STEPSTONE FUNDS, 497, 1996-01-04

STEPSTONE FUNDS
497, 1996-01-04

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<PAGE> 1
STEPSTONE FUNDS
INTERMEDIATE - TERM BOND FUND
GOVERNMENT SECURITIES FUND

SUPPLEMENT DATED JANUARY 4, 1996 TO
INVESTMENT CLASS PROSPECTUS
DATED JUNE 1, 1995

THIS SUPPLEMENT PROVIDES NEW AND ADDITIONAL INFORMATION BEYOND THAT CONTAINED
IN THE PROSPECTUS AND SHOULD BE RETAINED AND READ IN CONJUNCTION WITH SUCH
PROSPECTUS.

Effective as of February 15, 1996, the sales charge normally imposed on
purchases of the Intermediate - Term Bond and Government Securities Funds'
Investment Class Shares in the amount of $1,000,000 or more is waived. Such
purchases shall be subject to a 1.00% contingent deferred sales charge payable
to the Distributor, however, if such shares are redeemed prior to one year
from the date of purchase. Therefore, the sales charge table in the section
entitled "PURCHASE AND REDEMPTION OF SHARES" found on page 10 of the
Prospectus is replaced with the following:

SALES
CHARGE AS COMMISSION
SALES APPROPRIATE AS
CHARGE PERCENTAGE PERCENTAGE
AS A PERCENTAGE OF NET OF OFFERING
AMOUNT OF PURCHASE OF OFFERING PRICE AMOUNT INVESTED PRICE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 0-24,999....... 3.00% 3.09% 2.70%

$ 25,000-$49,999...... 2.50% 2.56% 2.25%

$ 50,000-$ 99,999..... 2.00% 2.04% 1.80%

$ 100,000-$249,999..... 1.50% 1.52% 1.35%

$ 250,000-$999,999..... 1.00% 1.01% 0.90%

$1,000,000-and Over..... 0.00%* 0.00% 0.00%
</TABLE>

* A contingent deferred sales charge will be charged if such Investment Class
shares are redeemed prior to one year from date of purchase.

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE

<PAGE> 2

STEPSTONE FUNDS

A Family of Mutual Funds

STEPSTONE FUNDS (the "Trust") is a mutual fund that offers a convenient and
economical means of investing in professionally managed portfolios of
securities. This Prospectus relates to the Trust's:

-- INTERMEDIATE-TERM BOND FUND
-- GOVERNMENT SECURITIES FUND

INVESTMENT CLASS

The Trust's Investment Class Shares are offered to individual and institutional
investors, including accounts for which UNION BANK and THE BANK OF TOKYO TRUST
COMPANY, their affiliates and correspondents act in an agency or custodial
capacity.

This Prospectus sets forth concisely the information about the Trust and the
Funds that a prospective investor should know before investing. Investors are
advised to read this Prospectus and retain it for future reference. A Statement
of Additional Information dated the same date as this Prospectus, has been filed
with the Securities and Exchange Commission and is available without charge
through the Distributor, SEI Financial Services Company, 680 East Swedesford
Road, Wayne, PA 19087-1658 or by calling 1-(800) 862-6243. The Statement of
Additional Information is incorporated into this Prospectus by reference.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, INCLUDING UNION BANK, THE BANK OF TOKYO TRUST COMPANY OR ANY OF
THEIR AFFILIATES OR CORRESPONDENTS. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISKS INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

JUNE 1, 1995

INVESTMENT CLASS
<PAGE> 3

SUMMARY

STEPSTONE FUNDS (the "Trust") is a diversified open-end investment company
providing a convenient way to invest in professionally managed portfolios of
securities. The following provides basic information about the Government
Securities Fund, Intermediate-Term Bond Fund Investment Class (each a "Fund").
This summary is qualified in its entirety by reference to the more detailed
information provided elsewhere in the Prospectus and in the Statement of
Additional Information.

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES? THE INTERMEDIATE-TERM BOND FUND
seeks to provide total return. THE GOVERNMENT SECURITIES FUND seeks to achieve
total return consistent with the preservation of capital by investing in a
diversified portfolio of obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities. See "Investment Objectives."

WHAT ARE THE FUNDS' PERMITTED INVESTMENTS? THE INTERMEDIATE-TERM BOND FUND will
invest primarily in debt instruments. THE GOVERNMENT SECURITIES FUND will invest
primarily in debt obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities including mortgage-backed securities issued by
U.S. government agencies. See "Investment Policies."

WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUNDS? The investment
policies of each Fund entail certain risks and considerations of which an
investor should be aware. The market value of a Fund's fixed income investments
will change in response to interest rate changes and other factors. During
periods of falling interest rates, the value of outstanding fixed income
securities generally rise. Conversely, during periods of rising interest rates,
the values of such securities generally decline. See, "Risk Factors."

ARE MY INVESTMENTS INSURED? Any guarantee by the U.S. Government, its agencies
or any instrumentalities of the securities in which any Fund invests guarantees
only the payment of principal and interest on the guaranteed security and does
not guarantee the yield or value of the security or yield or value of shares of
that Fund. The Trust's shares are not federally insured by the FDIC or any other
government agency.

WHO IS THE ADVISOR? Union Capital Advisors, a division of Union Bank serves as
the Advisor of the Trust. See "The Advisor."

WHO IS THE SUBADVISOR? The Bank of Tokyo Trust Company serves as the SubAdvisor
of the Government Securities Fund. See "The SubAdvisor."

WHO IS THE ADMINISTRATOR? SEI Financial Management Corporation serves as the
Administrator of the Trust. See "The Administrator."

WHO IS THE SHAREHOLDER SERVICING AGENT? SEI Financial Management Corporation
serves as transfer agent, dividend disbursing agent, and shareholder servicing
agent for the Trust. See "Shareholder Servicing Agent."

WHO IS THE DISTRIBUTOR? SEI Financial Services Company acts as Distributor of
the Trust's shares. See "The Distributor."

HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions may be made
through the Distributor on days on which both the New York Stock Exchange and
the Federal Reserve wire system are open for business ("Business Days"). The
minimum initial investment in the Fund's Investment Class is $2,000 ($1,000 for
IRAs). A purchase order will be effective if the Distributor receives an order
prior to 1:00 P.M. Pacific time. Payment of the purchase price is due no later
than five Business Days after a purchase order is executed. Purchase orders for
shares will be executed at a per share price equal to the asset value next
determined after the purchase order is effective plus any applicable sales
charge. Redemption orders must be placed prior to 1:00 P.M. Pacific time on any
Business Day for the order to be effective that day. See "Purchase and
Redemption of Shares."

HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of each Fund is distributed in the form of monthly
dividends to Shareholders of record. Any capital gain is distributed at least
annually. Distributions are paid in additional shares unless the Shareholder
elects to take the payment in cash. See "Dividends."
<PAGE> 4

<TABLE>
SHAREHOLDER TRANSACTION EXPENSES INVESTMENT CLASS
(As a percentage of offering price)
- --------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases.............................................. 3.00%
</TABLE>

<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------
GOVERNMENT
INTERMEDIATE-TERM SECURITIES
BOND FUND FUND
<S> <C> <C>
Advisory Fees.................................................... .50% .50%
12b-1 Fees (After Fee Waivers)(1)................................ .00% .00%
Other Expenses................................................... .20% .25%
- -------------------------------------------------------------------------------------------------------
Total Operating Expenses (After Fee Waivers)(2).................. .70% .75%
=======================================================================================================
</TABLE>

(1) The Investment Class Plan provides that the Investment Class shares will
bear the costs of distribution expenses and, in addition, the Trust may pay
the Distributor a fee of up to .40% of the Investment Class shares' average
daily net assets, of which a maximum of .25% may be used to compensate
broker/dealers and service providers. See "The Distributor" for further
information. The Distributor has agreed to waive any fees payable pursuant
to the Plan other than .25% for shareholder services provided by the
Distributor and other intermediaries and will bear the costs of other
distribution-related activities. The Distributor reserves the right to
terminate its waiver at any time in its sole discretion.

(2) "Total Operating Expenses" for the Intermediate-Term Bond Fund have been
restated to reflect current expenses, and the above mentioned fee waivers.
Absent fee waivers, "Total Operating Expenses" would be 1.15% for the
Government Securities Fund and 1.10% for the Intermediate-Term Bond Fund.

EXAMPLE:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment assuming (1) imposition of maximum sales charge; (2)
5% annual return and (3) redemption at the end of each
time period
Intermediate-Term Bond Fund...................................... $37 $52 $68 $114
Government Securities Fund....................................... $37 $53 $70 $120
============================================================================================================
</TABLE>

THE EXAMPLE IS BASED UPON THE TOTAL OPERATING EXPENSES OF A FUND AND SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. The purpose of this table is to assist the
investor in understanding the various costs and expenses that may be directly or
indirectly borne by investors in the Funds. The information set forth in the
foregoing table and example relates only to Investment Class shares. The Trust
also offers Institutional Class Shares of the Funds which are subject to the
same expenses, except there are no sales charges or distribution costs.

Additional information may be found under "The Administrator," "The Advisor" and
"The SubAdvisor."

The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "Purchase and Redemption of Shares."

Long-term Shareholders may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the Rules of the National Association of
Securities Dealers ("NASD").
<PAGE> 5

FINANCIAL HIGHLIGHTS

The following information has been audited by Arthur Andersen LLP, the Trust's
independent accountants, as indicated in their report dated March 15, 1995 on
the Trust's financial statements as of January 31, 1995 included in the Trust's
Statement of Additional Information under "Financial Information." This table
should be read in conjunction with the Trust's financial statements and notes
thereto. Additional information is set forth in the 1995 Annual Report to
Shareholders and is available without charge by calling 1-(800) 862-6243.

FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR

* Annualized.

** Total Return does not reflect the sales charge.

(1) Commenced operations on February 3, 1992.

</TABLE>
[/R]
<PAGE> 6

THE TRUST

STEPSTONE FUNDS (formerly Union Investors Funds) (the "Trust") is a diversified
open-end management investment company that offers units of beneficial interest
("shares") in fourteen separate investment funds. Shareholders may purchase
shares in a fund through two separate classes of shares (Institutional Class and
Investment Class) which provide for variations in distribution costs, voting
rights and dividends. Except for these differences between Institutional Class
and Investment Class shares, each share of each fund represents an equal
proportionate interest in that fund. This Prospectus relates to the Investment
Class shares of the Trust's Government Securities and Intermediate-Term Bond
Funds (each a "Fund"). Information regarding the Trust's other funds is
contained in separate prospectuses that may be obtained from the Trust's
Distributor, SEI Financial Services Company, 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658.

INVESTMENT OBJECTIVES

THE INTERMEDIATE-TERM BOND FUND seeks to provide total return.

THE GOVERNMENT SECURITIES FUND seeks to achieve total return consistent with the
preservation of capital by investing in a diversified portfolio of obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities.

There is no assurance that a Fund's investment objective will be met.

INVESTMENT POLICIES

INTERMEDIATE-TERM BOND FUND

At least 65% of the Intermediate-Term Bond Fund's assets will be invested in
debt instruments. Such debt instruments shall include corporate bonds and
debentures rated AAA, AA, A, or BBB by Standard & Poor's Corporation ("S&P") or
Aaa, Aa, A, or Baa by Moody's Investors Service ("Moody's") or be of comparable
quality at the time of purchase as determined by the Advisor; Yankee Bonds and
Eurodollars, obligations issued by the U.S. Government and its agencies and
instrumentalities (such as GNMA); mortgage-backed securities, including
privately issued mortgage-backed securities; readily-marketable asset-backed
securities; and securities issued or guaranteed by foreign governments, their
political subdivisions, agencies or instrumentalities and obligations of
supranational entities such as the World Bank and the Asian Development Bank.
The remainder of the Fund's assets may be invested in money market instruments
consisting of securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities, receipts, including TR's, TIGR's and CATS, money
market funds, repurchase agreements, certificates of deposit, time deposits,
bank master notes and bankers' acceptances issued by banks having net assets of
at least $1 billion as of the end of their most recent fiscal year, commercial
paper rated at least A-1 by Standard & Poor's Corporation ("S&P") or P-1 by
Moody's Investor Services ("Moody's"), and it also may hold a portion of its
assets in cash. The dollar-weighted average portfolio maturity of the Fund will
be from three to ten years.

GOVERNMENT SECURITIES FUND

Under normal market conditions, the Government Securities Fund will invest at
least 80% of its assets in obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities, including mortgage-backed
securities issued or guaranteed by U.S. government agencies such as the
Government National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC") and
repurchase agreements backed by such securities. With respect to the remaining
20% of its assets, the Fund may also invest in corporate or government bonds
that carry a rating of Baa or better by Moody's Investors Service, Inc. or BBB
or better by Standard & Poor's Corporation, or that are deemed by the SubAdvisor
to be of comparable quality; Yankee Bonds, including sovereign, supranational
and Canadian bonds; shares of other investment companies with similar investment
objectives; commercial paper;

<PAGE> 7

receipts, including TR's, TIGR's and CATS; money market funds; certificates of
deposit and time deposits; privately issued mortgage-backed and other
readily-marketable asset-backed securities.

The Fund may invest in futures and options on futures for the purpose of
achieving the Fund's objectives and for adjusting portfolio duration. The Fund
may invest in futures and related options based on any type of security or index
traded on U.S. or foreign exchanges or over-the-counter, as long as the
underlying security, or securities represented by an index, are permitted
investments of the Fund. The Fund may enter into futures contracts and options
on futures only to the extent that obligations under such contracts or
transactions represent not more than 10% of the Fund's assets.

The SubAdvisor will seek to enhance the yield of the Fund by taking advantage of
yield disparities or other factors that occur in the government securities and
money markets. The Fund may dispose of any security prior to its maturity if
such disposition and reinvestment of the proceeds are expected to enhance its
yield consistent with the SubAdvisor's judgment as to a desirable maturity
structure or if such disposition is believed to be advisable due to other
circumstances or considerations. The Fund will seek to achieve capital gains by
taking advantage of price appreciation caused by interest rate and credit
quality changes.

The portfolio turnover rate for the Government Securities Fund for the fiscal
year ended January 31, 1995 was 184%. This rate of portfolio turnover may result
in higher brokerage execution costs and higher levels of capital gains.

GENERAL INVESTMENT POLICIES

Mortgage-backed securities consisting of collateralized mortgage obligations
("CMOs") and real estate mortgage investment conduits ("REMICs") purchased by
the Funds will be issued or guaranteed as to payment of principal and interest
by the U.S. government or its agencies or instrumentalities or, if issued by
private issuers, rated in one of the two highest rating categories by a
nationally recognized rating agency. The principal governmental issuer or
guarantors of mortgage-backed securities are GNMA, FNMA, and FHLMC. Obligations
of GNMA are backed by the full faith and credit of the United States Government
while obligations of FNMA and FHLMC are supported by the respective agency only.
The Funds may purchase mortgage-backed securities that are backed or
collateralized by fixed, adjustable or floating rate mortgages.

Mortgage-backed securities that are not issued or guaranteed by the U.S.
government or its agencies or instrumentalities, including securities nominally
issued by a government entity (such as the Resolution Trust Corporation), are
not obligations of a governmental entity and thus may bear a risk of nonpayment.
The timely payment of principal and interest normally is supported, at least
partially, by various forms of insurance or guarantees. There can be no
assurance, however, that such credit enhancement will support fully the payment
of principal and interest on such obligations.

Certain of the obligations in which the Fund may invest may be variable or
floating rate instruments, may involve a conditional or unconditional demand
feature, and may include variable amount master demand notes.

For temporary defensive purposes during periods when the Advisor determines that
market conditions warrant, each Fund may invest up to 100% of its assets in
money market instruments consisting of securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, repurchase agreements,
receipts including TR's, TIGR's and CATS; money market funds, certificates of
deposit, time deposits, bank master notes and bankers' acceptances issued by
banks having net assets of at least $1 billion as of the end of their most
recent fiscal year, commercial paper rated at least A-1 by Standard & Poor's
Corporation ("S&P") or P-1 by Moody's Investor Services ("Moody's"), and it also
may hold a portion of its assets in cash. A Fund will not

<PAGE> 8

meet its investment objective to the extent that more than a substantial portion
of its assets are invested in money market securities.

In the event that a security owned by a Fund is downgraded below the stated
ratings categories, the Advisor will review and take appropriate action with
regard to the security.

Each Fund will restrict its investment in illiquid securities to 15% of its net
assets.

Each Fund may engage in securities lending and will limit such practice to
33 1/3% of total assets.

Each Fund may purchase restricted securities which have not been registered
under the Securities Act of 1933 (Rule 144A Securities).

Each Fund may purchase securities on a forward commitment or when-issued basis
where such purchases are for investment and not for leveraging purposes;
however, the Fund may sell these securities before the settlement date if it is
deemed advisable. No additional forward commitments will be made if more than
20% of a Fund's net assets would be so committed.

For further information about the permitted investments see "Description of
Permitted Investments."

RISK FACTORS

Each Fund's shares will fluctuate in value with the value of the underlying
securities in its portfolio. Changes in the value of a Fund's portfolio
securities will not affect cash received from ownership of such securities but
will affect the Fund's net asset value.

Each of the Fund's portfolios may hold dollar denominated securities of foreign
issuers which may bear greater investment risks than those of U.S. domestic
issuers. Such risks include political and economic instability, expropriation of
foreign deposits and other restrictions which may adversely affect the payment
of principal and interest on such securities. See "Description of Permitted
Investments."

Securities rated BBB by S&P or Fitch or Baa by Moody's are deemed by these
rating services to have some speculative characteristics and adverse economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
bonds.

INVESTMENT LIMITATIONS

Each Fund may not:

1. Purchase securities of any issuer (except securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities and repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of a Fund would be invested in the securities of such issuer or, with
respect to the Government Securities Fund, more than 10% of the outstanding
voting securities of such issuer would be owned by the Fund. This restriction
applies to 75% of a Fund's assets.

2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in the obligations issued or guaranteed
by the U.S. government or its agencies or instrumentalities and repurchase
agreements involving such securities, and provided further, that utilities as a
group will not be considered to be one industry, and wholly-owned subsidiaries
organized to finance the operations of their parent companies will be considered
to be in the same industries as their parent companies.

3. Make loans except that the Fund may (a) purchase or hold debt instruments in
accordance with its investment objectives and policies, (b) enter into
repurchase agreements, and (c) engage in securities lending as described in this
Prospectus and in the Statement of Additional Income.

The foregoing percentages will apply at the time of the purchase of a security.
Additional investment
<PAGE> 9

limitations are set forth in the Statement of Additional Information.

FUNDAMENTAL POLICIES

The investment objective and the investment limitations are fundamental policies
of the Funds. Fundamental policies cannot be changed with respect to a Fund
without the consent of the holders of a majority of the Fund's outstanding
shares. The term "majority of the outstanding shares" means the vote of (i) 67%
or more of the Fund's shares present at a meeting, if more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the Fund's outstanding shares, whichever is less.

