UNIVERSAL CAPITAL INVESTMENT TRUST, 497, 1996-02-07

UNIVERSAL CAPITAL INVESTMENT TRUST
497, 1996-02-07

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UNIVERSAL CAPITAL GROWTH FUND

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Universal Capital Growth Fund (the "Fund"), a series of Universal Capital
Investment Trust (the "Trust"), is a fully-managed, diversified, open-end mutual
fund. The Fund's investment objective is to maximize capital appreciation
primarily through investment in common stocks of companies which the Fund's
investment adviser, Integrated Financial Services, Inc., believes have potential
to increase earnings and are either undervalued or fairly valued.

This Prospectus, which should be read and retained for future reference, sets
forth concisely the information an investor should consider before investing in
the Fund. A Statement of Additional Information containing further information
about the Fund has been filed with the Securities and Exchange Commission and
may be obtained without charge by calling or writing the Fund at the telephone
number or address listed below. The Statement of Additional Information bears
the same date as this Prospectus and (together with any supplements thereto) is
incorporated by reference into this Prospectus.
UNIVERSAL CAPITAL GROWTH FUND
ONE OAKBROOK TERRACE
SUITE 708
OAKBROOK TERRACE, ILLINOIS 60181-4793
(708) 932-3000

TABLE OF CONTENTS
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<TABLE>
<S> <C>
Highlights........................ 2
Expense Information............... 3
Financial Highlights.............. 3
Investment Objective and
Policies......................... 4
Investment Risks.................. 5
Investment Restrictions........... 5
How to Purchase Shares............ 6
How to Redeem Shares.............. 8
Shareholder Services.............. 10
Dividends and Distributions....... 10
Taxes............................. 11
Management of the Fund............ 11
Performance Information........... 12
Portfolio Transactions............ 13
The Trust and Its Shares.......... 13
Appendix - Letter of Intent....... 14
</TABLE>

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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 REPRESEN TATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE.

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The date of this Prospectus is January 31, 1996
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HIGHLIGHTS

INVESTMENT OBJECTIVE

The investment objective of Universal Capital Growth Fund (the "Fund") is to
maximize capital appreciation primarily through investment in common stocks of
companies which the Fund's investment adviser, Integrated Financial Services,
Inc., believes have potential to increase earnings and are either undervalued or
fairly valued.

There can be no assurance that the Fund will achieve its objective.

INVESTMENT RISKS

The Fund is designed for long-term investors who can accept the fluctuations in
portfolio value and other risks associated with seeking to maximize capital
appreciation through investment in securities. The Fund invests in both large
and small companies. Investments in small, and often newer, companies involve
greater risk than is customarily associated with more established companies. See
"Investment Risks" and "Investment Objective and Policies" for a more complete
description of the risks of investing in the Fund.

DIVIDENDS AND CAPITAL GAINS

All dividends from net investment income and net realized capital gains, if any,
are paid to shareholders by the Fund at least annually. Distributions are
automatically reinvested in additional shares at net asset value (without a
sales charge) unless payment in cash has been requested. See "Dividends and
Distributions."

PURCHASING SHARES

Shares of the Fund are sold with a front-end sales charge of 1.5% of the
offering price, with reduced sales charges on larger investments. There is no
sales charge on purchases of $250,000 or more or on reinvestment of
distributions. See "How to Purchase Shares."

MINIMUM INVESTMENTS

The Fund's minimum account size is generally $500. However, an investor making
an initial investment of $50 or more may take up to 12 months to reach the
minimum account size. Each investment must be $50 or more except for
reinvestment of distributions. There is no minimum account size for retirement
plans. See "How to Purchase Shares."

REDEMPTION PRICE

Shares are redeemed at current net asset value, without charge. See "How to
Redeem Shares."

EXPENSES OF THE FUND

The Fund pays a monthly advisory fee at the annual rate of 1% of the first $250
million of the Fund's average daily net assets. See "Management of the Fund --
The Adviser and Distributor." The Fund also pays the distributor monthly fees at
annual rates aggregating .50% of the Fund's average daily net assets for
shareholder servicing and for services in distributing Fund shares. See
"Management of the Fund -- Distribution Plan."

INVESTMENT ADVISER

Integrated Financial Services, Inc.
One Oakbrook Terrace, Suite 708
Oakbrook Terrace, Illinois 60181-4793

DISTRIBUTOR

Dreher & Associates, Inc.
One Oakbrook Terrace, Suite 708
Oakbrook Terrace, Illinois 60181-4793
(708) 932-3000

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EXPENSE INFORMATION

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)...... 1.50%
Maximum Sales Load Imposed on Reinvested
Dividends................................ None
Deferred Sales Load....................... None
Redemption Fees........................... None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Advisory and Management Fees.............. 1.00%
12b-1 Fees (b)............................ .50%
Other Expenses (after expense
reimbursements) (a)...................... .50%
---------
Total Fund Operating Expenses (after
expense reimbursements) (a).............. 2.00%
</TABLE>

(a) Takes into account the Adviser's voluntary undertaking to limit the
Fund's annual ordinary operating expenses to 2% of the Fund's average daily net
assets through December 31, 1996. "Other Expenses" and "Total Fund Operating
Expenses" for the year ended September 30, 1995 would have been 1.2% and 2.7%
respectively, without such limitation. You must pay the cost (currently $15) for
payment of redemption proceeds by wire.

(b) Includes a distribution fee of 0.25% and a service fee of 0.25%, all or
a portion of which may be paid to brokers for continuing services to be provided
to shareholders of the fund. Long-term shareholders may, as a result of the
Fund's distribution plan, pay more than the economic equivalent of the maximum
front-end sales charge. See "Management of the Fund -- Distribution Plan".

EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming a
5% annual return and redemption at the end of each time period:

The purpose of the foregoing table is to assist an investor in understanding the
various costs and expenses that an investor in the Fund may bear directly or
indirectly. The example assumes that the percentage amounts listed under Annual
Fund Operating Expenses remain the same through each of the periods, all income
dividends and capital gains distributions are reinvested in additional shares of
the Fund, and the Fund's net assets remain constant. The example is not a
representation of past or future expenses or investment performance. Reduced
sales charges apply to purchases of $50,000 or more. See "How to Purchase
Shares."

FINANCIAL HIGHLIGHTS

The table below shows the results of the Fund's operations for a share
outstanding throughout each fiscal year ended September 30, and has been audited
by Ernst & Young LLP, the Fund's independent auditors. This table should be read
in conjunction with the Fund's financial statements and notes thereto which may
be obtained at no charge by writing the Fund.

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991(c)
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................................. $12.47 $12.27 $11.38 $11.16 $10.00
Income from investment operations:
Net investment income (loss)(a).................................... (.10) (.13) (.04) .11 .07
Net realized and unrealized gain on investments.................... 4.54 .96 1.39 .37 1.09
------ ------ ------ ------ ------
Total from investment operations..................................... 4.44 .83 1.35 .48 1.16
Less distribution to shareholder from:
Net investment income.............................................. .00 .00 .11 .07 .00
Realized gains on investments...................................... .63 .63 .35 .19 .00
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Total distributions to shareholders.................................. .63 .63 .46 .26 .00
Net asset value, end of period....................................... $16.28 $12.47 $12.27 $11.38 $11.16
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN (b)..................................................... 37.9% 7.5% 12.2% 4.3% 11.6%
Net assets, end of period (in thousands)............................. $8,149 $4,969 $4,892 $4,715 $3,031
Ratio of net expenses to average net assets (a)...................... 2.0% 2.0% 2.0% 2.0% 2.0%*
Ratio of net investment income (loss) to average net assets (a)...... (0.8)% (1.1)% (0.4)% 1.2% 1.3%*
Portfolio turnover rate.............................................. 158% 189% 186% 111% 126%*
</TABLE>

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* Annualized
(a) After reimbursement and waiver of expenses by the Advisor of 0.7%, 1.1%,
.9%, 1.3% and 1.3% of average net assets for 1995, 1994, 1993, 1992 and
1991, respectively.
(b) Total return is not annualized for periods less than a full year and does
not reflect the effect of any sales charges.
(c) For the period January 22, 1991 (commencement of operations) through
September 30, 1991.

Note: Per share data for 1995, 1994 and 1993 was determined based on average
shares outstanding.

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INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE

The investment objective of the Fund is to maximize capital appreciation. The
realization of current income is not normally a consideration in the selection
of securities for investment and the Fund is not designed for investors seeking
income rather than capital appreciation. There can be no assurance that the Fund
will achieve its objective. The Fund's investment objective may not be changed
without shareholder approval.

TYPES OF SECURITIES

The Fund seeks capital appreciation primarily through investment in common
stocks which the Adviser believes have potential to increase earnings and are
either undervalued or fairly valued relative to earnings or potential earnings
growth.

The Fund ordinarily invests on a long-term basis. However, from time to time,
the Fund may invest on a short-term basis, or may sell within a few months
securities purchased on a long-term basis because of the possibility of rapid
security price fluctuations or a change in the circumstances of a particular
company or industry or general market or economic conditions.

The Fund may invest in companies of all size capitalizations. Large
capitalization companies (with total stock market capitalizations of $1 billion
or more) selected by the Adviser will typically have demonstrated increasing
sales and earnings and may have leadership positions in the markets in which
they compete. Small capitalization companies may have recent favorable trends in
revenue and earnings growth due to a product or service that offers the
opportunity for substantial future growth in a specialized market. The Adviser
believes that while investment in smaller companies offers the potential for
substantial capital appreciation, there is a greater risk and volatility
associated with the securities of small companies. The allocation of investments
between large and small capitalization companies may vary greatly from time to
time based on the Adviser's analysis of economic and market conditions.

The Fund expects that, under normal market conditions, at least 75% of the
Fund's assets will be in common stocks of companies with potential to increase
earnings. Subject to that limitation, the Fund may also invest in securities
that the Adviser believes offer an opportunity for capital appreciation for
reasons other than earnings growth.

The Fund also may invest in securities of unseasoned issuers, convertible
securities (such as convertible bonds and convertible preferred stocks),
warrants, options on securities, index options, financial futures contracts and
foreign securities and at times may lend its portfolio securities. The Fund
expects that no more than 5% of its net assets would be placed at risk in
connection with any one category of such investments. A more thorough
description of these investment practices and a discussion of their associated
risks are contained in the Statement of Additional Information.

When the Adviser believes that the prevailing market conditions indicate that a
temporary defensive position is warranted, or so that the Fund may receive a
favorable return on any cash in its portfolio, the Fund may invest in short-term
interest-bearing securities, U.S. Government securities, corporate debt
securities, preferred stocks, certificates of deposit of commercial banks and
repurchase agreements. Some of these investments may be medium or long term
investment grade obligations (rated in one of the four highest by a nationally
recognized rating agency) which, in the judgement of the Adviser, have the
greatest potential for a high current return or capital appreciation. Securities
rated in the fourth highest category are considered to have speculative
characteristics. While the Fund maintains a temporary defensive position,
investment income may be expected to be higher than if the Fund were invested in
common stocks and may constitute a large portion of the return of the Fund.
Moreover, during any such period the Fund probably will not

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participate in market advances or declines to the extent that it would if it
were fully invested in common stocks.

The Fund may sell short securities the Fund owns or has the right to acquire
without further consideration, a technique called selling short "against the
box." Short sales against the box may protect the Fund against the risk of
losses in the value of its portfolio securities because any subsequent
unrealized losses with respect to such securities should be wholly or partially
offset by a corresponding gain in the short position. However, any subsequent
gains in such securities should be wholly or partially offset by a corresponding
loss in the short position. Short sales against the box may be used to lock in a
gain on a security when, for tax reasons or otherwise, the Adviser does not want
to sell the security. The Fund currently does not expect that more than 40% of
the Fund's total assets would be subject to short sales against the box. For a
more complete explanation, please refer to the Statement of Additional
Information.

INVESTMENT RISKS

All investments, including those in mutual funds, have risks. No investment is
suitable for all investors. The Fund is designed for long-term investors who can
accept the fluctuations in portfolio value and other risks associated with
seeking to maximize capital appreciation through investment in securities. There
can be no guarantee that the Fund will achieve its objective.

