ADVISORS INNER CIRCLE FUND, 497, 1999-05-26

ADVISORS INNER CIRCLE FUND
497, 1999-05-26

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THE ADVISORS' INNER CIRCLE FUND

HGK MID CAP VALUE FUND

SUPPLEMENT DATED MAY 24, 1999 TO THE PROSPECTUS DATED MAY 24, 1999

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

The HGK Mid Cap Value Fund has not yet commenced the continuous offering of its
shares.

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.

HGK-A-006-01

<PAGE>

HGK EQUITY VALUE FUND
HGK MID CAP VALUE FUND

Investment Adviser:
HGK ASSET MANAGEMENT, INC.

PROSPECTUS
MAY 24, 1999

THE ADVISORS' INNER CIRCLE FUND

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED ANY FUND SHARES OR
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.

IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.

<PAGE>

HOW TO READ THIS PROSPECTUS

The HGK Equity Value Fund and HGK Mid Cap Value Fund are separate series of the
Advisors' Inner Circle Fund, a mutual fund family that offers shares in separate
investment portfolios (Funds). The portfolios have individual investment goals
and strategies. This prospectus gives you important information about the Funds
that you should know before investing. Please read this prospectus and keep it
for future reference.

This prospectus has been arranged into different sections so that you can easily
review this important information. On the next page, there is some general
information you should know about risk and return which is common to each Fund.
For more detailed information about the Funds, please see:

PAGE
----

HGK EQUITY VALUE FUND....................................... 4

FUND FEES AND EXPENSES...................................... 5

HGK MID CAP VALUE FUND...................................... 6

FUND FEES AND EXPENSES...................................... 7

MORE INFORMATION ABOUT RISK................................. 8

EACH FUND'S OTHER INVESTMENTS............................... 8

INVESTMENT ADVISER.......................................... 8

PORTFOLIO MANAGERS.......................................... 8

THE ADVISER'S PAST PERFORMANCE.............................. 9

PURCHASING, SELLING AND EXCHANGING FUND SHARES.............. 10

DIVIDENDS AND DISTRIBUTIONS................................. 13

TAXES....................................................... 13

HOW TO OBTAIN MORE INFORMATION ABOUT THE HGK FUNDS.......... Back Cover

2
<PAGE>

INTRODUCTION -- INFORMATION COMMON TO BOTH FUNDS

Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.

Each Fund has its own investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help each
Fund achieve its goal. Still, investing in each Fund involves risk and there is
no guarantee that a Fund will achieve its goal. An investment manager's
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. In fact, no matter how good
a job an investment manager does, you could lose money on your investment in the
Fund, just as you could with other investments.

The value of your investment in a Fund is based on the market value of the
securities the Fund holds. These prices change daily due to economic and other
events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities a Fund owns and the markets in which they trade. The
effect on a Fund of a change in the value of a single security will depend on
how widely the Fund diversifies its holdings.

EQUITY RISK

Each Fund principally invests (at least 65% of its assets) in the types of
equity securities described in its respective investment strategy. Equity
securities include public and privately issued equity securities, common and
preferred stocks, warrants, rights to subscribe to common stock and convertible
securities. Investments in equity securities in general are subject to market
risks that may cause their prices to fluctuate over time. The value of
securities convertible into equity securities, such as warrants or convertible
debt, is also affected by prevailing interest rates, the credit quality of the
issuer and any call provision.

Fluctuations in the value of equity securities in which a mutual fund invests
will cause a Fund's net asset value to fluctuate. Historically, the equity
markets have moved in cycles, and the value of the Fund's equity securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund. An investment in a Fund may be more
suitable for long-term investors who can bear the risk of these share price
fluctuations.

3
<PAGE>

HGK EQUITY VALUE FUND

FUND SUMMARY

<TABLE>

<S> <C>
Investment Goal Long-term capital appreciation

Investment Focus Large capitalization U.S. common stocks

Share Price Volatility Medium

Principal Investment Strategy Investing in common stocks of large-sized
companies which are undervalued relative to
their ability to generate cash flows

Investor Profile Investors who seek long-term capital
appreciation and who are willing to bear
the risks of investing in equity securities
</TABLE>

INVESTMENT STRATEGY OF THE HGK EQUITY VALUE FUND

The Fund invests primarily in common stocks of established U.S. companies with
large market capitalizations (in excess of $5 billion) that exhibit value
characteristics. In choosing investments for the Fund, the Adviser identifies
value through in-depth cash flow analysis, selecting those companies that
exhibit improving cash flow return on investment and that currently trade at a
price below the present value of their discounted cash flows. The Adviser's
process seeks to eliminate the accounting distortions inherent in financial
statements and allow comparisons between companies based on their ability to
generate cash flow for a given level of invested capital. The Adviser also
incorporates traditional "value criteria," such as price/earnings ratios, to
reinforce and enhance the investment selection process.

The Adviser employs a sell discipline for individual stocks based on a
discounted cash flow model. Using consensus earnings estimates and historical
asset growth rates, a model of future cash flows is constructed with a duration
based on a company's average asset life and a residual value comprised of cash,
land, accounts receivable, and inventories. A company-specific discount rate is
then applied to the cash flows and residual value, resulting in a present value
for the stock. When a stock's present value reaches its market price, it becomes
a candidate for sale.

The Adviser seeks to keep the Fund well-diversified and exposed to all major
market sectors (such as technology, consumer staples, etc.) in the Standard &
Poor's Composite 500 Index (S&P 500) and will overweight sectors which it
believes are undervalued. The Adviser will attempt to avoid overweighting the
Fund's position in any specific sector beyond 150% of the weighting that sector
has in the S&P 500. Conversely, for sectors that it believes are overvalued, the
Adviser will attempt to avoid underweighting the Fund's position in any specific
sector below 50% of the weighting that sector has in the S&P 500.

<PAGE>

PRINCIPAL RISKS OF INVESTING IN THE HGK EQUITY VALUE FUND

The Fund is subject to the risk that its market segment, large capitalization
value stocks, may underperform other equity market segments or the equity
markets as a whole.

PERFORMANCE INFORMATION

The Fund is new and did not have performance information at the time this
prospectus was printed.

FUND FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

<TABLE>
<S> <C>
- --------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)*............................ 5.50%
Maximum Deferred Sales Charge (Load) (as a percentage of net
asset value).............................................. None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
and other Distributions (as a percentage of offering
price).................................................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable)............................................... None
Exchange Fee................................................ None
- --------------------------------------------------------------------------
</TABLE>

* This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*

<TABLE>
<S> <C>
- --------------------------------------------------------------------------
Investment Advisory Fees.................................... .90%
Distribution and Service (12b-1) Fees....................... .25%
Other Expenses.............................................. 1.03%
- --------------------------------------------------------------------------
Total Annual Fund Operating Expenses........................ 2.18%
Fee Waivers and Expense Reimbursements...................... .68%
- --------------------------------------------------------------------------
Net Expenses................................................ 1.50%
</TABLE>

* The Fund's Adviser has contractually agreed to waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 1.50% for a
period of one year from the date of this prospectus. Other Expenses are
estimated. For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."

Example

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.

The Example also assumes that each year your investment has a 5% return and Fund
operating expenses remain the same. Although your actual costs and returns might
be different, your estimated costs of investing $10,000 in the Fund would be:

1 YEAR 3 YEARS
------ -------
$694 $1,133

<PAGE>

HGK MID CAP VALUE FUND

FUND SUMMARY

<TABLE>

<S> <C>
Investment Goal Long-term capital appreciation

Investment Focus Medium capitalization U.S. common stocks

Share Price Volatility High

Principal Investment Strategy Investing in common stocks of medium-sized
U.S. companies which are undervalued
relative to their ability to generate cash
flows

Investor Profile Investors who seek long-term capital
appreciation and who are willing to bear
the risks of investing in equity securities
of medium-sized companies
</TABLE>

INVESTMENT STRATEGY OF THE HGK MID CAP VALUE FUND

The Fund invests primarily in common stocks of established U.S. companies with
medium market capitalizations (between $1 billion and $5 billion) that exhibit
value characteristics. In choosing investments for the Fund, the Adviser
identifies value through in-depth cash flow analysis, selecting those companies
that exhibit improving cash flow return on investment and that trade at a price
below the present value of their discounted cash flows. The Adviser's process
seeks to eliminate the accounting distortions inherent in financial statements
and allow comparisons between companies based on their ability to generate cash
flow for a given level of invested capital. The Adviser also incorporates
traditional "value criteria," such as price/earnings ratios, to reinforce and
enhance the investment selection process.

The Adviser seeks to keep the Fund well-diversified and exposed to all major
market sectors (such as technology, consumer staples, etc.) represented in the
broad market and will overweight sectors which it believes are undervalued. The
Adviser will attempt to avoid significant overweighting or underweighting of the
Fund's position in any specific sector.

PRINCIPAL RISKS OF INVESTING IN THE HGK MID CAP VALUE FUND

The medium capitalization companies the Fund invests in may be more vulnerable
to adverse business or economic events than larger, more established companies.
In particular, these medium-sized companies may have limited product lines,
markets and financial resources, and may depend upon a relatively small
management group. Therefore, medium capitalization stocks may be more volatile
than those of larger companies. These securities may be traded over-the-counter
or listed on an exchange and may or may not pay dividends.

<PAGE>

The Fund is also subject to the risk that its market segment, medium
capitalization value stocks, may underperform other equity market segments or
the equity markets as a whole.

PERFORMANCE INFORMATION

The Fund is new and did not have performance information at the time this
prospectus was printed.

FUND FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.

SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)

* This sales charge varies depending upon how much you invest. See "Purchasing
Fund Shares."

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)*

Example

1 YEAR 3 YEARS
------ -------
$694 $1,133

<PAGE>

MORE INFORMATION ABOUT RISK

YEAR 2000 RISK -- The Funds depend on the smooth functioning of computer systems
in almost every aspect of their business. Like other mutual funds, businesses
and individuals around the world, the Funds could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000, and distinguish between the year 2000 and the year
1900. The Funds have asked their service providers whether they expect to have
their computer systems adjusted for the year 2000 transition, and are seeking
assurances from each service provider that they are devoting significant
resources to prevent material adverse consequences to the Funds. While it is
likely that such assurances will be obtained, the Funds and their shareholders
may experience losses if these assurances prove to be incorrect or as a result
of year 2000 computer difficulties experienced by issuers of portfolio
securities or third parties, such as custodians, banks, broker-dealers or others
with which the Funds do business.

EACH FUND'S OTHER INVESTMENTS

This prospectus describes the Funds' primary strategies, and the Funds will
normally invest in the types of securities described in this prospectus.
However, in addition to the investments and strategies described in this
prospectus, each Fund also may invest in other securities, use other strategies
and engage in other investment practices. These investments and strategies, as
well as those described in this prospectus, are described in detail in our
Statement of Additional Information.

