income tax. Municipal obligations are debt
obligations issued by states, territories and
possessions of the United States and their
political subdivisions, agencies and
instrumentalities. They typically are divided
into two types:

o GENERAL OBLIGATION BONDS, which are secured
by the full faith and credit of the issuer
and its taxing power

o REVENUE BONDS, which are payable from the
revenues derived from a specific revenue
source, such as charges for water and sewer
service or highway tolls

The Fund invests in investment grade
municipal obligations or the unrated
equivalent as determined by the Adviser. The
Adviser evaluates municipal obligations based
on credit quality, financial outlook and
yield potential, and seeks to diversify the
Fund's investments across several different
states, sectors and issuers.

PRINCIPAL INVESTMENT The Fund's investments in municipal
RISKS obligations will be subject primarily to
interest rate and credit risk.

Prices of municipal obligations tend to move
inversely with changes in interest rates.
While a rise in rates may allow the Fund to
invest for higher yields, the most immediate
effect is usually a drop in the prices of
such securities, and therefore in the Fund's
share price as well. As a result, the value
of your investment in the Fund will fluctuate
and you could lose money by investing in the
Fund.

The Fund's investments also are subject to
credit risk, which is the risk that the
issuer of the security will fail to make
timely payments of interest or principal, or
to otherwise honor its obligations. Credit
risk includes the possibility that any of the
Fund's investments will have its credit
rating downgraded or will default.

Although the Fund's objective is to generate
income exempt from Federal income tax,
interest from some of the Fund's holdings may
be subject to the Federal alternative minimum
tax.

PERFORMANCE BAR CHART AND TABLE

The bar chart and YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
table on this page CLASS A SHARES
show how the
Municipal Income
Fund has performed
and how its
performance has [CHART TO BE FILED BY AMENDMENT]
varied from year to
year. The bar chart
shows how the
performance of the
Fund's Class A
shares has varied
from year to year.
The table below
compares the
performance of Class
A shares over time The bar chart above does not reflect any
to that of the applicable sales charges which would
Lehman Brothers reduce returns.
Municipal Bond
Index, a ____________________________________________________
recognized, Best quarter: Q_ 199_ _____%
unmanaged index of Worst quarter: Q_ 199_ _____%
investment grade
municipal
obligations. Both
the bar chart and
the table assume the
reinvestment of
dividends and
distributions.
Class A shares are
not offered by this
prospectus.
However, except to
the extent Class A
and DG Class shares
have different
expenses, DG Class
shares should have
substantially
similar annual
returns to Class A
shares since each
class invests in
the same portfolio
of securities. Of
course, past
performance does not
indicate how the
Fund will perform in
the future.

AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)

Inception Past Past 5 Past 10 Since
Date Year Years Years Inception
Class A
(with 2.00% sales __/__/__ _____% _____% N/A _____%
charge imposed)

LEHMAN MUNICIPAL _____% _____% N/A _____%
BOND INDEX

FEES AND EXPENSES

As an investor in the Shareholder
Municipal Income Fund, Transaction
you pay certain fees and Fees (fees
expenses, which are paid by you DG CLASS
described in the tables. directly) SHARES
Shareholder transaction
fees are paid from your
account. Annual Fund Maximum sales
operating expenses are charge (load)
paid out of Fund assets, on purchases 2.00%(1)
and are reflected in the
share price. ----------------------------------------------
Maximum
deferred None(2)
sales charge
(CDSC)

Annual Fund
Operating DG CLASS
Expenses SHARES
(fees paid from
Fund assets)
---------------------------------------------
Management Fee .60%
---------------------------------------------
Distribution
(12b-1) Fee .25%
---------------------------------------------
Shareholder .15%
Services Fee
---------------------------------------------
Other Expenses ____%
---------------------------------------------
Total Annual
Fund ____%
Operating
Expenses
---------------------------------------------
Fee Waiver And
Expense ____%
Reimbursement
---------------------------------------------
Net Expenses(3) ____%
---------------------------------------------

(1) Sales charges may be reduced depending upon the amount invested or, in
certain circumstances, waived. See "Distribution Arrangements."

EXPENSE EXAMPLE

o $10,000 investment
o 5% annual return
o no changes in the Fund's operating expenses

Because actual returns and operating expenses will be different,
this example is for comparison only.

MUNICIPAL INCOME 1 3 5 10
FUND Year Years Years Years

DG CLASS SHARES $____ $____ $____ $____

<PAGE>

DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES

PRIME MONEY MARKET FUND
TICKER SYMBOL:
DG CLASS - _____

INVESTMENT OBJECTIVE The Fund seeks to provide investors with as
high a level of current income as is
consistent with the preservation of capital
and the maintenance of liquidity.

PRINCIPAL INVESTMENT The Fund invests in a diversified portfolio
STRATEGIES of high-quality, short-term U.S.
dollar-denominated debt securities, including
the following:

o obligations issued or guaranteed by the
U.S. Government or its agencies or
instrumentalities

o certificates of deposit, time deposits,
bankers' acceptances and other short-term
securities issued by domestic or foreign
banks or their subsidiaries or branches

o domestic and foreign commercial paper and
other short-term corporate debt
obligations, including those with floating
or variable rates of interest

o obligations issued or guaranteed by one or
more foreign governments or their agencies
or instrumentalities, including obligations
of supranational entities

o asset-backed securities

o repurchase agreements collateralized by the
types of securities listed above

The Fund buys and sells securities based on
considerations of safety of principal and
liquidity, which means that the Fund may not
necessarily invest in securities paying the
highest available yield at a particular time.
The Fund will attempt to increase its yield
by trading to take advantage of short-term
market variations. The Adviser evaluates Fund
investments based on credit analysis and the
interest rate outlook.

The Fund normally will invest at least 25% of
its total assets in domestic or foreign bank
obligations.

PRINCIPAL INVESTMENT Although the Fund seeks to preserve the
RISKS value of your investment at $1.00 per share,
it is possible to lose money by investing in
the Fund.

The Fund is subject to the risk that changes
in interest rates will affect the yield or
value of the Fund's investments in debt
securities.

The Fund's investments also are subject to
credit risk, which is the risk that the
issuer or guarantor of a debt security will
be unable or unwilling to make timely
interest or principal payments, or to
otherwise honor its obligations. Credit risk
includes the possibility that any of the
Fund's investments will have its credit
rating downgraded or will default.

PERFORMANCE BAR CHART AND TABLE

The bar chart and YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
table on this page CLASS A SHARES
show how the Prime
Money Market Fund
has performed and
how its performance
has varied from year [CHART TO BE FILED BY AMENDMENT]
to year. The bar
chart shows how the
performance of the
Fund's Class A
shares has varied
from year to year.
Both the bar chart _______________________________________________
and the table Best quarter: Q_ 199_ _____%
assume the Worst quarter: Q_ 199_ _____%
reinvestment of
dividends and
distributions.
Class A shares are
not offered by this
prospectus. However, except
to the extent Class A and DG
Class shares have
different expenses, DG Class
shares should have substantially similar annual
returns to Class A shares since
each class invests in the same portfolio of
securities. Of course,
past performance does not
indicate how the
Fund will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)

Inception Past Past 5 Past 10 Since
Date Year Years Years Inception
Class A __/__/__ _____% _____% N/A _____%

As of December 31, 1998, the Fund's 7-day yield was ___%. Without fee waivers
and expense reimbursements, the Fund's yield would have been ___% for this time
period. For current yield information on the Fund, call 1-800-852-0045. The
Fund's yield appears in THE WALL STREET JOURNAL each Thursday.

FEES AND EXPENSES

As an investor in the Shareholder
Prime Money Market Transaction
Fund, you pay certain Fees (fees
fees and expenses, paid by you DG CLASS
which are described in directly) SHARES
the tables.
Shareholder transaction
fees are paid from your Maximum sales
account. Annual Fund charge (load)
operating expenses are on purchases None
paid out of Fund
assets, and are
reflected in the share
price. -----------------------------------------------
Maximum
deferred None
sales charge
(CDSC)

Annual Fund
Operating DG CLASS
Expenses SHARES
(fees paid from
Fund assets)
----------------------------------------------
Management Fee .25%
----------------------------------------------
Distribution None
(12b-1) Fee
----------------------------------------------
Shareholder .25%
Services Fee
----------------------------------------------
Other Expenses ____%
----------------------------------------------
Total Annual
Fund ____%
Operating
Expenses
----------------------------------------------
Fee Waiver And
Expense ____%
Reimbursement
----------------------------------------------
Net Expenses(1) ____%
----------------------------------------------

(1) The expenses noted above reflect an agreement by the Adviser to maintain
total fund operating expenses for DG Class shares at no more than ___%
until May 1, 2000, when DG Class shares automatically convert to Class A
shares. The expenses noted above do not reflect any other fee waivers or
expense reimbursement arrangements that are or were in effect.

EXPENSE EXAMPLE

o $10,000 investment
o 5% annual return
o no changes in the Fund's operating expenses

Because actual returns and operating expenses will be different,

PRIME MONEY 1 3 5 10
MARKET FUND Year Years Years Years

DG CLASS SHARES $____ $____ $____ $____

<PAGE>

DESCRIPTION OF THE FUNDS--OBJECTIVES, RISK/RETURN AND EXPENSES
TREASURY MONEY MARKET FUND

TICKER SYMBOL:
DG CLASS - _____

INVESTMENT OBJECTIVE The Fund seeks to provide investors with as
high a level of current income as is
consistent with the preservation of capital
and the maintenance of liquidity.

PRINCIPAL INVESTMENT The Fund invests primarily in U.S. Treasury
STRATEGIES securities and repurchase agreements in
respect thereof. The Fund may invest up to
35% of its assets in other securities
guaranteed as to principal and interest by
the U.S. Government and repurchase agreements
in respect thereof.

The income from the Fund's investment in
direct obligations of the United States is
exempt from state and local, but not Federal,
income taxes. Dividends and distributions
attributable to income from repurchase
agreements may be subject to state and local
taxes.

The Fund invests based on considerations of
safety of principal and liquidity, which
means that the Fund may not necessarily
invest in securities paying the highest
available yield at a particular time. The
Fund will attempt to increase its yield by
trading to take advantage of short-term
market variations. The Adviser generally
evaluates investments based on interest rate
sensitivity.

PRINCIPAL INVESTMENT Although the Fund seeks to preserve the value
RISKS of your investment at $1.00 per share, it is
possible to lose money by investing in the
Fund. The Fund is subject to the risk that
changes in interest rates will affect the
yield or value of the Fund's investments.

A security backed by the U.S. Treasury or the
full faith and credit of the United States is
guaranteed only as to timely payment of
interest and principal when held to maturity.
Neither the market value of such securities
nor the Fund's share price is guaranteed.
<PAGE>

PERFORMANCE BAR CHART AND TABLE

The bar chart and YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31 FOR
table on this page CLASS A SHARES
show how the
Treasury Money
Market Fund has
performed and how
its performance has [CHART TO BE FILED BY AMENDMENT]
varied from year to
year. The bar chart
shows how the
performance of the
Fund's Class A
shares has varied
from year to year. ___________________________________________________
Both the bar chart Best quarter: Q_ 199_ ______%
and the table assume Worst quarter: Q_ 199_ ______%
the reinvestment of
dividends and
distributions.
Class A shares are
not offered by this
prospectus.
However, except to
the extent Class A
and DG Class shares
have different
expenses, DG Class
shares should have
substantially
similar annual
returns to Class A
shares since each
class invests in
the same portfolio
of securities. Of
course, past
performance does not
indicate how the
Fund will perform in the future.

AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 1998)

Inception Past Past 5 Past 10 Since
Date Year Years Years Inception

Class A __/__/__ _____% _____% N/A _____%

<PAGE>

FEES AND EXPENSES

As an investor in the Shareholder
Treasury Money Market Transaction
Fund, you pay certain Fees (fees
fees and expenses, paid by you DG CLASS
which are described in directly) SHARES
the tables.
Shareholder transaction
fees are paid from your Maximum sales
account. Annual Fund charge (load)
operating expenses are on purchases None
paid out of Fund
assets, and are
reflected in the share
price. --------------------------------------------------
Maximum deferred
sales charge None
(CDSC)

Annual Fund
Operating
Expenses DG CLASS
(fees paid from SHARES
Fund assets)
------------------------------------------------
Management Fee .25%
------------------------------------------------
Distribution None
(12b-1) Fee
------------------------------------------------
Shareholder .25%
Services Fee
------------------------------------------------
Other Expenses ____%
------------------------------------------------
Total Annual Fund
Operating ____%
Expenses
------------------------------------------------
Fee Waiver And
Expense ____%
Reimbursement
------------------------------------------------
Net Expenses(1) ____%
------------------------------------------------

EXPENSE EXAMPLE

o $10,000 investment
o 5% annual return
o redemption at the end of each period
o no changes in the Fund's operating expenses

Because actual returns and operating expenses will be different,
this example is for comparison only.

TREASURY MONEY 1 3 5 10
MARKET FUND Year Years Years Years

DG CLASS SHARES $____ $____ $____ $____

<PAGE>

ADDITIONAL INVESTMENT STRATEGIES AND RISKS

EQUITY FUNDS

INTERNATIONAL EQUITY FUND--The Fund will invest at least 65% of its total assets
in equity securities of non-United States companies (i.e., incorporated or
organized outside the United States). Under normal market conditions, the Fund
will invest at least 80% of the value of its total assets in the equity
securities of companies within not less than three different countries (not
including the United States).

The Fund is not required to invest exclusively in common stocks or other equity
securities, and, if deemed advisable, the Fund may invest in fixed income
securities and money market instruments. The Fund will not invest in fixed
income securities rated lower than A by a credit rating agency, such as Moody's,
S&P, Fitch or Duff, or, if unrated, deemed to be of comparable quality by the
Adviser. In addition, the Fund may have substantial investments in American and
Global Depositary Receipts and in convertible bonds and other convertible
securities.

The Fund may engage in foreign currency transactions to hedge the Fund's
portfolio or increase returns. The Fund's success in these transactions will
depend principally on the Sub-Adviser's ability to predict accurately the future
exchange rates between foreign currencies and the U.S. dollar.

The Fund also may engage in short-selling, which involves selling a security it
does not own in anticipation of a decline in the market price of the security.
To complete the transaction, the Fund must borrow the security to make delivery
to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it later in the market. The price at such time may be more or less
than the price at which the security was sold by the Fund, which would result in
a loss or gain, respectively.

The Fund is non-diversified and may invest a greater percentage of its assets in
a particular company compared with other funds. Accordingly, the Fund's
portfolio may be more sensitive to changes in the market value of a single
company or industry.

SMALL-CAP OPPORTUNITY FUND--The Fund will invest at least 65% of its total
assets in equity securities. The Fund also may invest in debt securities of
domestic issuers rated no lower than investment grade (Baa/BBB) by a credit
rating agency, or, if unrated, deemed to be of comparable quality by the
Adviser.

LARGE-CAP EQUITY FUND--The Fund will invest at least 70% of its total assets in
equity securities. The Fund also may invest in debt securities of domestic
issuers rated no lower than investment grade (Baa/BBB) by a credit rating
agency, or, if unrated, deemed to be of comparable quality by the Adviser.

APPLICABLE TO ALL EQUITY FUNDS--Under adverse market conditions, each Equity
Fund may invest some or all of its assets in money market instruments. Although
the Fund would do this only in seeking to avoid losses, it could reduce the
benefit from any upswing in the market.

Each Equity Fund may invest, to a limited extent, in securities issued by other
investment companies which principally invest in securities of the type in which
the Fund invests.

Each Equity Fund may invest some assets in derivative securities, such as
options and futures. These instruments are used primarily to hedge the Fund's
portfolio but may be used to increase returns; however, they sometimes may
reduce returns or increase volatility. In addition, derivatives can be illiquid
and highly sensitive to changes in their underlying security, interest rate or
index, and as a result can be highly volatile. A small investment in certain
derivatives could have a potentially large impact on the Fund's performance.

Each Equity Fund may lend its portfolio securities to brokers, dealers and other
financial institutions, which could subject the Fund to risk of loss if the
institution breaches it agreement with the Fund.

FIXED INCOME FUNDS

APPLICABLE TO EACH FIXED INCOME FUND--Each Fixed Income Fund will invest at
least 65% of its total assets in securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities and repurchase agreements in
respect of such securities.

Each Fixed Income Fund may invest, to a limited extent, in securities issued by
other investment companies which principally invest in securities of the type in
which the Fund invests.

Each Fixed Income Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, which could subject the Fund to risk of loss if
the institution breaches its agreement with the Fund.

TAX-EXEMPT FIXED INCOME FUND

MUNICIPAL INCOME FUND--The Fund will invest, as a fundamental policy, at least
80% of its net assets (except when maintaining a temporary defensive position)
in municipal obligations.

The Fund may invest in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental users. Interest on certain industrial
development bonds, while exempt from Federal income tax, is a preference item
for the purpose of the alternative minimum tax. The Fund may invest without
limitation in such municipal obligations if the Adviser determines that their
purchase is consistent with the Fund's investment objective.

From time to time, on a temporary basis other than for temporary defensive
purposes (but not to exceed 20% of the Fund's net assets) or for temporary
defensive purposes, the Fund may invest in taxable money market instruments
having, at the time of purchase, a quality rating in the two highest grades of
Moody's, S&P or Fitch or, if unrated, deemed to be of comparable quality by the
Adviser. Except for temporary defensive purposes, at no time will more than 20%
of the Fund's net assets be invested in taxable money market instruments.

Each Fund may invest, to a limited extent, in securities issued by other
investment companies which principally invest in securities of the type in which
the Fund invests.

The Fund may lend its portfolio securities to brokers, dealers and other
financial institutions, which could subject the Fund to risk of loss if the
institution breaches its agreement the Fund.

MONEY MARKET FUNDS

PRIME MONEY MARKET FUND--The Fund will invest in U.S. dollar denominated
short-term money market obligations.

As a money market fund, the Fund is subject to maturity, quality and
diversification requirements designed to help it maintain a stable price of
$1.00 per share. Generally, the Fund is required to invest at least 95% of its
assets in the securities of issuers with the highest credit rating or the
unrated equivalent as determined by the Adviser. The remainder may be invested
in securities with the second highest credit rating. In addition, the Fund must
do the following:

o maintain an average dollar weighted portfolio maturity of 90 days
or less

o buy individual securities that have remaining maturities of 397
days or less

o buy only high quality U.S. dollar denominated obligations

The Fund usually invests at least 25% of its assets in domestic and/or U.S.
dollar denominated foreign bank obligations. Thus, it will have correspondingly
greater exposure to the risks generally associated with investments in the
banking industry. Sustained increases in interest rates, for example, can
adversely affect the availability and cost of capital funds for a bank's lending
activities, and a deterioration in general economic conditions could increase
the bank's exposure to credit losses. In addition, economic or regulatory
developments in or related to the banking industry, and competition within the
banking industry as well as with other types of financial institutions will
affect the Fund's return. The Fund, however, will seek to minimize its exposure
to such risks by investing only in debt securities which are determined to be of
high quality.

Since the Fund may invest in U.S. dollar denominated securities issued by
foreign issuers, such as foreign governments, foreign banks and foreign
subsidiaries or branches of domestic banks, it may be subject to additional
investment risk with respect to those securities which are different in some
respects from those incurred by a fund that invests only in debt obligations of
U.S. domestic issuers. Foreign issuers usually are not subject to the same
degree of regulation as U.S. issuers. Reporting, accounting, and auditing
standards of foreign countries differ, in some cases, significantly from U.S.
standards. Foreign risk includes nationalization, expropriation or confiscatory
taxation, political changes or diplomatic developments that could adversely
affect such investments.

TREASURY MONEY MARKET FUND--The Fund will invest, as a fundamental policy, at
least 65% of its total assets in U.S. Treasury securities and repurchase
agreements in respect thereof. The remainder of its assets may be invested in
other securities guaranteed as to principal and interest by the U.S. Government
and repurchase agreements in respect thereof.

The Fund will not invest in securities issued or guaranteed by U.S. Government
agencies, instrumentalities or government-sponsored enterprises that are not
backed by the full faith and credit of the United States.

Like the Prime Money Market Fund, the Fund is a money market fund subject to
maturity, quality and diversification requirements designed to help it maintain
a stable price of $1.00 per share. The Fund must do the following:

o maintain an average dollar weighted portfolio maturity of 90 days
or less

o buy individual securities that have remaining maturities of 397 days
or less

APPLICABLE TO EACH MONEY MARKET FUND--Each Money Market Fund may lend its
portfolio securities to brokers, dealers and other financial institutions, which
could subject the Fund to risk of loss if the institution breaches its agreement
with the Fund.