THE ADVISOR

The Trust and Union Capitol Advisors (the "Advisor"), a division of Union Bank,
have entered into an advisory agreement (the "Advisory Agreement"). Under the
Advisory Agreement, the Advisor makes the investment decisions for the assets of
the Intermediate-Term Bond Fund and continuously reviews, supervises and
administers each Fund's investment program. The Advisor discharges its
responsibilities subject to the supervision of, and policies established by, the
Trustees of the Trust. The Trust's shares are not sponsored, endorsed or
guaranteed by, and do not constitute obligations or deposits of, the Advisor or
Union Bank and are not guaranteed by the FDIC or any other governmental agency.

The Advisor is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .50% of the average daily net assets of the Government
Securities and Intermediate-Term Bond Funds. The Advisor may from time to time
waive all or a portion of its fee in order to limit the operating expenses of a
Fund. Any such waiver is voluntary and may be terminated at any time in the
Advisor's sole discretion.

For the fiscal year ended January 31, 1995, the Advisor was paid an advisory fee
of .50% and .50% of the average daily net assets from the Intermediate-Term Bond
and the Government Securities Fund, respectively.

Union Capitol Advisors, 445 S. Figueroa Street, Los Angeles, California 90071,
operates as a separate division of Union Bank. In 1988, the former Union Bank
was acquired by California First Bank, and the resulting bank changed its name
to Union Bank. Each of the former banks or its predecessor bank had been in
banking since the early 1900s and each historically has had significant
investment functions within their Trust and Investment Divisions. Union Bank is
a subsidiary of The Bank of Tokyo, Ltd., Tokyo.

James Atkinson has served as portfolio manager of the Intermediate-Term Bond
Fund since 1991. Mr. Atkinson is a Vice President with the Advisor and has been
with the Advisor since 1991. Mr. Atkinson was a portfolio manager with the
Boston Company from 1988 to 1990.

At January 31, 1995, Union Capitol Advisors managed $4.7 billion in individual
portfolios and collective funds. The Advisor's clients range from pension funds,
national labor union plans and foundations to personal investments and trust
portfolios.

The Glass-Steagall Act restricts the securities activities of banks such as
Union Bank, but federal regulatory authorities permit such banks to provide
investment advisory and other services to mutual funds. Should this position be
challenged successfully in court or reversed by legislation, the Trust might
have to make other investment advisory arrangements.

THE SUBADVISOR

The Advisor and The Bank of Tokyo Trust Company (the "SubAdvisor") have entered
into an investment subadvisory agreement relating to the Government Securities
Fund (the "Investment SubAdvisory Agreement"). Under the Investment SubAdvisory
Agreement, the SubAdvisor makes the day-to-day investment decisions for the
assets of the Fund, subject to the supervision of, and policies established by,
the Trustees of the Trust.
<PAGE> 10

The Trust's shares are not sponsored, endorsed or guaranteed by and do not
constitute obligations or deposits of the SubAdvisor or The Bank of Tokyo, Ltd.,
Tokyo and are not guaranteed by the FDIC or any other governmental agency.

The SubAdvisor is entitled to a fee which is calculated daily and paid monthly
out of the Advisor's fee at an annual rate of .20% of the average daily net
assets of the Government Securities Fund. For the fiscal year ended January 31,
1995, the SubAdvisor received .20% of the average daily net assets of the
Government Securities Fund.

The Bank of Tokyo Trust Company, 100 Broadway, New York, New York 10005,
operates as a wholly-owned subsidiary of The Bank of Tokyo, Ltd., Tokyo. The
Bank of Tokyo, Ltd., Tokyo was established in 1946 and The Bank of Tokyo Trust
Company was established as a New York state chartered bank in 1955. The Bank of
Tokyo Trust Company has provided trust services since 1955 and asset management
services since 1965.

The SubAdvisor has not previously served as the investment advisor to mutual
funds. However, the SubAdvisor serves as portfolio manager to bank common funds,
employee benefit funds and personal trust accounts, managing assets in money
market, equity and fixed income portfolios. At December 31, 1994, Bank of Tokyo
Trust Company managed $1.2 billion in individual portfolios and collective
funds.

Stephen W. Blocklin has served as portfolio manager of the Government Securities
Fund since its inception. Mr. Blocklin has been a Vice President with the
SubAdvisor since December, 1993. From September, 1988 to December, 1993, he
served as a senior fixed income fund manager in the institutional investment
management group at First Fidelity Bancorporation.

THE ADMINISTRATOR

SEI Financial Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), and the Trust are parties to an
administration agreement (the "Administration Agreement"). Under the terms of
the Administration Agreement, the Administrator provides the Trust with certain
management services including all necessary office space, equipment, personnel,
and facilities.

The Administrator is entitled to a fee, calculated daily and paid monthly, at an
annual rate of .15% of the average daily net assets of the Trust up to $1
billion, .12% of the average daily net assets between $1 billion and $2 billion
and .10% of the average daily net assets over $2 billion. The Administrator may
waive its fee or reimburse various expenses to the extent necessary to limit the
total operating expenses of a Fund's Investment Class shares. Any such waiver is
voluntary and may be terminated at any time in the Administrator's sole
discretion.

THE SHAREHOLDER SERVICING AGENT

SEI Financial Management Corporation serves as the transfer agent, dividend
disbursing agent, and shareholder servicing agent for the Trust. Compensation
for these service is paid under the Administration Agreement.

THE DISTRIBUTOR

SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI Corporation (SEI), and the Trust are parties to a distribution agreement
("Distribution Agreement"). The Distribution Agreement is renewable annually and
may be terminated by the Distributor, by a majority vote of the Disinterested
Trustees or by a majority vote of the outstanding securities of the Trust upon
not more than 60 days written notice by either party, or upon assignment by the
Distributor.

The Investment Class has a distribution plan (the "Investment Class Plan"). The
Distribution Agreement and the Investment Class Plan adopted by the Investment
Class Shareholders provide that the Investment Class shares of a Fund may bear
the following distribution expenses: (1) the cost of

<PAGE> 11
10

prospectuses, reports to Shareholders, sales literature and other materials for
potential investors; (2) advertising; and (3) expenses incurred in connection
with the promotion and sale of the Trust's shares including the Distributor's
expenses for travel, communication, and compensation and benefits for sales
personnel. In addition, the Trust pays the Distributor a fee of up to .40% of a
Fund's Investment Class shares average daily net assets, of which a maximum of
.25% may be used to compensate broker/dealers and service providers which
provide administrative and/or distribution services to Investment Class
Shareholders or their customers who beneficially own Investment Class shares.
For the Funds' current year, the Distributor has agreed to waive any fees
payable pursuant to the Plan, and the Distributor will bear the costs of other
distribution-related activities. The Distributor reserves the right to terminate
its waiver at any time at its sole discretion.

PURCHASE AND REDEMPTION OF SHARES

Purchases and redemptions of shares of the Funds may be made on days on which
both the New York Stock Exchange and Federal Reserve Wire System are open for
business ("Business Days"). The minimum initial investment in a Fund is $2,000
($1,000 for IRAs); however, the minimum investment may be waived at the
Distributor's discretion. All subsequent purchases must be at least $1,000 ($500
for IRAs).

Purchase orders for shares will be executed at a per share price equal to the
asset value next determined after the receipt of the purchase order by the
Distributor plus any applicable sales charge. Payment of the purchase price is
due no later than five business days after a purchase order is executed. The
purchase price of shares of a Fund is the net asset value next determined after
a purchase order is received and accepted by the Trust plus a sales charge. The
net asset value per share of a Fund is determined by dividing the total market
value of a Fund's investments and other assets, less any liabilities, by the
total outstanding shares of a Fund. Net asset value per share is determined
daily as of 1:00 p.m. Pacific time, on any Business Day. Purchases will be made
in full and fractional shares of the Trust calculated to three decimal places.
The Trust reserves the right to reject a purchase order when the Distributor
determines that it is not in the best interest of the Trust and/or its
Shareholders to accept such order.

Shares of the Funds are offered only to residents of states in which the shares
are eligible for purchase.

The following table shows the regular sales charge on Investment Class shares to
a "single purchaser" (described below) together with the dealer discount paid to
dealers and the agency commission paid to brokers (collectively the
"commission"):

<TABLE>
<CAPTION>
SALES SALES
CHARGE CHARGE AS COMMISSION
AS A APPROPRIATE AS
PERCENTAGE PERCENTAGE PERCENTAGE
OF OF NET OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ---------------------------------------------------------------
<S> <C> <C> <C>
0 - $ 24,999.... 3.00% 3.09% 2.70%
$ 25,000 - $ 49,999.... 2.50% 2.56% 2.25%
$ 50,000 - $ 99,999.... 2.00% 2.04% 1.80%
$100,000 - $249,999.... 1.50% 1.52% 1.35%
$250,000 and over...... 1.00% 1.01% 0.90%
</TABLE>

The commissions shown in the table apply to sales through authorized dealers and
brokers. Under certain circumstances, the Distributor may use its own funds to
compensate financial institutions and intermediaries in amounts that are
additional to the commissions shown above. In addition, the Distributor may,
from time to time and at its own expense, provide promotional incentives in the
form of cash or other compensation to certain financial institutions and
intermediaries whose registered representatives have sold or are expected to
sell significant amounts of the Investment Class shares of the Fund. Such other
compensation may take the form of payments for travel expenses, including
lodging, incurred in connection with trips taken by qualifying registered
representatives to places within or without the United States. Under certain
circumstances,
<PAGE> 12

commissions up to the amount of the entire sales charge may be reallowed to
dealers or brokers, who might then be deemed to be "underwriters" under the
Securities Act of 1933. Commission rates may vary among the Funds.

In calculating the sales charge rates applicable to current purchases of a
Fund's shares, a "single purchaser" is entitled to cumulate current purchases
with the net purchases of previously purchased shares of the Fund and other
funds of Union Investors Funds (the "Eligible Funds") which are sold subject to
a comparable sales charge.

The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Fund for their own account or for trust or
custodial accounts for their minor children, or (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401, 403(b) or 457 of the Internal Revenue Code of 1986,
as amended (the "Code") including related plans of the same employer. To be
entitled to a reduced sales charge based upon shares already owned, the investor
must ask the Distributor for such entitlement at the time of purchase and
provide the account number(s) of the investor, the investor and spouse, and
their minor children, and give the age of such children. The Fund may amend or
terminate this right of accumulation at any time as to subsequent purchases.

LETTER OF INTENT. By submitting a Letter of Intent (the "Letter") to the
Distributor, a "single purchaser" may purchase shares of the Fund and the other
Eligible Funds during a 13 month period at the reduced sales charge rates
applying to the aggregate amount of the intended purchases stated in the Letter.
The Letter may apply to purchases made up to 90 days before the date of the
Letter. To receive credit for such prior purchases and later purchases
benefitting from the Letter, the Shareholder must notify the Transfer Agent at
the time the Letter is submitted that there are prior purchases that may apply,
and, at the time of later purchases, notify the Transfer Agent that such
purchases are applicable under the Letter.

OTHER CIRCUMSTANCES. No sales charge is imposed on Investment Class shares of
the Fund: (i) issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Trust is a party; (ii) sold to
dealers or brokers that have a sales agreement with the Distributor, for their
own account or for retirement plans for their employees or sold to employees
(and their spouses) of dealers or brokers that certify to the Distributor at the
time of purchase that such purchase is for their own account (or for the benefit
of such employees' minor children); (iii) in aggregate purchases of $1 million
or more by tax-exempt organizations enumerated in Section 501(c) of the Code, or
employee benefit plans created under Sections 401, 403(b) or 457 of the Code;
(iv) sold to employees and families of the Advisor and its affiliates; (v) all
fiduciary accounts of the Advisor and its affiliates; or (vi) purchased with
proceeds from the recent redemption of shares of a mutual fund with similar
investment objectives and policies for which a sales load was paid.

The waiver of the sales changes under clause (vi) applies only if the following
conditions are met: the purchase must be made within 60 days of the redemption;
the Distributor must be notified in writing by the investors, or his or her
agent, at the time a purchase is made; and a copy of the investor's account
statement showing such redemption must accompany such notice. The waiver policy
with respect to the purchase of shares through the use of proceeds from a recent
redemption above will not continue indefinitely and may be discontinued at any
time without notice. Investors should contact the Distributor to confirm
continued availability prior to initiating the procedures described in clause
(vi).

Shareholders who desire to redeem shares of a Fund must place their redemption
orders prior to 1:00 P.M. Pacific time, on any Business Day for the order to be
accepted on that Business Day. The redemption price is the net asset value of a
<PAGE> 13
12

Fund next determined after receipt by the Distributor of the redemption order.
Payment on redemption will be made as promptly as possible and, in any event,
within seven calendar days after the redemption order is received.

Neither the Trust's Transfer Agent nor the Trust will be responsible for any
loss, liability, cost, or expense for acting upon wire instructions or upon
telephone instructions that it reasonably believes are genuine. The Trust and
its transfer agent will each employ reasonable procedures to confirm that
telephone instructions are genuine, and may be liable for losses resulting from
unauthorized or fraudulent telephone instructions if it does not employ these
procedures. Such procedures may include taping of telephone conversations. If
market conditions are extraordinarily active or other extraordinary
circumstances exist, and you experience difficulties placing redemption orders
by telephone, you may wish to consider placing your order by other means.

PURCHASES BY EXCHANGE

As permitted pursuant to any rule, regulation or order promulgated by the
Securities and Exchange Commission, shareholders of Investment Class shares of
other Funds of the Trust that have similar sales charges may tender their shares
for those Funds for exchange into the number of shares (including fractional
shares) which have a value equal to the total net asset value of shares tendered
divided by the net asset value of Investment Class shares of the Fund next
determined after such order is received. Shares issued pursuant to this offer
will not be subject to this sales charge described above or any other charge.
The Fund may modify or terminate this exchange offer at any time.

PERFORMANCE

From time to time, the Funds may advertise yield and total return. These figures
will be based on historical earnings and are not intended to indicate future
performance. The yield of a Fund refers to the annualized income generated by an
investment in the Fund over a specified 30-day period. The yield is calculated
by assuming that the same amount of income generated by the investment during
that period is generated in each 30-day period over one year and is shown as a
percentage of the investment.

The total return of a Fund refers to the average compounded rate of return to a
hypothetical investment for designated time periods (including, but not limited
to, the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each period
and assuming the reinvestment of all dividend and capital gain distributions.
The total return of a Fund may also be quoted as a dollar amount or on an
aggregate basis, an actual basis, without inclusion of any sales charge, or with
a reduced sales charge in advertisements distributed to investors entitled to a
reduced sales charge.

A Fund may periodically compare its performance to the performance of: other
mutual funds tracked by mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; broad groups of comparable
mutual funds; unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs; or
other investment alternatives. The Fund may quote Morningstar, Inc., a service
that ranks mutual funds on the basis of risk-adjusted performance. The Fund may
quote Ibbotson Associates of Chicago, Illinois, which provides historical
returns of the capital markets in the U.S. The Fund may use long term
performance of these capital markets to demonstrate general long-term risk
versus reward scenarios and could include the value of a hypothetical investment
in any of the capital markets. The Fund may also quote financial and business
publications and periodicals as they relate to fund management, investment
philosophy, and investment techniques.

share price fluctuations or total returns to a benchmark while measures of
benchmark correlation indicate how valid a comparative benchmark might be.
Measures of volatility and correlation are calculated using averages of
historical data and cannot be calculated precisely.

The performance of Institutional Class shares will normally be higher than for
Investment Class shares because the Institutional Class is generally not subject
to distribution expenses generally charged to the Investment Class shares.

TAXES

The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial, or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state, or local income tax treatment of a Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisers regarding specific questions as to federal, state, and local income
taxes. Additional information concerning taxes is set forth in the Statement of
Additional Information.

TAX STATUS OF THE FUNDS:

Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other Funds. Each Fund intends to qualify for the
special tax treatment afforded regulated investment companies by the Internal
Revenue Code of 1986, as amended (the "Code"), so that it will be relieved of
federal income tax on that part of its net investment income and net capital
gains (the excess of net long-term capital gain over net short-term capital
loss) distributed to Shareholders.

TAX STATUS OF DISTRIBUTIONS:

A Fund will distribute all of its net investment income (including, for this
purpose, net short-term capital gain) to Shareholders. Dividends from the Fund's
net investment income will be taxable to Shareholders as ordinary income
(whether received in cash or in additional shares) to the extent of the Fund's
earnings and profits. Any net capital gains will be distributed at least
annually and will be taxed to Shareholders as long-term capital gains,
regardless of how long the Shareholder has held shares and regardless of whether
the distributions are received in cash or in additional shares. Corporate
Shareholders should note that Fund distributions of net investment income and
net capital gain will not qualify for the corporate dividends-received
deduction. Each Fund will make annual reports to Shareholders of the federal
income tax status of all distributions.

Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in that month will be deemed to have
been paid by the Fund and received by the Shareholders on the last day of that
month, if paid by the Fund any time during the following January.

With respect to investments in STRIPS, TR's, TIGR's and CATS, which are sold at
original issue discount and thus do not make periodic cash interest payments, a
Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because each Fund distributes
all of its net investment income to its shareholders, a Fund may have to sell
Fund securities to distribute such imputed income which may occur at a time when
the Advisor would not have chosen to sell such securities and which may result
in a taxable gain or loss.

The Funds intend to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.

<PAGE> 15

obligations. Shareholders should consult their tax advisors to determine whether
any portion of the income dividends received from a Fund is considered tax
exempt in their particular state.

A sale, exchange, or redemption of Fund shares is a taxable event to the
Shareholder.

GENERAL INFORMATION

THE TRUST

The Trust was organized as a Massachusetts Business Trust under a Declaration of
Trust dated October 16, 1990. The Declaration of Trust permits the Trust to
offer separate portfolios of shares and different classes of each fund. In
addition to the Funds, the Trust consists of the following funds: Treasury Money
Market Fund, Money Market Fund, California Tax Free Money Market Fund, Growth
Equity Fund, Value Momentum Fund, Balanced Fund, California Tax Free Bond Fund,
Blue Chip Growth Fund, Emerging Growth Fund, Limited Maturity Government Fund,
Convertible Securities Fund and International Equity Fund. All consideration
received by the Trust for shares of any fund and all assets of such fund belong
to that fund and would be subject to liabilities related thereto. The Trust
reserves the right to create and issue shares of additional funds.

The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to shareholders, costs of custodial services and registering the
shares under Federal and State securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses. Please refer to "Financial Highlights" in this
prospectus for more information regarding the Trust's expenses.

TRUSTEES OF THE TRUST

The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described above, certain
companies provide essential management, administrative and shareholder services
to the Trust.

VOTING RIGHTS

Each share held entitles the Shareholder of record to one vote. Each fund or
class will vote separately on matters relating solely to that fund or class. As
a Massachusetts business trust, the Trust is not required to hold annual
meetings of shareholders but approval will be sought for certain changes in the
operation of the Trust and for the election of Trustees under certain
circumstances. In addition, a Trustee may be removed by the remaining Trustees
or by Shareholders at a special meeting called upon written request of
Shareholders owning at least 10% of the outstanding shares of the Trust. In the
event that such a meeting is requested the Trust will provide appropriate
assistance and information to the Shareholders requesting the meeting.

REPORTING

The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.

SHAREHOLDER INQUIRIES

Shareholder inquiries should be directed to the Administrator, SEI Financial
Management Corporation, 680 East Swedesford Road, Wayne, Pennsylvania,
19087-1658.