The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic or market conditions, or
for temporary defensive or liquidity purposes, each Fund may invest up to 100%
of its assets in cash or money market instruments that would not ordinarily be
consistent with a Fund's objectives. A Fund will do so only if the Adviser
believes that the risk of loss outweighs the opportunity for capital gains. Of
course, we cannot guarantee that either Fund will achieve its investment goal.

INVESTMENT ADVISER

The Investment Adviser makes investment decisions for the Funds and continuously
reviews, supervises and administers each Fund's respective investment program.
The Board of Trustees of The Advisors' Inner Circle Fund supervises the Adviser
and establishes policies that the Adviser must follow in its management
activities.

HGK Asset Management, Inc. (HGK), serves as the Adviser to the Funds. HGK has
provided equity, fixed income and balanced asset management services for the
assets of institutional and individual investors since its inception in 1983. As
of December 31, 1998, HGK had approximately $2.1 billion in assets under
management. For its advisory services to the Funds, HGK is entitled to receive
.90% of the average daily net assets of each Fund. HGK has contractually agreed,
for a period of one year from the date of this prospectus, to waive a portion of
its fees and reimburse certain expenses for each Fund so that total operating
expenses do not exceed 1.50% of each Fund's average daily net assets.

PORTFOLIO MANAGERS

Michael Pendergast, CFA serves as a Senior Equity Portfolio Manager for HGK and
co-manages the HGK Equity Value Fund. He has more than 15 years of investment
experience. Prior to joining HGK in 1983, Mr. Pendergast served as an equity
portfolio manager at L.F. Rothchild, Unterberg, Towbin.

Paul B. Carlson, CFA serves as a Portfolio Manager for HGK and co-manages the
HGK Equity Value Fund. He has more than 10 years of investment experience. Prior
to joining HGK in 1991, Mr. Carlson served as a trading assistant at Dillon,
Read.

Arthur E. Coia, II serves as a managing director of HGK and manages the HGK Mid
Cap Value Fund. He has more than seven years of investment experience. Prior to
joining HGK in 1998, Mr. Coia managed equity accounts for a Manhattan investment
firm.

<PAGE>

THE ADVISER'S PAST PERFORMANCE

The following table represents the average annual return for all of the accounts
managed by HGK with investment goals and strategies that are substantially
similar to those of the HGK Equity Value Fund and the HGK Mid Cap Value Fund and
a comparison to each Fund's respective performance benchmark. These similarly
managed accounts are referred to as "composites." The composites were managed by
the same portfolio managers that currently manage the investments of each Fund,
respectively. The composite performance has been adjusted based on the
applicable sales charges and the estimated total operating expenses of each
Fund, based on the Adviser's contractual agreement to waive its fees and
reimburse fund expenses to limit each Fund's expenses to 1.50% of average daily
net assets. This adjustment reduces the actual performance of the composites.
The comparison of the composites to the benchmarks is meant to provide you with
a general sense of how the composites performed compared to an appropriate
broad-based equity market index. In addition, the composites were not registered
mutual funds so they were not subject to the same investment and tax
restrictions as the Funds. If they had been, the composites' performance might
have been lower. The past performance of the composites is no guarantee of the
future performance of the Funds.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN FOR
THE PERIODS ENDED 12/31/98
----------------------------------
SINCE INCEPTION
COMPOSITES/BENCHMARKS 1 YEAR 5 YEARS (10/1/90)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
HGK Equity Value Composite (reflects sales load and fees)... 7.13% 17.28% 16.56%
HGK Equity Value Composite (without sales load and fees).... 15.09% 20.48% 19.25%
Wilshire Large Cap Value Index.............................. 11.25% 19.02% 19.16%

<CAPTION>
SINCE INCEPTION
(7/1/98)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
HGK Mid Cap Value Composite (reflects sales load and
fees)....................................................... -5.86%
HGK Mid Cap Value Composite (without sales load and fees)... 0.75%
Wilshire Mid Cap 750 Index.................................. -3.77%
</TABLE>

<PAGE>

PURCHASING, SELLING AND EXCHANGING FUND SHARES

This section tells you how to buy, sell (sometimes called "redeem") and exchange
shares of the Funds.

The Funds are for individual and institutional investors.

HOW TO PURCHASE FUND SHARES

You may purchase shares directly by:

o Mail

o Telephone

o Wire, or

o Automated Clearing House (ACH).

To purchase shares directly from us, please call 1-800-932-7781, or complete and
send in the attached application. Unless you arrange to pay by wire or through
or ACH, write your check, payable in U.S. dollars, to "HGK Value Equity Fund" or
"HGK Mid Cap Equity Fund." A Fund cannot accept third-party checks, credit
cards, credit card checks or cash.

You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for their customers. If you
invest through an authorized institution, you will have to follow its
procedures, which may be different from the procedures for investing directly.
Your institution may charge a fee for its services, in addition to the fees
charged by the Fund. You will also generally have to address your corre-
spondence or questions regarding a Fund to your institution.

GENERAL INFORMATION

You may purchase shares on any day that the New York Stock Exchange is open for
business (a Business Day). Shares cannot be purchased by Federal Reserve Wire on
days when either the New York Stock Exchange or the Federal Reserve is closed.

A Fund may reject any purchase order if it determines that accepting the order
would not be in the best interests of the Fund or its shareholders.

The price per share (the offering price) will be the net asset value per share
(NAV) next determined after a Fund receives your purchase order plus, the
applicable front-end sales charge.

Each Fund calculates its NAV once each Business Day at the regularly-scheduled
close of normal trading on the New York Stock Exchange (normally, 4:00 Eastern
time). So, for you to receive the current Business Day's NAV, generally a Fund
must receive your purchase order before 4:00 Eastern time.

HOW WE CALCULATE NAV

NAV for one Fund share is the value of that share's portion of all of the net
assets in the Fund.

In calculating NAV, a Fund generally values its investment portfolio at market
price. If market prices are unavailable or a Fund thinks that they are
unreliable, fair value prices may be determined in good faith using methods
approved by the Board of Trustees.

MINIMUM PURCHASES

To purchase shares for the first time, you must invest at least $2,000 in either
Fund. There is no minimum for subsequent investments in either Fund. A Fund may
accept investments of smaller amounts at its discretion.

SYSTEMATIC INVESTMENT PLAN

If you have a checking or savings account with a bank, you may purchase shares
or either Fund automatically through regular deductions from your account in
amounts of at least $25 per month.

SALES CHARGES

FRONT-END SALES CHARGES

The offering price of Fund shares is the NAV next calculated after a Fund
receives your request, plus the front-end sales load.

The amount of any front-end sales charge included in your offering price varies,
depending on the amount of your investment:

<PAGE>

YOUR SALES YOUR SALES
CHARGE AS A CHARGE AS A
PERCENTAGE PERCENTAGE
OF OFFERING OF YOUR NET
IF YOUR INVESTMENT IS: PRICE INVESTMENT
- --------------------------------------------------------------
Less than $50,000............ 5.50% 5.82%
$50,000 but less than
$100,000.................... 4.75% 4.99%
$100,000 but less than
$250,000.................... 3.75% 3.90%
$250,000 but less than
$500,000.................... 2.75% 2.83%
$500,000 but less than
$1,000,000.................. 2.00% 2.04%
$1,000,000 and over.......... 0.00% 0.00%

WAIVER OF FRONT-END SALES CHARGE

The front-end sales charge will be waived on shares purchased:

o through reinvestment of dividends and distributions;

o by employees, and members of their immediate family, of HGK and its affiliates
and vendors;

o by employees and retirees of the Administrator or Distributor;

o by Trustees and officers of The Advisors' Inner Circle Fund;

o by all Taft-Hartley labor unions and their members and sold through HGK
(purchases made through brokers and dealers that are not affiliated with HGK
may be subject to a sales charge);

o by existing shareholders of the HGK Fixed Income Fund as of May 24, 1999; or

o by existing clients of HGK.

REDUCED SALES CHARGES

RIGHTS OF ACCUMULATION. In calculating the appropriate sales charge rate, this
right allows you to add the value of the shares you already own to the amount
that you are currently purchasing. The Fund will combine the value of your
current purchases with the current value of any shares you purchased previously
for (i) your account, (ii) your spouse's account, (iii) a joint account with
your spouse, or (iv) your minor children's trust or custodial accounts. A
fiduciary purchasing shares for the same fiduciary account, trust or estate may
also use this right of accumulation. The Fund will only consider the value of
shares purchased previously that were sold subject to a sales charge. To be
entitled to a reduced sales charge based on shares already owned, you must ask
us for the reduction at the time of purchase. You must provide the Fund with
your account number(s) and, if applicable, the account numbers for your spouse
and/or children (and provide the children's ages). The Fund may amend or
terminate this right of accumulation at any time.

LETTER OF INTENT. You may purchase shares at the sales charge rate applicable to
the total amount of the purchases you intend to make over a 13-month period. In
other words, a Letter of Intent allows you to purchase the shares over a
13-month period and receive the same sales charge as if you had purchased all
the shares at the same time. The Fund will only consider the value of shares
sold subject to a sales charge. As a result, shares of the Fund purchased with
dividends or distributions will not be included in the calculation. To be
entitled to a reduced sales charge based on shares you intend to purchase over
the 13-month period, you must send the Fund a Letter of Intent. In calculating
the total amount of purchases you may include in your letter purchases made up
to 90 days before the date of the Letter. The 13-month period begins on the date
of the first purchase, including those purchases made in the 90-day period
before the date of the Letter. Please note that the purchase price of these
prior purchases will not be adjusted.

You are not legally bound by the terms of your Letter of Intent to purchase the
amount of your shares stated in the Letter. The Letter does, however, authorize
the Fund to hold in escrow 4.0% of the total amount you intend to purchase. If
you do not complete the total intended purchase at the end of the 13-month
period, the Fund's transfer agent will redeem the necessary portion of the
escrowed shares to make up the difference between the reduced rate sales charge
(based on the amount you intended to purchase) and the sales charge that would
normally apply (based on the actual amount you purchased).

COMBINED PURCHASE/QUANTITY DISCOUNT PRIVILEGE. When calculating the appropriate
sales charge rate, the Fund will combine same day purchases of shares (that are
subject to a sales charge) made by you, your spouse and your minor children
(under age 21). This combination also

<PAGE>

applies to the shares you purchase with a Letter of Intent.

GENERAL INFORMATION ABOUT SALES CHARGES

Your securities dealer is paid a commission when you buy your shares and is paid
a servicing fee as long as you hold your shares.

From time to time, some financial institutions, including brokerage firms
affiliated with the Adviser, may be reallowed up to the entire sales charge.
Firms that receive a reallowance of the entire sales charge may be considered
underwriters for the purpose of federal securities law.

The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs for dealers, which will be paid for by the
Distributor from any sales charge it receives or from any other source available
to it. Under any such program, the Distributor may provide incentives, in the
form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of a Fund.

HOW TO SELL YOUR FUND SHARES

If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares.

If you own your shares directly, you may sell your shares on any Business Day by
contacting the Fund directly by mail or telephone at 1-800-932-7781.