Each Money Market Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. In these transactions, the Fund sells a portfolio security
to another party in return for cash and agrees to repurchase the security
generally at a particular price and time. The Fund will use the cash to make
investments which either mature or have a demand feature to resell to the issuer
at a date simultaneous with or prior to the time the Fund must repurchase the
security. Reverse repurchase agreements may be preferable to a regular sale and
later repurchase of the securities because it avoids certain market risks and
transaction costs. Such transactions, however, may increase the risk of
potential fluctuations in the market value of the Fund's assets. In addition,
interest costs on the cash received may exceed the return on the securities
purchased.

The Money Market Funds expect to maintain a net asset value of $1.00 per share,
but there is no assurance that the Funds will be able to do so on a continuous
basis. Each Money Market Fund's performance per share will change daily based on
many factors, including fluctuation in interest rates, and for the Prime Money
Market Fund the quality of the instruments in the Fund's investment portfolio,
national and international economic conditions and general market conditions.

APPLICABLE TO ALL FUNDS

YEAR 2000 RISK--Like other funds and business organizations around the world,
the Funds could be adversely affected if the computer systems used by the
Adviser or a Sub-Adviser and the Funds' other service providers do not properly
process and calculate date-related information for the year 2000 and beyond. In
addition, Year 2000 issues may adversely affect the companies or other issuers
in which the Funds invest where, for example, such entities incur substantial
costs to address Year 2000 issues or suffer losses caused by the failure to
adequately or timely do so.

The Adviser, the Sub-Advisers and the Funds' other service providers (i.e.,
Administrator, Transfer Agent, Fund Accounting Agent, Custodian and Distributor)
have assured the Funds that they have developed and are implementing clearly
defined and documented plans intended to minimize risks to services critical to
the Funds' operations associated with Year 2000 issues. The Adviser, the
Sub-Advisers and service providers are likewise seeking assurances from their
respective vendors and suppliers that such entities are addressing Year 2000
issues.

While the ultimate costs or consequences of incomplete or untimely resolution of
Year 2000 issues by the Adviser, the Sub-Advisers or the Funds' service
providers cannot be accurately assessed at this time, the Funds currently have
no reason to believe that the Year 2000 plans of the Adviser, the Sub-Advisers
and the Funds' service providers will not be completed by December 31, 1999, or
that the anticipated costs associated with full implementation of their plans
will have a material adverse impact on either their business operations or
financial condition or those of the Funds. If any systems upon which the Funds
are dependent are not Year 2000 ready by December 31, 1999, administrative
errors and account maintenance failures would likely occur.

FUND MANAGEMENT

INVESTMENT ADVISERS

First American National Bank, located at First American Center, 315 Deaderick
Street, Nashville, Tennessee 37237, serves as each Fund's investment adviser.
The Adviser is a wholly-owned subsidiary of First American Corporation, a
registered bank holding company. First American National Bank, and its
affiliates, provide personal trust, estate, employee benefit trust, corporate
trust and custody services to over 7,000 accounts, as well as investment
advisory services. The Adviser, and its affiliates, as of December 31, 1998, had
approximately $10 billion under trust and approximately $6 billion under
management. On May 1, 1998, Deposit Guaranty Corp., located in Jackson,
Mississippi, merged with and into First American Corporation.

Lazard Asset Management, located at 30 Rockefeller Plaza, New York, New York
10112, serves as the sub-investment adviser to the International Equity Fund.
Lazard Asset Management, a division of Lazard Freres & Co. LLC, which is a New
York limited liability company, provides investment management services to
client discretionary accounts with assets totaling approximately $71 billion as
of December 31, 1998.

Womack Asset Management, Inc., located at 1667 Lelia Drive, Suite 101, Jackson,
Mississippi 39216, serves as the sub-investment adviser to the Small-Cap
Opportunity Fund. Womack Asset Management provides investment management
services to client discretionary accounts totaling approximately $500 million as
of December 31, 1998. The table below shows the investment advisory fee rate
paid to the Adviser by the relevant Fund for the fiscal year ended December 31,
1998.

NAME OF FUND ANNUAL RATE

International Equity Fund -%
Small-Cap Opportunity Fund -%
Large-Cap Equity Fund -%
Government Income Fund -%
Limited Term U.S. Government Fund -%
Municipal Income Fund -%
Prime Money Market Fund -%
Treasury Money Market Fund -%

PRIMARY PORTFOLIO MANAGERS

The primary portfolio manager for each Fund, other than the Money Market Funds,
is as follows:

INTERNATIONAL EQUITY FUND--Herbert W. Gullquist and John R. Reinsberg. Messrs.
Gullquist and Reinsberg have been the International Equity Fund's primary
portfolio managers since its inception, and have been Managing Directors of
Lazard for over five years.

SMALL-CAP OPPORTUNITY FUND--William A. Womack. He has been the Small-Cap
Opportunity Fund's primary portfolio manager since its inception. Mr. Womack
formed Womack Management in February 1997. For more than 12 years prior thereto,
he was a Senior Vice President and Trust Investment Officer of Deposit Guaranty
National Bank.

LARGE-CAP EQUITY FUND--Ronald E. Lindquist. Mr. Lindquist, who has over 30
years' experience as a portfolio manager, has been the Large-Cap Equity Fund's
primary portfolio manager since its inception, and has been employed by the
Adviser since May 1998. Since 1978, he was employed by Deposit Guaranty National
Bank and Commercial National Bank, affiliates of the Adviser.

GOVERNMENT INCOME FUND--John Mark McKenzie. He has been the Government Income
Fund's primary portfolio manager since its inception and has been employed by
the Adviser since May 1998. Since 1984, he was employed by Deposit Guaranty
National Bank.

LIMITED TERM U.S. GOVERNMENT FUND--Donald F. Turk. He has been the Limited Term
U.S. Government Fund's primary portfolio manager since its inception and has
been a Trust Officer of the Adviser since 1980.

MUNICIPAL INCOME FUND--Sharon S. Brown and John Mark McKenzie. Ms. Brown and Mr.
McKenzie have been the Municipal Income Fund's primary portfolio managers since
its inception. Ms. Brown has been a Trust Officer of the Adviser since 1988. Mr.
McKenzie has been employed by the Adviser since May 1998 and by Deposit Guaranty
National Bank since 1984.

ADMINISTRATOR AND DISTRIBUTOR

BISYS Fund Services Ohio, Inc. (the "Administrator"), 3435 Stelzer Road,
Columbus, Ohio 43219-3035, serves as each Fund's administrator. The
administrative services of the Administrator include providing office space,
equipment and clerical personnel to the Funds and supervising custodial,
auditing, valuation, bookkeeping, legal and dividend dispersing services.

BISYS Fund Services Limited Partnership (the "Distributor"), an affiliate of the
Administrator, serves as the distributor of each Fund's shares. The Distributor
may provide financial assistance in connection with pre-approved seminars,
conferences and advertising to the extent permitted by applicable state or
self-regulatory agencies, such as the National Association of Securities
Dealers.

SHAREHOLDER INFORMATION

DG Class shares are offered only to investors who acquired Fund shares in
connection with the reorganization of a corresponding DG Investor Series fund.

Other classes of shares--Institutional Shares, Class A Shares and Class B
Shares--are offered by a separate prospectus and are not offered hereby. The DG
Class shares, Institutional shares, Class A shares and Class B shares are
identical, except as to the services offered to each Class and the expenses
borne by each Class which may affect performance. Investors desiring to obtain
information about Institutional shares, Class A shares and Class B shares should
ask their sales representative or call _______________.

PRICING OF FUND SHARES

HOW NAV IS CALCULATED

The NAV of each class is calculated by adding the total value of the Fund's
investments and other assets attributable to such class, subtracting its
liabilities and then dividing that figure by the number of outstanding shares of
the class:

NAV =

TOTAL ASSETS - LIABILITIES
Number of Class Shares
Outstanding

You can find each Fund's NAV daily in THE WALL STREET JOURNAL
and other newspapers.

MONEY MARKET FUNDS

Each Money Market Fund's per share net asset value (NAV) is determined and its
shares are priced at 2:00 p.m. Eastern time on each day the New York Stock
Exchange is open, except Columbus Day and Veterans' Day.

OTHER FUNDS

Per share net asset value (NAV) for each non-Money Market Fund is determined and
its shares are priced at the close of regular trading on the New York Stock
Exchange, normally at 4:00 p.m. Eastern time, on days the Exchange is open,
except Columbus Day and Veterans' Day.

Your order for purchase, sale or exchange of shares is priced at the next NAV
calculated after your order is accepted by the Fund less any applicable sales
charge as noted in the section on "Distribution Arrangements/Sales Charges."
This is what is known as the offering price. o

Each Money Market Fund uses the amortized cost method of valuing its
investments, which does not take into account unrealized gains or losses. Each
other Fund's investments are valued each business day generally by using
available market quotations or at fair value which may be determined by one or
more pricing services approved by the Board of Directors. Each pricing service's
procedures are reviewed under the general supervision of the Board of Directors.
For further information regarding the methods employed in valuing the Funds'
investments, see the Statement of Additional Information.

<PAGE>

SHAREHOLDER INFORMATION

PURCHASING AND ADDING TO YOUR SHARES

You may purchase DG Class shares through a number of institutions, including the
Adviser and its affiliates, directly from the Distributor, or through banks,
brokers and other investment representatives. Certain investment representatives
may charge additional fees and may require higher minimum investments or impose
other limitations on buying and selling shares. If you purchase shares through
an investment representative, that party is responsible for transmitting orders
in a timely manner and may have an earlier cut-off time for purchase and sale
requests. Consult your investment representative for specific information.

MINIMUM INVESTMENT
ACCOUNT TYPE INITIAL SUBSEQUENT

Regular
(non-retirement) $1,000 $100
Retirement (IRA) $ 100 $ 50
Automatic Investment $ 250 $ 25
Plan

All purchases must be in U.S. dollars. A fee will be charged for any checks that
do not clear. Third-party checks are not accepted.

A Fund may waive the minimum purchase requirements and may reject any purchase
order in whole or in part.

Avoid 31% Tax Withholding
A Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number in compliance with IRS
rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.

<PAGE>

SHAREHOLDER INFORMATION

INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT

If purchasing through an investment representative, simply tell your
representative that you wish to purchase shares of the Funds and he or she will
take care of the necessary documentation. For all other purchases, follow the
instructions below.

BY REGULAR MAIL

Initial Investment:
1 Carefully read and complete the account application. Establishing your
account privileges now saves you the inconvenience of having to add them
later.
2 Make check, bank draft or money order payable to "ISG Funds [name of
Fund]."
3 Mail to: ISG Funds, c/o BISYS Fund Services, Dept. L-1686,
Columbus, Ohio 43260-1686.

Subsequent Investment:
1 Use the investment slip attached to your account statement.
Or, if unavailable,
2 Include the following information on a piece of paper:
o ISG Funds/Fund name
o Share class
o Amount invested
o Account name
o Account number
Include your account number on your check.

3 Mail to: ISG Funds, c/o BISYS Fund Services, Dept. L-1686,
Columbus, Ohio 43260-1686.

BY OVERNIGHT SERVICE

See instructions 1-2 above for subsequent investments.
Send to: ISG Funds,
c/o BISYS Funds Services,
Attn: T.A. Operations, 3435 Stelzer Road, Columbus, OH 43219.

ELECTRONIC PURCHASES

Your bank must participate in the Automated Clearing House (ACH) and must be a
United States Bank. Your bank or broker may charge for this service.

<PAGE>

Establish an electronic purchase option on your account application or call
1-800-000-0000. Your account can generally be set up for electronic purchases
within 15 days.

Call 1-800-000-0000 to arrange a transfer from your bank account.

SHAREHOLDER INFORMATION

PURCHASING AND ADDING TO YOUR SHARES - CONTINUED

ELECTRONIC VS. WIRE TRANSFER

Wire transfers allow financial
institutions to send funds to each
other, almost instantaneously. With
an electronic purchase or sale, the
transaction is made through the
Automated Clearing House (ACH) and
may take up to eight days to clear.
There is generally no fee for ACH
transactions.

BY WIRE TRANSFER

NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.

For initial investment:
Fax the completed account application, along with a request for a confirmation
number to 1-800-000-0000. Follow the instructions below after receiving your
confirmation number.

For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
Name of Bank
Routing Number: ABA #000000
DDA#
Include:
Your name
Your confirmation number
After instructing your bank to wire the funds, call
1-800-000-0000 to advise us of the amount being transferred and the name
of your bank

You can add to your account by using the convenient options described below. The
Funds reserve the right to change or eliminate these privileges at any time with
60 days' notice.

<PAGE>

SHAREHOLDER INFORMATION

PURCHASING AND ADDING TO YOUR SHARES - CONTINUED

AUTOMATIC INVESTMENT PLAN Directed Dividend Option

You can make automatic investments By selecting the appropriate box in
in the Funds from your bank the account application, you can elect
account, through payroll deduction to receive your
or from your federal employment, distributions (capital
Social Security or other regular gains and dividends)
government checks. Automatic in cash (check) or have them
investments can be as little as reinvested in another ISG Fund
$25, once you've invested the without a sales charge. You must
$250 minimum required to open the maintain the minimum balance in each
account. Fund into which you plan to reinvest
distributions or the reinvestment
To invest regularly from your bank will be suspended and your
account: distributions paid to you. The Fund
Complete the Automatic Investment may modify or terminate this
Plan portion on to reinvest reinvestment option without notice.
your Account Application. You can change or terminate your
Make sure you note: participation in the reinvestment
o Your bank name, address and option at any time.
account number
o The amount you wish to invest
automatically (minimum $25)
o How often you want to invest
(every month, 4 times a
year, twice a year or once a
year)
o Attach a voided personal check.

To invest regularly from your
paycheck or government check:
Call 1-800-000-0000 for an
enrollment form.

- - -------------------------------------------------------------------------------
AUTOMATICALLY THROUGH "SWEEP" PROGRAMS--MONEY MARKET FUNDs ONLY--Certain
investor accounts may be eligible for an automatic investment privilege,
commonly called a "sweep," under which amounts in excess of a certain minimum
held in these accounts will be invested automatically in shares of either Money
Market Fund at predetermined intervals at the next determined NAV. Investors
desiring to use this privilege should consult their investment representative to
determine if it is available and whether any conditions are imposed on its use.

<PAGE>

SHAREHOLDER INFORMATION

SELLING YOUR SHARES

You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Fund, its transfer agent, or your
investment representative. Normally you will receive your proceeds within a week
after your request is received. See section on "General Policies on Selling
Shares" below.

WITHDRAWING MONEY FROM YOUR FUND INVESTMENT

As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares or a
redemption of shares.

INSTRUCTIONS FOR SELLING SHARES

If you are selling your shares through your financial adviser or broker, ask him
or her for redemption procedures. Your adviser and/or broker may have
transaction minimums and/or transaction times which will affect your redemption.
For all other sales transactions, follow the instructions below.

By telephone 1. Call 1-800-000-0000 with
(UNLESS YOU HAVE instructions as to how you wish to
DECLINED TELEPHONE receive your funds (mail, wire,
SALES PRIVILEGES) electronic transfer). (See "General
Policies on Selling Shares--Verifying
Telephone Redemptions" below)
- - -------------------------------------------------------------------------------
By mail 1. Call 1-800-000-0000 to request
redemption forms or write a letter of
instruction indicating:
o your Fund and account number
o amount you wish to redeem
o address where your check should be
sent
o account owner signature
2. Mail to:
ISG Funds
c/o BISYS Fund Services, Inc.
Department L -1686
Columbus, OH 43260-1686
- - -------------------------------------------------------------------------------
By overnight service See instruction 1 above.
(See "General 2. Send to
Policies on Selling ISG Funds
Shares--Redemptions c/o BISYS Fund Services, Inc.
in Writing Required" Attn: T.A. Operations
below) 3435 Stelzer Road
Columbus, OH 43219

<PAGE>

SHAREHOLDER INFORMATION

SELLING YOUR SHARES - CONTINUED

Wire transfer Call 1-800-852-0045 to request a wire
YOU MUST INDICATE transfer.
THIS OPTION ON YOUR
APPLICATION. If you call by 4 p.m. Eastern time,
your payment will normally be wired
to your bank on the next business day.
The Fund may charge
a wire transfer fee.
Note: Your financial
institution may
also charge a
separate fee.

- - -------------------------------------------------------------------------------
Electronic Call 1-800-852-0045 to request an
Redemptions electronic redemption.

Your bank must participate in If you call by 4 p.m. Eastern time, the
the Automated Clearing House NAV of your shares will normally be
(ACH) and must be a U.S. determined on the same day and the
bank. proceeds credited within 8 days.

Your bank may charge for this service.

SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly,
semi-annual or annual basis. The minimum withdrawal is $25. To activate this
feature: o Make sure you've checked the appropriate box on the account
application. Or call 1-800-852-0045.
o Include a voided personal check.
o Your account must have a value of $5,000 or more to start withdrawals.
o If the value of your account falls below $_____, you may be asked to add
sufficient funds to bring the account back to $_____, or the Fund may close
your account and mail the proceeds to you.

<PAGE>

SHAREHOLDER INFORMATION

SELLING YOUR SHARES - CONTINUED

REDEMPTION BY CHECK WRITING - MONEY MARKET FUNDS

You may write up to _____ checks a month in amounts of $ _____ or more on your
account in the Money Market Fund. To obtain checks, complete the signature card
section of the Account Application or contact the Fund to obtain a signature
card. Dividends and distributions will continue to be paid up to the day the
check is presented for payment. The check writing feature may be modified or
terminated upon 30-days' written notice. You must maintain the minimum required
account balance of ($_____) and you may not close your Money Market Fund account
by writing a check.

GENERAL POLICIES ON SELLING SHARES

REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Redemption requests requiring a signature guarantee which include each of
the following.
o Redemptions over $10,000
o Your account registration or the name(s) in your account has changed
within the last 15 days o The check is not being mailed to the address
on your account o The check is not being made payable to the owner of
the account
o The redemption proceeds are being transferred to another Fund account
with a different registration.

A signature guarantee can be obtained from a financial institution, such
as a bank, broker-dealer, or credit union, or from members of the STAMP
(Securities Transfer Agents Medallion Program), MSP (New York Stock
Exchange Signature Program) or SEMP (Stock Exchanges Medallion Program).
Members are subject to dollar limitations which must be considered when
requesting their guarantee. The Transfer Agent may reject any signature
guarantee if it believes the transaction would otherwise be improper.

VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to insure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Given these
precautions, unless you have specifically indicated on your application that you
do not want the telephone redemption feature, you may be responsible for any
fraudulent telephone orders. If appropriate precautions have not been taken, the
Transfer Agent may be liable for losses due to unauthorized transactions.

<PAGE>

SHAREHOLDER INFORMATION

SELLING YOUR SHARES - CONTINUED

REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, you cannot redeem any
portion of it until the Transfer Agent is satisfied that the check has cleared
(which may require up to 15 business days). You can avoid this delay by
purchasing shares with a certified check.

REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the SEC in order to protect remaining shareholders.

REDEMPTION IN KIND
The Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund operations
(for example, more than 1% of the Fund's net assets). If the Fund deems it
advisable for the benefit of all shareholders, redemption in kind will consist
of securities equal in market value to your shares. When you convert these
securities to cash, you might have to pay brokerage charges.

CLOSING OF SMALL ACCOUNTS
If your account falls below $500, the Fund may ask you to increase your balance.
If it is still below $500 after 45 days, the Fund may close your account and
send you the proceeds at the current NAV.

UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash: If
distribution checks (1) are returned and marked as "undeliverable" or (2) remain
uncashed for six months, your account will be changed automatically so that all
future distributions are reinvested in your account. Checks that remain uncashed
for six months will be canceled and the money reinvested in the Fund.

<PAGE>

SHAREHOLDER INFORMATION

DISTRIBUTION ARRANGEMENTS/SALES CHARGES

This section describes the sales charges and distribution fees you will pay as
an investor in DG Class shares and ways to qualify for reduced sales charges.

CALCULATION OF SALES CHARGES

DG CLASS SHARES

DG Class shares are sold at their public offering price. This price includes the
initial sales charge. Therefore, part of the money you invest will be used to
pay the sales charge. The remainder is invested in Fund shares. The sales charge
decreases with larger purchases. There is no sales charge on reinvested
dividends and distributions. DG Class shares of the International Equity Fund
and each Money Market Fund are sold at their NAV.