The Fund diversifies its securities holdings to reduce risk. Although risk
cannot be eliminated, diversification reduces the impact of any single
investment. The Fund may invest in both large and small companies. Investments
in small, and often newer, companies involve greater risk than is customarily
associated with more established companies. Smaller and newer companies often
have limited product lines, markets, management personnel, research and/or
financial resources. The securities of small companies, which may be thinly
capitalized, may have more limited marketability and be subject to more abrupt
or erratic market movements than securities of larger companies or the market
averages in general.

Any investment by the Fund in medium or long term interest-bearing obligations
has the risk of principal fluctuation due to changing interest rates and the
ability of the issuer to repay the obligation at maturity. Certain risk factors
are also associated with other investment practices of the Fund (none of which
is expected to involve more than 5% of the Fund's assets), including investing
in debt securities and securities of unseasoned issuers, engaging in futures and
options transactions, and investing in foreign securities. Risk factors specific
to those practices are explained more fully in the Statement of Additional
Information. Although the Fund does not purchase securities with a view to rapid
turnover, there are no limitations on the length of time portfolio securities
must be held. The Fund's portfolio turnover rate for the fiscal year ended
September 30, 1995 was 158% and is expected to continue to exceed 100% annually.
A high rate of portfolio turnover results in increased transaction expenses and
the realization of capital gains and losses. Please refer to the Statement of
Additional Information for a more complete explanation.

INVESTMENT RESTRICTIONS

In pursuing its investment objective, the Fund will not:

1. As to 75% of its assets, invest more than 5% of its total assets, taken at
market value at the time of a particular purchase, in the securities of any
one issuer, except that this restriction does not apply to securities issued
or guaranteed by the United States Government or its agencies or
instrumentalities;

2. Acquire more than 10%, taken at the time of a particular purchase, of the
outstanding voting securities of any issuer;

3. Invest in a security if more than 25% of its total assets (taken at market
value at the time of a particular purchase) would be invested in the
securities of issuers in any particular industry,

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except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities;

4. Borrow, except that the Fund may borrow up to 5% of its total assets, taken
at market value at the time of such borrowing, as a temporary measure for
extraordinary purposes, but not to increase portfolio income (reverse
repurchase agreements shall be considered borrowings for purposes of this
restriction) nor enter into transactions in options, or;

5. Purchase illiquid securities or securities of issuers (other than issuers of
Federal agency obligations) which, including their predecessors, have been
in operation for less than three years, if by reason of such purchase the
value of the Fund's aggregate investment in such securities would exceed 5%
of its total assets.

These are fundamental restrictions that cannot be changed without the approval
of a "majority of the outstanding" voting securities of the Fund, as defined in
the Investment Company Act of 1940. All of the Fund's investment restrictions
are described in the Statement of Additional Information.

HOW TO PURCHASE SHARES

An Application is included with this Prospectus. A completed and signed
Application is required for each new account opened, regardless of the method
chosen for purchasing shares. Redemptions will not be permitted until a
completed Application is on file and funds have been collected from the check
used to purchase shares.

The Fund's minimum account size is generally $500. However, an investor making
an initial investment of $50 or more may take up to 12 months from the date of
the initial investment to reach that $500 minimum account size. Each investment
must be $50 or more except for reinvestment of dividends and capital gains
distributions. There is no minimum account size for retirement plans. See
"Shareholder Services - Retirement Plans." These minimums may be changed at any
time. The Fund reserves the right to reject any order for the purchase of its
shares in whole or in part, and to suspend the sale of its shares to the public
in response to conditions in the securities markets or otherwise. Generally, the
Fund will not issue share certificates representing shares, although share
certificates in full share amounts will be furnished without charge upon a
shareholder's written request. Fractional shares, if any, will be carried on the
books of the Fund without issuance of certificates.

METHODS OF PURCHASE

Shares of the Fund may be purchased from Dreher & Associates, Inc. ("Dreher"),
the Fund's distributor, or from selected broker-dealers that have signed selling
agreements with Dreher. Investments in the Fund may be made either by check or
by wire. Please call the Fund at the number on the front cover of this
prospectus for wiring instructions.

BY CHECK: Checks should be made payable to "Universal Capital Growth Fund" and
mailed with the completed and signed Application to an authorized investment
dealer or directly to:

Universal Capital Growth Fund
c/o Dreher & Associates, Inc.
One Oakbrook Terrace
Suite 708
Oakbrook Terrace, Illinois 60181-4793

All checks should be drawn on U.S. banks in U.S. dollars in order to avoid fees
and delays. A charge (currently $15) may be imposed if any check submitted for
investment does not clear.

PURCHASES BY EXISTING SHAREHOLDERS

If a shareholder's account with the Fund is already established and an
investment dealer is recorded for such account, subsequent orders for shares may
be either mailed directly to Universal Capital Growth Fund, c/o Dreher &
Associates, Inc., at the address shown above, or purchased through the
shareholder's own authorized investment dealer. A check should be enclosed made
payable to

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"Universal Capital Growth Fund," along with information identifying the
shareholder and the shareholder's account number.

OFFERING PRICE

Except as otherwise described below under "Sales Commission Waiver," shares in
the Fund are offered at the public offering price, which is the net asset value
per share next determined after a properly completed order is received by the
Fund plus a sales commission. Orders received after the close of regular session
trading on the New York Stock Exchange (ordinarily 3:00 p.m., Chicago time) will
be processed the next business day. The table below shows the sales commission
at various investment levels.

SALES COMMISSION TABLE

<TABLE>
<CAPTION>
% of
Paid by Investor Offering
----------------------- Price
As a % of As a % of Retained by
Offering Net Amount Selling
Investment Price Invested Dealer
- ---------------------------------------- --------- ----------- -----------
<S> <C> <C> <C>
Less than $100,000...................... 1.50% 1.53% 1.75%(a)
$100,000 but less than $250,000......... 1.00% 1.01% 1.25%(a)
$250,000 or more........................ NONE NONE .25%(a)(b)
</TABLE>

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(a) Amount retained by selling dealer in excess of the sales commission paid by
the investor is paid by the Fund's distributor from its own resources,
including amounts received pursuant to the Fund's distribution (12b-1) plan.
(b) Paid by the Fund's distributor to the selling dealer six months after
investment only if the shares purchased have not been redeemed.

Under certain circumstances, Dreher may reallow up to the entire sales
commission to dealers. Dealers who receive 90% or more of the sales commission
are deemed to be underwriters under the Securities Act of 1933. Dreher may from
time to time conduct promotional campaigns in which incentives would be offered
to dealers who meet or exceed stated target sales of shares of the Fund. The
cost of any such promotional campaign, including any incentives offered, would
be borne entirely by Dreher and would have no effect on either the public
offering price of Fund shares or the percentage of the public offering price
retained by the selling dealer. The cost of any such promotional campaign is not
intended to be among the items for which the Distributor receives compensation
under the Fund's Distribution Plan. See "Management of the Fund - Distribution
Plan." At various times Dreher may also implement programs under which Dreher
will reallow, to all dealers or to dealers that meet uniformly applied targets
for sales of shares of the Fund, an amount not exceeding the total applicable
sales charges on the sales generated by the dealer at the public offering price
during such programs.

SALES COMMISSION WAIVER

The following persons or entities may purchase shares of the Fund at net asset
value without payment of any sales commission: (a) employees and registered
representatives of Dreher and its affiliates or broker-dealers with selling
group agreements with Dreher; (b) spouses and minor children of such persons;
(c) trustees of the Fund; (d) investment advisory clients of the Adviser; (e)
any trust, pension, profit sharing, or other benefit plan account for the
benefit of any person listed in (a), (b), (c) or (d) above; and (f) companies
exchanging shares with the Fund pursuant to a merger, acquisition or exchange
offer; and (g) clients of registered investment advisers and certified financial
planners who in each case either pay a fee for financial planning, investment
advisory or asset management services, or receive such services in connection
with the establishment of an investment account for which a comprehensive "wrap
fee" charge is imposed.

An investor may purchase shares of the Fund at net asset value, without a sales
commission, by certifying (on a form available from the Distributor) that the
amount invested represents the proceeds of redemption, within the preceding 60
days, of shares of another mutual fund as to which the investor paid a sales
commission.

Dividends and distributions paid by the Fund are reinvested in shares of the
Fund at net asset value without the payment of any sales commission, or an

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investor may elect to receive dividends and distributions in cash. See
"Dividends and Distributions."

RIGHTS OF ACCUMULATION

The reduced sales charges and offering prices set forth in the "Sales Commission
Table" may apply to subsequent purchases aggregated pursuant to a right of
accumulation privilege. With the right of accumulation privilege, investors are
permitted to purchase additional shares at the reduced sales charge and public
offering price applicable to the total of (a) the dollar amount then being
purchased, plus (b) an amount equal to the greater of (i) the then current net
asset value of aggregate holdings of shares of the Fund owned by the investor,
the investor's spouse, children of the investor or spouse for whom the investor
or spouse is custodian of such investment, Individual Retirement Account (IRA)
or other qualified plan of the investor or the investor's spouse, or any
revocable trust of which the grantor and principal beneficiary is the investor
or the investor's spouse, or (ii) the aggregate amount invested by the foregoing
in shares of the Fund. Although no sales charge or a reduced sales charge may be
applicable to a subsequent purchase, no refund of a sales charge previously paid
will be made by reason of subsequent purchases. Shareholders desiring to receive
the benefit of such right must, at the time of each purchase, give the
Distributor sufficient information to permit confirmation of qualification. See
the Application enclosed with this Prospectus for additional details.

LETTER OF INTENT

An investor intending to make additional investments in Fund shares may qualify
for reduced sales commissions by electing on the purchase application to
purchase pursuant to a Letter of Intent. The sales commission on each investment
then is computed at the rate that would apply to the intended aggregate
investment over a thirteen month period. The provisions applicable to a Letter
of Intent are set out in an appendix to this Prospectus.

NET ASSET VALUE

The net asset value per share of the Fund is determined as of the close of
regular session trading on the New York Stock Exchange (ordinarily 3:00 p.m.,
Chicago time) each day that exchange is open for trading by dividing the value
of all securities and other assets of the Fund, less its liabilities, by the
number of shares of the Fund outstanding.

Securities held by the Fund are valued on the basis of market valuation.
Securities and other assets for which market values are not readily available
are valued at a fair value as determined in good faith by a method the board of
trustees believes represents a fair value. For a more complete explanation,
please refer to the Statement of Additional Information.

HOW TO REDEEM SHARES

Shares of the Fund will be redeemed at the net asset value next determined after
receipt of a redemption request in good form on any day the New York Stock
Exchange is open for trading. Requests received after the close of regular
session trading on the New York Stock Exchange for that day (ordinarily 3:00
p.m., Chicago time) will be processed the next business day.

The redemption price per share may be more or less than the shareholder's cost
depending upon the value of the Fund's investment securities at the time of
redemption. The Fund imposes no redemption fee, although a shareholder must pay
a charge for payment of redemption proceeds by wire. An authorized dealer may
charge a fee for processing a redemption request on behalf of a shareholder.
Redemption of Fund shares is a taxable transaction.

PLEASE TELEPHONE THE FUND IF YOU HAVE ANY QUESTIONS ABOUT REQUIREMENTS FOR A
REDEMPTION BEFORE SUBMITTING A REQUEST. You may not cancel or revoke your
redemption request once your instructions have been received and accepted.

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REDEMPTION BY MAIL

A written request for redemption (and a properly endorsed share certificate, if
issued) must be received by the Fund to constitute a valid redemption request.

The redemption request must:

1. specify the number of shares or dollar amount to be redeemed, if less than
all shares are to be redeemed;

2. be signed by all owners exactly as their names appear on the account; and

3. include a signature guarantee for each signature on the redemption request
by Dreher & Associates, Inc., by a securities firm that is a member of the
New York Stock Exchange or by a bank, savings bank, credit union, savings
and loan association or other entity that is authorized by applicable state
law to guarantee signatures.

In the case of shares held by a corporation, the redemption request must be
signed in the name of the corporation by an officer whose title must be stated,
and a certified bylaw provision or resolution of the board of directors
authorizing the officer to so act may be required. In the case of a trust or
partnership, the signature must include the name of the registered shareholder
and the title of the person signing on its behalf. Under certain circumstances,
before shares can be redeemed, additional documents may be required in order to
verify the authority of the person seeking to redeem.