DIVIDENDS

Substantially all of the net investment income (exclusive of capital gains) of
the Fund is distributed in the form of monthly dividends to Shareholders of
record. Currently, capital gains of a Fund, if any, will be distributed at least
annually.

Shareholders automatically receive all income dividends and capital gain
distributions in additional shares, unless the Shareholder has elected to take
such payment in cash. Shareholders may change
<PAGE> 16

their election by providing written notice to the Administrator at least 15 days
prior to the distribution.

Dividends and distributions of the Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.

The dividends payable on the Investment Class shares will be less than the
dividends payable on the Institutional Class shares because of the distribution
expenses charged on Investment Class shares.

COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS

Morgan, Lewis & Bockius serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.

CUSTODIAN

CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
PA 19101 (the "Custodian") acts as Custodian of the Trust. The Custodian holds
cash, securities and other assets of the Trust as required by the Investment
Company Act of 1940, as amended (the "1940 Act").

DESCRIPTION OF PERMITTED INVESTMENTS

The following is a description of the permitted investments for the Funds:

ASSET-BACKED SECURITIES (NON-MORTGAGE)--Each Fund may invest in asset-backed
securities, which are instruments secured by company receivables, truck and auto
loans, leases, and credit card receivables. Such securities are generally issued
as pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities also may be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity, such as a trust,
organized solely for purpose of owning such assets and issuing such debt. The
purchase of non-mortgage asset-backed securities raises risk considerations
peculiar to the financing of the instruments underlying such securities.

The development of non-mortgage asset-backed securities is at an early stage
compared to mortgage backed securities. While the market for asset-backed
securities is becoming increasingly liquid, the market for non-mortgage
asset-backed securities is not as well developed as that for mortgage backed
securities guaranteed by government agencies or instrumentalities. Asset-backed
securities entail prepayment risk, which may vary depending on the type of
asset, but is generally less than the prepayment risk associated with
mortgage-backed securities.

BANKERS' ACCEPTANCE--A bill of exchange or time draft drawn on and accepted by a
commercial bank. It is used by corporations to finance the shipment and storage
of goods and to furnish dollar exchange. Maturities are generally six months or
less.

CERTIFICATE OF DEPOSIT--A negotiable interest-bearing instrument with a specific
maturity. Certificates of deposit are issued by banks and savings and loan
institutions in exchange for the deposit of funds and normally can be traded in
the secondary market prior to maturity.

COMMERCIAL PAPER--Unsecured short-term promissory notes issued by corporations
and other entities. Maturities on these issues vary from a few days to nine
months. Purchase of such instruments involves a risk of default by the issuer.

CORPORATE OR GOVERNMENT BONDS-- Interest-bearing or discounted corporate or
government securities that obligates the issuer to pay the bondholder a
specified sum of money, usually at specific intervals, and to repay the
principal amount of the loan at maturity. Bonds rated Baa or better by Moody's
Investors Service, Inc. or BBB or better by Standard & Poor's
<PAGE> 17

Corporation are considered investment grade quality.

DERIVATIVES--Derivatives are securities whose value is derived from an
underlying contract, index or security, or any combination thereof. This
includes: futures, options (e.g., puts and calls), options on futures, swap
agreements, and some mortgage-backed securities (CMOs, REMICs, IOs and POs). See
elsewhere in this "Description of Permitted Investments" for discussions of
these various instruments, and see "Investment Objectives and Policies" for more
information about any investment policies and limitations applicable to their
use.

FUTURES AND OPTIONS ON FUTURES--The Government Securities Fund may invest in
futures and options on futures. Some futures strategies, including selling
futures, buying puts and writing calls, reduce the Fund's exposure to price
fluctuations. Other strategies, including buying futures, writing puts and
buying calls, tend to increase market exposure. Futures and options may be
combined with each other in order to adjust the risk and return characteristics
of the overall portfolio.

Options and futures can be volatile instruments, and involve certain risks that
if applied at an inappropriate time, could negatively impact the Fund's return.

MORTGAGE-BACKED SECURITIES--Each Fund may purchase Mortgage-Backed Securities
which generally are issued or guaranteed by U.S. government agencies such as
GNMA, FNMA, or FHLMC. GNMA mortgaged-backed certificates are mortgage-backed
securities of the modified pass-through type, which means that both interest and
principal payments (including prepayments) are passed through monthly to the
holder of the certificate. Each GNMA certificate evidences an interest in a
specific pool of mortgage loans insured by the Federal Housing Administration or
the Farmers Home Administration or guaranteed by the Veterans Administration.
FNMA, a federally-chartered and stockholder-owned corporation, issues
pass-through certificates which are guaranteed as to payment of principal and
interest by FNMA. FHLMC, a corporate instrumentality of the United States,
issues participation certificates which represent an interest in mortgages held
in FHLMC's portfolio. FHLMC guarantees the timely payment of interest and the
ultimate collection of principal. Securities issued or guaranteed by FNMA and
FHLMC are not backed by the full faith and credit of the United States. There
can be no assurance that the U.S. government would provide financial support to
FNMA or FHLMC if necessary in the future.

Adjustable rate mortgage securities ("ARMs") are pass-through certificates
representing ownership interests in a pool of adjustable rate mortgages and the
resulting cash flow from those mortgages. Unlike conventional debt securities,
which provide for periodic (usually semi-annually) payments of interest and
payments of principal at maturity or on specified call dates, ARMs provide for
monthly payments based on a pro rata share of both periodic interest and
principal payments and prepayments of principal on the underlying mortgage pool
(less GNMA's, FNMA's, or FHLMC's fees and any applicable loan servicing fees).

Collateralized mortgage obligations ("CMOs") are bonds generally issued by
single purpose, stand-alone finance subsidiaries or trusts established by
financial institutions, government agencies, investment banks, or other similar
institutions, and collateralized by pools of mortgage loans. Payments of
principal and interest on the collateral mortgages are used to pay debt service
on the CMO. In a CMO a series of bonds or certificates is issued in multiple
classes. 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. The
principal and interest payment on the underlying mortgages may be allocated
among the classes of CMOs in several ways. Typically, payments of principal,
including any prepayments, on the underlying mortgages would be applied to the
classes in the order of their respective stated maturities or final distribution
dates, so that no payment of principal
<PAGE> 18

will be made on CMOs of a class until all CMOs of other classes having earlier
stated maturities or final distribution dates have been paid in full.

One or more classes of CMOs may have coupon rates that reset periodically based
on an index, such as the London Interbank Offered Rate ("LIBOR"). Each Fund may
purchase fixed, adjustable, or "floating" rate CMOs that are collateralized by
fixed rate or adjustable rate mortgages that are guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S. government;
are directly guaranteed as to payment of principal and interest by the issuer,
which guarantee is collateralized by U.S. government securities or are
collateralized by privately issued fixed rate or adjustable rate mortgages.

Real Estate Mortgage Investment Conduits ("REMICs") are private entities formed
for the purpose of holding a fixed pool of mortgages secured by an interest in
real property. REMICs are similar to CMOs in that they issue multiple classes of
securities.

Risks associated with mortgage-backed securities: While the U.S. government or
the issuing agency or entity guarantees the timely payment of interest on and
principal of the securities referred to in the preceding section, the guarantees
do not extend to the securities' yield or value, which are likely to vary
inversely with fluctuations in interest rates. Changes in interest rates can
lead to material changes in prepayment rates, which in turn can materially
affect an instrument's value. Because the prepayment characteristics of the
underlying mortgages vary, it is not possible to predict accurately the average
life or realized yield of a particular issue of pass-through certificates.

REPURCHASE AGREEMENTS--Agreements by which a person obtains a security and
simultaneously commits to return the security to the seller at an agreed upon
price (including principal and interest) on an agreed upon date within a number
of days from the date of purchase. The Custodian or its agent will hold the
security as collateral for the repurchase agreement. Collateral must be
maintained at a value of at least equal to 102% of the repurchase price. A Fund
bears a risk of loss in the event the other party defaults on its obligations
and the Fund is delayed or prevented from its rights to dispose of the
collateral securities or if the Fund realizes a loss on the sale of the
collateral securities. Repurchase agreements are considered loans under the
Investment Company Act of 1940, as amended.

RULE 144A SECURITIES -- Each Fund may purchase Rule 144A Securities. Rule 144A
Securities are restricted securities that have not been registered under the
Securities Act of 1933 but which may be traded between certain qualified
institutional investors, including investment companies. The absence of a
secondary market may affect the value of the Rule 144A Securities. The Board of
Trustees of the Trust has established guidelines and procedures to be utilized
to determine the liquidity of such securities.

SECURITIES ISSUED ON A FORWARD COMMITMENT BASIS OR WHEN-ISSUED
SECURITIES--Securities subject to settlement on a future date. The interest rate
realized on these securities is fixed as of the purchase date and no interest
accrues to a Fund before settlement. These securities are subject to market
fluctuation due to changes, real or anticipated, in market interest rates and
the public's perception of the creditworthiness of the issuer, and will have the
effect of leveraging the Fund's assets. The Fund will establish one or more
segregated accounts with the Custodian, and the Fund will maintain liquid assets
in such securities in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities.

SECURITIES LENDING--In order to generate income, each Fund may lend the
securities in which it is invested, in order to generate additional income,
pursuant to agreements requiring that the loan be continuously secured by cash,
securities of the U.S. Government or its agencies or any combination of cash and
such securities as collateral equal to 100% of the market value at all

<PAGE> 19

times of the securities lent. A Fund will continue to receive interest on the
securities lent while simultaneously earning interest on the investment of cash
collateral in U.S. Government securities. Collateral is marked to market daily
to provide a level of collateral at least equal to the value of the securities
lent. There may be risks of delay in receiving additional collateral or risks of
delay in recovery of the securities or even loss of rights in the collateral
should the borrower of the securities fail financially.

TIME DEPOSIT--A non-negotiable receipt issued by a U.S. or foreign bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time deposits with a withdrawal penalty are
considered to be illiquid securities.

U.S. GOVERNMENT AGENCY SECURITIES-- Certain Federal agencies have been
established as instrumentalities of the U.S. Government to supervise and finance
certain types of activities. Issues of these agencies, while not direct
obligations of the U.S. Government, are either backed by the full faith and
credit of the United States (e.g., GNMA) or supported by the issuing agencies'
right to borrow from the Treasury. The issues of other agencies are supported
only by the credit of the instrumentality (e.g., FNMA).

U.S. TREASURY OBLIGATIONS--Bills, notes, and bonds issued by the U.S. Treasury
and separately traded interest and principal component parts of such obligations
that are transferable through the Federal book-entry system known as Separately
Traded Registered Interest and Principal Securities ("STRIPS").

RECEIPTS--Interests in separately traded interest and principal component parts
of U.S. Treasury obligations that are issued by banks and brokerage firms and
are created by depositing Treasury notes and Treasury bonds into a special
account at a custodian bank. The custodian holds the interest and principal
payments for the benefit of the registered owners of the certificates of
receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts includes
"Treasury Receipts" ("TR's") "Treasury Investment Growth Receipts" ("TIGR's")
and "Certificates of Accrual on Treasury Securities" ("CATS").

STRIPS, TR'S, TIGR'S and CATS are sold as zero coupon securities which means
that they are sold at a substantial discount and redeemed at face value at their
maturity date without interim cash payments of interest or principal. This
discount is accreted over the life of the security, and such accretion will
constitute the income earned on the security for both accounting and tax
purposes. Because of these features, such securities may be subject to greater
interest rate volatility than interest paying securities. See also "Taxes."

VARIABLE AND FLOATING RATE INSTRUMENTS--Certain of the obligations purchased by
a Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. The interest rates on these securities may be reset daily,
weekly, quarterly or some other reset period, and may have a floor or ceiling on
interest rate changes. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates. A demand
instrument with a demand notice period exceeding seven days may be considered
illiquid if there is no secondary market for such security.

YANKEE BONDS--Dollar-denominated securities issued by foreign-domiciled issuers
that obligates the issuer to pay the bondholder a specified sum of money,
usually semiannually, and to repay the principal amount of the loan at maturity.
Most Yankee bond issues enjoy relatively high credit ratings. Sovereign bonds
are bonds issued by the governments of foreign countries. Supranational bonds
are those issued by supranational entities, such as the World Bank and the
European Investment Bank. Canadian bonds are bonds issued by Canadian provinces.

SECURITIES OF FOREIGN ISSUERS--Each Fund may purchase U.S. dollar denominated
securities of

<PAGE> 20

foreign issuers. There may be certain risks connected with investing in foreign
securities. These include risks of adverse political and economic developments
(including possible governmental seizure or nationalization of assets), the
possible imposition of exchange controls or other governmental restrictions,
including less uniformity in accounting and reporting requirements, the
possibility that there will be less information on such securities and their
issuers available to the public, the difficulty of obtaining or enforcing court
judgments abroad, restrictions on foreign investments in other jurisdictions,
difficulties in effecting repatriation of capital invested abroad, and
difficulties in transaction settlements and the effect of delay on shareholder
equity. Foreign securities may be subject to foreign taxes, which reduce yield,
and may be less marketable than comparable U.S. securities. A Fund may be
affected favorably or unfavorably by changes in the exchange rates or exchange
control regulations between foreign currencies and the U.S. dollar. Changes in
foreign currency exchange rates may also affect the value of dividends and
interest earned, gains and losses realized on the sale of securities and net
investment income and gains, if any, to distributed to shareholders by a Fund.

<PAGE> 21

TABLE OF CONTENTS
- --------------------------------------------------------

<TABLE>
<S> <C>
Summary.......................................... 2
Shareholder Transaction Expenses................. 3
The Trust........................................ 5
Investment Objectives............................ 5
Investment Policies.............................. 5
Risk Factors..................................... 7
Investment Limitations........................... 7
Fundamental Policies............................. 8
The Advisor...................................... 8
The SubAdvisor................................... 8
The Administrator................................ 9
The Shareholder Servicing Agent.................. 9
The Distributor.................................. 9
Purchase and Redemption of Shares................ 10
Purchases by Exchange............................ 12
Performance...................................... 12
Taxes............................................ 13
General Information.............................. 14
Description of Permitted Investments............. 15
</TABLE>

<PAGE> 22

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 23

INVESTMENT ADVISOR:

UNION CAPITAL ADVISORS(R)
A DIVISION OF UNION BANK

SUB ADVISOR:

THE BANK OF TOKYO TRUST COMPANY
GOVERNMENT SECURITIES FUND

DISTRIBUTOR:

SEI FINANCIAL SERVICES COMPANY

FIXED INCOME
FUNDS

I N V E S T M E N T C L A S S

INTERMEDIATE BOND FUND

GOVERNMENT SECURITIES FUND

THESE SECURITIES
ARE NOT OBLIGATIONS
OR DEPOSITS OF
UNION BANK AND
ARE NOT INSURED
BY THE FDIC.

[LOGO]

A FAMILY OF MUTUAL FUNDS

84864-B (REV. 6/95)

<PAGE> 24
STEPSTONE FUNDS
CALIFORNIA TAX FREE BOND FUND

SUPPLEMENT DATED JANUARY 4, 1996 TO
INVESTMENT CLASS PROSPECTUS
DATED JUNE 1, 1995

THIS SUPPLEMENT PROVIDES NEW AND ADDITIONAL INFORMATION BEYOND THAT CONTAINED
IN THE PROSPECTUS AND SHOULD BE RETAINED AND READ IN CONJUNCTION WITH SUCH
PROSPECTUS.

Effective as of February 15, 1996, the sales charge normally imposed on
purchases of the California Tax Free Bond Fund's Investment Class Shares in the
amount of $1,000,000 or more is waived. Such purchases shall be subject to a
1.00% contingent deferred sales charge payable to the Distributor, however, if
such shares are redeemed prior to one year from the date of purchase.
Therefore, the sales charge table in the section entitled "PURCHASE AND
REDEMPTION OF SHARES" found on page 9 of the Prospectus is replaced with the
following:

<TABLE>
<CAPTION>
SALES
CHARGE AS
SALES APPROPRIATE COMMISSION
CHARGE PERCENTAGE AS
AS A PERCENTAGE OF NET PERCENTAGE
AMOUNT OF PURCHASE OF OFFERING PRICE AMOUNT INVESTED OF OFFERING PRICE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 0-99,999....... 3.00% 3.09% 2.70%

$ 100,000-$249,999..... 2.50% 2.56% 2.25%

$ 250,000-$499,999..... 2.00% 2.04% 1.80%

$ 500,000-$999,999..... 1.50% 1.52% 1.35%

$1,000,000-and Over..... 0.00%* 0.00% 0.00%
</TABLE>

* A contingent deferred sales charge will be charge if such Investment Class
shares are redeemed prior to one year from date of purchase.

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE

<PAGE> 25

STEPSTONE FUNDS

A Family of Mutual Funds

STEPSTONE FUNDS (the "Trust") is a mutual fund that offers to provide a
convenient means of investing in professionally managed portfolios of
securities. This Prospectus relates to the Trust's:

CALIFORNIA TAX FREE BOND FUND

INVESTMENT CLASS

The Trust's Investment Class Shares are offered to individual and institutional
investors, including accounts for which UNION BANK, its affiliates and
correspondents act in an agency or custodial capacity.

This Prospectus sets forth concisely the information about the Trust and the
Fund that a prospective investor should know before investing. Investors are
advised to read this Prospectus and retain it for future reference. A Statement
of Additional Information dated the same date as this Prospectus, has been filed
with the Securities and Exchange Commission and is available without charge
through the Distributor, SEI Financial Services Company, 680 East Swedesford
Road, Wayne, PA 19087-1658 or by calling 1-(800) 862-6243. The Statement of
Additional Information is incorporated into this Prospectus by reference.

THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, INCLUDING UNION BANK, OR ANY OF ITS AFFILIATES OR CORRESPONDENTS.
THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISKS INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.

JUNE 1, 1995

INVESTMENT CLASS
<PAGE> 26

SUMMARY

STEPSTONE FUNDS (the "Trust") is a diversified open-end investment company
providing a convenient way to invest in professionally managed portfolios of
securities. The following provides basic information about the California Tax
Free Bond Fund, Investment Class (the "Fund"). This summary is qualified in its
entirety by reference to the more detailed information provided elsewhere in
this Prospectus and in the Statement of Additional Information.

WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to provide high current
income that is exempt from federal and State of California income taxes. See
"Investment Objective."

WHAT ARE THE FUND'S PERMITTED INVESTMENTS? The Fund invests primarily in
investment grade or better bonds and notes issued by the State of California,
its agencies, instrumentalities and political subdivisions, the income on which
is exempt from federal regular and State of California personal income taxes
("California Municipal Securities"). See "Investment Policies."

WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUND? The investment
policies of the Fund entail certain risks and considerations of which an
investor should be aware. Shares of the Fund will fluctuate in value with the
value of the Fund's underlying portfolio securities. Values of fixed income
securities in which the Fund invests tend to vary inversely with interest rates
and may be affected by other market and economic factors as well. See "Risk
Factors."

ARE MY INVESTMENTS INSURED? Any guarantee by the U.S. Government, its agencies,
or any instrumentalities of the securities in which any Fund invests guarantees
only the payment of principal and interest on the guaranteed security and does
not guarantee the yield or value of the security or yield or value of shares of
that Fund. The Trust's shares are not federally insured by the FDIC or any other
government agency.

