1838 INVESTMENT ADVISORS FUNDS, 497, 1999-03-04

1838 INVESTMENT ADVISORS FUNDS
497, 1999-03-04

Previous: THRUSTMASTER INC, S-3, 1999-03-04

Next: VINTAGE MUTUAL FUNDS INC, 497, 1999-03-04

[LOGO]

THE DATE OF THIS PROSPECTUS IS MARCH 1, 1999

Five Radnor Corporate Center, Suite 320

100 Matsonford Road, Radnor, PA 19087

(610) 293-4300

1838 INTERNATIONAL EQUITY FUND. The Investment objective of the 1838
International Equity Fund (the "International Equity Fund") is capital
appreciation, with a secondary objective of income. The International Equity
Fund seeks to achieve its objective by investing at least 65% of its total
assets in a diversified portfolio of equity securities of issuers located in
countries other than the United States.

1838 SMALL CAP EQUITY FUND. The investment objective of the 1838 Small Cap
Equity Fund (the "Small Cap Equity Fund") is long-term growth. The Small Cap
Equity Fund seeks to achieve its objective by investing at least 65% of its
total assets in the common stock of U.S. companies with market capitalizations
of $1 billion or less (small cap), which are believed to be undervalued and have
good prospects for capital appreciation.

1838 FIXED INCOME FUND. The investment objective of the 1838 Fixed Income
Fund (the "Fixed Income Fund") is maximum current income, with a secondary
objective of growth. The Fixed Income Fund seeks to achieve its objective by
investing, under normal circumstances, at least 65% of its total assets in a
diversified portfolio of fixed income securities.

1838 LARGE CAP EQUITY FUND. The investment objective of the 1838 Large Cap
Equity Fund (the "Large Cap Equity Fund") is long-term total return. The Large
Cap Equity Fund seeks to achieve its objective by investing at least 90% of its
total assets in the common stock of U.S. companies with market capitalizations
greater than $5 billion.

1838 SPECIAL EQUITY FUND. The investment objective of the 1838 Special
Equity Fund (the "Special Equity Fund") is high total return. The Special Equity
Fund seeks to achieve its objective by investing at least 90% of its total
assets in a select portfolio of the common stock of U.S. companies with market
capitalizations greater than $5 billion.

The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.

<PAGE>

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

Page
FUND SUMMARIES.................................................................3
EXPENSES OF THE FUNDS..........................................................9
FINANCIAL HIGHLIGHTS..........................................................10
INVESTMENT OBJECTIVES, POLICIES AND RISKS.....................................12
MANAGEMENT OF THE FUNDS.......................................................18
CALCULATION OF NET ASSET VALUE................................................22
HOW TO PURCHASE SHARES........................................................22
EXCHANGE OF SHARES............................................................24
HOW TO REDEEM SHARES..........................................................24
DIVIDENDS, DISTRIBUTIONS AND TAXES............................................27
YEAR 2000.....................................................................28

<PAGE>

- --------------------------------------------------------------------------------
FUND SUMMARIES
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES

INTERNATIONAL EQUITY FUND. The investment objective of the Fund is capital
appreciation, with a secondary objective of income. The Fund seeks to achieve
its objective by investing at least 65% of its total assets in a diversified
portfolio of equity securities of issuers located in countries other than the
United States. Investments may be shifted among the various equity markets of
the world outside of the U.S., depending upon management's opinion of prevailing
trends and developments. A substantial portion of the International Equity
Fund's assets generally is invested in the developed countries of Europe and the
Far East. A portion of the International Equity Fund's assets also may be
invested in developing countries.

The Fund's investment adviser looks for the following characteristics when
deciding which foreign company's securities it will buy and hold:

o industry leaders

o strong balance sheets

o stocks widely followed

o large market capitalization

o attractive price-to-earnings ratios compared with earnings growth
potential (PEG ratio)

Generally, the adviser sells Fund portfolio securities when

o company fundamentals deteriorate.

o stock valuation deteriorates due to a rise in the PEG ratio.

o Fund's portfolio should be rebalanced to include high potential
countries and/or industries.

SMALL CAP EQUITY FUND. The investment objective of the Fund is long-term
growth. The Fund seeks to achieve its objective by investing at least 65% of its
total assets in the common stock of U.S. companies with market capitalizations
of $1 billion or less (small cap), which are believed to be undervalued and have
good prospects for capital appreciation. The Fund invests in small
capitalization companies using a value approach. This approach entails finding
companies whose current stock prices are (i) believed not to reflect adequately
their underlying value as measured by business prospects; and (ii) low in
relation to current earnings, cash flow or business franchises, and which, in
the Fund adviser's opinion, seem capable of recovering from any out-of-favor
considerations.

Stocks are selected for the Fund's portfolio when the adviser believes

o the stocks are undervalued.

o a potential catalyst exists to cause the stock price to rise to a
target sell price.

Generally, the adviser sells securities when

o the target sell price is achieved.

o the security attains a high price-to-earnings ratio.

o company fundamentals deteriorate.

FIXED INCOME FUND. The investment objective of the Fund is maximum current
income, with a secondary objective of growth. The Fund seeks to achieve its
objective by investing, under normal circumstances, at least 65% of its total
assets in a diversified portfolio of all types of fixed income securities. The
Fund normally will invest in

3
<PAGE>

investment grade debt securities and unrated securities determined to be of
comparable quality by the Fund's adviser. Investment grade debt securities are
securities rated Baa or better by Moody's or BBB or better by S&P.

The adviser also looks for securities that offer strong risk adjusted
return; that is, a yield premium that may compensate the portfolio for the
credit risk inherent in the security. The Fund has no restriction on maturity;
however, it generally maintains a dollar-weighted average maturity of 7 to 12
years.

The Fund buys securities perceived by the investment adviser

o to be undervalued.

o to present an opportunity for yield enhancement and capital
appreciation or stability.

The Fund may sell securities

o in anticipation of market decline.

o when the securities are down-graded to below investment grade.

LARGE CAP EQUITY FUND. The investment objective of the Fund is long-term
total return. The Fund seeks to achieve its objective by investing at least 90%
of its total assets in the common stock of U.S. companies with market
capitalization greater than $5 billion. The Fund invests in large capitalization
companies using a relative value approach. This approach entails finding
companies whose current stock prices are believed not to reflect adequately
their underlying value, measured by the companies' price-to-earnings ratios as
compared to the S&P 500 over a long period of time.

Stocks are selected for the Fund's portfolio when the adviser believes

o a stock is undervalued.

o a potential catalyst exists to cause the stock price to rise.

Fund portfolio securities will be sold when

o they reach predicted price-to-earnings ratios.

o company fundamentals deteriorate.

o a combination of underperformance, downward earnings and/or negative
earnings occurs.

SPECIAL EQUITY FUND. The investment objective of the Fund is high total
return. The Fund seeks to achieve its objective by investing at least 90% of its
total assets in a select portfolio of the common stock of U.S. companies with
market capitalizations greater than $5 billion. The Fund's adviser generally
intends to use the same investment approach as is used for the Large Cap Equity
Fund (see above), except that the Fund's portfolio will consist of the stocks of
only 10 to 20 large cap companies and, therefore, will be non-diversified. Also,
since the Fund attempts to achieve high total return, returns are expected to be
short-term and portfolio turnover is expected to exceed 200% annually.

Stocks are selected for the Fund's portfolio when the adviser believes

o a stock is undervalued.

o a potential catalyst exists to cause the stock price to rise.

Fund portfolio securities will be sold when the adviser believes

o the portfolio should be rebalanced to include a more attractive
stock or stocks.

o a stock is not meeting near-term objectives.

o a stock's near-term objectives have been met.

4
<PAGE>

PRINCIPAL RISKS

INTERNATIONAL EQUITY FUND. Investments in foreign securities involve
certain risks not involved in domestic investment, including fluctuations in
foreign exchange rates, future political and economic developments, different
legal systems and the existence or possible imposition of exchange controls or
other foreign or U.S. governmental laws or restrictions applicable to such
investments. Also, investment risks are heightened for developing countries. The
economies of developing countries generally are dependent upon international
trade and may be adversely affected by trade barriers or other protectionist
measures imposed by the countries with which developing countries trade.

SMALL CAP EQUITY FUND. Due to the uncertainty of growth prospects of
smaller companies, investments in the securities of companies with small market
capitalizations are generally considered to offer greater opportunity for
appreciation, but may also involve greater risks of depreciation than securities
of companies with larger market capitalizations.

FIXED INCOME FUND. Fixed income securities generally are affected by
changes in interest rates that may result in an increase or decrease in the
value of the obligations held by the Fixed Income Fund. The value of the
securities held by the Fund generally can be expected to vary inversely with the
changes in interest rates; as the rates decline, market value tends to increase
and vice versa. Also, the Fund may invest in securities rated Baa or BBB, which
are considered to be more speculative with respect to payment of interest and
principal.

LARGE CAP EQUITY AND SPECIAL EQUITY FUNDS. These funds invest in U.S.
common stocks, and the portfolio stock prices will fluctuate up and down; which
means that you could lose money. Further, different types of stocks will shift
in and out of favor depending upon market and economic conditions, and the Funds
may underperform other types of funds if any or all of their portfolio stocks
fall out of favor with the stock market.

The Special Equity Fund anticipates an annual portfolio turnover rate of
200% or more. High portfolio turnover may involve additional transaction costs
(such as brokerage commissions) which are borne by the Fund, or adverse tax
effects, including a greater proportion of dividend income from the Fund that
will be taxed as ordinary income rather than as capital gain.

The Special Equity Fund is a non-diversified fund which means that it may
invest a higher percentage of its assets in a single company than a diversified
fund. Because the Fund will invest in a fewer number of companies, a decline in
the value of the stock of any one of these companies will have a greater impact
on the Fund's share price.

ALL FUNDS: An investment in any Fund presents the risk of loss of part or
all of your money.

5
<PAGE>

PERFORMANCE OF THE FUNDS

The bar charts and tables below provide an indication of the risks of
investing in a Fund by showing changes in each Fund's performance from year to
year, and by showing how each Fund's performance over time compares to that of a
relevant broad-based securities market index. The past performance of a Fund is
not necessarily a prediction of how the Fund will perform in the future. The
Large Cap Equity and Special Equity Funds are not depicted because they are new
Funds.

INTERNATIONAL EQUITY FUND
YEAR-BY-YEAR TOTAL RETURN
AS OF 12/31 EACH YEAR (%)

[GRAPHIC]

In the printed version of the document, a bar graph
appears which depicts the following plot points:

1996.................. 8.04%
1997.................. 9.99%
1998.................. 17.52%

-------------------------------------------
During the periods shown in the bar chart,
the highest return for a quarter was 32.80%
(quarter ending April 30, 1998) and the
lowest return for a quarter was -16.81%
(quarter ending Sept. 30, 1998)
-------------------------------------------

AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/98
<TABLE>
<CAPTION>
Inception
1 Year (8/3/95)
------ ---------
<S> <C> <C>
International Fund.......................................... 17.52% 12.41%
EAFE*....................................................... 19.97% 8.85**
</TABLE>

- ------------------
* The Morgan Stanley Capital International EAFE Index is an unmanaged index
representing the stocks of companies in Europe, Australia and the Far East.
The EAFE does not include expenses.
** Cumulative from 9/1/95-12/31/98

6
<PAGE>

SMALL CAP EQUITY FUND
YEAR-BY-YEAR TOTAL RETURN
AS OF 12/31 EACH YEAR (%)

[GRAPHIC]

In the printed version of the document, a bar graph
appears which depicts the following plot points:

1997.................. 29.85%
1998.................. -6.08%

-------------------------------------------
During the periods shown in the bar chart,
the highest return for a quarter was 40.50%
(quarter ending April 30, 1998) and the
lowest return for a quarter was -23.89%
(quarter ending Sept. 30, 1998)
-------------------------------------------

AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/98

<TABLE>
<CAPTION>
Inception
1 Year (6/17/96)
------ ---------
<S> <C> <C>
Small Cap Fund.............................................. (6.08)% 9.57%
Russell 2000*............................................... (2.56)% 9.86**
</TABLE>

- ------------------
* The Russell 2000 Index is an unmanaged index representing small stocks. The
index does not include expenses.
** Cumulative from 7/1/96-12/31/98

7
<PAGE>
FIXED INCOME FUND
YEAR-BY-YEAR TOTAL RETURN
AS OF 12/31 EACH YEAR (%)

[GRAPHIC]

In the printed version of the document, a bar graph
appears which depicts the following plot points:

1998.................. 7.03%

-------------------------------------------
During the period shown in the bar chart,
the highest return for a quarter was 2.81%
(quarter ended September 30, 1998) and the
lowest return for a quarter was 0.10%
(quarter ended December 31, 1998)
-------------------------------------------

AVERAGE ANNUAL TOTAL RETURN
AS OF 12/31/98
<TABLE>
<CAPTION>
Inception
1 Year (9/2/97)
------ ---------
<S> <C> <C>
Fixed Income Fund........................................... 7.03% 7.72%
Lehman Aggregate*........................................... 8.67% 9.81
</TABLE>

- ------------------
* The Lehman Aggregate Bond Index is an index consisting of more than 14,750
issues, in the Treasury/Government (45% of index), Corporate (22%), Mortgage
(31%) and Asset Backed (2%) sectors of the investment grade bond universe. The
index has an average maturity of 7.5 years and a duration of 4.8 years. The
average coupon rate is 6.5%. The index does not include expenses.

8
<PAGE>

- --------------------------------------------------------------------------------
EXPENSES OF THE FUNDS
- --------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
International Small Cap Fixed Large Cap Special
Equity Equity Income Equity Equity
Fund Fund Fund Fund Fund
------------- --------- ------ --------- -------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER FEES(1)
(paid directly from your investment).............. None None None None None
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees(2)................................ 0.75% 0.75% 0.50% 0.65% 1.00%
Other Expenses(3)................................. 0.38% 0.35% 0.10% 0.10% 0.25%
---- ---- ---- ---- ----
Total Annual Fund Operating Expenses............ 1.13% 1.10% 0.60% 0.75% 1.25%
</TABLE>

(1) You may be charged a fee if you buy or sell shares in a Fund through a
broker or agent. If such a fee is charged, it will be charged directly by
the broker or agent, and not by the Fund.

(2) The Funds' investment adviser voluntarily has agreed to waive its fees
and/or reimburse the International Equity, Small Cap Equity and Fixed Income
Funds so that each Fund's total operating expenses do not exceed the
following percentage of average daily net assets of the Fund: International
Equity Fund: 1.25%; Small Cap Equity Fund: 1.25%; and Fixed Income Fund:
0.60%. The investment adviser's voluntary fee waivers and reimbursement of
Fund expenses will remain in effect until further notice, but may be
rescinded at any time.

(3) The amount of "Other Expenses" is based on actual amounts incurred during
the most recently ended fiscal year for the International Equity Fund, Small
Cap Equity Fund, and Fixed Income Fund, but such amounts are estimated for
the Large Cap Equity and Special Equity Funds.

EXAMPLE

The following example illustrates the expenses that you would pay on a
$10,000 investment over various time periods assuming (1) a 5% annual rate of
return; (2) reinvestment of all dividends and distributions; (3) redemption at
the end of each time period, and (4) each Fund's operating expenses remain the
same:

<TABLE>
<CAPTION>
1 yr. 3 yrs. 5 yrs. 10 yrs.
----- ------ ------ -------
<S> <C> <C> <C> <C>
International Equity Fund.............. $115 $359 $622 $1,375
Small Cap Equity Fund.................. $112 $350 $606 $1,340
Fixed Income Fund...................... $ 61 $192 $335 $ 750
Large Cap Equity Fund.................. $ 77 $240 N/A N/A
Special Equity Fund.................... $127 $397 N/A N/A
</TABLE>

This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or lesser than those
shown. The example is based upon actual expenses for the International Equity
Fund and the Small Cap Equity Fund for the fiscal year ended October 31, 1998.
During the fiscal year ended October 31, 1998, the investment adviser
voluntarily agreed to waive its fees and/or reimburse expenses for the Fixed
Income Fund so that operating expenses would not exceed 0.75% of the Fund's
average daily net assets. The example for the Fixed Income Fund is based upon
the adviser's voluntary agreement effective January 1, 1999 to waive its fees
and/or reimburse expenses so that the Fixed Income Fund's operating expenses
will not exceed 0.60% of the Fund's average daily net assets. The Large Cap
Equity and Special Equity Funds have not yet begun operations.

9
<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

The financial highlights tables are intended to help you understand the
International Equity, Small Cap Equity and Fixed Income Funds' financial
performance for the periods presented. The Large Cap and Special Equity Funds
were not operational at the date of this prospectus. Certain information
reflects financial results for a single share of a Fund. "Total Return" shows
how much your investment in a Fund would have increased (or decreased) during
each period, assuming you had reinvested all dividends and distributions. The
figures for the years or periods ended October 31 have been audited by
PricewaterhouseCoopers LLP whose report, along with the Funds' financial
statements, are included in each Fund's Annual Report, which is available
without charge, upon request.