The current sales charge rates are as follows:

FOR THE LARGE-CAP EQUITY FUND AND SMALL-CAP OPPORTUNITY FUND

SALES CHARGE SALES CHARGE
AS A % OF AS A % OF
YOUR INVESTMENT OFFERING YOUR
PRICE INVESTMENT
- - -------------------------------------------------------------------------------
Up to $99,999 3.50% 3.63%
- - -------------------------------------------------------------------------------
$100,000 up to $249,999 3.00% 3.09%
- - -------------------------------------------------------------------------------
$250,000 up to $499,999 2.50% 2.56%
- - -------------------------------------------------------------------------------
$500,000 up to $999,999 1.00% 1.01%
- - -------------------------------------------------------------------------------
$1,000,000 and above1 0.00% 0.00%
- - -------------------------------------------------------------------------------

FOR THE FIXED INCOME FUNDS AND TAX-EXEMPT FIXED INCOME FUND

SALES CHARGE SALES CHARGE
AS A % OF AS A % OF
YOUR INVESTMENT OFFERING YOUR
PRICE INVESTMENT
- - -------------------------------------------------------------------------------
Up to $99,999 2.00% 2.04%
- - -------------------------------------------------------------------------------
$100,000 up to $249,999 1.75% 1.78%
- - -------------------------------------------------------------------------------
$250,000 up to $499,999 1.50% 1.52%
- - -------------------------------------------------------------------------------
$500,000 up to $999,999 1.00% 1.01%
- - -------------------------------------------------------------------------------
$1,000,000 and above1 0.00% 0.00%
- - -------------------------------------------------------------------------------

- - --------
1 There is no initial sales charge on purchases of $1 million or
more. However, a contingent deferred sales charge (CDSC) of 0.50% will be
charged at the time of redemption of DG Class shares purchased without an
initial sales charge as part of an investment of at least $1 million (0.25%
will be assessed on purchases over $2,000,000) and redeemed within one year
of purchase. This charge will be based on the lower of your cost for the
shares or the shares' NAV at the time of redemption. There is no CDSC on
reinvested distributions. The Distributor may pay financial representatives
an amount up to 0.50% of the net asset value of DG Class shares purchased
by their clients that are subject to a CDSC.

<PAGE>

SHAREHOLDER INFORMATION

DISTRIBUTION ARRANGEMENTS/SALES CHARGES - CONTINUED

CONVERSION FEATURE
o DG Class shares automatically convert to Class A shares of the same Fund on
May 1, 2000.
o After conversion, your shares will be subject to the distribution and
shareholder servicing fees charged on Class A shares which are the same as
those chargeable DG Class shares.
o You will not pay any sales charge or fees when your shares convert, nor
will the transaction be subject to any tax.
o The dollar value of Class A shares you receive will equal the dollar value
of the DG Class shares converted.

<PAGE>

SHAREHOLDER INFORMATION

DISTRIBUTION ARRANGEMENTS/SALES CHARGES - CONTINUED

SALES CHARGE REDUCTIONS
Reduced sales charges for DG Class shares are available to shareholders with
investments of $100,000 or more. In addition, you may qualify for reduced sales
charges under the following circumstances.

o Letter of Intent. You inform the Fund in writing that you intend to
purchase enough shares over a 13-month period to qualify for a reduced
sales charge. You must include a minimum of 5% of the total amount you
intend to purchase with your letter of intent.

o Rights of Accumulation. When the value of shares you already own plus the
amount you intend to invest reaches the amount needed to qualify for
reduced sales charges, your added investment will qualify for the reduced
sales charge.

o Combination Privilege. Combine accounts of multiple Funds (excluding the
Money Market Funds) or accounts of immediate family household members
(spouse and children under 21) to achieve reduced sales charges.

SALES CHARGE WAIVERS

CLASS A SHARES
The following qualify for waivers or reductions of sales charges:

o Shares purchased by investment representatives through fee-based investment
products or accounts.

o Proceeds from redemptions from another mutual fund complex within 90 days
after redemption, if you paid a sales charge for those shares, to the
extent of such charge.

o Reinvestment of distributions from a deferred compensation plan, agency,
trust, or custody account that was maintained by the Adviser or its
affiliates or invested in any ISG Fund.

o Shares purchased for trust or other advisory accounts established with the
Adviser or its affiliates.

o Shares purchased by full-time employees (and their family members) of the
Adviser or the Administrator; current and retired directors of the Adviser
or any of its affiliates; current and retired Fund directors; dealers who
have an agreement with the Distributor; and any trade organization to which
the Adviser or the Administrator belongs.

REINSTATEMENT PRIVILEGE
If you have sold DG Class shares and decide to reinvest in the Fund within a
90-day period, you will not be charged the applicable sales load on amounts up
to the value of the shares you sold. You must provide a written reinstatement
request and payment within 90 days of the date your instructions to sell were
processed.

<PAGE>

SHAREHOLDER INFORMATION

DISTRIBUTION ARRANGEMENTS/SALES CHARGES - CONTINUED

DISTRIBUTION (12B-1) FEES

12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and distribution
of the Fund's shares. Because 12b-1 fees are paid from Fund assets on an ongoing
basis, over time they will increase the cost of your investment and may cost you
more than paying other types of sales charges.

o DG Class shares (other than the Money Market Funds) pay a 12b-1 fee of .25%
of the average daily net assets represented by DG Class shares of the Fund.

Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
distribution fees.

<PAGE>

SHAREHOLDER INFORMATION

EXCHANGING YOUR SHARES

INSTRUCTIONS FOR EXCHANGING SHARES

You can exchange your shares in one Fund for shares of the same class of another
ISG Fund, usually without paying additional sales charges (see "Notes" below).
No transaction fees are charged for exchanges.

You must meet the minimum investment requirements for the Fund into which you
are exchanging. Exchanges from one Fund to another are taxable.

Exchanges may be made by sending a written request to ISG Funds, P.O. Box 0000,
Columbus OH 43219, or by calling 1-800-852-0045. Please provide the following
information:
o Your name and telephone number
o The exact name on your account and account number
o Taxpayer identification number (usually your Social Security number)
o Dollar value or number of shares to be exchanged
o The name of the Fund from which the exchange is to be made
o The name of the Fund into which the exchange is being made.

See "Selling your Shares" for important information about telephone
transactions.

To prevent disruption in the management of the Funds, due to market timing
strategies, exchange activity may be limited to _____ exchanges within a _____
period.

AUTOMATIC EXCHANGES

You can use the Funds' Automatic Exchange feature to purchase shares of the
Funds at regular intervals through regular, automatic redemptions from the
Money Market Funds. To participate in the Automatic Exchange:
o Complete the appropriate section of the Account Application.
o Keep a minimum of $10,000 in the Money Market Fund and $1,000
in the Fund whose shares you are buying.

To change the Automatic Exchange instructions or to discontinue the feature, you
must send a written request to ISG Funds, P.O.
Box 0000, Columbus, Ohio 43218-2733.

NOTES ON EXCHANGES
When exchanging from a Fund that has no sales charge or a lower sales charge to
a Fund with a higher sales charge, you will pay the difference.

The registration and tax identification numbers of the two accounts must be
identical.

The Exchange Privilege (including automatic exchanges) may be changed or
eliminated at any time upon 60 days' notice to shareholders.

Be sure to read the prospectus carefully of any Fund into which you wish to
exchange shares.

<PAGE>

SHAREHOLDER INFORMATION

DIVIDENDS, DISTRIBUTIONS AND TAXES

All dividends and distributions will be automatically reinvested in Fund shares
unless you request otherwise. There are no sales charges for reinvested
dividends and distributions. Each share class will generate a different dividend
because each has different expenses. Capital gains, if any, are distributed at
least annually.

Each Fund usually pays its shareholders dividends from its net investment income
as follows:
<TABLE>
<CAPTION>

MONTHLY QUARTERLY ANNUALLY
<S> <C> <C>
o Government Income Fund o Large-Cap Equity Fund o International Equity Fund
o Limited Term U.S. Government Fund o Small-Cap Opportunity Fund
o Municipal Income Fund
o Treasury Money Market Fund
o Prime Money Market Fund
</TABLE>

Dividends paid by a Fund (other than a tax-exempt fund) are taxable to U.S.
shareholders as ordinary income (unless your investment is in an IRA or
tax-advantaged account). The Municipal Income Fund anticipates that, under
normal market conditions, substantially all of its income dividends will be
exempt from Federal personal income taxes. However, any dividends from taxable
investments are taxable as ordinary income.

An exchange of shares is considered a sale, and any related gains may subject to
applicable taxes.

Dividends are taxable in the year in which they are paid, even if they appear on
your account statement the following year. Dividends and distributions are
treated in the same manner for Federal income tax purposes whether you receive
them in cash or in additional shares.

DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU'VE OWNED
YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION DATE, SOME
OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A DISTRIBUTION.

You will be notified in January each year about the Federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.

Foreign shareholders may be subject to special withholding requirements. There
is a penalty on certain pre-retirement distributions from retirement accounts.
Because everyone's tax situation is unique, you should consult your tax
professional about Federal, state and local tax consequences.

FINANCIAL HIGHLIGHTS

The tables below describe the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. The information in the financial highlights has
been audited by _______________, the Funds' independent auditors, whose report,
along with the Funds' financial statements, are included in the annual report.
No financial information is provided for shares of Funds which had not been
offered as of the date of the financials.

[To be filed by amendment]

<PAGE>

For more information about the Funds, the following documents are available free
upon request:

ANNUAL/SEMI-ANNUAL REPORTS (REPORTS): The Funds' annual and semi-annual reports
to shareholders contain additional information on the Funds' investments. In the
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year.

STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds, including its operations and investment policies.
It is incorporated by reference and is legally considered a part of this
prospectus.

- - --------------------------------------------------------------------------------
YOU CAN GET FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION AND
DISCUSS YOUR QUESTIONS ABOUT THE FUNDS BY CONTACTING A BROKER OR BANK THAT SELLS
THE FUNDS. OR CONTACT THE FUNDS AT:

ISG FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-800-_____-_________
E-MAIL: INVEST.SERV@____.COM
INTERNET: HTTP://WWW.____.COM
- - --------------------------------------------------------------------------------

You can review the Funds' Reports and SAI at the Public Reference Room of the
Securities and Exchange Commission.
You can get text-only copies:
o For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009, or calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov.

Investment Company Act file no. 811-06076.

<PAGE>

THE INFINITY MUTUAL FUNDS, INC. ISG FUNDS

o International Equity Fund
o Small-Cap Opportunity Fund
o Large-Cap Equity Fund
o Government Income Fund
o Limited Term U.S. Government Fund
o Municipal Income Fund
o Prime Money Market Fund
o Treasury Money Market Fund

DG CLASS SHARES

STATEMENT OF ADDITIONAL INFORMATION
_________, 1999

This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus for DG
Class Shares of the ISG Funds listed above (each, a "Fund" and collectively, the
"Funds") of The Infinity Mutual Funds, Inc. (the "Company"), dated _________,
1999, as it may be revised from time to time. To obtain a copy of the
Prospectus, please write to the Company at 3435 Stelzer Road, Columbus, Ohio
43219-3035. This Statement of Additional Information relates only to the Funds
and not to any of the Company's other portfolios.

The most recent Annual Report and Semi-Annual Report to Shareholders
for each Fund are separate documents supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.

<PAGE>

TABLE OF CONTENTS
PAGE

Description of the Company and the Funds...........................B-3
Management of the Company.........................................B-41
Management Arrangements...........................................B-44
Purchase and Redemption of Shares.................................B-53
Determination of Net Asset Value..................................B-61
Shareholder Services and Privileges...............................B-64
Performance Information...........................................B-67
Portfolio Transactions............................................B-73
Information About the Company and the Funds.......................B-75
Counsel and Independent Auditors..................................B-76
Financial Statements..............................................B-76
Appendix .........................................................B-77

<PAGE>
DESCRIPTION OF THE COMPANY AND THE FUNDS

GENERAL

The Company is a Maryland corporation organized on March 6, 1990. Each
Fund is a separate portfolio of the Company, an open-end management investment
company, known as a mutual fund. Each of the Large-Cap Equity, Small-Cap
Opportunity, Municipal Income, Government Income, Prime Money Market and
Treasury Money Market Funds is a diversified investment company, which means
that, with respect to 75% of its total assets, the Fund will not invest more
than 5% of its assets in the securities of any single issuer. Each other Fund is
a non-diversified investment company, which means that the proportion of the
Fund's assets that may be invested in the securities of a single issuer is not
limited by the Investment Company Act of 1940, as amended (the "1940 Act").

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

BISYS Fund Services Ohio, Inc. (the "Administrator") serves as each
Fund's administrator.

BISYS Fund Services Limited Partnership (the "Distributor"), an
affiliate of the Administrator, serves as each Fund's distributor.

CERTAIN PORTFOLIO SECURITIES

The following information supplements and should be read in
conjunction with the Funds' Prospectus.

U.S. TREASURY SECURITIES. (All Funds) Each Fund may invest in U.S.
Treasury securities which include Treasury Bills, Treasury Notes and Treasury
Bonds that differ in their interest rates, maturities and times of issuance.
Treasury Bills have initial maturities of one year or less; Treasury Notes have
initial maturities of one to ten years; and Treasury Bonds generally have
initial maturities of greater than ten years.

U.S. GOVERNMENT SECURITIES. (All Funds) In addition to U.S. Treasury
securities, each Fund may invest in securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. Some obligations issued or
guaranteed by U.S. Government agencies and instrumentalities, for example,
Government National Mortgage Association pass-through certificates, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal Home Loan Banks, by the right of the issuer to borrow from
the Treasury; others, such as those issued by the Federal National Mortgage
Association, by discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the credit of the
agency or instrumentality. These securities bear fixed, floating or variable
rates of interest. Principal and interest may fluctuate based on generally
recognized reference rates or the relationship of rates. While the U.S.
Government provides financial support to such U.S. Government-sponsored agencies
or instrumentalities, no assurance can be given that it will always do so, since
it is not so obligated by law. Each Fund will invest in such securities only
when it is satisfied that the credit risk with respect to the issuer is minimal.
The Treasury Money Market Fund will not invest in securities issued or
guaranteed by U.S. Government agencies, instrumentalities or
government-sponsored enterprises that are not backed by the full faith and
credit of the United States.

BANK OBLIGATIONS. (All Funds, except the Limited Term U.S. Government
Fund and Treasury Money Market Fund) Each of these Funds may invest in bank
obligations (other than those issued by the Adviser or its affiliates),
including certificates of deposit ("CDs"), time deposits ("TDs"), bankers'
acceptances and other short-term obligations of domestic banks, foreign
subsidiaries or foreign branches of domestic banks, and domestic branches of
foreign banks, domestic savings and loan associations and other banking
institutions. 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 CDs may be purchased by the Fund are insured by the Bank
Insurance Fund administered by the FDIC (although such insurance may not be of
material benefit to the Fund, depending upon the principal amount of the CDs of
each bank held by the Fund) 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 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 Money Market Fund's investment in obligations of foreign subsidiaries of
domestic banks are subject, to the extent required by 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, or by domestic branches of foreign banks, the Adviser carefully
evaluates such investments on a case-by-case basis.

Each of these Funds 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 the Fund 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 Fund will own more than one such CD per such issuer.

Each of these Funds 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 Fund 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 Fund 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 Fund
and the Borrower. In such cases, the Fund would be required to rely on the
Intermediate Participant that sold the participation interest not only for the
enforcement of the Fund's rights against the Borrower but also for the receipt
and processing of payments due to the Fund 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 Fund may be subject to delays, expenses and risks that
are greater than those that would be involved if the Fund could enforce its
rights directly against the Borrower. Moreover, under the terms of a
participation interest, the Fund 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 Fund 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 Fund 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 Money Market Fund 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 Prime Money Market
Fund should be in a temporary defensive position, the Fund may invest less than
25% of its total assets in the banking industry; during such times the Prime
Money Market Fund'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 Prime
Money Market Fund.

COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS. (Each
Fund, except the Limited Term U.S. Government Fund and Treasury Money Market
Fund) Each of these Funds may invest in commercial paper, which consists of
short-term, unsecured promissory notes issued to finance short-term credit
needs. The commercial paper purchased by the Funds will consist only of direct
obligations which, at the time of their purchase, are (a) rated not lower than
Prime-1 by Moody's Investors Service, Inc. ("Moody's"), A-1 by Standard & Poor's
Ratings Group ("S&P"), F-1 by Fitch IBCA, Inc. ("Fitch") or Duff-1 by Duff &
Phelps Credit Rating Co. ("Duff"), or (b) issued by companies having an
outstanding unsecured debt issue currently rated not lower than Aa3 by Moody's
or AA- by S&P, Fitch or Duff, or (c) if unrated, determined by the Adviser to be
of comparable quality to those rated obligations which may be purchased by the
Fund.

REPURCHASE AGREEMENTS. (All Funds) Each Fund may enter into repurchase
agreements which involve the acquisition by a Fund of an underlying debt
instrument, subject to an obligation of the seller to repurchase, and such Fund
to resell, the instrument at a fixed price usually not more than one week after
its purchase. 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 Fund 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 1940 Act. Repurchase agreements are considered by the staff of the
Securities and Exchange Commission to be loans by the Fund entering into them.
Certain costs may be incurred by a Fund in connection with the sale of the
securities if the seller does not repurchase them in accordance with the
repurchase agreement. In addition, if bankruptcy proceedings are commenced with
respect to the seller of the securities, realization on the securities by a Fund
may be delayed or limited. Each Fund will consider on an ongoing basis the
creditworthiness of the institutions with which it enters into repurchase
agreements. In an attempt to reduce the risk of incurring a loss on a repurchase
agreement, each Fund 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 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 Adviser will monitor on an ongoing basis the value of the collateral
to assure that it always equals or exceeds the repurchase price. Each Fund will
consider on an ongoing basis the creditworthiness of the institutions with which
it enters into repurchase agreements.

ZERO COUPON AND STRIPPED SECURITIES. (All Funds) Each Fund may invest
in zero coupon U.S. Treasury securities, which are Treasury Notes and Bonds that
have been stripped of their unmatured interest coupons, the coupons themselves
and receipts or certificates representing interests in such stripped debt
obligations and coupons. Each Fund, except the Limited Term U.S. Government
Fund, Prime Money Market Fund and Treasury Money Market Fund, also may invest in
zero coupon securities issued by corporations and financial institutions which
constitute a proportionate ownership of the issuer's pool of underlying U.S.
Treasury securities. A zero coupon security pays no interest to its holder
during its life and is sold at a discount to its face value at maturity. The
amount of the discount fluctuates with the market price of the security. The
market prices of zero coupon securities generally are more volatile than the
market prices of securities that pay interest periodically and are likely to
respond to a greater degree to changes in interest rates than non-zero coupon
securities having similar maturities and credit qualities.

FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES.
(Each Fund, except the Limited Term U.S. Government Fund and Treasury Money
Market Fund) Each of these Funds may invest in obligations issued or guaranteed
by one or more foreign governments or any of their political subdivisions,
agencies or instrumentalities that are determined by the Adviser to be of
comparable quality to the other obligations in which such Fund may invest. Such
securities also include debt obligations of supranational entities.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the Asian
Development Bank and the InterAmerican Development Bank. The percentage of a
Fund's assets invested in securities issued by foreign governments will vary
depending on the relative yields of such securities, the economic and financial
markets of the countries in which the investments are made and the interest rate
climate of such countries.

FLOATING AND VARIABLE RATE OBLIGATIONS. (Each Fund, except the Limited
Term U.S. Government Fund and Treasury Money Market Fund) Each of these Funds
may purchase floating and variable rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of 397 days, but which
permit the holder to demand payment of principal at any time, or at specified
intervals. Variable rate demand notes include master demand notes which are
obligations that permit the Fund to invest fluctuating amounts, at varying rates
of interest, pursuant to direct arrangements between the Fund, as lender, and
the borrower. These obligations permit daily changes in the amount borrowed.
Because these obligations are direct lending arrangements between the lender and
borrower, it is not contemplated that such instruments generally will be traded,
and there generally is no established secondary market for these obligations,
although they are redeemable at face value. Accordingly, where these obligations
are not secured by letters of credit or other credit support arrangements, the
Fund's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. Such obligations frequently are not rated by
credit rating agencies and a Fund may invest in obligations which are not so
rated only if the Adviser determines that at the time of investment the
obligations are of comparable quality to the other obligations in which the Fund
may invest. The Adviser, on behalf of each Fund, will consider on an ongoing
basis the creditworthiness of the issuers of the floating and variable rate
demand obligations purchased by such Fund.