If you would like to close your account, or have your sale proceeds sent to a
third party or an address other than your own, please notify the Fund in writing
and include a signature guarantee by a bank or other financial institution (a
notarized signature is not sufficient).

The sale price of each share will be the next NAV determined after the Fund
receives your request.

SYSTEMATIC WITHDRAWAL PLAN

If you have at least $50,000 in your account, you may use the systematic
withdrawal plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $100 from either Fund. The proceeds
of each withdrawal will be mailed to you by check or, if you have a checking or
savings account with a bank, electronically transferred to your account. The
Fund may waive the $50,000 minimum account size for the systematic withdrawal
plan at its discretion.

RECEIVING YOUR MONEY

Normally, we will send your sale proceeds within seven days after we receive
your request. Your proceeds can be wired to your bank account (subject to a $10
wire fee) or sent to you by check. IF YOU RECENTLY PURCHASED YOUR SHARES BY
CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY NOT BE AVAILABLE UNTIL YOUR CHECK
HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM YOUR DATE OF PURCHASE).

REDEMPTIONS IN KIND

We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Fund's remaining shareholders) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). It is highly unlikely that your shares would ever be
redeemed in kind, but if they were you would probably have to pay transaction
costs to sell the securities distributed to you, as well as taxes on any capital
gains from the sale as with any redemption.

INVOLUNTARY REDEMPTIONS OF YOUR SHARES

If your account balance drops below $2,000 because of redemptions, a Fund may
redeem your shares. But, the Fund will always give you at least 60 days' written
notice to give you time to add to your account and avoid the sale of your
shares.

SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES

A Fund may suspend your right to sell your shares if the NYSE restricts trading,
the SEC declares an emergency or for other reasons. More information about this
is in our Statement of Additional Information.

<PAGE>

HOW TO EXCHANGE YOUR SHARES

You may exchange your shares of the HGK Equity Value Fund for shares of the HGK
Mid Cap Value Fund (and vice versa) on any Business Day by contacting us
directly by mail or telephone.

You may also exchange shares through your financial institution by mail or
telephone.

IF YOU RECENTLY PURCHASED SHARES BY CHECK OR THROUGH ACH, YOU MAY NOT BE ABLE TO
EXCHANGE YOUR SHARES UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS
FROM YOUR DATE OF PURCHASE). This exchange privilege may be changed or canceled
at any time upon 60 days' notice.

When you exchange shares, you are really selling your shares and buying other
Fund shares. So, your sale price and purchase price will be based on the NAV
next calculated after the Fund receives your exchange request.

TELEPHONE TRANSACTIONS

Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although the Fund has certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, the Fund is not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you or
your financial institution transact with the Fund over the telephone, you will
generally bear the risk of any loss.

DISTRIBUTION OF FUND SHARES

Each Fund has adopted a distribution plan that allows the Fund to pay
distribution and service fees for the sale and distribution of its shares, and
for services provided to shareholders. Because these fees are paid out of a
Fund's assets continuously, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.

Distribution fees, as a percentage of average daily net assets are as follows:

HGK Equity Value Fund .25%

HGK Mid Cap Value Fund .25%

DIVIDENDS AND DISTRIBUTIONS

Each Fund distributes its income monthly and makes distributions of capital
gains, if any, at least annually. If you own Fund shares on a Fund's record
date, you will be entitled to receive the distribution.

You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after the Fund
receives your written notice. To cancel your election, simply send the Fund
written notice.

TAXES

PLEASE CONSULT YOUR TAX ADVISER REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Funds and their shareholders. This summary is based on current
tax laws, which may change.

Each Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from a Fund may be taxable whether or not you reinvest them. EACH SALE
OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT.

MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.

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================================================================================

INVESTMENT ADVISER
HGK Asset Management, Inc.
525 Washington Boulevard
Jersey City, New Jersey 07310

DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456

LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036

More information about the Funds is available without charge through the
following:

STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated May 24, 1999, includes detailed information about The Advisors'
Inner Circle Fund and the HGK Funds. The SAI is on file with the SEC and is
incorporated by reference into this prospectus. This means that the SAI, for
legal purposes, is a part of this prospectus.

ANNUAL AND SEMI-ANNUAL REPORTS
These reports list the Funds' holdings and contain information from the Funds'
managers about strategies, and recent market conditions and trends and their
impact on Fund performance. The reports also contain detailed financial
information about the Funds.

TO OBTAIN MORE INFORMATION:
BY TELEPHONE: CALL 1-800-932-7781

BY MAIL: Write to us
HGK Funds
c/o The Advisors' Inner Circle Fund
P.O. Box 419009
Kansas City, Missouri 64141-6009

BY E-MAIL: [email protected]

BY INTERNET: www.hgk.com

FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual
reports, as well as other information about The Advisors' Inner Circle Fund,
from the SEC's website ("http://www.sec.gov"). You may review and copy
documents at the SEC Public Reference Room in Washington, DC (for information
call 1-800-SEC-0330). You may request documents by mail from the SEC, upon
payment of a duplicating fee, by writing to: Securities and Exchange
Commission, Public Reference Section, Washington, DC 20549-6009. The Advisors'
Inner Circle Fund's Investment Company Act registration number is 811-6400.

HGK-F-006-01

================================================================================

PROSPECTUS

HGK
EQUITY VALUE FUND

HGK
MID CAP VALUE FUND

[LOGO]

Advised by
HGK ASSET MANAGEMENT, INC.
================================================================================

<PAGE>

Fund:
THE ADVISORS' INNER CIRCLE FUND

Portfolios:
HGK EQUITY VALUE FUND
HGK MID CAP VALUE FUND

Investment Adviser:
HGK ASSET MANAGEMENT, INC.

This Statement of Additional Information is not a prospectus and relates only to
the HGK Equity Value Fund and the HGK Mid Cap Value Fund (each a "Portfolio" and
collectively, the "Portfolios"). It is intended to provide additional
information regarding the activities and operations of The Advisors' Inner
Circle Fund (the "Fund") and the Portfolios and should be read in conjunction
with the Portfolios' Prospectus dated May 24, 1999. The Prospectus for the
Portfolios may be obtained by calling 1-800-932-7781.

TABLE OF CONTENTS

THE FUND ..................................................................S-2
INVESTMENT OBJECTIVES AND POLICIES.........................................S-2
DESCRIPTION OF PERMITTED INVESTMENTS.......................................S-3
INVESTMENT LIMITATIONS.....................................................S-13
THE ADVISER................................................................S-15
THE ADMINISTRATOR..........................................................S-16
THE DISTRIBUTOR............................................................S-17
THE TRANSFER AGENT.........................................................S-17
THE CUSTODIAN..............................................................S-18
INDEPENDENT PUBLIC ACCOUNTANTS.............................................S-18
LEGAL COUNSEL..............................................................S-18
TRUSTEES AND OFFICERS OF THE FUND..........................................S-18
PERFORMANCE INFORMATION....................................................S-21
COMPUTATION OF YIELD.......................................................S-21
CALCULATION OF TOTAL RETURN................................................S-22
PURCHASING SHARES..........................................................S-22
REDEEMING SHARES...........................................................S-22
DETERMINATION OF NET ASSET VALUE...........................................S-23
TAXES ..................................................................S-23
PORTFOLIO TRANSACTIONS.....................................................S-26
TRADING PRACTICES AND BROKERAGE............................................S-27
DESCRIPTION OF SHARES......................................................S-29
SHAREHOLDER LIABILITY......................................................S-29
LIMITATION OF TRUSTEES' LIABILITY..........................................S-29

May 24, 1999

HGK-F-007-01

<PAGE>

THE FUND

This Statement of Additional Information relates only to the HGK Equity Value
Fund and the HGK Mid Cap Value Fund (each a "Portfolio" and collectively, the
"Portfolios"). Each Portfolio is a diversified investment management company.
The Portfolios are separate series of The Advisors' Inner Circle Fund (the
"Fund"), an open-end investment management company, established under
Massachusetts law as a Massachusetts business trust under a Declaration of Trust
dated July 18, 1991. The Declaration of Trust permits the Fund to offer separate
series ("portfolios") of shares of beneficial interest ("shares"). Each
portfolio is a separate mutual fund, and each share of each portfolio represents
an equal proportionate interest in that portfolio. See "Description of Shares."
No investment in shares of a portfolio should be made without first reading that
portfolio's prospectus. Capitalized terms not defined herein are defined in the
Prospectus offering shares of the Portfolios.

Each Portfolio pays its (i) operating expenses, including fees of its service
providers, expenses of preparing prospectuses, proxy solicitation material and
reports to shareholders, costs of custodial services and registering its shares
under federal and state securities laws, pricing and insurance expenses and pays
additional expenses, brokerage costs, interest charges, taxes and organization
expenses and (ii) pro rata share of the Fund's other expenses, including audit
and legal expenses. Expenses not attributable to a specific portfolio are
allocated across all of the portfolios on the basis of relative net assets.

INVESTMENT OBJECTIVES AND POLICIES

In General

The Portfolios' investment goal is long-term capital appreciation. This goal is
fundamental, and may not be changed without the consent of shareholders. There
can be no assurance that the Portfolios will be able to achieve their investment
objectives.

The Portfolios may invest in common stocks, preferred stocks and convertible
securities of domestic companies, as well as warrants to purchase such
securities that are traded on registered exchanges or the over-the-counter
market in the United States. The Portfolios may also purchase equity securities
(including depositary receipts) and preferred stocks (including depositary
stocks convertible into common stocks) issued by foreign companies, as well as
debt securities convertible into common stock of such companies.

Although a Portfolio will normally be fully invested in equity securities
(other than as considered appropriate for cash reserves), for temporary
defensive purposes during periods when the Adviser determines that market
conditions warrant, up to 100% of a Portfolio's assets may be held from time to
time in cash or cash equivalents. In general, cash or cash equivalents will be
held in U.S. Treasury bills, high quality

S - 2

<PAGE>

commercial paper, certificates of deposit and money market instruments,
consisting of securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; certificates of deposit, time deposits, and
bankers' acceptances issued by banks or savings and loans associations having
net assets of at least $500 million as of the end of their most recent fiscal
year; commercial paper rated at the time of purchase at least A-1 by S&P or P-1
by Moody's, or unrated commercial paper determined by the Adviser to be of
comparable quality; repurchase agreements involving any of the foregoing; and,
to the extent permitted by applicable law, shares of other investment companies.

Auxiliary Policies of the Portfolios

Although not primary strategies employed by the Adviser in managing the
Portfolios, the Portfolios may engage in a number of investment practices in
order to meet their investment objectives. In this regard, the Portfolios may
invest in variable and floating rate obligations, enter into forward
commitments, purchase securities on a when-issued basis and sell securities
short against the box. The Portfolios may also purchase put and call options and
write covered call options on fixed income and equity securities, and may enter
into futures contracts (including index futures contracts), purchase options on
futures contracts, and lend its securities.