WHO IS THE ADVISOR? Union Capital Advisors, a division of Union Bank, serves as
the Advisor of the Fund. See "The Advisor."

WHO IS THE ADMINISTRATOR? SEI Financial Management serves as the Administrator
of the Trust. See "The Administrator."

WHO IS THE DISTRIBUTOR? SEI Financial Services Company acts as distributor of
the Trust's shares. See "The Distributor."

HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions may be made
through the Distributor on days on which both the New York Stock Exchange and
the Federal Reserve wire system are open for business ("Business Days"). The
minimum initial investment is $2,000 ($1,000 for IRAs). A purchase order will be
effective if the Distributor receives an order prior to 1:00 P.M. Pacific time.
Payment of the purchase price is due no later than five business days after a
purchase order is executed. Purchase orders for shares will be executed at a per
share price equal to the asset value next determined after the purchase order is
effective plus any applicable sales charge. Redemption orders must be placed
prior to 1:00 P.M. Pacific time on any Business Day for the order to be accepted
that day. See "Purchase and Redemption of Shares."

HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gain) of the Fund is distributed in the form of monthly
dividends to Shareholders of record. Any capital gain is distributed at least
annually. Distributions are paid in additional shares unless the Shareholder
elects to take the payment in cash. See "Dividends."
<PAGE> 27

SHAREHOLDER TRANSACTION EXPENSES INVESTMENT CLASS
(As a percentage of offering price)

CALIFORNIA TAX FREE
BOND FUND
- -------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases.......................................... 3.00%

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
- -------------------------------------------------------------------------------------------------------
Advisory Fee (After Fee Waivers)(1)................................................ .00%
12b-1 Fees (After Fee Waivers)(2).................................................. .00%
Other Expenses..................................................................... .22%
- -------------------------------------------------------------------------------------------------------
Total Operating Expenses (After Fee Waivers)(3).................................... .22%
=======================================================================================================
</TABLE>

(1) The Advisor has agreed to waive its fee to the extent necessary to limit
Total Operating Expenses. Absent such waiver, the advisory fee would have
been .50%. The Advisor may terminate its waiver at any time in its sole
discretion.

(2) The Investment Class Plan provides that the Investment Class shares will
bear the costs of distribution expenses and, in addition, the Trust may pay
the Distributor a fee of up to .40% of the Investment Class shares' average
daily net assets, of which a maximum of .25% may be used to compensate
broker/dealers and service providers. See "The Distributor" for further
information. The Distributor has agreed to waive any fees otherwise payable
pursuant to the Plan, and will bear the costs of other distribution-related
activities. The Distributor reserves the right to terminate its waiver at
any time in its sole discretion.

(3) "Total Operating Expenses" have been restated to reflect current expenses
and fee waivers. Absent fee waivers, "Total Operating Expenses" would have
been 1.12%.

EXAMPLE:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000 investment
assuming (1) imposition of maximum sales charge; (2) 5%
annual return and (3) redemption at the end of each time
period........................................................... $32 $37 $42 $57
==========================================================================================================
</TABLE>

THE EXAMPLE IS BASED UPON THE TOTAL OPERATING EXPENSES OF THE FUND AND SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of this table is to assist
the investor in understanding the various costs and expenses that may be
directly or indirectly borne by investors in the Fund. The information set forth
in the foregoing table and example relates only to Investment Class shares. The
Trust also offers Institutional Class shares of the Fund which are subject to
the same expenses, except there are no sales charges or distribution costs.

Additional information may be found under "The Administrator" and "The Advisor."

Long-term Shareholders may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the Rules of the National Association of
Securities Dealers ("NASD").
<PAGE> 28
4

FINANCIAL HIGHLIGHTS

The following information has been audited by Arthur Andersen LLP, the Trust's
independent accountants, as indicated in their report dated March 15, 1995 on
the Trust's financial statements as of January 31, 1995 included in the Trust's
Statement of Additional Information under "Financial Information." This table
should be read in conjunction with the Trust's financial statements and notes
thereto. Additional Information is set forth in the 1995 Annual Report to
Shareholders and is available without charge by calling 1-(800) 862-6243.

FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR

<TABLE>
<CAPTION>
INVESTMENT ACTIVITIES
NET -------------------------- DISTRIBUTIONS NET NET
ASSET NET REALIZED ------------------- ASSET ASSETS, RATIO
VALUE, NET AND UNREALIZED NET VALUE, END OF EXPENSES
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS OF PERIOD RETURN (000) NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------
CALIFORNIA TAX FREE FUND
- --------------------------
INVESTMENT CLASS (**)
FOR THE YEARS ENDED
JANUARY 31,:
1995 10.03 0.439 (1.077) (0.452) -- 8.94 (6.33)% 4,882 0.50%
1994(1) 10.00 0.115 0.020 (0.105) -- 10.03 4.67 %* 2,830 0.50%*

<CAPTION>
RATIO OF RATIO OF
OF EXPENSES RATIO OF INCOME TO
TO AVERAGE NET INVESTMENT AVERAGE
NET ASSETS INCOME NET ASSETS PORTFOLIO
EXCLUDING TO AVERAGE EXCLUDING TURNOVER
FEE WAIVERS NET ASSETS FEE WAIVERS RATE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------
CALIFORNIA TAX FREE FUND
- ------------------------
INVESTMENT CLASS (**)
FOR THE YEARS ENDED
JANUARY 31,:
1995 1.12% 4.92% 4.30% 22%
1994(1) 1.13%* 4.26%* 3.63%* 19%

* Annualized.
** Total return does not reflect the sales charge.
(1) Commenced operations on October 15, 1993.
</TABLE>

<PAGE> 29

THE TRUST

STEPSTONE FUNDS (formerly Union Investors Funds) (the "Trust") is a diversified
open-end management investment company that offers units of beneficial interest
("shares") in fourteen separate investment funds. Shareholders may purchase
shares in a fund through two separate classes of shares (Institutional Class and
Investment Class) which provide for variations in sales charges, distribution
costs, voting rights and dividends. Except for these differences between
Institutional Class and Investment Class shares, each share of each fund
represents an equal proportionate interest in that fund. This Prospectus relates
to the Investment Class shares of the Trust's California Tax Free Bond Fund (the
"Fund"). Information regarding the Trust's other funds is contained in separate
prospectuses that may be obtained from the Trust's Distributor, SEI Financial
Services Company, 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658.

INVESTMENT OBJECTIVE

The California Tax Free Bond Fund seeks to provide high current income that is
exempt from federal and State of California income taxes.

There is no assurance that the Fund's investment objective will be met.

INVESTMENT POLICIES

Under normal market conditions, the Fund will invest primarily in bonds and
notes issued by the State of California, its agencies, instrumentalities, and
political sub-divisions, the income on which is exempt from federal regular and
State of California personal income taxes ("California Municipal Securities").
The Fund may also invest in bonds and notes of other states, territories, and
possessions of the U.S. and their agencies, authorities, instrumentalities and
political sub-divisions which are free of Federal income taxes and shares of
other investment companies, specifically money market funds, which have similar
objectives. Under normal market conditions, at least 80% of the Fund's assets
will be invested in bonds and notes rated AAA, AA, A or BBB by Standard & Poor's
Corporation ("S&P"), Aaa, Aa, A or Baa by Moody's Investors Service ("Moody's"),
or AAA, AA, A or BBB by Fitch Investors Service ("Fitch") and which pay interest
that is not treated as a preference item for purposes of the federal alternative
maximum tax. The Fund may purchase unrated securities that are of comparable
quality at the time of purchase as determined by the Advisor under quality
standards set by the Board of Trustees. In the event that a security owned by
the Fund is downgraded below the stated ratings categories, the Advisor will
review and take appropriate action with regard to the security. The Fund may
invest in restricted securities which have not been registered under the
Securities Act of 1933 (Rule 144A Securities). The Fund will restrict its
investment in illiquid securities to 15% of its net assets. Under California
law, a mutual fund must have at least 50% of its total assets invested in
California Municipal Securities at the end of each quarter of its taxable year
in order to be eligible to pay California residents dividends that are wholly or
partially exempt from California personal income taxes. Accordingly, the Fund
intends to maintain at least 65% of its assets in California Municipal
Securities and may invest up to 100% of its assets in such securities. The Fund
has no restrictions on the maturity of municipal securities in which it may
invest. Accordingly, the Fund seeks to invest in municipal securities of such
maturities which, in the judgment of the investment manager, will provide a high
level of current income consistent with prudent investment, with consideration
given to market conditions. The Fund may purchase securities on a forward
commitment or a when-issued basis where such purchases are for investment and
not for leveraging purposes; however, the Fund may sell these securities before
the settlement date if it is deemed advisable. No additional forward commitments
will be made if more than 20% of a Fund's net assets would be so committed.

CALIFORNIA MUNICIPAL SECURITIES

The two principal classifications of California Municipal Securities are
"general obligation" and
<PAGE> 30

"revenue" bonds. General obligation bonds are secured by the issuer's pledge of
its full faith, credit, and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. Private activity bonds
(formerly known as industrial revenue bonds) are generally revenue bonds.

Certain California Municipal Securities are municipal lease revenue obligations
(or certificates of participation), which typically provide that the
municipality has no obligation to make lease or installment payments in future
years unless money is appropriated for such purpose. While the risk of
non-appropriation is inherent to COP financing, this risk is mitigated by the
Fund's policy to invest in certificates of participation that are rated in one
of the four highest rating categories used by Moody's, S&P, or Fitch.

California Municipal Securities also include so-called Mello-Roos bonds, which
are usually unrated instruments issued to finance the building of roads and
other public works and projects that are primarily secured by real estate taxes
levied on property located in the local community. Most Mello-Roos bonds do not
seek agency ratings because the issues are too small, and consequently in most
cases the purchase of a Mello-Roos bond is based upon the Advisor's
determination that it is suitable for the Fund.

The Fund may also purchase, subject to a limit of 15% of its assets, California
Municipal Securities that are variable rate demand notes (or VRDNs).

For temporary defensive purposes during periods when the Advisor determines that
market conditions warrant, the Fund may invest up to 25% of its assets in
taxable money market instruments consisting of securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, receipts including
TR's, TIGR's and CATS, money market funds, repurchase agreements, and commercial
paper rated at least A-1 by S&P, or P-1 by Moody's, or Fitch-1 by Fitch. The
Fund also may hold a portion of its assets in cash. The Fund will not be
pursuing its investment objective to the extent that a substantial portion of
its assets is invested in money market securities, and the Fund may pay taxable
dividends to shareholders as a result.

For further information about the permitted investments see "Description of
Permitted Investments."

RISK FACTORS

The ability of the State of California and its political sub-divisions to raise
money through property taxes and to increase spending has been the subject of
considerable debate and various constitutional initiatives and other
limitations. This process, and associated legal challenges, remains on-going. It
is not possible to predict the ultimate effect of these constitutional
initiatives, nor can there be any assurance that additional initiatives will not
be introduced in the coming years.

The market value of the Fund's fixed income investments will change in response
to interest rate changes and other factors. During periods of falling interest
rates, the values of outstanding fixed income securities generally rise.
Conversely, during periods of rising interest rates, the values of such
securities generally decline. Changes by recognized rating agencies in the
rating of any fixed income security and in the ability of an issuer to make
payments of interest and principal also affect the value of these investments.
Changes in the value of fund securities will not affect cash income derived from
these securities, but will affect the Fund's net asset value.

<PAGE> 31

INVESTMENT LIMITATIONS

The Fund may not:

1. Purchase securities of any issuer (except securities issued or guaranteed by
the United States or its agencies and instrumentalities and repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of the Fund would be invested in the securities of such issuer provided,
however, that the Fund may invest up to 25% of its total assets without regard
to this restriction as permitted by applicable law.

2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in the obligations issued or guaranteed
by the U.S. Government or its agencies and instrumentalities and repurchase
agreements involving such securities, and provided further, that utilities as a
group will not be considered to be one industry, and wholly-owned subsidiaries
organized to finance the operations of their parent companies will be considered
to be in the same industries as their parent companies.

3. Make loans, except that the Fund may (a) purchase or hold debt instruments in
accordance with its investment objective and policies; and (b) enter into
repurchase agreements.

The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.

FUNDAMENTAL POLICIES

The investment objective and the above stated investment limitations are
fundamental policies of the Fund. Fundamental policies cannot be changed with
respect to the Fund without the consent of a majority of the Fund's outstanding
shares. The term "majority of the outstanding shares" means the vote of (i) 67%
or more of the Fund's shares present at a meeting, if the holders of more than
50% of the outstanding shares of the Fund are present or represented by proxy,
or (ii) more than 50% of the Fund's outstanding shares, whichever is less.

THE ADVISOR

The Trust and Union Capital Advisors (the "Advisor"), a division of Union Bank,
have entered into an advisory agreement (the "Advisory Agreement"). Under the
Advisory Agreement, the Advisor makes the investment decisions for the assets of
the Fund and continuously reviews, supervises and administers the Fund's
investment program. The Advisor discharges its responsibilities subject to the
supervision of, and policies established by, the Trustees of the Trust. The
Trust's shares are not sponsored, endorsed or guaranteed by, and do not
constitute obligations or deposits of, the Advisor or Union Bank and are not
guaranteed by the FDIC or any other governmental agency.

Under the Advisory Agreement, the Advisor is entitled to a fee, calculated daily
and paid monthly, at an annual rate of .50% of the average daily net assets of
the Fund. The Advisor may from time to time waive all or a portion of its fee in
order to limit the operating expenses of the Fund. Any such waiver is voluntary
and may be terminated at any time in the Advisor's sole discretion.

For the fiscal year ended January 31, 1995, the Fund paid the Advisor an
advisory fee of .27% of its average daily net assets.

Union Capital Advisors, 445 S. Figueroa Street, Los Angeles, California 90071,
operates as a separate division of Union Bank. In 1988, the former Union Bank
was acquired by California First Bank, and the resulting bank changed its name
to Union Bank. Each of the former banks or its predecessor bank had been in
banking since the early 1900's and each historically has had significant
investment functions within their Trust and Investment Divisions. Union Bank is
a subsidiary of The Bank of Tokyo, Ltd. Tokyo.

<PAGE> 32

Robert Bigelow has served as portfolio manager of the Fund since October, 1994.
Prior to joining the Advisor in June, 1994, Mr. Bigelow served as a portfolio
manager at City National Bank from January, 1986 to June, 1994.

At January 31, 1995, Union Capital Advisors managed $4.7 billion in individual
portfolios and collective funds. The Advisor's clients range from pension funds,
national labor union plans and foundations to personal investments and trust
portfolios.

THE ADMINISTRATOR

SEI Financial Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), and the Trust are parties to an
administration agreement dated January 30, 1991 (the "Administration
Agreement"). Under the terms of the Administration Agreement, the Administrator
provides the Trust with certain management services including all necessary
office space, equipment, personnel, and facilities.

The Administrator is entitled to a fee, calculated daily and paid monthly, at an
annual rate of .15% of Trust assets up to $1 billion, .12% of assets between $1
billion and $2 billion and .10% of assets over $2 billion. The Administrator may
waive its fee or reimburse various expenses to the extent necessary to limit the
total operating expenses of the Fund's Investment Class shares. Any such waiver
is voluntary and may be terminated at any time in the Administrator's sole
discretion.

THE SHAREHOLDER SERVICING AGENT

SEI Financial Management Corporation serves as the transfer agent, dividend
disbursing agent, and shareholder servicing agent for the Trust. Compensation
for these services is paid under the Administration Agreement.

THE DISTRIBUTOR

The Investment Class has a distribution plan ("Investment Class Plan"). The
Distribution Agreement and the Investment Class Plan adopted by the Investment
Class Shareholders provide that the Investment Class shares of the Fund may bear
the following distribution expenses: (1) the cost of prospectuses, reports to
shareholders, sales literature and other materials for potential investors; (2)
advertising; and (3) expenses incurred in connection with the promotion and sale
of the Trust's shares including the Distributor's expenses for travel,
communication, and compensation and benefits for sales personnel. In addition,
the Trust pays the Distributor a fee of up to .40% of the Fund's Investment
Class shares average daily net assets, of which a maximum of .25% may be used to
compensate broker/dealers and service providers which provide administrative
and/or distribution services to Investment Class Shareholders or their customers
who beneficially own Investment Class shares. The Distributor has agreed to
waive any fees payable pursuant to the Plan, and the Distributor will bear the
costs of other distribution-related activities. The Distributor reserves the
right to terminate its waiver at any time at its sole discretion.

PURCHASE AND REDEMPTION OF SHARES

Purchases and redemptions of shares of the Fund may be made on days on which
both the New York Stock Exchange and the Federal Reserve wire
<PAGE> 33

system are open for business. ("Business Days"). The minimum initial investment
is $2,000 ($1,000 for IRAs); however, the minimum investment may be waived in
the Distributor's discretion. All subsequent purchases must be at least $1,000
($500 for IRAs).

Purchase orders for shares will be executed at a per share price equal to the
asset value next determined after the receipt of the purchase order by the
Distributor, plus any applicable sales charge. Payment of the purchase price is
due no later than five business days after a purchase order is executed. The
purchase price of shares of the Fund is the net asset value next determined
after a purchase order is received and accepted by the Trust plus a sales
charge. The net asset value per share of the Fund is determined by dividing the
total market value of the Fund's investments and other assets, less any
liabilities, by the total outstanding shares of the Fund. Net asset value per
share is determined daily as of 1:00 P.M., Pacific time, on any Business Day.
Purchases will be made in full and fractional shares of the Trust calculated to
three decimal places. The Trust reserves the right to reject a purchase order
when the Distributor determines that it is not in the best interest of the Trust
and/or its Shareholders to accept such order.

Shares of the Fund are offered only to residents of states in which the shares
are eligible for purchase.

The following table shows the regular sales charge on Investment Class shares to
a "single purchaser" (defined below), together with the dealer discount paid to
dealers and the agency commission paid to brokers (collectively the
"commission"):

<TABLE>
<CAPTION>
SALES
CHARGE SALES COMMISSION
AS A CHARGE AS AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF OF NET OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- --------------------------------------------------------------
<S> <C> <C> <C>
0-$ 99,999... 3.00% 3.09% 2.70%
$ 100,000-$249,999... 2.50% 2.56% 2.25%
$ 250,000-$499,999... 2.00% 2.04% 1.80%
$ 500,000-$999,999... 1.50% 1.52% 1.35%
$1,000,000-and over... 0.60% 0.60% 0.54%
</TABLE>

In calculating the sales charge rates applicable to current purchases of a
Fund's shares, a "single purchaser" is entitled to cumulate current purchases
with net purchases of previously purchased shares of the Fund and other funds of
Union Investors Funds (the "Eligible Funds") which are sold subject to a
comparable sales charge.

The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Fund for their own account or for trust or
custodial accounts for their minor children, or (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401, 403(b) or 457 of the Internal Revenue Code of 1986,
as amended (the "Code"), including related plans of the same employer. To be
entitled to a reduced sales charge based upon shares already owned, the investor
must ask the Distributor for such entitlement at the time of purchase and
provide the account number(s) of the investor, the investor and spouse, and
their minor children, and give the
<PAGE> 34

age of such children. The Fund may amend or terminate this right of accumulation
at any time as to subsequent purchases.