INTERNATIONAL EQUITY FUND

<TABLE>
<CAPTION>
For the Fiscal Year or Period Ended October 31,
1998 1997 1996 1995+
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF YEAR........................ $ 11.99 $ 10.44 $ 9.61 $ 10.00
------- ------- ------- -------
Investment Operations:
Net investment income..................................... 0.01 0.02 0.07 0.02
Net realized and unrealized gain (loss) on investments and
foreign currency transactions........................... 0.75 1.57 0.80 (0.41)
------- ------- ------- -------
Total from investment operations...................... 0.76 1.59 0.87 (0.39)
------- ------- ------- -------
Distributions:
From net investment income................................ -- (0.04) (0.04) 0.00
From net realized capital gains........................... (0.67) -- -- 0.00
------- ------- ------- -------
Total distributions................................... (0.67) (0.04) (0.04) 0.00
------- ------- ------- -------
NET ASSET VALUE -- END OF YEAR.............................. $ 12.08 $ 11.99 $ 10.44 $ 9.61
======= ======= ======= =======
TOTAL RETURN................................................ 6.90% 15.23% 9.11% (3.90)%**
Ratios (to average net assets)/Supplemental Data:
Expenses(1)............................................... 1.13% 1.25% 1.25% 1.25%*
Net investment income..................................... 0.10% 0.28% 0.70% 1.02%*
Portfolio turnover rate..................................... 166.77% 92.33% 59.11% 42.21%*
Net assets at end of period (000's omitted)................. $57,875 $51,046 $41,209 $16,764
</TABLE>

SMALL CAP EQUITY FUND

<TABLE>
<CAPTION>
For the Fiscal Year or Period Ended
October 31,
1998 1997 1996+
-------- -------- -------
<S> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF YEAR........................ $ 13.08 $ 9.57 $10.00
------- ------- ------
INVESTMENT OPERATIONS:
Net investment loss....................................... (0.01) (0.02) (0.02)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions........................... (1.86) 3.62 (0.41)
------- ------- ------
Total from investment operations........................ (1.87) 3.60 (0.43)
------- ------- ------
Distributions:
From net investment income................................ -- -- --
From net realized capital gains........................... (0.95) (0.09) --
------- ------- ------
Total distributions..................................... (0.95) (0.09) --
------- ------- ------
NET ASSET VALUE -- END OF YEAR.............................. $ 10.26 $ 13.08 $ 9.57
======= ======= ======
TOTAL RETURN................................................ (15.33)% 37.81% (4.30)%**
Ratios (to average net assets)/Supplemental Data:
Expenses(2)............................................... 1.10% 1.25% 1.25%*
Net investment income..................................... (0.13)% (0.27)% (0.52)%*
Portfolio turnover rate..................................... 42.64% 67.66% 94.38%*
Net assets at end of period (000's omitted)................. $38,633 $28,923 $5,428
</TABLE>

10
<PAGE>

FIXED INCOME FUND

<TABLE>
<CAPTION>
For the Fiscal Year or Period Ended
October 31,

1998 1997+
---------------- -----------------
<S> <C> <C>
NET ASSET VALUE -- BEGINNING OF YEAR........................ $ 10.27 $ 10.00
------- -------
INVESTMENT OPERATIONS:
Net investment income..................................... 0.54 0.06
Net realized and unrealized gain on investments and
foreign currency transactions........................... 0.08 0.21
------- -------
Total from investment operations........................ 0.62 0.27
------- -------
Distributions:
From net investment income................................ (0.59) --
Return of capital......................................... (0.04) --
From net realized capital gains........................... (0.02) --
------- -------
Total distributions..................................... (0.65) 0.00
------- -------
NET ASSET VALUE -- END OF YEAR.............................. $ 10.24 $ 10.27
======= =======
TOTAL RETURN................................................ 6.26% 2.70%**
Ratios (to average net assets)/Supplemental Data:
Expenses(3)............................................... 0.75%* 0.75%*
Net investment income..................................... 5.60%* 5.83%*
Portfolio turnover rate..................................... 92.65%** 39.12%*
Net assets at end of period (000's omitted)................. $71,723 $32,537
</TABLE>

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

<TABLE>
<C> <S>
* Annualized.
** Total return has not been annualized.
+ The International Equity Fund commenced operations on August
3, 1995. The Small Cap Equity Fund commenced operations on
June 17, 1996. The Fixed Income Fund commenced operations on
September 2, 1997.
(1) Without waivers the annualized ratio of expenses to average
daily net assets would have been 1.44%, 1.80% and 2.60% for
the fiscal years ended October 31, 1997, 1996 and the period
ended October 31, 1995, respectively.
(2) Without waivers the annualized ratio of expenses to average
daily net assets would have been 1.84% and 4.63% for the
fiscal year ended October 31, 1997, and the period ended
October 31, 1996, respectively.
(3) Without waivers and reimbursements the annualized ratio of
expenses to average daily net assets would have been 0.88%
and 2.12% for the fiscal year ended October 31, 1998 and for
the period ended October 31, 1997, respectively.
</TABLE>

<PAGE>

- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RISKS

INTERNATIONAL EQUITY FUND. The International Equity Fund's investment
objective is capital appreciation, with a secondary objective of income. The
Fund seeks to achieve its objective by investing in a diversified portfolio of
equity securities of issuers located in countries other than the United States.
Under normal conditions, at least 65% of the Fund's total assets will be
invested in the equity securities of issuers from at least three different
foreign countries. The Fund may employ a variety of investment strategies and
techniques to hedge against market and currency risk. The Fund is designed for
investors seeking to complement their U.S. holdings through foreign equity
investments and should be considered as a vehicle for diversification and not as
a balanced investment program.

The Fund intends to reduce investment risk by diversifying its portfolio of
securities among the securities of foreign companies located throughout the
world. Specifically, the Fund intends to invest in the capital markets of more
than 20 countries, with emphasis on the largest markets of Japan, the United
Kingdom, France and Germany. The Fund's adviser anticipates that a substantial
portion of the Fund's assets will be invested in the developed countries of
Europe and the Far East. The Fund also may invest up to 20% of its assets in the
securities of developing countries. The Fund may invest up to 25% of its assets
in securities issued or guaranteed by non-U.S. governments, but will invest only
in securities issued or guaranteed by the governments of countries which are
members of the Organization for Economic Co-operation and Development (OECD).

For purposes of the Fund's investment objective, an issuer ordinarily will
be considered to be located in the country under the laws of which it is
organized or where the primary trading market of its securities is located. The
Fund, however, may consider a company to be located in a country, without
reference to its domicile or to the primary trading market of its securities,
when at least 50% of its non-current assets, capitalization, gross revenues or
profits in any one of the two most recent fiscal years represents (directly or
indirectly through subsidiaries) assets or activities located in such country.

Allocation of the Fund's assets is determined after the adviser examines
the phases in the business cycles and long-term growth potential of the various
foreign economies and the valuation of each foreign securities market currency,
taxation and other pertinent financial, social, national and political factors
are taken into account. The Fund's adviser seeks to identify equity investments
in each market which are expected to provide long-term capital appreciation that
equals or exceeds the performance benchmark of such market as a whole. Companies
considered for investment share the following characteristics:

o Industry leaders in their country, region or world

o Strong balance sheets

o Stocks widely followed by research analysts

o Large market capitalization (usually greater than $2 billion)

o Attractive price-to-earnings ratios compared with earnings growth
potential (PEG ratio)

Generally, the adviser sells Fund portfolio securities when:

o Company fundamentals deteriorate

o Stock valuation deteriorates due to a rise in the PEG ratio

o The Fund's portfolio should be rebalanced to include a country or
industry in which prospects for capital appreciation are determined
to be better than others

The Fund's investments in developing countries generally focus on a small
number of leading or relatively actively traded companies in such countries'
capital markets, with the expectation that the investment experience of the

12
<PAGE>

securities of such companies will substantially represent the investment
experience of the countries' capital markets as a whole.

The Fund primarily invests in common stock, but the Fund may also invest in
other equity securities. The Fund reserves the right, as a temporary defensive
measure and to provide for redemptions, to hold cash or cash equivalents in U.S.
dollars or foreign currencies and short-term securities including money market
securities. Under certain adverse investment conditions, the Fund may restrict
the markets in which its assets will be invested and may increase the proportion
of assets invested in temporary defensive obligations of U.S. issuers. When the
Fund maintains a temporary defensive position, it may not achieve its investment
objective.

RISKS. Investments in foreign securities involve certain risks not
involved in domestic investment, including fluctuations in foreign exchange
rates, future political and economic developments, different legal systems and
the existence or possible imposition of exchange controls or other foreign or
U.S. governmental laws or restrictions applicable to such investment. There may
be less publicly available information about a foreign company than about a U.S.
company, and foreign companies may not be subject to accounting, auditing and
financial reporting standards and requirements comparable to those to which U.S.
companies are subject. Securities prices in different countries are subject to
different economic, financial, political and social factors. Because the Fund
may invest in securities denominated or quoted in currencies other than the U.S.
dollar, changes in foreign currency exchange rates may affect the value of
securities in the Fund's portfolio and the unrealized appreciation or
depreciation of investments insofar as U.S. investors are concerned. Foreign
currency exchange rates are determined by forces of supply and demand in the
foreign exchange markets. These forces are, in turn, affected by international
balance of payments and other economic and financial conditions, government
intervention, speculation and other factors.

Many European countries have adopted a single European currency, the euro.
The consequences of the euro conversion for foreign exchange rates, interest
rates and the value of European securities eligible for purchase by the Fund are
presently unclear. Such consequences may adversely affect the value and/or
increase the volatility of securities held by the Fund.

In some countries there may be the possibility of expropriation of assets,
confiscatory taxation, high rate of inflation, political or social instability
or diplomatic developments which could affect investment in those countries. In
addition, certain foreign investments may be subject to foreign withholding
taxes. As a result, management of the Fund may determine that, notwithstanding
otherwise favorable investment criteria, it may not be practicable or
appropriate to invest in a particular country.

Securities of many foreign companies are less liquid and their prices may
be more volatile than securities of comparable domestic companies. Such markets
have different clearance and settlement procedures, and in certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when assets of the Fund
are uninvested so no return is earned.

Satisfactory custodial services for investment securities may not be
available in some countries having smaller capital markets, which may result in
the Fund incurring additional costs and delays in transporting and custodying
such securities outside such countries. Brokerage commissions and other
transaction costs on foreign securities exchanges are generally higher than in
the U.S.

Investment risks are often heightened for investments in developing
countries. The economics of developing countries generally are heavily dependent
upon international trade and have been and may continue to be adversely affected
by trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist

13
<PAGE>

measures imposed or negotiated by the countries with which they trade, as well
as the economic conditions in the countries with which they trade.

SMALL CAP EQUITY FUND. The Fund's investment objective is long-term
growth. The Fund seeks to achieve its objective by investing primarily in the
stock of U.S. companies with market capitalizations of $1 billion or less (small
cap), which are believed to be undervalued and have good prospects for capital
appreciation. During normal market conditions, at least 65% of the Fund's total
assets will be invested in the equity securities of companies considered to be
small cap at the time of initial purchase.

The Fund invests primarily in small capitalization companies using a value
approach. This approach entails finding companies whose current stock prices (i)
are believed not to reflect adequately their underlying value as measured by
business prospects; and (ii) are low in relation to current earnings, cash flow
or business franchises, and which, in the Fund adviser's opinion, seem capable
of recovering from any out-of-favor considerations. Companies with a market
capitalization of $1 billion or less may offer greater potential for capital
appreciation since they are often overlooked or undervalued by investors.
Because of their size, small cap stocks are less actively followed by stock
analysts and less information is available on which to base stock price
evaluations. As a result, greater discrepancies often exist between the current
stock price and its estimated underlying value, and may present greater
opportunity for long-term capital growth.

The Fund's adviser relies on its proprietary research to identify
undervalued, small cap stocks before their value is recognized by the investment
community. Stocks are selected when the adviser believes (1) the current stock
price is undervalued in relation to current earnings, cash flow or estimated
asset value per share; and (2) the potential for a catalyst exists (such as
improved business prospects, increased investor attention, asset sales or a
change in management), which will cause the stock's price to increase to reflect
the company's underlying value. The Fund generally sells stocks when (1) the
stock has realized its value in the opinion of the adviser; (2) the stock
attains a high price-to-earnings ratio; or (3) the issuing company's
fundamentals deteriorate.

The Fund's holdings generally will be traded in established
over-the-counter markets, but assets may also be invested in securities listed
on a national or regional securities exchange. The Fund's adviser expects that a
majority of Fund investments will be in U.S. based companies; however, from time
to time, the Fund may invest up to 20% of its total assets in securities
principally traded in markets outside the United States, if they meet the Fund's
investment criteria. Under normal circumstances, investments in foreign
securities will comprise no more than 10% of portfolio assets. While investments
in foreign securities are intended to reduce risk by providing further
diversification, such investments involve certain risks not involved in domestic
investment. These risks are discussed under "International Equity Fund" above.

While the Fund primarily invests in common stocks, it may, for temporary
defensive purposes, invest in reserves without limitation. Reserves in which the
Fund may invest are cash or short-term cash equivalents, including Treasury
obligations, direct obligations of federal agencies, and high quality, private
sector short-term instruments. The Fund may also establish and maintain reserves
as the adviser believes is advisable to facilitate the Fund's cash flow needs
(e.g., redemptions, expenses, and purchases of portfolio securities). The Fund's
reserves will be invested in domestic and foreign money market instruments rated
within the top two credit categories by a national rating organization or, if
unrated, of comparable quality. When the Fund maintains a temporary defensive
position, it may not achieve its investment objective.

RISKS. Higher risks are often associated with investment in the securities
of small capitalization companies. Among the reasons for the greater price
volatility of these securities are the less certain growth prospects of smaller
firms, a lower degree of liquidity in the markets for such stocks compared to
larger capitalization stocks, and the

14
<PAGE>

greater sensitivity of small companies to changing economic conditions. Also,
small company stocks may, to a degree, fluctuate independently of larger company
stocks. Small company stocks may decline in price as large company stock prices
rise, or rise in price as large company stock prices decline. Investors should
therefore expect that the value of the Fund's shares may be more volatile than
the shares of a fund that invests in larger capitalization stocks.

FIXED INCOME FUND. The Fixed Income Fund's investment objective is maximum
current income, with a secondary objective of growth. The Fund seeks its
objective by investing, under normal circumstances, at least 65% of its assets
in a diversified portfolio of fixed income securities.

The Fund may invest in income-producing securities of all types, including
bonds, notes, mortgage and mortgage-backed securities, corporate debt
securities, commercial paper, government and government agency obligations, zero
coupon securities, convertible securities, bank certificates of deposit, fixed
time deposits and bankers' acceptances, foreign securities, indexed securities,
asset-backed securities, and inverse floater securities. The Fund normally will
invest in investment-grade debt securities (including convertible securities) or
unrated securities determined by the investment adviser to be of comparable
quality. Investment grade securities have a rating of Baa or better as
determined by Moody's Investors Service, Inc. ("Moody's") or BBB or better by
Standard & Poor's Ratings Group, or are of comparable quality. These are the
highest ratings or categories as defined by Moody's and S&P.

The Fund buys securities perceived by the investment adviser to be
undervalued and to present an opportunity for yield enhancement and capital
appreciation or stability. The Fund may sell securities in anticipation of
market decline. If the credit rating of a portfolio security is down-graded to
below investment grade, the adviser will examine the issuer's current credit
rating relative to the security's yield and the adviser's expectations regarding
the issuer's credit going forward. The downgrade triggers more intensive and
formal analysis by the adviser of industry and company specific factors, after
which the adviser makes a specific sell or hold decision. Timing of the sell or
hold also factors into the adviser's analysis. If the rating of an investment
grade security held by the Fund is downgraded, but still falls within investment
grades, the investment adviser will evaluate the security as it relates to the
rest of the portfolio securities to determine whether to sell or hold the
security.

The Fund will not invest more than 25% of its total assets in
mortgage-related securities not guaranteed by the U.S. Government or by agencies
or instrumentalities of the U.S. Government. The Fund has no restriction on
maturity; however, it normally invests in a broad range of maturities and
generally maintains a dollar-weighted average maturity of 7 to 12 years. The
average maturity of the Fund's investments will vary depending on market
conditions. In making investment decisions for the Fund, the adviser will
consider factors in addition to current yield, including preservation of
capital, the potential for realizing capital appreciation, maturity and yield to
maturity. The adviser will monitor the Fund's investment in particular
securities or in types of debt securities in response to its appraisal of
changing economic conditions and trends, and may sell securities in anticipation
of a market decline or purchase securities in anticipation of a market rise.

RISKS. The market value of fixed-income securities will change in response
to interest rate changes and other factors. During periods of falling interest
rates, the value of outstanding fixed-income securities generally rises.
Conversely, during periods of rising interest rates, the value of such
securities generally declines. 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 credit rating of any fixed-income security
and in the ability of an issuer to make payments of interest and principal also
affect the value of these investments. Changes in the value of portfolio
securities will not necessarily affect cash income derived from those securities
but will affect the net asset value of the Portfolio's shares.

15
<PAGE>

The Fund may invest in mortgage-backed, asset-backed and mortgage
pass-through securities. Early repayment of principal on some mortgage-related
securities may expose the Fund to a lower rate of return upon reinvestment of
principal. Also, if a security subject to prepayment has been purchased at a
premium, the value of the premium would be lost in the event of prepayment. The
value of some mortgage-or asset-backed securities in which the Funds invest may
be sensitive to changes in prevailing interest rates, and, like the other
investments of the Fund, the ability of the Fund to successfully utilize these
instruments may depend in part upon the ability of the investment adviser to
forecast interest rates and other economic factors correctly. Like other fixed
income securities, when interest rates rise, the value of a mortgage-related
security generally will decline; however, when interest rates are declining, the
value of mortgage-related securities with prepayment features may not increase
as much as other fixed income securities.