The Portfolios may purchase securities denominated in foreign currencies in
amounts up to 10% of its total assets. The Portfolios do not have a
corresponding limitation with respect to foreign securities denominated in U.S.
dollars.

It is anticipated that the annual portfolio turnover rate for the Portfolios
will not exceed 100%.

For a description of the permitted investments of the Portfolios and the
associated risk factors, see "Description of Permitted Investments."

DESCRIPTION OF PERMITTED INVESTMENTS

Bank Obligations - Bank obligations are short-term obligations issued by
U.S. and foreign banks, including bankers' acceptances, certificates of deposit,
custodial receipts, and time deposits. Eurodollar and Yankee Bank Obligations
are U.S. dollar-denominated certificates of deposit or time deposits issued
outside the U.S. by foreign branches of U.S. banks or by foreign banks.

Bankers' Acceptances - Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by a commercial bank. Bankers' acceptances are used
by corporations to finance the shipment and storage of goods. Maturities are
generally six months or less.

S - 3

<PAGE>

Certificates of Deposit - Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.

Commercial Paper - Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities.
Maturities on these issues vary from a few to 270 days.

Common and Preferred Stocks - Common and preferred stocks represent units of
ownership in a corporation. Owners of common stock typically are entitled to
vote on important matters. Owners of preferred stock ordinarily do not have
voting rights, but are entitled to dividends at a specified rate. Preferred
stock has a prior claim to common stockholders with respect to dividends.

Convertible Securities - Convertible securities are securities issued by
corporations that are exchangeable for a set number of another security at a
prestated price. The market value of a convertible security tends to move with
the market value of the underlying stock. The value of a convertible security is
also affected by prevailing interest rates, the credit quality of the issuer,
and any call option provisions.

High Risk, High Yield Convertible Securities -- Fixed income securities
(including convertible securities) rated below investment grade are often
referred to as "junk bonds." Such securities involve greater risk of default or
price declines than investment grade securities due to changes in the issuer's
creditworthiness and the outlook for economic growth. The market for these
securities may be less active, causing market price volatility and limited
liquidity in the secondary market. This may limit a Portfolio's ability to sell
such securities at their market value. In addition, the market for these
securities may also be adversely affected by legislative and regulatory
developments. Credit quality in the junk bond market can change suddenly and
unexpectedly, and even recently issued credit ratings may not fully reflect the
actual risks imposed by a particular security.

Corporate Bonds - Debt instruments issued by a private corporation, as distinct
from one issued by a governmental agency or municipality. Corporate bonds
generally have the following features: (1) they are taxable; (2) they have a par
value of $1,000; and (3) they have a term maturity. They are sometimes traded on
major exchanges.

Equity Securities - Investments in equity securities in general are subject to
market risks that may cause their prices to fluctuate over time. The value of
securities, such as warrants or convertible debt, exercisable for or convertible
into equity securities is also affected by prevailing interest rates, the credit
quality of the issuer and any call provision. Fluctuations in the value of
equity securities in which a Portfolio invests will

S - 4

<PAGE>

cause the net asset value of that Portfolio to fluctuate. An investment in
a Portfolio may therefore be more suitable for long-term investors.

The Euro - On January 1, 1999, the European Monetary Union (EMU) implemented a
new currency unit, the Euro. The countries initially converting or tieing their
currencies to the Euro include Austria, Belgium, France, Germany, Luxembourg,
the Netherlands, Ireland, Finland, Italy, Portugal, and Spain. Financial
transactions and market information, including share quotations and company
accounts, in participating countries are denominated in Euros. Approximately 46%
of the stock exchange capitalization of the total European market is now
reflected in Euros, and participating governments now issue their bonds in
Euros. Monetary policy for participating countries is now uniformly managed by a
new central bank, the European Central Bank (ECB).

Although it is not possible to predict the impact of the Euro conversion on the
Portfolios, the transition to the Euro may change the economic environment and
behavior of investors, particularly in European markets. For example, investors
may begin to view those countries participating in the EMU as a single entity,
and the Adviser may need to adapt investment strategies accordingly. The process
of implementing the Euro also may adversely affect financial markets worldwide
and may result in changes in the relative strength and value of the U.S. dollar
or other major currencies, as well as possible adverse tax consequences. The
transition to the Euro is likely to have a significant impact on fiscal and
monetary policy in the participating countries and may produce unpredictable
effects on trade and commerce generally. These resulting uncertainties could
create increased volatility in financial markets world-wide.

Fixed Income Securities - Fixed income securities are debt obligations issued by
corporations, municipalities and other borrowers. The market value of fixed
income investments will change in response to interest rate changes and other
factors. During periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during periods of rising
interest rates, the values of such securities generally decline. Moreover, while
securities with longer maturities tend to produce higher yields, the prices of
longer maturity securities are also subject to greater market fluctuations as a
result of changes in interest rates. Changes by recognized agencies in the
rating of any fixed income security and in the ability of an issuer to make
payments of interest and principal will also affect the value of these
investments. Changes in the value of portfolio securities will not affect cash
income derived from these securities but will affect the Portfolios' net asset
value.

Floating rate instruments - have a rate of interest that is set as a specific
percentage of a designated base rate (such as the prime rate) at a major
commercial bank. The Portfolios can demand payment of the obligation at all
times or at stipulated dates on short notice (not to exceed 30 days) at par plus
accrued interest. The Portfolios may use the longer of the period required
before the Portfolios are entitled to prepayment

S - 5

<PAGE>

under such obligations or the period remaining until the next interest rate
adjustment date for purposes of determining the maturity of the instrument. Such
obligations are frequently secured by letters of credit or other credit support
arrangements provided by banks. The quality of the underlying credit or of the
bank, as the case may be, must, in the Adviser's opinion be equivalent to the
long-term bond or commercial paper ratings stated in the Prospectus. The Adviser
will monitor the earning power, cash flow and liquidity ratios of the issuers of
such instruments and the ability of an issuer of a demand instrument to pay
principal and interest on demand.

Futures Contracts and Options on Futures Contracts - Futures contracts provide
for the future sale by one party and purchase by another party of a specified
amount of a specific security at a specified future time and at a specified
price. An option on a futures contract gives the purchase the right, in exchange
for a premium, to assume a position in a futures contract at a specified
exercise price during the term of the option.

A Portfolio may use futures contracts, and related options for bona fide hedging
purposes, to offset changes in the value of securities held or expected to be
acquired. They may also be used to minimize fluctuations in foreign currencies
or to gain exposure to a particular market or instrument. A Portfolio will
minimize the risk that it will be unable to close out a futures contract by only
entering into futures contracts which are traded on national futures exchanges
and for which there appears to be a liquid secondary market.

Index futures are futures contracts for various indices that are traded on
registered securities exchanges. An index futures contract obligates the seller
to deliver (and the purchaser to take) an amount of cash equal to a specific
dollar amount times the difference between the value of a specific index at the
close of the last trading day of the contract and the price at which the
agreement is made.

Although futures contracts by their terms call for actual delivery or acceptance
of the underlying securities, in most cases the contracts are closed out before
the settlement date without the making or taking of delivery. Closing out an
open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold" or "selling" a contract which has
previously been "purchased") in an identical contract to terminate the position.
Brokerage commissions are incurred when a futures contract is bought or sold.

Futures traders are required to make a good faith margin deposit in cash or
government securities with or for the account of a broker or custodian to
initiate and maintain open secondary market will exist for any particular
futures contract at any specific time. Thus, it may not be possible to close a
futures position. In the event of adverse price movements, a Portfolio would
continue to be required to make daily cash payments to maintain its required
margin. In such situations, if a Portfolio has insufficient cash, it may have to
sell portfolio securities to meet daily margin requirements at a time when it
may be disadvantageous to do so. In addition, the Portfolios may be required to
make

S - 6

<PAGE>

delivery of the instruments underlying the futures contracts they hold. The
inability to close options and futures positions also could have an adverse
impact on the ability to effectively hedge the underlying securities.

The risk of loss in trading futures contracts can be substantial, due both to
the low margin deposits required and the extremely high degree of leverage
involved in futures pricing. As a result, a relatively small price movement in a
futures contract may result in immediate and substantial loss (or gain) to a
Portfolio. For example, if at the time of purchase, 10% of the value of the
futures contract is deposited as margin, a subsequent 10% decrease in the value
of the futures contract would result in a total loss of the margin deposit,
before any deduction for the transaction costs, if the account were then closed
out. A 15% decrease would result in a loss equal to 150% of the original margin
deposit if the contract were closed out. Thus, a purchase or sale of a futures
contract may result in losses in excess of the amount invested in the contract.
However, because the Portfolios will be engaged in futures transactions only for
hedging purposes, the Adviser does not believe that the Portfolios will
generally be subject to the risks of loss frequently associated with futures
transactions. The Portfolios presumably would have sustained comparable losses
if, instead of the futures contract, they had invested in the underlying
financial instrument and sold it after the decline. The risk of loss from the
purchase of options is less as compared with the purchase or sale of futures
contracts because the maximum amount at risk is the premium paid for the option.

Utilization of futures transactions by the Portfolios does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the fund securities being hedged. It is also
possible that the Portfolios could both lose money on futures contracts and
experience a decline in value of its fund securities. There is also the risk of
loss by the Portfolios of margin deposits in the event of the bankruptcy of a
broker with whom the Portfolios have an open position in a futures contract or
related option.

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reachedin a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some futures
traders to substantial losses.

Investment Company Securities - A Portfolio's purchase of investment company
securities will result in the layering of expenses. A Portfolio is prohibited
from acquiring

S - 7

<PAGE>

the securities of other investment companies if, as a result of such
acquisition, the Portfolio owns in the aggregate (1) more than 3% of the total
outstanding voting stock of the acquired company, (2) securities issued by the
acquired company having an aggregate value of 5% of the value of the total
assets of the Portfolio, or (3) securities issued by the acquired company and
all other investment companies having an aggregate value in excess of 10% of the
value of the total assets of the Portfolio.

Illiquid Securities - Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price at which they are being
carried on the Portfolios' books. An illiquid security includes a demand
instrument with a demand notice period exceeding seven days, where there is no
secondary market for such security, and repurchase agreements with a remaining
term to maturity in excess of seven days.

Options - A Portfolio may write call options on a covered basis only, and will
not engage in option writing strategies for speculative purposes. A call option
gives the purchaser of such option the right to buy, and the writer, in this
case the Portfolio, the obligation to sell the underlying security at the
exercise price during the option period. The advantage to the Portfolios of
writing covered calls is that the Portfolios receive a premium which is
additional income. However, if the security rises in value, the Portfolios may
not fully participate in the market appreciation.

During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction is one in which the Portfolio, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written.

A closing purchase transaction cannot be effected with respect to an option once
the option writer has received an exercise notice for such option.

Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable a Portfolio to write
another call option on the underlying security with either a different exercise
price or expiration date or both. A Portfolio may realize a net gain or loss
from a closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security.