EXPEDITED REDEMPTION

Unless share certificates have been issued, a shareholder may have redemption
proceeds of at least $5,000 wired directly to a domestic commercial bank account
or brokerage account that the shareholder has previously designated. Normally,
such payments will be transmitted no later than the second business day
following receipt of your written redemption request (provided redemptions may
be made under the general criteria set forth below). A service charge (currently
$15) for payment of redemption proceeds by wire will be deducted from the
proceeds. The service charge will not be changed without 30 days prior written
notice to shareholders.

GENERAL

Shares of the Fund may not be redeemed until funds from the check used to
purchase the shares has been collected, which is usually no more than 15 days
after purchase. A shareholder may avoid this delay by purchasing shares in such
a way that the Fund receives immediate payment for the purchase, such as by wire
transfer of funds or payment by a certified or cashier's check. The Fund may
suspend the right of redemption under certain extraordinary circumstances in
accordance with the rules of the Securities and Exchange Commission.

Due to the relatively high cost of handling small accounts, the Fund reserves
the right, upon 60 days written notice, to redeem, at net asset value, the
shares of any shareholder (other than a retirement plan) whose account with the
Fund which is more than 12 months old has a value of less than $500, unless the
reduction in value to less than $500 was the result of market fluctuation.
Retirement plan accounts are not subject to this minimum account value
requirement. See "Shareholder Services - Retirement Plans."

Shareholders may redeem shares and later reinvest the proceeds into the Fund at
the then current net asset value (without payment of a new sales commission)
provided that the reinvestment is made within 6 months of the redemption. This
redemption-reinvestment privilege is limited to two reinvestments per person per
calendar year. This limit helps keep the Fund's asset base stable and reduces
administrative expenses. For purposes of the two reinvestment limit, accounts
under common ownership or control, including accounts with the same taxpayer
identification number, will be aggregated. The Fund reserves the right to
terminate or modify this reinvestment privilege in the future. If you sell at a
loss and reinvest within 91 days, the loss attributable to any sales charge must
be deferred for the shareholder's tax purposes.

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SHAREHOLDER SERVICES

Inquiries regarding the Fund should be addressed to Universal Capital Growth
Fund, One Oakbrook Terrace, Suite 708, Oakbrook Terrace, Illinois 60181-4793.
Telephone inquiries may be made at (708) 932-3000.

SHAREHOLDER ACCOUNTS

Each shareholder of the Fund receives quarterly account statements showing
transactions in shares of the Fund and the total account balance of Fund shares.
A confirmation will be sent to the shareholder upon purchase, redemption,
dividend reinvestment and change of shareholder address.

RETIREMENT PLANS

The Fund may be used as an investment for Individual Retirement Accounts
("IRA"), profit sharing or pension plans, Section 401(k) plans, Section
403(b)(7) plans in the case of employees of public school systems and certain
nonprofit organizations, and certain other qualified plans. A master IRA plan
and information regarding plan administration, fees and other details are
available from Dreher and authorized broker-dealers. The Fund's minimum
investment and minimum account value requirements do not apply to retirement
plan accounts.

AUTOMATIC INVESTMENT PLAN

Shares may be purchased by automatic monthly transfer of funds ($50 minimum per
month) from a shareholder's checking, bank money market, NOW account, or savings
account by electronic transfer through the Fund's Automatic Investment Plan.

Through the Automatic Investment Plan, the bank account designated by the
shareholder will be debited on the date selected by the shareholder or the next
business day, if the date selected is not a business day. Shares of the Fund
will be purchased on the date funds are actually received by the Fund's
custodian bank.

To sign up for the plan, new investors in the fund should complete the Automatic
Investment Plan section in the fund's application and attach a voided check to
the application. Existing shareholders of the fund may sign up for the Plan by
calling the fund or an authorized broker/dealer for a separate Automatic
Investment Plan Application.

Only an account at a domestic financial institution which is an Automated
Clearing House member may be used for the Automatic Investment Plan.
Participation in the Automatic Investment Plan may be changed or terminated only
upon written notice, which will be effective within five business days after
receipt of the notice by the Fund from the distributor or an authorized
broker/dealer. The Fund may modify or terminate the Automatic Investment Plan at
any time or charge a service fee, although no such fee currently is
contemplated. A charge (currently $15) may be imposed if an electronic transfer
does not clear. Normal sales commissions apply to the purchase of shares through
the Automatic Plan.

SYSTEMATIC WITHDRAWAL PLAN

Shareholders may request that the Fund redeem shares monthly or quarterly in
specified dollar amounts. For example, a shareholder might request that enough
shares be redeemed to pay $200 per month.

Investors may initiate the Systematic Withdrawal Plan for a non-IRA account with
an initial investment of $25,000 or more, or at any time after the initial
investment if the value of the investor's account is $25,000 or more. An IRA
account must have a balance of at least $10,000 to begin a Systematic Withdrawal
Plan. The minimum periodic withdrawal amount is $100. Withdrawal proceeds are
likely to exceed dividends and distributions paid on shares in the account and
therefore may deplete and eventually exhaust the account. The periodic payments
are proceeds of redemption and are taxable as such. A shareholder normally
should not purchase shares while participating in the systematic withdrawal plan
if the additional investment would be subject to a sales charge.

DIVIDENDS AND DISTRIBUTIONS

Shareholders may receive two kinds of distributions from the Fund: dividends and
capital gains. All

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dividends and capital gains distributions are paid in the form of additional
shares credited to the shareholder's account at the net asset value per share
next computed after the dividend or distribution is payable to shareholders
(without a sales charge) unless the shareholder requested on the account
application or in writing that distributions be made in cash. All dividends from
net investment income and net realized short-term and long-term capital gains,
if any, are paid to shareholders by the Fund at least annually. The Fund will
not change the way in which shareholders may reinvest dividends and
distributions without giving shareholders at least 30 days written notice.

If two consecutive dividend checks from the Fund are returned as undeliverable,
the undelivered dividends will be invested in additional shares of the Fund at
the current net asset value and the account will be designated as a dividend
reinvestment account.

TAXES

The Fund intends to continue to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, and thus not be subject to
federal income taxes on amounts which it distributes to shareholders.

You may realize a capital gain or capital loss when you redeem (sell) shares.
The federal tax treatment may depend on how long you owned the shares and on
your individual tax position. You may be subject to state and local taxes on
your investment in the Fund, depending on the laws of your home state and
locality.

Dividends and distributions paid by the Fund are subject to taxation as of the
date of payment, except that distributions declared in October, November or
December to shareholders of record in one of those months will be treated as
received by shareholders on December 31 of the year they are declared, provided
they are paid prior to February 1 of the next year.

You will be advised annually as to the source of your distributions for tax
purposes. If you are not subject to income taxation, you will not be required to
pay tax on amounts distributed to you.

The Fund is currently required by law to withhold 31% of reportable payments
(which may include redemptions, capital gains distributions and other taxable
distributions, if any) paid to any non-exempt shareholder who has failed to
certify to the Fund that the social security or taxpayer identification number
provided to the Fund is correct and that the shareholder is not subject to
backup withholding. Please refer to the Statement of Additional Information for
a more complete explanation.

MANAGEMENT OF THE FUND

THE TRUSTEES

The board of trustees of Universal Capital Investment Trust has overall
responsibility for the conduct of the affairs of the Fund. The trustees serve
indefinite terms of unlimited duration. The trustees appoint their own
successors, provided at least two-thirds of the trustees, after such
appointment, have been elected by the shareholders. A trustee may be removed
with or without cause upon the written declaration of a majority of the trustees
or by the declaration in writing or vote of two-thirds of the Trust's
outstanding shares.

THE ADVISER AND DISTRIBUTOR

The Fund's investments are managed by its investment adviser, Integrated
Financial Services, Inc. (the "Adviser"). The Fund's investment objective and
policies were developed by James A. Dreher, chairman of the Trust, and Nicholas
J. Biscan, president of the Trust. Mr. Dreher and Mr. Biscan have been
co-managers of the Fund's portfolio since the Fund's inception. Mr. Dreher has
been president and chief executive officer of the Adviser since 1985, and
president of Dreher & Associates, Inc., the Fund's distributor, since 1980. Mr.
Biscan has been vice-president of the Adviser since 1990 and Director of
Investment Analysis for Dreher & Associates since 1987.

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The Fund's distributor, Dreher & Associates, Inc., is an affiliate of the
Adviser and is owned by Mr. Dreher, Richard H. Burgess and Patricia M.
Ellington. Mr. Burgess and Ms. Ellington are trustees of the Trust. Dreher &
Associates, Inc. was formed in 1980 and since inception has sold over $550
million in equity and income oriented mutual funds. Mr. Dreher formed Integrated
Financial Services, Inc. in 1985. The Fund is the only mutual fund for which the
Adviser acts as investment adviser.

Subject to the overall authority of the board of trustees, the Adviser furnishes
continuous investment supervision and management to the Fund under a management
agreement and also furnishes office space, equipment and management personnel.
For these services the Adviser receives from the Fund a fee accrued daily and
paid monthly at the annual rate of 1.0% of the first $250 million of the Fund's
average daily net assets and .75% of average daily net assets in excess of $250
million. These rates are higher than those paid by most other mutual funds.

The management agreement also provides that the total annual expenses of the
Fund, exclusive of taxes, interest, extraordinary litigation expenses and
brokers' commissions and other charges relating to the purchase and sale of
securities but including fees paid to the Adviser and fees paid pursuant to the
Distribution Plan, shall not exceed the limits, if any, prescribed by any state
in which shares of the Fund are being sold or are qualified for sale, and the
Adviser has agreed to reimburse the Fund for any such expenses in excess of such
limits. In addition, the Adviser has voluntarily undertaken to limit the
ordinary operating expenses of the Fund to 2.0% of the Fund's average daily net
assets through December 31, 1996. Subject to those expense limitations, the Fund
pays all of its operating expenses not specifically assumed by the Adviser.

DISTRIBUTION PLAN

The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 whereby the Fund pays to Dreher an
annual service fee of .25% and an annual sales compensation fee of .25%, both
accrued daily and paid monthly and based on the Fund's daily net assets. In
return, Dreher bears all expenses incurred in the distribution and promotion of
the Fund's shares, including the printing of prospectuses and reports used for
sales purposes, advertisements, expenses of preparation and printing of sales
literature, and other distribution related expenses, including service fees, at
an annual rate of up to .25% and distribution fees for ongoing services by the
broker to the shareholder of up to an additional .25% of average net assets,
paid to broker-dealers who have executed selling group agreements with Dreher.
The expenses incurred by Dreher may be more or less than the distribution fees
paid to Dreher by the Fund.

PERFORMANCE INFORMATION

The Fund may quote total return figures from time to time in advertisements,
sales literature and otherwise. "Total Return" for a period is the percentage
change in value during a period of an investment in Fund shares, including the
value of all shares acquired through reinvestment of all dividends and capital
gains distributions. "Average Annual Total Return" is the average annual
compounded rate of change in value represented by the Total Return for the
period. All of these calculations assume the reinvestment of dividends and
distributions in additional shares of the Fund. Quotations of Average Annual
Total Return will take into account the effect of any sales charge on the amount
available for investment; quotations of Total Return will indicate whether the
effect of the sales charge is included. Income taxes owed by the shareholder are
not taken into account. Please refer to the Statement of Additional Information
for a more complete explanation.

In advertising and sales literature, the Fund's performance may be compared with
that of market indices and other mutual funds, comparative performance as
computed in a ranking determined

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by Lipper Analytical Services, Inc., an independent service that monitors the
performance of over 2,000 mutual funds, or that of another service.

Performance of the Fund will vary from time to time, and past results are not
necessarily indicative of future results. Performance information supplied by
the Fund may not provide a basis for comparison with other investments using
different reinvestment assumptions or time periods.

More information about the Fund's performance is included in the annual report
to shareholders, which may be obtained from the Fund upon request at no charge.

PORTFOLIO TRANSACTIONS

Consistent with the Fund's policy of obtaining the best combination of net price
and execution on portfolio transactions, the trustees have determined that
portfolio transactions for the Fund may be executed through Dreher if, in the
judgment of the Adviser, the use of Dreher is likely to result in a combination
of net price and execution at least as favorable to the Fund as that available
from other qualified brokers and if, in such transactions, Dreher charges the
Fund commission rates consistent with those charged by Dreher to comparable
unaffiliated customers in similar transactions.

Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable combination
of net price and execution available and such other policies as the trustees may
determine, the Adviser may consider sales of shares of the Fund as a factor in
the selection of broker-dealers to execute portfolio transactions for the Fund.

THE TRUST AND ITS SHARES

The Fund is a series of Universal Capital Investment Trust, a Massachusetts
business trust organized on October 18, 1990, and is an open-end diversified
management investment company.

Under the terms of the Declaration of Trust, the Trust may issue an unlimited
number of shares of beneficial interest without par value in one or more series
(funds). While only shares of a single series (the Fund) are presently being
offered, the Trustees may authorize the issuance of additional funds if deemed
desirable, each with its own investment objective, policies and restrictions.
All shares issued will be fully paid and non-assessable.

The Fund's shares are entitled to participate pro rata in any dividends and
other distributions declared by the Trust's board of trustees with respect to
shares of the Fund. All shares of the Fund have equal rights in the event of
liquidation of the Fund.

Under Massachusetts law, the shareholders of the Trust may, under certain
circumstances, be held personally liable for the Trust's obligations. However,
the Trust's Declaration of Trust disclaims liability of the shareholders,
trustees, and officers of the Trust for acts or obligations of a fund, which are
binding only on the assets and property of the fund. The Declaration of Trust
requires that notice of such disclaimer be given in each agreement, obligation,
or contract entered into or executed by the Trust or the board of trustees. The
Declaration of Trust provides for indemnification out of the Fund's assets of
all losses and expenses of any Fund shareholder held personally liable for the
Fund's obligations. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is remote, since it is limited to circumstances
in which the disclaimer is inoperative and the Fund itself is unable to meet its
obligations.

VOTING RIGHTS

Each share has one vote and fractional shares have fractional votes. As a
business trust, the Trust is not required to hold annual shareholder meetings.
However, special meetings may be called (including by the holders of at least
10% of the Fund's outstanding shares) for purposes such as electing or removing
trustees, changing fundamental policies or approving an investment advisory
agreement. On any matters submitted to a vote of shareholders, shares are voted
by individual series and not in the aggregate, except when voting in the
aggregate is required by the 1940 Act or other applicable law.

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Shares of the Fund are not entitled to vote on any matter not affecting the
Fund. All shares of the Trust vote together in the election of trustees.

APPENDIX - LETTER OF INTENT

By checking "Letter of Intent" on the Application and signing the Application, a
shareholder agrees to the following:

1. ESCROW PROVISIONS. Out of the shareholder's initial purchase (or subsequent
purchases if necessary) 5% of the specified dollar amount of the Letter will be
held in escrow in the shareholder's account. All dividends and capital gains
distributions on the escrowed shares will be paid directly to the shareholder or
credited to his account.

2. COMPLETION. When the shareholder's total purchases made at offering prices
pursuant to this Letter plus his Accumulation Credit equal the amount specified
on the face of this Letter, the escrowed shares will be released.

3. RETROACTIVE PRICE ADJUSTMENT. If the shareholder's total purchases through
the Dealer pursuant to this Letter plus the shareholder's Accumulation Credit
exceed the specified amount of this Letter and an equal amount which would
qualify for a further quantity discount, a retroactive price adjustment will be
made as of the expiration date of this Letter by Distributor and the Dealer for
all purchases made pursuant to this Letter to reflect such further quantity
discount. The resulting difference in offering price will be applied to the
purchase of additional shares for the shareholder's account at the offering
price then applicable to a single purchase of the dollar amount of his total
purchases hereunder. As part of such adjustment, Dealer shall return to
Distributor the excess of commission previously allowed or paid to Dealer over
that which would be applicable to the actual amount of the shareholder's
aggregate purchases. Such adjustment does not apply to the sales charge
applicable to the shares valued in the shareholder's Accumulation Credit. If at
the time of such adjustment a broker-dealer other than the Dealer is purchasing
shares for the shareholder's account, the adjustment will be made only with
respect to those shares purchased through such broker-dealer.

4. NON-COMPLETION. The shareholder makes no commitment to purchase additional
shares. However, if total purchases pursuant to this Letter plus the
Accumulation Credit are less than the specified amount of this Letter, an
appropriate number of the escrowed shares will be redeemed in order to realize
an amount equal to the difference in the dollar amount of sales charges actually
paid and the amount of sales charges that the shareholder would have paid on
those aggregate purchases if the total of such purchases had been made at a
single time. Any escrowed shares remaining after redemption as provided in this
paragraph, together with any excess cash proceeds of the redeemed shares, will
be credited to the shareholder's account. The shareholder hereby consents to the
redemption of any or all escrowed shares as described in this paragraph.

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INVESTMENT ADVISER
Integrated Financial Services, Inc.
One Oakbrook Terrace, Suite 708
Oakbrook Terrace, Illinois 60181-4793

DISTRIBUTOR
Dreher & Associates, Inc.
One Oakbrook Terrace, Suite 708
Oakbrook Terrace, Illinois 60181-4793
(708) 932-3000

CUSTODIAN
UMB Bank, N.A.
P.O. Box 419226
Kansas City, Missouri 64141

TRANSFER AGENT
Jones and Babson, Inc.
2440 Pershing Road
Kansas City, Missouri 64108

COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois

INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, Illinois

NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED, IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS, TO ACT AS AGENT FOR UNIVERSAL
CAPITAL GROWTH FUND, NOR IS ANY PERSON AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN
SUPPLEMENTARY INFORMATION OR IN SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY
UNIVERSAL CAPITAL GROWTH FUND AND NO PERSON IS ENTITLED TO RELY UPON ANY
INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN OR THEREIN.

UNIVERSAL
CAPITAL
GROWTH
FUND
PROSPECTUS
-------------------------------------------
JANUARY 31, 1996
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<PAGE>

Statement of Additional Information January 31, 1996
UNIVERSAL CAPITAL GROWTH FUND
A series of Universal Capital Investment Trust

_____________________________________________________________________________
_____________________________________________________________________________

One Oakbrook Terrace, Suite 708
Oakbrook Terrace, Illinois 60181-4793
(708) 932-3000

This Statement of Additional Information relates to Universal Capital
Growth Fund (the "Fund"), a series of Universal Capital Investment Trust
(the "Trust"). It is not a prospectus, but provides information that
should be read in conjunction with the Fund's prospectus dated January 31,
1996 and any supplements to the prospectus, and the Fund's annual report
for the year ended September 30, 1995, a copy of which accompanies this
Statement of Additional Information. The prospectus and additional copies
of the annual report may be obtained without charge by writing or
telephoning the Fund at the address or telephone number set forth above.

_____________________________________________________________________________
_____________________________________________________________________________

TABLE OF CONTENTS

PAGE
General Information. . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Objective . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Practices . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . 7
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Investment Advisory Services . . . . . . . . . . . . . . . . . . . . 12
Distributor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Distribution Plan. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Purchasing and Redeeming Shares. . . . . . . . . . . . . . . . . . . 15
Performance Information. . . . . . . . . . . . . . . . . . . . . . . 16
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . 18
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Fund Accounting Services . . . . . . . . . . . . . . . . . . . . . . 22
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . 23
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 23

_____________________________________________________________________________
_____________________________________________________________________________

<PAGE>

GENERAL INFORMATION

Universal Capital Growth Fund began operations on January 23, 1991. The
Fund is a series of Universal Capital Investment Trust.

INVESTMENT OBJECTIVE

The Fund's investment objective is to maximize capital appreciation. The
realization of current income is not normally a consideration in the
selection of securities for investment and the Fund is not designed for
investors seeking income rather than capital appreciation. There can be no
assurance that the Fund will achieve its objective. The Fund's objective
may not be changed without shareholder approval.

INVESTMENT PRACTICES

The following policies and limitations supplement those set forth in the
Prospectus. Whenever an investment policy or limitation states a maximum
percentage of the Fund's assets that may be invested in any security or
other asset or sets forth a policy regarding quality standards, such
standard or percentage limitation shall be determined immediately after and
as a result of the Fund's acquisition of such security or other asset.
Accordingly, any later increase or decrease resulting from a change in
values, net assets or other circumstances will not be considered when
determining whether the investment complies with the Fund's investment
policies and limitations.

DEBT SECURITIES

As described in the Prospectus, the Fund may make substantial temporary
investments in fixed-income obligations provided they are of
investment-grade quality. For this purpose investment-grade obligations
are considered to be those which are rated Baa or higher by Moody's
Investors Service, Inc. or BBB or higher by Standard & Poor's Corporation.
Securities rated in the lowest of the investment grade categories are
considered to have speculative characteristics.

WARRANTS

The Fund may invest up to 5% of the value of its net assets at the time of
purchase in warrants (not including those acquired in units or attached to
other securities), including up to 2% of the value of its net assets in
warrants not listed on the New York or American stock exchanges. A warrant
is a right to purchase common stock at a specific price (usually at a
premium above the market value of the underlying common stock at time of
issuance) during a specified period of time. A warrant may have a life
ranging from less than a year to twenty years or longer, but a warrant
becomes worthless unless it is exercised or sold before expiration. In
addition, if the market price of the common stock does not exceed the
warrant's exercise price during the life of the warrant, the warrant will
expire worthless. Warrants have no voting rights, pay no dividends and
have no rights with respect to the assets of the corporation issuing them.
The percentage increase or decrease in the value of a warrant may tend to
be greater than the percentage increase or decrease in the value of the
underlying common stock.

FOREIGN SECURITIES

The Fund may invest up to 5% of its net assets in foreign securities. For
the purpose of calculating the 5% limitation, foreign securities do not
include American Depository Receipts (ADRs) or securities guaranteed by a
United States person. ADRs are receipts typically issued by an American
bank or trust company evidencing ownership of the underlying securities.
All foreign securities acquired by the Fund will be listed on a stock
exchange.

Investment in foreign securities may entail a greater degree of risk
(including risks relating to exchange rate fluctuations, tax provisions, or
expropriation of assets) than does investment in securities of domestic
issuers. Investors should understand and consider carefully the risks
involved in foreign investing. Investing in foreign securities, which are
generally denominated in foreign currencies, and

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utilization of forward foreign currency exchange contracts involve certain
considerations comprising both risks and opportunities not typically
associated with investing in U.S. securities. These considerations
include: fluctuations in exchange rates of foreign currencies; possible
imposition of exchange control regulation or currency restrictions that
would prevent cash from being brought back to the United States; less
public information with respect to issuers of securities; less governmental
supervision of stock exchanges, securities brokers, and issuers of
securities; lack of uniform accounting, auditing, and financial reporting
standards; lack of uniform settlement periods and trading practices; less
liquidity and frequently greater price volatility in foreign markets than
in the United States; possible imposition of foreign taxes; possible
investment in securities of companies in developing as well as developed
countries; and sometimes less advantageous legal, operational, and
financial protections applicable to foreign sub-custodial arrangements.

Although the Fund intends to invest in companies and governments of
countries having stable political environments, there is the possibility
of expropriation or confiscatory taxation, seizure or nationalization of
foreign bank deposits or other assets, establishment of exchange controls,
the adoption of foreign government restrictions, or other adverse
political, social or diplomatic developments that could affect investment
in these nations.

To the extent positions in portfolio securities are denominated in foreign
currencies, the Fund's investment performance is affected by the strength
or weakness of the U.S. dollar against these currencies. For example, if
the dollar falls in value relative to the Japanese yen, the dollar value of
a Japanese stock held in the portfolio will rise even though the price of
the stock remains unchanged. Conversely, if the dollar rises in value
relative to the yen, the dollar value of the Japanese stock will fall.

OPTIONS AND FUTURES

In order to provide additional revenue, or to hedge against changes in
security prices or interest rates, the Fund may purchase and write (sell)
both call options and put options on securities and on indexes and may
enter into interest rate and index futures contracts and options on such
futures contracts.

OPTIONS. An option on a security (or index) is a contract that gives the
holder, in return for a premium, the right to buy (call) from or sell (put)
to the option seller (writer) the security (or the cash value of the index)
underlying the option at a designated price during the term of the option
(normally not exceeding nine months). The Fund may write a call option
only if the option is "covered" by the Fund's holding a position, in the
underlying security or otherwise, which would allow immediate satisfaction
of its obligation. Prior to exercise or expiration, an option may be closed
out by an offsetting purchase or sale of an option of the same series.