NOTES. (Each Fund, except the Limited Term U.S. Government Fund and
Treasury Money Market Fund) Each of these Funds may purchase unsecured
promissory notes ("Notes") which are not readily marketable and have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"),
provided such investments are consistent with its investment objective.

PARTICIPATION INTERESTS AND TRUST RECEIPTS. (Each Fund, except the
Limited Term U.S. Government Fund and Treasury Money Market Fund) Each of these
Funds may purchase from financial institutions and trusts created by such
institutions participation interests and trust receipts in securities in which
it may invest and may enter into loan participation agreements. A participation
interest or receipt gives the Fund an undivided interest in the security in the
proportion that the Fund's participation interest or receipt bears to the total
principal amount of the security. These instruments may have fixed, floating or
variable rates of interest with remaining maturities of 397 days or less. If the
instrument is unrated, or has been given a rating below that which is
permissible for purchase by the Fund, the instrument will be backed by an
irrevocable letter of credit or guarantee of a bank or other entity the debt
securities of which are rated high quality, or the payment obligation otherwise
will be collateralized by U.S. Government securities, or, in the case of unrated
instruments, the Adviser, acting upon delegated authority from the Company's
Board of Directors, must have determined that the instrument is of comparable
quality to those instruments in which the Fund may invest. Participation
interests or trust receipts with a rating below high quality that are backed by
an irrevocable letter of credit or guarantee as described above will be
purchased only if the Adviser, acting as described above, determines after an
analysis of, among other factors, the creditworthiness of the guarantor that
such instrument is high quality, and if the rating agency did not include the
letter of credit or guarantee in its determination of the instrument's rating.
If the rating of a participation interest or trust receipt is reduced subsequent
to its purchase by the Fund, the Adviser will consider, in accordance with
procedures established by the Board of Directors, all circumstances deemed
relevant in determining whether the Fund should continue to hold the instrument.
The guarantor of a participation interest or trust receipt will be treated as a
separate issuer. For certain participation interests and trust receipts, the
Fund will have the unconditional right to demand payment, on not more than seven
days' notice, for all or any part of the Fund's interest in the security, plus
accrued interest. As to these instruments, the Fund intends to exercise its
right to demand payment only upon a default under the terms of the security, as
needed to provide liquidity to meet redemptions, or to maintain or improve the
quality of its investment portfolio.

GUARANTEED INVESTMENT CONTRACTS. (Each Fund, except the Limited Term
U.S. Government Fund and Treasury Money Market Fund) Each of these Funds may
make limited investments in guaranteed investment contracts ("GICs") issued by
highly rated U.S. insurance companies. Pursuant to such a contract, the Fund
would make cash contributions to a deposit fund of the insurance company's
general account. The insurance company would then credit to the Fund on a
monthly basis interest which is based on an index (in most cases the Salomon
Smith Barney CD Index), but is guaranteed not to be less than a certain minimum
rate. The Prime Money Market Fund currently does not expect to invest more than
5% of its net assets in GICs.

ILLIQUID SECURITIES. (All Funds) Each Fund may invest up to 15% (10%
in the case of Limited Term U.S. Government and Money Market Funds) of the value
of its net assets in illiquid securities. As to these securities, the Fund is
subject to a risk that should the Fund desire to sell them when a ready buyer is
not available at a price the Fund deems representative of their value, the value
of the Fund's net assets could be adversely affected. 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 Fund 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 Company's Board and repurchase
agreements maturing in more than seven days. Commercial paper issues include
securities issued by major corporations without registration under the 1933 Act,
in reliance on the exemption from such registration afforded by Section 3(a)(3)
thereof and commercial paper and medium term notes 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. Where a substantial market of qualified institutional buyers
has developed for certain restricted securities purchased by the Fund pursuant
to Rule 144A under the 1933 Act, the Fund intends to treat such securities as
liquid securities in accordance with procedures approved by the Company'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 Company's
Board has directed the Adviser to monitor carefully each Fund'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 Fund's investing in such securities may have
the effect of increasing the level of illiquidity in its investment portfolio
during such period.

FORWARD COMMITMENTS. (All Funds) Each Fund may purchase securities on
a when-issued or forward commitment basis, which means that the price is fixed
at the time of commitment, but delivery and payment ordinarily take place a
number of days after the date of the commitment to purchase. Each Fund will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable. The Fund will not accrue income in
respect of a security purchased on a forward commitment basis prior to its
stated delivery date.

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 Fund 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 Fund
is fully or almost fully invested may result in greater potential fluctuation in
the value of the Fund's net assets and its net asset value per share.

INVESTMENT COMPANY SECURITIES. (All Funds) Each Fund may invest in
securities issued by other investment companies which principally invest in
securities of the type in which such Fund invests. Under the 1940 Act, a Fund's
investment in such securities currently is limited to, subject to certain
exceptions, (i) 3% of the total voting stock of any one investment company, (ii)
5% of such Fund's total assets with respect to any one investment company and
(iii) 10% of such Fund's total assets in the aggregate. Investments in the
securities of other investment companies will involve duplication of advisory
fees and certain other expenses.

CONVERTIBLE SECURITIES. (Large-Cap Equity, Small-Cap Opportunity and
International Equity Funds) Convertible securities may be converted at either a
stated price or stated rate into underlying shares of common stock. Convertible
securities have characteristics similar to both fixed income and equity
securities. Convertible securities generally are subordinated to other similar
but non-convertible securities of the same issuer, although convertible bonds,
as corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.

Although to a lesser extent than with fixed income securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the underlying
common stock. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.

Convertible securities are investments that provide for a stable
stream of income with generally higher yields than common stocks. There can be
no assurance of current income because the issuers of the convertible securities
may default on their obligations. A convertible security, in addition to
providing fixed income, offers the potential for capital appreciation through
the conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.

WARRANTS. (Large-Cap Equity, Small-Cap Opportunity and International
Equity Funds) A warrant is an instrument issued by a corporation which gives the
holder the right to subscribe to a specified amount of the corporation's capital
stock at a set price for a specified period of time. A Fund may invest up to 5%
of its net assets in warrants, except that this limitation does not apply to
warrants purchased by the Fund that are sold in units with, or attached to,
other securities.

MORTGAGE-RELATED SECURITIES. (Government Income Fund) Mortgage-related
securities are a form of derivative collateralized by pools of commercial or
residential mortgages. Pools of mortgage loans are assembled as securities for
sale to investors by various governmental, government-related and private
organizations. These securities may include complex instruments such as
collateralized mortgage obligations and stripped mortgage-backed securities,
mortgage pass-through securities, interests in real estate mortgage investment
conduits ("REMICs"), adjustable rate mortgages, real estate investment trusts
("REITs"), including debt and preferred stock issued by REITs, as well as other
real estate-related securities. The mortgage-related securities in which the
Fund may invest include those with fixed, floating and variable interest rates,
those with interest rates that change based on multiples of changes in a
specified index of interest rates and those with interest rates that change
inversely to changes in interest rates.

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 Fund or the
price of the Fund'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.

COMMERCIAL MORTGAGE-RELATED SECURITIES--Commercial mortgage-related securities
generally are multi-class debt or pass-through certificates secured by mortgage
loans on commercial properties. These mortgage-related securities generally are
structured to provide protection to the senior classes investors against
potential losses on the underlying mortgage loans. This protection generally is
provided by having the holders of subordinated classes of securities
("Subordinated Securities") take the first loss if there are defaults on the
underlying commercial mortgage loans. Other protection, which may benefit all of
the classes or particular classes, may include issuer guarantees, reserve funds,
additional Subordinated Securities, cross-collateralization and
over-collateralization.

The Fund may invest in Subordinated Securities issued or sponsored by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Subordinated
Securities have no governmental guarantee, and are subordinated in some manner
as to the payment of principal and/or interest to the holders of more senior
mortgage-related securities arising out of the same pool of mortgages. The
holders of Subordinated Securities typically are compensated with a higher
stated yield than are the holders of more senior mortgage-related securities. On
the other hand, Subordinated Securities typically subject the holder to greater
risk than senior mortgage-related securities and tend to be rated in a lower
rating category, and frequently a substantially lower rating category, than the
senior mortgage-related securities issued in respect of the same pool of
mortgage. Subordinated Securities generally are likely to be more sensitive to
changes in prepayment and interest rates and the market for such securities may
be less liquid than is the case for traditional fixed-income securities and
senior mortgage-related securities.

The market for commercial mortgage-related securities developed more
recently and in terms of total outstanding principal amount of issues is
relatively small compared to the market for residential single-family
mortgage-related securities. In addition, commercial lending generally is viewed
as exposing the lender to a greater risk of loss than one- to four-family
residential lending. Commercial lending, for example, typically involves larger
loans to single borrowers or groups of related borrowers than residential one-
to four-family mortgage loans. In addition, the repayment of loans secured by
income producing properties typically is dependent upon the successful operation
of the related real estate project and the cash flow generated therefrom.
Consequently, adverse changes in economic conditions and circumstances are more
likely to have an adverse impact on mortgage-related securities secured by loans
on commercial properties than on those secured by loans on residential
properties.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")--A CMO is a multiclass bond backed
by a pool of mortgage pass-through certificates or mortgage loans. CMOs may be
collateralized by (a) Ginnie Mae, Fannie Mae, or Freddie Mac pass-through
certificates, (b) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of Veterans' Affairs, (c)
unsecuritized conventional mortgages, (d) other mortgage-related securities, or
(e) any combination thereof. Each class of CMOs, often referred to as a
"tranche," is issued at a specific coupon rate and has a stated maturity or
final distribution date. Principal prepayments on collateral underlying a CMO
may cause it to be retired substantially earlier than the stated maturities or
final distribution dates. The principal and interest on the underlying mortgages
may be allocated among the several classes of a series of a CMO in many ways.
One or more tranches of a CMO may have coupon rates which reset periodically at
a specified increment over an index, such as the London Interbank Offered Rate
("LIBOR") (or sometimes more than one index). These floating rate CMOs typically
are issued with lifetime caps on the coupon rate thereon. The Fund also may
invest in inverse floating rate CMOs. Inverse floating rate CMOs constitute a
tranche of a CMO with a coupon rate that moves in the reverse direction to an
applicable index such a LIBOR. Accordingly, the coupon rate thereon will
increase as interest rates decrease. Inverse floating rate CMOs are typically
more volatile than fixed or floating rate tranches of CMOs.

Many inverse floating rate CMOs have coupons that move inversely to a
multiple of the applicable indexes. The effect of the coupon varying inversely
to a multiple of an applicable index creates a leverage factor. Inverse floaters
based on multiples of a stated index are designed to be highly sensitive to
changes in interest rates and can subject the holders thereof to extreme
reductions of yield and loss of principal. The markets for inverse floating rate
CMOs with highly leveraged characteristics at times may be very thin. The Fund's
ability to dispose of its positions in such securities will depend on the degree
of liquidity in the markets for such securities. It is impossible to predict the
amount of trading interest that may exist in such securities, and therefore the
future degree of liquidity.

STRIPPED MORTGAGE-BACKED SECURITIES--The Fund also may invest in stripped
mortgage-backed securities. Stripped mortgage-backed securities are created by
segregating the cash flows from underlying mortgage loans or mortgage securities
to create two or more new securities, each with a specified percentage of the
underlying security's principal or interest payments. Mortgage securities may be
partially stripped so that each investor class receives some interest and some
principal. When securities are completely stripped, however, all of the interest
is distributed to holders of one type of security, known as an interest-only
security, or IO, and all of the principal is distributed to holders of another
type of security known as a principal-only security, or PO. Strips can be
created in a pass-through structure or as tranches of a CMO. The yields to
maturity on IOs and POs are very sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, the Fund may not fully recoup its initial investment in IOs.
Conversely, if the underlying mortgage assets experience less than anticipated
prepayments of principal, the yield on POs could be materially and adversely
affected.

REAL ESTATE INVESTMENT TRUSTS--A REIT is a corporation, or a business trust that
would otherwise be taxed as a corporation, which meets the definitional
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The
Code permits a qualifying REIT to deduct dividends paid, thereby effectively
eliminating corporate level Federal income tax and making the REIT a
pass-through vehicle for Federal income tax purposes. To meet the definitional
requirements of the Code, a REIT must, among other things, invest substantially
all of its assets in interests in real estate (including mortgages and other
REITs) or cash and government securities, derive most of its income from rents
from real property or interest on loans secured by mortgages on real property,
and distribute to shareholders annually a substantial portion of its otherwise
taxable income.

REITs are characterized as equity REITs, mortgage REITs and hybrid
REITs. Equity REITs, which may include operating or finance companies, own real
estate directly and the value of, and income earned by, the REITs depends upon
the income of the underlying properties and the rental income they earn. Equity
REITs also can realize capital gains (or losses) by selling properties that have
appreciated (or depreciated) in value. Mortgage REITs can make construction,
development or long-term mortgage loans and are sensitive to the credit quality
of the borrower. Mortgage REITs derive their income from interest payments on
such loans. Hybrid REITs combine the characteristics of both equity and mortgage
REITs, generally by holding both ownership interests and mortgage interests in
real estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management skill. They also are
subject to heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation and the possibility of failing to qualify for tax-free status
under the Code or to maintain exemption from the 1940 Act.

ADJUSTABLE-RATE MORTGAGE LOANS ("ARMS")--ARMs eligible for inclusion in a
mortgage pool will generally provide for a fixed initial mortgage interest rate
for a specified period of time, generally for either the first three, six,
twelve, thirteen, thirty-six, or sixty scheduled monthly payments. Thereafter,
the interest rates are subject to periodic adjustment based on changes in an
index. ARMs typically have minimum and maximum rates beyond which the mortgage
interest rate may not vary over the lifetime of the loans. Certain ARMs provide
for additional limitations on the maximum amount by which the mortgage interest
rate may adjust for any single adjustment period. Negatively amortizing ARMs may
provide limitations on changes in the required monthly payment. Limitations on
monthly payments can result in monthly payments that are greater or less than
the amount necessary to amortize a negatively amortizing ARM by its maturity at
the interest rate in effect during any particular month.

OTHER MORTGAGE-RELATED SECURITIES--Other mortgage-related securities include
securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including CMO residuals. Other mortgage-related securities may
be equity or debt securities issued by agencies or instrumentalities of the U.S.
Government or by private originators of, or investors in, mortgage loans,
including savings and loan associations, homebuilders, mortgage banks,
commercial banks, investment banks, partnerships, trusts and special purpose
entities of the foregoing.

ASSET-BACKED SECURITIES. (Government Income and Prime Money Market
Funds) Asset-backed securities are a form of derivative. The securitization
techniques used for asset-backed securities are similar to those used for
mortgage-related securities. These securities include debt securities and
securities with debt-like characteristics. The collateral for these securities
has included home equity loans, automobile and credit card receivables, boat
loans, computer leases, airplane leases, mobile home loans, recreational vehicle
loans and hospital account receivables. Each of these Funds may invest in these
and other types of asset-backed securities that may be developed in the future.

The Prime Money Market Fund may purchase asset-backed securities
issued by special purpose entities whose primary assets consist of a pool of
mortgages, loans, receivables or other assets. Payment of principal and interest
may depend largely on the cash flows generated by the assets backing the
securities and, in certain cases, supported by letters of credit, surety bonds
or other forms of credit or liquidity enhancements. The value of asset-backed
securities also may be affected by the creditworthiness of the servicing agent
for the pool of assets, the originator of the loans or receivables or the
financial institution providing the credit support.

Asset-backed securities present certain risks that are not presented
by mortgage-backed securities. Primarily, these securities may provide the Fund
with a less effective security interest in the related collateral than do
mortgage-backed securities. Therefore, there is the possibility that recoveries
on the underlying collateral may not, in some cases, be available to support
payments on these securities.

AMERICAN DEPOSITARY RECEIPTS. (Large-Cap Equity, Small-Cap Opportunity
and International Equity Funds) Each of these Funds may invest in the securities
of foreign issuers in the form of American Depositary Receipts ("ADRs") and
other forms of depositary receipts. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. Generally, ADRs in registered form are designed for use in the
United States securities markets. Each of these Funds may invest in ADRs through
"sponsored" or "unsponsored" facilities. A sponsored facility is established
jointly by the issuer of the underlying security and a depositary, whereas a
depositary may establish an unsponsored facility without participation by the
issuer of the deposited security. Holders of unsponsored depositary receipts
generally bear all the costs of such facilities and the depositary of an
unsponsored facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through voting rights to the holders of such receipts in respect of the
deposited securities.

MUNICIPAL OBLIGATIONS. (Municipal Income and, to a limited extent,
Prime Money Market Funds) 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.

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 Obligations and
purchased and sold separately.

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 Fund operating expenses,
will have the effect of reducing the yield to investors.

The Municipal Income Fund 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
Fund 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 Company'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 Municipal Income Fund may purchase tender option bonds and similar
securities. A tender option bond is a Municipal Obligation (generally held
pursuant to a custodial arrangement) having a relatively long maturity and
bearing interest at a fixed rate substantially higher than prevailing short-term
tax exempt rates, that has been coupled with the agreement of a third party,
such as a bank, broker-dealer or other financial institution, pursuant to which
such institution grants the security holders the option, at periodic intervals,
to tender their securities to the institution and receive the face value
thereof. As consideration for providing the option, the financial institution
receives periodic fees equal to the difference between the Municipal
Obligation's fixed coupon rate and the rate, as determined by a remarketing or
similar agent at or near the commencement of such period, that would cause the
securities, coupled with the tender option, to trade at par on the date of such
determination. Thus, after payment of this fee, the security holder effectively
holds a demand obligation that bears interest at the prevailing short-term tax
exempt rate. The Adviser, on behalf of the Fund, will consider on an ongoing
basis the creditworthiness of the issuer of the underlying Municipal Obligation,
of any custodian and of the third party provider of the tender option. In
certain instances and for certain tender option bonds, the option may be
terminable in the event of a default in payment of principal or interest on the
underlying Municipal Obligations and for other reasons.

The Municipal Income Fund 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 Fund. Based on the tender
option bond agreement, each of these Funds 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
Fund, 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 Fund.
Neither event will require the sale of such Municipal Obligations by the Fund,
but the Adviser will consider such event in determining whether the Fund 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 Fund will attempt to
use comparable ratings as standards for its investments in accordance with the
investment policies contained in the Fund'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, 1998 computed on a
monthly basis, for the Municipal Income Fund was as follows:

Percentage of Value

Municipal
Income
Moody's Fitch S&P Fund

Aaa AAA AAA %
Aa AA AA %
A A A %
100.0%

MANAGEMENT POLICIES

INVESTMENT TECHNIQUES AND PORTFOLIO TURNOVER RATES. (All Funds) Each
Fund may engage in various investment techniques the use of which involves risk.
Investors in the Municipal Income Fund should be aware that the use of these
techniques may give rise to taxable income. Using these techniques may produce
higher than normal portfolio turnover for a Fund and may affect the degree to
which its net asset value fluctuates.

Portfolio turnover may vary from year to year, as well as within a
year. No Fund will consider portfolio turnover to be a limiting factor in making
investment decisions. Under normal market conditions, the portfolio turnover
rate for the current fiscal year is anticipated to be less than 200% for the
Small-Cap Opportunity Fund and International Equity Fund, and is anticipated to
be less than 100% for the Large-Cap Equity Fund, Municipal Income Fund,
Government Income Fund and Limited Term U.S. Government Fund. A portfolio
turnover rate of 100% is equivalent to the Fund buying and selling all of the
securities in its portfolio once in the course of a year. Higher portfolio
turnover rates are likely to result in comparatively greater brokerage
commissions or transaction costs. In addition, short-term gains realized from
portfolio transactions are taxable to shareholders as ordinary income. Each
Money Market Fund will have a high portfolio turnover, but that should not
adversely affect the Fund since it usually does not pay brokerage commissions
when it purchases short-term debt obligations.