The rate of prepayments on underlying mortgages will affect the price and
volatility of a mortgage-related security, and may have the effect of shortening
or extending the effective maturity of the security beyond what was anticipated
at the time of purchase. To the extent that unanticipated rates of prepayment on
underlying mortgages increase the effective maturity of a mortgage-related
security, the volatility of such security can be expected to increase.

Commercial mortgage-backed securities reflect an interest in, and are
secured by, mortgage loans on commercial real property. Many of the risks of
investing in commercial mortgage-backed securities reflect the risks of
investing in the real estate securing the underlying mortgage loans. These risks
include the effects of local and other economic conditions on real estate
markets, the ability of tenants to make loan payments, and the ability of a
property to attract and retain tenants. Commercial mortgage-backed securities
may be less liquid and exhibit greater price volatility than other types of
mortgage- or asset-backed securities.

Debt securities that are rated Baa by Moody's or BBB by S&P, or, if
unrated, are of comparable quality, may have speculative characteristics, and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case
with higher rated debt securities.

LARGE CAP EQUITY FUND. The Fund's investment objective is long-term total
return. The Fund seeks to achieve its objective by investing primarily in the
common stock of U.S. companies with market capitalizations greater than $5
billion (large cap). During normal market conditions, at least 90% of the Fund's
total assets will be invested in the equity securities of companies considered
to be large cap at the time of initial purchase. The Fund's holdings generally
will be listed on a national or regional securities exchange, but assets may
also be invested in securities traded in established over-the-counter markets.

The Fund invests primarily in large capitalization companies using a
relative value approach. This approach entails finding companies whose current
stock prices are believed not to reflect adequately their underlying value,
measured by the companies' price-to-earnings ratios as compared to the S&P 500
over a long period of time.

The Fund's adviser relies on its proprietary research to identify
undervalued, large cap stocks before their value is recognized by the investment
community. Stocks will be selected when the adviser believes (1) the current
stock price is undervalued in relation to the relative price-to-earnings ratio
range; and (2) the potential for a catalyst exists (such as accelerated
earnings-per-share growth or expanding price-to-earnings ratios), which will
cause the stock's price to increase to reflect the company's underlying value.

Fund portfolio securities will be sold when they reach analysts' relative
price-to-earnings ratio ranges and earning-per-share expectations. Stocks also
are sold when company fundamentals deteriorate or when a combination of
underperformance relative to its index, downward earnings revisions or negative
earnings occur.

16
<PAGE>

RISKS. Stock prices do fluctuate, and the value of your investment in the
Fund will go up and down, which means that you could lose money. Further,
different types of stocks will shift in and out of favor depending on market and
economic conditions, so the Fund's performance may sometimes be lower or higher
than that of other types of funds (such as those emphasizing growth stocks).
While there is the risk that a value stock may never reach what the investment
adviser believes is its full value, or may even go down in value, the Fund's
emphasis on large company value stocks could potentially limit the downside risk
of the Fund, because value stocks in theory are already underpriced and large
company stocks tend to be less volatile than small company stocks. In the long
run, the Fund may produce more modest gains than riskier stock funds as a
trade-off for this potentially lower risk.

SPECIAL EQUITY FUND. The Fund's investment objective is high total return.
The Fund seeks to achieve its objective by investing primarily in the common
stock of U.S. companies with market capitalizations greater than $5 billion
(large cap). During normal market conditions, at least 90% of the Fund's total
assets will be invested in a non-diversified, select portfolio of the equity
securities of 10 to 20 companies considered to be large cap at the time of
initial purchase. The Fund's holdings generally will be listed on a national or
regional securities exchange, but assets may also be invested in securities
traded in established over-the-counter markets.

The Fund's adviser relies on its proprietary research to identify
undervalued, large cap stocks before their value is recognized by the investment
community. Stocks will be selected when the adviser believes (1) the current
stock price is undervalued in relation to the relative price-to-earnings ratio,
and (2) the potential for a catalyst exists (such as earnings announcements,
earnings revisions, near-term economic or political changes affecting an
industry and other industry conditions), which will cause the stock's price to
increase to reflect the company's underlying value.

The adviser will sell a stock to make room for one with a higher potential
for appreciation; when a stock is not meeting near-term objectives or when a
stock's near-term objectives are met.

Since the Fund's investment objective is high total return, returns are
expected to be short-term, and portfolio turnover is expected to exceed 200%
annually. High portfolio turnover may result in additional transaction costs
(such as brokerage commissions), which are borne by the Fund and adverse tax
consequences for Fund shareholders. A greater proportion of any dividends that
you receive from the Fund may be characterized as ordinary income, which is
taxed at higher rates than capital gains.

17
<PAGE>

may also establish and maintain reserves as the adviser believes is advisable to
facilitate the Fund's cash flow needs (e.g., redemptions, expenses, and
purchases of portfolio securities). The Fund's reserves will be invested in
domestic and foreign money market instruments rated within the top two credit
categories by a national rating organization or, if unrated, of comparable
quality. When the Fund maintains a temporary defensive position, it may not
achieve its investment objective.

RISKS. Stock prices do fluctuate, and the value of your investment in the
Fund will go up and down, which means that you could lose money. Further,
different types of stocks tend to shift in and out of favor depending on market
and economic conditions, so that Fund's performance may sometimes be lower or
higher than that of other types of funds (such as those emphasizing growth
stocks). While there is the risk that a value stock may never reach what the
investment adviser believes is its full value, or may even go down in value, the
Fund's emphasis on large company value stocks could potentially limit the
downside risk of the Fund, because value stocks in theory are already
underpriced and large company stocks tend to be less volatile than small company
stocks. In the long run, the Fund may produce more modest gains than riskier
stock funds as a trade-off for this potentially lower risk.

In seeking to achieve its investment objective, the Fund limits its
portfolio to a select group of securities and is classified as a non-diversified
fund. As such, the Fund may invest more heavily in fewer companies and may be
more at risk for loss than a fund with a diversified portfolio.

- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS

INVESTMENT ADVISER

The investment adviser for the Funds is 1838 Investment Advisors, Inc.,
(formerly 1838 Investment Advisors, L.P.), a direct, wholly-owned subsidiary of
MBIA, Inc., and an investment adviser registered under the Investment Advisers
Act of 1940. The investment adviser's offices are located at Five Radnor
Corporate Center, Suite 320, 100 Matsonford Road, Radnor, PA 19087. The
investment adviser supervises the investment of the assets of each Fund in
accordance with its objective, policies and restrictions. Taking predecessor
firms into account, the investment adviser has over 10 years of investment
advisory experience, including management of the Funds, institutional investment
accounts, and investment accounts of high net-worth individuals.

As compensation for its services, for the fiscal year ended October 31,
1998, the investment adviser received an annual fee on a monthly basis equal to
the following percentages of the applicable Fund's average daily net assets:

<TABLE>
<S> <C>
International Equity Fund 0.75%
Small Cap Equity Fund 0.75%
Fixed Income Fund 0.50%
Large Cap Equity Fund 0.65%
Special Equity Fund 1.00%
</TABLE>

The investment adviser voluntarily has agreed to waive its fee to meet the
expense cap for the International Equity, Small Cap Equity and Fixed Income
Funds as set forth under "Expenses of the Funds."

Johannes B. van den Berg, Managing Director with the investment adviser, is
principally responsible for the day-to-day management of the International
Equity Fund's portfolio. Mr. van den Berg has acted as portfolio manager of this
Fund since its inception.

18
<PAGE>

From 1993 to 1998, Mr. van den Berg was a principal of 1838 Investment
Advisors, L.P. (the predecessor of the investment adviser), a director of
MeesPierson 1838 Investment Advisors (an indirect predecessor of the investment
adviser).

Edwin B. Powell, Managing Director with the investment adviser, is
principally responsible for the day-to-day management of the Small Cap Equity
Fund's portfolio. Since June of 1994, Mr. Powell has served as a money manager
with the investment adviser, managing a number of separate portfolios in the
small cap style. Prior to joining the investment adviser, Mr. Powell was
employed by Provident Capital Management (a subsidiary of PNC Bancorp) where for
seven years he managed a number of large and small cap portfolios in a value
style. While at Provident Capital Management, Mr. Powell managed two publicly
traded, open-end mutual funds: PNC Value Fund and PNC Small Cap Value Fund.

Clifford D. Corso, Managing Director and Head of Fixed Income Trading with
the investment adviser, is principally responsible for the day-to-day management
of the Fixed Income Fund's portfolio. Mr. Corso has acted as portfolio manager
for this Fund since August 1, 1998. Mr. Corso currently is Vice President and
Senior Portfolio Manager at MBIA Capital Management Corp. (since 1994). From
1992 to 1994, Mr. Corso was Vice President and Co-head of Fixed Income Trading
at Shields Alliance.

The Large Cap Equity and Special Equity Funds are managed day-to-day by the
same team of persons. Each person generally is responsible for overseeing one or
more specific investment strategies for these Funds. The portfolio management
team for these Funds is as follows:

George W. Gephart, Jr., Senior Managing Director with the investment
adviser. Mr. Gephart was a Principal of and portfolio manager at the adviser's
predecessor firm from 1988 to 1998. He specializes in the management of equity
securities.

Robert W. Herz, Director with the investment adviser. Mr. Herz specializes
in equity securities and was an Equity Analyst with the adviser's predecessor
firm from 1989 to 1998.

James E. Moore, III, Director with the investment adviser. Mr. Moore
specializes in equity securities and was an equity portfolio manager with the
adviser's predecessor firm from 1994 to 1998. During 1993, Mr. Moore was an
intern at Taylor Investments, New London, NH.

Patricia J. Pierce, Director with the investment adviser. Ms. Pierce was a
Principal of and portfolio manager at the adviser's predecessor firm from 1988
to 1998. She specializes in the management of equity securities.

19
<PAGE>

INVESTMENT ADVISER'S HISTORICAL PERFORMANCE

Below are certain performance data provided by the investment adviser
pertaining to the composite of separately managed accounts of the investment
adviser that are managed with substantially similar (although not necessarily
identical) objectives, policies and strategies as those of the Large Cap Equity
Fund and Special Equity Fund, respectively. The performance data for the managed
accounts is net of all fees and expenses. The investment returns of the Large
Cap Equity and Special Equity Funds may differ from those of the separately
managed accounts because such separately managed accounts may have fees and
expenses that differ from those of the Funds. Further, the separately managed
accounts are not subject to investment limitations, diversification requirements
and other restrictions imposed by the Investment Company Act of 1940 and
Internal Revenue Code; such conditions, if applicable, may have lowered the
returns for separately managed accounts. The results presented are not intended
to predict or suggest the return to be experienced by the Large Cap Equity or
Special Equity Funds, or the return an investor might achieve by investing in
either Fund.

1838 INVESTMENT ADVISORS INC. -- LARGE CAP EQUITY COMPOSITE
(UNAUDITED PERCENTAGE RETURNS NET OF MANAGEMENT FEES)

<TABLE>
<CAPTION>
1838 Investment S&P 500
Advisors Index
--------------- -------
<S> <C> <C> <C>
One year period through: 12/31/89 28.42% 31.43%
12/31/90 -1.55% -3.19%
12/31/91 30.25% 30.55%
12/31/92 8.00% 7.68%
12/31/93 13.88% 10.00%
12/31/94 0.19% 1.33%
12/31/95 31.66% 37.50%
12/31/96 25.57% 23.25%
12/31/97 31.77% 33.38%
12/31/98 40.42% 28.76%

Value of $1 during 10 years (1/1/89-12/31/98) $ 6.21 $ 5.80
10 year mean 22.74% 20.07%
Cumulative 520.67% 480.19%
Annualized returns
1 Year 40.42% 28.76%
3 Year 32.45% 28.39%
5 Year 25.11% 24.15%
8 Year 22.00% 20.88%
10 Year 20.03% 19.22%
</TABLE>

20
<PAGE>

1838 INVESTMENT ADVISORS INC. -- SPECIAL EQUITY COMPOSITE
(UNAUDITED PERCENTAGE RETURNS NET OF MANAGEMENT FEES)

<TABLE>
<CAPTION>
1838 Investment S&P 500
Advisors Index
--------------- -------
<S> <C> <C> <C>
One year period through: 4/1/96-12/31/96 33.47% 16.88%
12/31/97 45.56% 33.38%
12/31/98 43.95% 28.76%
2 year, 9 month annualized 45.35% 28.83%

Value of $1 invested during 2 years, 9 months (4/1/96-12/31/98) $ 2.80 $ 2.01
2 year, 9 month mean 44.72% 28.73%
Cumulative 179.65% 100.71%
</TABLE>

Notes:

1. The annualized return is calculated from monthly data, allowing for
compounding. The formula used is in accordance with the acceptable methods
set forth by the Association for Investment Management Research (AIMR), the
Bank Administration Institute, and the Investment Counsel Association of
America. The AIMR calculation method differs from that used by the SEC.
Market Value of the account was the sum of the account's total assets,
including cash, cash equivalents, short term investments, and securities
valued at current market prices.

2. The cumulative return means that $1 invested in the composite account on
10/1/88 had grown to $6.21 by 12/31/98 for the Large Cap Equity Composite;
and $1 invested on 4/1/96 had grown to $2.80 by 12/31/98 for the Special
Equity Composite.

3. The Large Cap Equity 10 year mean, and the Special Equity 2 year, 9 month
mean is the arithmetic average of the annual returns for the years listed,
for each respective composite.

4. The S&P 500 is an unmanaged index which assumes reinvestment of dividends and
is generally considered representative of securities similar to those
invested in by the investment adviser for the purpose of the composite
performance numbers set forth above.

5. The investment adviser's average annual management fee for Large Capacity
Accounts over the periods shown was .45l % or 45 basis points. During the
periods presented, fees on the investment adviser's individual accounts of
this type changed from 35% to 60% (35 basis points to 60 basis points). The
investment adviser's average annual management fee for Special Equity
accounts over the periods shown was .65% or 65 basis points. During the
periods presented, fees on the investment adviser's individual accounts of
this type ranged from .60% to 1.00% (60 basis points to 100 basis points).
Net returns to investors vary depending on the management fee.

21
<PAGE>

- --------------------------------------------------------------------------------
CALCULATION OF NET ASSET VALUE

The net asset value per share of each Fund is determined as of the close of
regular trading on each day that the New York Stock Exchange ("Exchange") is
open for unrestricted trading from Monday through Friday, and on which there is
a purchase or redemption of a Fund's shares. The net asset value is determined
by dividing the value of a Fund's securities, plus any cash and other assets,
less all liabilities, by the number of shares outstanding. Expenses and fees of
a Fund, including the advisory and administration fees, are accrued daily and
taken into account for the purpose of determining the net asset value.

In valuing each Fund's net assets, all securities for which representative
market quotations are available will be valued at the last quoted sales price on
the security's principal exchange on that day. If there are no sales of the
relevant security on such day, the security will be valued at the mean between
the closing bid and asked price on that day, if any. Securities for which market
quotations are not readily available and all other assets will be valued at
their respective fair market value as determined in good faith by, or under
procedures established by, the Board of Trustees. In determining fair value, the
Trustees may employ an independent pricing service.

Money market securities with less than sixty days remaining to maturity
when acquired by a Fund will be valued on an amortized cost basis by the Fund,
excluding unrealized gains or losses thereon from the valuation. This is
accomplished by valuing the security at cost and then assuming a constant
amortization to maturity of any premium or discount. If a Fund acquires a money
market security with more than sixty days remaining to its maturity, it will be
valued at current market value until the 60th day prior to maturity, and will
then be valued on an amortized cost basis based upon the value on such date
unless the Trustees determine during such 60-day period that this amortized cost
value does not represent fair market value.

Those securities that are quoted in foreign currency will be valued daily
in U.S. dollars at the foreign currency exchange rates prevailing at the time a
Fund calculates the daily net asset value per share. Although each Fund values
its assets in U.S. dollars on a daily basis, it does not intend to convert its
holdings of foreign currencies into U.S. dollars on a daily basis.

- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES

Shares of each Fund are offered through the Fund's distributor, and may be
purchased at the net asset value next determined after receipt of a purchase
order in proper form by the distributor. An application in proper form is fully
completed, contains all necessary signatures and is accompanied by a correctly
written and signed investment check. Brokers and other intermediaries are also
authorized to accept purchase orders on behalf of the Funds. The Funds and the
distributor reserve the right to reject any purchase order, and a Fund and the
distributor may suspend the offering of any Fund's shares. The minimum initial
investment is $1,000, with no minimum subsequent investment. Each Fund reserves
the right to vary the initial and subsequent investment minimums at any time.
Shares of each Fund are available for use in certain tax-deferred plans (such as
Individual Retirement Accounts ("IRAs"), defined contribution, 401(k) and
403(b)(7) plans). There is no minimum investment requirement for qualified
retirement plans.

Purchase orders for shares of a Fund which are received and accepted by the
Fund's distributor prior to the close of regular trading hours on the New York
Stock Exchange (generally 4:00 p.m. Eastern time) on any day that the Fund
calculates its net asset value, are priced according to the net asset value
determined on that day. Purchase orders received and accepted by the distributor
after the close of the Exchange on a particular day are priced as of the time
the net asset value per share is next determined.

22
<PAGE>

Purchases may be made in one of the following ways:

PURCHASES BY MAIL

You may purchase shares by sending a check drawn on a U.S. bank payable to
the Fund of your choice, along with a completed application (located at the back
of this Prospectus), to 1838 Investment Advisors Funds, c/o Declaration Service
Company, P.O. Box 844, Conshohocken, PA 19428. A purchase order sent by
overnight mail should be sent to 1838 Investment Advisors Funds, c/o Declaration
Service Company, 555 North Lane, Suite 6160, Conshohocken, PA 19428. If a
subsequent investment is being made, the check should also indicate your Fund
account number.