The Fund may write puts only if they are "secured." A put is "secured" if
the Fund (i) maintains in a segregated account with the custodian cash or
U.S. Government securities or other appropriate high-grade debt obligations
with a value equal to the exercise price or (ii) holds a put on the same
underlying security at an equal or greater exercise price. When the Fund
writes a put, it receives a premium and gives the purchaser of the put the
right to sell the underlying security to the Fund at the exercise price at
any time during the option period. The Fund may purchase a put on the
underlying security to effect a "closing purchase transaction," except in
those circumstances, which are believed by the Adviser to be rare, when it
is unable to do so.

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

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There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. If the Fund were unable to close
out an option that it had purchased on a security, it would have to
exercise the option in order to realize any profit or the option would
expire and become worthless. If the Fund were unable to close out a
covered call option that it had written on a security, it would not be able
to sell the underlying security unless the option expired without exercise.
As the writer of a covered call option, the Fund foregoes, during the
option's life, the opportunity to profit from increases in the market value
of the security covering the call option above the sum of the premium and
the exercise price of the call.

If trading were suspended in an option purchased or written by the Fund,
the Fund would not be able to close out the option. If restrictions on
exercise were imposed, the Fund might be unable to exercise an option it
had purchased. Except to the extent that a call option on an index written
by the Fund is covered by an option on the same index purchased by the
Fund, movements in the index may result in a loss to the Fund; however,
such losses may be mitigated by changes in the value of the Fund's
securities during the period the option was outstanding.

The Fund will only enter into options that are standardized and traded on a
U.S. exchange or board of trade, or similar entity, or quoted on NASDAQ.
When the Fund writes an over-the-counter option, there is no assurance
that the Fund will be able to enter into a closing purchase transaction.
It may not always be possible for the Fund to negotiate a closing purchase
transaction with the same dealer for the same exercise price and expiration
date as the option which the Fund previously had written. Although the
Fund may choose to purchase an option from a different dealer, the Fund
would also be subject to the additional credit risk of such dealer. If the
Fund as a writer of a covered call option is unable to effect a closing
purchase transaction, it will not be able to sell the underlying security
until the option expires or until it delivers the underlying security upon
exercise. It is the position of the staff of the Securities and Exchange
Commission that over-the-counter options are illiquid securities.

FUTURES. The Fund may also engage in futures transactions. An interest
rate futures contract provides for the future sale by one party and
purchase by another party of a specified quantity of a financial instrument
(such as U.S. Treasury bonds) at a specified price and time. A futures
contract on a index is an agreement pursuant to which the parties agree to
take or make delivery of an amount of cash equal to the difference between
the value of the index at the close of the last trading day of the contract
and the price at which the futures contract was originally written. A
futures contract may be satisfied by delivery or purchase, as the case may
be, of the instrument or by payment of the change in the cash value of the
index. More commonly, a futures contract is closed out prior to delivery
by entering into an offsetting transaction in a matching futures contract.

The Fund may also purchase and write call and put options on futures
contracts ("futures options"). A futures option gives the holder the
right, in return for the premium paid, to assume a long position (call) or
short position (put) in a futures contract at a specified exercise price
prior to the expiration of the option. Upon exercise of a call option, the
holder acquires a long position in the futures contract and the writer is
assigned the opposite short position. In the case of a put option, the
opposite is true. Prior to exercise or expiration, a futures option may be
closed out by an offsetting purchase or sale of a futures option of the
same series.

The Fund will limit its use of futures contracts and futures options to
hedging transactions to the extent required to do so by regulatory
authorities. For example, the Fund might use futures contracts to hedge
against fluctuations in the general level of stock prices or anticipated
changes in interest rates that might adversely affect either the value of
the Fund's securities or the price of the securities that the Fund intends
to purchase. The Fund's hedging may include sales of futures contracts as
an offset against the effect of expected declines in stock prices or
increases in interest rates and purchases of futures contracts as an offset
against the effect of expected increases in stock prices or declines in
interest rates.

There are several risks associated with the use of futures contracts and
futures options for hedging purposes. There can be no guarantee that there
will be a correlation between price movements in the

B-4

<PAGE>

hedging vehicle and the portfolio securities being hedged. Successful
hedging depends on the Adviser's ability to predict correctly changes in
the level and the direction of stock prices, interest rates, and other
market factors. An incorrect prediction could result in a loss on both the
hedged securities in the Fund's portfolio and the hedging vehicle so that
the Fund's return might have been better had hedging not been attempted.
In addition, because of the low margin deposits required, futures trading
involves a high degree of leverage.(1)/ As a result, a relatively small price
movement in a futures contract may result in immediate and substantial
loss, or gain, to the investor. A purchase or sale of a futures contract
may result in losses in excess of the amount of the margin deposit.
However, in the absence of the ability to hedge, the Fund might have taken
portfolio actions in anticipation of the same events with similar
investment results but, presumably, at greater transaction costs.

There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out a futures contract or a futures option
position. This may prevent the Fund from liquidating an unfavorable
position and the Fund would be exposed to possible loss on the position
during the interval of inability to close and would continue to be required
to meet margin requirements until the position is closed. In addition,
certain of these instruments are relatively new and without a significant
trading history. As a result, there is no assurance that an active
secondary market will develop or continue to exist.

The Fund will only enter into futures contracts or futures options that are
standardized and traded on a U.S. exchange or board of trade, or similar
entity, or quoted on an automated quotation system. The Fund will not
enter into a futures contract or purchase a futures option if immediately
thereafter the initial margin deposits for futures contracts held by the
Fund plus premiums paid by it for open futures option positions, less the
amount by which any such positions are "in-the-money, (2)/ would exceed 5%
of the Fund's net assets.

PORTFOLIO TURNOVER

Although the Fund does not purchase securities with a view to rapid
turnover, there are no limitations on the length of time that portfolio
securities must be held. Portfolio turnover can occur for a number of
reasons, including general conditions in the securities markets, more
favorable investment opportunities in other securities, or other factors
relating to the desirability of holding or changing a portfolio investment.
The Fund's portfolio turnover rate for the fiscal year ended September 30,
1995 was 158%, and is expected to continue to be in excess of 100%
annually. A high rate of portfolio turnover results in increased
transaction expense, which must be borne by the Fund. High portfolio
turnover may also result in the realization of capital gains or losses
and, to the extent net short-term capital gains are realized, any
distributions resulting from such gains will be considered ordinary income
for Federal income tax purposes. See "Investment Risks" and "Dividends and
Distributions" in the Prospectus.

SHORT SALES

The Fund may sell securities short "against the box," that is: (1) enter
into short sales of securities that it currently owns or has the right to
acquire through the conversion or exchange of other securities that it
owns; and (2) enter into arrangements with the broker-dealers through which
such securities are sold

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

(1)/ "Margin" is the fraction of the value of the contract that the Fund must
actually deposit in order to invest in a futures contract. The use of
margin creates "leverage," which provides an opportunity for greater total
return but correspondingly increases the risk of loss. The margin deposit
requirement applicable to futures contracts is generally only 10% or less
of the value of the contract. For comparison, the margin deposit
requirementapplicable to securities is generally 50%. The Fund does not
purchase securities on margin.

(2)/ A call option is "in-the-money" if it can be exercised at a price less
than the current trading price of the underlying security. A put option
is "in-the-money" if it can be exercised at a price greater than the
current trading price of the underlying security.

B-5

<PAGE>

short to receive income with respect to the proceeds of short sales during
the period the Fund's short positions remain open. The Fund may make short
sales of securities only if at all times when a short position is open the
Fund owns an equal amount of such securities or securities convertible into
or exchangeable for, without payment of any further consideration,
securities of the same issue as, and equal in amount to, the securities
sold short.

In a short sale against the box, the Fund does not deliver from its
portfolio the securities sold and does not receive immediately the proceeds
from the short sale. Instead, the Fund borrows the securities sold short
from a broker-dealer through which the short sale is executed, and the
broker-dealer delivers such securities, on behalf of the Fund, to the
purchaser of such securities. Such broker-dealer is entitled to retain the
proceeds from the short sale until the Fund delivers to such broker-dealer
the securities sold short. In addition, the Fund is required to pay to the
broker-dealer the amount of any dividends paid on shares sold short.
Finally, to secure its obligation to deliver to such broker-dealer the
securities sold short, the Fund must deposit and continuously maintain in a
separate account with the Fund's custodian an equivalent amount of the
securities sold short or securities convertible into or exchangeable for
such securities without the payment of additional consideration. The Fund
is said to have a short position in the securities sold until it delivers
to the broker-dealer the securities sold, at which time the Fund receives
the proceeds of the sale. The Fund may close out a short position by
purchasing on the open market and delivering to the broker-dealer an equal
amount of the securities sold short, rather than by delivering portfolio
securities.

Short sales may protect the Fund against the risk of losses in the value of
its portfolio securities because any unrealized losses with respect to such
portfolio securities should be wholly or partially offset by a
corresponding gain in the short position. However, any potential gains in
such portfolio securities should be wholly or partially offset by a
corresponding loss in the short position. The extent to which such gains
or losses are offset will depend upon the amount of securities sold short
relative to the amount the Fund owns, either directly or indirectly, and,
in the case where the Fund owns convertible securities, changes in the
conversion premium.

Short sale transactions of the Fund involve certain risks. If the price of
the security sold short increases between the time of the short sale and
the time the Fund replaces the borrowed security, the Fund will incur a
loss and if the price declines during this period, the Fund will realize a
short-term capital gain. Any realized short-term capital gain will be
decreased, and any incurred loss increased, by the amount of transaction
costs and any premium, dividend or interest which the Fund may have to pay
in connection with such short sale. In determining the number of shares to
be sold short against the Fund's position in the convertible securities,
the anticipated fluctuation in the conversion premiums is considered. The
Fund will also incur transaction costs in connection with short sales.
Certain provisions of the Internal Revenue Code may limit the degree to
which the Fund is able to enter into short sales. See "Taxation." The
Fund does not currently expect that more than 40% of the Fund's total
assets would be involved in short sales against the box.

REPURCHASE AGREEMENTS

As part of its strategy for the temporary investment of cash, the Fund may
enter into "repurchase agreements" or "reverse repurchase agreements"
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers (as designated by the Federal Reserve
Bank of New York) in such securities. A repurchase agreement arises when
the Fund purchases a security and simultaneously agrees to resell it to the
vendor at an agreed upon future date. The resale price is greater than the
purchase price, reflecting an agreed upon market rate of return that is
effective for the period of time the Fund holds the security and that is
not related to the coupon rate on the purchased security. Such agreements
generally have maturities of no more than seven days and could be used to
permit the Fund to earn interest on assets awaiting long term investment.
The Fund requires continuous maintenance by the custodian for the Fund's
account in the Federal Reserve/Treasury Book Entry System of collateral in
an amount equal to, or in excess of, the market value of the securities
that are the subject

B-6

<PAGE>

of a repurchase agreement. The Fund does not intend to invest in
repurchase agreements maturing in more than seven days, which are
considered illiquid securities.

In a reverse repurchase agreement, the Fund temporarily transfers
possession of an instrument to another party, such as a bank or
broker-dealer, in return for cash. At the same time, the Fund agrees to
repurchase the instrument at an agreed upon time (normally within seven
days) and price, including interest payment. At all times that a reverse
repurchase agreement is outstanding, the Fund will maintain cash and liquid
securities in a segregated account at its custodian bank with a value at
least equal to its obligation under the agreement. Securities and other
assets held in the segregated account may not be sold while the reverse
repurchase agreement is outstanding, unless other suitable assets are
substituted. Reverse repurchase agreements are included in the Fund's
fundamental limitations regarding borrowings, and may only be entered into
for temporary or emergency purposes.