LETTER OF INTENT. By initially investing at least $2,000 and submitting a
Letter of Intent to the Distributor, a "single purchaser" may purchase shares of
the Fund and the other Eligible Funds during a 13-month period at the reduced
sales charge rates applying to the aggregate amount of the intended purchases
stated in the Letter. The Letter may apply to purchases made up to 90 days
before the date of the Letter.

OTHER CIRCUMSTANCES. No sales charge is imposed on the Investment Class shares
of the Fund: (i) issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Trust is a party; (ii) sold to
dealers or brokers that have a sales agreement with the Distributor, for their
own account or for retirement plans for their employees or sold to employees
(and their spouses) of dealers or brokers that certify to the Distributor at the
time of purchase that such purchase is for their own account (or for the benefit
of such employees' minor children); (iii) in aggregate purchases of $1 million
or more by tax-exempt organizations enumerated in Section 501(c) of the Internal
Revenue Code, or employee benefit plans created under Sections 401, 403(b) or
457 of the Code; (iv) sold to employees and families of the Advisor and its
affiliates; (v) all fiduciary accounts of the Advisor and its affiliates; or
(vi) purchased with proceeds from the recent redemption of shares of a mutual
fund with similar investment objectives and policies for which a sales load was
paid.

An investor relying upon any of the categories of waivers of the sales charge
must qualify for such waiver in advance of the purchase with the Distributor or
the financial institution or intermediary through which shares are purchased by
the investor.

The waiver of the sales charge under circumstance (vi) above applies only if the
purchase is made within 60 days of the redemption and if conditions imposed by
the Distributor are met. This waiver policy with respect to the purchase of
shares through the use of proceeds from a recent redemption as described in
circumstance (vi) above will not be continued indefinitely and may be
discontinued at any time without notice. Investors should contact the
Distributor to determine whether they are eligible to purchase shares without
paying a sales charge through the use of proceeds from a recent redemption as
described above and to confirm continued availability of this waiver policy
prior to initiating the procedures described in circumstance (vi).

Shareholders who desire to redeem shares of the Trust must place their
redemption orders prior to 1:00 P.M., Pacific time, on any Business Day for the
order to be accepted on that Business Day. The redemption price is the net asset
value of the Fund next determined after receipt by the Distributor of the
redemption order. Payment on redemption will be made as promptly as possible
and, in any event, within seven calendar days after the redemption order is
received.

Neither the Trust's transfer agent nor the Trust will be responsible for any
loss, liability, cost or expense for acting upon wire instructions or upon
telephone instructions that it reasonably believes are genuine. The Trust and
its transfer agent will each employ reasonable procedures to confirm that
telephone instructions are genuine, and may be liable for losses resulting from
unauthorized or fraudulent telephone instructions if it does not employ these
procedures. Such procedures may include taping of telephone conversations. If
market conditions are extraordinarily active or other extraordinary
circumstances exist, and you experience difficulties placing redemption orders
by telephone, you may wish to consider placing your order by other means.

PURCHASES BY EXCHANGE

number of shares (including fractional shares) which have a value equal to the
total net asset value of shares tendered divided by the net asset value of
Investment Class shares of the Fund next determined after such order is
received. Shares issued pursuant to this offer will not be subject to the sales
charge described above or any other charge. The Fund may modify or terminate
this exchange offer at any time.

PERFORMANCE

From time to time, the Fund may advertise yield and total return. These figures
will be based on historical earnings and are not intended to indicate future
performance. The yield of the Fund refers to the annualized income generated by
an investment in the Fund over a specified 30-day period. The yield is
calculated by assuming that the same amount of income generated by the
investment during that period is generated in each 30-day period over one year
and is shown as a percentage of the investment.

The total return of the Fund refers to the average compounded rate of return to
a hypothetical investment for designated time periods (including, but not
limited to, the period from which the Fund commenced operations through the
specified date), assuming that the entire investment is redeemed at the end of
each period and assuming the reinvestment of all dividend and capital gain
distributions. The total return of the Fund may also be quoted as a dollar
amount or on an aggregate basis, an actual basis, without inclusion of any sales
charge, or with a reduced sales charge in advertisements distributed to
investors entitled to a reduced sales charge.

The Fund may periodically compare its performance to the performance of: other
mutual funds tracked by mutual fund rating services (such as Lipper Analytical),
financial and business publications and periodicals; broad groups of comparable
mutual funds; unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs; or
other investment alternatives. The Fund may quote Morningstar, Inc., a service
that ranks mutual funds on the basis of risk-adjusted performance. The Fund may
quote Ibbotson Associates of Chicago, Illinois, which provides historical
returns of the capital markets in the U.S. The Fund may use long-term
performance of these capital markets to demonstrate general long-term risk
versus reward scenarios and could include the value of a hypothetical investment
in any of the capital markets. The Fund may also quote financial and business
publications and periodicals as they relate to fund management, investment
philosophy, and investment techniques.

The Fund may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.

TAXES

The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to provide a detailed
explanation of the federal, state, or local income tax treatment of the Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisors regarding specific questions as to federal, state and local income
taxes. Additional information concerning taxes is set forth in the Statement of
Additional Information.

<PAGE> 36

TAX STATUS OF THE FUND:

The Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other Funds. The Fund intends to qualify for the
special tax treatment afforded regulated investment companies under the Internal
Revenue Code of 1986, as amended, so that it will be relieved of federal income
tax on that part of its net investment income and net capital gain (the excess
of net long-term capital gain over net short-term capital loss) which is
distributed to Shareholders.

TAX STATUS OF DISTRIBUTIONS:

The Fund will distribute substantially all of its net investment income
(including net short-term capital gain) and net capital gain to Shareholders.
Dividends from the Fund's net investment income, to the extent derived from
California Municipal Securities, be exempt from federal regular and State of
California personal income taxes. Such dividends will not qualify for the
dividends-received deduction.

Distributions of net capital gain also do not qualify for the dividends-received
deduction and are taxable to shareholders as long-term capital gain, regardless
of how long a Shareholder has held Fund shares, and regardless of whether the
distributions are received in cash or in additional shares.

The Fund will make annual reports to Shareholders of the federal income tax
status of all distributions.

With respect to investments in STRIPS, TR's, TIGR's and CATS which are sold at
original issue discount and thus do not make periodic cash interest payments,
the Fund will be required to include as part of its current income the imputed
interest on such obligations even though the Fund has not received any interest
payments on such obligations during that period. Because the Fund distributes
all of its net investment income to shareholders, the Fund may have to sell Fund
securities to distribute such imputed income which may occur at a time when the
Advisor would not have chosen to sell such securities and which may result in a
taxable gain or loss.

Dividends declared by the Fund in October, November or December of any year and
payable to Shareholders of record on a date in that month will be deemed to have
been paid by the Fund and received by the Shareholders on the last day of that
month, if paid by the Fund any time during the following January.

The Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.

Income received on direct U.S. obligations is exempt from tax at the state level
when received directly by the Fund and may be exempt, depending on the state,
when received by a Shareholder as income dividends from the Fund provided
certain state-specific conditions are satisfied. The Fund will inform
Shareholders annually of the percentage of income and distributions derived from
direct U.S. Treasury obligations. Shareholders should consult their tax advisors
to determine whether any portion of the income dividends received from the Fund
is considered tax exempt in their particular state.

A sale, exchange, or redemption of Fund Shares is a taxable transaction to the
Shareholder.

SPECIAL CONSIDERATIONS FOR THE CALIFORNIA TAX-FREE BOND FUND

The California Tax-Free Bond Fund will distribute all of its net investment
income (including net short-term capital gain) to Shareholders. If, at the close
of each quarter of its taxable year, at least 50% of the value of the Fund's
assets consists of obligations the interest on which is excludable from gross
income, the Fund may pay "exempt-interest dividends" to its Shareholders. Those
dividends constitute the portion of the aggregate dividends as designated by the
Fund, equal to the excess of the excludable interest over certain amounts
disallowed as deductions. Exempt-interest dividends are excludable from a
Shareholder's gross income for federal income tax purposes, but

<PAGE> 37

may have certain collateral federal income tax consequences, as described in the
Statement of Additional Information.

Current federal tax law limits the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Fund to purchase sufficient amounts of tax-exempt securities to
satisfy the Code's requirements for the payment of "exempt-interest" dividends.

Any dividends attributable to the Fund's taxable income will be taxable to
Shareholders as ordinary income (whether received in cash or in additional
units) to the extent of the Fund's earnings and profits. None of the Fund's
distributions will qualify for the corporate dividends-received deduction.

Furthermore, entities or persons who are "substantial users" (or persons related
to "substantial users") of facilities financed by "private activity bonds" or
"industrial development bonds" should consult their tax advisors before
purchasing shares. (See the Statement of Additional Information).

CALIFORNIA TAXES:

The California Tax-Free Bond Fund is treated as a separate taxable entity for
California tax purposes and is therefore subject to California franchise or
corporate income tax on its net income. However, the Fund intends to qualify as
a regulated investment company under the Code, and if it does so qualify, it
will be entitled, for California tax purposes, to a deduction for dividends paid
to Shareholders. As a regulated investment company, the Fund will pay California
franchise or corporate income tax only on any undistributed income, net of
allocable expenses.

The Fund intends to qualify to pay dividends to Shareholders that are exempt
from California personal income tax ("California exempt-interest dividends").
The Fund will qualify to pay California exempt-interest dividends if (1) at the
close of each quarter of the Fund's taxable year, at least 50 percent of the
value of the Fund's total assets consists of obligations the interest on which
would be exempt from California personal income tax if the obligations were held
by an individual ("California Tax Exempt Obligations") and (2) the Fund
continues to qualify as a regulated investment company.

If the Fund qualifies to pay California exempt-interest dividends, dividends
distributed to Shareholders will be considered California exempt-interest
dividends (1) if they are designated as exempt-interest dividends by the Fund in
a written notice to Shareholders mailed within 60 days of the close of the
Fund's taxable year and (2) to the extent the interest received by the Fund
during the year on California Tax Exempt Obligations exceeds expenses of the
Fund that would be disallowed under California personal income tax law as
allocable to tax exempt interest if the Fund were an individual. If the
aggregate dividends so designated exceed the amount that may be treated as
California exempt-interest dividends, only that percentage of each dividend
distribution equal to the ratio of aggregate California exempt-interest
dividends to aggregate dividends so designated will be treated as a California
exempt-interest dividend. The Fund will notify Shareholders of the amount of
California exempt-interest dividends each year.

Corporations subject to California franchise tax that invest in the Fund may not
be entitled to exclude California exempt-interest dividends from income.

Dividend distributions that do not qualify for treatment as California
exempt-interest dividends (including those dividend distributions to
Shareholders taxable as long-term capital gains for federal income tax purposes)
will be taxable to Shareholders at ordinary income tax rates for California
personal income tax purposes to the extent of the Fund's earnings and profits.

Interest on indebtedness incurred or continued by a Shareholder in connection
with the purchase of shares of the Fund will not be deductible for California
personal income tax purposes if the

<PAGE> 38

Fund distributes California exempt-interest dividends.

The foregoing is a general, abbreviated summary of certain of the provisions of
the California Revenue and Taxation Code presently in effect as they directly
govern the taxation of Shareholders subject to California personal income tax.
These provisions are subject to change by legislative or administrative action,
and any such change may be retroactive with respect to Fund transactions.
Shareholders are advised to consult with their own tax advisors for more
detailed information concerning California tax matters.

GENERAL INFORMATION

THE TRUST

The Trust was organized as a Massachusetts business trust under a Declaration of
Trust dated October 16, 1990. The Declaration of Trust permits the Trust to
offer separate series of shares and different classes of each fund. In addition
to the Fund, the Trust consists of the following funds: Treasury Money Market
Fund, Money Market Fund, California Tax Free Money Market Fund, Growth Equity
Fund, Value Momentum Fund, Limited Maturity Government Fund, Balanced Fund,
Intermediate-Term Bond Fund, Blue Chip Growth Fund, Emerging Growth Fund,
Convertible Securities Fund, Government Securities Fund and International Equity
Fund. All consideration received by the Trust for shares of any fund and all
assets of such fund belong to that fund and would be subject to liabilities
related thereto. The Trust reserves the right to create and issue shares of
additional funds.

The Trust pays its expenses, including audit and legal expenses, expenses of
preparing and printing prospectuses, proxy solicitation material and reports to
Shareholders, costs of custodial services and registering the shares under
federal and state securities laws, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses. Please refer to "Financial Highlights" in this prospectus
for more information regarding the Trust's expenses.

TRUSTEES OF THE TRUST

VOTING RIGHTS

Each share held entitles the Shareholder of record to one vote. Each fund or
class will vote separately on matters relating solely to such fund or class. As
a Massachusetts business trust, the Trust is not required to hold annual
meetings but approval will be sought for certain changes in the operation of the
Trust and for the election of Trustees under certain circumstances. In addition,
a Trustee may be removed by the remaining Trustees or by Shareholders at a
special meeting called upon the written request of Shareholders owning at least
10% of the outstanding shares of the Trust. Shareholders will be provided with
Shareholder communication assistance in connection with such matters.

SHAREHOLDER INQUIRIES

Shareholder inquiries should be directed to the Administrator, SEI Financial
Management Corporation, 680 East Swedesford Road, Wayne, PA 19087-1658.

DIVIDENDS

Substantially all of the net investment income (exclusive of capital gains) of
the Fund is distributed in the form of monthly dividends to Shareholders of
record. Currently, capital gains of the Fund, if any, will be distributed at
least annually.

Shareholders automatically receive all income dividends and capital gain
distributions in additional shares at the net asset value next determined
<PAGE> 39

following the record date, unless the Shareholder has elected to take such
payment in cash. Shareholders may change their election by providing written
notice to the Administrator at least 15 days prior to the change.

The dividends payable on Investment Class shares will be less than dividends
payable on Institutional Class shares because of the distribution expenses
charged to Investment Class shares.

COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS

Morgan, Lewis & Bockius serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.

CUSTODIAN

CoreStates Bank, N.A. Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
PA 19101 (the "Custodian") acts as Custodian of the assets of the Fund. The
Custodian holds cash, securities and other assets of the Trust as required by
the Investment Company Act of 1940, as amended.

DESCRIPTION OF PERMITTED INVESTMENTS

The following is a description of the permitted investments for the Fund:

MUNICIPAL FORWARDS--Municipal Forwards are forward commitments for the purchase
of tax-exempt bonds with a specified coupon to be delivered by an issuer at a
future date, typically exceeding 45 days but normally less than one year after
the commitment date. Municipal forwards are normally used as a refunding
mechanism for bonds that may only be redeemed on a designated future date. As
with forward commitments and when-issued securities, municipal forwards are
subject to market fluctuations due to changes, real or anticipated, in market
interest rates between the commitment date and the settlement date and will have
the effect of leveraging the Fund's assets. Municipal forwards may be considered
to be illiquid investments. The Fund will maintain liquid, high quality
securities in a segregated account at least equal to the purchase price of the
municipal forward.

MUNICIPAL SECURITIES--Municipal Securities consist of (i) debt obligations
issued by or on behalf of public authorities to obtain funds to be used for
various public facilities, for refunding outstanding obligations, for general
operating expenses and for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial development bonds
issued by or on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated facilities.
Municipal notes include general obligation notes, tax anticipation notes,
revenue anticipation notes, bond anticipation notes, certificates of
indebtedness, demand notes and construction loan notes. Municipal bonds include
general obligation bonds, revenue or special obligation bonds, private activity
and industrial development bonds. General obligation bonds are backed by the
taxing power of the issuing

<PAGE> 40

municipality. Revenue bonds are backed by the revenues of a project or facility,
tolls from a toll bridge, for example. The payment of principal and interest on
private activity and industrial development bonds generally is dependent solely
on the ability of the facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed as security for such
payment.

PARTICIPATION INTERESTS--Participation interests are interests in Municipal
Securities from financial institutions such as commercial and investment banks,
savings and loan associations and insurance companies. These interests may take
the form of participations, beneficial interests in a trust, partnership
interests or any other form of indirect ownership that allows the Fund to treat
the income from the investment as exempt from federal income tax. The Fund
invests in these participation interests in order to obtain credit enhancement
or demand features that would not be available through direct ownership of the
underlying Municipal Securities.

RULE 144A SECURITIES--The Fund may purchase Rule 144A Securities. Rule 144A
Securities are restricted securities that have not been registered under the
Securities Act of 1933 but which may be traded between certain qualified
institutional investors, including investment companies. The absence of a
secondary market may affect the value of Rule 144A Securities. The Board of
Trustees of the Trust has established guidelines and procedures to be utilized
to determine the liquidity of such securities.

REPURCHASE AGREEMENTS--Agreements by which a person obtains a security and
simultaneously commits to return the security to the seller at an agreed upon
price (including principal and interest) on an agreed upon date within a number
of days from the date of purchase. The Custodian or its agent will hold the
security as collateral for the repurchase agreement. Collateral must be
maintained at a value at least equal to 102% of the repurchase price. The Fund
bears a risk of loss in the event the other party defaults on its obligations
and the Fund is delayed or prevented from its right to dispose of the collateral
securities or if the Fund realizes a loss on the sale of the collateral
securities. Repurchase agreements are considered loans under the Investment
Company Act of 1940, as amended.

U.S. GOVERNMENT AGENCY SECURITIES-- Certain federal agencies have been
established as instrumentalities of the U.S. Government to supervise and finance
certain types of activities. Issues of these agencies, while not direct
obligations of the U.S. Government, are either backed by the full faith and
credit of the United States (e.g., GNMA) or supported by the issuing agencies'
right to borrow from the Treasury. The issues of other agencies are supported
only by the credit of the instrumentality (e.g., FNMA).

U.S. GOVERNMENT SUBSIDIARY CORPORATION SECURITIES--Securities of wholly-owned
corporations of the U.S. Government (within the Department of Housing and Urban
Development) which are secured by the full faith and credit of the U.S.
Government (e.g., GNMA).

U.S. TREASURY OBLIGATIONS--Bills, notes and bonds issued by the U.S. Treasury
and separately traded interest and principal component parts of such obligations
that are transferable through the Federal book-entry system known as Separately
Traded Registered Interest and Principal Securities ("STRIPS").

RECEIPTS--Interests in separately traded interest and principal component parts
of U.S. Treasury obligations that are issued by banks and brokerage firms and
are created by depositing Treasury notes and Treasury bonds into a special
account at a custodian bank. The custodian holds the interest and principal
payments for the benefit of the registered owners of the certificates of
receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
"Treasury Receipts" ("TR's"), "Treasury Investment Growth Receipts" ("TIGR's")
and "Certificates of Accrual on Treasury Securities" ("CATS").

<PAGE> 41

VARIABLE AND FLOATING RATE INSTRUMENTS--Certain obligations purchased by the
Fund may carry variable or floating rates of interest, may involve a conditional
or unconditional demand feature and may include variable amount master demand
notes. VRDNs pay a variable rate of interest derived from the application of a
formula, and provide the holder with the unconditional right to demand payment
in full of all unpaid principal and accrued interest on seven days' notice.
California Municipal Securities may also be acquired through the purchase of
municipal forwards. The interest rates on these securities may be reset daily,
weekly, quarterly or some other reset period and may have a floor or ceiling on
interest rate changes. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates. A demand
instrument with a demand notice exceeding seven days may be considered illiquid
if there is no secondary market for such security.