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<PAGE>

If a call option expires unexercised, a Portfolio will realize a short-term
capital gain in the amount of the premium on the option, less the commission
paid. Such a gain, however, may be offset by depreciation in the market value of
the underlying security during the option period. If a call option is exercised,
a Portfolio will realize a gain or loss from the sale of the underlying security
equal to the difference between the cost of the underlying security, and the
proceeds of the sale of the security plus the amount of the premium on the
option, less the commission paid.

The market value of a call option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security, and the time remaining until the expiration date.

The Portfolios will write call options only on a covered basis, which means that
a Portfolio will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, a Portfolio would be required to continue to hold a security which it
might otherwise wish to sell, or deliver a security it would want to hold.
Options written by the Portfolios will normally have expiration dates between
one and nine months from the date written. The exercise price of a call option
may be below, equal to, or above the current market value of the underlying
security at the time the option is written.

Repurchase Agreements -Repurchase agreements are agreements by which a
person (e.g., the Portfolios) obtains a security and simultaneously commits to
return the security to the seller (a primary securities dealer as recognized by
the Federal Reserve Bank of New York or a national member bank as defined in
Section 3(d)(1) of the Federal Deposit Insurance Act, as amended) at an agreed
upon price (including principal and interest) on an agreed upon date within a
number of days (usually not more than seven) from the date of purchase. The
resale price reflects the purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or maturity of the underlying
security. A repurchase agreement involves the obligation of the seller to pay
the agreed upon price, which obligation is, in effect, secured by the value of
the underlying security.

Repurchase agreements are considered to be loans by the Portfolios for purposes
of their investment limitations. The repurchase agreements entered into by the
Portfolios will provide that the underlying security at all times shall have a
value at least equal to 102% of the resale price stated in the agreement (the
Adviser monitors compliance with this requirement). Under all repurchase
agreements entered into by the Portfolios, the appropriate Custodian or its
agent must take possession of the underlying collateral. However, if the seller
defaults, the Portfolios could realize a loss on the sale of the underlying
security to the extent that the proceeds of the sale including accrued interest
are less than the resale price provided in the agreement including interest. In
addition, even though the Bankruptcy Code provides protection for most
repurchase agreements, if the seller should be involved in bankruptcy or
insolvency proceedings, the Portfolios

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<PAGE>

may incur delay and costs in selling the underlying security or may suffer
a loss of principal and interest if the Portfolios is treated as an unsecured
creditor and required to return the underlying security to the seller's estate.

Restricted Securities - Restricted securities are securities that may not be
sold to the public without registration under the Securities Act of 1933 (the
"1933 Act") or an exemption from registration. Permitted investments for the
Portfolios includes restricted securities. Restricted securities, including
securities eligible for re-sale under 1933 Act Rule 144A, that are determined to
be liquid are not subject to this limitation. This determination is to be made
by the Portfolios' Adviser pursuant to guidelines adopted by the Board of
Trustees. Under these guidelines, the Adviser will consider the frequency of
trades and quotes for the security, the number of dealers in, and potential
purchasers for, the securities, dealer undertakings to make a market in the
security, and the nature of the security and of the marketplace trades. In
purchasing such Restricted Securities, each Adviser intends to purchase
securities that are exempt from registration under Rule 144A under the 1933 Act.

Securities of Foreign Governments - The Portfolios may invest in U.S. dollar
denominated obligations or securities of the Government of Canada and its
provincial and local governments and U.S. dollar denominated securities issued
or guaranteed by foreign governments, their political subdivisions, agencies or
instrumentalities. Permissible investments may consist of obligations of foreign
branches of U.S. Banks and of foreign banks, including Yankee Certificates of
Deposit. In addition, the Portfolios may invest in American Depositary Receipts.
These instruments may subject the Portfolios to investment risks that differ in
some respects from those related to investments in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic developments,
the possible imposition of withholding taxes on interest or other income,
possible seizure, nationalization, or expropriation of foreign deposits, the
possible establishment of exchange controls or taxation at the source, or
the adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on such obligations. Such
investments may also entail higher custodial fees and sales commissions than
domestic investments. Foreign issuers of securities or obligations are often
subject to accounting treatment and engage in business practices different from
those respecting domestic issuers of similar securities or obligations. Foreign
branches of U.S. banks and foreign banks may be subject to less stringent
reserve requirements than those applicable to domestic branches of U.S. banks.

Securities of Foreign Issuers - There are certain risks connected with investing
in foreign securities. These include risks of adverse political and economic
developments (including possible governmental seizure or nationalization of
assets), the possible imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting requirements, the
possibility that there will be less information on such securities and their
issuers available to the public, the difficulty of obtaining or enforcing court
judgments abroad, restrictions on foreign investments in other

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jurisdictions, difficulties in effecting repatriation of capital invested
abroad, and difficulties in transaction settlements and the effect of delay on
shareholder equity. Foreign securities may be subject to foreign taxes, and may
be less marketable than comparable U.S. securities. The value of the Portfolios'
investments denominated in foreign currencies will depend on the relative
strengths of those currencies and the U.S. dollar, and the Portfolios may be
affected favorably or unfavorably by changes in the exchange rates or exchange
control regulations between foreign currencies and the U.S. dollar. Changes in
foreign currency exchange rates also may affect the value of dividends and
interest earned, gains and losses realized on the sale of securities and net
investment income and gains, if any, to be distributed to shareholders by the
Portfolios.

Securities Lending - Each Portfolio may lend securities pursuant to
agreements which require that the loans be continuously secured by collateral at
all times equal to 100% of the market value of the loaned securities which
consists of: cash, securities of the U.S. Government or its agencies, or any
combination of cash and such securities. Such loans will not be made if, as a
result, the aggregate amount of all outstanding securities loans for a Portfolio
exceed one-third of the value of the Portfolio's total assets taken at fair
market value. A Portfolio will continue to receive interest on the securities
lent while simultaneously earning interest on the investment of the cash
collateral in U.S. Government securities. However, a Portfolio will normally pay
lending fees to such broker-dealers and related expenses from the interest
earned on invested collateral. There may be risks of delay in receiving
additional collateral or risks of delay in recovery of the securities or even
loss of rights in the collateral should the borrower of the securities fail
financially. However, loans are made only to borrowers deemed by the appropriate
Adviser to be of good standing and when, in the judgment of that Adviser, the
consideration which can be earned currently from such securities loansjustifies
the attendant risk. Any loan may be terminated by either party upon reasonable
notice to the other party. The Portfolios may use the Distributor or a
broker-dealer affiliate of an Adviser as a broker in these transactions.

Time Deposits - Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time deposits with a withdrawal penalty or that
mature in more than seven days are considered to be illiquid securities.

U.S. Government Agency Obligations - U.S. Government agency obligations are
obligations issued or guaranteed by agencies or instrumentalities of the U.S.
Government. Agencies of the United States Government which issue obligations
consist of, among others, the Export Import Bank of the United States, Farmers
Home Administration, Federal Farm Credit Bank, Federal Housing Administration,
Government National Mortgage Association ("GNMA"), Maritime Administration,
Small Business Administration and The Tennessee Valley Authority. Obligations of
instrumentalities of the United States Government include securities issued by,
among

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others, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation
("FHLMC"), Federal Intermediate Credit Banks, Federal Land Banks, Fannie Mae and
the United States Postal Service as well as government trust certificates. Some
of these securities are supported by the full faith and credit of the United
States Treasury, others are supported by the right of the issuer to borrow from
the Treasury and still others are supported only by the credit of the
instrumentality. Guarantees of principal by agencies or instrumentalities of the
U.S. Government may be a guarantee of payment at the maturity of the obligation
so that in the event of a default prior to maturity there might not be a market
and thus no means of realizing the value of the obligation prior to maturity.

U.S. Treasury Obligations - U.S. Treasury obligations consist of bills, notes
and bonds issued by the U.S. Treasury and separately traded interest and
principal component parts of such obligations that are transferable through the
federal book-entry system known as Separately Traded Interest and Principal Risk
Securities.

Variable and Floating Rate Securities - Variable and floating rate
instruments involve certain obligations that may carry variable or floating
rates of interest, and may involve a conditional or unconditional demand
feature. Such instruments bear interest at rates which are not fixed, but which
vary with changes in specified market rates or indices. The interest rates on
these securities may be reset daily, weekly, quarterly, or some other reset
period, and may have a set floor or ceiling on interest rate changes. There is a
risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there is no secondary market
for such security.

Variable Rate Master Demand Notes - Variable rate master demand notes permit the
investment of fluctuating amounts at varying market rates of interest pursuant
to direct arrangements between a Portfolio, as lender, and a borrower. Such
notes provide that the interest rate on the amount outstanding varies on a
daily, weekly or monthly basis depending upon a stated short-term interest rate
index. Both the lender and the borrower have the right to reduce the amount of
outstanding indebtedness at any time. There is no secondary market for the notes
and it is not generally contemplated that such instruments will be traded. The
quality of the note or the underlying credit must, in the opinion of the
appropriate Adviser, be equivalent to the ratings applicable to permitted
investments for the particular Portfolio. The appropriate Adviser will monitor
on an ongoing basis the earning power, cash flow and liquidity ratios of the
issuers of such instruments and will similarly monitor the ability of an issuer
of a demand instrument to pay principal and interest on demand. Variable rate
master demand notes may or may not be backed by bank letters of credit.

Warrants - Warrants give holders the right, but not the obligation, to buy
shares of a company at a given price, usually higher than the market price,
during a specified period.

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<PAGE>

When-Issued and Delayed Delivery Securities - When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
The Portfolios will maintain with the Custodian a separate account with liquid
assets in an amount at least equal to these commitments. The interest rate
realized on these securities is fixed as of the purchase date and no interest
accrues to the Portfolios before settlement. These securities are subject to
market fluctuation due to changes in market interest rates and it is possible
that the market value at the time of settlement could be higher or lower than
the purchase price if the general level of interest rates has changed. Although
the Portfolios generally purchase securities on a when-issued or forward
commitment basis with the intention of actually acquiring securities for their
portfolio, the Portfolios may dispose of a when-issued security or forward
commitment prior to settlement if it deems appropriate.

Zero Coupon Obligations - Zero coupon obligations are debt obligations that do
not bear any interest, but instead are issued at a deep discount from face value
or par. The value of a zero coupon obligation increases over time to reflect the
interest accumulated. Such obligations will not result in the payment of
interest until maturity, and will have greater price volatility than similar
securities that are issued at face value or par and pay interest periodically.

INVESTMENT LIMITATIONS

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

Each Portfolio may not:

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

2. Purchase any securities which would cause 25% or more of the total assets
of a Portfolio to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry,
provided that this limitation does not apply to investments in the
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and repurchase agreements

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<PAGE>

involving such securities. For purposes of this limitation, (i) utility
companies will be classified according to their services, for example, gas,
gas transmission, electric and telephone will each be considered a separate
industry; and (ii) financial service companies will be classified according
to the end users of their services, for example, automobile finance, bank
finance and diversified finance will each be considered a separate
industry.