LENDING PORTFOLIO SECURITIES

In order to generate additional income, the Fund may from time to time lend
securities from its portfolio with a value not exceeding 5% of its net
assets, to brokers, dealers and financial institutions such as banks and
trust companies for which it will receive collateral in cash, U.S.
Government securities or irrevocable letters of credit that will be
maintained in an amount equal to at least 100% of the current market value
of the loaned securities. Cash collateral will be invested in short term
securities, which will increase the current income of the Fund. Such loans
will be terminable at any time. The Fund will have the right to regain
record ownership of loaned securities to exercise beneficial rights such as
voting rights and rights to interest or other distributions. The Fund may
pay reasonable fees to persons unaffiliated with the Fund for services in
arranging such loans. The lending of portfolio securities exposes the Fund
to the risk of failure by the borrower to return the securities involved in
such transactions, in which event the Fund may incur a loss. In an effort
to reduce that risk, the Adviser will monitor the creditworthiness of the
firms to which the Fund lends portfolio securities.

INVESTMENT RESTRICTIONS

The Fund operates under the following investment restrictions. The Fund
may not (except as indicated):

(i) as to 75% of its assets, invest more than 5% of its total assets,
taken at market value at the time of a particular purchase, in the
securities of any one issuer, except that this restriction does not apply
to securities issued or guaranteed by the United States Government or its
agencies or instrumentalities;

(ii) acquire more than 10%, taken at the time of a particular purchase, of
the outstanding voting securities of any one issuer;

(iii) act as an underwriter of securities, except insofar as it may be
deemed an underwriter for purposes of the Securities Act of 1933 on
disposition of securities acquired subject to legal or contractual
restrictions on resale;

(iv) purchase or sell real estate (although it may purchase securities
secured by real estate or interests therein, or securities issued by
companies which invest in real estate or interests therein), commodities or
commodity contracts (except that it may enter into futures and options on
futures);

(v) make loans, but this restriction shall not prevent the Fund from (a)
investing in debt obligations, (b) investing in repurchase agreements or
(c) lending portfolio securities;

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

(3)/ In addition, as long as Fund shares are qualified for sale in Texas,
the Fund will not invest in interests in real estate limited
partnerships.

B-7

<PAGE>

(vi) borrow, except that the Fund may (a) borrow up to 5% of its total
assets, taken at market value at the time of such borrowing, as a temporary
measure for extraordinary purposes, but not to increase portfolio income
(reverse repurchase agreements shall be considered borrowings for purposes
of this restriction) and (b) enter into transactions in options;

(vii) invest in a security if more than 25% of its total assets (taken at
market value at the time of a particular purchase) would be invested in the
securities of issuers in any particular industry, except that this
restriction does not apply to securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; or

(viii) issue any senior security.

Restrictions (i) through (viii) are fundamental policies and may not be
changed without the approval of a "majority" of the outstanding shares of
the Fund, which for this purpose means the approval of the lesser of (a)
more than 50% of the outstanding voting securities of the Fund or (b) 67%
or more of the outstanding shares if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at the meeting by
proxy.

In addition to the fundamental restrictions listed above, the Fund may not:

(a) invest in interests in oil, gas, or other mineral exploration or
development programs or puts, calls, straddles, spreads, or any combination
thereof (except that the Fund may enter into transactions in options,
futures and options on futures);

(b) invest in shares of other investment companies except in connection
with a merger, consolidation or acquisition of assets, or in the open
market involving no commission or profit to a sponsor or dealer (other than
the usual and customary broker's commission);(4)

(d) purchase securities on margin (except for use of such short-term
credits as are necessary for the clearance of transactions, including
transactions in options, futures and options on futures), or participate on
a joint or a joint and several basis in any trading account in securities,
except in connection with transactions in options, futures and options on
futures;

(e) make short sales of securities unless the Fund owns an equal amount of
such securities, or owns securities that are convertible or exchangeable,
without payment of further consideration, into an equal amount of such
securities;

(f) purchase or hold securities of an issuer if 5% of the securities of
such issuer are owned by those officers, directors, or trustees of the
Trust or of its investment adviser who each own beneficially more than 1/2
of 1% of the securities of that issuer;

(g) purchase illiquid securities or securities of issuers (other than
issuers of Federal agency obligations) which, including their predecessors,
have been in operation for less than three years, if by reason of such
purchase the value of the Fund's aggregate investment in such securities
would exceed 5% of its total assets;

(h) mortgage, pledge, or hypothecate in excess of 5% of the Fund's total
assets (taken at cost), except as may be necessary in connection with
options, futures, and options on futures;

- ---------------------------
(4) The Fund does not currently intend to invest in the shares of other
investment companies.

B-8

<PAGE>

(i) invest more than 5% of the Fund's net assets (valued at time of
purchase) in warrants, other than those acquired in units or attached to
other securities;(5)

(j) write an option on a security unless the option is issued by the
Options Clearing Corporation, an exchange or similar entity; or buy or sell
an option on a security unless the option is offered through the facilities
of a recognized securities association or listed on a recognized exchange
or similar entity;

(k) buy or sell a futures contract, or an option on a futures contract,
unless the futures contract or the option on the futures contract is
offered through the facilities of a recognized securities association or
listed on a recognized exchange or similar entity;

(l) invest more than 5% of its total assets in securities of issuers which
the Fund is restricted from selling to the public without registration
under the Securities Act of 1933 (6); or

(m) invest more than 5% of its net assets (valued at time of purchase) in
securities of foreign issuers (other than securities represented by
American Depository Receipts (ADRs) and securities guaranteed by a U.S.
person).

Restrictions (a) through (m) may be changed by the board of trustees
without shareholder approval.

MANAGEMENT

TRUSTEES AND OFFICERS

Set forth below is information about the trustees and officers of the Trust.

Name and Position(s) Principal Occupation(s)
Business Address with Trust During Past Five Years
- ---------------- ----------- -----------------------
<S> <C> <C>

Richard H. Burgess (1) Trustee, Compliance Field Auditor,
One Oakbrook Terrace, Suite 708 Assistant Secretary and December 31, 1995 to present,
Oakbrook Terrace, Illinois 60181 Assistant Treasurer Vice President, prior thereto,
Dreher & Associates, Inc.

Patricia M. Ellington (1) Trustee and Vice President, Dreher &
One Oakbrook Terrace, Suite 708 Vice President Associates, Inc.; Assistant
Oakbrook Terrace, Illinois 60181 Secretary and Assistant
Treasurer, Integrated Financial
Services, Inc., since 1988.

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

(5) In addition, as long as Fund shares are qualified for sale in Texas,
the Fund will not invest more than 2% of its net assets in warrants not
listed on the New York or American stock exchanges.

(6) The Fund does not currently intend to invest in restricted securities.

B-9

<PAGE>

Name and Position(s) Principal Occupation(s)
Business Address with Trust During Past Five Years
- ---------------- ----------- -----------------------
<S> <C> <C>

Dennis J. Hiffman (2) Trustee Vice Chairman, Hiffman Shaffer
180 North Wacker Drive, Suite 500 Associates, Inc. (commercial and
Chicago, Illinois 60606 industrial real estate
development, management and
brokerage).

Harold D. McAninch (2) Trustee Consultant; Interim President,
73 Bluebird Lane Dundalk Community College, June
Naperville, Illinois 60565 1994 to present; prior thereto,
President, College of DuPage
(community college).

Alan L. Zable (2) Trustee Consultant since January 1, 1995;
270 Indiana Street prior thereto, Senior Vice
Elmhurst, Illinois 60126 President and Treasurer, Midwest
Stock Exchange, Incorporated.

James A. Dreher Chairman President, Integrated Financial
One Oakbrook Terrace, Suite 708 Services, Inc., and President,
Oakbrook Terrace, Illinois 60181 Dreher & Associates, Inc.

Nicholas J. Biscan President Vice President, Integrated
One Oakbrook Terrace, Suite 708 Financial Services, Inc., since
Oakbrook Terrace, Illinois 60181 1990; Director of Investment
Analysis, Dreher & Associates,
Inc.; President, Sunrise
Resources (oil and gas
exploration and marketing).

Linda M. Kozak Secretary and Secretary and Treasurer, Dreher &
One Oakbrook Terrace, Suite 708 Treasurer Associates, Inc.; Secretary and
Oakbrook Terrace, Illinois 60181 Treasurer, Integrated Financial
Services, Inc. and Dreher
Insurance Services, Inc.

</TABLE>

- ----------------------
(1) Mr. Burgess and Ms. Ellington are trustees who are "interested
persons" of the Trust as defined in the Investment Company Act of
1940 (the "1940 Act") and are members of the executive committee of
the board of trustees which has authority during intervals between
meetings of the board of trustees to exercise the powers of the
board.

(2) Messrs. Hiffman, McAninch and Zable are members of the audit
committee of the board of trustees, which makes recommendations
regarding the selection of the Trust's independent auditors and
meets with representatives of the independent auditors to determine
the scope and review the results of each audit.

B-10

<PAGE>

At December 31, 1995, the trustees and officers of the Trust owned
beneficially 39,187 shares of the Fund, or 6% of the Fund's outstanding
shares. As of December 31, 1995, no person was known by the Fund to own
beneficially 5% or more of the outstanding shares of the Fund. The
following persons, collectively, may be deemed to own beneficially 5% or
more of the outstanding shares of the Fund:

Outstanding Shares Owned
-------------------------
Number Percent
------ -------

<S> <C> <C>
Ertl & Ertl Profit Sharing Trust 27,230 4.2%
40 South Clay Street
Hinsdale, IL 60521

Jeanette Ertl* 18,028 2.8%
644 West 58th Street
Hinsdale, IL 60521

John W. Ertl* 565 2.4%
817 West 58th Street
Hinsdale, IL 60521

Rosemarie Ertl* 5,760 0.9%
817 West 58th Street
Hinsdale, IL 60521

</TABLE>

INVESTMENT ADVISORY SERVICES

Management and investment advisory services are provided to the Fund by
Integrated Financial Services, Inc. (the "Adviser") pursuant to an
Investment Advisory Agreement (the "Agreement") dated January 14, 1991.
See the prospectus - "Management of the Fund--The Adviser and Distributor."
The Fund pays the Adviser a fee accrued daily and paid monthly at the
annual rate of 1.00% of the first $250 million of the Fund's average daily
net assets and .75% of the Fund's average daily net assets in excess of
$250 million.

The Agreement will remain in effect until January 13, 1997, and from year
to year thereafter so long as such continuation is approved at least
annually by (1) the board of trustees or the vote of a majority of the
outstanding voting securities of the Fund, and (2) a majority of the
trustees who are not interested persons of any party to the Agreement, cast
in person at a meeting called for the purpose of voting on such approval.
The Agreement may be terminated at any time, without penalty, by either the
Trust or the Adviser upon sixty days' written notice, and is automatically
terminated in the event of its assignment as defined in the 1940 Act.

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

* As trustees of the Ertl & Ertl Profit Sharing Trust (the "Trust"), each of
the named individuals may be considered a beneficial owner of the
shares held by the Trust.

B-11

<PAGE>

EXPENSES

Subject to the expense limitations described below, the Fund pays all its
own operating expenses that are not specifically assumed by the Adviser,
including (i) fees of the investment adviser; (ii) interest, taxes and any
governmental filing fees; (iii) compensation and expenses of the trustees,
other than those who are interested persons of the Trust, the investment
adviser or the distributor; (iv) legal, audit, custodial, fund accounting
and transfer agency fees and expenses; (v) fees and expenses related to the
organization of the Fund and registration and qualification of the Fund and
its shares under federal and state securities laws; (vi) expenses of
printing and mailing reports, notices and proxy material to shareholders,
and expenses incidental to meetings of shareholders; (vii) expenses of
preparing prospectuses and of printing and distributing them to existing
shareholders; (viii) insurance premiums; (ix) litigation and
indemnification expenses and other extraordinary expenses not incurred in
the normal course of the business of the Trust; (x) distribution expenses
pursuant to the Distribution Plan; and (xi) brokerage commissions and other
transaction-related costs.

The Adviser has agreed to reimburse the Fund to the extent that the total
annual expenses of the Fund, exclusive of taxes, interest, brokers'
commissions and other charges related to the purchase and sale of
securities and extraordinary litigation expenses, exceed the limits, if
any, prescribed by any state in which shares of the Fund are being sold or
are qualified for sale. The Trust believes that the most restrictive
expense limitation applicable to the Fund is currently 2-1/2% of the first
$30 million of average daily net assets of the Fund, 2% of the next $70
million of average daily net assets and 1-1/2% per year of average daily
net assets in excess of $100 million. In addition, the Adviser has
voluntarily undertaken to reimburse the Fund for any annual operating
expenses in excess of 2% of the Fund's average net assets through December
31, 1996.

