LIFE CYCLE MUTUAL FUNDS INC, 497, 1997-02-11

LIFE CYCLE MUTUAL FUNDS INC
497, 1997-02-11

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<PAGE>
PROSPECTUS

LIFE CYCLE MUTUAL FUNDS(TM), INC.

656 East Swedesford Road--Suite 322
Wayne, PA 19087

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For information call (800) 266-5240
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Life Cycle Mutual Funds, Inc. (the "Fund") is a diversified, open-end,
management investment company, organized under Maryland law, that is composed
of four portfolios (the "Portfolio" or "Portfolios"): the Life Cycle Equity
Fund(TM) (the "Equity Fund"), the Life Cycle Bond Fund(TM) (the "Bond Fund"),
the Life Cycle Retirement Income Fund(TM) (the "Retirement Income Fund") and
the Life Cycle Harvest Fund(TM) (the "Harvest Fund"). The Portfolios are
offered in connection with an age-based asset allocation program (the "Life
Cycle Program"(TM)) which is designed to meet the long-term retirement
investment needs of individual investors. The Life Cycle Program(TM) is
intended to manage investors' retirement assets by making disciplined
age-based asset allocation decisions to achieve this overall objective. The
Life Cycle Program is described more completely under the heading "The Life
Cycle Program."

The minimum initial investment for the Fund is $2,000 for investors
participating in the Life Cycle Program and the minimum subsequent investment
is $250. Such investors must maintain a minimum balance of $2,000 in the
Fund.

Investors may elect not to participate in the Life Cycle Program and purchase
shares in any of the Portfolios provided that they maintain at least a $5,000
balance in any Portfolio in which they are invested and the minimum
subsequent investment for these investors is $1,000. Such investors will be
paying higher fees than would be charged by comparable funds that do not
offer the additional benefits of the Life Cycle Program (see
"Management--Adviser's Fees").

Exchanges among the Portfolios on behalf of a participant in the Life Cycle
Program may only be effected by the Fund's investment adviser, pursuant to
the terms of the Life Cycle Program. Participants in the Life Cycle Program
may not otherwise exchange shares among the Portfolios. There are no fees for
exchanges among the Portfolios effected by the Fund's investment adviser
pursuant to the continuing allocation process of the Life Cycle Program.
There are also no fees for exchanges among the Portfolios for those not
participating in the asset allocation program if not done more than twice per
year. Investors not participating in the Life Cycle Program who make
exchanges among the Portfolios in excess of twice per year will be assessed a
$25 fee per exchange. Investors may redeem shares in any Portfolio at any
time without being subject to a redemption fee.

Each Portfolio of the Fund will pay Benson White & Company, the Fund's
investment adviser, a monthly advisory fee at the annual rate of .75% of its
average daily net assets. This fee is higher than the fee paid by most other
mutual funds because of the provision of the other services offered through
the Life Cycle Program described herein for which a separate fee is not
charged. The Fund, on behalf of each Portfolio, has adopted a distribution
and service plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended. The Plan encompasses both a service fee and
an asset-based sales charge for distribution assistance, which are 0.25% and
0.50% of each Portfolio's average daily net assets per year, respectively.
The maximum sales charge imposed on purchases is 5.25%.

This Prospectus sets forth concisely the information about each Portfolio
that a prospective investor ought to know before investing and it should be
retained for future reference. Additional information about each Portfolio,
including additional information concerning risk factors relating to an
investment in each Portfolio, has been filed with the Securities and Exchange
Commission in a Statement of Additional Information for the Fund, dated
October 11, 1996 (Supplemented February 11, 1997). This information is
incorporated by reference and is available without charge upon request from
the Fund's distributor, Life Cycle Mutual Funds Distributors, Inc., 3435
Stelzer Road, Columbus, Ohio 43219 or by calling (800) 266-5240.

Shares of the Life Cycle Mutual Funds, Inc. are not deposits or obligations
of any bank, are not guaranteed by any bank, and are not insured by the FDIC
or any other agency, and involve investment risks, including possible loss of
the principal amount invested.

AN INVESTMENT IN THE FUND MAY INVOLVE SIGNIFICANT RISKS (See "Investment
Objectives and Policies" and "Risk Factors, Additional Investment Information
and Derivatives" herein, as well as "Description of the Fund's Investment
Securities and Derivatives" in the Statement of Additional Information).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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October 11, 1996 (Supplemented February 11, 1997)
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
--------
<S> <C>
SUMMARY OF PORTFOLIOS ......................... 3
EXPENSE SUMMARY ............................... 4
FINANCIAL HIGHLIGHTS .......................... 5
THE LIFE CYCLE PROGRAM(TM) .................... 6
Hurdle Rates .................................. 8
INVESTMENT OBJECTIVES AND POLICIES ............ 9
LIFE CYCLE EQUITY FUND(TM) .................... 9
Investment Objective .......................... 9
Permitted Investments ......................... 9
LIFE CYCLE BOND FUND(TM) ...................... 10
Investment Objective .......................... 10
LIFE CYCLE RETIREMENT INCOME FUND(TM) ......... 11
Investment Objective .......................... 11
Permitted Investments For The Bond Fund and The
Retirement Income Fund ....................... 11
LIFE CYCLE HARVEST FUND(TM) ................... 13
Investment Objective .......................... 13
Permitted Investments ......................... 14
RISK FACTORS, ADDITIONAL INVESTMENT INFORMATION
AND DERIVATIVES .............................. 14
When-Issued and Delayed Delivery Securities ... 14
Lending of Securities ......................... 14
Foreign Investment Information for the
Retirement Income Fund ....................... 15
Hedging for the Equity Fund ................... 15
Brokerage and Execution Policies .............. 15
LIFE CYCLE PROGRAM RISK CONSIDERATIONS ........ 16
Age-Based Allocation Methodology .............. 16
Hurdle Rate ................................... 16
Purchase of Shares ............................ 16
Exchange of Shares ............................ 16
INVESTMENT RESTRICTIONS ....................... 17
MANAGEMENT .................................... 17
PURCHASE OF SHARES ............................ 20
REDUCTION OR ELIMINATION OF SALES LOADS ....... 22
REDEMPTION OF SHARES .......................... 23
EXCHANGE OF SHARES ............................ 25
DIVIDENDS AND DISTRIBUTIONS ................... 25
NET ASSET VALUE ............................... 26
DISTRIBUTION AND SERVICE PLAN ................. 26
YIELD AND TOTAL RETURN INFORMATION ............ 28
DESCRIPTION OF COMMON STOCK ................... 28
TAXES ......................................... 28
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT .. 30
COUNSEL AND INDEPENDENT AUDITORS .............. 30
</TABLE>

2
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM) PORTFOLIOS

The Life Cycle Program is intended to manage investors' retirement assets
by making disciplined age-based asset allocation decisions. Each Portfolio
which is managed by Benson White & Company, is designed to achieve its
individual objective set forth herein and to serve an integral function
within the context of the Life Cycle Program. See "The Life Cycle Program"
for further description.

SUMMARY OF PORTFOLIOS((1))

Portfolio Portfolio Representative Quality Ratings
Investment Objective Investment Policies Portfolio Restrictions Investments Moody's S&P
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Life Cycle Equity Fund
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<S> <C> <C> <C> <C> <C>
Seeks to accumulate Investing in a portfolio No privately placed Common Stock -- --
retirement assets by of common stocks securities. No Convertible Preferred
maximizing investors' selected from the securities issued by a Stock -- --
total return. Standard & Poor's 500 foreign company and Corporate Debt
Index on the basis of purchased on any foreign Securities Baa BBB
such stocks' ability to stock exchange.
provide capital
appreciation and
generate dividend
income.
Life Cycle Bond Fund
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Seeks to maximize income Investing in a laddered Under normal U.S. Government
consistent with the portfolio of bonds circumstances, at least Obligations -- --
preservation of capital. issued and backed by the 65% of the value of the Commercial Paper P-1 A-1
full faith and credit of portfolio will be Negotiable CDs -- --
the U.S. Government and invested in bonds. At Bankers Acceptances -- --
its agencies and least 50% of the Corporate Debt
instrumentalities, Portfolio will be Securities Baa BBB
mortgage-backed invested in U.S. Repurchase Agreements -- --
securities, and Government obligations, Mortgage Pass
investment-grade debt commercial paper, Through Securities -- --
securities issued by negotiable CD's, Planned Amortization -- --
corporations and banks. repurchase agreements, Class Mortgage-Backed
The Portfolio intends to and short-term corporate Securities
invest in debt debt securities. No more
securities with an than 50% of the
average maturity between Portfolio may be
1 and 10 years. invested in
mortgage-backed
securities and long-term
corporate debt
securities. No foreign
securities may be
purchased.

</TABLE>

Portfolio Portfolio Representative Quality Ratings
Investment Objective Investment Policies Portfolio Restrictions Investments Moody's S&P
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Life Cycle Retirement Income Fund
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<S> <C> <C> <C> <C> <C>
Seeks to maximize income Investing in a laddered At least 75% of the U.S. Government -- --
consistent with the portfolio of bonds Portfolio will be Obligations
preservation of capital. issued and backed by the invested in U.S. Commercial Paper P-1 A-1
full faith and credit of Government obligations, Negotiable CDs -- --
the U.S. Government and commercial paper, Bankers Acceptances -- --
its agencies and negotiable CD's, Corporate Debt
instrumentalities, repurchase agreements, Securities Baa BBB
mortgage-backed short-term corporate Repurchase Agreements -- --
securities, and debt securities, and Mortgage Pass
investment-grade debt mortgage-backed Through Securities -- --
securities issued by securities, with at Planned Amortization
corporations and banks. least 25% of the Class -- --
The Portfolio intends to Portfolio invested in Mortgage-Backed Securities
invest in debt direct U.S. Government Foreign Debt Securities -- --
securities with an obligations and its
average maturity between agencies and
1 and 12 years. instrumentalities,
backed by the full faith
and credit of the U.S.
Government. No more than
10% of the Portfolio may
be invested in
investment grade debt
securities of foreign
corporations and direct
obligations of foreign
nations.
Life Cycle Harvest Fund
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Seeks to earn income Investing in a laddered No foreign securities U.S. Government
consistent with the portfolio of short-term may be purchased. Obligations -- --
preservation of capital. bonds issued and backed Commercial Paper P-1 A-1
by the full faith and Corporate Notes, Bonds
credit of the U.S. and Other Obligations MIG-1 A
Government and its Bankers Acceptances --
agencies and Negotiable CDs --
instrumentalities
negotiable CD's,
repurchase agreements,
and short-term corporate
debt securities.

</TABLE>
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(1) There can be no assurance that each Portfolio's investment objective will
be achieved. An investment in each Portfolio of the Fund entails certain
risks, including, for certain Portfolios, risks associated with the
purchase of when-issued and delayed delivery securities, repurchase
agreements, hedging instruments, foreign securities, as well as
investments made in connection with the age-based allocation methodology
(see "The Life Cycle Program") and the hurdle rate (see "The Hurdle
Rate"), which are further described under "Risk Factors, Additional
Investment Information and Derivatives" herein. For information regarding
how to purchase shares of the Fund see "Purchase of Shares" herein and
for information concerning redemption of shares of the Fund see
"Redemption of Shares" herein.

3
<PAGE>

EXPENSE SUMMARY

INVESTOR TRANSACTION EXPENSES

<TABLE>
<CAPTION>
Retirement
Portfolio Equity Bond Income Harvest
-------- ------- ------------ ---------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases (as a
percentage of the offering price) .......... 5.25% 5.25% 5.25% 5.25%
Redemption Fees ............................. NONE NONE NONE NONE
Exchange Fees(1).............................. NONE NONE NONE NONE
Annual Portfolio Operating Expenses
(as a percentage of average net assets)
Management Fees ............................. 0.75% 0.75% 0.75% 0.75%
12b-1 Fees(2)................................. 0.75% 0.75% 0.75% 0.75%
Other Expenses (after reimbursement) ........ 0.45% 0.45% 0.45% 0.45%
Administration Fees (after reimbursement) .. 0.25%
Operating Expenses (after reimbursement) ... 0.20%
Total Portfolio Operating Expenses .......... 1.95% 1.95% 1.95% 1.95%

</TABLE>

Example: An investor of each Portfolio would pay the following expenses on a
$1,000 investment in the Portfolio assuming a 5% annual return
reinvested in shares of a Portfolio and redemption at the end of
each time period:

Year 1 Year 3 Year 5 Year 10
-------- -------- -------- ---------
$71 $111 $152 $268

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The purpose of the expense table provided above is to assist investors in
understanding the various costs and expenses that an investor will bear
directly or indirectly. For a further discussion of these fees see
"Management of the Fund." The Adviser has voluntarily agreed to reimburse the
Fund's Administration Fees and Operating Expenses to the extent necessary to
maintain the Annual Total Portfolio Operating Expenses at not more than 1.95%
of each Portfolio's average net assets. Absent such reimbursements, Total
Portfolio Operating Expenses would have been 9.70%, 76.34%, 60.32% and 12.38%
for the Equity, Bond, Retirement Income and Harvest Portfolios, respectively.
In addition, absent such reimbursements, the example provided above for Year
1, Year 3, Year 5 and Year 10 would have been $142, $309, $461, $782 for
Equity; $518, $689, $703, $705 for Bond; $466, $733, $787, $800 for
Retirement Income; and $165, $367, $540, $872 for Harvest Portfolios,
respectively. The Adviser, Administrator and the Distributor may voluntarily
waive all or a portion of their respective Management Fee, Administrative Fee
or 12b-1 fees. There will be no sales load for shares purchased on behalf of
clients of financial intermediaries holding such shares in fee based asset
management accounts. The expenses reflected above are estimates of the
expenses the Fund will incur during its first fiscal year. The "Example" set
forth above should not be considered a representation of past or future
expenses; actual expenses may be greater or less than those shown.

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1 Shareholders not participating in the Life Cycle Program may exchange
shares, without the assessment of a fee, twice a year. Exchanges among the
Portfolios in excess of twice per year by such investors will be assessed a
$25 fee per exchange.

2 12b-1 fees are composed of a service fee payable to the Adviser and an
asset-based sales charge payable to the Distributor for distribution
assistance which are 0.25% and 0.50% of each Portfolio's average daily net
assets per year, respectively. As a result of the asset-based sales charge,
long-term shareholders of the Portfolio may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc.

4
<PAGE>

FINANCIAL HIGHLIGHTS+

The following table provides information about each Portfolio's financial
history. It is based on a single share outstanding throughout each period
provided. The table is part of each Portfolio's financial statements, which
are included in the Fund's annual report and are incorporated by reference
into the Statement of Additional Information. This document is available to
shareholders upon request.

<TABLE>
<CAPTION>
Equity Bond Retirement Harvest
Fund Fund Income Fund Fund
October 2, 1995* October 4, 1995* October 4, 1995* October 4, 1995*
through through through through
July 31, 1996 July 31, 1996 July 31, 1996 July 31, 1996
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ... $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from Investment Operations:
Net investment income ................ 0.12 0.22 0.24 0.20
Net realized and unrealized gain/loss
on investments .................... 0.68 (0.18) (0.24) 0.00
---------------- ---------------- ---------------- ----------------
Total from Investment Operations ..... 0.80 0.04 0.00 0.20
---------------- ---------------- ---------------- ----------------
Less Distributions:
Dividends from net investment income . (0.12) (0.22) (0.24) (0.20)
Distributions from capital gains ..... 0 0 0 0
---------------- ---------------- ---------------- ----------------
Total Distributions .................. (0.12) (0.22) (0.24) (0.20)
---------------- ---------------- ---------------- ----------------
Net Asset Value, End of Period ....... $ 10.68 $ 9.82 $ 9.76 $ 10.00
================ ================ ================ ================
Total Return ......................... 8.05% 0.39% (0.02)% 2.05%
Net Assets, End of Period (in
thousands) ........................ $2,951 $222 $272 $925
Ratios to Average Net Assets of:
Net investment income** ................ 1.82% 2.51% 2.83% 2.44%
Expenses before waivers ** ............. 9.70% 76.34% 60.32% 12.38%
Expenses net of waivers ** ............. 1.95% 1.95% 1.95% 1.95%
Portfolio Turnover Rate ................ 132% 0 0 0
Average Commission Rate ................ $ 0.03 0 0 0
</TABLE>

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* Commencement of operations.
+ Per share amounts based on the average number of shares outstanding during
the period from commencement of operations to July 31, 1996.
** Annualized

5
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.
THE LIFE CYCLE PROGRAM(TM)

The four Portfolios are offered in connection with an age-based asset
allocation program (the "Life Cycle Program") and have been designed as
specialized and unique tools to be used in accordance with the guidelines of
the Life Cycle Program. The Equity Fund seeks to accumulate investors'
retirement assets by maximizing investors' total return. The Bond Fund is a
more conservative portfolio than the Equity Fund and seeks to preserve
capital. The Bond Fund, under the Life Cycle Program, serves as a repository
for assets exchanged from the Equity Fund. The Retirement Income Fund also
serves as a repository for assets exchanged from the Equity Fund, but
operates with a moderately higher level of risk than the Bond Fund in an
attempt to realize greater income. The Harvest Fund seeks to serve as a
repository for assets exchanged from the Equity Fund, while earning income
and preserving capital (see "The Hurdle Rate"). The Harvest Fund also serves
as the entry portfolio to the Life Cycle Program. Investors' funds are
initially invested in the Harvest Fund, for a period not to exceed four
business days, and earn income, until those monies are allocated in two of
the other three Portfolios. Purchasing shares in connection with the Life
Cycle Program is described more completely under the heading "Purchase of
Shares."

The Life Cycle Program is based upon the premise that the single most
relevant factor in determining portfolio strategy for investing retirement
assets is the age of the investor and, therefore, asset allocations
correspond to the age of each individual investor. Shares of the Equity Fund
are exchanged for shares of either the Bond Fund or the Retirement Income
Fund under the Life Cycle Program for the purpose of building and preserving
wealth throughout an investor's working life and generating additional income
and preserving the investor's purchasing power once the investor has retired.
All initial and subsequent purchases made in the Portfolios by Life Cycle
Program participants ("Participants") are allocated between the Equity Fund
and either the Bond Fund or the Retirement Income Fund in accordance with
age-based asset allocation models predetermined by Benson White & Company
(the "Adviser").

Such age-based asset allocations are authorized by Participants at the
time of their initial purchase of shares, as described under the heading
"Purchase of Shares." Up to and including each Participant's 45th birthday,
80% of a Participant's assets will be allocated into the Equity Fund and the
remaining 20% of the Participant's assets will be allocated into the Bond
Fund. Starting with each Participant's 46th birthday, and on each successive
birthday, the Adviser gradually decreases the Participant's holdings in the
Equity Fund and increases the Participant's holdings in the Bond Fund or the
Retirement Fund. There is no fee for this exchange of assets. The Life Cycle
Program re-allocates each Participant's shares in the Equity Fund, until
reaching the age of 60, into the Bond Fund. Upon reaching the age of 60, the
Participant's shares in the Bond Fund are exchanged for shares in the
Retirement Income Fund. On each successive birthday starting with a
Participant's 60th birthday, age-based asset allocations will be made through
share exchanges from the Equity Fund to shares in the Retirement Income Fund.
For example, at age 50 all Participants would hold 70% of their account in
the Equity Fund and 30% in the Bond Fund, whereas at age 65 they would hold
50% of their account in the Equity Fund, and 50% in the Retirement Fund.

Once a Participant turns 60 years old, under the Life Cycle Program,
assets are exchanged from the Bond Fund into the Retirement Income Fund
because of the increasing need to generate additional income to meet
retirement-related expenses. During retirement, withdrawals of income are
preferable to withdrawals of principal so as not to decrease the amount of
principal from which additional income may be generated. Therefore, once an
investor reaches the age of 60 years, at which age withdrawals from a
tax-qualified account are currently free from the premature distribution
penalty, the investor may have greater need for income production to support
subsequent withdrawals. Although the Retirement Income Fund has a higher risk
to principal than the Bond Fund, the Bond Fund may be less likely to generate
sufficient amounts of income to meet the anticipated expenses of a retiree
without invading the principal.

Under the Life Cycle Program, shares are exchanged from the Equity Fund
for shares of either the Bond Fund or the Retirement Income Fund in two
situations. For Participants between the ages of 46 and 75; once a year on
each Participant's birthday or, if that birthday does not fall on a business
day, then on the first business day following the Participant's birthday, the
Participant will have his or her investment in the Equity Fund

6
<PAGE>

decreased while his or her investment in the Bond Fund or the Retirement
Income Fund is increased. These exchanges are intended to increase retirement
wealth by providing added exposure to the equity market when a Participant is
younger and to generate more retirement income as the Participant nears
retirement age, while maintaining appropriate exposure to the following
risks, based on the Participant's age: (1) risk to principal; (2) risk to
income; and (3) risk of diminished purchasing power through inflation.
Historically, risks concerning diminished purchasing power as a result of
inflation have been mitigated by exposure to equity securities. Additionally,
the risk of experiencing diminished purchasing power as a result of inflation
is higher for individuals who are further away from the age of retirement
than individuals who are closer to the age of retirement. Thus, an increased
exposure to equity securities when an investor is younger is warranted.
Nonetheless, retired investors continue to have the need to protect
themselves from the risk of inflation which is why the Life Cycle Program
maintains Participants' funds in equity securities on a diminishing basis as
they get older. The outcome of basing investment allocation on a
Participant's date of birth is that each account is highly individualized.

In addition to the allocation adjustments pursuant to the age-based asset
allocation table ("the Table") on page 8 herein, subsequent to the
application of the Hurdle Rate (see "The Hurdle Rate"), shares will be
exchanged between the Equity Fund and the Bond Fund (or Retirement Income
Fund for Participants 60 years or older) under the Life Cycle Program, if on
a Participant's birthday the net asset value per share of either Portfolio
has increased or decreased by a greater proportion than the net asset value
per share of the other Portfolio since the Participant's last birthday, and
as a result, the allocation among the two Portfolios is no longer in
conformity with the asset allocation prescribed in the Table. Shares of the
two Portfolios will be exchanged at such time to bring the individual
Participant's account into alignment with the Table.

The Life Cycle Program's age-based asset allocations will not be changed
by the Adviser in reaction to general market fluctuations. The Adviser may,
however, upon approval from individual Participants, modify the asset
allocation formula of the Life Cycle Program to react to what it believes to
be material structural changes in the capital markets. An example of a
"material structural change in the capital markets" might involve the effects
of changing demographics on the demand for various securities. As a larger
percentage of the population approaches retirement age, they may be forced to
sell equities to raise cash for retirement expenses. This requirement for
liquidity could cause pervasive and persistent selling pressure on the
domestic equity markets. If this type of pressure asserted itself, it might
qualify as a "material structural change in the capital markets" that could
force a reconsideration of the speed of asset conversion (from equity to
debt) for Participants. In the event that the Adviser believes that the Table
should be modified, it will provide Participants 60 days' prior notice of any
recommended modification in order to allow Participants an opportunity to
approve such modification. Modifications to the Table can only be implemented
by the Adviser on behalf of each Participant with the prior written approval
of such Participant.

The Life Cycle Program's allocation process takes place over a period of
years that may, depending on a Participant's age, stretch for decades. The
Adviser believes that short-term market fluctuations in the capital markets
are less likely to adversely impact the asset allocation process because the
Life Cycle Program is intended to be utilized over a longer period of time.
Historically, equity markets have been subject to a number of multi-year
declines or periods of depressed prices and if an investor is forced to sell
equities during a period of depressed market prices, the investor will have
to liquidate a larger position to raise a sufficient amount of cash. The Life
Cycle Program's allocation process between the Equity Fund and either the
Bond Fund or the Retirement Income Fund is intended to be spread out over a
period of years in an attempt to avoid the risk that a Participant will be
divested from the Equity Fund throughout a period in which equity securities'
market prices are depressed.

7
<PAGE>

Provided below is the Life Cycle Program's age-based asset allocation
table:

<TABLE>
<CAPTION>
Bond Fund or
Investor Age Equity Fund Retirement Income Fund
----------------- --------------- --------------------------
<S> <C> <C>
Up to age 45 80% 20%
At age 46 78% 22%
At age 47 76% 24%
At age 48 74% 26%
At age 49 72% 28%
At age 50 70% 30%
At age 51 68% 32%
At age 52 66% 34%
At age 53 64% 36%
At age 54 62% 38%
At age 55 60% 40%
At age 56 59% 41%
At age 57 58% 42%
At age 58 57% 43%
At age 59 56% 44%
At age 60 55% 45%
At age 61 54% 46%
At age 62 53% 47%
At age 63 52% 48%
At age 64 51% 49%
At age 65 50% 50%
At age 66 48% 52%
At age 67 46% 54%
At age 68 44% 56%
At age 69 42% 58%
At age 70 40% 60%
At age 71 38% 62%
At age 72 36% 64%
At age 73 34% 66%
At age 74 32% 68%
Age 75 & over 30% 70%

</TABLE>

There are certain risks inherent in using an age-based allocation
methodology. An explanation of these risks is provided under the heading
"Risk Factors, Additional Investment Information and Derivatives."