DURATION. (Limited Term U.S. Government Income Fund) The Fund follows
a controlled duration strategy. As a measure of a fixed income security's cash
flow, duration is an alternative to the concept of "term to maturity" in
assessing the price volatility associated with changes in interest rates.
Generally, the longer the duration, the more volatility an investor should
expect. For example, the market price of a bond with a duration of three years
would be expected to decline 3% if interest rates rose 1%. Conversely, the
market price of the same bond would be expected to increase 3% if interest rates
fell 1%. The market price of a bond with a duration of six years would be
expected to increase or decline twice as much as the market price of a bond with
a three-year duration. Duration is a way of measuring a security's maturity in
terms of the average time required to receive the present value of all interest
and principal payments as opposed to its term to maturity. The maturity of a
security measures only the time until final payment is due; it does not take
account of the pattern of a security's cash flows over time, which would include
how cash flow is affected by prepayments and by changes in interest rates.
Incorporating a security's yield, coupon interest payments, final maturity and
option features into one measure, duration is computed by determining the
weighted average maturity of a bond's cash flows, where the present values of
the cash flows serve as weights. In computing the duration of the Fund, the
Adviser will estimate the duration of obligations that are subject to features
such as prepayment or redemption by the issuer, put options retained by the
investor or other imbedded options, taking into account the influence of
interest rates on prepayments and coupon flows.

LENDING PORTFOLIO SECURITIES. (All Funds) From time to time, each Fund
may lend securities from its investment portfolio to brokers, dealers and other
financial institutions needing to borrow securities to complete certain
transactions. Such loans may not exceed 331/3% of the value of the relevant
Fund's total assets. In connection with such loans, each Fund will receive
collateral consisting of cash or U.S. Government securities which will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Each Fund can increase its income through
the investment of such collateral. Each Fund continues to be entitled to
payments in amounts equal to the dividends, interest and other distributions
payable on the loaned security and receives interest on the amount of the loan.
Such loans will be terminable at any time upon specified notice. A Fund might
experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with such Fund. From time to
time, a Fund 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 Fund 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 Fund must be able
to terminate the loan at any time; (4) the Fund 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 Fund 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 Company'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.

OPTIONS TRANSACTIONS. (Large-Cap Equity, Small-Cap Opportunity,
Government Income and International Equity Funds) Each of these Funds may
purchase call and put options in respect of specific securities in which the
Fund may invest and write covered call and put option contracts. A call option
gives the purchaser of the option the right to buy, and obligates the writer to
sell, the underlying security at the exercise price at any time during the
option period. Conversely, a put option gives the purchaser of the option the
right to sell, and obligates the writer to buy, the underlying security at the
exercise price at any time during the option period. A covered call option sold
by the Fund, which is a call option with respect to which the Fund owns the
underlying security, exposes the Fund during the term of the option to possible
loss of opportunity to realize appreciation in the market price of the
underlying security or to possible continued holding of a security which might
otherwise have been sold to protect against depreciation in the market price of
the security. A covered put option sold by the Fund exposes the Fund during the
term of the option to a decline in price of the underlying security. A put
option sold by the Fund is covered when, among other things, permissible liquid
assets are placed in a segregated account to fulfill the obligation undertaken.

The principal reason for the Fund 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 Fund 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 Fund 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 Fund'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
Fund effects a closing purchase transaction. The Fund 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 Fund 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 Fund 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 Fund 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 Fund as illiquid securities.

STOCK INDEX OPTIONS. (Large-Cap Equity, Small-Cap Opportunity and
International Equity Funds) Each of these Funds may purchase and write put and
call options on stock indexes listed on national securities exchanges or traded
in the over-the-counter market to the extent of 15% of the value of its net
assets. A stock index fluctuates with changes in the market values of the stocks
included in the index. 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.

The effectiveness of the Fund's purchasing or writing stock index
options will depend upon the extent to which price movements in its portfolio
correlate with price movements of the stock index selected. Because the value of
an index option depends upon movements in the level of the index rather than the
price of a particular stock, whether the Fund will realize a gain or loss from
the purchase or writing of options on an index depends upon movements in the
level of stock prices in the stock market generally or, in the case of certain
indexes, in an industry or market segment, rather than movements in the price of
a particular stock. Accordingly, successful use by the Fund of options on stock
indexes will be subject to the Adviser's ability to predict correctly movements
in the direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.

When the Fund writes an option on a stock index, it will place in a
segregated account permissible liquid assets in an amount at least equal to the
market value of the underlying stock index and will maintain the account while
the option is open or will otherwise cover the transaction.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. (Large-Cap Equity,
Small-Cap Opportunity and International Equity Funds) None of these Funds will
be a commodity pool. However, as a substitute for a comparable market position
in the underlying securities or for hedging purposes, each of these Funds may
engage in futures and options on futures transactions, as described below.

The commodities transactions of each of these Funds must constitute
bona fide hedging or other permissible transactions pursuant to regulations
promulgated by the Commodity Futures Trading Commission. In addition, none of
these Funds may engage in such transactions if the sum of the amount of initial
margin deposits and premiums paid for unexpired commodity options, other than
for bona fide hedging transactions, would exceed 5% of the liquidation value of
the Fund's total assets, after taking into account unrealized profits and
unrealized losses on such contracts it has entered into; provided, however, that
in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%. Pursuant to
regulations and/or published positions of the Securities and Exchange
Commission, each of these Funds may be required to segregate permissible liquid
assets in connection with its commodities transactions in an amount at least
equal to the value of the underlying commodity.

Initially, when purchasing or selling futures contracts, a Fund will
be required to deposit with the Company's custodian in the broker's name an
amount of cash or cash equivalents up to approximately 10% of the contract
amount. This amount is subject to change by the exchange or board of trade on
which the contract is traded and members of such exchange or board of trade may
impose their own higher requirements. This amount is known as "initial margin"
and is in the nature of a performance bond or good faith deposit on the contract
which is returned to the Fund upon termination of the futures position, assuming
all contractual obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker will be made daily as the price of
the index or securities underlying the futures contract fluctuates, making the
long and short positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to the expiration of a
futures contract, the Fund may elect to close the position by taking an opposite
position, at the then prevailing price, which will operate to terminate its
existing position in the contract.

Although each of these Funds intends to purchase or sell futures
contracts only if there is an active market for such contracts, no assurance can
be given that a liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the trading day. Futures contract prices could move to
the limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and potentially
subjecting the relevant Fund to substantial losses. If it is not possible, or
the Fund determines not, to close a futures position in anticipation of adverse
price movements, it will be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may offset partially or completely losses on the
futures contract. However, no assurance can be given that the price of the
securities being hedged will correlate with the price movements in a futures
contract and thus provide an offset to losses on the futures contract.

To the extent a Fund is engaging in a futures transaction as a hedging
device, because of the risk of an imperfect correlation between securities in a
portfolio that are the subject of a hedging transaction and the futures contract
used as a hedging device, it is possible that the hedge will not be fully
effective if, for example, losses on the portfolio securities exceed gains on
the futures contract or losses on the futures contract exceed gains on the
portfolio securities. For futures contracts based on indexes, the risk of
imperfect correlation increases as the composition of a Fund's investments
varies from the composition of the index. In an effort to compensate for the
imperfect correlation of movements in the price of the securities being hedged
and movements in the price of futures contracts, the Fund may buy or sell
futures contracts in a greater or lesser dollar amount than the dollar amount of
the securities being hedged if the historical volatility of the futures contract
has been less or greater than that of the securities. Such "over hedging" or
"under hedging" may adversely affect the Fund's net investment results if market
movements are not as anticipated when the hedge is established.

Successful use of futures by a Fund also is subject to the Adviser's
ability to predict correctly movements in the direction of the market or
interest rates. For example, if a Fund has hedged against the possibility of a
decline in the market adversely affecting the value of securities held in its
portfolio and prices increase instead, such Fund will lose part or all of the
benefit of the increased value of securities which it has hedged because it will
have offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. The Fund may have to sell such
securities at a time when it may be disadvantageous to do so.

An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume an offsetting futures
position (a short position if the option is a call and a long position if the
option is a put). Upon exercise of the option, the assumption of offsetting
futures positions by the writer and holder of the option will be accompanied by
delivery of the accumulated cash balance in the writer's futures margin account
which represents the amount by which the market price of the futures contract,
at exercise, 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.

Call options sold by a Fund with respect to futures contracts will be
covered by, among other things, entering into a long position in the same
contract at a price no higher than the strike price of the call option, or by
ownership of the instruments underlying, or instruments the prices of which are
expected to move relatively consistently with, the instruments underlying the
futures contract. Put options sold by a Fund with respect to futures contracts
will be covered in the same manner as put options on specific securities as
described above.

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 Fund.

STOCK INDEX FUTURES AND OPTIONS ON STOCK INDEX Futures. (Large-Cap
Equity, Small-Cap Opportunity and International Equity Funds) Each of these
Funds may purchase and sell stock index futures contracts and options on stock
index futures contracts to the extent of 15% of the value of its net assets.

A stock index future obligates the seller to deliver (and the
purchaser to take) an amount of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at the close of the last
trading day of the contract and the price at which the agreement is made. No
physical delivery of the underlying stocks in the index is made. With respect to
stock indexes that are permitted investments, each of these Funds intends to
purchase and sell futures contracts on the stock index for which it can obtain
the best price with consideration also given to liquidity.

Each of these Funds may use index futures as a substitute for a
comparable market position in the underlying securities.

FUTURE DEVELOPMENTS. Each Fund 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 Fund 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 Fund. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
Prospectus or this Statement of Additional Information.

FOREIGN CURRENCY TRANSACTIONS. (International Equity Fund) Foreign
currency transactions may be entered into for a variety of purposes, including:
to fix in U.S. dollars, between trade and settlement date, the value of a
security the Fund has agreed to buy or sell; to hedge the U.S. dollar value of
securities the Fund already owns, particularly if it expects a decrease in the
value of the currency in which the foreign security is denominated; or to gain
exposure to the foreign currency in an attempt to realize gains.

Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies, which would involve the Fund agreeing to
exchange an amount of a currency it did not currently own for another currency
at a future date in anticipation of a decline in the value of the currency sold
relative to the currency the Fund contracted to receive in the exchange. The
Fund's success in these transactions will depend principally on the ability of
the Fund's Sub-Adviser to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar.

SHORT-SELLING. (International Equity Fund and, to a limited extent,
Limited Term U.S. Government Fund) In these transactions the Fund sells a
security it does not own in anticipation of a decline in the market value of the
security. To complete the transaction, the Fund must borrow the security to make
delivery to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it subsequently at the market price at the time of replacement. The
price at such time may be more or less than the price at which the security was
sold by the Fund, which would result in a loss or gain, respectively. Securities
will not be sold short if, after effect is given to any such short sale, the
total market value of all securities sold short would exceed 25% of the value of
the Fund's net assets. The Limited Term U.S. Government Fund will limit its
short sales to those that are "against the box," a transaction in which the Fund
enters into a short sale of a security which it owns. The proceeds of the short
sale will be held by a broker until the settlement date at which time the Fund
delivers the security to close the short position. The Fund receives the net
proceeds from the short sale. At no time will either of these Funds have more
than 15% of the value of its net assets in deposits on short sales against the
box.

BORROWING MONEY. (All Funds) As a fundamental policy, each Fund is
permitted to borrow money in an amount up to 331/3% of the value of its total
assets. However, each Fund currently intends to borrow money only for temporary
or emergency (not leveraging) purposes, in an amount up to 331/3% of the value
of its total assets (including the amount borrowed) valued at 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 a Fund's total assets, such
Fund will not make any investments. In addition, each Money Market Fund may
borrow for investment purposes on a secured basis through entering into reverse
repurchase agreements as described below.

REVERSE REPURCHASE AGREEMENTS. (Money Market Funds only) The Prime
Money Market Fund and Treasury Money Market Fund may enter into reverse
repurchase agreements with banks, brokers or dealers. Reverse repurchase
agreements involve the transfer by the Fund of an underlying debt instrument in
return for cash proceeds based on a percentage of the value of the security. The
Fund retains the right to receive interest and principal payments on the
security. The Fund will use the proceeds of reverse repurchase agreements only
to make investments which generally either mature or have a demand feature to
resell to the issuer at a date simultaneous with or prior to the expiration of
the reverse repurchase agreement. At an agreed upon future date, the Fund
repurchases the security at principal plus accrued interest. In certain types of
agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based on the prevailing overnight repurchase rate. As a
result of these transactions, the Fund may be exposed to greater potential
fluctuations in the value of its assets and its net asset value per share.
Interest costs on the money borrowed may exceed the return received on the
securities purchased. The Company's Directors have considered the risks to each
of the Prime Money Market Fund and Treasury Money Market Fund and its
shareholders which may result from the entry into reverse repurchase agreements
and have determined that the entry into such agreements is consistent with such
Fund's investment objective and management policies. The Fund will maintain in a
segregated account permissible liquid assets 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.

INVESTMENT CONSIDERATIONS AND RISK FACTORS

RISK OF INVESTING IN MUNICIPAL OBLIGATIONS. (Municipal Income Fund)
The Fund may invest more than 25% of the value of its total assets in Municipal
Obligations which are related in such a way that an economic, business or
political development or change affecting one such security also would affect
the other securities; for example, securities the interest upon which is paid
from revenues of similar types of projects or securities whose issuers are
located in the same state. As a result, the Fund may be subject to greater risk
as compared to a fund that does not follow this practice.

Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase the
cost of the Municipal Obligations available for purchase by the Fund and thus
reduce its available yield. Proposals that may restrict or eliminate the income
tax exemption for interest on Municipal Obligations may be introduced in the
future. If any such proposal were enacted that would reduce the availability of
Municipal Obligations for investment by the Fund so as to adversely affect its
shareholders, the Company would reevaluate the Fund's investment objective and
policies and submit possible changes in the Fund's structure to shareholders for
their consideration. If legislation were enacted that would treat a type of
Municipal Obligation as taxable, the Fund would treat such security as a
permissible taxable investment within the applicable limits set forth in the
Prospectus.

MORTGAGE-RELATED SECURITIES RISK. (Government Income Fund)
Mortgage-related securities in which the Fund may invest are complex derivative
instruments, subject to both credit and prepayment risk, and may be more
volatile and less liquid than more traditional debt securities. Some
mortgage-related securities have structures that make their reactions to
interest rate changes and other factors difficult to predict, making their value
highly volatile. No assurance can be given as to the liquidity of the market for
certain mortgage-backed securities, such as collateralized mortgage obligations
and stripped mortgage-backed securities. Determination as to the liquidity of
interest-only and principal-only fixed mortgage-backed securities issued by the
U.S. Government or its agencies and instrumentalities will be made in accordance
with guidelines established by the Company's Board of Directors. In accordance
with such guidelines, the Adviser will monitor investments in such securities
with particular regard to trading activity, availability of reliable price
information and other relevant information. The Fund intends to treat other
stripped mortgage-backed securities as illiquid securities.

Mortgage-related securities are subject to credit risks associated
with the performance of the underlying mortgage properties. Adverse changes in
economic conditions and circumstances are more likely to have an adverse impact
on mortgage-related securities secured by loans on certain types of commercial
properties than on those secured by loans on residential properties. In
addition, these securities are subject to prepayment risk, although commercial
mortgages typically have shorter maturities than residential mortgages and
prepayment protection features. In certain instances, the credit risk associated
with mortgage-related securities can be reduced by third party guarantees or
other forms of credit support. Improved credit risk does not reduce prepayment
risk which is unrelated to the rating assigned to the mortgage-related security.
Prepayment risk can lead to fluctuations in value of the mortgage-related
security which may be pronounced. If a mortgage-related security is purchased at
a premium, all or part of the premium may be lost if there is a decline in the
market value of the security, whether resulting from changes in interest rates
or prepayments in the underlying mortgage collateral. Certain mortgage-related
securities that may be purchased by the Fund, such as inverse floating rate
collateralized mortgage obligations, have coupons that move inversely to a
multiple of a specific index which may result in a form of leverage. As with
other interest-bearing securities, the prices of certain mortgage-related
securities are inversely affected by changes in interest rates. However, though
the value of a mortgage-related security may decline when interest rates rise,
the converse is not necessarily true, since in periods of declining interest
rates the mortgages underlying the security are more likely to be prepaid. For
this and other reasons, a mortgage-related security's stated maturity may be
shortened by unscheduled prepayments on the underlying mortgages, and,
therefore, it is not possible to predict accurately the security's return to the
Fund. Moreover, with respect to certain stripped mortgage-backed securities, if
the underlying mortgage securities experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating category. During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity which generally would cause the value of such security to fluctuate
more widely in response to changes in interest rates. Were the prepayments on
the Fund's mortgage-related securities to decrease significantly, the Fund's
effective duration, and thus sensitivity to interest rate fluctuations, would
increase.

SIMULTANEOUS INVESTMENTS. (All Funds) Investment decisions for each
Fund are made independently from those of the other investment companies,
investment advisory accounts, custodial accounts, individual trust accounts and
commingled funds that may be advised by the Adviser or, if applicable, sub-
investment adviser. However, if such other investment companies or managed
accounts desire to invest in, or dispose of, the same securities as the Fund,
available investments or opportunities for sales will be allocated equitably to
each of them. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by a Fund or the price paid or received by
a Fund.

INVESTMENT RESTRICTIONS

Each Fund's investment objective is a fundamental policy, which cannot
be changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. In addition, each Fund has adopted
investment restrictions numbered 1 through 7 as fundamental policies, and only
the Funds so indicated have adopted investment restrictions numbered 8 through
12 as additional fundamental policies. These restrictions cannot be changed, as
to a Fund, without approval by the holders of a majority (as defined in the 1940
Act) of such Fund's outstanding voting securities. Each Fund, except as
otherwise indicated, has adopted investment restrictions numbered 13 through 18
as non-fundamental policies which may be changed by vote of a majority of the
Company's Directors at any time. No Fund may:

1. Invest in commodities, except that each Fund 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 Fund 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 each Fund may borrow up to 331/3% of the
value of its total assets. For purposes of this investment restriction, a Fund'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 Fund may
lend its portfolio securities in an amount not to exceed 331/3% 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
Company'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 1933 Act by virtue of
disposing of portfolio securities, and except that the Municipal Income Fund 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. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act). A Fund's permitted borrowings and transactions in futures and
options, to the extent permitted under the 1940 Act, are not considered senior
securities for purposes of this investment restriction.

7. Purchase securities on margin, but each Fund 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.

The following investment restrictions numbered 8 and 9 are fundamental
policies which apply only to the Prime Money Market Fund. The Prime Money Market
Fund may not:

8. 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 Money Market Fund'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 Money Market
Fund.

9. 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 Money Market Fund may invest more than 25% of its assets in
bank obligations.

The following investment restriction number 10 is a fundamental policy
which applies to each Fund, except the Prime Money Market Fund. None of these
Funds may:

10. Invest more than 25% of its assets in the securities of issuers in
any single industry, provided that, in the case of the Municipal Income Fund,
there shall be no such limitation on the purchase of tax-exempt municipal
obligations and, in the case of each Fund, there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.

The following investment restrictions numbered 11 and 12 are
fundamental policies which apply only to the Large-Cap Equity Fund, Small-Cap
Opportunity Fund, Municipal Income Fund and Government Income Fund. None of
these Funds may:

11. With respect to 75% of its total assets, invest more than 5% of
its assets in the obligations of any single issuer. This investment restriction
does not apply to the purchase of U.S. Government securities.

12. Hold more than 10% of the outstanding voting securities of any
single issuer. This investment restriction applies only with respect to 75% of
the Fund's total assets.

* * *

13. Invest in the securities of a company for the purpose of
exercising management or control, but each Fund will vote (as provided in the
Company's Charter) the securities it owns as a shareholder in accordance with
its views.

14. 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.

15. 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% (10% in the case of the Limited Term U.S.
Government and Money Market Funds) of the value of the Fund's net assets would
be so invested.

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

The following investment restrictions numbered 17 and 18 are
non-fundamental policies which apply only to the Limited Term U.S. Government
Fund. The Limited Term U.S. Government Fund may not:

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

18. 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 Fund's investments in all such companies
to exceed 5% of the value of its total assets.

For purposes of Investment Restriction No. 10, 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 COMPANY

The Company's Board of Directors is responsible for the management and
supervision of each Fund. The Board approves all significant agreements with
those companies that furnish services to the Funds. These companies are as
follows:

First American National Bank............ Investment Adviser and Custodian
Lazard Asset Management................. Sub-Investment Adviser
Womack Asset Management, Inc............ Sub-Investment Adviser
BISYS Fund Services Limited
Partnership........................... Distributor
BISYS Fund Services Ohio, Inc........... Administrator and Transfer Agent
The Bank of New York.................... Sub-Custodian

Directors and officers of the Company, 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 Company, as
defined in the 1940 Act, is indicated by an asterisk.