When you purchase by check, payment on share redemptions will be mailed
upon clearance of the check (which may take up to 15 days from the purchase
date). If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be responsible for any losses or fees incurred in
that transaction.

PURCHASES BY WIRE

You may purchase shares by wiring federal funds. To advise the Trust of the
wire, and initially to obtain an account number, you must telephone Declaration
Service Company at (800) 884-1838. Once you have an account number, instruct
your bank to wire federal funds to:

Declaration Service Company
C/O First Union National Bank
Philadelphia, PA
ABA # 031201467
ATTENTION: [FUND NAME]
ACCT. # 2014205606743
FOR FURTHER CREDIT TO [SHAREHOLDER NAME AND ACCOUNT NUMBER]

If you make an initial purchase by wire, you must promptly forward a
completed Application to Declaration at the address stated above under
"Purchases By Mail." Investors should be aware that some banks may impose a wire
service fee.

AUTOMATIC INVESTMENT PLAN

Shareholders may purchase shares of a Fund through an Automatic Investment
Plan (the "Plan"). The Plan provides a convenient method by which investors may
have monies deducted directly from their checking, savings or bank money market
accounts for investment in the Fund. Under the Plan, Declaration, at regular
intervals, will automatically debit a shareholder's bank checking account in an
amount of $50 or more (subsequent to the $1,000 minimum initial investment), as
specified by the shareholder. A shareholder may elect to invest the specified
amount monthly, bimonthly, quarterly, semi-annually or annually. The purchase of
a Fund's shares will be effected at the net asset value at the close of regular
trading on the New York Stock Exchange (generally 4:00 p.m. Eastern time) on or
about the 20th day of the month. To obtain an Application for the Automatic
Investment Plan, check the appropriate box of the Application at the end of this
Prospectus or call Declaration at (800) 884-1838.

23
<PAGE>

INDIVIDUAL RETIREMENT ACCOUNTS

Application forms and brochures for IRAs can be obtained from Declaration
by calling (800) 884-1838.

The IRA custodian receives an annual fee of $10.00 per account, which fee
is paid directly to the custodian by the IRA shareholder. If the fee is not paid
by the date due, shares of the Fund held in the IRA account will be redeemed
automatically for purposes of making the payment.

- --------------------------------------------------------------------------------
EXCHANGE OF SHARES

You may exchange all or a portion of your Fund shares for shares of any of
the other Funds in the 1838 Investment Advisors Funds' complex that currently
offer shares to investors. Shares of a Fund are available only in states in
which such shares may be lawfully sold.

A redemption of shares through an exchange will be effected at the net
asset value per share next determined after receipt by Declaration of the
request, and a purchase of shares through an exchange will be effected at the
net asset value per share determined at that time. Exchange transactions will be
subject to the minimum initial investment and other requirements of the Fund
into which the exchange is made. An exchange may not be made if the exchange
would leave a balance in a shareholder's account of less than $1,000.

To obtain more information about exchanges, or to place exchange orders,
contact Declaration at (800) 884-1838. The Trust reserves the right to terminate
or modify the exchange offer described here and will give shareholders sixty
days' notice of such termination or modification.

- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES

Shareholders may redeem their Fund shares without charge on any day that
the Fund calculates its net asset value (see "Calculation of Net Asset Value").
Brokers and other intermediaries also are authorized to accept redemption
requests on behalf of the Funds. Redemptions will be effective at the net asset
value per share next determined after receipt by Declaration of a redemption
request meeting the requirements described below. Redemption proceeds are
normally sent on the next business day following receipt by Declaration of the
redemption request but, in any event, redemption proceeds are sent within seven
calendar days of receipt of the request. Redemption requests should be
accompanied by the Fund's name and your account number. Corporations, other
organizations, trusts, fiduciaries and other institutional investors may be
required to furnish certain additional documentation to authorize redemptions.

Each Fund will honor redemption requests of shareholders who recently
purchased shares by check, but will not mail the proceeds until reasonably
satisfied that the purchase check has cleared, which may take up to fifteen days
from the purchase date, at which time the redemption proceeds will be mailed to
the shareholder.

Except as noted below, redemption requests received by Declaration prior to
the close of regular trading hours on the Exchange on any business day that a
Fund calculates its per share net asset value are effective that day. Redemption
requests received by Declaration after the close of the Exchange are effective
as of the time the net asset value per share is next determined.

24
<PAGE>

IN-KIND REDEMPTION

Each Fund will satisfy redemption requests in cash to the fullest extent
feasible, so long as such payments would not, in the opinion of the investment
adviser or the Board of Trustees, result in the necessity of a Fund selling
assets under disadvantageous conditions and to the detriment of the remaining
shareholders of the Fund.

The Trust has the authority to pay for shares redeemed either in cash or
in-kind, or partly in cash and partly in-kind. However, the Trust will redeem
its shares solely in cash up to the lesser of $250,000 or 1% of the net asset
value of a Fund, during any 90-day period for any one shareholder. Payments in
excess of this limit also will be made wholly in cash unless the Board of
Trustees believes that economic conditions exist which would make such a payment
detrimental to the best interests of a Fund. Any portfolio securities paid or
distributed in-kind would be valued as described under "Calculation of Net Asset
Value."

Shares redeemed in kind will be redeemed with liquid securities. In the
event that an in-kind distribution is made, a shareholder may incur additional
expenses, such as the payment of brokerage commissions, on the sale or other
disposition of the securities received from a Fund. In-kind payments need not
constitute a cross-section of a Fund's portfolio. When a shareholder has
requested redemption of all or a part of the shareholder's investment, and the a
Fund completes a redemption in-kind, such Fund will not recognize gain or loss
for federal tax purposes, on the securities used to complete the redemption but
the shareholder will recognize gain or loss equal to the difference between the
fair market value of the securities received and the shareholder's basis in the
Fund shares redeemed.

Shares may be redeemed in one of the following ways:

REDEMPTION BY MAIL

Shareholders redeeming their shares by mail should submit written
instructions with a guarantee of their signature by an "eligible guarantor
institution." Eligible guarantor institutions include banks, brokers, dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. Broker-dealers
guaranteeing signatures must be a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program. A
signature and a signature guarantee are required for each person in whose name
the account is registered.

Written redemption instructions should be submitted to 1838 Investment
Advisors Funds, c/o Declaration Service Company, P.O. Box 844, Conshohocken, PA
19428. A redemption order sent by overnight mail should be sent to 1838
Investment Advisors Funds, c/o Declaration, 555 North Lane, Suite 6160,
Conshohocken, PA 19428.

REDEMPTION BY TELEPHONE

Shareholders who prefer to redeem their shares by telephone must apply in
writing for telephone redemption privileges. For an Application for Telephone
Redemptions, check the appropriate box on the Application or call Declaration at
(800) 884-1838. The Application for Telephone Redemptions describes the
telephone redemption procedures in more detail and requires certain information
that will be used to identify the shareholder when a telephone redemption
request is made.

Neither the Funds nor their service contractors will be liable for any loss
or expense in acting upon any telephone instructions that are reasonably
believed to be genuine. In attempting to confirm that telephone instructions are
genuine, each Fund will use procedures considered reasonable, including
requesting a shareholder to correctly state his or her Fund account number, the
name in which his or her account is registered, the number of shares to be
redeemed and certain other information necessary to identify you as the
shareholder. To the extent that a Fund fails to use reasonable

25
<PAGE>

procedures to verify the genuineness of telephone instructions, it and/or its
service contractors may be liable for any instructions that prove to be
fraudulent or unauthorized.

During times of drastic economic or market changes, the telephone
redemption privilege may be difficult to use. In the event that you are unable
to reach Declaration by telephone, you may make a redemption request by mail.
The Funds and Declaration reserve the right to refuse a wire or telephone
redemption if it is believed advisable to do so. Procedures for redeeming Fund
shares by wire or telephone may be modified or terminated at any time by the
Trust.

REDEMPTIONS BY WIRE

Redemption proceeds may be wired to your predesignated bank account at any
commercial bank in the United States if the amount is $1,000 or more. The
receiving bank may charge a fee for this service. Amounts redeemed by wire
normally are wired on the next business day after receipt and acceptance of
redemption instructions (if received before the close of regular trading on the
Exchange), but in no event later than seven days following such receipt and
acceptance.

SYSTEMATIC WITHDRAWAL PLAN

Shareholders who own shares with a value of $10,000 or more may participate
in the Systematic Withdrawal Plan. For an Application for the Systematic
Withdrawal Plan, check the appropriate box on the Application or call
Declaration at (800) 884-1838. Under the Plan, shareholders may automatically
redeem a portion of their Fund shares monthly, bimonthly, quarterly,
semi-annually or annually. The minimum withdrawal available is $100. The
redemption of Fund shares will be effected at their net asset value at the close
of the Exchange on or about the 25th day of the month. If you expect to purchase
additional Fund shares, it may not be to your advantage to participate in the
Systematic Withdrawal Plan because contemporaneous purchases and redemptions may
result in adverse tax consequences.

ADDITIONAL REDEMPTION INFORMATION

Redemption proceeds may be mailed to your bank or, for amounts of $10,000
or less, mailed to your Fund account address of record if the address has been
established for a minimum of 60 days. In order to authorize a Fund to mail
redemption proceeds to your Fund account address of record, complete the
appropriate section of the Application for Telephone Redemptions or include your
Fund account address of record when you submit written instructions. You may
change the account which you have designated to receive amounts redeemed at any
time. Any request to change the account designated to receive redemption
proceeds should be accompanied by a guarantee of the shareholder's signature by
an eligible guarantor institution. Further documentation will be required to
change the designated account when shares are held by a corporation, other
organization, trust, fiduciary or other institutional investor.

Each Fund also reserves the right to involuntarily redeem an investor's
account where the account is worth less than the minimum initial investment
required when the account is established, presently $1,000. (Any redemption of
shares from an inactive account established with a minimum investment may reduce
the account below the minimum initial investment, and could subject the account
to redemption initiated by the Fund). A Fund will advise the shareholder of such
intention in writing at least sixty (60) days prior to effecting such
redemption, during which time the shareholder may purchase additional shares in
any amount necessary to bring the account back to $1,000. If the value of an
investor's account falls below the minimum initial investment requirement due to
market fluctuations, the fund will not redeem an investor's account except
pursuant to the instructions of the shareholder.

For more information on redemption services, contact Declaration.

26
<PAGE>

- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES

The International Equity, Small Cap Equity, Large Cap Equity and Special
Equity Funds will declare and pay dividends annually to their shareholders of
substantially all of their net investment income, if any, earned during the year
from their investments. The Fixed Income Fund will declare and pay dividends
quarterly to its shareholders of substantially all of its net investment income,
if any, earned during each quarter from its investments. A Fund will distribute
net realized capital gains, if any, once each fiscal year. Expenses of each
Fund, including the advisory fee, are accrued each day. Reinvestments of
dividends and distributions in additional shares of each Fund will be made at
the net asset value determined on the record date of the dividend or
distribution unless the shareholder has elected in writing to receive dividends
or distributions in cash. An election may be changed by notifying Declaration in
writing thirty days prior to the record date.

Each Fund intends to distribute substantially all of its net investment
income and net capital gains. Dividends from net investment income or net
short-term capital gains will be taxable to you as ordinary income, whether
received in cash or in additional shares. A Fund with a high portfolio turnover
rate, such as the Special Equity Fund, may have significantly more dividends
from net investment income, which will result in more ordinary income to
shareholders, rather than capital gain. For corporate investors, dividends from
net investment income will generally qualify in part for the corporate
dividends-received deduction. However, the portion of the dividends so qualified
depends on the aggregate qualifying dividend income received by a Fund from
domestic (U.S.) sources.

Distributions paid by a Fund from long-term capital gains, whether received
in cash or in additional shares, are taxable to those investors subject to
income tax as long-term capital gains, regardless of the length of time an
investor has owned shares in the Fund. A Fund does not seek to realize any
particular amount of capital gains during a year; rather, realized gains are a
byproduct of Fund management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in a Fund are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.

Dividends which are declared in October, November or December to
shareholders of record in such a month but which, for operational reasons, may
not be paid to the shareholder until the following January, will be treated for
tax purposes as if paid by each Fund and received by the shareholder on December
31 of the calendar year in which they are declared.

A sale of shares or exchange of shares between two mutual funds, or a
redemption of Fund shares, is a taxable event and may result in a capital gain
or loss to shareholders subject to tax. The capital gain or loss will be
short-term capital gain or loss if shares were held for one year or less, and
long-term capital gain if shares were held more than one year. The ability of a
shareholder to deduct capital losses on the sale or redemption of a Fund's
shares may be limited to the amount of capital losses (plus $3,000 for
non-corporate shareholders). Any loss incurred on sale or exchange of a Fund's
shares, held for six months or less, will be treated as a long-term capital loss
to the extent of capital gain dividends received with respect to such shares.

Each Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% of the total assets of a
Fund at the end of its fiscal year are invested in securities of foreign
corporations, a Fund may elect to pass-through to its shareholders their pro
rata share of foreign taxes paid by such Fund. If this election is made,
shareholders will be (i) required to include in their gross income their pro
rata share of foreign source income (including any foreign taxes paid by the
Fund), and (ii) entitled to either deduct (as an itemized deduction in the case
of individuals) their share of such foreign taxes in computing their taxable
income or to claim a credit for such

27
<PAGE>

taxes against their U.S. income tax, subject to certain limitations under the
Code. Shareholders will be informed by each Fund at the end of each calendar
year regarding the availability of any credits and the amount of foreign source
income (including any foreign taxes paid by the Fund) to be included on their
income tax returns.

Under Code Section 988, foreign currency gains or losses, including those
from forward contracts, from futures contracts that are not "regulated futures
contracts" and from unlisted options, will generally be treated as ordinary
income or loss. Such Code Section 988 gains or losses will increase or decrease
the amount of a Fund's investment company taxable income available to be
distributed to shareholders as ordinary income. If Code Section 988 losses
exceed other investment company taxable income during a taxable year, a Fund
would not be able to make any ordinary dividend distributions, and any
distributions made before the losses were realized but in the same taxable year,
would be recharacterized as a return of capital to shareholders, thereby
reducing each shareholder's basis in Fund shares.

Each year, each Fund will mail information to shareholders on the tax
status of the Fund's dividends and distributions. Each Fund is required to
withhold 31% of taxable dividends, capital gains distributions, and redemptions
paid to shareholders who have not complied with Internal Revenue Service
taxpayer identification regulations. You may avoid this withholding requirement
by certifying on your account registration form your proper taxpayer
identification number and by certifying that you are not subject to backup
withholding.

In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. It is recommended that shareholders consult their
tax advisers regarding specific questions as to federal, state, local or foreign
taxes. The tax discussion set forth above is included for general information
only, prospective investors should consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in a Fund.
Additional information on tax matters relating to the Funds and to shareholders
is included in the Statement of Additional Information.

- --------------------------------------------------------------------------------
YEAR 2000

The services provided to the Funds and their shareholders by the investment
adviser, the distributor, Declaration and the custodian depend on the smooth
functioning of their computer systems and those of their outside service
providers. Many computer software systems in use today cannot distinguish the
year 2000 from the year 1900 because of the way dates are encoded and
calculated. Such event could have a negative impact on handling securities
trades, payments of interest and dividends, pricing and account services.
Although, at this time, there can be no assurance that there will be no adverse
impact on the Funds, the investment adviser, the distributor, Declaration, and
the custodian have advised the Funds that they have been actively working on
necessary changes to their computer systems to prepare for the year 2000 and
expect that their systems, and those of their outside service providers, will be
adapted in time for that event.

<PAGE>

This Prospectus sets forth concisely the information that a prospective
investor should know before investing. Investors should read and retain this
Prospectus for future reference. More information about each Fund has been filed
with the Securities and Exchange Commission ("SEC"), and is contained in a
"Statement of Additional Information" for 1838 Investment Advisors Funds. The
Statement of Additional Information is incorporated by reference into this
Prospectus (legally it is part of this Prospectus).

Additional information about each Fund's investments is also available in
the Fund's Annual and Semi-Annual Reports to shareholders. In the Annual Report,
you will find a discussion of the market conditions and investment strategies
that significantly affected each Fund's performance during the last fiscal year.

Your questions, including requests for the Statement of Additional
Information and/or a Fund's Annual and Semi-Annual Report to shareholders, may
be directed to Declaration Services Company at 1-800-844-1838.

You may also review and copy information about the Funds (including the
Statement of Additional Information) at the SEC's Public Reference Room in
Washington, D.C. Call the SEC at 1-800-SEC-0330 for the hours of operation of
the Public Reference Room.

Reports and other information about the Funds are available on the SEC's
internet site at http://www.sec.gov. Copies of this information may be obtained
for a duplicating fee by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.

SEC File No. 811-8902

1838
INVESTMENT ADVISORS FUNDS

INTERNATIONAL EQUITY FUND
SMALL CAP EQUITY FUND
FIXED INCOME FUND
LARGE CAP EQUITY FUND
SPECIAL EQUITY FUND

PROSPECTUS
MARCH 1, 1999

<PAGE>

1838 INVESTMENT ADVISORS FUNDS

STATEMENT OF ADDITIONAL INFORMATION DATED MARCH 1, 1999

- --------------------------------------------------------------------------------
Five Radnor Corporate Center, Suite 320, 100 Matsonford Road, Radnor, PA 19087
- --------------------------------------------------------------------------------

1838 Investment Advisors Funds (the "Trust") has established five
funds: 1838 International Equity Fund, 1838 Small Cap Equity Fund, 1838 Fixed
Income Fund, 1838 Large Cap Equity Fund, and 1838 Special Equity Fund, each with
its own investment objective. Information concerning each Fund is included in
the Trust's Prospectus dated March 1, 1999. No investment in shares should be
made without first reading the Prospectus. A copy of the Prospectus may be
obtained without charge from Declaration Distributors, Inc., 555 North Lane,
Suite 6160, Conshohocken, PA 19428, (800) 884-1838.