While investors participating in the Life Cycle Program may redeem shares
held in any Portfolio, at any time, in whole or in part, any shares remaining
in one or more of the Portfolios after a partial redemption will be
reallocated among the Portfolios in accordance with the Life Cycle Program.
All exchanges of shares pursuant to the Life Cycle Program are made, without
cost, on the basis of the relative net asset values per share. Investors who
are not participating in the Life Cycle Program with holdings of at least
$5,000 have the flexibility to elect to initially determine an asset
allocation different than the Life Cycle Program. Further, these investors
will have the right, without a fee, to adjust their own allocation mix twice
each year which may differ from the parameters of the Life Cycle Program. Any
additional exchanges in excess of twice per year will be assessed a $25 fee
per exchange. However, such investors will be paying higher fees than would
be charged by comparable funds and will not receive the benefits of the Life
Cycle Program described herein (see "Management--Adviser's Fees). For
further information concerning the Life Cycle Program and/or the individual
Portfolios investors may call (800) 266-5240.

HURDLE RATES

The hurdle rate is a given rate of return predetermined by the Adviser,
which may vary over time based upon the overall performance of the U.S.
equity markets that is applied annually to the total return of the Equity

8
<PAGE>

Fund (the "Hurdle Rate"). On each Participant's birthday or, if that birthday
does not fall on a business day, then on the first business day following
each Participant's birthday, the calculated Hurdle Rate is applied to that
Participant's shares in the Equity Fund. Whenever the annual total return of
the Equity Fund is in excess of the Hurdle Rate then in effect for each
Participant, a portion of such Participant's shares in the Equity Fund
reflecting the excess value over the Hurdle Rate are automatically exchanged
for shares of the Harvest Fund.

The Adviser believes that the application of the Hurdle Rate and the
exchange of shares within certain Portfolios is an incremental risk
management discipline that is age-based and reflects the rates of return
experienced by the shareholder relative to average historic rates of return.
The Hurdle Rate was created as an investment strategy to minimize the effect
that large swings in the equity market would otherwise have on the Equity
Fund and, therefore, to reduce its volatility. A different Hurdle Rate is
determined for Participants by age and will generally be higher for younger
Participants than older Participants, because it is presumed that younger
Participants have more time to make up any losses sustained in the equity
market, while older Participants require greater liquidity from their
investments due to their withdrawals of income. The application of the Hurdle
Rate to the Equity Fund will impose a cap upon a Participant's return from
that Portfolio. Thus, for example, a Participant who has a Hurdle Rate of 20%
per year will have the incremental excess equity return over 20% per year
exchanged from the Equity Fund into the Harvest Fund. As a result,
incremental returns that are exceedingly high from a historic perspective
will be placed at less risk to principal in the Harvest Fund than they would
have been had they remained in the Equity Fund. It is expected that under
most market conditions, the largest component of total returns will likely
fall below the Hurdle Rate and that a Participant's funds will be solely
subject to the asset-based allocations of the Life Cycle Program. The
calculation and application of the appropriate Hurdle Rate will depend upon
prevailing values in the equity markets as measured by such traditional
measures of market valuation as dividend yields, price to book ratios, and
dividend yield and bond yield ratios. Depending on the relation between the
total return and the Hurdle Rate, shares of the Equity Fund may be
automatically exchanged for shares of the Harvest Fund, on the Participant's
birthday. When and if the domestic stock market enters into a condition that,
in the Adviser's view, is considered to be undervalued, Harvest Fund shares
will be exchanged in accordance with the age-based allocation target
appropriate for the Participant's age (e.g., Equity Fund/Bond Fund (up to age
60) or Equity Fund/Retirement Income Fund (60 years or over in age). The test
of "reasonable valuation" is based upon market conditions and, as described
above, tempered with age-based judgment. There are certain risks inherent in
using the Hurdle Rate. An explanation of these risks is provided under the
heading "Risk Factors, Additional Investment Information and Derivatives."

INVESTMENT OBJECTIVES AND POLICIES

LIFE CYCLE EQUITY FUND(TM)
INVESTMENT OBJECTIVE

The Equity Fund's investment objective is to maximize investors' total
return by investing in a portfolio of common stocks selected from the
Standard & Poor's 500 Index (the "S&P 500") on the basis of such stocks'
ability to provide capital appreciation and generate dividend income. The
investment objective is fundamental to this Portfolio and may not be changed
without stockholder approval. There can be no assurance that the Equity
Fund's investment objective will be achieved.

Under normal circumstances, the Portfolio will invest substantially all of
its assets (i.e., 90%) in certain of the stocks comprising the S&P 500, that
the Adviser believes will allow the portfolio to meet its objectives. Equity
securities are selected on their ability to provide capital appreciation and
generate dividend income through a quantitative methodology that analyzes an
issuer's ability to produce high, stable and growing dividends. This analysis
includes the examination of quantitative characteristics including, but not
limited to, the debt to equity ratio, the price to book ratio, the price to
earnings ratio, the issuer's history of paying growing dividends, the
dividend payout ratio and the size of the dividend yield as compared to other
dividend-paying stocks within the S&P 500.

PERMITTED INVESTMENTS

The investment policy of the Portfolio will emphasize flexibility in
arranging its portfolio, consistent with its investment objective to maximize
investors' total return and, under normal circumstances, to invest
substantially all of its assets (i.e. 90%) in certain of the stocks
comprising the S&P 500.

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The Equity Fund Portfolio is quantitatively managed based on fundamental
characteristics of the companies that have issued the securities eligible for
purchase by the Portfolio. The Adviser has developed proprietary computer
screening methods that screen for fundamental corporate characteristics
related to the ability of the portfolio securities to generate capital
appreciation and dividend income. The Adviser will consider certain factors
in the selection of securities including but not limited to fundamental
factors as debt to equity ratios, dividend payout ratios, price to earnings
ratios, current dividend yield, historic dividend growth, and price to book
ratios. All stocks in the S&P 500 will be screened for fundamental quality
and income generation and the Portfolio will be rebalanced periodically in
accordance with the results of such screening. The Portfolio Stocks that no
longer meet the quality or dividend production criteria established by the
Adviser will be sold and replaced with securities that meet the established
criteria.

The Portfolio may also invest in publicly-traded common and preferred
stocks not presently included in the S&P 500. While the Portfolio has no
present intention of investing any significant portion of its assets in such
securities, it reserves the right to invest in such securities if purchase
thereof at the time of purchase would not cause more than 10% of the value of
its total assets to be invested therein.

The Portfolio may use certain hedging instruments to try to reduce risks
of market fluctuations that affect the value of the securities in the
Portfolio. The Portfolio will not invest in such hedging instruments for
speculation. See "Risk Factors, Additional Investment Information and
Derivatives" herein.

The Portfolio may invest not more than 10% of its total assets in money
market instruments and in investment-grade corporate debt securities and
convertible preferred stocks offering a significant opportunity for income.
Money market instruments include short-term obligations issued or guaranteed
by the U.S. Government, its agencies and instrumentalities (including such
obligations subject to repurchase agreements), commercial paper rated in the
highest grade by any nationally recognized statistical rating organizations
and certificates of deposit and bankers' acceptances issued by domestic banks
having total assets in excess of one billion dollars. A repurchase agreement
is an instrument under which an investor purchases a U.S. Government security
from a vendor, with an agreement by the vendor to repurchase the security at
the same price, plus interest at a specified rate. Repurchase agreements may
be entered into with member banks of the Federal Reserve System or "primary
dealers" (as designated by the Federal Reserve Bank of New York) in U.S.
Government securities. Repurchase agreements usually have a short duration,
often less than one week. In the event that a vendor defaults on its
repurchase obligation, the Portfolio might suffer a loss to the extent that
the proceeds from the sale of the collateral were less than the repurchase
price. If the vendor becomes bankrupt, the Portfolio might be delayed, or may
incur costs or possible losses of principal and income, in selling the
collateral.

The Portfolio will not necessarily dispose of any securities that fall
below investment-grade (i.e., rated within the four highest ratings
categories by a nationally recognized statistical rating organization, e.g.,
BBB by Standard & Poor's Ratings Services, a division of the McGraw-Hill
Companies ("S&P"), Baa by Moody's Investors Service, Inc. ("Moody's"), BBB by
Fitch Investors Services, Inc., or BBB by Duff & Phelps Credit Rating Co.).
Rather, the Portfolio, based upon the Adviser's determination, will retain
securities that fall below investment-grade so long as such retention is
consistent with the Portfolio's investment objective and that such holdings
of securities which fall below investment-grade do not exceed 5% of each
Portfolio's total assets.

The Portfolio's investment policies, unlike its investment objective, are
not fundamental and may be changed by the Board of Directors without
stockholder approval. If a percentage limitation is adhered to at the time an
investment is made, a later change in percentage resulting from changes in
the value of the Portfolio's securities will not be considered a violation of
the Portfolio's policies or restrictions.

LIFE CYCLE BOND FUND(TM)
INVESTMENT OBJECTIVE

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portfolio of bonds issued and backed by the full faith and credit of the U.S.
Government and its agencies and instrumentalities, mortgage-backed
securities, and investment-grade debt securities issued by corporations and
banks. Under normal circumstances, at least 65% of the value of the
Portfolio's total assets will be invested in bonds. The Portfolio intends to
invest in debt securities with an average maturity between 1 and 10 years.
The investment objective is fundamental to this Portfolio and may not be
changed without stockholder approval. There can be no assurance that the Bond
Fund's investment objective will be achieved.

At least 50% of the Portfolio will be invested in U.S. Government
obligations, commercial paper, negotiable CD's, repurchase agreements, and
short-term corporate debt securities. No more than 50% of the Portfolio may
be invested in mortgage-backed securities and long-term corporate debt
securities. No foreign securities will be purchased by this Portfolio.

LIFE CYCLE RETIREMENT INCOME FUND(TM)
INVESTMENT OBJECTIVE

At least 75% of the Portfolio will be invested in U.S. Government
obligations, commercial paper, negotiable CD's, repurchase agreements,
short-term corporate debt securities, mortgage-backed securities, and
corporate debt securities, with no less than 25% of the Portfolio invested in
direct U.S. Government obligations and its agencies and instrumentalities,
backed by the full faith and credit of the United States. In addition, no
more than 10% of the Portfolio may be invested in investment-grade debt
securities of foreign corporations and direct obligations of foreign nations.
Additional information concerning such foreign investments is provided under
the heading "Risk Factors, Additional Investment Information and
Derivatives."

PERMITTED INVESTMENTS FOR THE BOND FUND AND THE RETIREMENT INCOME FUND

U.S. Government Obligations--obligations issued or guaranteed by the U.S.
Government or by its agencies and instrumentalities. These obligations are
backed by the full faith and credit of the United States, by the credit of
the issuing or guaranteeing agency or by the agency's right to borrow from
the U.S. Treasury. U.S. Government obligations include U.S. Treasury
obligations which differ only in their interest rates, maturities and times
of issuance as follows: U.S. Treasury bills (maturity of one year or less),
U.S. Treasury Notes (maturities of one to ten years) and U.S. Treasury bonds;
however, U.S. Treasury Bonds generally have maturities of greater than ten
years. For further description of the government obligations in which the
Portfolios will invest, see "Risk Factors, Additional Investment Information
and Derivatives."

Commercial Paper and other Corporate Debt Securities--commercial paper and
other domestic corporate debt securities, including corporate bonds and
variable amount master demand notes. Each Portfolio is permitted to purchase
commercial paper, including variable amount master demand notes, if they are
rated A-1 by S&P or Prime-1 by Moody's, or if not rated, issued by a
corporation having an outstanding unsecured debt issue rating of A or better
by either S&P or Moody's. Each Portfolio is permitted to purchase corporate
obligations which are rated BBB/Baa or better by either S&P or Moody's. Each
Portfolio will not necessarily dispose of a security that falls below
investment-grade so long as such holdings of securities which fall below
investment- grade do not exceed 5% of each Portfolio's total assets.

Bank Obligations--certificates of deposit, bankers' acceptances and other
obligations (or instruments secured by such obligations) of domestic banks
subject to regulation by the U.S. Government or its agencies (such as the
Federal Reserve Board, the Comptroller of the Currency or the FDIC) and
having total assets of over $10 billion.

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<PAGE>

Mortgage Pass-Through Securities--includes those issued by the Government
National Mortgage Association ("GNMA"), the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association ("FNMA") and the
Federal Housing Administration ("FHLMCA"). Securities of the GNMA include
GNMA Certificates, which are mortgage-backed securities representing part
ownership of a pool of mortgage loans. Such loans are initially made by
lenders such as mortgage bankers, commercial banks and savings and loan
associations and are either insured by the FHLMCA or Farmers' Home
Administration or guaranteed by the Veterans Administration. A GNMA
Certificate represents an interest in a specific pool of such mortgages
which, after being approved by GNMA, is offered to investors through
securities dealers. Each Portfolio will invest in GNMA certificates only of
the "fully modified pass-through" type which are guaranteed as to timely
payment of principal and interest by the full faith and credit of the U.S.
Government.

The average life of a GNMA Certificate is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities,
due to prepayments of principal by mortgagors and mortgage foreclosures which
will usually result in the return of the greater part of principal investment
long before the maturity of the mortgages in the pool. The occurrence of
mortgage prepayments is affected by many factors including the level of
interest rates, general economic conditions, the location and age of the
mortgage and other social and demographic conditions. At the time principal
prepayments or payments upon foreclosure are received by the Portfolio,
prevailing interest rates may be higher or lower than the current yield of a
Portfolio. Prepayments often occur following a decline in interest rates, in
which case reinvestment will take place at a lower interest rate than the
rate on the prepaid obligation. Foreclosures impose no risk to principal
investment because of the GNMA guarantee; however, inasmuch as foreclosures
will involve a repayment of principal to a Portfolio, the Portfolio's yield
on its portfolio securities will be affected if reinvestment takes place at a
higher or lower interest rate.

FNMA and FHLMC obligations are not backed by the full faith and credit of
the U.S. Government as GNMA certificates are, but FHLMC securities are
supported by the instrumentality's limited right to borrow from the United
States Treasury, and obligations of the FNMA are supported only by the
discretionary authority of the U.S. Government to purchase the agency's
obligations. No assurance can be given that the U.S. Government will provide
financial support in the future to U.S. Government Agency's, authorities or
instrumentalities that are not supported by the full faith and credit of the
United States.

The prices of U.S. Government securities, like conventional bonds, are
inversely affected by changes in interest rate levels. A decrease in rates
generally produces an increase in the value of the Portfolio's investments,
while an increase in rates generally reduces the value of these investments.
Investors should be prepared to accept the principal volatility normally
associated with investment in longer term fixed income securities and should
not rely on either Portfolio for their short-term financial needs. The
Portfolios are not intended to be vehicles for trading on short-term swings
in the market.

Planned Amortization Class Mortgaged-Backed Securities--includes certain
Collateralized Mortgage Obligations ("CMOs") that are Planned Amortization
Class bonds ("PACs"). CMOs are debt obligations or multi-class pass-through
certificates issued by agencies or instrumentalities of the U.S. Government
or by private originators or investors in mortgage loans. CMOs are backed by
mortgage pass-through securities or pools of whole mortgage loans and are
evidenced by a series of bonds issued in multiple classes. PACs are a type of
CMO tranche or series designed to provide relatively predictable payments of
principal provided that, among other things, the actual prepayment experience
on the underlying mortgage loans falls within a predefined range. Because of
these features, PACs generally are less subject to the risks of prepayment
than are other types of mortgage-backed securities. However, if the actual
prepayment experience on the underlying mortgage loans is at a rate faster or
slower than the predefined range or if deviations from other assumptions
occur, principal payments on the PACs may be earlier or later than predicted.
Additional information concerning PACs is provided in the Statement of
Additional Information under the heading "Description of the Fund's
Investment Securities and Derivatives."

Repurchase Agreements--each Portfolio's investment portfolio may include
repurchase agreements with banks and dealers in U.S. Government securities. A
repurchase agreement involves the purchase by either Portfolio of an
investment contract from a bank or an authorized dealer in U.S. Government
securities and is secured by U.S. Government obligations, as defined above
(see "U.S. Government Obligations"), whose value is equal to or greater than
the value of the repurchase agreement including the agreed upon interest. The
agreement provides that the institution will repurchase the underlying
securities at an agreed upon time and price. The total

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<PAGE>

amount received on repurchase would exceed the price paid by each Portfolio,
reflecting an agreed upon rate of interest for the period from the date of
the repurchase agreement to the settlement date, and would not be related to
the interest rate on the underlying securities. The difference between the
total amount to be received upon the repurchase of the securities and the
price paid by either Portfolio upon their acquisition is accrued daily as
interest. The Portfolios require continual maintenance by each Portfolio's
custodian of the market value of underlying collateral in amounts equal to,
or in excess of, the value of the repurchase agreement including the agreed
upon interest. If the institution defaults on the repurchase agreement, each
Portfolio dealing with such institution will retain possession of the
underlying securities. In addition, if bankruptcy proceedings are commenced
with respect to the seller, realization on the collateral by the Portfolio
dealing with such institution may be delayed or limited and such Portfolio
may incur additional costs. In such case the Portfolio will be subject to
risks associated with changes in the market value of the collateral
securities. Each Portfolio intends to limit repurchase agreements to
transactions with institutions believed by the Adviser to present minimal
credit risk. Repurchase agreements may be considered to be loans under the
Investment Company Act of 1940.

Reverse Purchase Agreements--Although each Portfolio may enter into
reverse repurchase agreements, they currently do not have the intention to
enter into such agreements. The Portfolios may each enter into reverse
repurchase agreements with the same parties with whom they may enter into
repurchase agreements. Under a reverse repurchase agreement, a Portfolio
sells securities and agrees to repurchase them, at an mutually agreed upon
date and price. Under generally accepted accounting principles, reverse
repurchase agreements are generally regarded as a form of borrowing. At the
time a Portfolio enters into a reverse repurchase agreement, it will
establish and maintain a segregated account with its custodian containing
securities from its portfolio having a value not less than the repurchase
price (including accrued interest). A Portfolio's ability to enter into
reverse repurchase agreements is not limited except by the requirement to
maintain assets in segregated accounts. Reverse repurchase agreements involve
the risk that the market value of the securities retained in lieu of their
sale by a Portfolio may decline below the price of the securities the
Portfolio has sold but is obligated to repurchase. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce the Portfolio's obligation
to repurchase the securities, and the Portfolio's use of the proceeds of the
reverse repurchase agreement may effectively be restricted pending such
decision. Investors should be aware that each Portfolio may enter into
reverse repurchase agreements, which may be considered to be a form of
borrowing and, therefore, involve the use of leverage. The use of leverage
involves special risks in that, while providing increased opportunities of
income, the use of leverage also means that any losses will be magnified. The
use of reverse repurchase agreements also involves certain fees and costs to
the Portfolio.

Portfolio turnover will be influenced by the Portfolios' investment
objectives, other investment policies, and the need to meet redemptions.
While the rate of each Portfolio's turnover will not be a limiting factor
when the Adviser believes that portfolio changes are appropriate, it is
anticipated that given each Portfolio's investment objective, the annual
portfolio turnover rate of each Portfolio should generally not exceed 100%. A
100% turnover rate would occur, for example, if all of the securities in
either Portfolio are replaced once within a period of one year. The
Portfolios will not normally engage in short-term trading but reserve the
right to do so.

Short-term obligations may be purchased pending investment of proceeds of
sales of either Portfolio's shares or portfolio securities, or to maintain
liquidity to meet anticipated redemptions.

LIFE CYCLE HARVEST FUND(TM)
INVESTMENT OBJECTIVE

The Portfolio's investment objective is to earn income consistent with the
preservation of capital. The Harvest Fund intends to achieve its investment
objective by investing in a laddered portfolio of short-term bonds issued and
backed by the full faith and credit of the U.S. Government and its agencies
and instrumentalities, negotiable CD's, repurchase agreements, and short-term
corporate debt securities. The investment objective is fundamental to this
Portfolio and may not be changed without stockholder approval. There can be
no assurance that the Harvest Fund's investment objective will be achieved.

No foreign securities will be purchased for this Portfolio. The weighted
average maturity of the Portfolio initially will not exceed 90 days, and the
maximum maturity of each security initially will not exceed 13 months.

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<PAGE>

Portfolio turnover will be influenced by the Portfolio's investment
objective, other investment policies, and the need to meet redemptions. While
the rate of portfolio turnover will not be a limiting factor when the Adviser
believes that portfolio changes are appropriate, it is anticipated that given
the Portfolio's investment objective, its annual portfolio turnover rate
should generally not exceed 500%. A 500% turnover rate would occur, for
example, if all of the securities in the Portfolio are replaced five times
within a period of one year. The relatively high turnover rate is primarily a
result of the short-term maturities of the securities in the Portfolio and
not of excessive trading in the Portfolio. The high rate of portfolio
turnover should not result in correspondingly high brokerage expenses for the
Portfolio because usually such transactions are principal transactions
conducted on a net basis with no brokerage costs being paid by the Portfolio.
In order to qualify as a regulated investment company, less than 30% of the
Portfolio's gross income must be derived from the sale or other disposition
of stock, securities or certain other investments held for less than three
months. Although increased portfolio turnover may increase the likelihood of
additional capital gains for the Portfolio, the Portfolio expects to satisfy
the 30% income test.

PERMITTED INVESTMENTS

U.S. Government Obligations--obligations issued or guaranteed by the U.S.
Government or by its agencies and instrumentalities. These obligations are
backed by the full faith and credit of the United States, by the credit of
the issuing or guaranteeing agency or by the agency's right to borrow from
the U.S. Treasury. U.S. Government obligations include U.S. Treasury
obligations which differ only in their interest rates, maturities and times
of issuance as follows: U.S. Treasury bills (maturity of one year or less),
and U.S. Treasury Notes (maturities of one to ten years). For further
description of the government obligations in which the Portfolio will invest,
see "Risk Factors, Additional Investment Information and Derivatives."

Commercial Paper and other Short-Term Corporate Obligations--commercial
paper and other short-term domestic corporate obligations, including
corporate bonds, variable amount master demand notes. The Portfolio is
permitted to purchase commercial paper, including variable amount master
demand notes, if they are rated A or better by S&P or P-1 or better by
Moody's, and short-term domestic corporate obligations, if they are rated A
or better by S&P or A or VMIG-1 or better by Moody's.

RISK FACTORS, ADDITIONAL INVESTMENT INFORMATION AND DERIVATIVES

When-Issued and Delayed Delivery Securities. Each Portfolio may purchase
securities on a "when-issued" or "delayed delivery" basis. When such
transactions are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment
for the securities take place at a later date. The securities are subject to
market fluctuation during this period and no interest accrues to a Portfolio
until settlement. The use of when-issued transactions enables the Portfolios
to hedge against an anticipated decline in interest rates and increase in
prices. However, if the Adviser was to forecast incorrectly the direction of
interest rate movement, a Portfolio might be required to complete a
when-issued transaction at a price less than the current market price. Each
Portfolio maintains with The Bank of New York (the "Custodian") a separate
account with a segregated portfolio of liquid high grade debt securities in
an amount at least equal to these commitments. No when-issued commitments
will be made if, as a result, more than 20% of the value of each Portfolio's
total assets would be committed to such transactions. See "Description of the
Fund's Investment Securities and Derivatives" in the Statement of Additional
Information.

Lending of Securities. Each Portfolio may lend its portfolio securities to
qualified institutions as determined by the Adviser. These transactions
involve some risk to the Portfolio if the other party should default on its
obligation and the Portfolio is delayed or prevented from recovering the
collateral or completing the transaction. By lending its portfolio
securities, each Portfolio 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 may occur during the term of the loan will be for the
account of the Portfolio in such transaction. No Portfolio will lend
portfolio securi-

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<PAGE>

ties if, as a result, the aggregate of such loans exceeds 33 1/3% of the value
of that particular Portfolio's total assets (including such loans). All
relevant facts and circumstances, including the creditworthiness of the
qualified institution, will be monitored by the Adviser, and will be
considered in making decisions with respect to lending of securities, subject
to review by the Fund's Board of Directors. Each Portfolio may pay reasonable
negotiated fees in connection with loaned securities, so long as such fees
are set forth in a written contract and their reasonableness is determined by
the Fund's Board of Directors.