DIRECTORS OF THE COMPANY

*WILLIAM B. BLUNDIN, PRESIDENT AND CHAIRMAN OF THE BOARD OF DIRECTORS. An
employee of BISYS Fund Services, Inc., BISYS' general partner. Mr.
Blundin also is an officer of other investment companies administered
by the Administrator or its affiliates. He is 60 years old and his
address is 90 Park Avenue, New York, New York 10016.

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 72 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 66
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 48 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 71
years old and his address is 2 Hathaway Common, New Canaan,
Connecticut 06840.

OFFICERS OF THE COMPANY

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 38 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 38 years old and his address is
3435 Stelzer Road, Columbus, Ohio 43219.

GARY R. TENKMAN, TREASURER. An employee of BISYS Fund Services, Inc. since
April 1998, and an officer of other investment companies administered
by the Administrator or its affiliates. For more than five years prior
thereto, he was an audit manager with Ernst & Young LLP. He is 34
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 45 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 29 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 who are not "interested persons" of the Company, as defined in the
1940 Act, will be selected and nominated by the Directors who are not
"interested persons" of the Company.

Directors and officers of the Company, as a group, owned less than 1%
of any Fund's shares of common stock outstanding on March 1, 1999.

The Company 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 the Administrator or any of their
affiliates. The aggregate amount of compensation paid to each such Director by
the Company for year ended December 31, 1998 was as follows:

<PAGE>
Total Compensation
Aggregate From Company
Name of Board Compensation from and Fund Complex
Member Company* Paid
to Board Member

Norma A. Coldwell $18,000 $18,000
Richard H. Francis $18,000 $18,000
William W. McInnes $18,000 $18,000
Robert A. Robinson $18,000 $18,000

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

MANAGEMENT ARRANGEMENTS

INVESTMENT ADVISERS. First American National Bank serves as each
Fund's investment adviser. The Adviser is a wholly-owned subsidiary of First
American Corporation, a registered bank holding company. The Adviser and its
affiliates deal, trade and invest for their own accounts and for the accounts of
their clients, in the types of securities in which the Funds may invest, and may
have deposit, loan and commercial banking relationships with the issuers of
securities purchased by a Fund. The Adviser has informed the Company that in
making its investment decisions it does not obtain or use material inside
information in its or its affiliates' possession. The Adviser also provides
research services for the Funds through a professional staff of portfolio
managers and securities analysts. All activities of the Adviser are conducted by
persons who are also officers of one or more of the Adviser's affiliates.

The Adviser also is responsible for the selection of brokers to effect
securities transactions and the negotiation of brokerage commissions, if any.
Purchases and sale of securities on a securities exchange are effected through
brokers who charge a negotiated commission for their services. Brokerage
commissions may be paid to affiliates of the Adviser for executing securities
transactions if the use of such affiliates is likely to result in price and
execution at least as favorable as those of other qualified brokers.

The Adviser provides investment advisory services pursuant to the
Investment Advisory Agreement (the "Agreement") dated February 15, 1994 with the
Company. As to each Fund, the Agreement is subject to annual approval by (i) the
Company's Board of Directors or (ii) vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of such Fund, 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 Company 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 Company'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 November 18, 1998.
As to each Fund, the Agreement is terminable without penalty, on 60 days'
notice, by the Company's Board of Directors or by vote of the holders of a
majority of such Fund's shares, or, on not less than 90 days' notice, by the
Adviser. The Agreement will terminate automatically, as to the relevant Fund, in
the event of its assignment (as defined in the 1940 Act).

Under the terms of the Agreement, the Company has agreed to pay the
Adviser a monthly fee at the annual rate set forth below as a percentage of the
relevant Fund's average daily net assets.

Annual Rate of
Investment
Name of Fund Advisory Fee Payable

International Equity Fund 1.00%
Small-Cap Opportunity Fund .95%
Large-Cap Equity Fund .75%
Government Income Fund .60%
Limited Term U.S. Government Fund .50%
Municipal Income Fund .60%
Prime Money Market Fund .25%*
Treasury Money Market Fund .25%

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

* Prior to January 30, 1998, the Fund paid the Prime Money Market Fund's
former sub-adviser, Barnett Capital Advisors, Inc. ("Barnett"), .15% and the
Adviser .10% of the value of the Fund's average daily net assets.

From time to time, the Adviser may waive receipt of its fees and/or
voluntarily assume certain expenses of a Fund, which would have the effect of
lowering the overall expense ratio of that Fund and increasing yield to its
investors. The Fund will not pay the Adviser at a later time for any amounts it
may waive, nor will the Fund reimburse the Adviser for any amounts it may
assume. For the fiscal years and/or periods ended December 31, 1996, 1997 and
1998, as applicable, the investment advisory fees payable by each indicated
Fund, the amounts waived by the Adviser, and the actual net fees paid by each
Fund, were as follows:

Name of Management Fee Payable Reduction in Fee Net Fee Paid
Fund

1996 1997 1998 1996 1997 1998 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Large-Cap $________ $________ $_______ $_______ $_______ $______ $______ $_______ $_______
Equity Fund*

International N/A $________(1) $_______ N/A $_______ $______ N/A $_______ $_______
Equity Fund*

Small-Cap $________ $________ $_______ $_______ $_______ $______ $______ $_______ $_______
Opportunity Fund*

Government Income $________ $________ $_______ $_______ $_______ $______ $______ $_______ $_______
Fund*

Limited Term N/A $ 81,110(2) $_______ N/A $ 41,559 $______ N/A $39,551 $_______
U.S. Government
Fund

Municipal Income $________ $________ $_______ $_______ $_______ $______ $_______ $_______ $_______
Fund*

Treasury Money $459,479 $474,129 $_______ $0 $0 $______ $459,479 $474,129 $_______
Market Fund

Prime Money $ 74,618 $ 80,064 $_______ $0 $0 $______ $ 74,618 $ 80,064 $_______
Market Fund

- - ---------------------------
* Prior to December 14, 1998, the Fund was a series of DG Investor Series, a
registered investment company advised by ParkSouth Corporation, a wholly-owned
subsidiary of Deposit Guaranty Corp., which merged into First American
Corporation on May 1, 1998.

(1) For the period August 15, 1997 (commencement of operations) through
December 31, 1996.

(2) For the period February 28, 1997 (commencement of operations) through
December 31, 1997.
</TABLE>

For the fiscal years and/or periods ended December 31, 1996, 1997 and 1998, the
Prime Money Market Fund paid Barnett $111,623, $120,097 and $ , respectively.

With respect to Small-Cap Opportunity Fund, the Adviser has entered
into a Sub-Investment Advisory Agreement (the "Womack Sub-Advisory Agreement")
with Womack Asset Management, Inc. ("Womack") dated May 14, 1998. As to such
Fund, the Womack Sub-Advisory Agreement is subject to annual approval by (i)
the Board or (ii) vote of a majority (as defined in the 1940 Act) of the Fund's
outstanding voting securities, provided that in either event the continuance
also is approved by a majority of the Board members who are not "interested
persons" (as defined in the 1940 Act) of the Fund or Womack, by vote cast in
person at a meeting called for the purpose of voting on such approval. The
Womack Sub-Advisory Agreement is terminable without penalty, (i) by the Adviser
on 60 days' notice, (ii) by the Fund's Board or by vote of the holders of a
majority of the Fund's outstanding voting securities on 60 days' notice, or
(iii) upon not less than 90 days' notice, by Womack. The Womack Sub-Advisory
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act). Under the terms of the Womack Sub-Advisory Agreement,
the Adviser has agreed to pay Womack a monthly fee at the annual rate of .35% of
the value of the Small-Cap Opportunity Fund's average daily net assets.

With respect to International Equity Fund, the Adviser has entered
into a Sub-Investment Advisory Agreement (the "Lazard Sub-Advisory Agreement")
with Lazard Asset Management ("Lazard") dated May 14, 1998. As to such Fund, the
Lazard Sub-Advisory Agreement is subject to annual approval by (i) the Board or
(ii) vote of a majority (as defined in the 1940 Act) of the Fund's outstanding
voting securities, provided that in either event the continuance also is
approved by a majority of the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund or Lazard, by vote cast in person at a
meeting called for the purpose of voting on such approval. The Lazard
Sub-Advisory Agreement is terminable without penalty, (i) by the Adviser on 60
days' notice, (ii) by the Fund's Board or by vote of the holders of a majority
of the Fund's outstanding voting securities on 60 days' notice, or (iii) upon
not less than 90 days' notice, by Lazard. The Lazard Sub-Advisory Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act). Under the terms of the Lazard Sub-Advisory Agreement, the Adviser has
agreed to pay Lazard a monthly fee at the annual rate of .50% of the value of
the International Equity Fund's average daily net assets.

ADMINISTRATOR. BISYS Fund Services Ohio, Inc., a wholly-owned
subsidiary of The BISYS Group, Inc., provides certain administrative services
pursuant to the Administration Agreement (the "Administration Agreement") dated
October 29, 1998 with the Company. Under the Administration Agreement with the
Company, the Administrator generally assists in all aspects of the Funds'
operations, other than providing investment advice, subject to the overall
authority of the Company's Board of Directors in accordance with Maryland law.
In connection therewith, the Administrator provides the Funds with office
facilities, personnel, and certain clerical and bookkeeping services (e.g.,
preparation of reports to shareholders and the Securities and Exchange
Commission and filing of Federal, state and local income tax returns) that are
not being furnished by the Funds' custodian. As to each Fund, the Administration
Agreement will continue until December 31, 2003 and thereafter is subject to
annual approval by (i) the Company's Board of Directors or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
such Fund, 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 Company 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 Company'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 August 12, 1998. As to each Fund,
the Administration Agreement is terminable without penalty, at any time if for
cause, by the Company's Board of Directors or by vote of the holders of a
majority of such Fund'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 Fund, in the event of its assignment (as
defined in the 1940 Act).

As compensation for the Administrator's services, the Company has
agreed to pay the Administrator a monthly administration fee at the annual rate
of .10% of the value of the Prime Money Market Fund's and Treasury Money Market
Fund's average daily net assets and .15% of the value of each other Fund's
average daily net assets. For the fiscal years and/or periods ended December 31,
1996, 1997 and 1998, as applicable, the administration fees payable by each
indicated Fund, the amounts waived by the Administrator, and the actual net
administration fees paid by each Fund, were as follows:

Name of Administration Fee Payable Reduction in Fee Net Fee Paid
Fund --------------------------------- ------------------------------- -----------------------

1996 1997 1998 1996 1997 1998 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Large-Cap N/A N/A $_______ N/A N/A $________ N/A N/A $_____
Equity Fund*

International Equity N/A N/A $_______ N/A N/A $________ N/A N/A $____
Fund*

Small-Cap N/A N/A $_______ N/A N/A $________ N/A N/A $____
Opportunity Fund*

Government Income N/A N/A $_______ N/A N/A $________ N/A N/A $____
Fund*

Limited Term N/A $24,333(1) $_______ N/A $17,844 $________ N/A $6,489 $____
U.S. Government
Fund

Municipal Income N/A N/A $_______ N/A N/A $________ N/A N/A $____
Fund*

Treasury Money $183,791 $189,650 $_______ $0 $0 $________ $183,791 $189,650 $____
Market Fund

Prime Money $74,618 $ 80,064 $_______ $0 $0 $________ $ 74,618 $80,064 $____
Market Fund

- - ---------------------------
* Prior to December 14, 1998, the Fund was a series of DG Investor Series, a
registered investment company administered by an entity other than the
Administrator.

(1) For the period February 28, 1997 (commencement of operations) through
December 31, 1997.
</TABLE>

DISTRIBUTOR. BISYS Fund Services Limited Partnership, a wholly-owned
subsidiary of The BISYS Group, Inc., acts as the exclusive distributor of each
Fund's shares on a best efforts basis pursuant to a Distribution Agreement (the
"Distribution Agreement") dated November 11, 1997, with the Company. 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 Company to the Distributor pursuant to the Distribution Plan for
its distribution services.

DISTRIBUTION PLAN. (Applicable to each Fund other than the Prime Money
Market Fund and Treasury Money Market Fund) 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 Company's
Directors have adopted such a plan (the "Distribution Plan") with respect to DG
Class Shares of each Fund other than the Prime Money Market Fund and Treasury
Money Market Fund pursuant to which each such Fund pays the Distributor for
advertising, marketing and distributing DG Class Shares at an annual rate of
.25% of the value of the average daily net assets represented by DG Class
Shares. Under the Distribution Plan, the Distributor may make payments to
certain financial institutions, securities dealers and other industry
professionals that have entered into agreements with the Distributor ("Service
Organizations") in respect of these services. The Distributor determines the
amounts to be paid to Service Organizations. Service Organizations receive such
fees in respect of the average daily value of DG Class Shares owned by their
clients. From time to time, the Distributor may defer or waive receipt of fees
under the Distribution Plan while retaining the ability to be paid by the Fund
under the Distribution Plan thereafter. The fees payable to the Distributor
under the Distribution Plan for advertising, marketing and distributing are
payable without regard to actual expenses incurred. The Company's Directors
believe that there is a reasonable likelihood that the Distribution Plan will
benefit each such Fund and the holders of its DG Class Shares.

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
DG Class 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 Company 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 February 25, 1999. 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 DG Class Shares voting separately as a Class. 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 Fund's DG Class
Shares voting separately as a Class. A Distribution Plan agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act).

DG Class Shares had not been offered as of the last fiscal year end.
However, the Funds' Class A Shares are subject to the Distribution Plan at the
same annual rate as are the DG Class Shares. For the fiscal year and/or period
ended December 31, 1998, the Distribution Plan fees payable with respect to
Class A Shares by each indicated Fund, the amounts waived by the Distributor,
and the actual net Distribution Plan fees paid by each Fund, were as follows:

Name of
Fund Distribution Plan Reduction in Fee Net Fee Paid
Fee Payable

CLASS A CLASS A CLASS A

Large-Cap $________ $________ $________
Equity Fund*

International $________ $________ $________
Equity Fund*

Small-Cap $________ $________ $________
Opportunity Fund*

Government $________ $________ $________
Income Fund*

Limited Term $________ $________ $________
U.S. Government
Fund

Municipal $________ $________ $________
Income Fund*

- - ---------------------------
* Prior to December 14, 1998, the Fund was a series of DG Investor
Series and was not subject to the Distribution Plan.

SHAREHOLDER SERVICES PLAN. The Company's Directors have adopted a
shareholder services plan (the "Shareholder Services Plan") pursuant to which
each Fund pays the Distributor for the provision of certain services to the
holders of its shares at an annual rate of .15% of the value of the average
daily net assets represented by DG Class Shares (.25% in the case of the Prime
Money Market Fund and Treasury Money Market Fund). The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding a Fund and providing reports and other
information, and services related to the maintenance of such shareholder
accounts. The fee payable for such services is intended to be a "service fee" as
defined in the NASD Conduct Rules. Under the Shareholder Services Plan, the
Distributor may make payments to certain Service Organizations in respect of
these services. The Distributor determines the amounts to be paid to Service
Organizations. Service Organizations receive such fees in respect of the average
daily value of DG Class Shares owned by their clients. From time to time, the
Distributor may defer or waive receipt of fees under the Shareholder Services
Plan while retaining the ability to be paid by the Fund under the Shareholder
Services Plan thereafter. The fees payable to the Distributor under the
Shareholder Services Plan are payable without regard to actual expenses
incurred. The Company's Directors believe that there is a reasonable likelihood
that the Shareholder Services Plan will benefit each Fund and its shareholders.

A quarterly report of the amounts expended under the Shareholder
Services Plan, and the purposes for which such expenditures were incurred, must
be made to the Directors for their review. In addition, the Shareholder Services
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 Company nor have any direct or indirect
financial interest in the operation of the Shareholder Services Plan or in the
related Shareholder Services Plan agreements, by vote cast in person at a
meeting called for the purpose of considering such amendments. The Shareholder
Services 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 Shareholder Services Plan. The Shareholder Services Plan was last so
approved on February 25, 1999. The Shareholder 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
Shareholder Services Plan or in the Shareholder Services Plan agreements. A
Shareholder Services Plan agreement is terminable without penalty, at any time,
by such vote of the Directors. A Shareholder Services Plan agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act).

DG Class Shares had not been offered as of the last fiscal year end.
However, the Funds' Class A Shares are subject to the Shareholder Services Plan
at the same annual rate as are the DG Class Shares. For the fiscal year and/or
period ended December 31, 1998, the Shareholder Services Plan fees payable with
respect to Class A Shares by each indicated Fund, the amounts waived by the
Distributor, and the actual net Shareholder Services Plan fees paid by each
Fund, were as follows:

<PAGE>

Shareholder Services
Name of Plan Reduction in Fee Net Fee Paid
Fund Fee Payable

CLASS A CLASS A CLASS A

Large-Cap $________ $________ $________
Equity Fund*

International $________ $________ $________
Equity Fund*

Small-Cap $________ $________ $________
Opportunity Fund*

Government $________ $________ $________
Income Fund*

Limited Term $________ $________ $________
U.S. Government
Fund

Municipal $________ $________ $________
Income Fund*

Treasury Money $________ $________ $________
Market Fund

Prime Money $________ $________ $________
Market Fund

- - ---------------------------
* Prior to December 14, 1998, the Fund was a series of DG Investor Series and
was not subject to the Shareholder Services Plan.

TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN. BISYS Fund
Services Ohio, Inc. (the "Transfer Agent"), a wholly-owned subsidiary of The
BISYS Group, Inc., located at 3435 Stelzer Road, Columbus, Ohio 43219-3035, is
the Company's transfer and dividend disbursing agent. Under a transfer agency
agreement with the Company, the Transfer Agent arranges for the maintenance of
shareholder account records for each Fund, the handling of certain
communications between shareholders and the Fund and the payment of dividends
and distributions payable by the Fund. For these services, the Transfer Agent
receives a monthly fee computed on the basis of the number of shareholder
accounts it maintains for each Fund during the month, and is reimbursed for
certain out-of-pocket expenses.

First American National Bank acts as custodian of the investments of
each Fund. Under a custody agreement with the Company, First American National
Bank provides for the holding of each Fund's securities and the retention of all
necessary accounts and records. For its custody services, First American
National Bank receives a monthly fee based on the market value of the Funds'
assets held in custody and receives certain securities transactions charges. The
Bank of New York, 90 Washington Street, New York, New York 10286, is the Funds'
sub-custodian.

EXPENSES. All expenses incurred in the operation of the Company are
borne by the Company, except to the extent specifically assumed by others. The
expenses borne by the Company include: 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 the 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 Fund'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 Fund are charged against the assets of that Fund; other expenses of the
Company are allocated among the Funds on the basis determined by the Board of
Directors, including, but not limited to, proportionately in relation to the net
assets of each Fund.

PURCHASE AND REDEMPTION OF SHARES

GENERAL PURCHASE INFORMATION. DG CLASS SHARES ARE OFFERED ONLY TO
INVESTORS WHO ACQUIRED FUND SHARES IN CONNECTION WITH THE REORGANIZATION OF A
CORRESPONDING DG INVESTOR SERIES FUND. DG Class Shares are sold at net asset
value per share plus, for each Fund, other than the International Equity and
Money Market Funds, an initial sales charge imposed at the time of purchase,
which may be reduced or waived for certain purchases, as described below. On May
1, 2000, DG Class Shares automatically will convert to Class A Shares, based on
the relative net asset values for shares of each such Class.

DG Class Shares may be purchased through a number of institutions,
including the Adviser and its affiliates, Service Organizations, and directly
from the Distributor. When purchasing Fund shares, you must specify the Fund and
Class of shares being purchased. The Adviser, its affiliates and Service
Organizations may receive different levels of compensation for selling different
Classes of Fund shares. Stock certificates will not be issued. It is not
recommended that the Municipal Income Fund be used as a vehicle for Keogh, IRA
and other qualified plans, because such plans are otherwise entitled to tax
deferred benefits. The Company reserves the right to reject any purchase order
in whole or in part, including purchases made with foreign checks and third
party checks not originally made payable to the order of the investor.