<PAGE> 42

TABLE OF CONTENTS
- -------------------------------------------------------

<TABLE>
<S> <C>
Summary.......................................... 2
Shareholder Transaction Expenses................. 3
Annual Operating Expenses........................ 3
Financial Highlights............................. 4
The Trust........................................ 5
Investment Objective............................. 5
Investment Policies.............................. 5
California Municipal Securities.................. 5
Risk Factors..................................... 6
Investment Limitations........................... 7
Fundamental Policies............................. 7
The Advisor...................................... 7
The Administrator................................ 8
The Shareholder Servicing Agent.................. 8
The Distributor.................................. 8
Purchase and Redemption of Shares................ 8
Purchases by Exchange............................ 10
Performance...................................... 11
Taxes............................................ 11
General Information.............................. 14
Description of Permitted Investments............. 15
</TABLE>

<PAGE> 43

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 44

INVESTMENT ADVISOR:

UNION CAPITAL ADVISORS(R)
A DIVISION OF UNION BANK

DISTRIBUTOR:

SEI FINANCIAL SERVICES COMPANY

CALIFORNIA TAX FREE
BOND FUND

I N V E S T M E N T C L A S S

THESE SECURITIES
ARE NOT OBLIGATIONS
OR DEPOSITS OF
UNION BANK AND
ARE NOT INSURED
BY THE FDIC.

[LOGO]

A FAMILY OF MUTUAL FUNDS

84866-B (REV. 6/95)

<PAGE> 45
STEPSTONE FUNDS

BALANCED FUND
VALUE MOMENTUM FUND
GROWTH EQUITY FUND
EMERGING GROWTH FUND

SUPPLEMENT DATED JANUARY 4, 1996 TO
INVESTMENT CLASS PROSPECTUS
DATED JUNE 1, 1995

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

Effective October 1, 1995 the Balanced Fund, Value Momentum Fund, and Growth
Equity Fund (the "Funds") will begin to pay .25% in 12b-1 fees as permitted
under the Investment Class Plan. Therefore the Annual Operating Expenses table
for these Funds is hereby replaced with the following:

<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of offering price)
- -------------------------------------------------------------------------------------------------------------
VALUE GROWTH
BALANCED MOMENTUM EQUITY
FUND FUND FUND
<S> <C> <C> <C>
Advisory Fees.................................................. .60% .60% .60%
12b-1 Fees (After Fee Waivers) (1)............................. .25% .25% .25%
Other Expenses................................................. .20% .20% .20%
- -------------------------------------------------------------------------------------------------------------
Total Operating Expenses (After Fee Waivers)(2)................ 1.05% 1.05% 1.05%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Absent fee waivers, 12b-1 Fees would be .40%.
(2) "Total Operating Expenses" for the Balanced Fund, Value Momentum Fund
and Growth Equity Fund have been restated to reflect current expenses
and the aforementioned fee waivers. Absent fee waivers, "Total
Operating Expenses" would be 1.20%, 1.20% and 1.20% for the Balanced
Fund, Value Momentum Fund and Growth Equity Fund.

<TABLE>
<CAPTION>
EXAMPLE:
- ------------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment
assuming (1) imposition of the
maximum sales charge; (2) 5%
return and (3) redemption at the
end of each time.

Balanced Fund........................................... $55 $77 $100 $167

Value Momentum Fund..................................... $55 $77 $100 $167

Growth Equity Fund...................................... $55 $77 $100 $167

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

<PAGE> 46
Effective July 14, 1995, Clyde N. Powers no longer serves as portfolio manager
of the Growth Equity Fund nor as co-portfolio manager of the Balanced Fund.
Therefore, the fifth paragraph of "The Advisor" section on page 10 of the
Prospectus is replaced with the following:

Richard Earnest, a Vice President and Chief Investment Officer of the
Advisor, has served as portfolio manager of the Value Momentum Fund since its
inception and has been with the Advisor and its predecessor since 1964. Carl
J. Colombo, a Vice President of the Advisor, has served as portfolio manager of
the Balanced Fund since its inception, as co-portfolio manager of the Growth
Equity Fund since May, 1995, and has been with the Advisor and its predecessor
since 1985. Effective July 14, 1995, Mr. Colombo will serve as portfolio
manager of the Growth Equity Fund.

Effective as of February 15, 1996, the sales charge normally imposed on
purchases of the Funds' Investment Class Shares in the amount of $1,000,000 or
more is waived. Such purchases shall be subject to a 1.00% contingent deferred
sales charge payable to the Distributor, however, if such shares are redeemed
prior to one year from the date of purchase. Therefore, the sales charge table
in the section entitled "PURCHASE AND REDEMPTION OF SHARES" found on page 12 of
the Prospectus is replaced with the following:

<TABLE>
<CAPTION>
SALES CHARGE AS A SALES CHARGE AS COMMISSION AS
PERCENTAGE OF OFFERING APPRORIATE PERCENTAGE PERCENTAGE OF OFFERING
AMOUNT OF PURCHASE PRICE OF NET AMOUNT INVESTED PRICE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 0- 49,999 4.50% 4.71% 4.05%

$ 50,000- 99,999 4.00% 4.17% 3.60%

$ 100,000-249,999 3.50% 3.63% 3.15%

$ 250,000-499,999 2.50% 2.56% 2.25%

$ 500,000-999,999 1.50% 1.52% 1.35%

$1,000,000 and over 0.00%* 0.00% 0.00%
</TABLE>

* A contingent deferred sales charge will be charged if such Investment Class
shares are redeemed prior to one year from date of purchase.

The first sentence of the section on page 13 entitled "PURCHASE AND REDEMPTION
OF SHARES-Other Circumstances" should be augmented to include the following:

(vii) sold to purchasers of Investment Class shares of the Growth Equity Fund
that are sponsors of other investment companies that are unit investment trusts
for deposit by such sponsors into such unit investment trusts, and to
purchasers of Investment Class shares of the Growth Equity Fund that are
holders of such unit investment trusts that invest distributions from such
investment trusts in Investment Class shares of the Growth Equity Fund.

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.

<PAGE> 47

STEPSTONE FUNDS

A Family of Mutual Funds

STEPSTONE FUNDS (the "Trust") is a mutual fund that offers a convenient means of
investing in one or more professionally managed portfolios of securities. This
Prospectus relates to the Trust's:

- -- BALANCED FUND
- -- VALUE MOMENTUM FUND
- -- GROWTH EQUITY FUND
- -- EMERGING GROWTH FUND

INVESTMENT CLASS

The Trust's Investment Class Shares are offered to individuals and institutional
investors, including accounts for which UNION BANK and THE BANK OF TOKYO TRUST
COMPANY, their affiliates and correspondents act in an agency or custodial
capacity.

This Prospectus sets forth concisely the information about the Trust and the
Fund that a prospective investor should know before investing. Investors are
advised to read this Prospectus and retain it for future reference. A Statement
of Additional Information dated the same date as this Prospectus has been filed
with the Securities and Exchange Commission and is available without charge
through the Distributor, SEI Financial Services Company, 680 East Swedesford
Road, Wayne, PA 19087-1658 or by calling 1-(800) 862-6243. The Statement of
Additional Information is incorporated into this Prospectus by reference.

JUNE 1, 1995

INVESTMENT CLASS
<PAGE> 48

SUMMARY

STEPSTONE FUNDS (the "Trust") is a diversified open-end investment company
providing a convenient way to invest in professionally managed funds of
securities. The following provides basic information about the Growth Equity,
Value Momentum, Balanced and Emerging Growth Funds, Investment Class (each a
"Fund"). This summary is qualified in its entirety by reference to the more
detailed information provided elsewhere in the Prospectus and in the Statement
of Additional Information.

WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES? THE BALANCED FUND seeks to provide
both capital appreciation and income. THE VALUE MOMENTUM FUND seeks long-term
capital growth with a secondary objective of income. THE GROWTH EQUITY FUND
seeks long-term capital growth. THE EMERGING GROWTH FUND seeks long-term growth
of capital by investing in a diversified portfolio of equity securities of small
capitalization, emerging growth companies. See "Investment Objectives."

WHAT ARE THE FUNDS' PERMITTED INVESTMENTS? Each of the Funds may invest,
consistent with its investment objectives, in equity securities including common
stocks and securities convertible into common stock. Each Fund, except the
Emerging Growth Fund, may also invest, consistent with its investment objective
and investment policies in debt securities. See "Investment Policies."

WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUNDS? The investment
policies of each Fund entail certain risks and considerations of which an
investor should be aware. Each of the Funds may purchase common stocks and other
equity securities that are volatile and may fluctuate in value more than other
types of investments. Values of fixed income securities and, correspondingly,
share prices of Funds invested in such securities, tend to vary inversely with
interest rates and may be affected by other market and economic factors as well.
In addition, the securities of emerging growth companies in which the Emerging
Growth Fund may invest may be less liquid, and subject to more abrupt or erratic
market movements than securities of larger, more established growth companies.

WHO IS THE ADVISOR? Union Capital Advisors, a division of Union Bank, serves as
the Advisor of the Trust. See "The Advisor."

WHO IS THE SUBADVISOR? The Bank of Tokyo Trust Company serves as the SubAdvisor
of the Emerging Growth Fund. See "The SubAdvisor."

WHO IS THE ADMINISTRATOR? SEI Financial Management serves as the Administrator
of the Trust. See "The Administrator."

WHO IS THE DISTRIBUTOR? SEI Financial Services Company acts as distributor of
the Trust's shares. See "The Distributor."

HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions may be made
through the Distributor on days on which both the New York Stock Exchange and
the Federal Reserve wire system are open for business. ("Business Days"). The
minimum initial investment is $2,000 ($1,000 for IRAs). A purchase order will be
effective if the Distributor receives an order prior to 1:00 P.M. Pacific time.
Payment of the purchase price is due no later than five business days after a
purchase order is executed. Purchase orders for shares will be executed at a per
share price equal to the asset value next determined after the purchase order is
effective plus any applicable sales charge. Redemption orders must be placed
prior to 1:00 P.M. Pacific time on any Business Day for the order to be
effective that day. See "Purchase and Redemption of Shares."

HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Funds is distributed in the form of monthly
dividends to Shareholders of record. Any capital gain is distributed at least
annually. Distributions are paid in additional shares unless the Shareholder
elects to take the payment in cash. See "Dividends."
<PAGE> 49

<TABLE>
SHAREHOLDER TRANSACTION EXPENSES INVESTMENT CLASS
(As a percentage of offering price)

- -----------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases................................................... 4.50%
</TABLE>

ANNUAL OPERATING EXPENSES
(As a percentage of offering price)

- -----------------------------------------------------------------------------------------------------
VALUE GROWTH EMERGING
BALANCE MOMENTUM EQUITY GROWTH
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
Advisory Fees....................................... .60% .60% .60% .80%
12b-1 Fees (After Fee Waivers)(1)................... .00% .00% .00% .00%
Other Expenses...................................... .20% .20% .20% .25%
- -----------------------------------------------------------------------------------------------------
Total Operating Expenses (After Fee Waivers)(2)..... .80% .80% .80% 1.05%
=====================================================================================================
</TABLE>

(1) The Investment Class Plan provides that the Investment Class shares will
bear the costs of distribution expenses and, in addition, the Trust may pay
the Distributor a fee of up to .40% of the Investment Class shares' average
daily net assets of which a maximum of .25% may be used to compensate
broker/dealers and service providers. See "The Distributor" for further
information. The Distributor has agreed to waive any fees otherwise payable
pursuant to the Plan, and will bear the costs of other distribution-related
activities. The Distributor reserves the right to terminate its waiver at
anytime in its sole discretion.

(2) "Total Operating Expenses" for the Balanced Fund, Value Momentum Fund and
Growth Equity Fund have been restated to reflect current expenses and the
aforementioned fee waivers. Absent fee waivers, "Total Operating Expenses"
would be 1.20%, 1.20%, 1.20% and 1.45% for the Balanced Fund, Value Momentum
Fund, Growth Equity Fund and Emerging Growth Fund.

EXAMPLE:
- -------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment assuming (1) imposition of the maximum sales charge;
(2) 5% return and (3) redemption at the end of each time period.
Balanced Fund..................................................... $53 $69 $ 87 $140
Value Momentum Fund............................................... $53 $69 $ 87 $140
Growth Equity Fund................................................ $53 $69 $ 87 $140
Emerging Growth Fund.............................................. $55 $77 $100 $167
=============================================================================================================
</TABLE>

THE EXAMPLE IS BASED UPON THE TOTAL OPERATING EXPENSES OF A FUND AND SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. The purpose of this table is to assist the
investor in understanding the various costs and expenses that may be directly or
indirectly borne by investors in the Funds. The information set forth in the
foregoing table and example relates only to Investment Class shares. The Trust
also offers Institutional Class shares of the Funds which are subject to the
same expenses except there are no sales charges or distribution costs.

Additional information may be found under "The Administrator," "The Advisor" and
"The SubAdvisor."

Long-term Shareholders may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the Rules of the National Association of
Securities Dealers ("NASD").
<PAGE> 50
4

FINANCIAL HIGHLIGHTS

The following information has been audited by Arthur Andersen LLP, the Trust's
independent accountants, as indicated in their report dated March 15, 1995 on
the Trust's financial statements as of January 31, 1995 included in the Trust's
Statement of Additional Information under "Financial Information." This table
should be read in conjunction with the Trust's financial statements and notes
thereto. Additional Information is set forth in the 1995 Annual Report to
Shareholders and is available without charge by calling 1-(800) 862-6243.

FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR

<TABLE>
<CAPTION>
INVESTMENT ACTIVITIES
NET -------------------------- DISTRIBUTIONS NET NET
ASSET NET REALIZED ------------------- ASSET ASSETS, RATIO OF
VALUE, NET AND UNREALIZED NET VALUE, END EXPENSES
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON INVESTMENTS INCOME GAINS OF PERIOD RETURN (000) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------
BALANCED FUND
- ----------------
INVESTMENT CLASS (**)
FOR THE YEARS ENDED
JANUARY 31,:
1995 12.21 0.393 (0.758) (0.392) (0.003) 11.45 (2.95)% 7,128 0.79%
1994 11.50 0.397 0.925 (0.391) (0.221) 12.21 11.79% 7,292 0.69%
1993 (1) 11.30 0.092 0.404 (0.098) (0.198) 11.50 4.45%* 425 0.60%*
- ------------------------
VALUE MOMENTUM FUND
- ------------------------
INVESTMENT CLASS (**)
FOR THE YEARS ENDED
JANUARY 31,:
1995 14.27 0.321 (0.820) (0.317) (0.054) 13.40 (3.48)% 9,777 0.81%
1994 12.75 0.297 1.543 (0.290) (0.030) 14.27 14.65% 9,346 0.77%
1993 (2) 11.52 0.246 1.257 (0.251) (0.022) 12.75 15.97%* 3,162 0.65%*
- ---------------------
GROWTH EQUITY FUND
- ---------------------
INVESTMENT CLASS (**)
FOR THE YEARS ENDED
JANUARY 31,:
1995 15.19 0.097 (0.884) (0.092) (0.181) 14.13 (5.17)% 1,422 0.78%
1994 13.80 0.064 1.392 (0.066) -- 15.19 10.61% 1,243 0.77%
1993 12.69 0.099 1.103 (0.092) -- 13.80 9.56% 43 0.67%
1992 (3) 11.76 0.019 0.948 (0.023) (0.014) 12.69 39.11%* 13 0.83%*

<CAPTION>
RATIO OF RATIO OF
EXPENSES RATIO OF INCOME TO
TO AVERAGE NET INVESTMENT AVERAGE
NET ASSETS INCOME NET ASSETS PORTFOLIO
EXCLUDING TO AVERAGE EXCLUDING TURNOVER
FEE WAIVERS NET ASSETS FEE WAIVERS RATE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------
BALANCED FUND
- ----------------
INVESTMENT CLASS (**)
FOR THE YEARS ENDED
JANUARY 31,:
1995 1.19% 3.41% 3.01% 48%
1994 1.19% 3.26% 2.76% 49%
1993 (1) 1.10%* 3.20%* 2.70%* 68%
- -----------------------
VALUE MOMENTUM FUND
- -----------------------
INVESTMENT CLASS (**)
FOR THE YEARS ENDED
JANUARY 31,:
1995 1.21% 2.37% 1.97% 6%
1994 1.20% 2.12% 1.69% 5%
1993 (2) 1.15%* 2.53%* 2.03%* 3%
- ---------------------
GROWTH EQUITY FUND
- ---------------------
INVESTMENT CLASS (**)
FOR THE YEARS ENDED
JANUARY 31,:
1995 1.17% 0.69% 0.30% 22%
1994 1.18% 0.48% 0.07% 45%
1993 1.17% 0.69% 0.19% 23%
1992 (3) 0.96%* 0.79%* 0.66%* 26%

* Annualized.
** Total return does not reflect the sales charge.
(1) Commenced operations on November 13, 1992.
(2) Commenced operations on April 2, 1992.
(3) Commenced operations on November 14, 1991.
</TABLE>

<PAGE> 51

THE TRUST

STEPSTONE FUNDS (formerly Union Investors Funds) (the "Trust") is a diversified
open-end management investment company that offers units of beneficial interest
("shares") in fourteen separate investment funds. Shareholders may purchase
shares in a fund through two separate classes of shares (Institutional Class and
Investment Class) which provide for variations in distribution costs, voting
rights and dividends. Except for these differences between Institutional Class
and Investment Class shares, each share of each fund represents an equal
proportionate interest in that fund. This Prospectus relates to the Investment
Class shares of the Trust's Growth Equity, Value Momentum, Balanced and Emerging
Growth Funds (each a "Fund"). Information regarding the Trust's other funds is
contained in separate prospectuses that may be obtained from the Trust's
Distributor, SEI Financial Services Company, 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658.

INVESTMENT OBJECTIVES

THE BALANCED FUND seeks to provide both capital appreciation and income.

THE VALUE MOMENTUM FUND seeks long-term capital growth with a secondary
objective of income.

THE GROWTH EQUITY FUND seeks long-term capital growth.

THE EMERGING GROWTH FUND seeks long-term growth of capital by investing in a
diversified portfolio of equity securities of small capitalization, emerging
growth companies.

There is no assurance that a Fund's investment objective will be met.

INVESTMENT POLICIES

BALANCED FUND

The Balanced Fund will invest in a combination of equity, fixed-income, and
money market securities. Under normal conditions, the Fund will invest between
50% and 70% of its total assets in equity securities, including common stocks,
warrants, and U.S. dollar denominated securities of foreign issuers and both
preferred stock and debt securities convertible into common stocks. The Fund may
invest in a broad spectrum of common stocks with varying characteristics. All of
the common stocks in which the Fund invests (including foreign securities) are
traded on registered exchanges or the over-the-counter market or in the form of
American Depositary Receipts ("ADRs") traded on registered exchanges or NASDAQ.
The Fund may also buy and sell options, futures contracts and options on
futures. The Fund may enter into futures contracts and options on futures only
to the extent that obligations under such contracts or transactions, together
with options on securities represent not more than 25% of the Fund's assets. The
aggregate value of options on securities (long puts and calls) will not exceed
10% of a Fund's net assets at the time such options are purchased by the Fund.