Foreign Investment Information for the Retirement Income Fund. The
Retirement Income Fund may invest in direct obligations of foreign nations
and investment-grade foreign corporate debt securities which are U.S. dollar
denominated. Investments in the securities of foreign issuers will be limited
to industrialized countries with stable economies and established markets
including, but not limited to, England, Germany, France, Canada and
Australia. Investment in direct obligations of foreign nations and investment
grade foreign corporate debt securities involves somewhat different
investment risks from those affecting obligations of United States domestic
issuers. There may be limited publicly available information with respect to
these securities and they may not generally be subject to uniform accounting,
auditing and financial standards and requirements comparable to those
applicable to domestic companies. There may also be less government
supervision and regulation of foreign securities exchanges, brokers and
listed companies than in the United States. Foreign securities markets have
substantially less volume than domestic securities exchanges and securities
of some foreign companies are less liquid and more volatile than securities
of comparable domestic companies. Brokerage commissions and other transaction
costs on foreign securities exchanges are generally higher than in the United
States. Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes, which may decrease the net return on
foreign investments as compared to dividends and interest paid to the
Portfolio by domestic issuers. Additional risks include future political and
economic developments; the possibility that a foreign jurisdiction might
impose or change withholding taxes on income payable with respect to foreign
securities; the possible seizure, nationalization or expropriation of the
foreign issuer or foreign deposits; and the possible adoption of foreign
governmental restrictions such as exchange controls.

Hedging for the Equity Fund. Hedging is a means of transferring risk which
an investor does not desire to assume during an uncertain market environment.
The Equity Fund is permitted to enter into the transactions more fully
described in the Statement of Additional Information solely (a) to hedge
against changes in the market value of portfolio securities or (b) to close
out or offset existing positions. THE TRANSACTIONS MUST BE APPROPRIATE TO
REDUCTION OF RISK; THEY CANNOT BE FOR SPECULATION. In particular, the Equity
Fund may write covered call options on securities or stock indices. By
writing call options, the Equity Fund limits its profit to the amount of the
premium received. By writing a covered call option, the Equity Fund assumes
the risk that it may be required to deliver the security having a market
value higher than its market value at the time the option was written. The
Equity Fund will not write options if immediately after such sale the
aggregate value of the obligations under the outstanding options would exceed
25% of the Fund's net assets. See "Description of the Fund's Investment
Securities and Derivatives" in the Statement of Additional Information.

To the extent the Portfolio uses hedging instruments which do not involve
specific portfolio securities, offsetting price changes between the hedging
instruments and the securities being hedged will not always be possible, and
market value fluctuations of the Portfolio may not be completely eliminated.
When using hedging instruments that do not specifically correlate with
securities in a Portfolio, the Adviser will attempt to create a very closely
correlated hedge.

BROKERAGE AND EXECUTION POLICIES

The Adviser is responsible for the selection of broker-dealers and the
negotiation of brokerage commission rates. The Adviser's primary
consideration in effecting a security transaction will be execution at the
most favorable price. In selecting a broker-dealer to execute each particular
transaction, the Adviser will also consider the reliability, integrity and
financial condition of the broker-dealer, the size of and difficulty in
executing the order, the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing
basis, as well as other factors such as the broker-dealer's ability to engage
in transactions in securities of issuers which are thinly traded. The Adviser
does not intend to employ a broker-dealer whose commission rates fall outside
of the prevailing ranges of execution costs charged by other broker-dealers
offering similar services.

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LIFE CYCLE PROGRAM RISK CONSIDERATIONS

AGE-BASED ALLOCATION METHODOLOGY

The Life Cycle Program is an age-based allocation methodology. The Adviser
will utilize the Life Cycle Program for allocating Participants' assets among
the Portfolios. As a result of the strict application of the age- based
allocation, Participants are subject to risks associated with market
movements. Allocation among the Portfolios will be made on each Participant's
birthday or, if that birthday does not fall on a business day, then on the
first business day following each Participant's birthday, without regard to
market movements. Because the Life Cycle Program predetermines each
Participant's allocation among the Portfolios and a Participant's assets are
automatically allocated on each of their birthdays, each Participant will
experience a different return on his or her investment due to the different
dates on which a Participant's assets are allocated among the Portfolios.
Thus, Participants may have shares allocated to a Portfolio prior to or
subsequent to changes in the valuation of the securities held by that
Portfolio. For example, a Participant may remain invested in a Portfolio that
is in a downward cycle, may be divested from a Portfolio that is about to
enter an upward movement, or may be exchanged into a Portfolio subsequent to
an upward market movement or prior to a downward cycle. The Adviser believes
that there are long-term benefits for Participants which outweigh the risks
related to market fluctuations.

HURDLE RATE

Participants whose assets are allocated pursuant to the Hurdle Rate are
subject to certain risks. As a result of the strict application of the Hurdle
Rate, Participants are subject to risks associated with market movements.
Because the Hurdle Rate predetermines rates of return upon which a
Participant's incremental asset allocation among the Portfolios will be
changed, each Participant will experience a different rate of return on his
or her investment due to the date on which the rate of return is calculated
and compared to the Hurdle Rate. Participants are also subject to the risk of
(i) being divested from a Portfolio prior to an upward market movement or
(ii) exchanging into a Portfolio subsequent to an upward market movement or
prior to a downward market movement.

PURCHASE OF SHARES

The purchase of shares in the Portfolios under the age-based allocation
methodology offered by the Life Cycle Program must be made through the
purchase of shares in the Harvest Fund. While invested in the Harvest Fund,
Participants' shares are credited with income. Due to weekends, holidays, or
order entry problems and delays, Participants may experience a delay of up to
four business days in getting their investment allocated from the Harvest
Fund into the other Portfolios. This potential delay subjects Participants to
risks associated with market movements. As a result of potential delay,
Participants may be exchanged into a Portfolio subsequent to an upward
movement or prior to a downward cycle.

EXCHANGE OF SHARES

An exchange of shares between any Portfolios resulting from any change in
an investment or any reallocation pursuant to the Life Cycle Program or the
Hurdle Rate will be treated, for federal income tax purposes, as a redemption
of shares in one Portfolio and the purchase of shares in another Portfolio.
For investors not holding their shares in a tax deferred retirement account
the redemption of shares may result in the investor recognizing taxable
income or a tax loss, even though the investor does not derive any cash
proceeds from the transaction. If the shares that are redeemed have been held
by the investor for more or less than one year, the investor will generally
realize a long-term or short-term capital gain or loss upon a redemption, as
the case may be. The investor will take a tax basis in the shares that are
acquired equal to the investor's cost of those shares, which will generally
equal the amount realized by the investor upon the redemption. Investors
should consult their tax advisors about the federal, state and local tax
consequences of an exchange of shares.

16
<PAGE>

INVESTMENT RESTRICTIONS

As a diversified investment company, 75% of the assets of each of the
Portfolios is subject to the following limitations: (a) each Portfolio may
not invest more than 5% of its total assets in the securities of any one
issuer, except obligations of the United States Government and its agencies
and instrumentalities, and (b) each Portfolio may not own more than 10% of
the outstanding voting securities of any one issuer. The classification of
the Fund as a diversified investment company is a fundamental policy of the
Fund and may be changed only with the approval of the holders of a majority
of the Fund's outstanding shares. As used in this Prospectus, the term
"majority of the outstanding shares" of a Portfolio means, respectively, the
vote of the lesser of (i) 67% or more of the shares of the Portfolio present
at the meeting, if more than 50% of the outstanding shares of the Portfolio
are present or represented by proxy, or (ii) more than 50% of the outstanding
shares of the Portfolio.

Each Portfolio also operates under certain investment restrictions which
are deemed fundamental policies of the Portfolio and also may be changed only
with the approval of the holders of a majority of a Portfolio's outstanding
shares. In addition to other restrictions listed in the Statement of
Additional Information, none of the Portfolios may (except where specified):

(i) invest more than 15% of the market value of the Fund's net assets
in illiquid investments including foreign securities and bank
participation interests for which a readily available market does
not exist;
(ii) purchase securities on margin or borrow money, except (a) from
banks for extraordinary or emergency purposes (not for leveraging
or investment) or (b) by engaging in reverse repurchase
agreements, provided that (a) and (b) in the aggregate do not
exceed an amount equal to one-third of the value of the total
assets of that Portfolio less its liabilities (not including the
amount borrowed) at the time of the borrowing, and further
provided that 300% asset coverage is maintained at all times;
(iii) purchase securities while borrowings exceed 5% of its total
assets;
(iv) mortgage, pledge or hypothecate any assets except that a Portfolio
may pledge not more than one-third of its total assets to secure
borrowings made in accordance with paragraph (ii) above. However,
although not a fundamental policy of the Fund, as a matter of
operating policy in order to comply with certain state statutes,
no Portfolio will pledge its assets in excess of an amount equal
to 10% of net assets; or
(v) lend portfolio securities of value exceeding in the aggregate
one-third of the market value of the Portfolio's total assets less
liabilities other than obligations created by these transactions.

For a more detailed discussion of investment restrictions, see
"Description of the Fund's Investment Securities and Derivatives" in the
Statement of Additional Information.

MANAGEMENT

Adviser. Benson White & Company, a registered investment adviser, is a
Delaware corporation founded by Clay B. Mansfield and Timothy W. Cunningham,
with offices located at 656 East Swedesford Road, Suite 322, Wayne,
Pennsylvania 19087. Benson White & Company has been retained by the Board of
Directors as the investment adviser for each Portfolio pursuant to an
Investment Advisory Agreement entered into by the Fund on behalf of each
Portfolio. The Adviser supervises all aspects of the Fund's operations and
provides investment advice and portfolio management services to the Fund.
Subject to the supervision of the Fund's Board of Directors, the Adviser
makes each Portfolio's day-to-day investment decisions, arranges for the
execution of portfolio transactions and generally manages the portfolio
investments. The Adviser is also responsible for the management and
implementation of the Life Cycle Program.

The Adviser also provides supervisory personnel who are responsible for
supervising the performance of administrative services, accounting and
related services, net asset value and yield calculations, reports to and
filings with regulatory authorities and services relating to such functions.
However, the Administrator provides personnel to perform the operational
components of such services.

17
<PAGE>

Messrs. Mansfield and Cunningham are principally engaged in the management
of the affairs of Benson White & Company and serve as portfolio managers and
Directors of the Fund. Mr. Mansfield is a former Executive Secretary of the
Pennsylvania School District Liquid Asset Fund which represented
approximately $2 billion of short-term assets invested on behalf of the
Pennsylvania School districts, and former Chief Investment Officer of the
Pennsylvania Public School Employees' Retirement System where he was
responsible for the direct management of over $1 billion in assets and
supervised numerous asset managers of over $16 billion in equities, fixed
income, real estate and venture capital. He is the Chairman of the Board,
Treasurer and a Director of the Fund. He is also the Chairman of the Board
and the Chief Investment Officer of the Adviser. Mr. Cunningham previously
co-founded a group of private investment partnerships with an aggregate of
$25 million under management. He also founded and was President of a
specialty pension fund consulting company, Springhouse Associates, Inc., that
provided advisory services in connection with approximately $650 million of
pension fund assets. He is the President and Chief Executive Officer of the
Fund and serves as a Director to the Adviser.

Messrs. Mansfield and Cunningham are co-authors of the book Pension Funds:
A Commonsense Guide to a Common Goal, and the book Pay Yourself First: A
Commonsense Guide to Life Cycle Retirement Investing. Mr. Mansfield is a
graduate of Bucknell University. Mr. Cunningham earned a Master of
International Management Degree from the American Graduate School of
International Management in Glendale, Arizona and a Bachelor of Arts Degree
from Williams College in Williamstown, Massachusetts.

The Adviser provides persons satisfactory to the Fund's Board of Directors
to serve as officers of the Fund. Such officers, as well as certain other
employees and Directors of the Fund, may be directors, officers or employees
of the Adviser or its affiliates. Due to the services performed on its behalf
by the Adviser and the Administrator, the Fund currently has no employees and
its officers are not required to devote their full time to the affairs of the
Fund. The Statement of Additional Information contains general background
information regarding each Director and principal officers of the Fund. The
Fund's Annual Report will contain information regarding the performance of
each Portfolio and, when available, will be provided without charge, upon
request.

Adviser's Fees. Pursuant to the terms of an Investment Advisory Agreement,
each Portfolio will pay monthly advisory fees equal to 0.75% of such
Portfolio's average daily net asset per annum. This fee is higher than the
fee paid by most other mutual funds because of the provision of the other
services offered through the Life Cycle Program. Such other services include
individualized age-based annual asset allocation, the application of hurdle
rate risk management, and preparation and annual dissemination of an
individualized Life Cycle Program participant account statement. Because the
advisory fees paid by the Portfolios compensate the Adviser both for the
provision of portfolio investment advisory services as well as the provision
of such asset allocation services to the Life Cycle Program, investors in the
Portfolios not participating in the Life Cycle Program will be paying fees
higher than those charged by comparable funds that do not offer these
benefits and whose investment advisory fees relate solely to the provision of
portfolio investment management services. Any portion of the advisory fees
received by the Adviser may be used by the Adviser to provide investor and
administrative services and for distribution of Fund shares. The Adviser
reserves the right to assess an administrative account charge in connection
with the Life Cycle Program participants. The Adviser may voluntarily waive a
portion of its fee or assume certain expenses of any Portfolio of the Fund.
This would have the effect of lowering the overall expense ratio of the
Portfolio and of increasing yield to investors in that Portfolio. See
"Expense Limitation" in the Statement of Additional Information.

Administrator. The Administrator for the Fund is BISYS Fund Services (the
"Administrator"), a subsidiary of BISYS Group, Inc. ("BISYS"). BISYS,
headquartered in Little Falls, New Jersey, supports more than 5,000 financial
institutions and corporate clients through two strategic business units.
BISYS Information Services Group provides image and data processing
outsourcing, and pricing analysis to more than 600 banks nationwide. BISYS
Investment Services Group designs, administers and distributes over 30
families of proprietary mutual funds consisting of more than 365 portfolios,
and provides 401(k) marketing support, administration, and recordkeeping
services in partnership with banking institutions and investment management
companies. BISYS and its affiliates BISYS Fund Services and BISYS Fund
Services, Inc. have their principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219.

18
<PAGE>

vided by the Adviser, subject to the supervision of the Fund's Board of
Directors. BISYS Fund Services, Inc. provides the Fund with accounting
services pursuant to a Fund Accounting Agreement dated October 1, 1996. The
Adviser and the Administrator will provide persons to serve as officers of
the Fund. Such officers may be directors, officers or employees of the
Adviser or the Administrator or their affiliates.

The Investment Advisory Agreement is terminable by the Board of Directors
of the Fund or the Adviser, respectively, on sixty days' written notice and
terminates automatically in the event of an "assignment" as defined by the
1940 Act. The Investment Advisory Agreement shall remain in effect for two
years from the date of its initial approval and is subject to annual approval
of the Fund's Board of Directors for one-year periods thereafter. The
Administration Agreement is terminable by the Board of Directors of the Fund
or the Administrator, respectively, on written notice of nonrenewal given at
least 90 days prior to the end of the then-current term. The Administration
Agreement shall remain in effect for one year from the date of the conversion
of services to BISYS data processing system, and subject to annual approval
of the Fund's Board of Directors for one-year periods thereafter. Each
Agreement provides that in the absence of willful misfeasance, bad faith or
gross negligence on the part of the Adviser or the Administrator,
respectively, or reckless disregard of its obligations thereunder, the
Adviser or the Administrator shall not be liable for any action or failure to
act in accordance with its duties thereunder.

Administrator's Fees. For the services rendered to the Fund by the
Administrator, the Fund pays the Administrator an annual fee paid monthly
equal to 0.20% of the Fund's aggregate average daily net assets up to $100
million, 0.15% of the Fund's aggregate average daily net assets between $100
and $500 million, and 0.10% of the Fund's aggregate average daily net assets
over $500 million. BISYS Fund Services, Inc. also provides the Fund with all
accounting related services. The Fund pays BISYS Fund Services, Inc. $30,000
per Portfolio per year plus out-of-pocket expenses for such services. The
minimum fee for all services provided by BISYS Fund Services, Inc. in the
aggregate, is $250,000 per year. For additional information, see "Custodian,
Transfer Agent and Dividend Agent."

Expenses. Each Portfolio is responsible for payment of its expenses,
including the following expenses, without limitation: fees payable to the
Adviser, Administrator, Custodian, Transfer Agent and Dividend Agent;
brokerage and commission expenses; Federal, state or local taxes, including
issuance and transfer taxes incurred by or levied on them; commitment fees,
certain insurance premiums and membership fees and dues in investment company
organizations; interest charges on borrowings; telecommunications expenses;
recurring and nonrecurring legal and auditing expenses; costs of organizing
and maintaining the Fund's existence as a corporation; compensation,
including directors' fees, of any directors, officers or employees who are
not the officers of the Adviser, the Administrator or their affiliates; costs
of other personnel providing administrative and clerical services; costs of
stockholders' services and costs of stockholders' reports, proxy
solicitations, and corporate meetings; fees and expenses of registering their
shares under the appropriate federal securities laws and of qualifying their
shares under applicable state securities laws, including expenses attendant
upon the initial registration and qualification of these shares and attendant
upon renewals of, or amendments to, those registrations and qualifications;
and expenses of preparing, printing and delivering the Prospectus to existing
investors and of printing investor application forms for investor accounts.
The Distributor pays the promotional and advertising expenses related to the
distribution of the Fund's shares and for the printing of all Fund
prospectuses used in connection with the distribution and sale of Fund
shares. See "Management of Fund" in the Statement of Additional Information.
The Adviser and the Administrator have each agreed to a reduction in the
amounts payable to it and to reimburse each Portfolio, as necessary, if in
any fiscal year the sum of the Portfolio's expenses exceeds the limits set by
applicable regulations of state securities commissions.

Distributor. Life Cycle Mutual Funds Distributors, Inc. serves as
distributor (the "Distributor") of the shares of the Fund and is an affiliate
of the Administrator. The Distributor pays the promotional and advertising
expenses related to the distribution of the Fund's shares and for the
printing of all Fund prospectuses used in connection with the distribution
and sale of Fund shares. See "Management of Fund" in the Statement of
Additional Information. For information concerning changes to the
Administrator, see "Administrator" in the Prospectus and Statement of
Additional Information.

19
<PAGE>

PURCHASE OF SHARES

OPENING A NEW LIFE CYCLE MUTUAL FUNDS ACCOUNT
FOR PARTICIPANT IN THE LIFE CYCLE PROGRAM.

By Check

1. Make check payable to Life Cycle Mutual Funds, Inc. (Initial purchases are
subject to a $2,000 minimum investment to participate in the Life Cycle
Program.)

2. Deliver the check, completed application and signed Exchange Agreement to
your registered representative or selling broker, or mail it directly to
Life Cycle Mutual Funds, Inc., P.O. Box 182490, Columbus, Ohio 43218-2490.
Make sure to include your birthdate.

3. Purchases made by check are not permitted to be redeemed until payment of
the purchase has been collected, which may take up to fifteen days after
purchase.

4. No third party or foreign checks are accepted.

5. No Share Certificates will be issued.

By Wire

Please call 1-800-266-5240 for wiring instructions. A completed application
and Exchange Agreement must be delivered to the Fund in advance of the wire
at Life Cycle Mutual Funds, Inc. c/o BISYS Fund Services, Inc., 3435 Stelzer
Road, Columbus, Ohio 43219-8021. Notification must be given to the Fund at
1-800-266-5240 prior to 4:00 p.m. Eastern Standard Time of the wire date.

OPENING A NEW LIFE CYCLE MUTUAL FUNDS ACCOUNT
FOR NON-PARTICIPANT IN THE LIFE CYCLE PROGRAM.

By Check

1. Make check payable to Life Cycle Mutual Funds, Inc. (Initial purchases
are subject to a $5,000 per Portfolio minimum initial investment.)

2. Deliver the completed application form to your registered representative
or selling broker, or mail it directly to Life Cycle Mutual Fund, Inc.,
P.O. Box 18240, Columbus, Ohio 43218-2490.

3. Purchases made by check are not permitted to be redeemed until payment of
the purchase has been collected which may take up to fifteen days after
purchase.

By Wire

Please call 1-800-266-5240 for wiring instructions. A completed account
application must be delivered to the Fund in advance of the wire at Life
Cycle Mutual Funds, Inc. c/o BISYS Fund Services, Inc., 3435 Stelzer Road,
Columbus, Ohio 43219-8021. Notification must be given to the Fund at
1-800-266-5240 prior to 4:00 p.m. Eastern Standard Time of the wire date.

PURCHASE OF ADDITIONAL SHARES IN A LIFE CYCLE MUTUAL FUNDS ACCOUNT
FOR PARTICIPANT IN THE LIFE CYCLE PROGRAM.

By Check

1. If available, fill out an additional purchase form included with your
Account Statement and fill in the dollar amount of the purchase and the
account number.

2. Make check payable to Life Cycle Mutual Funds, Inc. (There is a minimum
$250 purchase for additional investments into an existing Life Cycle
account.)

3. Deliver the check to your registered representative or selling broker, or
mail it directly to Life Cycle Mutual Funds, Inc., P.O. Box 182490,
Columbus, Ohio 43218-2490.

20
<PAGE>

By Wire

Please call 1-800-266-5240 for wiring instructions. Notification must be
given to the Fund at 1-800-266-5240 prior to 4:00 p.m. Eastern Standard Time
of the wire date.

PURCHASE OF ADDITIONAL SHARES IN A LIFE CYCLE MUTUAL FUNDS ACCOUNT
FOR NON-PARTICIPANT IN THE LIFE CYCLE PROGRAM.

By Check

1. If available, fill out an additional purchase form included with your
Account Statement and fill in the dollar amount of the purchase and the
account number.

2. Make check payable to Life Cycle Mutual Funds, Inc. (There is a minimum
$1,000 purchase for additional investments into any Portfolio for
shareholders who are not participants in the Life Cycle Program.)

3. Deliver the check to your registered representative or selling broker, or
mail it directly to Life Cycle Mutual Funds, Inc., P.O. Box 182490,
Columbus, Ohio 43218-2490.

By Wire

Please call 1-800-266-5240 for wiring instructions. Notification must be
given to the Fund at 1-800-266-5240 prior to 4:00 p.m. Eastern Standard Time
of the wire date

Life Cycle Mutual Funds Distributors, Inc. serves as the exclusive
distributor of the shares of each Portfolio pursuant to its Distribution
Agreement with the Fund. Investors may open accounts in the Portfolios of the
Fund only through the exclusive Distributor for the Fund. Under the
Distribution Agreement, the Distributor, for nominal consideration and as
agent for the Fund, will solicit orders for the purchase of Fund shares,
provided that any subscriptions and orders will not be binding on the Fund
until accepted by the Fund as principal.

The Life Cycle Program requires a minimum initial investment of $2,000 per
investor participating in the Life Cycle Program, and $5,000 or more for an
investor not participating in the Life Cycle Program. Additionally, a minimum
of $250 is required for each subsequent investment for investors
participating in the Life Cycle Program, while a minimum of $1,000 is
required for each subsequent investment for investors not participating in
the Life Cycle Program. Investors not participating in the Life Cycle Program
have the flexibility to allocate their investment among the four Portfolios
at their discretion provided that they maintain at least a $5,000 balance in
any portfolio in which they are invested. Any exchanges among the Portfolios
by investors not participating in the Life Cycle Program in excess of twice
per calendar year will entail an exchange fee of $25 per exchange.

The price paid for shares of each Portfolio is the public offering price,
that is, the next determined net asset value of the shares after the order is
placed plus the applicable sales charge. The sales load is a one-time charge
paid at the time of purchase of shares, most of which ordinarily goes to the
investor's broker-dealer to compensate him for the services provided the
investor. Shares of each Portfolio are sold on a continuous basis with a
front-end sales charge of 5.25% of the net asset value per share. Volume
discounts are provided for both initial purchases of the Fund's shares, as
well as for additional purchases of the Fund's shares. See "Reduction or
Elimination of Sales Loads" herein. The Fund reserves the right to reject any
subscription for the shares of its Portfolios. In addition, the Fund does not
issue certificates. The Fund does not accept third party or foreign checks.