During the fiscal years ended September 30, 1995, 1994, and 1993,
the Fund paid advisory fees of $59,467, $48,202, and $48,333, respectively,
but the Adviser waived fees or reimbursed expenses aggregating $39,545,
$50,672, and $44,546, respectively, pursuant to the expense limitation
undertaking.

DISTRIBUTOR

Dreher & Associates, Inc. ("Dreher"), a broker-dealer owned by Mr. Dreher
and Mr. Burgess, serves as distributor for the Fund, subject to change by a
majority of the "non-interested" trustees at any time. Dreher is located
at One Oakbrook Terrace, Suite 708, Oakbrook Terrace, Illinois 60181.
Dreher is responsible for all purchases, sales, redemptions and other
transfers of shares of the Fund without any charge to the Fund except the
fees paid to Dreher under the Distribution Plan. Dreher is also
responsible for all expenses incurred in connection with its performance of
services for the Fund, including, but not limited to, personnel, office
space and equipment, telephone, postage and stationery expenses. Dreher
receives commissions from sales of shares of the Fund which amounts are not
expenses of the Fund but represent sales commissions added to the net asset
value of shares purchased from the Fund.

Dreher has the exclusive right to distribute shares of the Fund in a
continuous offering through affiliated and unaffiliated dealers. The
obligation of Dreher is an agency or "best efforts" arrangement, which does
not obligate Dreher to sell any stated number of shares.

During the fiscal years ended September 30, 1995, 1994 and 1993, Dreher
received and retained commissions of $48,040, $6,210 and $9,457,
respectively.

Dreher also receives brokerage commissions for executing portfolio
transactions on behalf of the Fund. See "Portfolio Transactions."

B-12

<PAGE>

DISTRIBUTION PLAN

The Trust has adopted a plan pursuant to rule 12b-1 under the Investment
Company Act of 1940 (the "Plan"), whereby the Fund pays to Dreher &
Associates, Inc., the Fund's distributor ("Dreher"), fees accrued daily and
paid monthly at the aggregate annual rate of .50% of the Fund's average
daily net assets, consisting of a service fee of .25% of average daily net
assets and additional sales compensation of .25% of average daily net
assets.

From the payments made by the Fund to Dreher, Dreher pays service fees and
additional sales compensation to brokers that have signed selling group
agreements with Dreher and thereby participate in the distribution of Fund
shares and provide services to Fund shareholders. Payments to selling
group members are made at the same rates as the payments from the Fund to
Dreher - a service fee of .25% of the average daily net assets of the
accounts for which the selling group member performs shareholder servicing
and .25% of the average daily net asset value of those accounts as
additional sales compensation.

The board of trustees of the Trust has determined that a continuous cash
flow resulting from the sale of new shares is necessary and appropriate to
meet redemptions and to take advantage of buying opportunities without
having to make unwarranted liquidations of portfolio securities. The board
also considered that continuing growth in the size of the Fund would be in
the best interests of shareholders because increased size would allow the
Fund to realize certain economies of scale in its operations and would
likely reduce the proportionate share of expenses borne by each
shareholder. The board of trustees therefore determined that it would
benefit the Fund to have monies available for the direct distribution and
service activities of Dreher, as the Fund's distributor, in promoting the
continuous sale of the Fund's shares. The trustees, including the
non-interested trustees, concluded, in the exercise of their reasonable
business judgment and in light of their fiduciary duties, that there is a
reasonable likelihood that the Plan will benefit the Fund and its
shareholders.

The Plan has been approved by the board of trustees, including all of the
trustees who are not interested persons as defined in the 1940 Act. The
Plan must be approved annually by the board of trustees, including a
majority of the trustees who are non-interested persons of the Fund and who
have no direct or indirect financial interest in the operation of the Plan
("non-interested trustees"), by a vote cast in person at a meeting called
for that purpose. So long as the Plan is in effect, it is required that
the selection and nomination of non-interested trustees be done by
non-interested trustees. The Plan may be terminated at any time, without
penalty, by either a majority vote of such trustees or by vote of a
majority of the Fund's outstanding shares, and shall terminate
automatically in the event of any act that terminates the distribution
agreement with Dreher. Any agreement related to the Plan, including any
distribution or service agreement, may be terminated in the same manner,
except that such termination must be on not more than sixty days' written
notice to any other party to such agreement. Any such related agreement
shall terminate automatically in the event of any act that terminates the
Plan or the distribution agreement with Dreher, or in the event of any act
that constitutes the assignment of any such related agreement. Any
distributor, dealer or institution may also terminate its distribution or
service agreement at any time upon written notice.

Neither the Plan nor any distribution or service agreement may be amended
to increase materially the amount spent for distribution or service
expenses or in any other material way without approval by a majority of the
outstanding shares of the Fund, and all such material amendments to the
Plan or any distribution or service agreement must also be approved by a
majority of the trustees of the Trust, including a majority of the
non-interested trustees, by a vote cast in person at a meeting called for
the purpose of voting on any such amendment.

Dreher is required to report in writing to the board of trustees at least
quarterly on the amounts and purpose of any payments made under the Plan
and any distribution or service agreement and the amount

B-13

<PAGE>

of expenses incurred by Dreher under the Plan, and, to furnish the board
with such other information as may reasonably be requested in order to
enable the board to make an informed determination of whether the Plan
should be continued.

During the year ended September 30, 1995, the Fund made payments to Dreher
pursuant to the Plan, and Dreher paid expenses in connection with the
distribution of Fund shares as shown below:

Distribution fees paid by Fund to Dreher: $ 29,734

Distribution expenses incurred by Dreher:
Fees reallowed to brokers $ 17,771
Employee Compensation 13,333
Printing - Quarterly reports to brokers 2,050
Printing - Prospectus 2,130
Printing - Other 2,819
Postage 402
Other marketing expenses 184

Total Expenses $ 38,104

PURCHASING AND REDEEMING SHARES

Purchases and redemptions are discussed in the Fund's prospectus under the
headings "How to Purchase Shares" and "How to Redeem Shares." All of that
information is incorporated herein by reference.

NET ASSET VALUE. For purposes of this computation, portfolio securities,
including options, that are traded on a national securities exchange or in
the over-the-counter market are valued at the last current reported sales
price, or lacking any current reported sale on that day, at the mean of the
most recently quoted bid and asked prices. Each outstanding futures
contract is valued at the official settlement price for the contract on the
exchange on which the contract is traded, except that if the market price
of the contract has increased or decreased by the maximum amount permitted
on the valuation date ("up or down the limit"), the contract is valued at a
fair value as described below. Short-term obligations with maturities of
60 days or less are valued at amortized cost.

When market quotations are not readily available for the Fund's securities,
such securities are valued at a fair value following procedures approved by
the board of trustees. These procedures include determining fair value on
the basis of valuations furnished by pricing services approved by the board
of trustees, which include market transactions for comparable securities
and various relationships between securities which are generally recognized
by institutional traders, as well as on the basis of appraisals received
from a pricing service using a computerized matrix system, or appraisals
derived from information concerning the securities or similar securities
received from recognized dealers in those securities.

The Fund's net asset value is determined only on days on which the New York
Stock Exchange is open for trading. That Exchange is regularly closed on
Saturdays and Sundays and on New Year's Day, the third Monday in February,
Good Friday, the last Monday in May, Independence Day, Labor Day,
Thanksgiving and Christmas. If one of these holidays falls on a Saturday
or Sunday, the Exchange will be closed on the preceding Friday or the
following Monday, respectively.

B-14

<PAGE>

REDEMPTION IN KIND. The Fund has elected to be governed by Rule 18f-1
under the Investment Company Act of 1940 pursuant to which it is obligated
to redeem shares solely in cash up to the lesser of $250,000 or 1% of the
net asset value of the Fund during any 90-day period for any one
shareholder. Redemptions in excess of these amounts will normally be paid
in cash, but may be paid wholly or partly by a distribution in kind of
securities.

PERFORMANCE INFORMATION

From time to time the Fund may quote total return figures. "Total Return"
for a period is the percentage change in value during a period of an
investment in Fund shares, including the value of shares acquired through
reinvestment of all dividends and capital gains distributions. Total
Return may also be described as the cumulative percentage change in value,
assuming reinvestment of all dividends and distributions. "Average Annual
Total Return" is the average annual compounded rate of change in value
represented by the Total Return for the period.

Average Annual Total Return will be computed as follows:

ERV = P(1+T)n
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
investment made at the beginning of the period,
at the end of the period (or fractional portion
thereof)

The figures quoted will assume reinvestment of all dividends and
distributions. Quotations of Average Annual Total Return will take into
account the effect of any sales charge on the amount available for
investment or redemption, at the maximum rate in effect on the date of the
quotation; quotations of Total Return will indicate whether or not the
effect of the sales charge is included. Income taxes payable by
shareholders will not be taken into account. For example, Average Annual
Total Return and Total Return for the Fund for various periods ended
September 30, 1995 are shown below:

Total Return Total Return
Average Annual with without
Period Total Return Sales Charge Sales Charge
------ ------------ ------------ ------------
<S> <C> <C> <C>

1 year............................. 35.8% 35.8% 37.9%
3 years............................ 17.9% 63.7% 66.2%
Life of fund....................... 14.7% 90.5% 93.4%
(beginning January 22, 1991)

</TABLE>

B-15

<PAGE>

The performance of the Fund is a result of conditions in the securities
markets, portfolio management, and operating expenses. Although
information such as yield and total return is useful in reviewing the
Fund's performance and in providing some basis for comparison with other
investment alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time periods.

In advertising and sales literature, the Fund's performance may be compared
with that of market indices and other mutual funds. The Fund might also
use comparative performance as computed in a ranking determined by Lipper
Analytical Services, Inc. ("Lipper"), an independent service that monitors
the performance of over 2,000 mutual funds, or that of another service.

In advertising and sales literature, the performance of the Fund may be
compared with that of other mutual funds, indexes or averages of other
mutual funds, indexes of related financial assets or data, and other
competing investment and deposit products available from or through other
financial institutions. The composition of these indexes or averages
differs from that of the Fund. Comparison of the Fund to an alternative
investment should consider differences in features and expected performance.

All of the indexes and averages noted below will be obtained from the
indicated sources or reporting services, which the Fund generally believes
to be accurate. The Fund may also note its mention in newspapers,
magazines, or other media from time to time. However, the Fund assumes no
responsibility for the accuracy of such data.

The Fund may compare its performance to the Consumer Price Index (All
Urban), a widely recognized measure of inflation. The performance of the
Fund may also be compared to the following indexes or averages:

<TABLE>

<S> <C>
Dow-Jones Industrial Average New York Stock Exchange Composite Index
Standard & Poor's 500 Stock Index American Stock Exchange Composite Index
Standard & Poor's 400 Industrials NASDAQ Composite
Wilshire 5000 NASDAQ Industrials
(These indexes are widely recognized indicators (These indexes generally reflect the
of general U.S. stock market results.) performance of stocks traded in the
indicated markets.)

</TABLE>

In addition, the Fund may compare its performance to:

Value Line Index
(Widely recognized indicator of the
performance of small- and medium-
sized company stocks.)
Lipper Capital Appreciation Fund Average
Lipper Growth Funds Average
Lipper Small Company Growth Funds Average
Lipper General Equity Funds Average
Lipper Equity Funds Average
Lipper Small Company Growth Fund Index

Lipper Small Company Growth Fund Index reflects the net asset value
weighted total return of the largest thirty growth funds as calculated and
published by Lipper.

B-16
<PAGE>

The Lipper averages are unweighted averages of total return performance of
mutual funds as classified, calculated and published by Lipper. The Fund
may also use comparative performance as computed in a ranking by Lipper or
category averages and rankings provided by another independent service.
Should Lipper or another service reclassify the Fund to a different
category or develop (and place the Fund into) a new category, the Fund may
compare its performance or ranking against other funds in the newly
assigned category, as published by the service. Moreover, the Fund may
compare its performance or ranking against all funds tracked by Lipper or
another independent service.