The minimum initial investment for DG Class Shares of each Fund is
$1,000, and subsequent investments must be at least $100. The minimum initial
investment is $100 for IRAs, and subsequent investments for IRAs must be at
least $50. For full-time or part-time employees of the Adviser or any of its
affiliates, the minimum initial investment is $500, and subsequent investments
must be at least $50. For full-time or part-time employees of the Adviser or any
of its affiliates who elect to have a portion of their pay directly deposited
into their ISG Fund accounts, the minimum initial or subsequent investment must
be at least $25. The Adviser, its affiliates and Service Organizations may
impose initial or subsequent investment minimums which are higher or lower than
those specified above and may impose different minimums for different types of
accounts or purchase arrangements. In addition, purchases of shares made in
connection with certain shareholder privileges may have different minimum
investment requirements.

You may purchase DG Class Shares by check or wire, or through
TeleTrade or, for the Money Market Funds only, a sweep program as described
below. Investors purchasing shares through the Adviser, its affiliates or
Service Organizations should contact such entity directly for appropriate
instructions, as well as for information about conditions pertaining to the
account and any related fees.

For written orders for DG Class Shares, you may send your initial or
subsequent purchase order, together with the Funds' Account Application for
initial orders and your check or money order payable to: ISG Funds (Fund Name),
to ISG Funds, c/o BISYS Fund Services, Inc., Department L-1686, Columbus, Ohio
43260-1686. For subsequent investments, your Fund account number should appear
on the check or money order. All payments should be made in U.S. dollars and, to
avoid fees and delays, should be drawn only on U.S. banks. A charge will be
imposed if a check used for investment in your account does not clear.

For wire orders for DG Class Shares, you must call the Transfer Agent
at 1-800-852-0045. If a subsequent payment is being made, your Fund account
number should be included. Information on remitting funds in this manner,
including any related fees, may be obtained from your bank.

Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. For information on
purchasing shares through the Automated Clearing House, you must call the
Transfer Agent at 1-800-852-0045.

Management understands that the Adviser, its affiliates and some
Service Organizations may impose certain conditions on their clients which are
different from those described herein or in the Funds' Prospectus, and, to the
extent permitted by applicable regulatory authority, may charge their clients a
direct fee for effecting transactions in Fund shares. You should consult the
Adviser, its affiliates or your Service Organization in this regard.

SALES LOADS. (Applicable to DG Class Shares of each Fund other than
the International Equity Fund, Prime Money Market Fund and Treasury Money Market
Fund). The public offering price of DG Class Shares of the Government Income
Fund, Limited Term U.S. Government Income Fund and Municipal Income Fund is the
net asset value per share of that Class, plus a sales load as shown below:
<TABLE>
<CAPTION>

Total Sales Load

As a % of Dealers' Reallowance
As a % of Net Asset As a % of Offering
Amount of Transaction Offering Value Price
Price

The public offering price of DG Class Shares of the Large-Cap Equity Fund and
Small-Cap Opportunity Fund is the net asset value per share of that Class, plus
a sales load as shown below:

Total Sales Load
As a % of Dealers'
As a % of Net Asset Reallowance
Amount of Transaction Offering Price Value As a % of
Offering Price
<S> <C> <C> <C>
Less than $100,000..................... 3.50% 3.63% 3.15%
$100,000 to less than $250,000......... 3.00% 3.09% 2.70%
$250,000 to less than $500,000......... 2.50% 2.56% 2.25%
$500,000 to less than $1,000,000....... 1.00% 1.01% 0.90%
$1,000,000 or more..................... 0% 0% 0%
</TABLE>

A contingent deferred sales charge ("CDSC") of 0.50% will be assessed
at the time of redemption of DG Class Shares purchased without an initial sales
charge as part of an investment of at least $1,000,000 (0.25% will be assessed
on purchases over $2,000,000) and redeemed within one year after purchase. The
Distributor may pay Service Organizations an amount up to 0.50% of the net asset
value of DG Class Shares purchased by their clients that are subject to a CDSC.
Letter of Intent and Right of Accumulation apply to such purchases of DG Class
Shares.

The dealer reallowance may be changed from time to time but will
remain the same for all dealers. From time to time, the Distributor may make or
allow additional payments or promotional incentives in the form of cash or other
compensation to dealers that sell Fund shares. Such compensation may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding the Funds, and/or other dealer-sponsored special events.
Compensation may include payment for travel expenses, including lodging, to
various locations for meetings or seminars of a business nature. Compensation
also may include the following types of non-cash compensation offered through
promotional contests: travel and lodging at vacation locations; tickets for
entertainment events; and merchandise. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of Fund shares. None of the aforementioned compensation is paid for by the
Company, any Fund or its shareholders.

The scale of sales loads applies to purchases of DG Class Shares of
each Fund, other than the International Equity Fund, Prime Money Market Fund and
Treasury Money Market Fund, 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 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 DG Class Shares. The examples assume a purchase of DG Class Shares of
the indicated Fund aggregating less than $100,000 subject to the current
schedule of sales charges set forth above for DG Class Shares at a price based
upon the net asset value of the Fund's DG Class Shares on _______________, 1999:

LARGE-CAP EQUITY FUND:

Net Asset Value per Share $

Per Share Sales Charge - 3.50%
of offering price (3.63% of
net asset value per share) $________

Per Share Offering Price to
the Public $========

SMALL-CAP OPPORTUNITY FUND:

Net Asset Value per Share $

Per Share Sales Charge - 3.50%
of offering price (3.63% of
net asset value per share) $ _______

Per Share Offering Price to
the Public $========

LIMITED TERM U.S. GOVERNMENT FUND:

Net Asset Value per Share $

Per Share Sales Charge - 2.00%
of offering price (2.04% of $ ______

net asset value per share)

Per Share Offering Price to
the Public $=========

GOVERNMENT INCOME FUND:

Net Asset Value per Share $

Per Share Sales Charge - 2.00%
of offering price (2.04% of $ ______

net asset value per share)

Per Share Offering Price to
the Public $=======

MUNICIPAL INCOME FUND:

Net Asset Value per Share $

Per Share Sales Charge - 2.00%
of offering price (2.04% of $ ______

net asset value per share)

Per Share Offering Price to
the Public $=======

RIGHT OF ACCUMULATION. Reduced sales loads apply to any purchase of DG
Class Shares by you and any related "purchaser," where the aggregate investment
in DG Class Shares among any of the Funds offered with a sales load, including
such purchase, is $100,000 or more. If, for example, you previously purchased
and still hold DG Class Shares of the Municipal Income Fund, with an aggregate
current market value of $90,000 and subsequently purchase DG Class Shares of the
Municipal Income Fund having a current value of $20,000, the sales load
applicable to the subsequent purchase would be reduced to 1.75% of the offering
price (1.78% of the net asset value). DG Class Shares of the other Funds may be
subject to different sales load schedules, as described above. All present
holdings of DG Class Shares may be combined to determine the current offering
price of the aggregate investment in ascertaining the sales load applicable to
each subsequent purchase. To qualify for reduced sales loads, at the time of a
purchase an investor or the investor's Service Organization must notify the
Transfer Agent. The reduced sales load is subject to confirmation of an
investor's holdings through a check of appropriate records.

CONTINGENT DEFERRED SALES CHARGE. If a shareholder redeems within one
year after purchase DG Class Shares which were part of an investment of at least
$1,000,000 in a Fund that charges a sales load, the shareholder will pay a CDSC
at the rates set forth above. The CDSC is assessed on an amount equal to the
lesser of the then-current market value or the cost of the shares being
redeemed. Accordingly, no CDSC is imposed on increases in net asset value above
the initial purchase price. In addition, no charge is assessed on shares derived
from reinvestment of dividends or capital gain distributions. In determining
whether a CDSC is applicable to a redemption, the calculation will be made in a
manner that results in the lowest possible rate. Therefore, it will be assumed
that the redemption is made first of amounts representing shares acquired
pursuant to the reinvestment of dividends and distributions; then of amounts
representing any increase in net asset value.

"SWEEP" PROGRAM. (Applicable to the Prime Money Market Fund and
Treasury Money Market Fund Only) Shares of the Prime Money Market Fund and
Treasury Money Market Fund may be purchased or sold through the "sweep" program
established by certain financial institutions under which a portion of their
customers' accounts may be automatically invested in the Fund. 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 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 Company with
regard to shares of the Funds. 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 Fund'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 Company is a party to any of those
agreements and no part of the compensation received by the financial institution
flows to the Company or to BISYS 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 Fund's shares. Any fees charged by the financial institution effectively
reduces the Fund's yield for those customers.

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.

SIGNATURE-GUARANTIES. Written redemption requests must be signed by
each shareholder, including each holder of a joint account, and each signature
must be guaranteed. The 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. The signature guarantee requirement will be waived if the
following conditions apply: (1) the redemption check is payable to the
shareholder(s) of record; and (2) the redemption check is mailed to the
shareholder(s) at the address of record or the proceeds are either mailed or
wired to a financial institution account previously designated. Redemption
requests by corporate and fiduciary shareholders must be accompanied by
appropriate documentation establishing the authority of the person seeking to
act on behalf of the account.

REDEMPTION COMMITMENT. Each Fund 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 Fund'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 Fund to the detriment of the existing shareholders. In this
event, the securities would be valued in the same manner as the Fund is valued.
If the recipient sold such securities, brokerage charges might 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 Fund normally utilizes is restricted, or when an
emergency exists as determined by the Securities and Exchange Commission so that
disposal of the Fund'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 Fund's shareholders.

DETERMINATION OF NET ASSET VALUE

GENERAL. Expenses and fees, including the advisory fee and fees paid
pursuant to the Distribution Plan and Shareholder Services Plan, are accrued
daily and taken into account for the purpose of determining the net asset value
of the relevant Class of Fund shares.

LARGE-CAP EQUITY, SMALL-CAP OPPORTUNITY AND INTERNATIONAL EQUITY
FUNDS. Each of these Funds' securities, including covered call options written
by the Fund, 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. Forward currency contracts will be valued at the
current cost of offsetting the contract. Since the International Equity Fund has
to obtain prices as of the close of trading on various exchanges throughout the
world, the calculation of net asset value may not take place contemporaneously
with the determination of prices of certain of the Fund's securities. Debt
securities maturing in 60 days or less generally are carried at amortized cost,
which approximates value, except where to do so would not reflect accurately
their fair value, in which case such securities would be valued at their fair
value as determined under the supervision of the Board of Directors. 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 Company'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.

GOVERNMENT INCOME AND LIMITED TERM U.S. GOVERNMENT FUNDS. Each of
these Funds' 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 Company's officers under the general supervision
of the Board of Directors.

MUNICIPAL INCOME FUND. The Fund'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 Fund'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 Company's officers under the general
supervision of the Board of Directors.

PRIME MONEY MARKET FUND AND TREASURY MONEY MARKET Fund. The valuation
of each of these Funds' 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
Fund 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 each of these Funds' investors, to
establish procedures reasonably designed to stabilize each such Fund's price per
share as computed for the purpose of purchases and redemptions at $1.00. Such
procedures include review of the Fund's investment holdings by the Board of
Directors, at such intervals as it deems appropriate, to determine whether such
Fund's net asset value calculated by using available market quotations or market
equiva lents 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 Fund'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.

SHAREHOLDER SERVICES AND PRIVILEGES

The services and privileges described under this heading may not be
available to certain clients of the Adviser, its affiliates and certain Service
Organizations, and the Adviser, its affiliates and some Service Organizations
may impose certain conditions on their clients which are different from those
described in the Prospectus or this Statement of Additional Information. Such
investors should consult the Adviser, its affiliates or their Service
Organization in this regard.

EXCHANGE PRIVILEGE. The Exchange Privilege enables you to
purchase, in exchange for shares of a Fund, shares of the same Class of another
Fund in the ISG Family of Funds, to the extent such shares are offered for sale
in your state of residence. If you desire to use this Privilege, you should
consult the Adviser or its affiliate where you maintain your account, your
Service Organization or the Administrator to determine if it is available and
whether any conditions are imposed on its use.

The shares being exchanged must have a current value of at least $500;
furthermore, when establishing a new account by exchange, the shares being
exchanged must have a value of at least the minimum initial investment required
for the Fund into which the exchange is being made.

Shares will be exchanged at the next determined net asset value;
however, a sales load, which may be waived or reduced as described below, may be
charged with respect to exchanges of DG Class Shares. If you are exchanging DG
Class Shares into a Fund that charges a sales load, you may qualify for share
prices which do not include the sales load or which reflect a reduced sales
load, if the shares you are exchanging were: (a) purchased with a sales load,
(b) acquired by a previous exchange from shares purchased with a sales load, or
(c) acquired through reinvestment of dividends or distributions paid with
respect to the foregoing categories of shares. No fees currently are charged
shareholders directly in connection with exchanges although the Company reserves
the right, upon not less than 60 days' written notice, to charge shareholders a
nominal administrative fee in accordance with rules promulgated by the
Securities and Exchange Commission. The Company reserves the right to reject any
exchange request in whole or in part. The Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.

The exchange of shares of one Fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable gain
or loss.

AUTOMATIC INVESTMENT PLAN. The Automatic Investment Plan permits you
to purchase DG Class Shares (minimum initial investment of $1,000 and minimum
subsequent investments of $100 per transaction) at regular intervals selected by
you. Provided your bank or other financial institution allows automatic
withdrawals, DG Class Shares may be purchased by transferring funds from the
bank account designated by you. At your option, the account designated will be
debited in the specified amount, and DG Class Shares will be purchased, once a
month, on either the first or fifteenth day, or twice a month, on both days.
Only an account maintained at a domestic financial institution which is an
Automated Clearing House member may be so designated. This service enables you
to make regularly scheduled investments and may provide you with a convenient
way to invest for long-term financial goals. You should be aware, however, that
periodic investment plans do not guarantee a profit and will not protect an
investor against loss in a declining market. To establish an Automatic
Investment Plan account, you must check the appropriate box and supply the
necessary information on the Account Application. You may obtain the necessary
applications from the Administrator. You may cancel your participation in the
Automatic Investment Plan or change the amount of purchase at any time by
mailing written notification to ISG Funds, c/o BISYS Fund Services, Inc.,
Department L-1686, Columbus, Ohio 43260-1686, and such notification will be
effective three business days following receipt. The Company may modify or
terminate the Automatic Investment Plan at any time or charge a service fee. No
such fee currently is contemplated.

DIRECTED DISTRIBUTION PLAN. The Directed Distribution Plan enables you
to invest automatically dividends and capital gain distributions, if any, paid
by a Fund in shares of another Fund of which you are a shareholder. Shares of
the other Fund will be purchased at the then-current net asset value. Minimum
subsequent investments do not apply. Investors desiring to participate in the
Directed Distribution Plan should check the appropriate box and supply the
necessary information on the Account Application. The Plan is available only for
existing accounts and may not be used to open new accounts. The Company may
modify or terminate the Directed Distribution Plan at any time or charge a
service fee. No such fee currently is contemplated.

AUTOMATIC WITHDRAWAL PLAN. The Automatic Withdrawal Plan permits you
to request withdrawal of a specified dollar amount (minimum of $50), with
respect to DG Class Shares, on either a monthly, quarterly, semi-annual or
annual basis if you have a $5,000 minimum account. The automatic withdrawal will
be made on the first or fifteenth day, at your option, of the period selected.
To participate in the Automatic Withdrawal Plan, you must check the appropriate
box and supply the necessary information on the Account Application. The
Automatic Withdrawal Plan may be ended at any time by the investor, the Company
or the Transfer Agent.

Purchases of additional DG Class Shares where the sales load is
imposed concurrently with withdrawals of DG Class Shares generally are
undesirable.

REINSTATEMENT PRIVILEGE. The Reinstatement Privilege enables investors
who have redeemed DG Class Shares to repurchase, within 90 days of such
redemption, DG Class Shares of a Fund in an amount not to exceed the redemption
proceeds received at a purchase price equal to the then-current net asset value
determined after a reinstatement request and payment are received by the
Transfer Agent. This privilege also enables such investors to reinstate their
account for the purpose of exercising the Exchange Privilege. To use the
Reinstatement Privilege, you must submit a written reinstatement request to the
Transfer Agent. The reinstatement request and payment must be received within 90
days of the trade date of the redemption. There currently are no restrictions on
the number of times an investor may use this privilege.

LETTER OF INTENT. By signing a Letter of Intent form, available from
the Administrator or certain Service Organizations, you become eligible for
reduced sales load applicable to the total number of DG Class Shares purchased
in a 13-month period (beginning up to 90 days prior to the date of execution of
the Letter of Intent) pursuant to the terms and conditions set forth in the
Letter of Intent. A minimum initial purchase of $5,000 is required. To compute
the applicable sales load, the offering price of shares you hold (on the date of
submission of the Letter of Intent) in any Fund that may be used toward "Right
of Accumulation" benefits described above may be used as a credit toward
completion of the Letter of Intent.

The Transfer Agent will hold in escrow 5% of the amount indicated in
the Letter of Intent for payment of a higher sales load if the investor does not
purchase the full amount indicated in the Letter of Intent. The escrow will be
released when the investor fulfills the terms of the Letter of Intent by
purchasing the specified amount. Assuming completion of the total minimum
investment specified under a Letter of Intent, an adjustment will be made to
reflect any reduced sales load applicable to shares purchased during the 90-day
period prior to the submission of the Letter of Intent. In addition, if the
investor's purchases qualify for a further sales load reduction, the sales load
will be adjusted to reflect the investor's total purchase at the end of 13
months.

If total purchases are less than the amount specified, the investor
will be requested to remit an amount equal to the difference between the sales
load actually paid and the sales load applicable to the aggregate purchases
actually made. If such remittance is not received within 20 days, the Transfer
Agent, as attorney-in-fact pursuant to the terms of the Letter of Intent, will
redeem an appropriate number of DG Class Shares held in escrow to realize the
difference. Signing a Letter of Intent does not bind the investor to purchase,
or the Company to sell, the full amount indicated at the sales load in effect at
the time of signing, but the investor must complete the intended purchase to
obtain the reduced sales load. At the time you purchase DG Class Shares, you
must indicate your intention to do so under a Letter of Intent. Purchases
pursuant to a Letter of Intent will be made at the then-current net asset value
plus the applicable sales load in effect at the time such Letter of Intent was
executed.

PERFORMANCE INFORMATION

Current yield is computed pursuant to a formula which operates as
follows: The amount of the Fund's expenses accrued for the 30-day period (net of
reimbursements) is subtracted from the amount of the dividends and interest
earned by the Fund 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.

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 Fund that is not tax exempt.

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 DG Class
Shares the maximum sales load has been deducted from the hypothetical initial
investment at the time of purchase.

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 for DG Class Shares. In such cases, the calculation
would not reflect the deduction of the sales load with respect to DG Class
Shares, which, if reflected, would reduce the performance quoted.

Seven-day yield will be computed in accordance with a standardized
method which involves determining the net change in the value of a hypothetical
pre-existing Fund 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 Fund'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 Fund is not guaranteed. See "Determination of Net
Asset Value" for a discussion of the manner in which each Fund's price per share
is determined.

From time to time, advertising materials for a Fund 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 Fund may include
information concerning retirement and investing for retirement, average life
expectancy and pension and social security benefits. Comparative performance
information may be used from time to time in advertising or marketing each
Fund's shares, including data from Lipper Analytical Services, Inc.,
Morningstar, Inc., Bank Rate MonitorTM, IBC Money Fund Averages ReportTM, Bond
Buyer's 20-Bond Index, Moody's Bond Survey Bond Index, Lehman Brothers Aggregate
Bond Index and components thereof, S&P 500 Index, Russell 2000 Index, EAFE
Index, the Dow Jones Industrial Average, CDA/Wiesenberger Investment Companies
Service, Mutual Fund Values; Mutual Fund Forecaster, Mutual Fund Investing and
other industry publications.

DIVIDENDS, DISTRIBUTION AND TAXES

The Adviser believes that each Fund qualified as a "regulated
investment company" under the Code for the fiscal year ended December 31, 1998.
Each Fund 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
Fund 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), and must meet certain asset diversification and other requirements.
Qualification as a regulated investment company relieves the Fund from any
liability for Federal income taxes to the extent its earnings are distributed in
accordance with the applicable provisions of the Code. If a Fund did not qualify
as a regulated investment company, it would be treated for tax purposes as an
ordinary corporation subject to Federal income tax. 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 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.