An investor who wishes to purchase shares of the Fund pursuant to the Life
Cycle Program must provide their birthdate on the application. In addition,
investors participating in the asset allocation program must complete and
execute the Exchange Agreement. If an investor does not provide their
birthdate on the application or fails to provide an executed draft of the
Exchange Agreement with the application, the purchase will not be accepted
and the investment will be delayed. This delay may affect the price paid for
shares dependent upon market movements.

PURCHASE OF SHARES IN THE PORTFOLIOS UNDER THE AGE-BASED ALLOCATION
METHODOLOGY OFFERED BY THE LIFE CYCLE PROGRAM WILL BE MADE THROUGH AN

21
<PAGE>

INITIAL PURCHASE OF SHARES IN THE HARVEST FUND. These monies are invested,
for a period not to exceed four business days, in the Harvest Fund. While
invested in the Harvest Fund, investors' shares are credited with income. The
Harvest Fund shares are then exchanged for the age-based allocated number of
shares in two of the other three Portfolios. Due to weekends, holidays, or
order entry problems and delays, investors may experience a delay of up to
four business days in getting their investment allocated into the Life Cycle
Program. This potential delay may have its own risks, depending on market
movements.

The Fund must receive an order and payment by the close of business for
the purchase to be effective and dividends to be earned on the same day. If
funds are received after the close of business, the purchase will become
effective and dividends will be earned on the next business day. Purchases
made by check will be invested and begin earning income on the next business
day after the check is received.

As long as you have read the Prospectus, you may establish a new regular
account through the Wire Desk; IRAs may not be opened in this way. When new
accounts are established by wire, the distribution options will be set to
reinvest and the social security or tax identification number ("TIN") will
not be certified until a signed application is received. Completed
applications should be forwarded immediately to the Fund. With the
application, the shareholder can specify other distribution options and add
any special features offered by the Fund. Should any dividend distributions
or redemptions be paid before the TIN is certified, they will be subject to
31% Federal tax withholding.

Institutional Accounts. Bank trust departments and other institutional
accounts, not subject to sales charges, may place orders directly with Life
Cycle Mutual Funds Distributors, Inc. by telephone at 1-800-266-5240.

Automatic Investment Plan. The Life Cycle Program offers an Automatic
Investment Plan which automatically debits money from the shareholder's
checking, NOW or bank money market account designated by the shareholder in
specified amounts of $50 or more per transaction, and Fund shares will be
purchased, once a month, on either the fifth or twentieth day, or twice a
month, on both days. Only accounts maintained at a domestic financial
institution which permits automatic withdrawals and is an Automated Clearing
House member are eligible.

Shareholders electing to start this Automatic Investment Plan when opening
an account should complete the Account Option Form which accompanies the
Account Application. Current shareholders may begin such a plan at any time
by sending a signed letter with a signature guarantee and a deposit slip or
voided check.

Shares are sold at the public offering price which is the net asset value
of the share next determined plus the applicable sales charge after the Life
Cycle Program receives your order in proper form. In most cases, in order to
receive that day's public offering price, the Life Cycle Program must receive
your order before the close of business. Orders for shares will be accepted
by the Fund after funds are converted to federal funds provided that all
requisite forms (i.e. Account Application and Account Option Form) are
completed.

If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase you should pay for those with
a certified check to avoid any delay in redemption, exchange or transfer.
Otherwise, the Fund may delay payment until the purchase price of those
shares has been collected or, if you redeem by telephone, until 15 calendar
days after the purchase date.

REDUCTION OR ELIMINATION OF SALES LOADS

Volume Discounts. Volume discounts are provided if the total amount being
invested in shares of the Portfolio reaches the levels indicated in the sales
load schedule provided below. The applicable volume discount available to
investors is determined by aggregating all share purchases of any of the
Portfolios of the Fund. Volume discounts are also available to investors
making sufficient additional purchases of Portfolio shares. The applicable
sales charge may be determined by adding to the total current value of shares
already owned in the Portfolio the value of new purchases computed at the
offering price on the day the additional purchase is made. For example, if an
investor previously purchased, and still holds, shares of the Portfolio worth
$95,000 at the current offering price and purchases an additional $5,000
worth of shares of the Portfolio, the sales charge appli-

22
<PAGE>

cable to the new purchase would be that applicable to the $100,000 to
$249,999 bracket in the sales load schedule provided below.

Amount of Sales Sales Charge as a % of Dealer Discount as a %
Purchase Charge Net Amount Invested of Offering Price
---------------------- -------- -------------------- --------------------
<S> <C> <C> <C>
$2,000 to $49,999 5.25% 5.54% 4.50%
$50,000 to $99,999 4.75% 4.99% 4.00%
$100,000 to $249,999 3.75% 3.89% 3.25%
$250,000 to $499,999 2.75% 2.83% 2.25%
$500,000 to $999,999 2.50% 2.56% 2.00%
$1 million and over 0.75% 0.76% 0.50%

</TABLE>

Letter Of Intent. Any investor may sign a Letter of Intent, available from
the Fund, stating an intention to make purchases of shares totaling a
specified amount of all the Portfolios of the Fund on an aggregate basis
within a period of thirteen months. Purchases within the thirteen-month
period can be made at the reduced sales load applicable to the total amount
of the intended purchase noted in the Letter of Intent. If a larger purchase
is actually made during the period, then a downward adjustment will be made
to the sales charge based on the actual purchase size. Any shares purchased
within 90 days preceding the actual signing of the Letter of Intent are
eligible for the reduced sales charge and the appropriate price adjustment
will be made on those share purchases. A number of shares equal to 4.50% of
the dollar amount of intended purchases specified in the Letter of Intent is
held in escrow by the Distributor until the purchases are completed.
Dividends and distributions on the escrowed shares are paid to the investor.
If the intended purchases are not completed during the Letter of Intent
period, the investor is required to pay the Fund an amount equal to the
difference between the regular sales load applicable to a single purchase of
the number of shares actually purchased and the sales load actually paid. If
such payment is not made within 20 days after written request by the Fund,
then the Fund has the right to redeem a sufficient number of escrowed shares
to effect payment of the amount due. Any remaining escrowed shares are
released to the investor's account. Agreeing to a Letter of Intent does not
obligate you to buy, or the Fund to sell, the indicated amount of shares. You
should read the Letter of Intent carefully before signing.

Purchases At Net Asset Value. There is no initial sales charge for
"Qualified Persons". Qualified Persons is defined to include persons who are
active or retired Trustees, Directors, officers, partners, employees,
shareholders or registered representatives (including their spouses and
children) of the Investment Adviser, Distributor or any affiliates or
subsidiaries thereof (the Directors, officers or employees of which shall
also include their parents and siblings for all purchases of Fund shares) or
any Director, officer, partner, employee or registered representative
(including their spouses and children) of any Broker-Dealer who has executed
a valid and currently active selling agreement with the Distributor. Further,
there will be no initial sales charge for shares purchased on behalf of
clients of financial intermediaries holding such shares in fee-based asset
management accounts.

Participants in corporate retirement plans established pursuant to Section
401(k) or Section 457 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any other qualified deferred compensation or retirement plan
(other than those plans established pursuant to Section 403(b), which have
more than 100 participants and which have aggregate assets in excess of $1
million, will not be subject to a sales charge.

Participants in corporate retirement plans established pursuant to Section
401(k) or Section 457 of the Code or any other qualified deferred
compensation or retirement plan, other than a plan for a self-employed
person, are not subject to any minimum initial investment or subsequent
investment for the Fund, whether or not they are participating in the Life
Cycle Program.

REDEMPTION OF SHARES

Participants in the Life Cycle Program should understand that partial
redemptions made from their share holdings in any Portfolio will result in a
re-allocation of the remaining shares held in all Portfolios into the age-
based allocations established for their age. This re-allocation will usually
take place within four days of any such partial redemption.

23
<PAGE>

REDEMPTION OF SHARES HELD IN A TAX-DEFERRED RETIREMENT ACCOUNT

By Mail

Redemption requests should be sent to Life Cycle Mutual Funds, Inc., P.O. Box
182490, Columbus, Ohio 43218-2490.

Please be aware that if share redemptions from the Portfolios represent
withdrawals from a qualified tax-deferred retirement account, then such
redemptions may result in penalties and withholdings if not carried out in
accordance with applicable law. Consult your tax adviser for additional
information concerning these redemptions.

REDEMPTION OF SHARES NOT HELD IN A TAX-DEFERRED RETIREMENT ACCOUNT

By Mail

Redemption requests should be sent to Life Cycle Mutual Funds, Inc., P.O. Box
182490, Columbus, Ohio 43218-2490.

The request for redemption of your shares made by sending a letter to the
Life Cycle Mutual Funds, Inc. must include the following information: your
account number, your Social Security number, the amount you wish to redeem,
and the signature of all registered owners. To protect shareholder accounts,
the Fund and its transfer agent from fraud, signature guarantees are required
for redemptions of $25,000 or more, to enable the Fund's Distributor to
verify the identity of the person who has authorized a redemption from an
account. Signature guarantees may be obtained from certain eligible financial
institutions, including but not limited to, the following: banks, trust
companies, credit unions, securities brokers and dealers, savings and loan
associations and participants in the Securities Transfer Association
Medallion Program ("STAMP"), the Stock Exchange Medallion Program ("SEMP") or
the New York Stock Exchange Medallion Signature Program ("MSP").

By Telephone

You may redeem your shares by telephone by calling the Fund toll free at
(800) 266-5240. You should be prepared to give the telephone representative
the following information:

1. Your account number.

2. Your Social Security number.

3. The amount you wish to redeem.

Investors participating in the Life Cycle Program may redeem shares, in
whole or in part, at any time, without cost, subject to the minimum balance
requirement of $2,000. Investors who are not participating in the Life Cycle
Program must maintain a share balance equal to at least $5,000 in any
Portfolio in which they wish to continue to invest. The Fund executes
redemption requests at the next determined net asset value per share after
the order is placed. See "Net Asset Value." The Fund reserves the right to
satisfy redemption requests in cash or in securities of the Portfolio whose
shares are being redeemed. During a period of dramatic economic or market
change, increased volume may make the telephone redemption option difficult
to implement. Investors unable to reach the Fund by telephone may wish to
seek alternate means of communication, such as courier. The Fund will employ
procedures to confirm that telephone or telecopy redemption instructions are
genuine, and will require that investors electing such option provide a form
of personal identification. The failure of the Fund to employ such procedures
may cause the Fund to be liable for losses incurred by investors due to
telephone or telecopy redemptions based upon unauthorized or fraudulent
instructions.

Automatic Redemption Plan. The Automatic Redemption Plan provides
shareholders with a consistent monthly payment through redemption of a set
dollar amount on a monthly, quarterly, semi-annual, or annual basis. A
shareholder owning shares in the Portfolios whose value is $10,000 or more
may elect to have withdrawals of $100 or more made automatically each month.
A sufficient number of full and fractional shares will be redeemed so that
the designated automatic redemption is effected.

The Fund does not recommend a specific monthly amount, as each
shareholder's situation and needs vary. For Participants, the amount selected
will be withdrawn first from the shares in the Harvest Fund, if any, and then
pro-rata from the remaining two Portfolios based upon the age-based asset
allocation then applicable to the

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<PAGE>

shareholder. The Automatic Redemption Plan is only available to those
shareholders who request it in writing. Automatic Redemption Plan request
forms are available from the Distributor, or through an authorized registered
representative. All Automatic Redemptions will be made in the form of a check
sent by mail to the investor.

The Automatic Redemption Plan should be used in conjunction with the
distribution options, which are described in "Choosing a Distribution Option"
herein. Typically, a retired shareholder will select the Automatic
Reinvestment Option and then use the Automatic Withdrawal Plan to set a level
amount to be sent each month. The shareholder should realize that this method
may deplete the account over time, especially if net investment income is
insufficient to meet the planned withdrawal. Therefore, the shareholder
should give careful consideration to all aspects of his or her situation
before using this method of withdrawal.

Optional Redemption by the Fund. Investors participating in the Life Cycle
Program shall maintain a balance of at least $2,000 in the Fund. Investors
not participating in the Life Cycle Program shall maintain a balance of at
least $5,000 for each Portfolio in which they are invested. The Fund reserves
the right to redeem, after 60 days' written notice, shares in accounts that
fall below the minimum balance by reason of redemption and return the
proceeds to investors. The investors may restore and maintain a minimum
balance during the notice period.

Further Redemption Information. Investors should be aware that redemptions
from the Fund may not be processed if a completed account application with a
certified Taxpayer Identification Number has not been received. See "Taxes."
In addition, if a customer sends a check for the purchase of Fund shares, and
those shares are redeemed before the check has cleared, the transmittal of
redemption proceeds may be delayed until 15 days after the check used to
purchase the shares has been deposited by the Fund.

Redemption of shares by telephone will be suspended for a period of 10
days following a telephone change of address. In addition, Signature
Guarantee is required when changing or adding payment instructions after an
account has been established.

Each of the Portfolios of the Fund reserves the right to suspend the right
of redemption and to postpone the date of payment upon redemption for up to
seven days and for such other periods as the Investment Company Act of 1940
may permit.

EXCHANGE OF SHARES

An investor who is not participating in the Life Cycle Program may,
without cost, exchange shares on any two occasions during any single calendar
year, from any of the Portfolios of the Fund into any other Portfolio of the
Fund, subject to the $5,000 minimum investment requirement per Portfolio.
Exchanges among the Portfolios in excess of twice per calendar year will
incur a fee of $25 per exchange. See "Purchase of Shares." Shares are
exchanged on the basis of relative net asset value per share. Exchanges are
in effect redemptions from one Portfolio and purchases of another Portfolio;
and the Portfolio's purchase and redemption procedures and requirements are
applicable to exchanges. An exchange pursuant to this exchange privilege is
treated for federal income tax purposes as a sale on which a investor may
realize a taxable gain or loss. Investors should contact their tax advisers
if they have questions. See "Purchase of Shares" and "Redemption of Shares."
Future exchanges of shares by telephone will be suspended for a period of 10
days following a telephone change of address.

DIVIDENDS AND DISTRIBUTIONS

At least 90% of each Portfolio's net investment income, except for the
Equity Fund, will be declared as dividends and paid monthly. At least 90% of
the net investment income of the Equity Fund will be declared as dividends
and paid quarterly. If an investor's shares are redeemed prior to the date on
which dividends are normally declared and paid, accrued but unpaid dividends
will be paid with the redemption proceeds. Substantially all the realized net
capital gains for the Portfolios, if any, are declared and paid on an annual
basis. Dividends are payable to investors of record at the time of
declaration.

Dividends of each Portfolio are automatically reinvested in additional
Portfolio shares in accordance with the asset allocation program unless the
investor has elected to have them paid in cash.

25
<PAGE>

The net investment income of each Portfolio for each business day is
determined immediately prior to the determination of net asset value. Net
investment income for other days is determined at the time net asset value is
determined on the prior business day. Shares of each Portfolio earn dividends
on the business day their purchase is effective but not on the business day
their redemption is effective. See "Purchase of Shares" and "Redemption of
Shares."

Choosing A Distribution Option. Distribution of dividends from the
Portfolios may be made in accordance with several options. Cash distribution
of dividends paid on shares held in a qualified tax-deferred retirement plan
may be subject to tax penalties and withholdings, depending on the
circumstances of the individual shareholder. Shareholders should consult
their tax advisors for additional information concerning the tax consequences
of cash distribution from their retirement accounts.

A shareholder may select one of three distribution options:

1. Automatic Reinvestment Option. Both dividends and capital gains
distributions will be automatically reinvested in additional Portfolio
shares unless the investor has elected one of the other two options.

2. Cash Dividend Option. Dividends will be paid in cash, and capital gains,
if any, will be reinvested in additional shares.

3. All Cash Option. Both dividend and capital gains distributions will be
paid in cash.

A Signature Guarantee is required when changing dividend options from
reinvestment to cash. If you elect to receive distributions in cash and
checks (1) are returned and marked as "undeliverable" or (2) remain uncashed
for six months, your cash election will be changed automatically and your
future dividend and capital gains distributions will be reinvested in the
Fund at the per share net asset value determined as of the date of payment of
the distribution. In addition, any undeliverable checks or checks that remain
uncashed for six months will be canceled and will be reinvested in the Fund
at the per share net asset value determined as of the date of cancellation.

NET ASSET VALUE

Net asset value per share for each Portfolio is determined by subtracting
from the value of each Portfolio's total assets the amount of its liabilities
and dividing the remainder by the number of its outstanding shares. The value
of each security for which readily available market quotations exist is based
on a decision as to the broadest and most representative market for the
security; the value is based either on the last sale price on a national
securities exchange, or, in the absence of recorded sales, at the readily
available closing bid price on such exchanges, or at the quoted bid price in
the over-the-counter market. Assets for which market quotations are not
readily available are valued in accordance with procedures established by the
Fund's Board of Directors, including use of an independent pricing service or
services which use prices based on yields or prices of comparable securities,
indications as to values from dealers and general market conditions.

Each Portfolio computes its net asset value once daily on Monday through
Friday, at 4:00 p.m. Eastern Standard Time, except on the holidays listed
under "Net Asset Value" in the Statement of Additional Information.

DISTRIBUTION AND SERVICE PLAN

26
<PAGE>

assistance and to be used to provide distribution assistance and promotional
support to the Fund. For its service under the Shareholder Servicing
Agreement, the Adviser will receive a service fee from each Portfolio equal
to .25% per annum of each Portfolio's average daily net assets to compensate
it for providing shareholder services to Fund shareholders and compensate
parties with which it has written agreements and whose clients are Fund
shareholder for providing servicing to their clients ("Shareholder
Servicing").

Each Shareholder Servicing Agent and Broker-Dealer will, as agent for its
customers, among other things; answer customer inquiries regarding account
status and history, the manner in which purchases and redemptions of shares
of each Portfolio may be effected and certain other matters pertaining to the
Fund; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and
facilities to establish and maintain shareholder accounts and records; assist
in processing purchase and redemption transactions; arrange for the wiring of
funds; transmit and receive funds in connection with customer orders to
purchase or redeem shares; verify and guarantee shareholder signatures in
connection with redemption orders and transfers and changes in shareholder
designated accounts; furnish (either separately or on an integrated basis
with other reports sent to a shareholder by the Portfolios) monthly and
year-end statements and confirmations of purchases and redemptions, as
required by Rule 10b-10 under the Securities Exchange Act of 1934; transmit,
on behalf of each Portfolio, proxy statements, annual reports, updating
prospectuses and other communications from each Portfolio to shareholders;
receive, tabulate and transmit to the each Portfolio, proxies executed by
shareholders with respect to meeting of shareholders of the Fund; and provide
such other related services as the Fund or a shareholder may request.

The Plan, the Shareholder Servicing Agreements and the Distribution
Agreement each provide that the Adviser and the Distributor may make payments
from time to time from their own resources which may include the advisory fee
and the asset based sales changes and past profits for the following
purposes: (i) to defray the costs of and to compensate others, including
financial intermediaries with whom the Distributor or Adviser has entered
into written agreements, for performing shareholder servicing and related
administrative functions on behalf of each Portfolio; (ii) to compensate
certain financial intermediaries for providing assistance in distributing
each Portfolio's shares; (iii) to pay the costs of printing and distributing
the Portfolio's prospectus to prospective investors; and (iv) to defray the
cost of the preparation and printing of brochures and other promotional
materials, mailings to prospective shareholders, advertising, and other
promotional activities, including the salaries and/or commissions of sales
personnel in connection with the distribution of the Portfolio's shares.
Further, it provides that the Adviser may use its service fee for the
purposes enumerated in (i) above. The Distributor or the Adviser, as the case
may be, in their sole discretion, will determine the amount of such payments
made pursuant to the Plan with the Shareholder Servicing Agents and
Broker-Dealers they have contracted with, provided that such payments made
pursuant to the Plan will not increase the amount which a Portfolio is
required to pay to the Distributor or the Adviser for any fiscal year under
the Shareholder Servicing Agreements or otherwise.

Shareholder Servicing Agents and Broker-Dealers may charge investors a fee
in connection with their use of specialized purchase and redemption
procedures offered to investors by the Shareholder Servicing Agents and
Broker-Dealers. In addition, Shareholder Servicing Agents and Broker-Dealers
offering purchase and redemption procedures similar to those offered to
shareholders who invest in a Portfolio directly may impose charges,
limitations, minimums and restrictions in addition to or different from those
applicable to shareholders who invest in a Portfolio directly. Accordingly,
the net yield to investors who invest through Shareholder Servicing Agents
and Broker-Dealers may be less than by investing in the Portfolio directly.
An investor should read the Prospectus in conjunction with the materials
provided by the Shareholder Servicing Agent and Broker-Dealer describing the
procedures under which Portfolio shares may be purchased and redeemed through
the Shareholder Servicing Agent and Broker-Dealer.

The Glass-Steagall Act limits the ability of a depository institution to
become an underwriter or distributor of securities. However, it is the Fund's
position that banks are not prohibited from acting in other capacities for
investment companies, such as providing administrative and shareholder
account maintenance services and receiving compensation from the Distributor
for providing such services. However, this is an unsettled area of the law
and if a determination contrary to the Fund's position is made by a bank
regulatory agency or court concerning shareholder servicing and
administration payments to banks from the Distributor, any such payments will
be terminated and any shares registered in the banks' names, for their
underlying customers, will be re-registered

27
<PAGE>

in the name of the customers at no cost to each Portfolio or its
shareholders. In addition, state securities laws on this issue may differ
from the interpretation of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to
state law.

In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into by the Fund, on behalf of a Portfolio, the
Distributor or the Adviser, and the Shareholder Servicing Agents,
Broker-Dealers, or other organizations must be in a form satisfactory to the
Fund's Board of Directors. In addition, the Plan requires the Fund and the
Distributor to prepare, at least quarterly, written reports setting forth all
amounts expended for distribution purposes by the Fund and the Distributor
pursuant to the Plan and identifying the distribution activities for which
those expenditures were made.

YIELD AND TOTAL RETURN INFORMATION

Each Portfolio may, from time to time, include yield, effective yield and
total return information in advertisements or reports to investors or
prospective investors. The "yield" refers to income generated by an
investment in a Portfolio over a thirty-day period. This income is then
"annualized." That is, the amount of income generated by the investment
during that month is assumed to be generated each month over a 12-month
period and is shown as a percentage of the investment. The "effective yield"
is calculated similarly but, when annualized, the income earned by an
investment in the Portfolio is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment. The "total return" of a Portfolio is
required to be included in any advertisement containing the yield of the
Portfolio. Total return is the average annual total return for the period
which began at the inception of the Portfolio and ended on the date of the
most recent balance sheet, and is computed by finding the average annual
compound rates of return over the period that would equate the initial amount
invested to the ending redeemable value. For a description of the methods
used to calculate total return, see the Statement of Additional Information.
Yield, effective yield and total return may fluctuate daily and do not
provide a basis for determining future yields, effective yields or total
returns.

DESCRIPTION OF COMMON STOCK

The Fund was incorporated in Maryland on June 23, 1995. The authorized
capital stock of the Fund consists of 20 billion shares of stock having a par
value of one-tenth of one cent ($.001) per share. The Fund's Board of
Directors is authorized to divide the unissued shares into separate series of
stock, each series representing a separate, additional investment portfolio.
The Board currently has authorized the division of the unissued shares into
four series, one for each of the Portfolios. Shares of all series will have
identical voting rights, except where, by law, certain matters must be
approved by a majority of the shares of the affected series. Each share of
any series of shares when issued has equal dividend, distribution,
liquidation and voting rights within the series for which it was issued, and
each fractional share has those rights in proportion to the percentage that
the fractional share represents of a whole share. Shares will be voted in the
aggregate. There are no conversion or preemptive rights in connection with
any shares of the Fund. All shares, when issued in accordance with the terms
of the offering, will be fully paid and non-assessable. Shares are redeemable
at net asset value, at the option of the investor.

The shares of the Fund have non-cumulative voting rights, which means that
the holders of more than 50% of the shares outstanding voting for the
election of directors can elect 100% of the directors if the holders choose
to do so, and, in that event, the holders of the remaining shares will not be
able to elect any person or persons to the Board of Directors. Unless
specifically requested by an investor who is an investor of record, the Fund
does not issue certificates evidencing Fund shares.

TAXES

Each Portfolio has qualified and intends to continue to qualify under the
Internal Revenue Code of 1986, as amended (the "Code"), as a regulated
investment company. As a regulated investment company, each Portfolio is not
subject to federal income taxes on the investment company taxable income and
long-term capital gains that it distributes to its investors, provided that
at least 90% of its investment company taxable income and at least 90% of its
tax-exempt net interest income for the taxable year is distributed. Each
Portfolio's policy is

28
<PAGE>

to distribute as dividends each year 100% (and in no event less than 90%) of
its investment company taxable income and tax-exempt net interest income.
Each Portfolio will be treated as a separate corporation and generally will
have to comply with the qualification and other requirements applicable to
regulated investment companies without regard to other Portfolios. If for any
taxable year a Portfolio does not qualify as a regulated investment company,
all of its taxable income will be taxed to it at corporate rates and no
distribution will be deductible.