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

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
IN CONNECTION WITH THE TRUST'S CURRENT PROSPECTUS DATED MARCH 1, 1999.
RETAIN THIS STATEMENT OF ADDITIONAL INFORMATION FOR FUTURE REFERENCE.

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

<PAGE>

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

Page
----

THE TRUST ...................................................................3

INVESTMENT STRATEGIES, POLICIES AND RISKS....................................3

MANAGEMENT OF THE TRUST.....................................................17

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................19

SHARES OF BENEFICIAL INTEREST, VOTING RIGHTS AND SHAREHOLDER MEETINGS.......21

INVESTMENT ADVISORY AND OTHER SERVICES......................................21

ALLOCATION OF PORTFOLIO BROKERAGE...........................................23

PURCHASE, REDEMPTION AND PRICING OF SHARES..................................24

TAXATION ..................................................................25

PERFORMANCE.................................................................26

FINANCIAL STATEMENTS........................................................28

-2-

<PAGE>

THE TRUST

1838 Investment Advisors Funds was organized as a Delaware series business
trust on December 9, 1994, and is an open-end, management investment company.
The Trust currently offers five Funds, each with its own investment objective.
Each of the Funds, except the 1838 Special Equity Fund, is diversified.

INVESTMENT STRATEGIES, POLICIES AND RISKS

Each Fund seeks to achieve its respective investment objective by making
investments selected in accordance with its investment policies and
restrictions. Each Fund will vary its investment strategy as described in the
Trust's Prospectus to achieve its objectives. This Statement of Additional
Information contains further information concerning the strategies and
operations of each Fund, the securities in which each may invest, and the
policies each will follow.

Securities Lending

Each Fund may lend its investment securities to approved borrowers who need
to borrow securities in order to complete certain transactions, such as covering
short sales, avoiding failures to deliver securities or completing arbitrage
operations. By lending its investment securities, a Fund attempts to increase
its income through the receipt of interest on the loan. Any gain or loss in the
market price of the securities loaned that might occur during the term of the
loan would be for the account of the Fund. Each Fund may lend its investment
securities to qualified brokers, dealers, domestic and foreign banks or other
financial institutions, so long as the terms, the structure and the aggregate
amount of such loans are not inconsistent with the Investment Company Act of
1940, as amended, ("Investment Company Act") or the rules and regulations or
interpretations of the Securities and Exchange Commission (the "SEC")
thereunder, which currently require that (a) the borrower pledge and maintain
with a Fund collateral consisting of cash, an irrevocable letter of credit
issued by a bank or securities issued or guaranteed by the United States
Government having a value at all times not less than 100% of the value of the
securities loaned, (b) the borrower add to such collateral whenever the price of
the securities loaned rises (i.e., the borrower "marks to the market" on a daily
basis), (c) the loan be made subject to termination by a Fund at any time, and
(d) the Fund receives reasonable interest on the loan (which may include the
Fund investing any cash collateral in interest bearing short-term investments).
All relevant facts and circumstances, including the creditworthiness of the
broker, dealer or institution, will be considered in making decisions with
respect to the lending of securities, subject to review by the Board of
Trustees.

At the present time, the staff of the SEC does not object if an investment
company pays reasonable negotiated fees in connection with loaned securities so
long as such fees are set forth in a written contract and approved by the
investment company's Board of Trustees. In addition, voting rights may pass with
the loaned securities, but if a material event occurs affecting an investment on
a loan, the loan must be called and the securities voted.

When Issued Securities

The Small Cap Equity, Large Cap Equity and Special Equity Funds may invest
in securities whose terms and characteristics are already known but which have
not yet been issued. These are called "when-issued" or "forward delivery"
securities. "Delayed settlements" occur when a Fund agrees to buy or sell
securities at some time in the future, making no payment until the transaction
is actually completed. Such transactions are limited to no more than 25% of a
Fund's assets. The Fund engages in these types of purchases in order to buy
securities that fit with its investment objective at attractive prices -- not to
increase its investment leverage. Securities purchased on a when-issued basis
may decline or appreciate in market value prior to their actual delivery to the
Fund.

-3-

<PAGE>

Depositary Receipts

Each Fund may invest in the securities of foreign issuers in the form of
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global
Depositary Receipts (GDRs) or other securities convertible into securities of
foreign issuers such as convertible preferred stock, convertible bonds and
warrants or rights convertible into common stock. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. If a Fund determines that other securities convertible
into foreign securities are available on the market, that Fund will notify
shareholders before investing in such securities.

ADRs are receipts typically issued by an American bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. GDRs are receipts issued throughout the world which
evidence a similar ownership arrangement. Generally, ADRs, in registered form,
are designed for use in the U.S. securities markets, and EDRs, in bearer form,
are designed for use in European securities markets. GDRs are tradable both in
the U.S. and Europe and are designed for use throughout the world. The Fund may
invest in unsponsored ADRs, EDRs and GDRs. The issuers of unsponsored ADRs, EDRs
and GDRs are not obligated to disclose material information in the United States
and, therefore, there may not be a correlation between such information and the
market value of such securities.

Restricted/Illiquid Securities

Each Fund may purchase securities that are not registered ("restricted
securities") under the Securities Act of 1933, as amended, but can be offered
and sold to "qualified institutional buyers" under Rule 144A under that Act.
However, a Fund will not invest more than 15% of its net assets in illiquid
investments, which includes securities for which there is no readily available
market, securities subject to contractual restrictions on resale, and otherwise
restricted securities, unless the Fund's Board of Trustees continuously
determines, based on the trading markets for the specific restricted security,
that it is liquid. The Board of Trustees has determined to treat as liquid Rule
144A securities which are freely tradable in their primary markets offshore. The
Board of Trustees may adopt guidelines and delegate to the investment adviser
the daily function of determining and monitoring liquidity of restricted
securities. The Board of Trustees, however, will retain sufficient oversight and
be ultimately responsible for the determinations.

Since it is not possible to predict with assurance exactly how this market
for restricted securities sold and offered under Rule 144A will develop, the
Board of Trustees will carefully monitor each Fund's investments in these
securities, focusing on such factors, among others, as valuation, liquidity and
availability of information. This investment practice could have the effect of
increasing the level of illiquidity in a Fund to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
securities.

Repurchase Agreements and Purchase and Sale Contracts

Each Fund may invest in securities pursuant to repurchase agreements or
purchase and sale contracts. Repurchase agreements may be entered into only with
a member bank of the Federal Reserve System or a primary dealer in U.S.
Government securities. Purchase and sale contracts may be entered into only with
financial institutions which have capital of at least $50 million or whose
obligations are guaranteed by an entity having capital of at least $50 million.
Under such agreements, the other party agrees, upon entering into the contract
with a Fund, to repurchase the security at a mutually agreed upon time and price
in a specified currency, thereby determining the yield during the term of the
agreement. This results in a fixed rate of return insulated from market
fluctuations during such period although it may be affected by currency
fluctuations. In the case of repurchase agreements, the prices at which the
trades are conducted do not reflect accrued interest on the underlying
obligation; whereas, in the case of purchase and sale contracts, the prices take
into account accrued interest. Such agreements usually cover short periods, such
as under one week. Repurchase agreements may be construed to be collateralized
loans by the purchaser to the seller secured by the securities transferred to
the purchaser. In the case of a repurchase agreement,

-4-

<PAGE>

as a purchaser, a Fund will require the seller to provide additional collateral
if the market value of the securities falls below the repurchase price at any
time during the term of the repurchase agreement; such Fund does not have the
right to seek additional collateral in the case of purchase and sale contracts.
In the event of default by the seller under a repurchase agreement construed to
be a collateralized loan, the underlying securities are not owned by a Fund but
only constitute collateral for the seller's obligation to pay the repurchase
price. Therefore, a Fund may suffer time delays and incur costs or possible
losses in connection with disposition of the collateral. A purchase and sale
contract differs from a repurchase agreement in that the contract arrangements
stipulate that the securities are owned by such Fund. In the event of a default
under such a repurchase agreement or under a purchase and sale contract, instead
of the contractual fixed rate, the rate of return to a Fund would be dependent
upon intervening fluctuations of the market values of such securities and the
accrued interest on the securities. In such event, a Fund would have rights
against the seller for breach of contract with respect to any losses arising
from market fluctuations following the failure of the seller to perform.
Repurchase agreements and purchase and sale contracts maturing in more than
seven days are deemed illiquid by the SEC and are therefore subject to each
Fund's investment restriction limiting investments in securities that are not
readily marketable to 15% of the Fund's net assets.

Convertible Securities

Each Fund may invest in convertible securities. Convertible securities are
usually preferred stock or bond issues that may be converted or exchanged by the
holder into shares of the underlying common stock at a stated exchange ratio. A
convertible security may also be subject to redemption by the issuer but only
after a particular date and under certain circumstances (including a
specified-price) established upon issue. If a convertible security held by a
Fund is called for redemption, that Fund could be required to tender it for
redemption, convert it to the underlying common stock, or sell it to a third
party.

Municipal Obligations

The Fixed Income Fund may invest in municipal obligations. Municipal
obligations are issued to raise money for a variety of public or private
purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. They may be issued in
anticipation of future revenues, and may be backed by the full taxing power of a
municipality, the revenues from a specific project, or the credit of a private
organization. The value of some or all municipal securities may be affected by
uncertainties in the municipal market related to legislation or litigation
involving the taxation of municipal securities or the rights on municipal
securities holders. The Fixed Income Fund may own a municipal security directly
or through a participation interest.

High Yield Securities ("Junk Bonds")

The Fixed Income Fund may invest in high yield securities. Investing in
high yield securities involves special risks in addition to the risks associated
with investments in higher rated fixed income securities. High yield securities
may be regarded as predominately speculative with respect to the issuer's
continuing ability to meet principal and interest payments. Analysis of the
creditworthiness of issuers of high yield securities may be more complex than
for issuers of higher quality debt securities, and the ability to achieve its
investment objective may, to the extent of its investments in high yield
securities, be more dependent upon such creditworthiness analysis than would be
the case if the Fund were investing in higher quality debt securities.

High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than higher grade securities. The
prices of high yield securities have been found to be less sensitive to interest
rate changes than more highly rated investments, but more sensitive to adverse
economic downturns or individual corporate developments. A projection of an
economic downturn or of a period of rising interest rates, for example, could
cause a decline in high yield security prices because the advent of a recession
could lessen the ability of a highly leveraged company to make principal and
interest payments on its debt securities. If the issuer of high yield securities
defaults, the Fund may incur additional expenses to seek recovery. In the case
of high yield securities structured as zero coupon or payment-in-kind
securities, the market prices of such securities are

-5-

<PAGE>

affected to a greater extent by interest rate changes, and therefore tend to be
more volatile than securities which pay interest periodically and in cash.

The secondary markets on which high yield securities are traded may be less
liquid than the market for higher grade securities. Less liquidity in the
secondary trading markets could adversely affect and cause large fluctuations in
the daily net asset value of the Fund's shares. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high yield securities, especially in a thinly traded
market.

The use of credit ratings as the sale method of evaluating high yield
securities can involve certain risks. For example, credit ratings evaluate the
safety of principal and interest payments, not the market value risk of high
yield securities. Also, credit rating agencies may fail to change credit ratings
in a timely fashion to reflect events since the security was last rated. The
investment adviser does not rely solely on credit ratings when selecting
securities for the Fund, and develops its own independent analysis of issuer
credit quality. If a credit rating agency changes the rating of a portfolio
security held by the Fund, the Fund may retain the portfolio security if the
investment adviser deems it in the best interest of shareholders.

Hedging Strategies

Each Fund may engage in various portfolio strategies to hedge against
adverse movements in the equity, debt and currency markets. Each Fund may buy or
sell futures contracts, write (i.e., sell) covered call and put options on its
portfolio securities, purchase put and call options on securities and engage in
transactions in related options on such futures. Each of these portfolio
strategies is described below. Although certain risks are involved in options
and futures transactions, the investment adviser believes that, because the
Funds will engage in options and futures transactions only for hedging purposes,
the options and futures portfolio strategies of a Fund will not subject it to
the risks frequently associated with the speculative use of options and futures
transactions. While a Fund's use of hedging strategies is intended to reduce the
volatility of the net asset value of the Fund's shares, the Fund's net asset
value will fluctuate. There can be no assurance that a Fund's hedging
transactions will be effective. Also, a Fund may not necessarily be engaging in
hedging activities when movements in any equity, debt or currency market occur.

Forward Foreign Currency Exchange Contracts

The U.S. dollar value of the assets of the Funds may be affected favorably
or unfavorably by changes in foreign currency exchange rates and exchange
control regulations, and the Funds may incur costs in connection with
conversions between various currencies. The Funds will conduct their foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through entering
into forward contracts to purchase or sell foreign currencies. A forward foreign
currency exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement, and no commissions are
charged at any stage for such trades.

The Funds may enter into forward foreign currency exchange contracts in
several circumstances. When a Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, or when a Fund anticipates
the receipt in a foreign currency of dividends or interest payments on a
security which it holds, the Fund may desire to "lock-in" the U.S. dollar price
of the security or the U.S. dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for a fixed
amount of dollars, for the purchase or sale of the amount of foreign currency
involved in the underlying transactions, the Fund will be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the U.S. dollar and

-6-

<PAGE>

the subject foreign currency during the period between the date on which the
security is purchased or sold, or on which the dividend or interest payment is
declared, and the date on which such payments are made or received.

Additionally, when a Fund anticipates that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, it may
enter into a forward contract for a fixed amount of dollars, to sell the amount
of foreign currency approximating the value of some or all of such Fund's
securities denominated in such foreign currency. The precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible since the future value of securities in foreign currencies
will change as a consequence of market movements in the value of these
securities between the date on which the forward contract is entered into and
the date it matures. The projection of short-term currency market movement is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. From time to time, each Fund may enter into
forward contracts to protect the value of portfolio securities and enhance Fund
performance. The Funds will not enter into such forward contracts or maintain a
net exposure to such contracts where the consummation of the contracts would
obligate such Fund to deliver an amount of foreign currency in excess of the
value of such Fund securities or other assets denominated in that currency.

The Funds generally will not enter into a forward contract with a term of
greater than one year. At the maturity of a forward contract, a Fund may either
sell the portfolio security and make delivery of the foreign currency, or it may
retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the foreign currency. A forward contract which obligates a Fund to buy or sell
currency will generally require the Trust's custodian to hold an amount of that
currency or liquid securities denominated in that currency equal to the Fund's
obligations, or to segregate liquid assets equal to the amount of the Fund's
obligation. If the value of the segregated assets declines, additional liquid
assets will be segregated on a daily basis so that the value of the segregated
assets will equal the amount of the Fund's commitments with respect to such
contracts.

It is impossible to forecast with absolute precision the market value of a
particular portfolio security at the expiration of the contract. Accordingly, it
may be necessary for a Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency that such Fund is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency.

If a Fund retains the portfolio security and engages in an offsetting
transaction, such Fund will incur a gain or loss (as described below) to the
extent that there has been movement in forward contract prices. Should forward
prices decline during the period between a Fund entering into a forward contract
for the sale of a foreign currency and the date it enters into an offsetting
contract for the purchase of the foreign currency, such Fund will realize a gain
to the extent that the price of the currency it has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward prices increase,
such Fund would suffer a loss to the extent that the price of the currency it
has agreed to purchase exceeds the price of the currency it has agreed to sell.

Each of the Funds' dealings in forward foreign currency exchange contracts
will be limited to the transactions described above. Of course, the Funds are
not required to enter into such transactions with regard to their foreign
currency-denominated securities. It also should be realized that this method of
protecting the value of portfolio securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices of the
securities. It simply establishes a rate of exchange which one can achieve at
some future point in time. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time, they tend to limit any potential gain which might result
should the value of such currency increase.

-7-

<PAGE>

Futures Contracts

Each Fund may enter into futures contracts for the purposes of hedging,
remaining fully invested and reducing transaction costs. 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. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission ("CFTC"), a U.S. Government Agency.

Although most 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 previously
"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 initial margin deposit in
cash or acceptable securities with a broker or custodian to initiate and
maintain open positions in futures contracts. An initial margin deposit is
intended to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish initial deposit requirements
which are higher than the exchange minimums. Futures contracts are customarily
purchased and sold on initial margin that may range upward from less than 5% of
the value of the contract being traded. After a futures contract position is
opened, the value of the contract is marked to market daily. A second type of
deposit called variation margin is used to adjust the futures position account
for the daily marked to market variations. If the marked to market value
declines, additional deposits in cash are required to balance this decline
(variation margin). Conversely, if the marked to market value increases,
deposits in cash may be withdrawn from the account to the extent of the increase
(variation margin). Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Funds expect to earn
interest income on their initial margin deposits.

Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade and use
futures contracts with the expectation of realizing profits from a fluctuation
in interest rates. The Funds intend to use futures contracts only for hedging
purposes.