3. Acquire more than 10% of the voting securities of any one issuer.

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

5. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 33 1/3% of the value of total assets. Any borrowing
will be done from a bank and to the extent that such borrowing exceeds 5%
of the value of a Portfolios' assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any time fall
below 300%, a Portfolio shall, within three days thereafter or such longer
period as the Securities and Exchange Commission ("SEC") may prescribe by
rules and regulations, reduce the amount of its borrowings to such an
extent that the asset coverage of such borrowings shall be at least 300%.
This borrowing provision is included for temporary liquidity or emergency
purposes. All borrowings will be repaid before making investments and any
interest paid on such borrowings will reduce income.

6. Make loans, except that a Portfolio may purchase or hold debt instruments
in accordance with its investment objective and policies and may enter into
repurchase agreements.

7. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (5) above in aggregate amounts not to exceed 10% of
total assets taken at current value at the time of the incurrence of such
loan.

8. Purchase or sell real estate, real estate limited partnership interests,
futures contracts, commodities or commodities contracts and interests in a
pool of securities that are secured by interests in real estate. However,
subject to the permitted investments of each Portfolio, it may invest in
municipal securities or other marketable obligations secured by real estate
or interests therein.

9. Make short sales of securities, maintain a short position or purchase
securities on margin, except that each Portfolio may obtain short-term
credits as necessary for the clearance of security transactions.

10. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a Portfolio security.

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<PAGE>

11. Purchase securities of other investment companies except as permitted by
the Investment Company Act of 1940, as amended (the "1940 Act") and the
rules and regulations thereunder.

12. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described above or as permitted by rule,
regulation or order of the SEC.

13. Purchase or retain securities of an issuer if, to the knowledge of the
Fund, an officer, trustee, partner or director of the Fund or any
investment adviser of the Fund owns beneficially more than 0.5% of the
shares or securities of such issuer and all such officers, trustees,
partners and directors owning more than 0.5% of such shares or securities
together own more than 5% of such shares or securities.

14. Invest in interests in oil, gas or other mineral exploration or development
programs and oil, gas or mineral leases.

15. Write or purchase puts, calls, options or combinations thereof or invest in
warrants.

The foregoing percentages will apply at the time of the purchase of a security.

THE ADVISER

The Fund and HGK Asset Management Inc. (the "Adviser") have entered into an
advisory agreement dated August 15, 1994 (the "Advisory Agreement"). The
Advisory Agreement provides that the Adviser shall not be protected against any
liability to the Fund or its shareholders by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard of its obligations or duties thereunder.

The Adviser was incorporated in 1983 by three principals, Jeffrey T. Harris,
Warren A. Greenhouse and Joseph E. Kutzel. The Adviser has provided equity,
fixed income and balanced fund management of individually structured portfolios
since its inception. As of December 31, 1998, total assets under management were
approximately $2.1 billion. The principal business address of the Adviser is
Newport Tower, 525 Washington Boulevard, Jersey City, New Jersey, 07310.

The Adviser makes the investment decisions for the assets of each Portfolio and
continuously reviews, supervises and administers each Portfolio's investment
program, subject to the supervision of, and policies established by, the
Trustees of the Fund.

The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .90% of the average daily net assets of the HGK Equity Value
Fund and the

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<PAGE>

HGK Mid Cap Value Fund, respectively. The Adviser has contractually agreed
to waive all or a portion of its fees for, and reimburse expenses of, a
Portfolio to the extent necessary in order to limit total operating expenses to
an annual rate of not more than 1.50% of the Portfolio's average daily net
assets for a period of one year from the date of the Prospectus. The Adviser
may, from its own resources, compensate broker-dealers whose clients purchase
shares of a Portfolio.

To the extent a Portfolio purchases securities of open end investment companies,
the Adviser will waive its advisory fee on that portion of the Portfolio's
assets invested in such securities.

The continuance of the Advisory Agreement, after the first two years, must
be specifically approved at least annually (i) by the vote of the Trustees or by
a vote of the shareholders of the Portfolios, and (ii) by the vote of a majority
of the Trustees who are not parties to the Agreement or "interested persons" of
any party thereto, cast in person at a meeting called for the purpose of voting
on such approval. The Advisory Agreement will terminate automatically in the
event of its assignment, and is terminable at any time without penalty by the
Trustees of the Fund or, with respect to a Portfolio, by a majority of the
outstanding shares of a Portfolio, on not less than 30 days' nor more than 60
days' written notice to the Adviser, or by the Adviser on 90 days' written
notice to the Fund.

THE ADMINISTRATOR

SEI Investments Mutual Funds Services (the "Administrator") serves as the
administrator of the Fund. The Administrator provides the Fund with
administrative services, including regulatory reporting and all necessary office
space, equipment, personnel and facilities. For these administrative services,
the Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of each Portfolio's average daily net assets.
However, each Portfolio pays the Administrator a minimum annual fee of $75,000,
and consequently the annual administration fee each Portfolio pays will exceed
.20% of the Portfolio's average daily net assets at low asset levels.

The Administration Agreement provides that the Administrator shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which the Administration Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Administrator in the performance of its duties or from
reckless disregard by it of its duties and obligations thereunder. The
Administration Agreement shall remain in effect with respect to the Portfolios
until August 15, 1999 and shall continue in effect for successive periods of two
years unless terminated by either party on not less than 90 days' written notice
to the other party.

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<PAGE>

The Fund and the Administrator have also entered into a shareholder servicing
agreement pursuant to which the Administrator provides certain shareholder
services in addition to those set forth in the Administration Agreement.

The Administrator, a Delaware business trust, has its principal business
offices at Oaks, Pennsylvania 19456. SEI Investments Management Corporation
("SIMC"), a wholly-owned subsidiary of SEI Investments Company ("SEI
Investments"), is the owner of all beneficial interest in the Administrator. SEI
Investments and its subsidiaries and affiliates, including the Administrator,
are leading providers of funds evaluation services, trust accounting systems,
and brokerage and information services to financial institutions, institutional
investors, and money managers. The Administrator and its affiliates also serve
as administrator or sub-administrator to the following other mutual funds: The
Achievement Funds Trust, Alpha Select Funds, The Arbor Fund, ARK Funds, Armada
Funds, Bishop Street Funds, Boston 1784 Funds(R), CNI Charter Funds, CrestFunds,
Inc., CUFUND, The Expedition Funds, First American Funds, Inc., First American
Investment Funds, Inc., First American Strategy Funds, Inc., HighMark Funds,
Huntington Funds, The Nevis Fund, Inc., Oak Associates Funds, The PBHG Funds,
Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International
Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI
Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic
Variable Trust, TIP Funds and UAM Funds, Inc. II.

THE DISTRIBUTOR

SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI, and the Fund are parties to a distribution agreement dated November 14,
1991 ("Distribution Agreement"). The Distributor will not receive compensation
for the distribution of shares of any Portfolio.

The Distribution Agreement is renewable annually. The Distribution Agreement may
be terminated by the Distributor, by a majority vote of the Trustees who are not
interested persons and have no financial interest in the Distribution Agreement
or by a majority of the outstanding shares of the Fund upon not more than 60
days' written notice by either party or upon assignment by the Distributor.

No compensation is paid to the Distributor for distribution services for the
shares of the Portfolios.

THE TRANSFER AGENT

DST Systems, Inc., 330 W. 9th Street, Kansas City, Missouri 64105 serves as the
Fund's transfer agent.

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<PAGE>

THE CUSTODIAN

First Union National Bank, Broad and Chestnut Streets, P.O. Box 7618,
Philadelphia, Pennsylvania 19101 acts as custodian (the "Custodian") of the
Fund. The Custodian holds cash, securities and other assets of the Fund as
required by the 1940 Act.

INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen LLP serves as independent public accountants for the Fund.

LEGAL COUNSEL

Morgan, Lewis & Bockius LLP, 1800 M Street, N.W., Washington, D.C. 20036 serves
as legal counsel to the Fund.

TRUSTEES AND OFFICERS OF THE FUND

The management and affairs of the Fund are supervised by the Trustees under the
laws of the Commonwealth of Massachusetts. The Trustees have approved contracts
under which, as described above, certain companies provide essential management
services to the Fund. The Fund pays the fees for unaffiliated Trustees.

The Trustees and Executive Officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with the named companies during that
period. Unless otherwise noted, the business address of each Trustee and each
Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as officers of some or all of the following:
The Achievement Funds Trust, Alpha Select Funds, The Arbor Fund, ARK Funds,
Armada Funds, Bishop Street Funds, Boston 1784 Funds(R), CNI Charter Funds,
CrestFunds, Inc., CUFUND, The Expedition Funds, First American Funds, Inc.,
First American Investment Funds, Inc., First American Strategy Funds, Inc.,
HighMark Funds, Huntington Funds, The Nevis Fund, Inc., Oak Associates Funds,
The Parkstone Group of Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund,
Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional International Trust, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI
Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust, and TIP Funds,
each of which is an open-end management investment company managed by SEI
Investments Mutual Funds Services or its affiliates and distributed by SEI
Investments Distribution Co.

ROBERT A. NESHER (DOB 08/17/46) -- Chairman of the Board of Trustees* --
Currently performs various services on behalf of SEI Investments for which Mr.
Nesher is compensated. Executive Vice President of SEI Investments, 1986-1994.
Director

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<PAGE>

and Executive Vice President of the Administrator and the Distributor,
1981-1994. Trustee of The Arbor Fund, Bishop Street Funds, Boston 1784 Funds(R),
The Expedition Funds, Oak Associates Funds, Pillar Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International
Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI
Liquid Asset Trust and SEI Tax Exempt Trust.

JOHN T. COONEY (DOB 01/20/27) -- Trustee** -- Vice Chairman of Ameritrust Texas
N.A., 1989-1992, and MTrust Corp., 1985-1989. Trustee of The Arbor Fund, The
Expedition Funds and Oak Associates Funds.

WILLIAM M. DORAN (DOB 05/26/40) -- Trustee* -- 1701 Market Street,
Philadelphia, PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel
to the Trust, SEI Investments, the Administrator and the Distributor. Director
of SEI Investments since 1974; Secretary of SEI Investments since 1978. Trustee
of The Arbor Fund, The Expedition Funds, Oak Associates Funds, SEI Asset
Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
International Trust, SEI Institutional Investments Trust, SEI Institutional
Managed Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust.

ROBERT A. PATTERSON (DOB 11/05/27) -- Trustee** -- Pennsylvania State
University, Senior Vice President, Treasurer (Emeritus); Financial and
Investment Consultant, Professor of Transportation since 1984; Vice
President-Investments, Treasurer, Senior Vice President (Emeritus), 1982-1984.
Director, Pennsylvania Research Corp.; Member and Treasurer, Board of Trustees
of Grove City College. Trustee of The Arbor Fund, The Expedition Funds and Oak
Associates Funds.