The Fund has adopted a policy of declaring dividends monthly, except for
the Equity Fund, which declares dividends quarterly, in an amount based on
its net investment income. The amount of each dividend may differ from actual
net investment income calculated in accordance with federal income tax
principles. Dividend distributions generally will be made on the twentieth
day of each month. Dividends paid from taxable income and distributions of
any realized short-term capital gains are taxable to investors as ordinary
income for federal income tax purposes, whether received in cash or
reinvested in additional shares of the Fund. Distributions of net realized
capital gains after utilization of capital loss carryforwards, if any, are
made annually to meet applicable distribution and excise tax requirements.
Investors in each Portfolio will automatically have them reinvested in
additional shares of the Portfolio or can elect to receive such distribution
in cash. An exchange of shares between Portfolios will be treated, for
federal income tax purposes, as a redemption of shares in one Portfolio and
the purchase of shares in another Portfolio. The redemption of shares may
result in the investor recognizing taxable income or a tax loss, even though
the investor does not derive any cash proceeds from the transaction. If the
shares that are redeemed have been held by the investor for more than one
year, the investor will generally realize a long-term capital gain or loss
upon a redemption. The investor will take a tax basis in the shares that are
acquired equal to the investor's cost of those shares, which will generally
equal the amount realized by the investor upon the redemption.

While shares of each Portfolio are sold primarily to investors through
their qualified retirement plan accounts (e.g., 401(k), Keogh and IRA
accounts), the Adviser has reserved the right to accept subscriptions for
Fund shares from individuals outside these tax-deferred accounts.

If a Portfolio acquires debt instruments that were originally issued at a
discount, e.g., zero coupon bonds, it will be required to include annually in
gross income a portion of the "original issue discount" that accrues over the
term of the obligation regardless of whether the income is received by the
Portfolio, and to make distributions accordingly. To insure that each
Portfolio has sufficient cash to meet this distribution requirement, the
Portfolio may borrow funds on a short-term basis or sell certain investments.
Since a substantial percentage of each Portfolio's dividends are expected to
be reinvested and dividends that are declared and automatically reinvested
satisfy the distribution requirement, each Portfolio expects to satisfy the
distribution requirement even if it owns obligations with original issue
discount. Investors will realize taxable income on the automatic reinvestment
of dividends that are attributable to original issue discount on taxable
obligations.

Each Portfolio is required, subject to certain exemptions, to withhold at
a rate of 31% from dividends paid or credited to investors in addition to the
proceeds from the redemption of Portfolio shares, if a correct taxpayer
identification number, certified when required, is not on file with the Fund.
Corporate investors are not subject to this requirement.

The Code imposes a nondeductible 4% excise tax on a Portfolio unless it
meets certain requirements with respect to distributions of net ordinary
income and capital gain net income. It is anticipated that this provision
will not have any material impact on a Portfolio.

Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes, which may decrease the net return on
foreign investments as compared to dividends and interest paid by domestic
issuers. The Fund does not expect that any Portfolio will qualify to elect to
pass through to its investors the right to take a foreign tax credit for
foreign taxes withheld from dividends and interest payments.

29
<PAGE>

able as ordinary income. Generally, on the sale or exchange of obligations
held for more than one year, gain realized by a Portfolio that is not
attributable to original issue discount or certain market discount will be
long-term capital gain. Such capital gain, if any, will be distributed as
capital gain dividends. Capital gain dividends, designated as such in a
written notice to investors mailed not later than 60 days after a Portfolio
taxable year closes, will be taxed as long-term capital gain. However, if an
investor receives a capital gain dividend and sells shares after holding them
for six months or less (not including periods during which the investor holds
an offsetting position), then any loss realized on the sale will be treated
as long-term capital loss to the extent of such capital gain dividend.

All taxable dividends from investment company taxable income are taxable
as ordinary income.

The federal, state and local income tax rules that apply to each Portfolio
and its investors have changed extensively in recent years, and investors
should recognize that additional changes may be made in the future, some of
which could have an adverse effect on a Portfolio and its investors for
federal and/or state and local income tax purposes. Investors in the
Portfolios should consult their tax advisors about the federal, state and
local tax consequences of an investment in each Portfolio in light of their
own individual circumstances.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT

The Bank of New York serves as custodian (the "Custodian") for each
Portfolio's cash and securities. The Custodian does not assist in, and is not
responsible for, investment decisions involving assets of the Fund. BISYS
Fund Services, Inc. also acts as each Portfolio's transfer and dividend
agent. The Fund pays BISYS Fund Services, Inc. $15 per year per account, plus
out-of-pocket expenses, for such services.

COUNSEL AND INDEPENDENT AUDITORS

Legal matters in connection with the issuance of shares of common stock of
the Fund are passed upon by Battle Fowler LLP, 75 East 55th Street, New York,
New York 10022. Coopers & Lybrand L.L.P., 2400 Eleven Penn Center,
Philadelphia, PA 19103, independent certified public accountants, have been
selected as auditors for the Fund.

30
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.

STATEMENT OF ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
October 11, 1996 (Supplemented February 11, 1997)

This Statement of Additional Information sets forth information which may be of
interest to investors but which is not necessarily included in the Fund's
Prospectus, dated October 11, 1996 (Supplemented February 11, 1997) (the
"Prospectus"). This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus, a copy of which may be
obtained without charge by writing to the Fund's distributor, Life Cycle Mutual
Funds Distributors, Inc. (the "Distributor"), 3435 Stelzer Road, Columbus, Ohio
43219 or by calling (800) 266-5240. This Statement of Additional Information is
incorporated by reference into the Prospectus in its entirety.
- -------------------------------------------------------------------------------

<PAGE>

TABLE OF CONTENTS

Page
------
THE FUND...........................................2
INVESTMENT OBJECTIVES, POLICIES
AND RESTRICTIONS...............................2
Life Cycle Equity Fund(TM) .......................2
Life Cycle Bond Fund(TM) .........................2
Life Cycle Retirement Income Fund(TM) ............3
Life Cycle Harvest Fund(TM) ......................3
DESCRIPTION OF THE FUND'S
INVESTMENT SECURITIES AND
DERIVATIVES.......................................3
U.S. Government Obligations.......................3
Mortgage-Backed Securities........................3
When-Issued Securities............................6
Repurchase Agreements.............................6
Variable-Amount Master Demand Notes...............7
Bank Obligations, Certificates of
Deposit and Bankers' Acceptances.................8
Foreign Securities................................8
Hedging Instruments...............................9
INVESTMENT RESTRICTIONS............................9
Percentage Restrictions...........................10
MANAGEMENT OF THE FUND.............................10
Officers and Directors of the Fund................11
Investment Adviser................................13
Adviser's Fees....................................14
Expense Limitation................................14
Administrator.....................................15
Administrator's Fees..............................16
Custodian, Transfer Agent and Dividend Agent......16
TAXES..............................................16
PURCHASE, REDEMPTION
AND EXCHANGE......................................18
DIVIDENDS AND DISTRIBUTIONS........................19
NET ASSET VALUE....................................19
COMPUTATION OF YIELD...............................19
Computation of Total Return.......................20
DESCRIPTION OF COMMON STOCK........................20
SHAREHOLDER SERVICING AND
DISTRIBUTION PLAN.................................21
BROKERAGE AND PORTFOLIO
TURNOVER..........................................22
Brokerage.........................................22
Portfolio Turnover................................23
COUNSEL AND INDEPENDENT AUDITORS...................24
RATINGS OF CORPORATE OBLIGATIONS...................25
Unrated Bonds.....................................26
Commercial Paper Ratings..........................27
Money Market Fund Ratings.........................27
Report of Independent Accountants and
Financial Statements.............................F-1

<PAGE>

LIFE CYCLE MUTUAL FUNDS,(TM) INC.

THE FUND

Life Cycle Mutual Funds, Inc. (the "Fund") is a diversified, open-end,
management investment company, organized under Maryland law on June 23, 1995,
that is composed of four portfolios (the "Portfolio" or "Portfolios"): the Life
Cycle Equity Fund(TM) (the "Equity Fund"), the Life Cycle Bond Fund(TM) (the
"Bond Fund"), the Life Cycle Retirement Income Fund(TM) (the "Retirement Income
Fund") and the Life Cycle Harvest Fund(TM) (the "Harvest Fund"). The Adviser,
Benson White & Company, manages the investments of the Fund from day-to-day in
accordance with the Portfolios' investment objectives and policies.

The Portfolios are offered in connection with an age-based asset
allocation program (the "Life Cycle Program") which is designed to meet the
long-term retirement investment needs of individual investors. The Life Cycle
Program(TM) is intended to manage investors' retirement assets by making
disciplined age-based asset allocation decisions to achieve this overall
objective. The Life Cycle Program is described more completely in the Fund's
Prospectus dated October 11, 1996 (Supplemented February 11, 1997).

INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

A detailed description of the types and quality of the securities in
which the Portfolios may invest is further described in the Fund's Prospectus
and is incorporated herein by reference. The investment objectives stated below
for each Portfolio are fundamental and may be changed only with the approval of
a majority of outstanding shares of that Portfolio. There can be no assurance
that the Portfolios' investment objectives will be achieved.

Life Cycle Equity Fund(TM)

The Equity Fund's investment objective is to maximize investors' total
return by investing, under normal circumstances, substantially all of its assets
(i.e., 90%) in a portfolio of common stocks selected from the Standard & Poor's
500 Index (the "S&P 500") on the basis of such stocks' ability to provide
capital appreciation and generate dividend income. The Portfolio may also invest
up to 10% of the value of its total assets in publicly-traded common and
preferred stocks not presently included in the S&P 500 and may invest up to 10%
of its total assets in money market instruments and in investment-grade
corporate debt securities and convertible preferred stocks offering a
significant opportunity for income. Money market instruments include short-term
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities (including such obligations subject to repurchase agreements),
commercial paper rated in the highest grade by any nationally recognized rating
agency and certificates of deposit and bankers' acceptances issued by domestic
banks having total assets in excess of one billion dollars. Although the
Portfolio may also use certain hedging instruments to try to reduce risks of
market fluctuations that affect the value of the securities in the Portfolio it
will not invest in such hedging instruments for speculation. When the Adviser
determines that adverse conditions warrant, the Portfolio may take a defensive
position and invest up to 10% of its assets temporarily in investment grade debt
securities, preferred stocks, and money market instruments. The Portfolio's
investment policies, unlike its investment objective, are not fundamental and
may be changed by the Board of Directors without stockholder approval. If a
percentage limitation is adhered to at the time an investment is made, a later
change in percentage resulting from changes in the value of the Portfolio's
securities will not be considered a violation of the Portfolio's policies or
restrictions.

Life Cycle Bond Fund(TM)

The Bond Fund's investment objective is to maximize income consistent
with the preservation of capital. The Bond Fund intends to achieve its
investment objective, with a low risk to capital, by investing in a laddered
portfolio of bonds issued and backed by the full faith and credit of the U.S.
Government and its agencies and instrumentalities, mortgage-backed securities,
and the investment-grade debt securities issued by corporations and banks. Under
normal circumstances, at least 65% of the value of the Portfolio's total assets
will be invested in bonds. The Portfolio intends to invest in debt securities
with an average maturity between 1 and 10 years. At least 50% of the Portfolio
will be invested in U.S. Government obligations, commercial paper, negotiable
CD's, repurchase agreements, and short-term corporate debt securities. Up to 50%
of the Portfolio may be invested in mortgage-backed securities and long-term
corporate debt securities. No foreign securities may be purchased by this
Portfolio.

2
<PAGE>

Life Cycle Retirement Income Fund(TM)

The Retirement Income Fund's investment objective is to maximize income
consistent with the preservation of capital. The Retirement Income Fund intends
to achieve its investment objective, with a moderate risk to capital, by
investing in a laddered portfolio of bonds issued and backed by the full faith
and credit of the U.S. Government and its agencies and instrumentalities,
mortgage-backed securities, and the investment-grade debt securities issued by
corporations and banks. The Portfolio intends to invest in debt securities with
an average maturity between 1 and 12 years. At least 75% of the Portfolio will
be invested in U.S. Government obligations, commercial paper, negotiable CD's,
repurchase agreements, short-term corporate debt securities, mortgage-backed
securities, and corporate debt securities, with at least 25% of the Portfolio
invested in direct U.S. Government obligations and its agencies and
instrumentalities, backed by the full faith and credit of the United States. In
addition, up to 10% of the Portfolio may be invested in investment grade debt
securities of foreign corporations and direct obligations of foreign nations.

Life Cycle Harvest Fund(TM)

The Harvest Fund's investment objective is to earn income consistent
with the preservation of capital. The Harvest Fund intends to achieve its
investment objective by investing in a laddered portfolio of short-term bonds
issued and backed by the full faith and credit of the U.S. Government and its
agencies and instrumentalities, negotiable CD's, repurchase agreements, and
short-term corporate debt securities. No foreign securities will be purchased
for this Portfolio. The weighted average maturity of the Portfolio initially
will not exceed 90 days, and the maximum maturity of each security will not
exceed 13 months.

DESCRIPTION OF THE FUND'S INVESTMENT SECURITIES AND DERIVATIVES

U.S. Government Obligations

U.S. Government obligations are obligations which are backed by the
full faith and credit of the United States, by the credit of the issuing or
guaranteeing agency or by the agency's right to borrow from the U.S. Treasury.
They include (i) U.S. Treasury obligations which differ only in their interest
rates, maturities and times of issuance as follows: U.S. Treasury bills
(maturity of one year or less), U.S. Treasury notes (maturity of one year tens
years), U.S. Treasury bonds (generally maturities of greater than ten years);
and (ii) obligations issued or guaranteed by U.S. Government agencies or
instrumentalities that are supported by the full faith and credit of the United
States (such as securities issued by the Government National Mortgage
Association, the Federal Housing Administration, the Department of Housing and
Urban Development, the Export-Import Bank, the General Services Administration
and the Maritime Administration and certain securities issued by the Farmers'
Home Administration and the Small Business Administration, most of which are
explained below under the section entitled "Mortgage-Backed Securities"). The
maturities of U.S. Government obligations usually range from three months to
thirty years.

Mortgage-Backed Securities

Ginnie Mae Certificates--The Government National Mortgage Association
("Ginnie Mae") is a wholly-owned corporate instrumentality of the United States
within the Department of Housing and Urban Development. The National Housing Act
of 1934, as amended (the "Housing Act"), authorizes Ginnie Mae to guarantee the
timely payment of the principal of and interest on certificates that are based
on and backed by a pool of mortgage loans insured by the Federal Housing
Administration under the Housing Act, or Title V of the Housing Act of 1949
("FHA Loans"), or guaranteed by the Department of Veterans Affairs under the
Servicemen's Readjustment Act of 1944, as amended ("VA Loans"), or by pools of
other eligible mortgage loans. The Housing Act provides that the full faith and
credit of the United States Government is pledged to the payment of all amounts
that may be required to be paid under any guaranty. In order to meet its
obligations under such guaranty, Ginnie Mae is authorized to borrow from the
United States Treasury with no limitations as to amount.

The Ginnie Mae Certificates represent a pro rata interest in one or
more pools of the following types of mortgage loans: (i) fixed rate level
payment mortgage loans; (ii) fixed rate graduated payment mortgage loans; (iii)
fixed rate growing equity mortgage loans; (iv) fixed rate mortgage loans secured
by manufactured (mobile) homes, (v) mortgage loans on multifamily residential
properties under construction; (vi) mortgage loans on completed multifamily
projects; (vii) fixed rate mortgage loans as to which escrowed funds are used to
reduce the borrower's monthly payments during the early years of the mortgage

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loans ("buydown" mortgage loans); (viii) mortgage loans that provide for
adjustments in payments based on periodic changes in interest rates or in other
payment terms of the mortgage loans; and (ix) mortgage-backed serial notes. All
of these mortgage loans will be FHA Loans or VA Loans and, except as otherwise
specified above, will be fully-amortizing loans secured by first liens on one-to
four-family housing units.

Fannie Mae Certificates--The Federal National Mortgage Association
("Fannie Mae" or "FNMA") is a federally chartered and privately owned
corporation organized and existing under the Federal National Mortgage
Association Charter Act of 1938. The obligations of FNMA are not backed by the
full faith and credit of the United States Government.

Each Fannie Mae Certificate will represent a pro rata interest in one
or more pools of FHA Loans, VA Loans or conventional mortgage loans (i.e.,
mortgage loans that are not insured or guaranteed by any governmental agency) of
the following types: (i) fixed rate level payment mortgage loans; (ii) fixed
rate growing equity mortgage loans; (iii) fixed rate graduated payment mortgage
loans; (iv) variable rate California mortgage loans; (v) other adjustable rate
mortgage loans; and (vi) fixed rate and adjustable mortgage loans secured by
multi-family projects.

Freddie Mac Certificates--The Federal Home Loan Mortgage Corporation
("Freddie Mac") is a corporate instrumentality of the United States created
pursuant to the Emergency Home Finance Act of 1970, as amended (the "FHLMC
Act"). The obligations of Freddie Mac are obligations solely of Freddie Mac and
are not backed by the full faith and credit of the United States Government.

Freddie Mac Certificates represent a pro rata interest in a group of
mortgage loans (a "Freddie Mac Certificate group") purchased by Freddie Mac. The
mortgage loans underlying the Freddie Mac Certificates will consist of fixed
rate or adjustable rate mortgage loans with original terms to maturity of
between ten and thirty years, substantially all of which are secured by first
liens on one-to four-family residential properties or multifamily projects. Each
mortgage loan must meet the applicable standards set forth in the FHLMC Act. A
Freddie Mac Certificate group may include whole loans, participation interests
in whole loans and undivided interests in whole loans and participations
comprising another Freddie Mac Certificate group.

Collateralized Mortgage Obligations--Collateralized mortgage
obligations ("CMOs") are debt obligations or multi-class pass-through
certificates issued by agencies or instrumentalities of the U.S. Government or
by private originators or investors in mortgage loans. They are backed by
Mortgage Pass-Through Securities or pools of whole loans (all such assets, the
"Mortgage Assets") and are evidenced by a series of bonds or certificates issued
in multiple classes or "tranches." The principal and interest on the underlying
Mortgage Assets may be allocated among the several classes of a series of CMOs
in many ways. CMOs may be issued by agencies or instrumentalities of the U.S.
Government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage bankers, commercial banks,
investment banks and special purpose subsidiaries of the foregoing.

In a CMO, a series of bonds or certificates are issued in multiple
classes. Each class of CMOs, often referred to as a "tranche," may be issued
with a specific fixed or floating coupon rate and has a stated maturity or final
scheduled distribution date. Principal prepayments on the underlying Mortgage
Assets may cause the CMOs to be retired substantially earlier than their stated
maturities or final scheduled distribution dates. Interest is paid or accrues on
CMOs on a monthly, quarterly or semi-annual basis. The principal of and interest
on the Mortgage Assets may be allocated among the several classes of a CMO in
many ways. The general goal in allocating cash flows on Mortgage Assets to the
various classes of a CMO is to create certain tranches on which the expected
cash flows have a higher degree of predictability than the underlying Mortgage
Assets. As a general matter, the more predictable the cash flow is on a
particular CMO tranche, the lower the anticipated yield will be on that tranche
at the time of issuance relative to prevailing market yields on certain other
Mortgage-Backed Securities. As part of the process of creating more predictable
cash flows on certain tranches of a CMO, one or more tranches generally must be
created that absorb most of the changes in the cash flows on the underlying
Mortgage Assets. The yields on these tranches are generally higher than
prevailing market yields on Mortgage-Backed Securities with similar average
lives. Because of the uncertainty of the cash flows on these tranches, the
market prices of and yields on these tranches are more volatile. The Fund may
purchase CMOs that have been sold in public offerings registered under the
Securities Act of 1933 or in private placements. CMOs acquired in private
placements will be subject to certain restrictions on resale and accordingly
will have limited marketability.

Subordinated CMOS--Subordinated tranches of CMOs are multiple class
securities with one or more classes subordinate to other classes as to the
payment of principal thereof and interest thereon, with defaults on the
underlying assets being borne first by the holders of the most subordinated
class. The Portfolios will not invest in first loss classes of subordinated

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CMOs. Subordinated tranches are entitled to receive repayment of principal only
after all required principal payments have been made on more senior tranches and
also have subordinate rights as to receipt of interest distributions. Such
subordinated tranches are subject to greater risk of non-payment than are more
senior tranches or CMOs backed by third party credit enhancement may have
limited marketability.

CMOs Backed By Mortgages On Multi-Family Dwelling--Multi-family
dwellings are residential properties consisting of five or more units.
investment in CMOs backed by mortgages on multi-family dwellings involves
different investment considerations than investment in Mortgage-Backed
Securities backed by single-family homes due to such factors as the investment
character of the underlying asset and regulatory requirements. CMOs backed by
multi-family dwelling mortgages are subject to risks generally not associated
with mortgages on single family homes, including vacancy rates, increases in
operating expenses, regulatory requirements and environmental liability issues.
In addition, such CMOs may have limited marketability.

Private Pass-Throughs--Pass-Throughs are Mortgage-Backed Securities
that are structured similarly to government agency pass-through securities such
as Ginnie Mae, Fannie Mae and Freddie Mac Certificates, but are issued by
private sector originators of or investors in mortgage loans. Private
Pass-Throughs can represent an interest in any of the variety of types of
mortgage loans that can back an issue of Mortgage-Backed Securities. Since
Private Pass- Throughs typically lack a guarantee by an entity having the credit
status of a governmental agency or instrumentality, they are generally
structured with one or more forms of credit enhancement. All of the Private
Pass-Throughs purchased by the Fund will have been sold in public offerings
registered under the Securities Act of 1933 and will, accordingly, not be
subject to restrictions on resale generally imposed upon privately-placed
securities.

Planned Amortization Class--Planned Amortization Class bonds ("PACs")
are a type of CMO tranche or series designed to provide relatively predictable
payments of principal provided that, among other things, the actual prepayment
experience on the underlying mortgage loans falls within a predefined range.
Because of these features, PACs generally are less subject to the risks of
prepayment than are other types of mortgage-backed securities. However, if the
actual prepayment experience on the underlying mortgage loans is at a rate
faster or slower than the predefined range or if deviations from other from
other assumptions occur, principal payments on the PACs may be earlier or later
than predicted.

Adjustable Rate Mortgages--Interest Rate Indices--The One Year Treasury
Index is the figure derived from the average weekly quoted yield on U.S.
Treasury Securities adjusted to a constant maturity of one year. The Cost of
Funds Index reflects the monthly weighted average cost of funds of savings and
loan associations and savings banks whose home offices are located in Arizona,
California and Nevada (the "FHLB Eleventh District") that are member
institutions of the Federal Home Loan Bank of San Francisco (the "FHLB of San
Francisco"), as computed from statistics tabulated and published by the FHLB of
San Francisco. The FHLB of San Francisco normally announces the Cost of Funds
Index on the last working day of the month following the month in which the cost
of funds was incurred.

A number of factors affect the performance of the Cost of Funds Index
and may cause the Cost of Funds Index to move in a manner different from indices
based upon specific interest rates, such as the One Year Treasury Index. Because
of the various origination dates and maturities of the liabilities of member
institutions of the FHLB Eleventh District upon which the Cost of Funds Index is
based, among other things, at any time the Cost of Funds Index may not reflect
the average prevailing market interest rates on new liabilities of similar
maturities. There can be no assurance that the Cost of Funds Index will
necessarily move in the same direction or at the same rate as prevailing
interest rates since as longer term deposits or borrowings mature and are
renewed at market interest rates, the Cost of Funds Index will rise or fall
depending upon the differential between the prior and the new rates on such
deposits and borrowings. In addition, dislocations in the thrift industry in
recent years have caused and may continue to cause the cost of funds of thrift
institutions to change for reasons unrelated to changes in general interest rate
levels. Furthermore, any movement in the Cost of Funds Index as compared to
other indices based upon specific interest rates may be affected by changes
instituted by the FHLB of San Francisco in the method used to calculate the Cost
of Funds Index. To the extent that the Cost of Funds Index may reflect interest
changes on a more delayed basis than other indices, in a period of rising
interest rates, any increase may produce a higher yield later than would be
produced by such other indices, and in a period of declining interest rates, the
Cost of Funds Index may remain higher than other market interest rates. This may
result in a higher level of principal prepayments on mortgage loans which adjust
in accordance with the Cost of Funds Index than mortgage loans which adjust in
accordance with other indices.