Under normal conditions a minimum of 25% of the Fund's total assets will be
invested in senior fixed income securities. Such securities consist of bonds,
debentures, and similar obligations or instruments which constitute a security
and evidence indebtedness. Corporate bonds and debentures will be rated AAA, AA,
A, or BBB by Standard & Poor's Corporation ("S&P") or Aaa, Aa, A, or Baa by
Moody's Investors Service ("Moody's") or be of comparable quality at the time of
purchase as determined by the Advisor.

The Fund may also invest in mortgage-backed securities consisting of
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two rating categories by
Moody's or S&P.

In addition to mortgage-backed securities, the Fund may invest in other
asset-backed securities backed by company receivables, truck and auto loans,
leases, and credit card receivables. These issues are traded over-the-counter
and typically have a short-intermediate maturity structure

<PAGE> 52

depending on the paydown characteristics of the underlying financial assets
which are passed through to the security holder.

The Fund may invest in securities issued or guaranteed by foreign governments,
their political subdivisions, agencies or instrumentalities and obligations of
supranational entities such as the World Bank and the Asian Development Bank.

Money market instruments the Fund may invest in consist of (i) commercial paper
rated at least A-1 by S&P or P-1 by Moody's at the time of investment, or, if
not rated, are determined by the Advisor to be of comparable quality; (ii)
obligations (certificates of deposit, time deposits, bank master notes, and
bankers' acceptances) of thrift institutions, savings and loans, U.S. commercial
banks (including foreign branches of such banks), and U.S. and foreign branches
of foreign banks, provided that such institutions (or, in the case of a branch,
the parent institution) have total assets of $1 billion or more as shown on
their last published financial statements at the time of investment; (iii)
short-term corporate obligations rated at least A by S&P or A by Moody's at the
time of investment, or, if not rated, are determined by the Advisor to be of
comparable quality; (iv) general obligations issued by the U.S. Government and
backed by its full faith and credit, and obligations issued or guaranteed as to
principal and interest by agencies or instrumentalities of the U.S. Government
(e.g., obligations issued by Farmers Home Administration, Government National
Mortgage Association, Federal Farm Credit Bank and Federal Housing
Administration); (v) receipts including TR's, TIGR's and CATS; (vi) repurchase
agreements involving such obligations; (vii) loan participations; (viii) money
market funds and (ix) foreign commercial paper. The Fund may only purchase
interests in a loan participation issued by a bank in the United States with
assets exceeding $1 billion and for which the underlying loan is issued by
borrowers in whose obligations the Fund may invest.

Certain of the obligations in which the Fund may invest may be variable or
floating rate instruments, may involve a conditional or unconditional demand
feature and may include variable amount master demand notes.

The Fund may enter into forward commitments, or purchase securities on a
when-issued basis. The Fund is permitted to invest in when-issued securities
where such purchases are for investment and not for leveraging purposes;
however, the Fund may sell these securities before the settlement date if it is
deemed advisable. No additional forward commitments will be made if more than
20% of the Fund's net assets would be so committed.

VALUE MOMENTUM FUND

At least 65% of the Value Momentum Fund's assets will be invested in equity
securities including common stocks, warrants to purchase common stock and both
debt securities and preferred stocks convertible into common stocks, and
American Depositary Receipts.

The Fund will be invested primarily in securities which the Advisor believes to
be undervalued relative to the market and to the security's historic valuation.
Stocks are then screened for positive price or earnings momentum. Securities
purchased will generally have a medium to high market capitalization. A majority
of the securities in which the Fund invests will be dividend paying. All of the
common stocks in which the fund invests are traded on registered exchanges or
the over-the-counter market. The remainder of the Fund may be invested in
covered call options on equity securities, money market instruments consisting
of securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities, receipts including TR's, TIGR's and CATS, money market funds,
repurchase agreements, certificates of deposit, time deposits, bank master notes
and bankers' acceptances issued by banks having net assets of at least $1
billion as of the end of their most recent fiscal year, commercial paper rated
at least A-1 by Standard & Poor's Corporation ("S&P") or P-1 by Moody's
Investors Services,

<PAGE> 53
7

Inc. ("Moody's") and may hold a portion of its assets in cash for liquidity
purposes.

GROWTH EQUITY FUND

At least 65% of the Growth Equity Fund will be invested in equity securities
consisting of common stocks, warrants to purchase common stock, U.S. dollar
denominated equity securities of foreign issuers, and debt securities and
preferred stock convertible into common stocks.

The Fund may also be invested in covered call options on equity securities and
money market instruments consisting of securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities, receipts including TR's,
TIGR's and CATS, money market funds, repurchase agreements, certificates of
deposit, time deposits, bank master notes and bankers' acceptances issued by
banks having net assets of at least $1 billion as of the end of their most
recent fiscal year, commercial paper rated at least A-1 by Standard & Poor's
Corporation ("S&P") or P-1 by Moody's Investors Services, Inc. ("Moody's") and
may hold a portion of its assets in cash for liquidity purposes. All of the
common stocks in which the Fund invests (including foreign securities) are
traded on registered exchanges or the over-the-counter market or in the form of
American Depositary Receipts traded on registered exchanges of NASDAQ.

EMERGING GROWTH FUND

The Emerging Growth Fund will invest at least 65% of its assets in equity
securities (i.e., common stocks and convertible preferred stocks) of small
capitalization (i.e., companies with capitalization between $50 million and $1
billion) with the potential for emerging growth or, in the Advisor's opinion,
which have potential for above-average long-term capital appreciation. An
emerging growth company is one which, in the Advisor's judgment, is in the
developing stages of its life cycle and has demonstrated or is expected to
achieve rapid growth in earnings and/or revenues. Emerging growth companies are
characterized by opportunities for rapid growth rates and/or dynamic business
changes. Emerging growth companies, regardless of size, tend to offer the
potential for accelerated earnings or revenue growth because of new products or
technologies, new channels of distribution, revitalized management or industry
conditions, or similar opportunities. A company may or may not yet be profitable
at the time the Fund invests in its securities. Current income will not be a
criterion of investment selection and any such income should be considered
incidental.

The Fund may also invest in equity securities of companies in "special equity
situations," meaning companies experiencing unusual and possibly non-repetitive
developments, such as mergers; acquisitions; spin-offs; liquidations;
reorganizations; and new products, technology or management. Since a special
equity situation may involve a significant change from a company's past
experiences, the uncertainties in the appraisal of the future value of the
company's equity securities and the risk of a possible decline in the value of
the Fund's investments are significant.

The Fund's assets may be invested in U.S. dollar-denominated equity securities
of foreign issuers traded as American Depositary Receipts. All of the common
stocks in which the Fund invests (with the exception of Rule 144A Securities)
are traded on registered exchanges or the over-the-counter market or in the form
of ADRs on registered exchanges or NASDAQ. Many of the securities in which the
Fund's assets will be invested will not pay dividends.

The balance of the Fund's assets may be invested in money market instruments,
options, futures contracts and options on futures, Standard & Poor's Depositary
Receipts ("SPDRs") shares of other investment companies with similar investment
objectives; and convertible bonds. The Fund may enter into futures contracts and
options on futures only to the extent that obligations under such contracts or
transactions, together with options on securities, represent not more than 25%
of the Fund's assets. The aggregate value options on securities (long puts and
calls) will not exceed

<PAGE> 54
8

10% of the Fund's net asset at the time such options are purchased by the Fund.

The portfolio turnover rate for the Emerging Growth Fund for the fiscal year
ended January 31, 1995 was 123%. This rate of portfolio turnover may result in
higher brokerage execution costs and higher levels of capital gains.

GENERAL INVESTMENT POLICIES

For temporary defensive purposes during periods when the Advisor determines that
market conditions warrant, a Fund may invest up to 100% of its assets in money
market instruments consisting of securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities, receipts, including TR's,
TIGR's and CATS, money market funds, repurchase agreements, certificates of
deposit, time deposits, bank master notes and bankers' acceptances issued by
banks having net assets of at least $1 billion as of the end of their most
recent fiscal year, commercial paper rated at least A-1 by Standard & Poor's
Corporation ("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's"), and
it also may hold a portion of its assets in cash. A Fund will not be pursuing
its investment objective to the extent that a substantial portion of its assets
are invested in money market securities.

Each Fund will restrict its investment in illiquid securities to 15% of its net
assets.

Each of the Funds may engage in securities lending and will limit such practice
to 33 1/3% of its assets.

Each Fund may purchase restricted securities which have not been registered
under the Securities Act of 1933 (Rule 144A Securities).

Each Fund may engage in options on stock indices to invest cash on an interim
basis. The aggregate premium paid on all options on stock indices cannot exceed
20% of the Fund's total assets.

In the event that a security owned by a Fund is downgraded below the stated
rating categories, the Advisor will review and take appropriate action with
regard to the security.

For further information about the permitted investments see "Description of
Permitted Investments."

RISK FACTORS

Since the Funds invest in equity securities, each Fund's shares will fluctuate
in value and thus may be more suitable for long-term investors who can bear the
risk of short-term fluctuations.

Securities rated BBB by S&P or Fitch or Baa by Moody's are deemed by these
rating services to have some speculative characteristics, and adverse economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
bonds.

In addition, the market value of fixed income securities bears an inverse
relationship to changes in market interest rates which may affect the net asset
value of shares. The longer the remaining maturity of security, the greater is
the effect of interest rate changes on its market value.

Investments in securities of foreign issuers may subject the Fund to different
risks than those attendant to investments in securities of U.S. issuers such as
differences in accounting, auditing and financial reporting standards, the
possibility of expropriation or confiscatory taxation, and political
instability. See "Description of Permitted Investments."

Given the uncertainty of the future value of emerging growth companies and
companies in special equity situations, the risk of possible decline in the
value of the Emerging Growth Fund's net assets are significant. Companies in
which the Emerging Growth Fund invests may offer greater opportunities for
capital appreciation than larger, more established companies, but investment in
such companies may involve certain special risks. These risks may be due to the
greater business risks of small size, limited markets and financial resources,
narrow product lines and frequent lack

<PAGE> 55

of depth in management. The securities of such companies are often traded in the
over-the-counter market and may not be traded in volumes typical on a national
securities exchange. Thus, the securities of emerging growth companies may be
less liquid, and subject to more abrupt or erratic market movements than
securities of larger, more established growth companies. Since a "special equity
situation" may involve a significant change from a company's past experiences,
the uncertainties in the appraisal of the future value of the company's equity
securities and the risk of a possible decline in the value of the Fund's
investments are significant.

INVESTMENT LIMITATIONS

Each Fund may not:

1. Purchase securities of any issuer (except securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities and repurchase
agreements involving such securities) if as a result more than 5% of the total
assets of the Fund would be invested in the securities of such issuer. This
restriction applies to 75% of the Fund's assets.

3. Make loans, except that the Fund may (a) purchase or hold debt instruments in
accordance with its investment objective and policies; (b) enter into repurchase
agreements; and (c) engage in securities lending as described in this prospectus
and in the Statement of Additional Information.

The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.

FUNDAMENTAL POLICIES

The investment objective and investment limitations are fundamental policies of
the Funds. Fundamental policies cannot be changed with respect to a Fund without
the consent of a majority of the Fund's outstanding shares. The term "majority
of the outstanding shares" means the vote of (i) 67% or more of the Fund's
shares present at a meeting, if the holders of more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the Fund's outstanding shares, whichever is less.

THE ADVISOR

The Trust and Union Capital Advisors (the "Advisor"), a division of Union Bank,
have entered into an advisory agreement (the "Advisory Agreement"). Under the
Advisory Agreement, the Advisor makes the investment decisions for the assets of
the Balanced, Value Momentum and Growth Equity Funds and continuously reviews,
supervises and administers each Fund's investment program. The Advisor
discharges its responsibilities subject to the supervision of, and policies
established by, the Trustees of the Trust. The Trust's shares are not sponsored,
endorsed or guaranteed by, and do not constitute obligations or deposits of, the
Advisor or Union Bank and are not guaranteed by the FDIC or any other
governmental agency.

The Advisor is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .60% of the average daily net assets of each of the Funds
except the Advisor is entitled to a fee of .80% of the average daily net assets
of the Emerging Growth Fund. Although the advisory fee for the Emerging Growth
Fund is higher than
<PAGE> 56

advisory fees paid by other mutual funds, the Trust believes that the fee is
comparable to the advisory fee paid by many other mutual funds with similar
investment objectives and policies. The Advisor may from time to time waive all
or a portion of its fee in order to limit the operating expenses of a Fund. Any
such waiver is voluntary and may be terminated at any time in the Advisor's sole
discretion.

For the fiscal year ended January 31, 1995, the Advisor was paid an advisory fee
of .60%, .60%, .60% and .80% of the average daily net assets of the Growth
Equity, Value Momentum, Balanced and the Emerging Growth Fund.

Union Capital Advisors, 445 S. Figueroa Street, Los Angeles, California 90071,
operates as a separate division of Union Bank. In 1988, the former Union Bank
was acquired by California First Bank, and the resulting bank changes its name
to Union Bank. Each of the former banks or its predecessor bank had been in
banking since the early 1900's and each historically has had significant
investment functions within their Trust and Investment Divisions. Union Bank is
a subsidiary of The Bank of Tokyo, Ltd., Tokyo.

Clyde N. Powers has served as portfolio manager of the Growth Equity Fund since
its inception and he has served as co-portfolio Manager of the Balanced Fund
since May 1995. Mr. Powers is a Vice President with the Advisor and has been
with the Advisor and its predecessor since 1985. Richard Earnest has served as
portfolio manager of the Value Momentum Fund since its inception. Mr. Earnest is
a Vice President and Chief Investment Officer of the Advisor and has been with
the Advisor and its predecessor since 1964. Carl J. Colombo has served as
portfolio manager of the Balanced Fund since its inception and he has served as
co-portfolio Manager of the Growth Equity Fund since May 1995. Mr. Colombo is a
Vice President with the Advisor and has been with the Advisor and its
predecessor since 1985.

THE SUBADVISOR

The Advisor and The Bank of Tokyo Trust Company (the "SubAdvisor") have entered
into an investment subadvisory agreement relating to the Emerging Growth Fund
(the "Investment SubAdvisory Agreement"). Under the Investment SubAdvisory
Agreement, the SubAdvisor makes the day-to-day investment decisions for the
assets of the Emerging Growth Fund, subject to the supervision of, and policies
established by, the Advisor and the Trustees of the Trust. The Trust's shares
are not sponsored, endorsed or guaranteed by and do not constitute obligations
or deposits of the SubAdvisor or The Bank of Tokyo, Ltd., Tokyo and are not
guaranteed by the FDIC or any other governmental agency.

The SubAdvisor is entitled to a fee which is calculated daily and paid monthly
out of the Advisor's fee at an annual rate of .50% of the average daily net
assets of the Emerging Growth Fund. For the fiscal year ended January 31, 1995,
the SubAdvisor received .50% of the average daily net assets of the Emerging
Growth Fund.

services since 1955 and asset management services since 1965.

Seth E. Shalov has served as portfolio manager of the Emerging Growth Fund since
its inception. Mr. Shalov has served as the SubAdvisor's Senior Portfolio
Manager since October, 1988.

THE ADMINISTRATOR

The Administrator is entitled to a fee, calculated daily and paid monthly, at an
annual rate of .15% of Trust assets up to $1 billion, .12% of assets between $1
billion and $2 billion and .10% of assets over $2 billion. The Administrator may
waive its fee or reimburse various expenses to the extent necessary to limit the
total operating expenses of a Fund's Investment Class shares. Any such waiver is
voluntary and may be terminated at any time in the Administrator's sole
discretion.

THE SHAREHOLDER SERVICING AGENT

THE DISTRIBUTOR

The Investment Class has a distribution plan ("Investment Class Plan"). The
Distribution Agreement and the Investment Class Plan adopted by the Investment
Class Shareholders provide that the Investment Class shares of a Fund may bear
the following distribution expenses: (1) the cost of prospectuses, reports to
Shareholders, sales literature and other materials for potential investors; (2)
advertising; and (3) expenses incurred in connection with the promotion and sale
of the Trust's shares including the Distributor's expenses for travel,
communication, and compensation and benefits for sales personnel. In addition,
the Trust pays the Distributor a fee of up to .40% of a Fund's Investment Class
shares average daily net assets, of which a maximum of .25% may be used to
compensate broker/dealers and service providers which provide administrative
and/or distribution services to Investment Class Shareholders or their customers
who beneficially own Investment Class shares. For the Funds' current year, the
Distributor has agreed to waive any fees payable pursuant to the Plan, and the
Distributor will bear the costs of other distribution-related activities. The
Distributor reserves the right to terminate its waiver at any time at its sole
discretion.

PURCHASE AND REDEMPTION OF SHARES

Purchases and redemptions of shares of the Funds may be made on days on which
both the New York Stock Exchange and the Federal Reserve wire system are open
for business. ("Business Days"). The minimum initial investment in a Fund is
$2,000
<PAGE> 58

($1,000 for IRAs); however, the minimum investment may be waived in the
Distributor's discretion. All subsequent purchases must be at least $1,000 ($500
for IRAs).

Purchase orders for shares will be executed at a per share price equal to the
asset value next determined after the receipt of the purchase order by the
Distributor plus any applicable sales charge. Payment of the purchase price is
due no later than five business days after a purchase order is executed. The
purchase price of shares of the Fund is the net asset value next determined
after a purchase order is received and accepted by the Trust plus a sales
charge. The net asset value per share of the Fund is determined by dividing the
total market value of the Fund's investments and other assets, less any
liabilities, by the total outstanding shares of the Fund. Net asset value per
share is determined daily as of 1:00 p.m. Pacific time, on any Business Day.
Purchases will be made in full and fractional shares of the Trust calculated to
three decimal places. The Trust reserves the right to reject a purchase order
when the Distributor determines that it is not in the best interest of the Trust
and/or its Shareholders to accept such order.

Shares of the Fund are offered only to residents of states in which the shares
are eligible for purchase.

The following table shows the regular sales charge on Investment Class shares to
a "single purchaser" (defined below) together with the dealer discount paid to
dealers and the agency commission paid to brokers (collectively the
"commission"):

<TABLE>
<CAPTION>
SALES
SALES CHARGE AS
CHARGE APPROPRIATE COMMISSION
AS A PERCENTAGE AS
PERCENTAGE OF NET PRECENTAGE
OF OFFERING AMOUNT OF OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ----------------------------------------------------------------
<S> <C> <C> <C>
0 - $ 49,999... 4.50% 4.71% 4.05%
$ 50,000 - $ 99,999... 4.00% 4.17% 3.60%
$ 100,000 - $249,999... 3.50% 3.63% 3.15%
$ 250,000 - $499,999... 2.50% 2.56% 2.25%
$ 500,000 - $999,999... 1.50% 1.52% 1.35%
$1,000,000 and over..... 0.60% 0.60% 0.54%
</TABLE>

In calculating the sales charge rates applicable to current purchases of a
Fund's shares, a "single purchaser" is entitled to cumulate current purchases
with the net purchase of previously purchased shares of the Fund and other funds
of Union Investors Funds (the "Eligible Funds") which are sold subject to a
comparable sales charge.