EUGENE B. PETERS (DOB 06/03/29) -- Trustee** -- Private investor from 1987
to present. Vice President and Chief Financial Officer, Western Company of North
America (petroleum service company) 1980-1986. President of Gene Peters and
Associates (import company) 1978-1980. President and Chief Executive Officer of
Jos. Schlitz Brewing Company before 1978. Trustee of The Arbor Fund, The
Expedition Funds and Oak Associates Funds.

JAMES M. STOREY (DOB 04/12/31) -- Trustee** -- Partner, Dechert Price & Rhoads,
September 1987 - December 1993; Trustee of The Arbor Fund, The Expedition Funds,
Oak Associates Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional International Trust, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust and
SEI Tax Exempt Trust.

GEORGE J. SULLIVAN, JR. (DOB 11/13/42) -- Trustee**-- Chief Executive Officer,
Newfound Consultants Inc. since April 1997. General Partner, Teton Partners,
L.P., June 1991- December 1996; Chief Financial Officer, Noble Partners, L.P.,
March 1991-December 1996; Treasurer and Clerk, Peak Asset Management, Inc.,
since 1991;

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<PAGE>

Trustee, Navigator Securities Lending Trust, since 1995. Trustee of The
Arbor Fund, The Expedition Funds, Oak Associates Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International
Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI
Liquid Asset Trust and SEI Tax Exempt Trust.

MARK E. NAGLE (DOB 10/20/59) -- President, Chief Executive Officer,
Controller and Chief Financial Officer -- President and Senior Vice President of
Fund Accounting and Administration of the Administrator since 1998. Vice
President of Fund Accounting and Administration of the Administrator 1996-1998.
Vice President of the Distributor since December 1997. Vice President, Fund
Accounting, BISYS Fund Services, September 1995 - November 1996. Senior Vice
President and Site Manager, Fidelity Investments, 1981 - September 1995.

TODD B. CIPPERMAN (DOB 02/14/66) -- Vice President and Assistant Secretary
- -- Vice President and Assistant Secretary of SEI Investments, the Administrator
and the Distributor since 1995. Associate, Dewey Ballantine (law firm),
1994-1995. Associate, Winston & Strawn (law firm), 1991-1994.

JAMES R. FOGGO (DOB 06/30/64) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of SEI Investments since 1998. Associate,
Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998. Associate, Baker &
McKenzie (law firm), 1995-1998. Associate, Battle Fowler L.L.P. (law firm),
1993-1995. Operations Manager, The Shareholder Services Group, Inc., 1986-1990.

LYDIA A. GAVALIS (DOB 06/05/64) -- Vice President and Assistant Secretary
- -- Vice President and Assistant Secretary of SEI Investments, t he Administrator
and the Distributor since 1998. Assistant General Counsel and Director of
Arbitration, Philadelphia Stock Exchange, 1989-1998.

KATHY HEILIG (DOB 12/21/58) -- Vice President and Assistant Secretary --
Treasurer of SEI Investments since 1997; Vice President of SEI Investments since
1991. Vice President and Treasurer of the Administrator since 1997. Assistant
Controller of SEI Investments and Vice President of the Distributor since 1995;
Director of Taxes of SEI Investments, 1987 to 1991. Tax Manager, Arthur Andersen
LLP prior to 1987.

JOSEPH M. O'DONNELL (DOB 11/13/54) -- Vice President and Assistant
Secretary -- Vice President and Assistant Secretary of SEI Investments, the
Administrator and the Distributor since 1998. Vice President and General
Counsel, FPS Services, Inc., 1993-1997. Staff Counsel and Secretary, Provident
Mutual Family of Funds, 1990-1993.

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<PAGE>

KEVIN P. ROBINS (DOB 04/15/61) -- Vice President and Assistant Secretary --
Senior Vice President and General Counsel of SEI Investments, the Administrator
and the Distributor since 1994. Assistant Secretary of SEI Investments since
1992; Secretary of the Administrator since 1994. Vice President, General Counsel
and Assistant Secretary of the Administrator and the Distributor, 1992-1994.
Associate, Morgan, Lewis & Bockius LLP (law firm), 1988-1992.

LYNDA J. STRIEGEL (DOB 10/30/48) -- Vice President and Assistant Secretary
- -- Vice President and Assistant Secretary of SEI Investments, the Administrator
and the Distributor since 1998. Senior Asset Management Counsel, Barnett Banks,
Inc., 1997-1998. Partner, Groom and Nordberg, Chartered, 1996-1997. Associate
General Counsel, Riggs Bank, N.A., 1991-1995.

JOHN H. GRADY, JR. (DOB 06/01/61) -- Secretary -- 1701 Market Street,
Philadelphia, PA 19103, Partner since 1995, Morgan, Lewis & Bockius LLP (law
firm), counsel to the Trust, SEI Investments, the Administrator and the
Distributor.

- ------------
*Messrs. Nesher and Doran are Trustees who may be deemed to be "interested"
persons of the Portfolio as that term is defined in the 1940 Act.

**Messrs. Cooney, Patterson, Peters, Storey and Sullivan serve as members of the
Audit Committee of the Portfolio.

The Trustees and officers of the Fund own less than 1% of the outstanding shares
of the Fund. The Fund pays the fees for unaffiliated Trustees.

PERFORMANCE INFORMATION

From time to time, the Fund may advertise yield, effective yield and total
return of the Portfolios. These figures will be based on historical earnings and
are not intended to indicate future performance. No representation can be made
concerning actual future yields.

Performance Comparisons

The Portfolios may periodically compare their performance to other mutual funds
tracked by mutual fund rating services, to broad groups of comparable mutual
funds, or to unmanaged indices. These comparisons may assume reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs.

COMPUTATION OF YIELD

From time to time, the Fund may advertise yield and total return of the
Portfolios. These figures will be based on historical earnings and are not
intended to indicate

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<PAGE>

future performance. No representation can be made concerning actual future
yields or returns. The yield of the Portfolios refer to the annualized income
generated by an investment in that Portfolio over a specified 30-day period. The
yield is calculated by assuming that the income generated by the investment
during that 30-day period is generated in each period over one year and is shown
as a percentage of the investment. In particular, yield will be calculated
according to the following formula:

Yield = 2[((a-b)/cd+1) to the power of 6-1], where a = dividends and interest
earned during the period; b = expenses accrued for the period (net of
reimbursement); c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and d = the maximum offering
price per share on the last day of the period.

CALCULATION OF TOTAL RETURN

The total return of the Portfolios refer to the average compounded rate of
return to a hypothetical investment for designated time periods (including, but
not limited to, the period from which that Portfolio commenced operations
through the specified date), assuming that the entire investment is redeemed at
the end of each period. In particular, total return will be calculated according
to the following formula: P (1 + T) to the power of n = ERV, where P = a
hypothetical initial payment of $1,000; T = average annual total return; n =
number of years; and ERV = ending redeemable value, as of the end of the
designated time period, of a hypothetical $1,000 payment made at the beginning
of the designated time period.

PURCHASING SHARES

Purchases and redemptions may be made through the Distributor on a day on which
the New York Stock Exchange is open for business. Shares of the Portfolios are
offered on a continuous basis. Currently, the Fund is closed for business when
the following holidays are observed: New Year's Day, Martin Luther King Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.

REDEEMING SHARES

It is currently the Fund's policy to pay all redemptions in cash. The Fund
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by a Portfolio in
lieu of cash. Shareholders may incur brokerage charges on the sale of any such
securities so received in payment of redemptions. The Fund has obtained an
exemptive order from the SEC that permits the Fund to make in-kind redemptions
to those shareholders of the Fund that are affiliated with the Fund solely by
their ownership of a certain percentage of the Fund's investment portfolios.

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A Shareholder will at all times be entitled to aggregate cash redemptions from
all portfolios of the Fund during any 90-day period of up to the lesser of
$250,000 or 1% of the Fund's net assets.

The Fund reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
the disposal or valuation of a Portfolio's securities is not reasonably
practicable, or for such other periods as the SEC has by order permitted. The
Fund also reserves the right to suspend sales of shares of any Portfolio for any
period during which the New York Stock Exchange, the Adviser, the Administrator,
the Transfer Agent and/or the Custodian are not open for business.

DETERMINATION OF NET ASSET VALUE

The securities of the Portfolios are valued by the Administrator. The
Administrator will use an independent pricing service to obtain valuations of
securities. The pricing service relies primarily on prices of actual market
transactions as well as trader quotations. However, the service may also use a
matrix system to determine valuations, which system considers such factors as
security prices, yields, maturities, call features, ratings and developments
relating to specific securities in arriving at valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Fund
under the general supervision of the Trustees.

TAXES

The following is only a summary of certain additional federal income tax
considerations generally affecting A Portfolio and its shareholders that are not
described in the Portfolio's prospectus. No attempt is made to present a
detailed explanation of the tax treatment of the Portfolios or their
shareholders, and the discussion here and in the Portfolios' prospectus is not
intended as a substitute for careful tax planning. Shareholders are urged to
consult their tax advisors with specific reference to their own tax situations,
including their state and local tax liabilities.

Federal Income Tax Treatment of Dividends and Distributions

The following general discussion of certain federal income tax consequences is
based on the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations issued thereunder as in effect on the date of this Statement of
Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.

Qualification as Regulated Investment Company

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A Portfolio intends to qualify and elect to be treated as a "regulated
investment company" ("RIC") as defined under Subchapter M of the Code. By
following such a policy, the Portfolios expect to eliminate or reduce to a
nominal amount the federal taxes to which it may be subject.

In order to qualify as a RIC, a Portfolio must distribute at least 90% of its
net investment income (generally, includes dividends, taxable interest, and the
excess of net short-term capital gains over net long-term capital losses less
operating expenses) and at least 90% of its net tax exempt interest income, for
each tax year, if any, to its shareholders and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of a
Portfolio's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of stock or securities, or certain other income; (ii) at the
close of each quarter of the Portfolio's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RICs and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does not
exceed 5% of the value of the Portfolio's assets and that does not represent
more than 10% of the outstanding voting securities of such issuer; and (iii) at
the close of each quarter of the Portfolio's taxable year, not more than 25% of
the value of its assets may be invested in securities (other than U.S.
Government securities or the securities of other RICs) of any one issuer or of
two or more issuers that the Portfolio controls or that are engaged in the same,
similar or related trades or business.

Although the Portfolios intend to distribute substantially all of its net
investment income and may distribute its capital gains for any taxable year, A
Portfolio will be subject to federal income taxation to the extent any such
income or gains are not distributed.

If a Portfolio fails to qualify for any taxable year as a RIC, all of its
taxable income will be subject to tax at regular corporate income tax rates
without any deduction for distributions to shareholders and such distributions
generally will be taxable to shareholders as ordinary dividends to the extent of
a Portfolio's current and accumulated earnings and profits. In this event,
distributions generally will be eligible for the dividends-received deduction
for corporate shareholders.