LIBOR, the London interbank offered rate, is the interest rate that the
most creditworthy international banks dealing in U.S. dollar-denominated
deposits and loans charge each other for large dollar-denominated loans. LIBOR
is also usually the base rate for large dollar-denominated loans in the

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international market. LIBOR is generally quoted for loans having rate
adjustments at one, three, six or twelve month intervals.

When-Issued Securities

Each Portfolio may purchase debt obligations offered on a "when-issued"
or "delayed delivery" basis. When so offered, the price, which is generally
expressed in yield terms, is fixed at the time the commitment to purchase is
made, but delivery and payment for the when-issued securities take place at a
later date. Normally, the settlement date occurs within one month of the
purchase of debt obligations; during the period between purchase and settlement,
no payment is made by the purchaser to the issuer and no interest accrues to the
purchaser. To the extent that assets of a Portfolio are not invested prior to
the settlement of a purchase of securities, that Portfolio will earn no income;
however, it is intended that each Portfolio will be fully invested to the extent
practicable and subject to the policies stated above. While when-issued
securities may be sold prior to the settlement date, it is intended that each
Portfolio will purchase such securities with the purpose of actually acquiring
them unless a sale appears desirable for investment reasons. At the time the
Portfolio makes the commitment to purchase a debt obligation on a when-issued
basis, it will record the transaction and reflect the value of the security in
determining its net asset value. The Fund does not believe that the net asset
value or income of the Portfolios' securities portfolios will be adversely
affected by their purchase of debt obligations on a when-issued basis. Each
Portfolio will establish a segregated account in which it will maintain cash and
liquid high grade debt securities equal in value to commitments for when-issued
securities. Such segregated securities either will mature or, if necessary, be
sold on or before the settlement date.

Repurchase Agreements

When a Portfolio purchases securities, it may enter into a repurchase
agreement with the seller wherein the seller agrees, at the time of sale, to
repurchase the security at a mutually agreed upon time and price. A Portfolio
may enter into repurchase agreements with member banks of the Federal Reserve
System and with broker-dealers who are recognized as primary dealers in United
States government securities by the Federal Reserve Bank of New York. Although
the securities subject to the repurchase agreement might bear maturities
exceeding one year, settlement for the repurchase would never be more than 397
days after the Portfolio's acquisition of the securities and normally would be
within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Portfolio's money will be invested in the security, and will not be
related to the coupon rate of the purchased security. At the time a Portfolio
enters into a repurchase agreement the value of the underlying security,
including accrued interest, will be equal to or exceed the value of the
repurchase agreement, and, in the case of a repurchase agreement exceeding one
day, the seller will agree that the value of the underlying security, including
accrued interest, will at all times be equal to or exceed the value of the
repurchase agreement. Each Portfolio may engage in a repurchase agreement with
respect to any security in which that Portfolio is authorized to invest, even
though the underlying security may mature in more than one year. The collateral
securing the seller's obligation must be of a credit quality at least equal to
the Portfolio's investment criteria for Portfolio securities and will be held by
the Portfolio's Custodian or in the Federal Reserve Book Entry System.

For purposes of the Investment Company Act of 1940, a repurchase
agreement is deemed to be a loan from a Portfolio to the seller subject to the
repurchase agreement and is therefore subject to that Portfolio's investment
restriction applicable to loans. It is not clear whether a court would consider
the securities purchased by a Portfolio subject to a repurchase agreement as
being owned by that Portfolio or as being collateral for a loan by that
Portfolio to the seller. In the event of the commencement of bankruptcy or
insolvency proceedings with respect to the seller of the securities before
repurchase of the security under a repurchase agreement, a Portfolio may
encounter delay and incur costs before being able to sell the security. Delays
may involve loss of interest or decline in price of the security. If the court
characterized the transaction as a loan and a Portfolio has not perfected a
security interest in the security, that Portfolio may be required to return the
security to the seller's estate and be treated as an unsecured creditor of the
seller. As an unsecured creditor, a Portfolio would be at the risk of losing
some or all of the principal and income involved in the transaction. As with any
unsecured debt obligation purchased for a Portfolio, the Adviser seeks to
minimize the risk of loss through repurchase agreements by analyzing the
creditworthiness of the obligor, in this case the seller. Apart from the risk of
bankruptcy or insolvency proceedings, there is also the risk that the seller may
fail to repurchase the security, in which case a Portfolio may incur a loss if
the proceeds to that Portfolio of the sale to a third party are less than the
repurchase price. However, if the market value of the securities subject to the
repurchase agreement becomes less than the repurchase price (including
interest), the Portfolio involved will direct the seller of the security to
deliver additional securities so that the market value of all securities subject

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<PAGE>

to the repurchase agreement will equal or exceed the repurchase price. It is
possible that a Portfolio will be unsuccessful in seeking to impose on the
seller a contractual obligation to deliver additional securities.

Reverse Purchase Agreements

Although each Portfolio may enter into reverse repurchase agreements,
they currently do not have the intention to enter into such agreements. The
Portfolios may each enter into reverse repurchase agreements with the same
parties with whom they may enter into repurchase agreements. Under a reverse
repurchase agreement, a Portfolio sells securities and agrees to repurchase
them, at an mutually agreed upon date and price. Under generally accepted
accounting principles, reverse repurchase agreements are generally regarded as a
form of borrowing. At the time a Portfolio enters into a reverse repurchase
agreement, it will establish and maintain a segregated account with its
custodian containing securities from its portfolio having a value not less than
the repurchase price (including accrued interest). A Portfolio's ability to
enter into reverse repurchase agreements is not limited except by the
requirement to maintain assets in segregated accounts. Reverse repurchase
agreements involve the risk that the market value of the securities retained in
lieu of their sale by a Portfolio may decline below the price of the securities
the Portfolio has sold but is obligated to repurchase. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, such buyer or its trustee or receiver may receive an extension of
time to determine whether to enforce the Portfolio's obligation to repurchase
the securities, and the Portfolio's use of the proceeds of the reverse
repurchase agreement may effectively be restricted pending such decision.
Investors should be aware that each Portfolio may enter into reverse repurchase
agreements, which may be considered to be a form of borrowing and, therefore,
involve the use of leverage. The use of leverage involves special risks in that,
while providing increased opportunities of income, the use of leverage also
means that any losses will be magnified. The use of reverse repurchase
agreements also involves certain fees and costs to the Portfolio.

Variable-Amount Master Demand Notes

The Bond Fund, Retirement Income Fund and Harvest Fund may purchase
variable amount master demand notes ("VANs"). VANs are debt obligations that
provide for a periodic adjustment in the interest rate paid on the instrument
and permit the holder to demand payment of the unpaid principal balance plus
accrued interest at specified intervals upon a specified number of days' notice
either from the issuer or by drawing on a bank letter of credit, a guarantee,
insurance or other credit facility issued with respect to such instrument.

The VANs in which the Portfolios may invest are payable on not more
than thirty calendar days' notice either on demand or at specified intervals not
exceeding one year depending upon the terms of the instrument. Variable rate
demand instruments with demand features in excess of 7 days are considered
illiquid. The terms of the instruments provide that interest rates are
adjustable at intervals ranging from daily to up to one year and their
adjustments are based upon the prime rate of a bank or other appropriate
interest rate adjustment index as provided in the respective instruments. The
Fund will decide which variable rate demand instruments it will purchase in
accordance with procedures prescribed by its Board of Directors to minimize
credit risks.

The VANs that the Portfolios may invest in include participation
certificates purchased by the Portfolios from banks, insurance companies or
other financial institutions in fixed or variable rate, or taxable debt
obligations (VANs) owned by such institutions or affiliated organizations. A
participation certificate gives the Portfolios an undivided interest in the
obligation in the proportion that the Portfolio's participation interest bears
to the total principal amount of the obligation and provides the demand
repurchase feature described below. Where the institution issuing the
participation does not meet the Portfolio's high quality standards, the
participation is backed by an irrevocable letter of credit or guaranty of a bank
(which may be a bank issuing a confirming letter of credit, or a bank serving as
agent of the issuing bank with respect to the possible repurchase of the
certificate of participation or a bank serving as agent of the issuer with
respect to the possible repurchase of the issue) or insurance policy of an
insurance company that the Board of Directors of the Fund has determined meets
the prescribed quality standards for the Portfolio. The Portfolio has the right
to sell the participation certificate back to the institution and, where
applicable, draw on the letter of credit, guarantee or insurance after no more
than 30 days' notice either on demand or at specified intervals not exceeding
397 days (depending on the terms of the participation), for all or any part of
the full principal amount of the Portfolio's participation interest in the
security, plus accrued interest. The Portfolios intend to exercise the demand
only (1) upon a default under the terms of the bond documents, (2) as needed to
provide liquidity to the Portfolio in order to make redemptions of the Portfolio
shares, or (3) to maintain a high quality investment portfolio. The institutions
issuing the participation certificates will retain a service and letter of
credit fee (where applicable) and a fee for providing the demand repurchase
feature, in an amount equal to the excess of the interest paid on the
instruments over the negotiated yield at which the participations were purchased
by the Portfolio. The total fees generally range from 5% to 15% of the

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<PAGE>

applicable prime rate* or other interest rate index. With respect to insurance,
the Portfolios will attempt to have the issuer of the participation certificate
bear the cost of the insurance, although the Portfolios retain the option to
purchase insurance if necessary, in which case the cost of insurance will be an
expense of the Portfolio subject to the expense limitation on investment company
expenses prescribed by any state in which the Portfolio's shares are qualified
for sale. The Adviser has been instructed by the Fund's Board of Directors to
continually monitor the pricing, quality and liquidity of the variable rate
demand instruments held by the Portfolio, including the participation
certificates, on the basis of published financial information and reports of the
rating agencies and other bank analytical services to which the Portfolio may
subscribe. Although these instruments may be sold by the Portfolio, the
Portfolio intends to hold them until maturity, except under the circumstances
stated above.

While the value of the underlying variable rate demand instruments may
change with changes in interest rates generally, the variable rate nature of the
underlying variable rate demand instruments should minimize changes in value of
the instruments. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation and the risk of potential capital
depreciation is less than would be the case with a portfolio of fixed income
securities. The Portfolios may contain VANs on which stated minimum or maximum
rates, or maximum rates set by state law limit the degree to which interest on
such VANs may fluctuate; to the extent it does, increases or decreases in value
may be somewhat greater than would be the case without such limits. In the event
that interest rates increased so that the variable rate exceeded the fixed-rate
on the obligations, the obligations could no longer be valued at par and this
may cause the Portfolios to take corrective action, including the elimination of
the instruments. Because the adjustment of interest rates on the VANs is made in
relation to movements of the applicable banks' "prime rate", or other interest
rate adjustment index, the VANs are not comparable to long-term fixed-rate
securities. Accordingly, interest rates on the VANs may be higher or lower than
current market rates for fixed-rate obligations or obligations of comparable
quality with similar maturities.

For purposes of determining whether a VAN held by a Portfolio matures
within 397 days from the date of its acquisition, the maturity of the instrument
will be deemed to be the longer of (1) the period required before the Portfolio
is entitled to receive payment of the principal amount of the instrument or (2)
the period remaining until the instrument's next interest rate adjustment. If a
variable rate demand instrument ceases to meet the investment criteria of the
Portfolio, it will be sold in the market or through exercise of the repurchase
demand.

Bank Obligations, Certificates of Deposit and Bankers' Acceptances

All the Portfolios, except the Equity Fund, may purchase certificates
of deposit, bankers' acceptances and other obligations issued or guaranteed by
domestic banks subject to regulation by the U.S. Government or its agencies
(such as the Federal Reserve Board, the Comptroller of the Currency, or the
FDIC) and having total assets of over $10 billion. Domestic banks organized
under Federal law are supervised and examined by the Comptroller of the Currency
and are required to be members of the Federal Reserve System and to be insured
by the Federal Deposit Insurance Corporation ("FDIC"). Domestic banks organized
under state law are supervised and examined by state banking authorities; In
addition, state banks whose certificates of deposit may be purchased by the Fund
are insured and are subject to Federal examination and to a substantial body of
Federal law and regulation. At the time the Portfolios invest in any certificate
of deposit, bankers' acceptance or other bank obligation, the issuer must have
its debt rated within the quality standards of the Portfolio or if unrated be of
comparable quality as determined by the Fund's Board of Directors.

Foreign Securities

The Retirement Income Fund may invest in certain foreign securities.
Investments in the securities of foreign issuers will be limited to
industrialized countries with stable economies and established markets
including, but not limited to, England, Germany, France, Canada and Australia.
Investment in obligations of foreign issuers and in direct obligations of
foreign nations involves somewhat different investment risks from those
affecting obligations of United States domestic issuers. There may be limited
publicly available information with respect to foreign issuers and foreign
issuers are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to domestic companies.
There may also be less government supervision and regulation of foreign
securities exchanges, brokers and listed companies than in the United States.
Foreign securities markets have substantially less volume than
- ---------
* The "prime rate" is generally the rate charged by a bank to its most
creditworthy customers for short term loans. The prime rate of a particular bank
may differ from other banks and will be the rate announced by each bank on a
particular day. Changes in the prime rate may occur with great frequency and
generally become effective on the date announced.

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<PAGE>

domestic securities exchanges and securities of some foreign companies are less
liquid and more volatile than securities of comparable domestic companies.
Brokerage commissions and other transaction costs on foreign securities
exchanges are generally higher than in the United States. Dividends and interest
paid by foreign issuers may be subject to withholding and other foreign taxes,
which may decrease the net return on foreign investments as compared to
dividends and interest paid to the Portfolio by domestic companies. Additional
risks include future political and economic developments, the possibility that a
foreign jurisdiction might impose or change withholding taxes on income payable
with respect to foreign securities, the possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits and the possible
adoption of foreign governmental restrictions such as exchange controls.

Hedging Instruments

The Equity Fund may write covered call options on optionable securities
or stock indices of the types in which it is permitted to invest from time to
time as the Investment Adviser determines is appropriate in seeking to attain
its objective. Call options written by a Fund gives the holder the right to buy
the underlying securities or index from the Fund at a stated exercise price.
Options on stock indices are settled in cash.

The Equity Fund may write only covered call options, which means that,
so long as a Fund is obligated as the writer of a call option, it will own the
underlying securities subject to the options (or comparable securities or cash
satisfying the cover requirements of securities exchanges).

The Equity Fund will receive a premium for writing a covered call
option, which increases the return of the Fund in the event the option expires
unexercised or is closed out of a profit. The amount of the premium will
reflect, among other things, the relationship of the market price of the
underlying security or index to the exercise price of the option, the term of
the option and the volatility of the market price of the underlying security or
index. By writing a covered call option, the Fund limits its opportunity to
profit from any increase in the market price value of the underlying security or
index above the exercise price of the option.

The Equity Fund may terminate an option that they have written prior to
the option's expiration by entering into a closing purchase transaction in which
an option is purchased having the same terms as the option written. The Fund
will realize a profit of loss from such transaction if the cost of such
transaction is less or more than the premium received from the writing of the
option. Because increases in the market price of a call option will generally
reflect increases in the market price of the underlying security or index, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by realized appreciation of the underlying security (or
securities) owned by the Equity Fund.

INVESTMENT RESTRICTIONS

The Fund has adopted the following fundamental investment restrictions
which apply to each Portfolio and which may not be changed unless approved by a
majority of the outstanding shares of the Portfolio that would be affected by
such a change. The Portfolios may not:

(1) Make portfolio investments other than as described under
"Investments Objectives, Policies and Restrictions" or any other form
of investment, where applicable, which meets the Portfolio's quality
criteria, as determined by the Board of Directors and which is
consistent with the Portfolio's objectives and policies.
Notwithstanding anything to the contrary herein, the Fund will not
invest in any securities that currently exist other than those
described in the Fund's Prospectus or Statement of Additional
Information. In the event that new investments become available, the
Board of Directors may make a determination as to whether the Fund may
make such an investment, provided that such investment is consistent
with the Portfolio's Objectives and Policies.

(2) Borrow Money. This restriction shall not apply to borrowing from
banks for temporary or emergency (not leveraging) purposes, including
the meeting of redemption requests that might otherwise require the
untimely disposition of securities, in an amount up to 15% of the value
of the Portfolio's total assets (including the amount borrowed) valued
at market less liabilities (not including the amount borrowed) at the
time the borrowing was made. While borrowings exceed 5% of the value of
a Portfolio's total assets, such Portfolio will not make any
investments. Interest paid on borrowings will reduce net income.

9
<PAGE>

(3) Pledged, hypothecate, mortgage or otherwise encumber its assets,
except in an amount up to 15% of the value of its total assets and only
to secure borrowings for temporary or emergency purposes.

(4) Sell securities short or purchase securities on margin, or engage
in the purchase and sale of put, call, straddle or spread options or in
writing such options, except to the extent that securities subject to a
demand obligation and stand-by commitments may be purchased as set
forth under "Investment Objectives, Policies and Risks."

(5) Underwrite the securities of other issuers, except insofar as the
Portfolio may be deemed an underwriter under the Securities Act of 1933
in disposing of a portfolio security.

(6) The Fund may not purchase securities subject to restrictions on
disposition under the Securities Act of 1933 ("restricted securities").
The Fund may not invest more than an aggregate of 15% of their net
assets in a repurchase agreement maturing in more than seven days,
variable rate demand instruments exercisable in more than seven days
and securities that are not readily marketable. The Fund may however,
purchase variable rate demand instruments consistent with the
Portfolio's objectives, which contain a demand feature.

(7) Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas
interests, but this shall not prevent the Portfolio from investing in
Government obligations secured by real estate or interests in real
estate.

(8) Make loans to others, except through the purchase of portfolio
investments, including repurchase agreements, as described under
"Investment Objectives, Policies and Risks."

(9) Purchase more than 10% of all outstanding voting securities of any
one issuer or invest in companies for the purpose of exercising
control.

(10) Invest more than 25% of its assets in the securities of "issuers"
in any single industry, provided that, (i) there shall be no limitation
on the Fund to purchase obligations issued or guaranteed by the United
States government, its agencies or instrumentalities. When the assets
and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government
creating the issuing entity and a security is backed only by the assets
and revenues of the entity, the entity would be deemed to be the sole
issuer of the security. Similarly, in the case of an industrial revenue
bond, if that bond is backed only by the assets and revenues of the
non-governmental user, then such non-governmental user would be deemed
to be the sole issuer. If, however, in either case, the creating
government guarantees a security, such a guarantee would be considered
a separate security and would be treated as an issue of such
government.

(11) Invest in securities of other investment companies, except (i) the
Portfolios may purchase unit investment trust securities where such
unit investment trusts meet the investment objectives of the Portfolios
and then only up to 5% of the Portfolios' net assets, except as they
may be acquired as part of a merger, consolidation or acquisition of
assets and (ii) as permitted by Section 12(d) of the Act.

(12) Issue senior securities except insofar as the Fund may be deemed
to have issued a senior security in connection with any permitted
borrowing.

Percentage Restrictions

Any investment restrictions herein which involve a maximum percentage
of securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
or encumbrance of securities or assets of, or borrowings by, the Portfolio.

MANAGEMENT OF THE FUND

The directors and officers of the Fund and their principal occupations
during the past five years are set forth below. Their titles may have varied
during this period. Asterisks indicate that those directors are "interested
persons" (as defined in the Investment Company Act of 1940) of the Fund. Unless
otherwise indicated, the address of each director and officer is 656 East
Swedesford Road, Suite 322, Wayne, Pennsylvania 19087.

10
<PAGE>
<TABLE>
<CAPTION>
Officers and Directors of the Fund
<S> <C>
CLAY B. MANSFIELD* Mr. Mansfield is Director, Chairman of the Board and Treasurer of the Fund.
Benson White & Company Mr. Mansfield is co-founder, Chairman of the Board Benson White &
656 East Swedesford Road Company and Treasurer of the Benson White & Company Fund, and Chief
Suite 322 Investment Officer of Benson White & Company, the Fund's investment
Wayne, PA 19087 adviser (the "Adviser") since June 1994. From June 1992 through May 1994,
(47) Mr. Mansfield was the principal of Mansfield Investment Advisors. Prior to
his involvement with the Adviser, Mr. Mansfield served as the Executive Secretary of
the Pennsylvania School District Liquid Asset Fund from March 1990 through May 1992,
which has approximately $2 billion of short term assets invested on behalf of
Pennsylvania school districts. He also served as the Chief Investment Officer of the
multi-billion dollar Pennsylvania Public School Employees' Retirement System, where he
managed an improvement in the funded ratio from approximately 49% to 71%, without
changing the actuarial assumptions. Mr. Mansfield was responsible for the direct
management of over $1 billion in assets, and supervised numerous asset managers of
over $16 billion in equities, fixed income, real estate, and venture capital.

TIMOTHY W. CUNNINGHAM* Mr. Cunningham is Director, President and Secretary of
Benson White & Company the Fund, and co-founder of the Adviser since June 1994.
656 East Swedesford Road Previously, he managed Springhouse Associates, Inc., a
Suite 322 specialty pension fund consulting company, that provided advisory
Wayne, PA 19087 services concerning some $550 million of pension fund assets. From
(44) May 1989 through May 1994, Mr. Cunningham served as President for
Springhouse Associates, Inc.

FREDRICK FAZER Mr. Fazer is a Director of the Fund. He is currently Managing Director of Oy
Oy Evoluta Ab Evoluta Ab, a private financial consulting firm. From 1989 through May
Tegelbacken 31 1996 he was Managing Director of Oy Investa Ab, a Finland-based financial
00330 Helsinki and investment company. From 1972 through 1989 he served with Citibank,
Finland N.A. in New York, London and Scandinavia. He is also a Board member of
(50) Oy Karl Fazer Ab, a major Scandinavian Foodstuffs Group and Chairman of Oy
NordCenter Ab, a property and leisure development Co. in Finland

THOMAS FLANIGAN Mr. Flanigan is a Director of the Fund. He also has been the Chief Investment
California State Teachers' Officer for the $63 billion California State Teacher's Retirement System
Retirement System since 1986.
7667 Folsom Blvd.
Sacramento, CA 95821
(49)

ROBERT STRANIERE Mr. Straniere is a Director of the Fund. He also is a legislator in the New
The Straniere Law Firm York State legislature since 1981.
88 New Dorp Plaza
New York, NY 10306
(55)

WILLIAM H. HASTINGS, JR. Mr. Hastings is an Assistant Secretary of the Fund and Controller of
Benson White & Company Benson White & Company since 1994. From 1993 through 1994, he was with
656 East Swedesford Road a regional accounting firm. Prior to that, he was head of analysis of
Suite 322 of operations for a specialized investment management firm.
Wayne, PA 19087
(49)
</TABLE>
- -------
*"Interested person" of the Fund, as defined in the Investment Company Act.

11
<PAGE>

Officers and Directors of the Fund (Continued)
<TABLE>
<CAPTION>
<S> <C>
ALAINA V. METZ Ms. Metz is Assistant Secretary of the Fund. She is also Chief BISYS
BISYS Fund Services Administrative Officer at BISYS Fund Services, Inc. since June 1995.
3435 Stelzer Road Prior to joining the Administrator, she was supervisor of the Blue Sky
Columbus, OH 43219 Department at Alliance Capital Management from May 1989 to June 1995.
(29)

BRUCE TREFF Mr. Treff is Assistant Secretary of the Fund. He is also Counsel, BISYS
BISYS Fund Services Fund Services, Inc. since September 1995. Prior to joining the Administrator
3435 Stelzer Road he was Manager, Alliance Capital Management, L.P.
Columbus, OH 43219
(30)

SHERYL HIRSCHFELD Ms. Hirschfeld is Assistant Secretary of the Fund. She is also
BISYS Fund Services Manager-Legal Services of the Administrator since January
125 West 55th Street 1997. Prior to joining the Administrator, she was Director,
New York, NY 10019 Corporate Secretary Services of Furman Selz LLC from November
(36) 1994 to December 1996. Prior to that she was an employee of The Dreyfus
Corporation from 1982 to 1994.