Regulations of the CFTC applicable to the Funds require that all of its
futures transactions constitute bona fide hedging transactions or that the
Funds' commodity futures and option positions be for other purposes, to the
extent that the aggregate initial margins and premiums required to establish
such non-hedging positions do not exceed five percent of the liquidation value
of each Fund. Each Fund will only sell futures contracts to protect securities
it owns against price declines or purchase contracts to protect against an
increase in the price of securities it intends to purchase. As evidence of this
hedging interest, each Fund expects that approximately 75% of any futures
contracts purchases will be "completed," that is, equivalent amounts of related
securities will have been purchased or are being purchased by the Fund upon sale
of open futures contracts.

Although techniques other than the sale and purchase of futures contracts
could be used to control a Fund's exposure to market fluctuations, the use of
futures contracts may be a more effective means of hedging this exposure. While
a Fund will incur commission expenses in both opening and closing out future
positions, these costs are lower than transaction costs incurred in the purchase
and sale of the underlying securities.

-8-

<PAGE>

Restrictions on the Use of Futures Transactions

Regulations of the Commodity Futures Trading Commission ("CFTC") applicable
to each Fund provide that the futures trading activities will not result in a
Fund being deemed a "commodity pool operator" under such regulations if the Fund
adheres to certain restrictions. In particular, a Fund may purchase and sell
futures contracts and options thereon (i) for bona fide hedging purposes, and
(ii) for non-hedging purposes, if the aggregate initial margin and premiums
required to establish positions in such contracts and options does not exceed 5%
of the liquidation value of the Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any such contracts and options.

When a Fund purchases a futures contract, or writes a put option or
purchases a call thereon, an amount of cash and liquid securities will be
deposited in a segregated account with the Fund's custodian so that the amount
so segregated, plus the amount of initial and variation margin held in the
account of its broker, equals the market value of the futures contract, thereby
ensuring that the use of such futures contract is unleveraged. The International
Equity Fund, the Small Cap Equity Fund and the Fixed Income Fund will not enter
into futures contracts to the extent that their outstanding obligations to
purchase securities under these contracts exceed 50%, 20%, and 10%,
respectively, of their total assets.

Options

The Funds may purchase and sell put and call options on futures contracts
for hedging purposes. Investments in options involve some of the same
considerations that are involved in connection with investments in futures
contracts (e.g., the existence of a liquid market). In addition, the purchase of
an option also entails the risk that changes in the value of the underlying
security or contract will not be fully reflected in the value of the option
purchased. Depending on the pricing of the option compared to either the futures
contract on which it is based or the price of the securities being hedged, an
option may or may not be less risky than ownership of the futures contract or
such securities. In general, the market prices of options can be expected to be
more volatile than the market prices on the underlying futures contract or
securities.

Writing Covered Options

Each Fund is authorized to write (i.e., sell) covered call options on the
securities in which it may invest and to enter into closing purchase
transactions with respect to certain of such options. A covered call option is
an option where a Fund in return for a premium gives another party a right to
buy specified securities owned by the Fund at a specified future date and price
set at the time of the contract. The general reason for writing call options is
to attempt to realize income. By writing covered call options, each Fund gives
up the opportunity, while the option is in effect, to profit from any price
increase in the underlying security above the option exercise price.

In addition, each Fund's ability to sell the underlying security will be
limited while the option is in effect unless the Fund effects a closing purchase
transaction. A closing purchase transaction cancels out the Fund's position as
the writer of an option by means of offsetting purchase of an identical option
prior to the expiration of the option it has written. Covered call options serve
as a partial hedge against the price of the underlying security declining. Each
Fund writes only covered options, which means that so long as a Fund is
obligated as the writer of the option it will, through its custodian, have
deposited the underlying security of the option or, if there is a commitment to
purchase the security, a segregated reserve of cash or liquid securities
denominated in U.S. dollars or non-U.S. currencies with a securities depository
with a value equal to or greater than the exercise price of the underlying
securities.

Each Fund also may write covered put options which give the holder of the
option the right to sell the underlying security to the Fund at the stated
exercise price. Each Fund maintains liquid securities with its custodian equal
to or greater than the exercise price of the underlying security. A Fund will
receive a premium for writing a put option, which increases the Fund's return. A
Fund will not write put options if the aggregate value of

-9-

<PAGE>

the obligations underlying the put shall exceed 50% of the Fund's net assets. By
writing a put, a Fund will be obligated to purchase the underlying security at a
price that may be higher than the market value of that security at the time of
exercise for as long as the option is outstanding. Each Fund may engage in
closing transactions in order to terminate put options that it has written.

Purchasing Options

Each Fund is authorized to purchase put options to hedge against a decline
in the market value of its securities. A put option may be purchased to
partially limit the risks of the value of an underlying security or the value of
a commitment to purchase that security for forward delivery. The amount of any
appreciation in the value of the underlying security will be partially offset by
the amount of the premium paid for the put option and any related transaction
costs. Prior to its expiration, a put option may be sold in a closing sale
transaction and profit or loss from a sale will depend on whether the amount
received is more or less than the premium paid for the put option plus the
related transaction costs. A closing sale transaction cancels out a Fund's
position as purchaser of an option by means of an offsetting sale of an
identical option prior to the expiration of the option it has purchased. In
certain circumstances, a Fund may purchase call options on securities held in
its investment portfolio on which it has written call options or on securities
which it intends to purchase.

A Fund will not purchase options on securities (including stock index
options discussed below) if, as a result of such purchase, the aggregate cost of
all outstanding options on securities held by the Fund would exceed 5% of the
market value of the Fund's total assets.

Stock Index Options and Futures

Each Fund may engage in transactions in stock index options and futures,
and related options on such futures. A Fund may purchase or write put and call
options on stock indices to hedge against the risks of market-wide stock price
movements in the securities in which the Fund invests. Options on indices are
similar to options on securities except that on exercise or assignment, the
parties to the contract pay or receive an amount of cash equal to the difference
between the closing value of the index and the exercise price of the option
times a specified multiple. Each Fund may invest in stock index options based on
a broad market index, or based on a narrow index representing an industry or
market segment.

Each Fund may also purchase and sell stock index futures contracts
("futures contracts") as a hedge against adverse changes in the market value of
its portfolio securities as described below. A futures contract is an agreement
between two parties which obligates the purchaser of the futures contract to buy
and the seller of a futures contract to sell a security for a set price on a
future date. Unlike most other futures contracts, a stock index futures contract
does not require actual delivery of securities, but results in cash settlement
based upon the difference in value of the index between the time the contract
was entered into and the time of its settlement. A Fund may effect transactions
in stock index futures contracts in connection with equity securities in which
it invests.

Each Fund may sell futures contracts in anticipation of or during a market
decline to attempt to offset the decrease in market value of the Fund's
securities that might otherwise result. When a Fund is not fully invested in the
securities markets and anticipates a significant market advance, it may purchase
futures in order to gain rapid market exposure that may in part or entirely
offset increases in the cost of securities that the Fund intends to purchase. As
such purchases are made, an equivalent amount of futures contracts will be
terminated by offsetting sales. The investment adviser does not consider
purchases of futures contracts to be a speculative practice under these
circumstances. It is anticipated that, in a substantial majority of these
transactions, the Fund will purchase such securities upon termination of the
long futures position, whether the long position is the purchase of a futures
contract or the purchase of a call option or the writing of a put option on a
future, but under unusual circumstances (e.g., the Fund experiences a
significant amount of redemptions), a long futures position may be terminated
without the corresponding purchase of securities.

-10-

<PAGE>

Each Fund also has authority to purchase and write call and put options on
stock indices in connection with its hedging activities. Generally, these
strategies are utilized under the same market and market sector conditions
(i.e., conditions relating to specific types of investments) in which the Fund
enters into futures transactions. A Fund may purchase put options or write call
options on stock indices rather than selling the underlying futures contract in
anticipation of a decrease in the market value of its securities. Similarly, a
Fund may purchase call options, or write put options on stock indices, as a
substitute for the purchase of such futures to hedge against the increased cost
resulting from an increase in the market value of securities which the Fund
intends to purchase.

Each Fund may engage in options and futures transactions on U.S. and
foreign exchanges and in options in the over-the-counter markets ("OTC
options"). Exchange-traded contracts are third-party contracts (i.e.,
performance of the parties' obligations is guaranteed by an exchange or clearing
corporation) which, in general, have standardized strike prices and expiration
dates. OTC options transactions are two-party contracts with price and terms
negotiated by the buyer and seller. See "Restrictions on OTC Options" below for
information as to restrictions on the use of OTC options.

Restrictions on OTC Options

A Fund will engage in OTC options, including over-the-counter stock index
options, over-the-counter foreign currency options and options on foreign
currency futures, only with member banks of the Federal Reserve System and
primary dealers in United States Government securities or with affiliates of
such banks or dealers that have capital of at least $50 million or whose
obligations are guaranteed by an entity having capital of at least $50 million
or any other bank or dealer having capital of at least $150 million or whose
obligations are guaranteed by an entity having capital of at least $150 million.
A Fund will acquire only those OTC options for which the investment adviser
believes the Fund can receive on each business day at least two independent bids
or offers (one of which will be from an entity other than a party to the option)
or which can be sold at a formula price provided for in the OTC option
agreement.

The staff of the SEC has taken the position that purchased OTC options and
the assets used as cover for written OTC options are illiquid securities.
Therefore, each Fund has adopted an investment policy pursuant to which it will
not purchase or sell OTC options (including OTC options on futures contracts)
if, as a result of such transaction, the sum of the market value of OTC options
currently outstanding which are held by the Fund, the market value of the
underlying securities covered by OTC call options currently outstanding which
were sold by a Fund and margin deposits on a Fund's existing OTC options on
futures contracts exceed 15% of the net assets of the Fund, taken at market
value, together with all other assets of the Fund which are illiquid or are not
otherwise readily marketable. However, if the OTC option is sold by a Fund to a
primary U.S. Government securities dealer recognized by the Federal Reserve Bank
of New York and the Fund has the unconditional contractual right to repurchase
such OTC option from the dealer at a predetermined price, then the Fund will
treat as illiquid such amount of the underlying securities as is equal to the
repurchase price less the amount by which the option is "in-the-money" (i.e.,
current market value of the underlying security minus the option's strike
price). The repurchase price with the primary dealers is typically a formula
price which is generally based on a multiple of the premium received for the
option, plus the amount by which the option is "in-the-money." This policy as to
OTC options is not a fundamental policy of the Funds and may be amended by the
Trustees of the Trust without the approval of the Funds' shareholders. However,
a Fund will not change or modify this policy prior to the change or modification
by the SEC's staff of its position.

Options on Foreign Currencies

The Funds may purchase and write options on foreign currencies for hedging
purposes in a manner similar to that in which futures contracts on foreign
currencies, or forward contracts, will be utilized. For example, a decline in
the dollar value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even if their value
in the foreign currency remains constant. In order to protect against such

-11-

<PAGE>

diminution in the value of portfolio securities, a Fund may purchase put options
on the foreign currency. If the value of the currency does decline, the Fund
will have the right to sell such currency for a fixed amount in dollars and will
thereby offset, in whole or in part, the adverse effect on its portfolio which
otherwise would have resulted.

Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Fund may purchase call options thereon. The purchase
of such options could offset, at least partially, the effects of the adverse
movements in exchange rates. As in the case of other types of options, however,
the benefit to a Fund deriving from purchases of foreign currency options will
be reduced by the amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the direction or to the
extent anticipated, a Fund could sustain losses on transactions in foreign
currency options which would require it to forego a portion or all of the
benefits of advantageous changes in such rates.

Each Fund may write options on foreign currencies for the same types of
hedging purposes. For example, where a Fund anticipates a decline in the dollar
value of foreign currency denominated securities due to adverse fluctuations in
exchange rates it could, instead of purchasing a put option, write a call option
on the relevant currency. If the anticipated decline occurs, the option will
most likely not be exercised, and the diminution in value of portfolio
securities will be offset by the amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, a Fund
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Fund to hedge such
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Fund would be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, a Fund also may be required to forego all or a
portion of the benefits which might otherwise have been obtained from favorable
movements in exchange rates.

Each Fund may write covered call options on foreign currencies. A call
option written on a foreign currency by a Fund is "covered" if the Fund owns the
underlying foreign currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash consideration (or
for additional cash consideration held in a segregated account by the Custodian)
upon conversion or exchange of other foreign currency held in its portfolio. A
call option is also covered if a Fund has a call on the same foreign currency
and in the same principal amount as the call written where the exercise price of
the call held (a) is equal to or less than the exercise price of the call
written or (b) is greater than the exercise price of the call written if the
difference is maintained by the Fund in cash or liquid securities in a
segregated account with the Custodian.

Each Fund may write call options on foreign currencies that are not covered
for cross-hedging purposes. A call option on a foreign currency is for
cross-hedging purposes if it is not covered, but is designed to provide a hedge
against a decline in the U.S. dollar value of a security which a Fund owns or
has the right to acquire and which is denominated in the currency underlying the
option due to an adverse change in the exchange rate. In such circumstances, a
Fund collateralized the option by maintaining in a segregated account with the
Custodian, cash or liquid securities in an amount not less than the value of the
underlying foreign currency in U.S. dollars marked to market daily. A Fund will
not enter into any option if immediately thereafter the value of all the foreign
currencies underlying its foreign currency options would exceed 50% of the value
of its total assets.

Risk Factors in Futures and Options Transactions

The primary risks associated with the use of futures and options are
(i) the failure to predict accurately the direction of stock prices, interest
rates, currency movements and other economic factors; (ii) the failure as
hedging techniques in cases where the price movements of the securities
underlying the options and futures

-12-

<PAGE>

do not follow the price movements of the portfolio securities subject to the
hedge; (iii) the potentially unlimited loss from investing in futures contracts;
and (iv) the likelihood of a Fund being unable to control losses by closing its
position where a liquid secondary market does not exist. The risk that a Fund
will be unable to close out a futures position or options contract will be
minimized by such Fund only entering into futures contracts or options
transactions on national exchanges and for which there appears to be a liquid
secondary market.

Positions in futures contracts may be closed out only on an exchange which
provides a market for such futures. However, there can be no assurance that a
liquid 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, each Fund would continue to be required to make daily
cash payments to maintain its required margin. In such situations, if a Fund has
insufficient cash, it may have to sell securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition, a
Fund may be required to make delivery of the instruments underlying futures
contracts it holds. The inability to close futures positions also could have an
adverse impact on a Fund's ability to effectively hedge.

A Fund will minimize the risk that it will be unable to close out a futures
position by only entering into futures which are traded on national futures
exchanges and for which there appears to be a liquid market. There can be no
assurance, however, that a liquid market will exist for a particular futures
contract at any given time.

The risk of loss in trading futures contracts in some strategies 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 (as well as gain) to the investor. 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 excess of the amount
invested in the contract. However, because the futures strategies of the Funds
are engaged in only for hedging purposes, the investment adviser does not
believe that a Fund is subject to the risks of loss frequently associated with
futures transactions. A Fund would presumably have sustained comparable losses
if, instead of the futures contract, it had invested in the underlying financial
instrument and sold it after the decline.

Utilization of futures transactions by a Fund does involve the risk of
imperfect or no correlation where the securities underlying the futures
contracts have different maturities than the Fund securities being hedged. It is
also possible that a Fund could both lose money on futures contracts and also
experience a decline in value of portfolio securities. There is also the risk of
loss on margin deposits in the event of bankruptcy of a broker with whom a Fund
has 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 reached in 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 futures positions and subjecting some futures
traders to substantial losses.

Risks of Options on Forward Contracts and Foreign Currencies

Options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the SEC. To the contrary, such instruments are traded
through financial institutions acting as market-makers, although foreign
currency options are

-13-

<PAGE>

also traded on certain national securities exchanges, such as the Philadelphia
Stock Exchange and the Chicago Board Options Exchange, subject to the regulation
of the SEC. Similarly, options on currencies may be traded over-the-counter. In
an over-the-counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time.

Although the purchase of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.

Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Furthermore, a liquid
secondary market in options traded on a national securities exchange may be more
readily available than in the over-the-counter market, potentially permitting a
Fund to liquidate open positions at a profit prior to exercise or expiration, or
to limit losses in the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effect of other
political and economic events. In addition, exchange-traded options of foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions, on exercise.

In addition, futures contracts, options on futures contracts, forward
contracts and options of foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in a Fund's
ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.

Portfolio Turnover

The International Equity Fund's annualized portfolio turnover rates for the
fiscal years ended October 31, 1997 and 1998 were 92.33% and 166.77%,
respectively. The increased portfolio turnover in 1998 resulted from the
volatility in the international securities markets coupled with a higher level
of shareholder purchase and redemption activity during the year. The portfolio
turnover rates for the Small Cap Equity Fund for the fiscal years ended October
31, 1997 and 1998 were 67.66% and 42.64%, respectively. The portfolio turnover
rate for the Fixed Income Fund for the period September 2, 1997 (commencement of
operations) through October 31, 1997 and for the fiscal year ended October 31,
1998 was 39.12% and 92.65%, respectively. The higher portfolio turnover in 1998
was a result of the following: (1) much higher volatility in the fixed income
markets in general leading to a more active strategy to reduce risk and take
advantage of buying opportunities, (2) the new portfolio manager repositioned

-14-

<PAGE>

the Fund to conform to the expected fundamental landscape and (3) more activity
surrounding the new issue market because corporate bond supply was high in 1998.
Given that supply will likely be strong in 1999, the investment adviser expects
that the Fixed Income Fund's portfolio turnover will be high this year as well.