To illustrate the historical returns on various types of financial assets,
the Fund may use historical data provided by Ibbotson Associates, Inc.
("Ibbotson"), a Chicago-based investment firm. Ibbotson constructs (or
obtains) very long-term (since 1926) total return data (including, for
example, total return indexes, total return percentages, average annual
total returns and standard deviations of such returns) for the following
asset types:

Common stocks
Small company stocks
Long-term corporate bonds
Long-term government bonds
Intermediate-term government bonds
U.S. Treasury bills
Consumer Price Index

PORTFOLIO TRANSACTIONS

See "Management of the Fund - The Adviser and Distributors" and "Portfolio
Transactions" in the Prospectus.

Portfolio transactions on behalf of the Fund effected on stock exchanges
involve the payment of negotiated brokerage commissions. There is
generally no stated commission in the case of securities traded in the
over-the-counter markets, but the price paid by the Fund usually includes
an undisclosed dealer commission or mark-up. In underwritten offerings,
the price paid by the Fund includes a disclosed, fixed commission or
discount retained by the underwriter or dealer.

In executing portfolio transactions, the Adviser uses its best efforts to
obtain for the Fund the most favorable price and execution available. In
seeking the most favorable price and execution, the Adviser considers all
factors it deems relevant, including price, the size of the transaction,
the nature of the market for the security, the amount of commission, the
timing of the transaction taking into account market prices and trends, the
execution capability of the broker-dealer and the quality of service
rendered by the broker-dealer in other transactions.

The trustees have determined that portfolio transactions for the Fund may
be executed through Dreher if, in the judgment of the Adviser, the use of
Dreher is likely to result in prices and execution at least as favorable to
the Fund as those available from other qualified brokers and if, in such
transactions, Dreher charges the Fund commission rates consistent with
those charged by Dreher to comparable unaffiliated customers in similar
transactions. The board of trustees, including a majority of the trustees
who are not "interested" trustees, has adopted procedures that are
reasonably designed to provide that any commissions, fees or other
remuneration paid to Dreher are consistent with the foregoing standard.
The Fund will not effect principal transactions with Dreher. It is expected
that all or a significant portion of the Fund's portfolio transactions will
be executed through Dreher. In executing portfolio transactions through
Dreher, the Fund will be subject to, and intends fully to comply with,
section 17(e) of the Investment Company Act of 1940 and the rules
thereunder.

B-17

<PAGE>

During the years ended September 30, 1995, 1994 and 1993, the Fund paid
total brokerage commissions on purchases and sales of securities (not
including the gross underwriting spread on securities purchased in
underwritten offerings) of $14,032, $12,619 and $15,575, respectively, all
of which was paid to Dreher, which executed all of the Fund's transactions
as to which commissions were paid.

TAXATION

The following is only a summary of certain tax considerations affecting the
Fund and its shareholders. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here is not intended as a substitute for careful tax planning.
Investors are urged to consult their tax advisers with specific reference
to their own tax situations.

QUALIFICATION AS A REGULATED INVESTMENT COMPANY. The Fund intends to
continue to qualify, as it did in its last fiscal year, as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). As a regulated investment company, the Fund will
be exempt from Federal income tax on its net investment income and capital
gains that it distributes to shareholders, provided that it distributes at
least 90% of its investment company taxable income (net investment income
and the excess of net short-term capital gain over net long-term capital
loss) for the year (the "Distribution Requirement") and satisfies certain
other requirements of the Code described below. Distributions of
investment company taxable income made during the taxable year or, under
certain specified circumstances, after the close of the taxable year will
satisfy the Distribution Requirement.

In addition to satisfaction of the Distribution Requirement, the Fund must
(1) derive at least 90% of its gross income from dividends, interest,
certain payments with respect to securities loans, gains from the sale or
other disposition of stock or securities and other income derived with
respect to its business of investing in such stock or securities (the
"Income Requirement"); and (2) derive less than 30% of its gross income
(exclusive of certain offsetting gains from "designated hedge" transactions
that are described below) from the sale or other disposition of stock,
securities (as defined in Section 2(a)(36) of the 1940 Act) or options held
for less than three months (the "Short-Short Test").

In addition, the Fund must diversify its holdings so that, at the close of
each quarter of its taxable year, at least 50% of the value of its assets
consists of cash and cash items, U.S. Government securities, securities of
other regulated investment companies, and securities of other issuers (as
to which the Fund has not invested more than 5% of the value of its total
assets in securities of such issuer and as to which the Fund does not hold
more than 10% of the outstanding voting securities of such issuer), and no
more than 25% of the value of its total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or of two or more
issuers which the Fund controls and which are engaged in the same or
similar trades or businesses (the "Diversification Requirement"). This
Diversification Requirement is in addition to the diversification standard
the Fund must meet under fundamental investment restriction (i). See
"Investment Restrictions."

Because of the Short-Short Test, the Fund may have to limit the sale of
appreciated (but not depreciated) securities that it has held for less than
three months. The short sale (including for this purpose the acquisition
of a put option) of (1) stock or securities held on the date of the short
sale or acquired after the short sale and on or before the date of closing
thereof or (2) stock or securities which are "substantially identical" to
stock or securities held on the date of the short sale or acquired after
the short sale and on or before the date of the closing thereof may reduce
the holding period of such stock or securities for purposes of the
Short-Short Test.

B-18

<PAGE>

Any increase in value of a position that is part of a "designated hedge"
will be offset by any decrease in value (whether realized or not) of the
offsetting hedging position during the period of such hedge for purposes of
the Short-Short Test. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of the Short-Short
Test. The Fund anticipates engaging in hedging transactions that qualify
as designated hedges. However, because of the failure of the U.S. Treasury
to promulgate regulations as authorized by the Code, it is not clear at the
present time whether this treatment will be available to all of the Fund's
hedging transactions. To the extent the Fund's transactions do not qualify
as designated hedges, the Fund's investments in short sales, options or
other transactions may be limited.

The Fund's option and hedging activities are subject to special provisions
of the Code that may, among other things, limit the use of losses of the
Fund and affect the holding period of the securities held by the Fund and
the nature of the income realized by the Fund. These provisions may also
require the Fund to mark-to-market some of the positions in its portfolio
(i.e., treat them as if they were closed out), which may cause the Fund to
recognize income without the cash to distribute such income. The Fund and
its shareholders may recognize taxable income as a result of the Fund's
hedging activities, a portion of which may be treated as long-term capital
gains. The Fund will monitor its transactions and may make certain tax
elections in order to mitigate the effect of these rules and prevent
disqualification of the Fund as a regulated investment company.

TAXATION OF DISTRIBUTIONS. The Fund distributes substantially all of its
net investment income and net short-term capital gains for any taxable
(i.e., fiscal) year. Distributions will be taxable to shareholders as
described below, regardless of whether such distributions are paid in cash
or are reinvested in shares. Shareholders receiving a distribution from
the Fund in the form of additional shares will generally be treated as
receiving a taxable distribution in an amount equal to the fair market
value of the shares received on the distribution date and will take a tax
basis for such shares equivalent to the amount deemed to have been
distributed to them. The Fund intends to distribute to shareholders its
excess of net long-term capital gain over net short-term capital loss ("net
capital gain") for each taxable year as a capital gain dividend. A capital
gain dividend will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares,
whether the net capital gain distributed by the Fund was recognized prior
to the date on which a shareholder acquired shares and whether the
distribution was paid in cash or reinvested in shares. The aggregate
amount of distributions designated by the Fund as capital gain dividends
may not exceed the net capital gain of the Fund for any taxable year,
determined by excluding any net capital loss or net long-term capital loss
attributable to transactions occurring after October 31 of such year and by
treating any such loss as if it arose on the first day of the following
taxable year.

Dividends (whether received in cash or reinvested in shares) will generally
be subject to taxation when received. Dividends declared in October,
November or December of any year accruing to shareholders of record on a
specified date in such a month, however, will be deemed to have been
received by the shareholders and paid by the Fund on December 31 of such
year, if such dividends are paid during January of the following year.

The Fund is required in certain cases to withhold and remit to the United
States Treasury 31% of dividends paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all,
(2) who is subject to backup withholding by the Internal Revenue Service
for failure to report the receipt of interest or dividend income properly,
or (3) who has failed to certify to the Fund that such shareholder is not
subject to backup withholding or that such shareholder is an "exempt
recipient."

Shareholders will be advised annually as to the U.S. Federal income tax
consequences of distributions made during the year.

B-19

<PAGE>

CORPORATE INVESTORS. In the case of corporate shareholders, a portion of
Fund distributions (other than capital gain dividends) for any taxable year
generally is expected to qualify for the 70% dividends received deduction
for regular Federal income tax purposes to the extent of the gross amount
of eligible dividends received by the Fund for the year with respect to
stock that has been held for more than 45 days (more than 90 days in the
case of certain preferred stock). Legislation has been introduced from
time to time to reduce the percentage of dividends entitled to the
dividends received deduction; however, it is not known whether Congress
will consider any such legislation in the near future. The Fund's
investment policies may affect the availability of the dividends received
deduction with respect to dividends paid on certain stocks in the Fund's
portfolio. For example, the holding period of any dividend paying stock
will not be deemed to include any day more than 45 days (or more than 90
days in the case of certain preferred stock) after the date on which the
stock becomes ex-dividend or any period in which the Fund holds a put
option on, has contracted to sell, or has made but not closed a short sale
of, "substantially identical" stock or securities. Convertible bonds or
convertible preferred stock may be deemed "substantially identical" to
common stock for purposes of this rule. The Fund will provide a statement
annually to shareholders of the amount of dividends eligible for the
dividends received deduction.

Corporate investors should also note that although the dividends received
deduction is available to reduce regular corporate Federal income tax
liability, any amount so deducted may increase the tax base upon which the
corporate alternative minimum tax and environmental tax is imposed.

CUSTODIAN

United Missouri Bank, N.A. is the custodian for the Trust. It is
responsible for holding all cash and securities of the Fund, directly or
through a book entry system, delivering and receiving payment for
securities sold by the Fund, receiving and paying for securities purchased
by the Fund, collecting income from investments of the Fund and performing
other duties, all as directed by authorized persons of the Trust. The
custodian does not exercise any supervisory functions in such matters as
the purchase and sale of securities by the Fund, payment of dividends or
payment of expenses of the Fund.

TRANSFER AGENT

Jones and Babson, Inc. ("JBI") is the Fund's transfer agent and dividend
disbursing agent. JBI records all sales, transfers and redemptions of
shares of the Fund, disburses dividends of the Fund and performs other
recordkeeping functions. JBI is responsible for all personnel, office
space and equipment expenses related to the performance of these services
for the Fund. The Fund pays all other out-of-pocket expenses, including
postage, mailing and stationery expenses.

FUND ACCOUNTING SERVICES

United Missouri Bank, N.A. ("UMB"), the Fund's custodian, provides
financial and accounting services, including portfolio accounting and
calculation of the Fund's net asset value per share, preparation of
financial statements and creation and maintenance of the related books and
records. UMB furnishes, at its own expense, the personnel and facilities
necessary to perform its duties. UMB receives from the Fund (a) a base fee
of $600 per month and (b) a fee accrued daily and paid monthly at the
annual rate of .03% of the Fund's average daily net assets up to and
including $100 million, .02% of average daily net assets in excess of $100
million, but not more than $350 million, .01% of average daily net assets
in excess of $350 million, but not more than $1 billion, and .005% of
average daily net assets in excess of $1 billion. For the fiscal years
ended September 30, 1995, 1994 and 1993, fees paid by the Fund for
financial and accounting services totalled $11,654, $11,609 and $12,212
respectively. Fees for periods prior to April 1, 1994 were paid to the
Fund's prior accounting agent.

B-20

<PAGE>

INDEPENDENT AUDITORS

Ernst & Young, LLP, Sears Tower, 233 South Wacker Drive, Chicago, Illinois
60606, audits and reports on the Fund's annual financial statements,
reviews certain regulatory reports and the Fund's Federal income tax
returns, and performs other professional accounting, tax and advisory
services when engaged to do so by the Fund.

FINANCIAL STATEMENTS

The Fund's annual report to shareholders for the year ended September 30,
1995, a copy of which accompanies this statement of additional information,
contains financial statements, notes thereto, supplementary information
entitled "Financial Highlights" and a report of independent auditors, all
of which (but no other part of the annual report) is incorporated herein by
reference.

B-21