JOHN J. PILEGGI Mr. Pileggi is Assistant Treasurer to the Fund. He is also a Senior Managing
Furman Selz LLC Director of Furman Selz LLC since 1992. Prior to that, he was a Managing
237 Park Avenue Director of Furman Selz LLC.
New York, NY 10017
(37)
</TABLE>

COMPENSATION TABLE
(For the year ended July 31, 1996)
<TABLE>
<CAPTION>

Pension or Total Compensation
Aggregate Retirement Benefits Estimated Annual From Fund and
Compensation Accrued as Part of Benefits Upon Fund Complex
Name of Person from Fund Fund Expenses Retirement Paid to Directors
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLAY MANSFIELD None None None None
- --------------------------------------------------------------------------------------------------------------------------
Director

TIMOTHY CUNNINGHAM None None None None
- --------------------------------------------------------------------------------------------------------------------------
Director

FREDRICK FAZER $3,000 None None $3,000
- --------------------------------------------------------------------------------------------------------------------------
Director

THOMAS FLANIGAN $3,000 None None $3,000
- --------------------------------------------------------------------------------------------------------------------------
Director

ROBERT STRANIERE $3,000 None None $3,000
- --------------------------------------------------------------------------------------------------------------------------
Director
</TABLE>

Each Director who is not an interested person of the Fund receives a
base annual fee of $4,000 which is paid by the Fund.

As of September 24, 1996, directors and officers of the Fund as a group
beneficially owned less than 1% of the outstanding shares of each of the Fund's
Portfolios.

As of September 24, 1996, the following individuals or entities owned
both beneficially and of record 5% or more of the indicated Portfolio's
outstanding shares:

Each person who has beneficial ownership of more than 25% of the voting
securities of a Portfolio may have an impact on matters submitted for
shareholder approval.
12
<PAGE>
<TABLE>
<CAPTION>

Name and Address Portfolio Percentage of
of record or Number of in which shares Ownership of
beneficial owner shares owned are owned Portfolio
- ---------------- ------------- ---------------- ----------------
<S> <C> <C> <C>
Ralph Tash TTEE 95,538.17 Equity Fund 29.71
Ralph Tash Trust
70-800 Tamarisk Lane
Rancho Mirage, CA 92270-2328

Donaldson Lufkin Jenrette 2,588,78 Bond Fund 48.94
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052

Donaldson Lufkin Jenrette 4,760,40 Retirement Fund 14.98
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052

Investors Fiduciary Trust Co 3,711.72 Retirement Fund 11.68
Cust for the IRA of
Shirley B. Cunningham
P.O. Box 588
Ivy, VA 22945-0588

Investors Fiduciary Trust Co 7,440.65 Retirement Fund 23.42
Cust for the IRA of
John T Cunningham
P.O. Box 588
Ivy, VA 22945-0588

Investors Fiduciary Trust Co 6,784,47 Retirement Fund 21.35
FBO William M Hawk IRA
2908 Stoneycreek Rd
Norristown, PA 19401-1318

Harold Glesner 2,363.06 Retirement Fund 7.44
Virginia Glesner JT WROS
535 High St
Norwood, NJ 07648-1204

Benson White & Co 67,163.30 Harvest Fund 99.26
656 E Swedesford Rd Suite 322
Wayne, PA 19087-1606
</TABLE>

Investment Adviser

Benson White & Company, a registered investment adviser, is a Delaware
corporation founded by Clay B. Mansfield and Timothy W. Cunningham, with offices
located at 656 East Swedesford Road, Suite 322, Wayne, Pennsylvania 19087.
Benson White & Company has been employed by the Board of Directors as the
investment adviser (the "Adviser") for each Portfolio of the Fund pursuant to an
Investment Advisory Agreement entered into by the Fund on behalf of each
Portfolio. The Adviser supervises all aspects of the Fund's operations and
provides investment advice and portfolio management services to the Fund.
Pursuant to the Advisory Agreements and subject to the supervision of the Fund's
Board of Directors, the Adviser makes the Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Portfolio's investments.

13
<PAGE>

The Adviser provides persons satisfactory to the Board of Directors of
the Fund to serve as officers of the Fund. Such officers, as well as certain
other employees and directors of the Fund, may be directors, officers or
employees of the Adviser or its affiliates.

The Adviser also provides the Fund with supervisory personnel who will
be responsible for supervising the performance of administrative services,
accounting and related services, net asset value and yield calculation, reports
to and filings with regulatory authorities, and services relating to such
functions. However, the Administrator will provide personnel who will be
responsible for performing the operational components of such services. The
personnel rendering such supervisory services may be employees of the Adviser,
of its affiliates or of other organizations. The Advisory Agreements for each
Portfolio were most recently approved, on July 31, 1995 by the Board of
Directors, including a majority of the directors who are not interested persons
(as defined in the Investment Company Act of 1940) of the Fund or the Adviser.

The Advisory Agreements have a term which extends to July 31, 1997, and
may be continued in force thereafter for successive twelve-month periods
beginning each August 1, provided that such continuance is specifically approved
annually by majority vote of the respective Portfolio's outstanding voting
securities or by the Fund's Board of Directors, and in either case by a majority
of the directors who are not parties to the Advisory Agreement or interested
persons of any such party, by votes cast in person at a meeting called for the
purpose of voting on such matter.

The Advisory Agreements are terminable without penalty by the Portfolio
on sixty days' written notice when authorized either by majority vote of the
outstanding voting shares of the Portfolio or by a vote of a majority of the
Fund's Board of Directors, or by the Adviser on sixty days' written notice, and
will automatically terminate in the event of an assignment. The Advisory
Agreements provide that in the absence of willful misfeasance, bad faith or
gross negligence on the part of the Adviser, or of reckless disregard of its
obligations thereunder, the Adviser shall not be liable for any action or
failure to act in accordance with its duties thereunder.

Adviser's Fees

Pursuant to the terms of the Advisory Agreements, each Portfolio will
pay monthly advisory fees equal to 0.75% of such Portfolio's average daily net
asset per annum. This fee is higher than the fee paid by most other mutual funds
because of the provision of the individualized asset allocation, risk management
and reporting services offered through the Life Cycle Program. Such other
services include individualized age-based annual asset allocation, the
application of hurdle rate risk management, and preparation and annual
dissemination of an individualized Life Cycle Program participant account
statement. Any portion of the advisory fees received by the Adviser may be used
by the Adviser to provide investor and administrative services and for
distribution of Fund shares. The Adviser reserves the right to assess an
administrative account charge in connection with the Life Cycle Program
participants. The Adviser may voluntarily waive a portion of its fee or assume
certain expenses of any Portfolio of the Fund. This would have the effect of
lowering the overall expense ratio of the Portfolio and of increasing yield to
investors in that Portfolio.
See "Expense Limitation" below.

The Adviser earned fees of $11,685, $856, $1,064, $6,218, for the
Equity, Bond, Retirement Income and Harvest Funds, respectively. For the period
ended July 31, 1996, the Adviser voluntarily waived fees of $11,685, $856,
$1,064, $6,218, for the Equity, Bond, Retirement Income and Harvest Funds,
respectively.

Expense Limitation

The Adviser has agreed to reimburse each Portfolio for its expenses
(exclusive of interest, taxes, brokerage, and extraordinary expenses) which in
any year exceed the limits on investment company expenses prescribed by any
state in which the Portfolio's shares are qualified for sale. For the purpose of
this obligation to reimburse expenses, the Portfolio's annual expenses are
estimated and accrued daily, and any appropriate estimated payments are made to
it on a monthly basis. From time to time, the Adviser may voluntarily assume
certain expenses of any Portfolio of the Fund. This would have the effect of
lowering the overall expense ratio of that Portfolio and of increasing yield to
investors in that Portfolio. Subject to the obligations of the Adviser to
reimburse a Portfolio for its excess expenses as described above, the Portfolios
have, under the respective Advisory Agreements, confirmed their obligation for
payment of all their other expenses, including without limitation: fees payable
to the Adviser, Administrator, Custodian, Transfer Agent and Dividend Agent;
brokerage and commission expenses; federal, state or local taxes, including
issuance and transfer taxes incurred by or levied on them; commitment fees,
certain insurance premiums and membership fees and dues in investment company
organizations; interest charges on borrowings; telecommunications expenses;
recurring and non-recurring legal and accounting expenses; costs of organizing

14
<PAGE>
and maintaining the Fund's existence as a corporation; compensation, including
directors' fees, of any directors, officers or employees who are not also
officers of the Adviser or its affiliates and costs of other personnel providing
administrative and clerical services; costs of stockholders' services and costs
of stockholders' reports, proxy solicitations, and corporate meetings; fees and
expenses of registering their shares under the appropriate Federal securities
laws and of qualifying their shares under applicable state securities laws,
including expenses attendant upon the initial registration and qualification of
these shares and attendant upon renewals of, or amendments to, those
registrations and qualifications; and expenses of preparing, printing and
delivering the Prospectus to existing shareholders and of printing shareholder
application forms for shareholder accounts.

The Fund may from time to time hire its own employees or contract to
have management services performed by third parties, and the management of the
Fund intends to do so whenever it appears advantageous to the Fund. The Fund's
expenses for employees and for such services are among the expenses subject to
the expense limitation described above.

The Adviser has voluntarily agreed to cap the expense ratios at 1.95%
for each Portfolio. In order to maintain that expense ratio, the Adviser has
agreed to reimburse expenses as follows: Equity Fund-$103,761; Bond
Fund-$84,120; Retirement Income Fund-$79,729; Harvest Fund-$80,875.

Administrator

The Administrator for the Fund is BISYS Fund Services Limited
Partnership d/b/a BISYS Fund Services (the "Administrator"). BISYS Fund Services
and its affiliated companies, including BISYS Fund Services, Inc., are wholly
owned by BISYS Group, Inc. ("BISYS"). BISYS, headquartered in Little Falls, New
Jersey, supports more than 5,000 financial institutions and corporate clients
through two strategic business units. BISYS Information Services Group provides
image and data processing outsourcing, and pricing analysis to more than 600
banks nationwide. BISYS Investment Services Group designs, administers and
distributes over 30 families of proprietary mutual funds consisting of more than
365 portfolios, and provides 401(k) marketing support, administration, and
recordkeeping services in partnership with banking institutions and investment
management companies. BISYS and its affiliates BISYS Fund Services and BISYS
Fund Services, Inc. have their principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219.

Pursuant to an Administration Agreement dated October 1, 1996 with the
Fund, on behalf of each of the Portfolios, the Administrator provides all
administrative services necessary for the Fund, other than those provided by the
Adviser, subject to the supervision of the Fund's Board of Directors. BISYS Fund
Services, Inc. provides the Fund with accounting services pursuant to a Fund
Accounting Agreement dated October 1, 1996. The Adviser and the Administrator
will provide persons to serve as officers of the Fund. Such officers may be
directors, officers or employees of the Adviser or the Administrator or their
affiliates.

The Administration Agreement is terminable by the Board of Directors of
the Fund or the Administrator, respectively, on written notice of nonrenewal
given at least 90 days prior to the end of the then-current term. The Agreement
shall remain in effect for one year from the date of the conversion of services
to BISYS data processing system, and subject to annual approval of the Fund's
Board of Directors for one-year periods thereafter. The Agreement provides that
in the absence of willful misfeasance, bad faith or gross negligence on the part
of the Administrator, or reckless disregard of its obligations thereunder, the
Administrator shall not be liable for any action or failure to act in accordance
with its duties thereunder.

Under the Administration Agreement with each Portfolio, the
Administrator provides all administrative services, including, without
limitation: (i) provides services of persons competent to perform such
administrative and clerical functions as are necessary to provide effective
administration of the Fund, including maintaining certain records described in
Rule 31a-1 under the 1940 Act, (ii) oversees the performance of administrative
and professional services to the Fund by others, including the Fund's Custodian;
(iii) prepares, but does not pay for, the periodic updating of the Fund's
Registration Statement, Prospectus and Statement of Additional Information in
conjunction with Fund counsel, including the printing of such documents for the
purpose of filings with the Securities and Exchange Commission and state
securities administrators, prepares the Fund's tax returns, and prepares reports
to the Fund's shareholders and the Securities and Exchange Commission; (iv)
prepares in conjunction with Fund counsel, but does not pay for, all filings
under the securities or "Blue Sky" laws of such states or countries as are
designated by the Distributor, which may be required to register or qualify, or
continue the registration or qualification, of the Fund and/or its shares under
such laws; (v) calculation of yield and total return for each Portfolio; (vi)
monitors daily and periodic compliance with respect to all requirements and
restrictions of the Investment Company Act, the Internal Revenue Code and the
Prospectus; and (vii) monitors and evaluates daily income and expense accruals,
and sales and redemptions of shares of the Portfolios.

15
<PAGE>

BISYS Fund Services Inc. provides, pursuant to a Fund Accounting
Agreement dated October 1, 1996 the Fund with all accounting services, including
but no limited to: (i) daily computation of net asset value for each Portfolio;
(ii) maintenance of security ledgers and books and records as required by the
Investment Company Act; (iii) production of the Portfolio and general ledger
reports and (iv) reconciliation of accounting records.

The Fund Accounting Agreement is terminable at any time, without the
payment of any penalty, by the Fund or BISYS Fund Services, Inc. on written
notice of nonrenewal given at least 60 days prior to the end of the then-current
term. The Fund Accounting Agreement shall remain in effect for the same periods
as the Administration Agreement subject to annual approval by the Fund's Board
of Directors. The Fund Accounting Agreement provides that in the absence of
willful misfeasance, bad faith or gross negligence on the part of BISYS Fund
Services, Inc., or reckless disregard of its obligations thereunder, BISYS Fund
Services, Inc. shall not be liable for any action or failure to act in
accordance with its duties thereunder.

Administrator's Fees

For the services rendered to the Fund by the Administrator, the Fund
pays the Administrator an annual fee paid monthly equal to 0.20% of the Fund's
aggregate average daily net assets up to $100 million, 0.15% of the Fund's
aggregate average daily net assets between $100 and $500 million, and 0.10% of
the Fund's aggregate average daily net assets over $500 million.

In return for providing the Fund with all accounting related services,
the Fund pays BISYS Fund Services, Inc. $30,000 per year plus out-of-pocket
expenses for such services.

For the period ended July 31, 1996, Furman Selz LLC, the previous
Administrator, earned $208,332 for services provided to the Fund, consisting of
$52,083 from each of the four individual portfolios.

Custodian, Transfer Agent and Dividend Agent

The Bank of New York serves as custodian for each Portfolio's cash and
securities. Pursuant to a Custodian Agreement with the Fund, it is responsible
for maintaining the books and records of the Fund's portfolio securities and
cash. The Custodian does not assist in, and is not responsible for, investment
decisions involving assets of the Fund.
BISYS Fund Services, Inc. acts as each Portfolio's transfer and dividend agent.

TAXES

The Fund has qualified and intends to continue to qualify under the
Internal Revenue Code of 1986, as amended ("Code"), as a regulated investment
company. As a regulated investment company, the Fund is not subject to federal
income taxes on its investment company taxable income and its long-term capital
gains that it distributes to its shareholders, provided that at least 90% of its
investment company taxable income and at least 90% of its tax exempt net
interest income for the taxable year is distributed and numerous other
requirements concerning regulated investment companies are satisfied. The Fund's
policy is to distribute as dividends each year 100% (and in no event less than
90%) of its investment company taxable income and tax exempt net interest
income. Each Portfolio will be treated as a separate corporation and generally
will have to comply with the qualifications and other requirements applicable to
regulated investment companies without regard to other Portfolios. If for any
taxable year a Portfolio does not qualify as a regulated investment company, all
of its taxable income would be taxable at corporate rates and no distributions
would be deductible.

The Fund has adopted a policy of declaring dividends monthly, except
for the Equity Fund which declares dividends quarterly, in an amount based on
its net investment income. The amount of each dividend may differ from actual
net investment income calculated in accordance with federal income tax
principles. Dividend distributions will be made on the twentieth day of each
month. Dividends paid from taxable income, if any, and distributions of any
realized short term capital gains (whether from tax exempt or taxable
obligations) are taxable to shareholders as ordinary income, whether received in
cash or reinvested in additional shares of the Fund. Distributions of net
realized capital gains after utilization of capital loss carryforwards, if any,
are made annually to meet applicable distribution and excise tax requirements.
Distributions paid by the Portfolios may result in a liability (or increased
liability) under the alternative minimum tax.

16
<PAGE>

The Fund may be subject to state or local tax in jurisdictions in which
the Fund is organized or may be deemed to be doing business. However, Maryland
taxes regulated investment companies in a manner that is generally similar to
the federal income tax rules described herein.

Distributions may be subject to state and local income taxes. In
addition, the treatment of the Fund and its shareholders in those states that
have income tax laws might differ from their treatment under the federal income
tax laws. Some states exempt from state personal income tax distributions
received from the Fund only to the extent such distributions are derived from
interest on obligations issued by such state or its municipalities or political
subdivisions. Shareholders should consult with their own tax advisors with
respect to any state or local taxes. In addition, shareholders should review
with their tax advisors the state and local income tax consequences of the
Fund's investing in certain investments issued by agencies and instrumentalities
of the U.S. Government and in repurchase and reverse repurchase agreements and
of the Fund's engaging in securities loans.

If the Fund acquires debt instruments that were originally issued at a
discount, e.g., zero coupon bonds, it will be required to include annually in
gross income or, in the case of tax-exempt instruments issued at a discount, in
tax-exempt income, a portion of the "original issue discount" that accrues over
the term of the obligation regardless of whether the income is received by the
Fund, and to make distributions accordingly. To insure that the Fund has
sufficient cash to meet this distribution requirement, the Fund may borrow funds
on a short-term basis or sell certain investments. Since a substantial
percentage of the Fund's dividends are expected to be reinvested and dividends
that are declared and automatically reinvested satisfy the distribution
requirement, the Fund expects to satisfy the distribution requirement even if it
owns obligations with original issue discount. Shareholders will realize taxable
income on the automatic reinvestment of dividends that are attributable to
original issue discount on taxable obligations.

The Code imposes a nondeductible 4% excise tax on a Portfolio unless it
meets certain requirements with respect to distributions of ordinary income and
capital gain net income. The formula requires payment to shareholders during a
calendar year of distributions representing at least 98% of each Portfolio's
ordinary income for the calendar year, plus at least 98% of the excess of its
capital gains over its capital losses realized during the one-year period ending
October 31 during such year, which shall be reduced (but not below net capital
gain) by the amount of the Portfolio's net ordinary loss for the year. It is
anticipated that this provision will not have any material impact on any
Portfolio.

Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes, which may decrease the net return on
foreign investments as compared to dividends and interest paid by domestic
issuers. The Fund does not expect that any Portfolio will qualify to elect to
pass through to its shareholders the right to take a foreign tax credit for
foreign taxes withheld from dividends and interest payments.

For federal income tax purposes, distributions of net capital gains
(the excess of net long-term capital gains over net short-term capital loss), if
any, are taxable as net capital gains regardless of the length of time
shareholders have owned their shares. Although the Tax Reform Act of 1986
eliminated the preferential treatment previously available for net capital
gains, the preferential treatment for net capital gains was restored, to some
extent, by the Revenue Reconciliation Act of 1990, which, in limited
circumstances, places a 28% ceiling on the marginal rate applicable to net
capital gains realized by individuals. Distributions attributable to short-term
capital gains (whether from tax exempt or taxable obligations) are taxable as
ordinary income for federal income tax purposes. Generally, on the sale or
exchange of obligations held for more than one year, gain realized by a
Portfolio that is not attributable to original issue discount or certain market
discount will be long-term capital gain. Such capital gain, if any, will be
distributed as capital gain dividends. Gain on the disposition of a tax-exempt
bond purchased at a market discount generally will be treated as ordinary
income, rather than capital gain, to the extent of accrued market discount.
Capital gain dividends, designated as such in a written notice to investors
mailed not later than 60 days after a Portfolio taxable year closes, will be
taxed as long-term capital gain. However, if an investor receives a capital gain
dividend and sells shares after holding them for six months or less (not
including periods during which the shareholder holds an offsetting position),
then any loss realized on the sale will be treated as long-term capital loss to
the extent of such capital gain dividend. If any net capital gains are retained
by a Portfolio for reinvestment, requiring federal income taxes to be paid
thereon by such Portfolio, the Portfolio will elect to treat such capital gains
as having been distributed to shareholders. As a result, shareholders will
report such capital gains as net capital gains, will be able to claim their
share of federal income taxes paid by the Portfolio on such gains as a credit
against their own federal income tax liability, and will be entitled to increase
the adjusted tax basis of their Portfolio shares by 65% of their share of the
undistributed gain. Distributions of net capital gains are not eligible for the
dividends received deduction.

17
<PAGE>

All taxable dividends from investment company taxable income are
taxable as ordinary income. It is not expected that any income distributions
from the Portfolios will qualify for the dividends received deduction for
corporations.

Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the value of a share on the reinvestment date.

Redemptions of shares, including exchanges for shares of another
Portfolio, may result in tax consequences (gain or loss) to shareholders and are
also subject to reporting requirements.

The Tax Reform Act of 1986 contained a provision limiting miscellaneous
itemized deductions for individuals and certain other shareholders, such as
estates and trusts, to the extent such miscellaneous itemized deductions do not
exceed 2% of adjusted gross income for a taxable year. However, the Revenue
Reconciliation Act of 1989 provided an exemption from the limitation for
publicly-offered regulated investment companies.

Interest incurred or continued to purchase shares of the other
Portfolios is generally treated as investment interest, and in the case of
non-corporate taxpayers is deductible only to the extent of net investment
income. Under rules used by the Internal Revenue Service to determine when
borrowed funds are used for the purpose of purchasing or carrying particular
assets, the purchase of shares may be considered to have been made with borrowed
funds even though the borrowed funds are not directly traceable to the purchase
of shares.

Under the federal income tax law, the Portfolios will be required to
report to the Internal Revenue Service all distributions of taxable income and
capital gains as well as gross proceeds from the redemption or exchange of
Portfolio shares, except in the case of exempt shareholders, which include most
corporations. Under the backup withholding provisions of Section 3406 of the
Code, distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and their required certifications regarding
their status under the federal income tax law. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld. Corporate shareholders should provide the Portfolios with their
taxpayer identification numbers and certify their exempt status in order to
avoid possible erroneous application of backup withholding.

The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. domestic corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of shares of a Portfolio, including the possibility
that such a shareholder may be subject to a U.S. withholding tax at a rate of
30% (or at a lower rate under an applicable income tax treaty) on amounts
constituting ordinary income received by such person, where such amounts are
treated as income from U.S. sources under the Code.

The federal, state and local income tax rules that apply to the Fund
and its shareholders have changed extensively in recent years, and investors
should recognize that additional changes may be made in the future, some of
which could have an adverse affect on the Fund and its investors for federal
and/or state and local tax purposes. Shareholders should consult their tax
advisors about the application of the provisions of tax law described in this
statement of additional information in light of their particular federal and
state tax situations.

PURCHASE, REDEMPTION AND EXCHANGE

Life Cycle Mutual Funds Distributors, Inc., an affiliate of the
Administrator, serves as the exclusive distributor of the shares of each
Portfolio pursuant to its Distribution Agreement with the Fund. Investors may
open accounts in the Portfolios in the Fund only through the exclusive
Distributor for the Fund. Under the Distribution Agreement, the Distributor, for
nominal consideration and as agent for the Fund, will solicit orders for the
purchase of Fund shares, provided that any subscriptions and orders will not be
binding on the Fund until accepted by the Fund as principal. The material
relating to the purchase, redemption and exchange of Portfolio shares in the
Prospectus is incorporated herein by reference and investors should refer to the
Prospectus for information relating to these areas.

18
<PAGE>
DIVIDENDS AND DISTRIBUTIONS

Net investment income is declared as dividends and paid monthly, except
for the Equity Fund, which declares and pays dividends quarterly; if an
investor's shares are redeemed during a month or quarter, depending on the
Portfolio, accrued but unpaid dividends are paid with the redemption proceeds.
Substantially all the realized net capital gains for the Portfolios, if any, are
declared and paid on an annual basis. Dividends are payable to shareholders of
record at the time of declaration.

Dividends of each Portfolio are automatically reinvested in additional
Portfolio shares unless the shareholder has elected to have them paid in cash.

The net investment income of the Fund for each business day is
determined immediately prior to the determination of net asset value. Net
investment income for other days is determined at the time net asset value is
determined on the prior business day. See "Purchase of Shares" and "Redemption
of Shares" in the Prospectus.

NET ASSET VALUE

Net asset value per share for each of the Portfolios is determined by
subtracting from the value of the Portfolio's total assets the amount of its
liabilities and dividing the remainder by the number of its outstanding shares.
The value of each security for which readily available market quotations exist
is based on a decision as to the broadest and most representative market for the
security; the value is based either on the last sale price on a national
securities exchange, or, in the absence of recorded sales, at the readily
available closing bid price on such exchanges, or at the quoted bid price in the
over-the-counter market. Assets for which market quotations are not readily
available are valued in accordance with procedures established by the Fund's
Board of Directors, including use of an independent pricing service or services
which use prices based on yields or prices of comparable Government obligations,
indications as to values from dealers and general market conditions.