Investment Restrictions

The Funds have adopted the investment restrictions set forth below, which
are fundamental policies of each Fund and cannot be changed without the approval
of a majority of the outstanding voting securities. As provided in the
Investment Company Act, a "vote of a majority of the outstanding voting
securities" means the affirmative vote of the lesser of (i) more than 50% of the
outstanding shares, or (ii) 67% or more of the shares present at a meeting if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy. Each Fund may not:

1. As to 75% of its total assets, invest in the securities of any one
issuer if, immediately after and as a result of such investment, the
value of the holdings of the Fund in the securities of such issuer
exceeds 5% of the Fund's total assets, taken at market value, except
that such restriction shall not apply to cash and cash items, or
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities, provided that the 1838 Special Equity
Fund is not subject to this restriction.

2. Invest in the securities of any single issuer if, immediately after
and as a result of such investment, the Fund owns more than 10% of the
outstanding voting securities of such issuer.

3. Invest more than 25% of its total assets (taken at market value at the
time of each investment) in the securities of issuers in any
particular industry, except for temporary defensive purposes.

Changes in values of particular assets of a Fund will not cause a violation of
the foregoing investment restrictions so long as percentage restrictions are
observed by such Fund at the time it purchases a security. Provided that a
dealer or institutional trading market in such securities exists, restricted
securities are not treated as illiquid securities for purposes of a Fund's
investment limitations.

4. Issue senior securities.

5. Make investments for the purpose of exercising control or management
of another company.

6. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or
reorganization, or by purchase in the open market or securities of
closed-end investment companies where no underwriter or dealer's
commission or profit, other than customary broker's commission, is
involved and any investments in the securities of other investment
companies will be in compliance with the Investment Company Act of
1940.

7. Purchase or sell real estate or interests therein; provided that a
Fund may invest in securities secured by real estate or interests
therein or issued by companies which invest in real estate or
interests therein.

8. Purchase or sell commodities or commodity contracts, except that a
Fund may deal in forward foreign exchange between currencies of the
different countries in which it may invest and that the Fund may
purchase or sell stock index and currency options, stock index
futures, financial futures and currency futures contracts and related
options on such futures.

9. Purchase any securities on margin, except that a Fund may obtain such
short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities, or make short sales of securities
or maintain a short position. The payment by a Fund of initial or
variation margin in

-15-

<PAGE>

connection with futures or related options transactions, if
applicable, shall not be considered the purchase of a security on
margin. Also, engaging in futures transactions and related options
will not be deemed a short sale or maintenance of a short position in
securities.

10. Make loans to other persons (except as provided in (11) below);
provided that for purposes of this restriction the acquisition of
bonds, debentures, or other corporate debt securities and investment
in government obligations, short-term commercial paper, certificates
of deposit, bankers' acceptances, repurchase agreements and any
fixed-income obligations in which the Fund may invest consistent with
its investment objective and policies shall not be deemed to be the
making of a loan.

11. Lend its portfolio securities in excess of 33 1/3% of its total
assets, taken at market value; provided that such loans shall be made
in accordance with the guidelines set forth under "Securities Lending"
above.

12. Borrow amounts in excess of 20% of its total assets, taken at market
value, and then only from banks as a temporary measure for
extraordinary or emergency purposes such as the redemption of Fund
shares. Utilization of borrowings may exaggerate increases or
decreases in an investment company's net asset value. However, a Fund
will not purchase securities while borrowings exceed 5% of its total
assets, except to honor prior commitments and to exercise subscription
rights when outstanding borrowings have been obtained exclusively for
settlements of other securities transactions.

13. Mortgage, pledge, hypothecate or in any manner transfer as security
for indebtedness, any securities owned or held by the Fund except as
may be necessary in connection with borrowings mentioned in (12)
above, and then such mortgaging, pledging or hypothecating may not
exceed 10% of the Fund's total assets, taken at market value. For the
purpose of this restriction and restriction (9) above, collateral
arrangements with respect to the writing of options, futures
contracts, options on futures contracts, and collateral arrangements
with respect to initial and variation margin are not deemed to be a
pledge of assets, and neither such arrangements nor the purchase and
sale of options, futures or related options are deemed to be the
issuance of a senior security.

14. Invest in securities which cannot be readily resold because of legal
or contractual restrictions or which are not otherwise readily
marketable if, regarding all such securities, more than 15% of its
total assets, taken at market value, would be invested in such
securities.

15. Underwrite securities of other issuers except insofar as a Fund may be
deemed an underwriter under the Securities Act of 1933, as amended, in
selling portfolio securities.

16. Purchase or sell interests in oil, gas or other mineral exploration or
development programs or leases, except that a Fund may invest in
securities of companies which invest in or sponsor such programs.

Notwithstanding the foregoing, each Fund may purchase securities pursuant
to the exercise of subscription rights, subject to the condition that such
purchase will not result in the Fund ceasing to be a diversified investment
company. Japanese and European corporations frequently issue additional capital
stock by means of subscription rights offerings to existing shareholders at a
price substantially below the market price of the shares. The failure to
exercise such rights would result in a Fund's interest in the issuing company
being diluted. The market for such rights is not well developed and,
accordingly, a Fund may not always realize full value on the sale of rights.
Therefore, the exception applies when investment limits would otherwise be
exceeded by exercising rights or have already been exceeded as a result of
fluctuations in the market value of a Fund's portfolio securities, and the

-16-

<PAGE>

Fund would otherwise be forced either to sell securities at a time when it might
not have done so, or to forego exercising the rights.

MANAGEMENT OF THE TRUST

Board of Trustees

The Board of Trustees of the Trust consists of four individuals, three of
whom are not "interested persons" of the Trust as defined in the Investment
Company Act. The members of the Board of Trustees are fiduciaries for the Funds'
shareholders and, in this regard, are governed by the laws of the State of
Delaware. The Trustees establish policy for the operation of each Fund, and
appoint the officers who conduct the daily business of the Funds.

The Trustees and principal executive officers of the Trust and its Funds
("Trust Complex"), and their principal occupations for the past five years are
listed below.

Position(s) Held With Principal Occupation
Name and Address Age the Trust Complex During the Past Five Years
---------------- --- ------------------- --------------------------
<S> <C> <C> <C>

*W. Thacher Brown 51 President, Chairman and President and Director, 1838
Five Radnor Corporate Center, Trustee of each Fund in the Investment Advisors, Inc. (successor
Suite 320 Trust Complex company to 1838 Investment
100 Matsonford Road Advisors, L.P.) (1988 - Present);
Radnor, PA 19087 President and Chief Executive
Officer, 1838 Investment Advisors,
Inc. (1988 - 1998); President, MBIA
Asset Management (1998-Present) and Director,
1838 Bond-Debenture Trading Fund;
Airgas, Inc. and Harleysville Mutual
Insurance Company

Charles D. Dickey, Jr. 80 Trustee of each Fund in the Retired. Formerly Chairman and
1 Tower Bridge Trust Complex CEO of Scott Paper Company
West Conshohocken, PA 19428 (retired as CEO 1983; retired as
Director, 1988); Formerly Director
of General Electric Company (retired
1991).

Frank B. Foster, III 64 Trustee of each Fund in the Managing Director, CIP, Inc.
20 Valley Stream Parkway Trust Complex (Investments) (1989-Present);
Suite 265 Consultant, DBH, Inc. (1987-1993);
Malvern, PA 19355 Director; Airgas Inc. (1986-present).

Robert P. Hauptfuhrer 67 Trustee of each Fund in the Chairman and CEO, Oryx Energy
100 Matsonford Road Trust Complex Company (1988-1994); Director,
Building 5, Suite 500 Oryx Energy Company (1988-1994),
Radnor, PA 19087 Director, Quaker Chemical Corp.
(1977-Present).

-17-

<PAGE>

Position(s) Held With Principal Occupation
Name and Address Age the Trust Complex During the Past Five Years
---------------- --- ------------------- --------------------------

Johannes B. van den Berg 41 Vice President of the Managing Director, 1838 Investment
Five Radnor Corporate Center, International Equity Fund Advisors Inc. (successor company to
Suite 320 1838 Investment Advisors, L.P.)
100 Matsonford Road (1997 - Present); Managing Director
Radnor, PA 19087 and Portfolio Manager, MeesPierson
1838 Investment Advisors
(1994-1998); President, MeesPierson
Capital Management, Inc. (1993-
1998); Director and Chief Investment
Officer, MeesPierson Capital
Management, B.V. (1983 -1993);
and Director, Fortis Azie Fonds N.V.

Edwin B. Powell 61 Vice President of the Managing Director, 1838 Investment
Five Radnor Corporate Center, Small Cap Equity Fund Advisors, Inc. (successor company to
Suite 320 1838 Investment Advisors, L.P.)
100 Matsonford Road (1994 - Present); Vice President and
Radnor, PA 19087 Portfolio Manager, Provident Capital
Management (1987 - 1994).

George W. Gephart, Jr. 46 Vice President of the Senior Managing Director, 1838
Five Radnor Corporate Center, Large Cap and Special Investment Advisors, Inc. (successor
Suite 320 Equity Funds company to 1838 Investment
100 Matsonford Road Advisors, L.P.), (1988 - Present);
Radnor, PA 19087 Chairman, Bryn Mawr Rehab
Hospital (Past); and Director, Main
Line Health Systems and Jefferson
Health Systems (Present).

Clifford D. Corso 36 Vice President of the Fixed Managing Director, 1838 Investment
MBIA Capital Management Corp. Income Fund Advisors, Inc. (successor company to
113 King Street 1838 Investment Advisors, L.P.
Armonk, NY 10504 (1998-Present); Vice President and
Senior Portfolio Manager, MBIA
Capital Management Corp. (1994-
1998); Vice President and co-head of
Fixed Income Trading, Shields
Alliance (1991-1994).

Anna M. Bencrowsky 47 Vice President, Treasurer Vice President-Operations Manager,
Five Radnor Corporate Center, and Secretary of each of 1838 Investment Advisors, Inc.,
Suite 320 the Funds in the Trust (successor company to 1838
100 Matsonford Road Complex Investment Advisors Funds, L.P.)
Radnor, PA 19087 (1988 - Present); and Vice President
and Secretary, 1838 Bond-Debenture
Trading Fund.
</TABLE>

* Trustee who is an "interested person" as defined in the Investment Company
Act.

-18-

<PAGE>

Information relating to the compensation paid to the Trustees of the Trust
for the fiscal year ended October 31, 1998 is set forth below:

<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Aggregate Benefits from Trust and
Compensation Accrued Part of Trust Complex
Name and Position from the Trust(1) Fund Expenses(2) Paid to Trustees
----------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>

W. Thacher Brown None $0 $0
Chairman of the Board and President
Charles D. Dickey, Jr. Trustee $12,500 $0 $12,500
Frank B. Foster, III Trustee $12,500 $0 $12,500
Robert P. Hauptfuhrer Trustee $12,500 $0 $12,500
</TABLE>

(1) The interested Trustee of the Trust, Mr. Brown, receive no compensation for
his service as Trustee. For their service as Trustees, the disinterested
Trustees receive a $6,000 annual fee and $500 per Fund for each Trust
meeting attended, as well as reimbursement for their out-of-pocket
expenses. If any special or additional meetings are held during a fiscal
year, the disinterested Trustees will be entitled to receive $500 per Fund
for each such meeting attended. For the fiscal year ended October 31, 1998,
the Trustees' fees and expenses totaled $37,500.

(2) The Trust has not adopted a pension plan or any other plan that would
afford benefits to its Trustees.

As of February 15, 1999, Trustees and officers owned less than 1% of the
outstanding shares of the Small Cap Equity Fund, International Equity Fund and
Fixed Income Fund.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

Persons or organizations beneficially owning 25% or more of the outstanding
shares of a Fund may be presumed to "control" the Fund. As a result, those
persons or organizations could have the ability to vote a majority of the shares
of the Fund on any matter requiring the approval of shareholders of that Fund.

As of February 15, 1999, the following shareholders were known to own of
record more than 5% of the outstanding shares of the International Equity Fund:

-19-

<PAGE>

Name and Address Percentage Ownership

Patterson & Co. 66.16%
P.O. Box 7829
Philadelphia, PA 19101

Saxon & Company 7.99%
P.O. Box 7780-1888
Philadelphia, PA 19182

As of February 15, 1999, the following shareholders were known to own of
record more than 5% of the outstanding shares of the Small Cap Equity Fund:

Name and Address Percentage Ownership

Trustees of Upper Darby Police Pension Plan 6.13%
KDB Resources
12 South Monroe Street, Suite 301
Media, PA 19063

Patterson & Co. 49.35%
c/o First Union Bank, NA
530 Walnut Street
Philadelphia, PA 19106

Poolside & Co. 15.24%
1 Enterprise Drive
Quincy, MA 02171

Mac & Company 7.62%
P.O. Box 3198
Pittsburgh, PA 15230

Saxon & Company 7.09%
P.O. Box 7780
Philadelphia, PA 19182

As of February 15, 1999, the following shareholders were known to own of
record more than 5% of the outstanding shares of the Fixed Income Fund:

Name and Address Percentage Ownership

Patterson & Co. 72.48%
c/o First Union Bank, N.A.
530 Walnut Street
Philadelphia, PA 19106

Saxon & Co. 8.46%
FBO Independence Seaport Museum
P.O. Box 7780-1888
Philadelphia, PA 19182

-20-

<PAGE>

SHARES OF BENEFICIAL INTEREST, VOTING RIGHTS AND SHAREHOLDER MEETINGS

Shares of Beneficial Interest and Voting Rights

The Trust's Agreement and Declaration of Trust permits the Board of
Trustees to issue an unlimited number of shares of beneficial interest with a
$0.001 par value per share. The Board of Trustees has the power to designate one
or more series or sub-series/classes of shares of beneficial interest and to
classify or reclassify any unissued shares with respect to such series.

The shares of each Fund, when issued, will be fully paid and non-assessable
and within each series or class, have no preference as to conversion, exchange,
dividends, retirement or other features. The shares of the Trust which the
trustees may, from time to time, establish, shall have no preemptive rights. The
shares of the Trust have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of trustees can
elect 100% of the trustees if they choose to do so. A shareholder is entitled to
one vote for each full share held (and a fractional vote for each fractional
share held), then standing in his name on the books of the Trust. On any matter
submitted to a vote of shareholders, all shares of the Trust then issued and
outstanding and entitled to vote on a matter shall vote without differentiation
between separate series on a one-vote-per-share basis. Each whole share is
entitled to one vote and each fractional share is entitled to a proportionate
fractional vote. If a matter to be voted on does not affect the interests of all
series of the Trust, then only the shareholders of the affected series shall be
entitled to vote on the matter. The Trust's Agreement and Declaration of Trust
also gives shareholders the right to vote (i) for the election or removal of
trustees; (ii) with respect to additional matters relating to the Trust as
required by the Investment Company Act; and (iii) on such other matters as the
trustees consider necessary or desirable.

Shareholder Meetings

Pursuant to the Trust's Agreement and Declaration of Trust, the Trust does
not intend to hold shareholder meetings except when required to elect trustees,
or with respect to additional matters relating to the Trust as required under
the Investment Company Act. The trustees have, however, undertaken to the SEC
that the trustees will promptly call a meeting for the purpose of voting upon
the question of removal of any trustee when requested to do so by not less than
10% of the outstanding shareholders of the Trust. In addition, subject to
certain conditions, shareholders of the Trust may apply to the Trust to
communicate with other shareholders to request a shareholders' meeting to vote
upon the removal of a trustee or trustees.

INVESTMENT ADVISORY AND OTHER SERVICES

Investment Adviser

1838 Investment Advisors, Inc. is a direct wholly-owned subsidiary of MBIA,
Inc. MBIA, Inc., through various subsidiaries, is an insurer of municipal bonds
and structured finance transactions, and is a provider of investment management
services to the public sector. MBIA, Inc. has principal offices located at 113
King Street, Armonk New York.

The Trust, on behalf of each Fund, entered into an Investment Advisory
Agreement with the investment adviser for the provision of investment advisory
services, subject to the supervision and direction of the Board of Trustees.
Pursuant to each Investment Advisory Agreement, the Funds are obligated to pay
the investment adviser the following annual fees on a monthly basis (as a
percentage of the average daily net assets of the applicable Fund):

-21-

<PAGE>

International Equity Fund: 0.75%
Small Cap Equity Fund: 0.75%
Fixed Income Fund: 0.50%
Large Cap Equity Fund: 0.65%
Special Equity Fund: 1.00%

With respect to the following funds, the investment adviser has voluntarily
agreed to waive its advisory fee and/or assume Fund expenses monthly to the
extent that the Fund's total operating expenses exceed the following expense
caps (as a percentage of the average daily net assets of the applicable Fund):

International Equity Fund: 1.25%
Small Cap Equity Fund: 1.25%
Fixed Income Fund: 0.60%

The advisory fees payable to the investment adviser for services provided
to the International Equity Fund for the fiscal years ended October 31, 1996,
1997 and 1998 were $218,232, $372,918 and $427,140, respectively, of which
$138,238, $93,801 and $0, respectively, were waived. The advisory fees payable
to the investment adviser for services provided to the Small Cap Equity Fund for
the period June 17, 1996 (commencement of operations) through October 31, 1996
and for the fiscal years ended October 31, 1997 and October 31, 1998 were
$12,641, $142,555 and $273,360, respectively, of which $12,641, $112,370 and $0,
respectively, were waived. The advisory fees payable to the investment adviser
for services provided to the Fixed Income Fund for the period September 2, 1997
(commencement of operations) through October 31, 1997 and the fiscal year ended
October 31, 1998 were $15,545 and $204,698, respectively, of which $15,545 and
$72,827, respectively, were waived.