Depending upon the composition of a Fund's income, the entire amount
or a portion of the dividends paid by the Fund from net investment income may
qualify for the dividends received deduction allowable to qualifying U.S.
corporate shareholders ("dividends received deduction"). In general, dividend
income from a Fund distributed to qualifying corporate shareholders will be
eligible for the dividends received deduction only to the extent that such
Fund's income consists of dividends paid by U.S. corporations. However, Section
246(c) of the Code generally provides that if a qualifying corporate shareholder
has disposed of Fund shares held for less than 46 days, which 46 days generally
must be during the 90-day period commencing 45 days before the shares become
ex-dividend, and has received a dividend from net investment income with respect
to such shares, the portion designated by the Fund as qualifying for the
dividends received deduction will not be eligible for such shareholder's
dividends received deduction. In addition, the Code provides other limitations
with respect to the ability of a qualifying corporate shareholder to claim the
dividends received deduction in connection with holding Fund shares.

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. In addition, 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 Fund after April 30, 1993, and after its original issuance, at a
price below its face or accredited value. Finally, 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.

Under Section 1256 of the Code, any gain or loss realized by the Fund
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 Fund's taxable year will be treated as sold for their then fair
market value, resulting in additional gain or loss to the Fund characterized in
the manner described above.

Offsetting positions held by a Fund 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 Sections 1092 and 1258 of the Code, which, in certain
circumstances, override or modify the provisions of Sections 988 and 1256 of the
Code. If the Fund 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 Fund may make one or more elections with respect
to "mixed straddles." Depending upon which election is made, if any, the results
to the Fund may differ. If no election is made, to the extent the straddle rules
apply to positions established by the Fund, losses realized by the Fund 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 on
straddle positions may be treated as short-term capital gain or ordinary income.

The Taxpayer Relief Act of 1997 included constructive sale provisions
that generally apply if a Fund either (1) holds an appreciated financial
position with respect to stock, certain debt obligations, or partnership
interests ("appreciated financial position") and then enters into a short sale,
futures, forward, or offsetting notional principal contract (collectively, a
"Contract") respecting the same or substantially identical property or (2) holds
an appreciated financial position that is a Contract and then acquires property
that is the same as or substantially identical to the underlying property. In
each instance, with certain exceptions, the Fund generally will be taxed as if
the appreciated financial position were sold at its fair market value on the
date the Fund enters into the financial position or acquires the property,
respectively. Transactions that are identified hedging or straddle transactions
under other provisions of the Code can be subject to the constructive sale
provisions.

Investment by a Fund 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 Fund to recognize
income prior to the receipt of cash payments. For example, the Fund 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 qualifica tion as a regulated investment company. In such case, the
Fund may have to dispose of securities which it might otherwise have continued
to hold in order to generate cash to satisfy these distribution requirements.

The International Equity Fund may qualify for and may make an election
permitted under Section 853 of the Code so that shareholders may be eligible to
claim a credit or deduction on their Federal income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro rata
portion of qualified taxes paid or incurred by the Fund to foreign countries
(which taxes relate primarily to investment income). The International Equity
Fund may make an election under Section 853 of the Code, provided more than 50%
of the value of the Fund's total assets at the close of the taxable year
consists of securities in foreign corporations, and the Fund satisfies the
applicable distribution provisions of the Code. The foreign tax credit available
to shareholders is subject to certain limitations imposed by the Code.

If the International Equity Fund invests in an entity that is
classified as a "passive foreign investment company" ("PFIC") for Federal income
tax purposes, the operation of certain provisions of the Code applying to PFICs
could result in the imposition of certain federal income taxes on the Fund. In
addition, gain realized from the sale or other disposition of PFIC securities
may be treated as ordinary income under Section 1291 of the Code and gain
realized with respect to PFIC securities that are marked-to-market will be
treated as ordinary income under Section 1296 of the Code.

PORTFOLIO TRANSACTIONS

GENERAL. Transactions are allocated to various dealers by the Funds'
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. The allocation of brokerage transactions also may take into account a
broker's sales of Fund shares. No brokerage commissions have been paid to date,
except as noted below.

To the extent research services are furnished by brokers through which
a Fund 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 Funds. 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.

The Company'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 Fund 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.

LARGE-CAP EQUITY, SMALL-CAP OPPORTUNITY AND INTERNATIONAL EQUITY
FUNDS. 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 each of these Funds 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.

For the fiscal years and/or periods ended December 31, 1996, 1997 and
1998, the amounts paid by the indicated Funds for brokerage commissions, gross
spreads and concessions on principal transactions, none of which was paid to the
Distributor, were as follows:

NAME OF FUND 1996 1997 1998
- - ------------ ---- ---- ----

Large-Cap Equity $__________ $__________ $__________
Small-Cap Opportunity $__________ $__________ $__________
International Equity N/A $__________(1) $__________

- - ------------------
(1) For the period from August 15, 1997 (commencement of operations) through
December 31, 1997.

The aggregate amount of transactions during the last fiscal year in
securities effected on an agency basis through a broker for, among other things,
research services, and the commissions and concessions related to such
transactions for the indicated Funds were as follows:

COMMISSIONS/
NAME OF FUND TRANSACTION AMOUNTS CONCESSIONS

Large-Cap Equity $ $
Small-Cap Opportunity $ $
International Equity $ $

MUNICIPAL INCOME, GOVERNMENT INCOME, LIMITED TERM U.S. GOVERNMENT,
PRIME MONEY MARKET AND TREASURY MONEY MARKET Funds. Purchases and sales of Fund
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 Fund 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 COMPANY AND THE FUNDS

The Fund is authorized to issue 28 billion 500 million shares of
Common Stock (with 1 billion 500 million shares allocated to the Prime Money
Market Fund, 1 billion 250 million shares allocated to the Treasury Money Market
Fund and 1 billion shares allocated to each other Fund), par value $.001 per
share. Each Fund's shares are classified into Class A Shares (250 million, 500
million in the case of each Money Market Fund), Class B Shares (250 million,
except for Treasury Money Market Fund which does not offer Class B Shares),
Institutional Shares (250 million, 500 million in the case of each Money Market
Fund) and DG Class Shares (250 million). Each share has one vote and
shareholders will vote in the aggregate and not by Class except as otherwise
required by law. Each Fund share, when issued and paid for in accordance with
the terms of the offering, is fully paid and non-assessable. Shares have no
preemptive or subscription rights and are freely transferable.

Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a result,
shareholders may not consider each year the election of Directors or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Company to hold a special
meeting of shareholders for purposes of removing a Director from office.
Shareholders may remove a Director by the affirmative vote of a majority of the
Company's outstanding voting shares. In addition, the Board of Directors will
call a meeting of shareholders for the purpose of electing Directors if, at any
time, less than a majority of the Directors then holding office have been
elected by shareholders.

The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for certain
matters under the 1940 Act and for other purposes. A shareholder of one
portfolio is not deemed to be a shareholder of any other portfolio. For certain
matters shareholders vote together as a group; as to others they vote separately
by portfolio. From time to time, other portfolios may be established and sold
pursuant to other offering documents.

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 Company, 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.

To date, 28 portfolios have been authorized. All consideration
received by the Company for shares of one of the portfolios, and all assets in
which such consideration is invested, belong to that portfolio (subject only to
the rights of creditors of the Company) and will be subject to the liabilities
related thereto. The income attributable to, and expenses of, one portfolio are
treated separately from those of the other portfolios.

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

COUNSEL AND INDEPENDENT AUDITORS

Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Company, 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 Prospectus.

___________________________, independent auditors, have been selected
as each Fund's auditors.

FINANCIAL STATEMENTS

The Funds' Annual Report to Shareholders for the fiscal year ended
December 31, 1998 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
into this Statement of Additional Information.

<PAGE>

APPENDIX

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

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.

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

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.

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

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
on funds employed, conservative capitalization structures with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well established access
to a range of financial markets and assured sources of alternate liquidity.

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.

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.

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 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.

BankWatch

COMMERCIAL PAPER AND SHORT-TERM OBLIGATIONS RATINGS

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.

INTERNATIONAL AND U.S. BANK RATINGS

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>

PART C. OTHER INFORMATION

Item 23.
(a) (1) Articles of Incorporation are incorporated by
reference to Exhibit (1) of the Registration
Statement on Form N-1A, filed on March 29, 1990.

(2) Articles of Amendment are incorporated by
reference to Exhibit (1)(b) of Pre-Effective
Amendment No. 3 to the Registration Statement on
Form N-1A, filed on June 22, 1990.

(3) Articles of Amendment are incorporated by
reference to Exhibit (1)(f) of Post-Effective
Amendment No. 26 to the Registration Statement
on Form N-1A, filed on April 30, 1996.

(4) Articles of Amendment are incorporated by
reference to Post-Effective Amendment No. 36 to
the Registration Statement on Form N-1A, filed
March 31, 1998.

(b) By-Laws are incorporated by reference to Exhibit (2) of
Pre-Effective Amendment No. 3 to the Registration Statement
on Form N-1A, filed on June 22, 1990.

(d) (1) Investment Advisory Agreement between the
Registrant and Mitchell Hutchins Asset
Management Inc. is incorporated by reference to
Exhibit (5)(b)(iii) of Post-Effective Amendment
No. 6 to the Registration Statement on Form
N-1A, filed on June 7, 1991.

(2) Investment Advisory Agreement between
Registrant and First American National Bank.*

(3) Sub-Investment Advisory Agreement between
First American National Bank and Lazard Asset
Management is incorporated by reference to
Exhibit (5)(b)(i) of Post-Effective Amendment
No. 40 to the Registration Statement on Form
N-1A, filed September 23, 1998.

(4) Sub-Investment Advisory Agreement between First
American National Bank and Womack Asset
Management, Inc.*

(5) Administration Agreement between Registrant and
BISYS Fund Services Ohio, Inc.*

(e) (1) Distribution Agreement between Registrant
and BISYS Fund Services Limited Partnership.*

(2) Form of Plan Agreement, with respect to
Registrant's Correspondent Cash Reserves Money
Market Portfolio and Correspondent Cash Reserves
Tax Free Money Market Portfolio, is incorporated
by reference to Exhibit (6)(b) of Post-
Effective Amendment No. 6 to the Registration
Statement on Form N-1A, filed on June 7, 1991.

(3) Distribution Plan Agreement, with respect to
Registrant's ISG and Stewardship Funds.*

(g) (1) Custody and Fund Accounting Agreement with
The Bank of New York is incorporated by
reference to Exhibit (8)(a) of Pre-Effective
Amendment No. 3 to the Registration Statement on
Form N-1A, filed on June 22, 1990.

(2) Form of Foreign Sub-Custodian Agreement is
incorporated by reference to Post-Effective
Amendment No. 22 to the Registration Statement
on Form N-1A, filed on February 10, 1994.

(h) (1) Special Management Services Agreement
among the Registrant, Mitchell Hutchins Asset
Management Inc. and Concord Holding Corporation
is incorporated by reference to Exhibit (9) of
Post-Effective Amendment No. 6 to the
Registration Statement on Form N-1A, filed on
June 7, 1991.

(2) Form of Shareholder Services Agreement, with
respect to Registrant's ISG/Stewardship Funds.*

(3) Shareholder Services Plan, with respect to
Registrant's ISG/Stewardship Funds.*

(i) Opinion and consent of Registrant's counsel is
incorporated by reference to Pre-Effective
Amendment No. 3 to the Registration Statement on
Form N-1A, filed June 22, 1990.

(j) Consent of Independent Auditors.*

(m) (1) Plan of Distribution pursuant to Rule
12b-1, with respect to Registrant's
Correspondent Cash Reserves Money Market
Portfolio and Correspondent Cash Reserves Tax
Free Money Market Portfolio, is incorporated by
reference to Exhibit (15) of Post-Effective
Amendment No. 6 to the Registration Statement on
Form N-1A, filed on June 7, 1991.

(2) Distribution Plan pursuant to Rule 12b-1,
with respect to Registrant's ISG/Stewardship
Funds.*

(n) Financial Data Schedules are incorporated
by reference to Registrant's Annual Report on
Form N-SAR filed on or about February 27, 1998
and Semi-Annual Report on Form N-SAR filed on or
about August 28, 1998.

(o) (1) Rule 18f-3 Plan for Registrant's CCR
Portfolios is incorporated by reference to
Post-Effective Amendment No. 25 to the
Registration Statement on Form N-1A, filed on
May 1, 1995.

(2) Rule 18f-3 Plan for Registrant's Non-Money
Market Portfolios.*

(3) Rule 18f-3 Plan for Registrant's ISG Money
Market Portfolios.*

Other Exhibit: (1) Certificate of Corporate Secretary is
incorporated by reference to Other Exhibit of
Pre-Effective Amendment No. 3 to the
Registration Statement on Form N-1A, filed on
June 22, 1990.

(2) Powers of Attorney are incorporated by
reference to Pre-Effective Amendment No. 1 and
Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A, filed on
May 23, 1990 and November 15, 1991,
respectively.

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

* To be filed by Amendment.

Item 24. Persons Controlled By or Under Common Control
with Registrant

Not applicable.

Item 25. Indemnification

Reference is made to Article SEVENTH of the Registrant's Articles of
Incorporation filed as Exhibit 1 to the Registration Statement, filed on March
29, 1990, and to Section 2-418 of the Maryland General Corporation Law. The
application of these provisions is limited by Article VIII of the Registrant's
By-Laws filed as Exhibit 2 to Pre-Effective Amendment No. 3 to the Registration
Statement, filed on June 22, 1990, and by the following undertaking set forth in
the rules promulgated by the Securities and Exchange Commission:

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in such
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.

Reference also is made to the Distribution Agreement to be filed as
Exhibit (e)(1) hereto.

Item 26(a). Business and Other Connections of Investment Adviser

(i) Registrant is fulfilling the requirement of this Item 26(a) to
provide a list of the officers and directors of Mitchell Hutchins Asset
Management Inc., the investment adviser of the Registrant's Correspondent Cash
Reserves Money Market Portfolio, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by Mitchell Hutchins Asset Management Inc. or those of its officers and
directors during the past two years, by incorporating by reference the
information contained in the Form ADV filed with the SEC pursuant to the
Investment Advisers Act of 1940 by the Mitchell Hutchins Asset Management Inc.
(SEC File No. 801-13219).

(ii) First American National Bank, the investment adviser of the
Registrant's ISG and Stewardship Funds, is a wholly-owned subsidiary of First
American Corporation, a registered bank holding company. To the knowledge of the
Registrant, none of the directors or executive officers of First American
National Bank, except those described below, are or have been, at any time
during the past two years, engaged in any other business, profession, vocation
or employment of a substantial nature, except that certain directors and
executive officers of First American National Bank also hold or have held
various positions with bank and non-bank affiliates of First American National
Bank, including First American Corporation.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
OTHER EMPLOYMENT OF A
POSITION WITH SUBSTANTIAL
NAME ADVISER NATURE

<S> <C> <C>
Dennis C. Bottorff Chairman and Chairman and Chief Executive
Chief Executive Officer of First American
Officer Corporation

Earnest W. Deavenport, Jr. Director Chairman and Chief Executive
Officer of Eastman Chemical
Company

Reginald D. Dickson Director President Emeritus of
INROADS, Inc.

James A. Haslam, II Director Chairman of the Board of
Pilot Corporation

Warren A. Hood, Jr. Director Chairman of Hood Industries, Inc.

Martha R. Ingram Director Chairman of the Board of
Ingram Industries, Inc.

Walter G. Knestrick Director Chairman of the Board of
Walter Knestrick
Contractor, Inc.

Gene C. Koonce Director Vice Chairman of United
Cities Gas Company

James R. Martin Director Chairman and Chief Executive
Officer of Plasti-Line, Inc.

Robert A. McCabe, Jr. Director Vice Chairman of First
American Corporation and
President of First American
Enterprises

Howard L. McMillan, Jr. Director Chairman of Deposit Guaranty
System

John N. Palmer Director Chairman and Chief Executive
Officer of SkyTel
Communications, Inc.

Dale W. Polley Director President and Principal
Financial Officer of First
American Corporation

E.B. Robinson, Jr. Director Vice Chairman and Chief
Operating Officer of First
American Corporation and
President of First American
National Bank

Roscoe R. Robinson Director Former Vice Chancellor for
Health Affairs of
Vanderbilt University
Medical Center

James F. Smith Director Former Chairman of the Board
of First American Corporation

Cal Turner, Jr. Director Chairman and Chief Executive
Officer of Dollar General
Corporation

Celia A. Wallace Director Chairman and Chief Executive
Officer of Southern Medical
Health Systems, Inc.

Ted H. Welch Director Real Estate Developer,
President and Chief
Executive Officer of Eagle
Communications

J. Kelley Williams, Sr. Director Chairman and Chief Executive
Officer of ChemFirst, Inc.

David K. Wilson Director Chairman of the Board of
Cherokee Equity Corporation

Toby S. Wilt Director President of TSW Investment Company

William S. Wire, II Director Former Chairman of the Board
of Genesco, Inc.

</TABLE>

<PAGE>

(iii) Registrant is fulfilling the requirement of this Item 26(a) to
provide a list of the officers and directors of Lazard Asset Management, the
investment adviser of the Registrant's ISG International Equity Fund,
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by Lazard Asset Management or
those of its officers and directors during the past two years, by incorporating
by reference the information contained in the Form ADV filed with the SEC
pursuant to the Investment Advisers Act of 1940 by the Lazard Asset Management
(SEC File No. 801-50349).

(iv) Registrant is fulfilling the requirement of this Item 26(a) to
provide a list of the officers and directors of Womack Asset Management, Inc.,
the investment adviser of the Registrant's ISG Small Cap Opportunity Fund and
Stewardship Small-Cap Equity Fund, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by Womack Asset Management, Inc. or those of its officers and directors during
the past two years, by incorporating by reference the information contained in
the Form ADV filed with the SEC pursuant to the Investment Advisers Act of 1940
by the Womack Asset Management, Inc. (SEC File No. 801-54327).

(v) Registrant is fulfilling the requirement of this Item 26(a) to
provide a list of the officers and directors of Bennett Lawrence Management LLC,
the investment adviser of the Registrant's ISG Mid Cap Fund, together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by Bennett Lawrence Management, LLC or those of
its officers and directors during the past two years, by incorporating by
reference the information contained in the Form ADV filed with the SEC pursuant
to the Investment Advisers Act of 1940 by the Bennett Lawrence Management, LLC
(SEC File No. 801-49805).

Item 27. Principal Underwriters

(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or exclusive
distributor:

American Performance Funds
AmSouth Mutual Funds
The ARCH Fund, Inc.
The BB&T Mutual Funds Group
The Coventry Group
The Empire Builder Tax Free Bond Fund
ESC Strategic Funds, Inc.
The Eureka Funds
Fountain Square Funds
Hirtle Callaghan Trust
HSBC Family of Funds
The Infinity Mutual Funds, Inc.
INTRUST Funds Trust
The Kent Funds
Magna Funds
Meyers Investment Trust
MMA Praxis Mutual Funds
M.S.D.&T. Funds
Pacific Capital Funds
Parkstone Group of Funds
The Parkstone Advantage Fund
Pegasus Funds
The Republic Funds Trust
The Republic Advisors Funds Trust
The Riverfront Funds, Inc.
SBSF Funds, Inc. dba Key Mutual Funds
Sefton Funds
The Sessions Group
Summit Investment Trust
Variable Insurance Funds
The Victory Portfolios
The Victory Variable Funds
Vintage Mutual Funds, Inc.

(b) The information required by this Item 27(b) regarding each director
or officer of BISYS Fund Services Limited Partnership is incorporated by
reference to Schedule A of Form BD filed pursuant to the Securities Exchange Act
of 1934 (SEC File No. 8-32480).

Item 28. Location of Accounts and Records

1. BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219-3035

2. The Bank of New York
90 Washington Street
New York, New York 10015

3. First American National Bank
315 Deaderick Street
Nashville, Tennessee 37238

4. Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019

Item 29. Management Services

Not Applicable.

Item 30. Undertakings

None

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, and State of New York, on the 2nd day
of March, 1999.

THE INFINITY MUTUAL FUNDS, INC.
(Registrant)

By: /s/ William B. Blundin*
WILLIAM B. BLUNDIN President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

/s/William B. Blundin* President (Principal
WILLIAM B. BLUNDIN Executive Officer) and
Chairman of the
Board of Directors

/s/Gary R. Tenkman* Treasurer (Chief
GARY R. TENKMAN Financial and
Accounting Officer)

/s/Richard H. Francis* Director
RICHARD H. FRANCIS

/s/Norma A. Coldwell* Director
NORMA A. COLDWELL

/s/William W. McInnes* Director
WILLIAM W. McINNES

/s/Robert A. Robinson* Director
ROBERT A. ROBINSON

*By:/s/Robert L. Tuch March 2, 1999
Robert L. Tuch
Attorney-in-fact