Portfolio Distributions

Distributions of investment company taxable income will be taxable to
shareholders as ordinary income, regardless of whether such distributions are
paid in cash or are reinvested in additional Shares, to the extent of a
Portfolio's earnings and profits. The Portfolios anticipate that they will
distribute substantially all of their investment company taxable income for each
taxable year.

A Portfolio may either retain or distribute to shareholders its excess of net
long-term capital gains over net short-term capital losses ("net capital
gains"). If such gains are

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distributed as a capital gains distribution, they are taxable to
shareholders who are individuals at a maximum rate of 20%, regardless of the
length of time the shareholder has held shares. If any such gains are retained,
a Portfolio will pay federal income tax thereon.

In the case of corporate shareholders, distributions (other than capital gains
distributions) from a RIC, generally qualify for the dividends-received
deduction only to the extent of the gross amount of qualifying dividends
received by a portfolio for the year. Generally, and subject to certain
limitations, a dividend will be treated as a qualifying dividend if it has been
received from a domestic corporation. Accordingly, such distributions will
generally qualify for the corporate dividends-received deduction.

Ordinarily, investors should include all dividends as income in the year of
payment. However, dividends declared payable to shareholders of record in
December of one year, but paid in January of the following year, will be deemed
for tax purposes to have been received by the shareholder and paid by a
Portfolio in the year in which the dividends were declared.

A Portfolio will provide a statement annually to shareholders as to the federal
tax status of distributions paid (or deemed to be paid) by a Portfolio during
the year, including the amount of dividends eligible for the corporate
dividends-received deduction.

Sale or Exchange of Portfolio Shares

Generally, gain or loss on the sale or exchange of a Share will be capital gain
or loss that will be long-term if the Share has been held for more than twelve
months and otherwise will be short-term. For individuals, long-term capital
gains are currently taxed at a maximum rate of 20% and short-term capital gains
are currently taxed at ordinary income tax rates. However, if a shareholder
realizes a loss on the sale, exchange or redemption of a Share held for six
months or less and has previously received a capital gains distribution with
respect to the Share (or any undistributed net capital gains of a Portfolio with
respect to such Share are included in determining the shareholder's long-term
capital gains), the shareholder must treat the loss as a long-term capital loss
to the extent of the amount of the prior capital gains distribution (or any
undistributed net capital gains of a Portfolio that have been included in
determining such shareholder's long-term capital gains). In addition, any loss
realized on a sale or other disposition of Shares will be disallowed to the
extent an investor repurchases (or enters into a contract or option to
repurchase) Shares within a period of 61 days (beginning 30 days before and
ending 30 days after the disposition of the Shares). This loss disallowance rule
will apply to Shares received through the reinvestment of dividends during the
61-day period.

In certain cases, a Portfolio will be required to withhold, and remit to the
United States Treasury, 31% of any distributions paid to a shareholder who (1)
has failed to provide a correct taxpayer identification number, (2) is subject
to backup withholding by the

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Internal Revenue Service, or (3) has failed to certify to a Portfolio that such
shareholder is not subject to backup withholding.

Federal Excise Tax

If a Portfolio fails to distribute in a calendar year at least 98% of its
ordinary income for the year and 98% of its capital gain net income (the excess
of short and long term capital gains over short and long term capital losses)
for the one-year period ending October 31 of that year (and any retained amount
from the prior calendar year), a Portfolio will be subject to a nondeductible 4%
Federal excise tax on the undistributed amounts. A Portfolio intends to make
sufficient distributions to avoid imposition of this tax, or to retain, at most
its net capital gains and pay tax thereon.

State and Local Taxes

A Portfolio is not liable for any income or franchise tax in Massachusetts
if it qualifies as a RIC for federal income tax purposes. Distributions by a
Portfolio to shareholders and the ownership of shares may be subject to state
and local taxes.

PORTFOLIO TRANSACTIONS

A Portfolio has no obligation to deal with any broker-dealer or group of
broker-dealers in the execution of transactions in portfolio securities. Subject
to policies established by the Trustees of the Fund, the Adviser is responsible
for placing the orders to execute transactions for the Portfolio. In placing
orders, it is the policy of the Fund to seek to obtain the best net results
taking into account such factors as price (including the applicable dealer
spread), the size, type and difficulty of the transaction involved, the firm's
general execution and operational facilities and the firm's risk in positioning
the securities involved. While the Adviser generally seeks reasonably
competitive spreads or commissions, a Portfolio will not necessarily be paying
the lowest spread or commission available.

The money market instruments in which a Portfolio invests are traded primarily
in the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the Adviser
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money market
instruments are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of a Portfolio will primarily consist of dealer spreads
and underwriting commissions.

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TRADING PRACTICES AND BROKERAGE

The Fund selects brokers or dealers to execute transactions for the purchase or
sale of portfolio securities on the basis of its judgment of their professional
capability to provide the service. The primary consideration is to have brokers
or dealers provide transactions at best price and execution for the Fund. Best
price and execution includes many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. The Fund's determination of what are reasonably competitive rates
is based upon the professional knowledge of its trading department as to rates
paid and charged for similar transactions throughout the securities industry. In
some instances, the Fund pays a minimal share transaction cost when the
transaction presents no difficulty. Some trades are made on a net basis where
the Fund either buys securities directly from the dealer or sells them to the
dealer. In these instances, there is no direct commission charged but there is a
spread (the difference between the buy and sell price) which is the equivalent
of a commission.

The Fund may allocate out of all commission business generated by the fund and
accounts under management by the Adviser, brokerage business to brokers or
dealers who provide brokerage and research services. These research services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends, assisting in
determining portfolio strategy, providing computer software used in security
analyses, and providing portfolio performance evaluation and technical market
analyses. Such services are used by the Adviser in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used exclusively with respect to the fund
or account generating the brokerage.

As provided in the Securities Exchange Act of 1934 (the "1934 Act"), higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to broker-dealers
who provide such brokerage and research services, the Fund believes that the
commissions paid to such broker-dealers are not, in general, higher than
commissions that would be paid to broker-dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In addition, portfolio transactions which
generate commissions or their equivalent are directed to broker-dealers who
provide daily portfolio pricing services to the Fund. Subject to best price and
execution, commissions used for pricing may or may not be generated by the funds
receiving the pricing service.

The Adviser may place a combined order for two or more accounts or funds engaged
in the purchase or sale of the same security if, in its judgment, joint
execution is in the best

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interest of each participant and will result in best price and execution.
Transactions involving commingled orders are allocated in a manner deemed
equitable to each account or fund. It is believed that the ability of the
accounts to participate in volume transactions will generally be beneficial to
the accounts and funds. Although it is recognized that, in some cases, the joint
execution of orders could adversely affect the price or volume of the security
that a particular account or the Portfolio may obtain, it is the opinion of the
Adviser and the Fund's Board of Trustees that the advantages of combined orders
outweigh the possible disadvantages of separate transactions.

Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Portfolio, at
the request of the Distributor, gives consideration to sales of shares of the
Fund as a factor in the selection of brokers and dealers to execute Fund
portfolio transactions.

The Adviser may, consistent with the interest of the Portfolios, select brokers
on the basis of the research services they provide to the Adviser. Such services
may include analyses of the business or prospects of a company, industry or
economic sector, or statistical and pricing services. Information so received by
the Adviser will be in addition to and not in lieu of the services required to
be performed by the Adviser under the Advisory Agreement. If, in the judgment of
the Adviser, a Portfolio or other accounts managed by the Adviser will be
benefitted by supplemental research services, the Adviser is authorized to pay
brokerage commissions to a broker furnishing such services which are in excess
of commissions which another broker may have charged for effecting the same
transaction. These research services include advice, either directly or through
publications or writings, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining portfolio strategy;
providing computer software used in security analyses; and providing portfolio
performance evaluation and technical market analyses. The expenses of the
Adviser will not necessarily be reduced as a result of the receipt of such
supplemental information, such services may not be used exclusively, or at all,
with respect to a Portfolio or account generating the brokerage, and there can
be no guarantee that the Adviser will find all of such services of value in
advising the Portfolio.

It is expected that a Portfolio may execute brokerage or other agency
transactions through the Distributor, which is a registered broker-dealer, for a
commission in conformity with the 1940 Act, the 1934 Act and rules promulgated
by the SEC. Under these provisions, the Distributor is permitted to receive and
retain compensation for effecting portfolio transactions for the Portfolio on an
exchange if a written contract is in effect between the Distributor and the Fund
expressly permitting the Distributor to receive and retain such compensation.
These rules further require that commissions paid to the Distributor by the
Portfolio for exchange transactions not exceed "usual and customary" brokerage
commissions. The rules define "usual and customary" commissions to include
amounts which are "reasonable and fair compared to the commission, fee or other
remuneration

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received or to be received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time." The Trustees, including
those who are not "interested persons" of the Fund, have adopted procedures for
evaluating the reasonableness of commissions paid to the Distributor and will
review these procedures periodically.

Since the Fund does not market its shares through intermediary brokers or
dealers, it is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, the Adviser may place portfolio orders with qualified
broker-dealers who recommend a Portfolio' shares to clients, and may, when a
number of brokers and dealers can provide best net results on a particular
transaction, consider such recommendations by a broker or dealer in selecting
among broker-dealers.

DESCRIPTION OF SHARES

The Declaration of Trust authorizes the issuance of an unlimited number of
portfolios and shares of each portfolio, each of which represents an equal
proportionate interest in the portfolio with each other share. Shares are
entitled upon liquidation to a pro rata share in the net assets of the
portfolio. Shareholders have no preemptive rights. The Declaration of Trust
provides that the Trustees of the Fund may create additional series of shares.
All consideration received by the Fund for shares of any additional series and
all assets in which such consideration is invested would belong to that series
and would be subject to the liabilities related thereto. Share certificates
representing shares will not be issued.

SHAREHOLDER LIABILITY

The Fund is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Fund were held to be a partnership, the
possibility of the shareholders incurring financial loss for that reason appears
remote because the Fund's Declaration of Trust contains an express disclaimer of
shareholder liability for obligations of the Fund and requires that notice of
such disclaimer be given in each agreement, obligation or instrument entered
into or executed by or on behalf of the Fund or the Trustees, and because the
Declaration of Trust provides for indemnification out of the Fund property for
any shareholder held personally liable for the obligations of the Fund.

LIMITATION OF TRUSTEES' LIABILITY

The Declaration of Trust provides that a Trustee shall be liable only for his or
her own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or investment advisers, shall not be
liable for any neglect or wrongdoing of any such person. The Declaration of
Trust also provides that the Fund will indemnify its Trustees and officers
against liabilities and expenses incurred in connection with actual

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or threatened litigation in which they may be involved because of their
offices with the Fund unless it is determined in the manner provided in the
Declaration of Trust that they have not acted in good faith in the reasonable
belief that their actions were in the best interests of the Fund. However,
nothing in the Declaration of Trust shall protect or indemnify a Trustee against
any liability for his or her willful misfeasance, bad faith, gross negligence or
reckless disregard of his or her duties.

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