Distributor

Declaration Distributors, Inc., 555 North Lane, Suite 6160, Conshohocken,
PA 19428, has been engaged pursuant to a distribution agreement, to assist in
securing purchasers for shares of each Fund. The distributor also directly, or
through its affiliates, provides investor support services. The distributor
receives no compensation for distributing the Funds' shares, except for
reimbursement of its out-of-pocket expenses.

Administrator, Transfer Agent, Dividend Paying Agent, Accounting Agent and
Custodian

Declaration Service Company, 555 North Lane, Suite 6160, Conshohocken, PA
19428, serves as Administrator, Transfer Agent, Shareholder Servicing Agent and
Dividend Paying Agent of each Fund and also provides accounting services to the
Funds.

As Administrator, Declaration supplies office facilities, non-investment
related statistical and research data, stationery and office supplies, executive
and administrative services, internal auditing and regulatory compliance
services. Declaration also assists in the preparation of reports to
shareholders, prepares proxy statements, updates prospectuses and makes filings
with the SEC and state securities authorities. Declaration performs certain
budgeting and financial reporting and compliance monitoring activities. For the
services provided as Administrator, Declaration receives an administration fee
from the Trust payable monthly at the annual rate of $20,000 for the Small Cap
Equity Fund, $20,000 for the Fixed Income Fund, $27,500 for the International
Equity Fund, $20,000 for the Special Equity Fund and $20,000 for the Large Cap
Equity Fund. Additionally, Declaration receives an annual fee based on the
combined assets of all Funds as follows: 0.0% of the first $50 million of net
assets; 0.04% of the next $50 million of net assets; 0.02% of the next $100
million of net assets and 0.01% of net assets in excess of $200 million.

-22-

<PAGE>

As Accounting Agent, Declaration determines each Fund's net asset value per
share and provides accounting services to the Funds pursuant to an Accounting
Services Agreement with the Trust. For the services provided as Accounting
Agent, Declaration receives a fee from the Trust at the annual rate of $25,000
for the International Equity Fund and $17,500 for each of the Small Capital
Equity, Fixed Income, Large Cap Equity and Special Equity Funds.

The custodian for each of the Funds is First Union National Bank, located
at 530 Walnut Street, Philadelphia, PA 19101. First Union has sub-contracted
with Morgan Stanley Trust Company, New York, NY for the custody of the
International Equity Fund's Assets. Morgan Stanley employs foreign
sub-custodians to maintain the Fund's foreign assets outside the United States
subject to the Board of Trustees' annual review of those foreign custody
arrangements.

Independent Accountants

The accounts of the Trust are audited each year by PricewaterhouseCoopers
LLP. Shareholders receive unaudited semi-annual and audited annual reports of
their Fund including the annual audited financial statements and a list of
securities owned.

ALLOCATION OF PORTFOLIO BROKERAGE

The investment adviser, when effecting the purchases and sales of portfolio
securities for the account of a Fund, will seek execution of trades either (i)
at the most favorable and competitive rate of commission charged by any broker,
dealer or member of an exchange, or (ii) at a higher rate of commission charges
if reasonable in relation to brokerage and research services provided to the
Fund, the investment adviser, by such member, broker, or dealer when viewed in
terms of either a particular transaction or the investment adviser's overall
responsibilities to the Fund. Such services may include, but are not limited to,
any one or more of the following: information as to the availability of
securities for purchase or sale, statistical or factual information, or opinions
pertaining to investments. The investment adviser may use research and services
provided to it by brokers and dealers in servicing all its clients; however, not
all such services will be used by the investment adviser in connection with the
Funds. Brokerage may also be allocated to dealers in consideration of a Fund's
share distribution, but only when execution and price are comparable to that
offered by other brokers. During the fiscal year ended October 31, 1998, the
Small Cap Equity Fund paid commissions totaling $23,532 to brokers which
provided investment research and statistical information with respect to
portfolio transactions valued at $8,230,671.

The investment adviser is responsible for making the Fund's portfolio
decisions subject to instructions described in the Prospectus. The Board of
Trustees, however, imposes limitations on the allocation of portfolio brokerage.
For the fiscal years ended October 31, 1996, 1997 and 1998, the International
Equity Fund paid $124,675, $190,009 and $178,761, respectively, in brokerage
commissions. During the period June 17, 1996 through October 31, 1996, the Small
Cap Equity Fund paid $9,692 and for the fiscal years ended October 31, 1997 and
1998 paid $60,836 and $89,959, respectively, in brokerage commissions. During
the period September 2, 1997 (commencement of operations) through October 31,
1997 and the fiscal year ended October 31, 1998, the Fixed Income Fund paid $0
in brokerage commissions.

It is anticipated that brokerage transactions involving securities of
companies domiciled in countries other than the U.S. will be conducted primarily
on the principal stock exchanges of such countries. Brokerage commissions and
other transaction costs on foreign stock exchange transactions are generally
higher than in the U.S., although the Funds will endeavor to achieve the best
net results in effecting their portfolio transactions. There is generally less
government supervision and regulation of foreign stock exchanges and brokers
than in the U.S.

Foreign equity securities may be held by a Fund in the form of ADRs, EDRs,
GDRs or other securities convertible into foreign equity securities. ADRs, EDRs
and GDRs may be listed on stock exchanges or traded in

-23-

<PAGE>

over-the-counter markets in the U.S. or Europe, as the case may be. ADRs, like
other securities traded in the U.S., as well as GDRs traded in the U.S., will be
subject to negotiated commission rates.

PURCHASE, REDEMPTION AND PRICING OF SHARES

Purchase

Shares of each Fund are available to all types of tax-deferred retirement
plans such as IRAs, employer-sponsored defined contribution plans (including
401(k) plans) and tax-sheltered custodial accounts described in Section
403(b)(7) of the Internal Revenue Code of 1986, as amended. Qualified investors
benefit from the tax-free compounding of income dividends and capital gains
distributions.

Individuals who are not active participants (and, when a joint return is
filed, who do not have a spouse who is an active participant) in an employer
maintained retirement plan are eligible to contribute on a deductible basis to
an IRA account. The IRA deduction is also retained for individual taxpayers and
married couples with adjusted gross incomes not in excess of certain specified
limits. All individuals who have earned income may make nondeductible IRA
contributions to the extent that they are not eligible for a deductible
contribution. Income earned by an IRA account will continue to be tax deferred.
A special IRA program is available for employers under which the employers may
establish IRA accounts for their employees in lieu of establishing tax-qualified
retirement plans. Known as SEP-IRAs (Simplified Employee Pension-IRA), they free
the employer of many of the recordkeeping requirements of establishing and
maintaining a tax-qualified retirement plan trust.

If you are entitled to receive a distribution from a qualified retirement
plan, you may rollover all or part of that distribution into a Fund's IRA. Your
rollover contribution is not subject to the limits on annual IRA contributions.
You can continue to defer federal income taxes on your contribution and on any
income that is earned on that contribution.

With respect to purchase orders accepted by brokers or other
intermediaries, a Fund is deemed to have received a purchase order when an
authorized broker or other intermediary accepts the order. Shares of the Fund
may be purchased on any Business Day at the net asset value next determined
after the receipt of the order, in good order, by the authorized broker or other
intermediary. A "Business Day" means any day on which the New York Stock
Exchange ("NYSE") is open. For an investor who invests through a broker or other
intermediary, the broker or other intermediary must receive the investor's
purchase order before the close of regular trading on the NYSE and promptly
forward such order to the transfer agent for the Fund in order for the investor
to receive that day's net asset value. Brokers and designated intermediaries are
responsible for promptly forwarding such investors' purchase orders to the
transfer agent.

Redemption

Under normal circumstances, you may redeem your shares at any time without
a fee. The redemption price will be based upon the net asset value per share
next determined after receipt of the redemption request, provided it has been
submitted in the manner described in the Prospectus of each Fund. See "How to
Redeem Shares" in the Prospectus. The redemption price may be more or less than
your cost, depending upon the net asset value per share at the time of
redemption.

With respect to redemption requests accepted by brokers or other
intermediaries, a Fund is deemed to have received a redemption order when an
authorized broker or other intermediary accepts the order. Shares of the Fund
may be redeemed on any Business Day at the net asset value next determined after
the receipt of the order, in good order, by the authorized broker or other
intermediary. A redemption request "in good order" is a request made in
accordance with the redemption instructions set forth in the Fund's Prospectus.
"Business Day" means any day on which the NYSE is open. For an investor who
invests through a broker or other intermediary, the broker or other intermediary
must receive the investor's redemption order before the close of regular trading
on the

-24-

<PAGE>

NYSE and promptly forward such order to the transfer agent for the Fund in order
for the investor to receive that day's net asset value. Brokers and other
intermediaries are responsible for promptly forwarding such investors'
redemption orders to the Fund's transfer agent.

Payment for shares tendered for redemption is made by check within seven
days after receipt and acceptance of your redemption request by Declaration,
except that each Fund reserves the right to suspend the right of redemption, or
to postpone the date of payment upon redemption beyond seven days, (i) for any
period during which the NYSE is restricted, (ii) for any period during which an
emergency exists as determined by the SEC as a result of which disposal of
securities owned by a given Fund is not reasonably predictable or it is not
reasonably practicable for such Fund fairly to determine the value of its net
assets, or (iii) for such other periods as the SEC may by order permit for the
protection of Fund shareholders.

TAXATION

Each Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code").

In order to so qualify, a Fund must, among other things (i) derive at least
90% of its gross income from dividends, interest, payments with respect to
certain securities loans, gains from the sale of securities or foreign
currencies, or other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; (ii) distribute at least 90% of its
dividends, interest and certain other taxable income each year; and (iii) at the
end of each fiscal quarter maintain at least 50% of the value of its total
assets in cash, government securities, securities of other regulated investment
companies, and other securities of issuers which represent, with respect to each
issuer, no more than 5% of the value of a Fund's total assets and 10% of the
outstanding voting securities of such issuer, and with no more than 25% of its
assets invested in the securities (other than those of the government or other
regulated investment companies) of any one issuer or of two or more issuers
which the Fund controls and which are engaged in the same, similar or related
trades and businesses.

To the extent a Fund qualifies for treatment as a regulated investment
company, it will not be subject to federal income tax on income and net capital
gains paid to shareholders in the form of dividends or capital gains
distributions.

An excise tax at the rate of 4% will be imposed on the excess, if any, of a
Fund's "required distributions" over actual distributions in any calendar year.
Generally, the "required distribution" is 98% of a fund's ordinary income for
the calendar year plus 98% of its capital gain net income recognized during the
one-year period ending on October 31 plus undistributed amounts from prior
years. The Funds intend to make distributions sufficient to avoid imposition of
the excise tax. Distributions declared by the Funds during October, November or
December to shareholders of record during such month and paid by January 31 of
the following year will be taxable to shareholders in the calendar year in which
they are declared, rather than the calendar year in which they are received.

Each Fund will provide an information return to shareholders describing the
federal tax status of the dividends paid by the Fund during the preceding year
within 60 days after the end of each year as required by present tax law.
Individual shareholders will receive Form 1099-DIV and Form 1099-B as required
by present tax law during January of each year. If the Fund makes a distribution
after the close of its fiscal year which is attributable to income or gains
earned in such earlier fiscal year, then the Fund shall send a notice to its
shareholders describing the amount and character of such distribution within 60
days after the close of the year in which the distribution is made. Shareholders
should consult their tax advisors concerning the state or local taxation of such
dividends, and the federal, state and local taxation of capital gains
distributions.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code

-25-

<PAGE>

sections and regulations. The Code and regulations are subject to change by
legislative or administrative action at any time, and retroactively.

Dividends and distributions also may be subject to state and local taxes.
Shareholders should consult their own tax advisors.

Federal Tax Treatment of Forward Currency and Futures Contracts

Except for transactions the Funds have identified as hedging transactions,
each Fund is required for federal income tax purposes to recognize as income for
each taxable year its net unrealized gains and losses on forward currency and
futures contracts as of the end of each taxable year as well as those actually
realized during the year. In most cases, any such gain or loss recognized with
respect to a regulated futures contract is considered to be 60% long-term
capital gain or loss and 40% short-term capital gain or loss without regard to
the holding period of the contract. Realized gain or loss attributable to a
foreign currency forward contract is treated as 100% ordinary income.
Furthermore, foreign currency futures contracts which are intended to hedge
against a change in the value of securities held by a Fund may affect the
holding period of such securities and, consequently, the nature of the gain or
loss on such securities upon disposition.

In order for each Fund to continue to qualify for federal income tax
treatment as a regulated investment company under the Code, at least 90% of each
Fund's gross income for a taxable year must be derived from certain qualifying
income, i.e., dividends, interest, income derived from loans of securities and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other related income, including gains from options, futures and
forward contracts, derived with respect to its business investing in stock,
securities or currencies. Any net gain realized from the closing out of futures
contracts will, therefore, generally be qualifying income for purposes of the
90% requirement.

Each Fund will distribute to shareholders annually any net capital gains
which have been recognized for federal income tax purposes (including unrealized
gains at the end of the Fund's taxable year) on futures transactions. Such
distribution will be combined with distributions of capital gains realized on a
Fund's other investments, and shareholders will be advised on the nature of the
payment.

Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state and local taxes.

PERFORMANCE

Current yield and total return data for the Funds may be quoted in
advertisements, shareholder reports or other communications to shareholders.
Yield is the ratio of income per share derived from a Fund's investments to a
current maximum offering price expressed in terms of percent. The yield is
quoted on the basis of earnings after expenses have been deducted. Total return
is the total of all income and capital gains paid to shareholders, assuming
reinvestment of all distributions, plus (or minus) the change in the value of
the original investment, expressed as a percentage of the purchase price.
Occasionally, a Fund may include its distribution rate in advertisements. The
distribution rate is the amount of distributions per share made by a Fund over a
12-month period divided by the current maximum offering price.

The SEC rules require the use of standardized performance quotations or,
alternatively, that every non-standardized performance quotation furnished by a
Fund be accompanied by certain standardized performance information computed as
required by the SEC. Current yield and total return quotations used by a Fund
are based on the standardized methods of computing performance mandated by the
SEC. An explanation of those and other methods used by a Fund to compute or
express performance follows.

-26-

<PAGE>

As indicated below, current yield is determined by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period and annualizing the result.
Expenses accrued for the period include any fees charged to all shareholders
during the 30-day base period. According to the SEC formula:

6
Yield = 2 [(a-b +1) - 1]
cd

where

a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reimbursements).

c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.

d = the maximum offering price per share on the last day of the period.

The Fixed Income Fund's current yield for the 30-day period ended
October 31, 1998 was 4.95%.

As the following formula indicates, the average annual total return is
determined by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital
appreciation/depreciation and dividends and distributions paid and reinvested)
for the stated period less any fees charged to all shareholder accounts and
annualizing the result. The calculation assumes the maximum sales load is
deducted from the initial $1,000 purchase order and that all dividends and
distributions are reinvested at the public offering price on the reinvestment
dates during the period. The quotation assumes the account was completely
redeemed at the end of each one, five and ten-year period and assumes the
deduction of all applicable charges and fees. According to the SEC formula:

n
P(1+T) = ERV
where:

P = a hypothetical initial payment of $1,000.

T = average annual total return.

n = number of years.

ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10-year periods,
determined at the end of the 1, 5 or 10-year periods (or
fractional portion thereof).

The International Equity Fund's total return for the fiscal year ended
October 31, 1998 was 6.90%. The aggregate total return from inception of the
International Equity Fund (August 3, 1995) to October 31, 1998 was 29.16%, and
the average annual return for such period was 8.21%. The Small Cap Fund's total
return for the fiscal year ended October 31, 1998 was (15.33)%. The Small Cap
Fund's aggregate total returns for the period June 17, 1996 (commencement of
operations) through October 31, 1998 was 11.74%, and the average annual return
for such period was 4.79%. The Fixed Income Fund's total return for the fiscal
year ended October 31, 1998 was 6.26%. The Fixed Income Fund's aggregate total
return for the period from September 2, 1997 through October 31, 1998 was 9.13%
and the average annual return for such period was 7.81%.

-27-

<PAGE>

Regardless of the method used, past performance is not necessarily
indicative of future results, but is an indication of the return to shareholders
only for the limited historical period used.

Comparisons and Advertisements

To help investors better evaluate how an investment in a Fund might satisfy
their investment objective, advertisements regarding a Fund may discuss yield or
total return for such Fund as reported by various financial publications.
Advertisements may also compare yield or total return to yield or total return
as reported by other investments, indices, and averages. The following
publications, indices, and averages may be used:

Financial Times Goldman Sachs Europe-Asia Index

Lehman Aggregate Index

Lehman Government Corporate Index

Lipper Mutual Fund Indices

Lipper Mutual Fund Performance Analysis

Morgan Stanley Capital International EAFE Index

Morningstar, Inc.

NASDAQ Industrial Index

Russell 2000 Index

Standard & Poor's 500 Composite Stock Price Index

A Fund may also from time to time along with performance advertisements,
present its investments, as of a current date, in the form of the "Schedule of
Investments" included in the Semi-Annual and Annual Reports to the shareholders
of the Trust.

FINANCIAL STATEMENTS

The audited financial statements and the financial highlights for the
International Equity Fund, Small Cap Equity Fund and Fixed Income Fund for the
fiscal year ended October 31, 1998, as set forth in their respective Annual
Reports to shareholders, and the reports thereon of PricewaterhouseCoopers LLP,
the Funds' independent public accountants, also appearing in the Annual Reports,
are incorporated herein by reference.

-28-