The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Fund for their own account or for trust or
custodial accounts for their minor children, (iii) a fiduciary purchasing for
any one trust, estate or fiduciary account including employee benefit plans
created under Sections 401, 403(b) or 457 of the Internal Revenue Code of 1986,
as amended (the "Code"), including related plans of the same employer. To be
entitled to a reduced sales charge based upon shares already owned, the investor
must ask the Distributor for such entitlement at the time of purchase and
provide the account number(s) of the investor, the investor and spouse, and
their minor children, and give the age
<PAGE> 59

of such children. The Fund may amend or terminate this right of accumulation at
any time as to subsequent purchases.

OTHER CIRCUMSTANCES. No sales charge is imposed on the Investment Class shares
of the Fund: (i) issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Trust is a party; (ii) sold to
dealers or brokers that have a sales agreement with the Distributor, for their
own account or for retirement plans for their employees or sold to employees
(and their spouses) of dealers or brokers that certify to the Distributor at the
time of purchase that such purchase is for their own account (or for the benefit
of such employees' minor children); (iii) in aggregate purchases of $1 million
or more by tax-exempt organizations enumerated in Section 501(c) of the Code, or
employee benefit plans created under Sections 401, 403(b) or 457 of the Code;
(iv) sold to employees and families of the Advisor and its affiliates; (v) all
fiduciary accounts of the Advisor and its affiliates; or (vi) purchased with
proceeds from the recent redemption of shares of a mutual fund with similar
investment objectives and policies for which a sales load was paid.

The waiver of the sales charge under clause (vi) applies only if the following
conditions are met: the purchase must be made within 60 days of the redemption;
the Distributor must be notified in writing by the investor, or his or her
agent, at the time a purchase is made; and a copy of the investor's account
statement showing such redemption must accompany such notice. The waiver policy
with respect to the purchase of shares through the use of proceeds from a recent
redemption above will not continue indefinitely and may be discontinued at any
time without notice. Investors should contact the Distributor to confirm
continued availability prior to initiating the procedures described in clause
(vi).

PURCHASES BY EXCHANGE

As permitted pursuant to any rule, regulation or order promulgated by the
Securities and Exchange Commission, shareholders of Investment Class shares of
other funds of the Trust that have similar sales charges may tender their shares
of those Funds for exchange into the number of shares (including fractional
shares) which have a value equal to the total net asset value of shares tendered
divided by the net asset value of Investment Class shares of the Fund next
determined after such order is received. Shares issued pursuant to this offer
will not be subject to the sales charge described above or any other
<PAGE> 60

charge. The Fund may modify or terminate this exchange offer at any time.

PERFORMANCE

The total return of a Fund refers to the average compounded rate of return to a
hypothetical investment, for designated time periods (including, but not limited
to, the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each period
and assuming the reinvestment of all dividend and capital gain distributions.
The total return of a Fund may also be quoted as a dollar amount or on an
aggregate basis, an actual basis, without inclusion of any sales charge, or with
a reduced sales charge in advertisements distributed to investors entitled to a
reduced sales charge.

TAXES

The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to provide a detailed
explanation of the federal, state, or local income tax treatment of a Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisers regarding specific questions as to federal, state and local income
taxes. Additional information concerning taxes is set forth in the Statement of
Additional Information.

TAX STATUS OF THE FUNDS:

Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other Funds. Each Fund intends to qualify for the
special tax treatment afforded regulated investment companies under the Internal
Revenue Code of 1986, as amended, so that it will be relieved of federal income
tax on that part of its net investment income and net capital gain (the excess
of net long-term capital gain over net

<PAGE> 61

short-term capital loss) which is distributed to Shareholders.

TAX STATUS OF DISTRIBUTIONS:

A Fund will distribute substantially all of its net investment income (including
net short-term capital gain) and net capital gain to Shareholders. Dividends
from the Fund's net investment income will be taxable to Shareholders as
ordinary income, (whether received in cash or in additional shares) to the
extent of the Fund's earnings and profits. Dividends paid by the Fund to
corporate Shareholders will qualify for the deduction for dividends received by
corporations to the extent derived from dividends received by the Fund from
domestic corporations. However, the full amount of such dividends may be subject
to the alternative minimum tax. Distributions of net capital gain do not qualify
for the dividends-received deduction and are taxable to Shareholders as
long-term capital gain, regardless of how long Shareholders have held their
shares and regardless of whether the distributions are received in cash or in
additional shares. Each Fund will make annual reports to Shareholders of the
federal income tax status of all distributions.

Dividends declared by a Fund in October, November, or December of any year and
payable to Shareholders of record on a date in that month will be deemed to have
been paid by the Fund and received by the Shareholders on the last day of
December of that year, if paid by the Fund any time during the following
January.

The Funds intend to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.

Income received on direct U.S. obligations is exempt from tax at the state level
when received directly by a Fund and may be exempt, depending on the state, when
received by a Shareholder as income dividends from a Fund provided certain
state-specific conditions are satisfied. A Fund will inform Shareholders
annually of the percentage of income and distributions derived from direct U.S.
Treasury obligations. Shareholders should consult their tax advisors to
determine whether any portion of the income dividends received from a Fund is
considered tax exempt in their particular state.

A sale, exchange, or redemption of Fund Shares is a taxable transaction to the
Shareholders.

GENERAL INFORMATION

THE TRUST

The Trust was organized as a Massachusetts business trust under a Declaration of
Trust dated October 16, 1990. The Declaration of Trust permits the Trust to
offer separate portfolio of shares and different classes of each fund. In
addition to the Funds, the Trust consists of the following funds: Treasury Money
Market Fund, Money Market Fund, California Tax-Free Money Market Fund,
Intermediate-Term Bond Fund, California Tax Free Bond Fund, Limited Maturity
Government Fund, Blue Chip Growth Fund, Convertible Securities Fund, Government
Securities Fund and International Equity Fund. All consideration received by the
Trust for shares of any fund and all assets of such fund belong to that fund and
would be subject to liabilities related thereto. The Trust reserves the right to
create and issue shares of additional funds.

The Trust pays its expenses, including audit and legal expenses, expenses of
preparing and printing prospectuses, proxy solicitation material and reports to
Shareholders, costs of custodial
<PAGE> 62

services and registering the shares under federal and state securities laws,
insurance expenses, litigation and other extraordinary expenses, brokerage
costs, interest charges, taxes and organization expenses. Please refer to
"Financial Highlights" in this Prospectus for more information regarding the
Trust's expenses.

TRUSTEES OF THE TRUST

VOTING RIGHTS

SHAREHOLDER INQUIRIES

Shareholder inquiries should be directed to the Administrator, SEI Financial
Management Corporation, 680 East Swedesford Road, Wayne, PA 19087.

DIVIDENDS

Substantially all of the net investment income (exclusive of capital gains) of a
Fund is distributed in the form of monthly dividends to Shareholders. Currently,
capital gains of a Fund, if any, will be distributed at least annually.

Shareholders automatically receive all income dividends and capital gain
distributions in additional shares at the net asset value next determined
following the record date, unless the Shareholder has elected to take such
payment in cash. Shareholders may change their election by providing written
notice to the Administrator at least 15 days prior to the change.

Dividends and distributions of a Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of the payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.

The dividends payable on Investment Class shares will be less than dividends
payable on Institutional Class shares because of the distribution expenses
charged to Investment Class shares.

COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS

Morgan, Lewis & Bockius serves as counsel to the Trust. Arthur Andersen LLP
serves as the independent public accountants of the Trust.

CUSTODIAN

CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
PA 19101 (the "Custodian") acts as Custodian of the assets of the Fund. The
Custodian holds cash, securities and other assets of the Trust as required by
the Investment Company Act of 1940, as amended.

DESCRIPTION OF PERMITTED INVESTMENTS

The following is a description of the permitted investments for the Funds:

AMERICAN DEPOSITARY RECEIPTS (ADRs)-- Each Fund may purchase ADRs. ADRs are
receipts typically issued by a U.S. financial institution that evidence
ownership of underlying securities issued by a foreign issuer.
<PAGE> 63

BANKER'S ACCEPTANCE--A bill of exchange or time draft drawn on and accepted by a
commercial bank. It is used by corporations to finance the shipment and storage
of goods and to furnish dollar exchange. Maturities are generally six months or
less.

CONVERTIBLE BONDS--Each Fund may purchase Convertible Bonds which are
convertible into a set number of shares of another form of security (usually
common stock) at a prestated price. Convertible bonds have characteristics
similar to both fixed income and equity securities. Because of the conversion
feature, the market value of convertible bonds tends to move together with the
market value of the underlying stock. As a result, a Fund's selection of
convertible bonds is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
bonds is also affected by prevailing interest rates, the credit quality of the
issuer and any call provisions.

CONVERTIBLE PREFERRED STOCK--Each Fund may invest in Convertible Preferred
Stock, a class of capital stock that pays dividends at a specified rate and has
preference over common stock in the payment of dividends and the liquidation of
assets. Convertible preferred stock is preferred stock exchangeable for a given
number of common stock shares and has characteristics similar to both
fixed-income and equity securities. Because of the conversion feature, the
market value of convertible preferred stock tends to move together with the
market value of the underlying common stock. As a result, a Fund's selection of
convertible preferred stock is based, to a great extent, on the potential for
capital appreciation that may exist in the underlying common stock. The value of
convertible preferred stock is also affected by prevailing interest rates, the
credit quality of the issuer and any call provisions.

FUTURES AND OPTIONS ON FUTURES--The Balanced Fund and Emerging Growth Fund may
invest in futures and options on futures. Some futures strategies, including
selling futures, buying puts and writing calls, reduce the Fund's exposure to
price fluctuations. Other strategies, including buying futures, writing puts and
buying calls, tend to increase market exposure. Futures and options may be
combined with each other in order to adjust the risk and return characteristics
of the overall portfolio.

Options and futures can be volatile instruments, and involve certain risks that
if applied at an inappropriate time, could negatively impact a Fund's return.

INVESTMENT GRADE BONDS--Interest-bearing or discounted government or corporate
securities that obligate the issuer to pay the bondholder a specified sum of
money, usually at specific intervals, and to repay the principal amount of the
loan at maturity. Investment grade bonds are those rated BBB or better by
Standard & Poor's Corporation or Baa or better by Moody's Investors Service,
Inc.

LOAN PARTICIPATIONS--The Balanced Fund may invest in Loan Participations, which
are interests in
<PAGE> 64

loans to U.S. corporations (i.e., borrowers) which are administered by the
lending bank or agent for a syndicate of lending banks, and sold by the lending
bank or syndicate member ("intermediary bank"). In a loan participation, the
borrower of the underlying loan will be deemed to be the issuer of the
participation interest except to the extent a purchasing Fund derives its rights
from the intermediary bank. Because the intermediary bank does not guarantee a
loan participation in any way, a loan participation is subject to the credit
risks generally associated with the underlying corporate borrower. In addition,
in the event the underlying corporate 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 have been involved if the Fund had purchased a
direct obligation (such as commercial paper) of such borrower because it may be
necessary under the terms of the loan participation for the Fund to assert its
rights against the borrower through the intermediary bank. Moreover, under the
terms of a loan participation the purchasing Fund may be regarded as a creditor
of the intermediary bank (rather than of the underlying corporate borrower), so
that a Fund may also be subject to the risk that the issuing bank may become
insolvent. Further, in the event of the bankruptcy or insolvency of the
corporate borrower, a loan participation may be subject to certain defenses that
can be asserted by such borrower as a result of improper conduct by the issuing
bank. The secondary market, if any, for these loan participations is limited and
any such participation purchased by the Fund may be regarded as illiquid.

OPTIONS--Each Fund, except the Value Momentum and Growth Equity Funds, may
purchase options with respect to securities that are permitted investments and
each Fund, including the Value Momentum and Growth Equity Funds may write
covered call options. Under a call option, the purchaser of the option has the
right to purchase, and the writer (the Fund) the obligation to sell, the
underlying security at the exercise price during the option period. A put option
gives the purchaser the right to sell, and the writer the obligation to
purchase, the underlying security at the exercise price during the option
period.

In addition, each Fund may buy options on stock indices to invest cash on an
interim basis. Such options will be listed on a national securities exchange. In
order to close out an option position, a Fund may enter into a "closing purchase
transaction"--the purchase of an option on the same security with the same
exercise price and expiration date as the option contract previously written on
any particular security. When the security is sold, a Fund effects a closing
purchase transaction so as to close out any existing option on that security.

There are risks associated with such investments including the following: (1)
the success of a hedging strategy may depend on the ability of the Advisor to
predict movements in the prices of individual securities, fluctuations in
markets and movements in interest rates; (2) there may be an imperfect
correlation between the movement in prices of securities held by a Fund and the
price of options; (3) there may not be a liquid secondary market for options;
and (4) while a Fund will receive a premium when it writes covered call options,
it may not participate fully in a rise in the market value of the underlying
security.

REPURCHASE AGREEMENTS--Agreements by which a person obtains a security and
simultaneously commits to return the security to the seller at an agreed upon
price (including principal and interest) on an agreed upon date within a number
of days from the date of purchase. The Custodian or its agent will hold the
security as collateral for the repurchase agreement. Collateral must be
maintained at a value at least equal to 102% of the repurchase price. A Fund
bears a risk of loss in the event the other party defaults on its obligations
and the Fund is delayed or prevented from its rights to dispose of the
collateral securities or if the Fund realizes a loss in the sale of the
collateral securities. Repurchase agreements are considered loans

<PAGE> 65

under the Investment Company Act of 1940, as amended.

RULE 144A SECURITIES--Each Fund may purchase Rule 144A Securities. Rule 144A
Securities are restricted securities that have not been registered under the
Securities Act of 1933 but which may be traded between certain qualified
institutional investors, including investment companies. The absence of a
secondary market may affect the value of Rule 144A Securities. The Board of
Trustees of the Trust has established guidelines and procedures to be utilized
to determine the liquidity of such securities.

SECURITIES LENDING--In order to generate additional income, each Fund may lend
the securities in which it is invested, pursuant to agreements requiring that
the loan be continuously secured by cash, securities of the U.S. Government or
its agencies or any combination of cash and such securities as collateral equal
to 100% of the market value at all times of the securities lent. The Fund will
continue to receive interest on the securities lent while simultaneously earning
interest on the investment of cash collateral in U.S. Government securities.
Collateral is marked to market daily to provide a level of collateral at least
equal to the value of the securities lent. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially.

SECURITIES OF FOREIGN ISSUERS--Each Fund may purchase U.S. dollar denominated
securities of foreign issuers. There may be certain risks connected with
investing in foreign securities. These include risks of adverse political and
economic developments (including possible governmental seizure or
nationalization of assets), the possible imposition of exchange controls or
other governmental restrictions, including less uniformity in accounting and
reporting requirements, the possibility that there will be less information on
such securities and their issuers available to the public, the difficulty of
obtaining or enforcing court judgments abroad, restrictions on foreign
investments in other jurisdictions, difficulties in effecting repatriation of
capital invested abroad, and difficulties in transaction settlements and the
effect of delay on shareholder equity. Foreign securities may be subject to
foreign taxes, which reduce yield, and may be less marketable than comparable
U.S. securities. The Fund may be affected favorably or unfavorably by changes in
the exchange rates or exchange control regulations between foreign currencies
and the U.S. dollar. Changes in foreign currency exchange rates may also affect
the value of dividends and interest earned, gains and losses realized on the
sale of securities and net investment income and gains, if any, to distributed
to shareholders by a Fund.

STANDARD & POOR'S DEPOSITARY RECEIPTS ("SPDRs")--The Emerging Growth Fund may
acquire SPDRs which are interests in a unit investment trust holding a portfolio
of securities linked to the S&P Index. SPDRs closely track the underlying
portfolio of securities, trade like a share of common stock and pay periodic
dividends proportionate to those paid by the portfolio of stocks that
constitutes the S&P Index. For further information regarding the Fund's
investment in SPDRs, see the Statement of Additional Information.

<PAGE> 66
20

issues of other agencies are supported only by the credit of the instrumentality
(e.g., FNMA).

RECEIPTS--Interests in separately traded interest and principal component parts
of U.S. Treasury obligations that are issued by banks and brokerage firms and
are created by depositing Treasury notes and Treasury bonds into a special
account at a custodian bank. The custodian holds the interest and principal
payments for the benefit of the registered owners of the certificates or
receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
"Treasury Receipts" ("TR's") "Treasury Investment Growth Receipts" ("TIGR's")
and "Certificates of Accrual on Treasury Securities" ("CATS").

VARIABLE AND FLOATING RATE INSTRUMENTS--Certain obligations purchased by the
Balanced Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. The interest rates on these securities may be reset daily,
weekly, quarterly or some other reset period, and may have a floor or ceiling on
interest rate changes. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates. A demand
instrument with a demand notice period exceeding seven days may be considered
illiquid if there is no secondary market for such security.

SECURITIES ISSUED ON A FORWARD BASIS OR WHEN-ISSUED SECURITIES--The Balanced
Fund may purchase securities subject to settlement on a future date. The
interest rate realized on these securities is fixed as of the purchase date and
no interest accrues to a Fund before settlement. These securities are subject to
market fluctuation due to changes, real or anticipated, in market interest rates
and the public's perception of the creditworthiness of the issuer and will have
the effect of leveraging the Fund's assets. A Fund will establish one or more
segregated accounts with the Custodian, and the Fund will maintain liquid assets
in such securities in an amount at least equal in value to the Fund's
commitments to purchase when-issued securities.

WARRANTS--The Growth Equity Fund, Value Momentum Fund and Balanced Fund may
purchase warrants which are securities that entitle the holder to buy a
proportionate amount of common stock at a specified price for a limited or
unlimited period of time. Warrants are commonly freely transferable and are
traded on the major stock exchanges.
<PAGE> 67

TABLE OF CONTENTS
- --------------------------------------------------------

<TABLE>
<S> <C>
Summary.......................................... 2
Shareholder Transaction Expenses................. 3
Financial Highlights............................. 4
The Trust........................................ 5
Investment Objectives............................ 5
Investment Policies.............................. 5
Risk Factors..................................... 8
Investment Limitations........................... 9
Fundamental Policies............................. 9
The Advisor...................................... 9
The SubAdvisor................................... 10
The Administrator................................ 11
The Shareholder Servicing Agent.................. 11
The Distributor.................................. 11
Purchase and Redemption of Shares................ 11
Purchases by Exchange............................ 13
Performance...................................... 14
Taxes............................................ 14
General Information.............................. 15
Description of Permitted Investments............. 16
</TABLE>

<PAGE> 68

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 69

INVESTMENT ADVISOR:

UNION CAPITAL ADVISORS(R)
A DIVISION OF UNION BANK

SUB ADVISOR:

THE BANK OF TOKYO TRUST COMPANY
EMERGING GROWTH FUND

DISTRIBUTOR:

SEI FINANCIAL SERVICES COMPANY

EQUITY FUNDS

I N V E S T M E N T C L A S S

BALANCED FUND

VALUE MOMENTUM FUND

GROWTH EQUITY FUND

EMERGING GROWTH FUND

THESE SECURITIES
ARE NOT OBLIGATIONS
OR DEPOSITS OF
UNION BANK AND
ARE NOT INSURED
BY THE FDIC.

[LOGO]

A FAMILY OF MUTUAL FUNDS

84861-B (REV. 6/95)