Each of the Portfolios computes its net asset value once daily on
Monday through Friday, except that the net asset value is not computed for a
Portfolio on the holidays listed herein. The Fund does not determine net asset
value per share on the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.

The Portfolios compute net asset value at 4:00 p.m. Eastern Standard
Time. The days on which a Fund's net asset value is determined are its business
days.

COMPUTATION OF YIELD

All the Portfolios compute yield based on a 30-day (or one month)
period ended on the date of the most recent balance sheet included in the
registration statement, computed 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, according to the following formula:

YIELD = 2 [ ( a-b + 1)6 - 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 dividends.

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

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<PAGE>

For the 30 day period ended July 31, 1996, the annualized yields for
the Bond Fund, the Retirement Income Fund and the Harvest Fund were 2.38%, 2.87%
and 2.69%, respectively.

Future yields will depend on the type, quality, and maturities of the
investments held by the Portfolios, changes in interest rates on investments,
and the Portfolios' expenses during the period.

Computation of Total Return

The total return must be displayed in any advertisement containing the
yield of any of these Portfolios. Total return is the average annual total
return for the 1-, 5- and 10-year period ended on the date of the most recent
balance sheet included in the Statement of Additional Information, computed by
finding the average annual compounded rates of return over 1-, 5- and 10-year
periods that would equate the initial amount invested to the ending redeemable
value according to the following formula:

n
P(1+T) = ERV

Where: P = a hypothetical initial investment of $1000

T = average annual total return

n = number of years

ERV = ending redeemable value of a
hypothetical $1000 payment made at
the beginning of the 1-, 5- or
10-year periods at the end of the 1-,
5- or 10-year periods (or fractions
thereof).

Because the Portfolios have not had a registration in effect for 1, 5
or 10 years the period during which the registration has been effective shall be
substituted.

For the period from October 2, 1995 and October 4, 1995 (commencement
of operations) through July 31, 1996, the total returns for the Equity Fund, the
Retirement Income Fund, the Harvest Fund and the Bond Fund were 8.05%, 0.39%,
- -0.02% and 2.05%, respectively.

Yield information may be useful for reviewing the performance of the
Portfolio and for providing a basis for comparison with other investment
alternatives. However, unlike bank deposits or other investments which pay a
fixed yield for a stated period of time, the Portfolios' yield does fluctuate,
and this should be considered when reviewing performance or making comparisons.

From time to time evaluations of performance of the Portfolios made by
independent sources may be used in advertisements concerning the Portfolios.
These sources may include Lipper Analytical Services, Wiesenberger Investment
Company Service, Donoghue's Money Fund Report, Barron's, Business Week, Changing
Times, Financial World, Forbes, Fortune, Money, Personal Investor, Bank Rate
Monitor, and The Wall Street Journal.

DESCRIPTION OF COMMON STOCK

The Fund was incorporated in Maryland on June 23. The authorized
capital stock of the Fund consists of 20 billion shares of stock having a par
value of one-tenth of one cent ($.001) per share. The Fund's Board of Directors
is authorized to divide the unissued shares into separate series of stock, each
series representing a separate, additional investment portfolio. The Board
currently has authorized the division of the unissued shares into four series,
one for each of the Portfolios. Shares of all series will have identical voting
rights, except where, by law, certain matters must be approved by a majority of
the shares of the affected series. Each share of any series of shares when
issued has equal dividend, distribution, liquidation and voting rights within
the series for which it was issued, and each fractional share has those rights
in proportion to the percentage that the fractional share represents of a whole
share. Shares will be voted in the aggregate. There are no conversion or
preemptive rights in connection with any shares of the Fund. All shares, when
issued in accordance with the terms of the offering, will be fully paid and
non-assessable. Shares are redeemable at net asset value, at the option of the
investor.

20
<PAGE>

The shares of the Fund have non-cumulative voting rights, which means
that the holders of more than 50% of the shares outstanding voting for the
election of directors can elect 100% of the directors if the holders choose to
do so, and, in that event, the holders of the remaining shares will not be able
to elect any person or persons to the Board of Directors. Unless specifically
requested by an investor who is a investor of record, the Fund does not issue
certificates evidencing Fund shares.

As a general matter, the Fund will not hold annual or other meetings of
the Funds' shareholders. This is because the By-laws of the Fund provide for
annual meetings only (a) for the election of directors, (b) for approval of the
Fund's revised investment advisory agreement with respect to a particular class
or series of stock, (c) for approval of revisions to the Fund's distribution
agreement with respect to a particular class or series of stock, and (d) upon
the written request of holders of shares entitled to cast not less than
twenty-five percent of all the votes entitled to be cast at such meeting. Annual
and other meetings may be required with respect to such additional matters
relating to the Fund as may be required by the Investment Company Act of 1940
(the "Act") including the removal of Fund directors and communication among
shareholders, any registration of the Fund with the Securities and Exchange
Commission or any state, or as the Directors may consider necessary or
desirable. Each Director serves until the next meeting of shareholders called
for the purpose of considering the election or reelection of such Director or of
a successor to such Director, and until the election and qualification of his or
her successor, elected at such meeting, or until such Director sooner dies,
resigns, retires or is removed by the vote of the shareholders.

Rule 18f-2 under the Act provides that any matter required to be
submitted by the provisions of the Act or applicable state law, or otherwise, to
the holders of the outstanding voting securities of an investment company such
as the Fund shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each class or
series affected by such matter, i.e., by a majority of the outstanding shares of
each Portfolio. Rule 18f-2 further provides that a class or series shall be
deemed to be affected by a matter unless it is clear that the interests of each
class or series in the matter are substantially identical or that the matter
does not affect any interest of such class or series. However, the Rule exempts
the selection of independent public accountants, the approval of principal
distribution contracts and the election of directors from the separate voting
requirements of the Rule.

SHAREHOLDER SERVICING AND DISTRIBUTION PLAN

The Fund, on behalf of each of the Portfolios, has adopted a
distribution and service plan, pursuant to Rule 12b-1 under the Act (the
"Rule"). The Rule provides that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. The Plan provides that each Portfolio may bear
certain expenses and costs which in the aggregate are subject to a maximum of
0.75% per annum of such Portfolio's average daily net assets. Life Cycle Mutual
Funds Distributors, Inc. serves as distributor of the shares of the Fund and is
an affiliate of the Administrator. Pursuant to the Plan, each Portfolio entered
into a Distribution Agreement with the Distributor and each Portfolio also
entered into a Shareholder Servicing Agreement with the Adviser. For its
services under the Distributor Agreement, the Distributor will receive
compensatory payments from the Portfolio of 0.50% per annum of the average daily
net assets of each Portfolio to permit it to make payments to broker-dealers and
other financial institutions with which it has written agreements and whose
clients are Fund shareholders (each a "Broker-Dealer") for providing
distribution assistance and to be used to provide distribution assistance and
promotional support to the Fund. For its service under the Shareholder Servicing
Agreement, the Adviser will receive a service fee from each Portfolio equal to
.25% per annum of each Portfolio's average daily net assets to compensate it for
providing shareholder services to Fund shareholders and compensate parties with
which it has written agreements and whose clients are Fund shareholder for
providing servicing to their clients ("Shareholder Servicing").

Each Shareholder Servicing Agent and Broker-Dealer will, as agent for
its customers, among other things; answer customer inquiries regarding account
status and history, the manner in which purchases and redemptions of shares of
each Portfolio may be effected and certain other matters pertaining to the Fund;
assist shareholders in designating and changing dividend options, account
designations and addresses; provide necessary personnel and facilities to
establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder designated accounts;
furnish (either separately or on an integrated basis with other reports sent to
a shareholder by the Portfolios) monthly and year-end statements and
confirmations of purchases and redemptions, as required by Rule 10b-10 under the
Securities Exchange Act of 1934; transmit, on behalf of each Portfolio, proxy
statements, annual reports, updating prospectuses and other communications from
each Portfolio to shareholders; receive, tabulate and transmit to the each
Portfolio, proxies executed by shareholders with respect to meeting of
shareholders of the Fund; and provide such other related services as the Fund or
a shareholder may request.

21
<PAGE>

The Plan, the Shareholder Servicing Agreements and the Distribution
Agreement each provide that the Adviser and the Distributor may make payments
from time to time from their own resources which may include the advisory fee
and the asset based sales changes and past profits for the following purposes:
to defray the costs of and to compensate others, including financial
intermediaries with whom the Distributor or Adviser has entered into written
agreements, for performing shareholder servicing and related administrative
functions on behalf of each Portfolio; to compensate certain financial
intermediaries for providing assistance in distributing each Portfolio's shares;
to pay the costs of printing and distributing the Portfolio's prospectus to
prospective investors; and to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including the salaries and/or
commissions of sales personnel in connection with the distribution of the
Portfolio's shares. Further, it provides that the Adviser may use its service
fee for the purposes enumerated in (i) above. The Distributor or the Adviser, as
the case may be, in their sole discretion, will determine the amount of such
payments made pursuant to the Plan with the Shareholder Servicing Agents and
Broker-Dealers they have contracted with, provided that such payments made
pursuant to the Plan will not increase the amount which a Portfolio is required
to pay to the Distributor or the Adviser for any fiscal year under the
Shareholder Servicing Agreements or otherwise.

Shareholder Servicing Agents and Broker-Dealers may charge investors a
fee in connection with their use of specialized purchase and redemption
procedures offered to investors by the Shareholder Servicing Agents and
Broker-Dealers. In addition, Shareholder Servicing Agents and Broker-Dealers
offering purchase and redemption procedures similar to those offered to
shareholders who invest in a Portfolio directly may impose charges, limitations,
minimums and restrictions in addition to or different from those applicable to
shareholders who invest in a Portfolio directly. Accordingly, the net yield to
investors who invest through Shareholder Servicing Agents and Broker-Dealers may
be less than by investing in the Portfolio directly. An investor should read the
Prospectus in conjunction with the materials provided by the Shareholder
Servicing Agent and Broker-Dealer describing the procedures under which
Portfolio shares may be purchased and redeemed through the Shareholder Servicing
Agent and Broker-Dealer.

The Glass-Steagell Act limits the ability of a depository institution
to become an underwriter or distributor of securities. However, it is the Fund's
position that banks are not prohibited from acting in other capacities for
investment companies, such as providing administrative and shareholder account
maintenance services and receiving compensation from the Distributor for
providing such services. However, this is an unsettled area of the law and if a
determination contrary to the Fund's position is made by a bank regulatory
agency or court concerning shareholder servicing and administration payments to
banks from the Distributor, any such payments will be terminated and any shares
registered in the banks' names, for their underlying customers, will be
re-registered in the name of the customers at no cost to each Portfolio or its
shareholders. In addition, state securities laws on this issue may differ from
the interpretation of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.

In accordance with the Rule, the Plan provides that all written
agreements relating to the Plan entered into by the Fund, on behalf of a
Portfolio, the Distributor or the Adviser, and the Shareholder Servicing Agents,
Broker- Dealers, or other organizations must be in a form satisfactory to the
Fund's Board of Directors. In addition, the Plan requires the Fund and the
Distributor to prepare, at least quarterly, written reports setting forth all
amounts expended for distribution purposes by the Fund and the Distributor
pursuant to the Plan and identifying the distribution activities for which those
expenditures were made.

For the period ended July 31, 1996, the Equity, Bond, Retirement Income
and Harvest Funds incurred distribution expenses of $10,880, $795, $938 and
$5,055, respectively.

BROKERAGE AND PORTFOLIO TURNOVER

Brokerage

The Adviser makes the Portfolios' portfolio decisions and determines
the broker to be used in each specific transaction with the objective of
negotiating a combination of the most favorable commission and the best price
obtainable on each transaction (generally defined as best execution). When
consistent with the objective of obtaining best execution, brokerage may be
directed to persons or firms supplying investment information to the Adviser or
portfolio transactions may be effected by the Adviser. Neither the Portfolio nor

22
<PAGE>

the Adviser has entered into agreements or understandings with any brokers
regarding the placement of securities transactions because of research services
they provide. To the extent that such persons or firms supply investment
information to the Adviser for use in rendering investment advice to the
Portfolio, such information may be supplied at no cost to the Adviser and,
therefore, may have the effect of reducing the expenses of the Adviser in
rendering advice to the Portfolio. While it is impossible to place an actual
dollar value on such investment information, its receipt by the Adviser probably
does not reduce the overall expenses of the Adviser to any material extent.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best execution, the Adviser may
consider sales of shares of the Portfolio as a factor in the selection of
brokers to execute portfolio transactions for the Portfolio.

The investment information provided to the Adviser is of the type
described in Section 28(e) of the Securities Exchange Act of 1934 and is
designed to augment the Advisor's own internal research and investment strategy
capabilities. Research services furnished by brokers through which the Portfolio
effects securities transactions are used by the Adviser in carrying out its
investment management responsibilities with respect to all its clients'
accounts. There may be occasions where the transaction cost charged by a broker
may be greater than that which another broker may charge if the Adviser
determines in good faith that the amount of such transaction cost is reasonable
in relation to the value of brokerage and research services provided by the
executing broker. The Adviser may consider the sale of shares of the Portfolio
by brokers including the Distributor as a factor in its selection of brokers of
Portfolio transactions.

The Portfolio may deal in some instances in securities which may not be
included presently in the Standard & Poor's 500 Index. When transactions are
executed in such securities, the Portfolio will seek to obtain best execution.

The Fund may also purchase and sell portfolio securities which
constitute principal transactions. Debt instruments are normally purchased
directly from the issuer, from banks and financial institutions or from an
underwriter or market maker for the securities. There usually are not brokerage
commissions paid for such purchases. Any transactions involving such securities
for which the Fund pays a brokerage commission will be effected at the best
price and execution available. Purchases from underwriters of portfolio
securities include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked price. The Fund may purchase Government
obligations with a demand feature from banks or other financial institutions at
a negotiated yield to the Fund based on the applicable interest rate adjustment
index for the security. The interest received by the Fund is net of a fee
charged by the issuing institution for servicing the underlying obligation and
issuing the participation certificate, letter of credit, guarantee or insurance
and providing the demand repurchase feature.

Allocation of transactions, including their frequency, to various
dealers is determined by the Adviser in its best judgment and in a manner deemed
in the best interest of shareholders of the Fund rather than by a formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price.

Investment decisions for the Fund will be made independently from those
for any other investment companies or accounts that may become managed by the
Adviser or its affiliates. If, however, the Fund and other investment companies
or accounts managed by the Adviser are simultaneously engaged in the purchase or
sale of the same security, the transactions may be averaged as to price and
allocated equitably to each account. In some cases, this policy might adversely
affect the price paid or received by the Fund or the size of the position
obtainable for the Fund. In addition, when purchases or sales of the same
security for the Fund and for other investment companies managed by the Adviser
occur contemporaneously, the purchase or sale orders may be aggregated in order
to obtain any price advantage available to large denomination purchasers or
sellers.

For the period ended July 31, 1996, the Equity, Bond, Retirement Income
and Harvest Funds paid brokerage commission of $14,067, $0, $0, and $0,
respectively.

Portfolio Turnover

Each Portfolio's average annual portfolio turnover rate, i.e., the
ratio of the lesser of sales or purchases to the monthly average value of the
portfolio (excluding from both the numerator and the denominator all securities
with maturities at the time of acquisition of one year or less) is expected to
be high. Purchases and sales are made for each Portfolio whenever necessary in
the Adviser's opinion, to meet the Portfolio's objective. In order to qualify as
a regulated investment company, less than 30% of each Portfolio's gross income
(including tax exempt income) must be derived from the sale or other disposition
of stock, securities or certain investments held for less than three months.
Although increased Portfolio turnover may increase the likelihood of additional
capital gains for the Portfolios, the Portfolios expect to satisfy the 30%
income test.

23
<PAGE>

The portfolio turnover rate for the period ended July 31, 1996 for the
Equity, Bond, Retirement Income and Harvest Funds were 132%, 0%, 0% and 0%,
respectively.

COUNSEL AND INDEPENDENT AUDITORS

Legal matters in connection with the issuance of shares of common stock
of the Fund are passed upon by Battle Fowler LLP, 75 East 55th Street, New York,
New York 10022. Coopers & Lybrand L.L.P., 2400 Eleven Penn Center, Philadelphia,
PA 19103, independent certified public accountants, have been selected as
auditors for the Fund.

FINANCIAL STATEMENTS

The Fund's Financial Statements, including the notes thereto, dated as
of July 31, 1996, which have been audited by Coopers & Lybrand L.L.P., are
included in this Statement of Additional Information.

24
<PAGE>

RATINGS OF CORPORATE OBLIGATIONS

Description of Moody's Investors Service, Inc.'s Corporate Bond Ratings:

Aaa--Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

A--Bonds which are rated A posses favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

Baa--Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Ba--Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B--Bonds which rated B generally lack characteristics of the desirable
Investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa--Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.

Ca--Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Moody's ratings for short-term loans are designated Moody's Investment
Grade (MIG). This distinction is in recognition of the differences between
short-term and long-term credit risk. Loans bearing the designation MIG 1 are of
the best quality, enjoying strong protection by establishing cash flow of funds
for their servicing or by established and broad-based access to the market for
refinancing, or both. Loans bearing the designation MIG 2 are of high quality,
with margins of protection ample although not so large as in the preceding
group. A short-term issue having a demand feature (i.e., payment relying on
external liquidity and usually payable on demand rather than fixed maturity
dates) is differentiated by Moody's with the use of the Symbol VMIG, instead of
MIG.

Moody's also provides credit ratings for tax exempt commercial paper.
These are promissory obligations (1) not having an original maturity in excess
of nine months, and (2) backed by commercial banks. Notes bearing the
designation P-1 have a superior capacity for repayment. Notes bearing the
designation P-2 have a strong capacity for repayment.

25
<PAGE>

Description of Standard & Poor's Ratings Services' Corporate Bond Ratings:

AAA--Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.

AA--Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.

A--Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in the highest rated
categories.

BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic condition or changing circumstances are more likely
to lead to a weakened capacity to pay interest and repay principal for bonds in
this category than for bonds in higher rated categories.

BB, B, CC, CCC--Bonds rated BB, B, CC, CCC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lower degree of speculation and CCC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

C--Bonds rated C are income bonds on which no interest is being paid.

D--Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.

Unrated Bonds

Bonds which are unrated expose the investor to risks with respect to
the issuer's capacity to pay interest and principal which are similar to the
risks of lower-rated obligations. The safety of an investment in an unrated
obligation, therefore, is more reliant as a general proposition on an investment
advisor's judgment, analysis and experience than an investment in a higher rated
obligation.

Description of Fitch Investors Service, Inc.'s Corporate Bond Ratings:

AAA--Securities in this category are considered to be investment grade
and of the highest credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

AA--Securities in this category are considered to be investment grade
and of high credit quality. The obligor's ability to pay interest and repay
principal is very strong although not quite as strong as securities rated "AAA."
As securities rated in the "AAA" and "AA categories are not significantly
vulnerable to foreseeable future developments short-term debt of these issuers
is generally rated F-1+."

A--Securities in this category are considered to be investment grade
and of high credit quality. The Obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than securities with higher
ratings.

BBB--Securities in this category are considered to be investment grade
and of satisfactory quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment.

Plus (+) or Minus (-)--The ratings from AA to C (i.e. five categories
below BBB) may be modified by the addition of a plus or minus sign to indicate
the relative position of a credit within the rating category.

NR--Indicates that Fitch does not rate the specific issue.

26
<PAGE>

Conditional--A conditional rating is premised on the successful
completion of a project or the occurrence of a specific event.

Description of Duff & Phelps Credit Rating Co.'s Corporate Bond Ratings:

AAA--Highest credit quality. The risk factors are negligible, being
only slightly more than for risk- free U.S. Treasury debt.

AA--High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.

A--Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.

BBB--Below-average protection factors but within the definition of
investment grade securities but still considered sufficient for prudent
investment. Considerable variability in risk during economic cycles.

Plus (+) Minus (-)--The ratings from AA to C (i.e. five categories
below BBB) may be modified by the addition of a plus or minus sign to indicate
the relative position of a credit within the rating category.

Commercial Paper Ratings

Description of Standard & Poor's Ratings Services' Two Highest Commercial Paper
Ratings:

A--Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety.

A-1--This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.

A-2--Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.

Description of Moody's Investors Service, Inc.'s Two Highest Commercial
Paper Ratings:

Moody's employs the following designations, both judged to be
investment grade, to indicate the relative repayment capacity of rated issues:
Prime-1, highest quality; Prime-2, higher quality.

Money Market Fund Ratings

Description of Standard & Poor's Ratings Services' Two Highest Money Market Fund
Ratings:

AAAm--Safety is excellent. Superior capacity to maintain principal
value and limit exposure to loss.

AAm--Safety is very good. Strong capacity to maintain principal value
and limit exposure to loss.

Description Of Moody's Investors Service, Inc.'s Two Highest Money
Market Fund Ratings:

Aaa--Money Market Funds rated Aaa have superior quality assets and
management.

Aa--Money Market Funds rated Aa have strong quality assets and
management.

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF THE LIFE CYCLE FUNDS, INC.:

We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Life Cycle Equity, Life Cycle
Bond, Life Cycle Retirement Income, and Life Cycle Harvest Funds (the
"Funds") of the Life Cycle Mutual Funds, Inc. as of July 31, 1996, and the
related statements of operations, changes in net assets and the financial
highlights for each of the periods then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of July 31, 1996, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios comprising the Life Cycle
Mutual Funds, Inc. as of July 31, 1996, and the results of their operations,
the changes in their net assets and their financial highlights for each of
the respective periods then ended, in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania

September 25, 1996

F-1
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.
The Life Cycle Equity Fund(TM)
Portfolio of Investments - July 31, 1996

<TABLE>
<CAPTION>
Shares Cost Value
-------- ---------- ----------
<S> <C> <C> <C>
Common Stocks - 80.65%
Banks - 8.95%
1,850 Banc One Corp. ..................... $ 65,022 $ 64,056
1,400 First Chicago NBD Bancorp .......... 59,571 53,900
1,900 KeyCorp ............................ 72,002 73,388
2,100 National City Corp. ................ 70,862 72,712
---------- ----------
267,457 264,056
---------- ----------
Chemicals - 2.13%
2,100 Nalco Chemical Co. ................. 63,914 63,000
---------- ----------
Financial Services - 6.94%
1,700 Boatmen's Bancshares Inc. .......... 66,777 68,000
2,000 Corestates Financial Corp. ......... 83,401 78,500
1,700 U.S. Bancorp ....................... 52,802 58,225
---------- ----------
202,980 204,725
---------- ----------
Forest Products & Paper - 4.37%
1,900 Potlatch Corp. ..................... 79,908 71,250
1,200 Union Camp Corp. ................... 63,972 57,600
---------- ----------
143,880 128,850
---------- ----------
Holding Companies - 2.50%
2,300 Eastern Enterprises ................ 81,491 73,887
---------- ----------
Insurance - 10.95%
1,900 American General Corp. ............. 68,039 66,025
1,500 Lincoln National Corp. ............. 78,510 63,938
700 Marsh & McLennan Cos., Inc. ........ 66,948 63,438
1,300 St. Paul Companies, Inc. ........... 66,216 67,275
2,100 USLife Corp. ....................... 65,372 62,475
---------- ----------
345,085 323,151
---------- ----------
Oil / Gas - 12.84%
1,000 Amoco Corp. ........................ 69,745 66,875
500 Atlantic Richfield Co. ............. 57,093 58,000
700 Exxon Corp. ........................ 57,548 57,575
600 Mobil Corp. ........................ 66,336 66,225
2,700 Oneok Inc. ......................... 70,025 71,212
1,200 Tenneco Inc. ....................... 63,670 59,100
---------- ----------
384,417 378,987
---------- ----------
</TABLE>

See accompanying notes to financial statements.

F-2
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.
The Life Cycle Equity Fund(TM)
Portfolio of Investments (continued) - July 31, 1996

<TABLE>
<CAPTION>
Shares Cost Value
-------- ------------- ------------
Common Stocks (continued)
<S> <C> <C> <C>
Telecommunications - 8.15%
1,900 Alltel Corp. ...................... $ 63,064 $ 52,013
1,100 Ameritech Corp. ................... 62,079 61,050
1,000 Bell Atlantic Corp. ............... 62,435 59,125
1,400 SBC Communication, Inc. ........... 69,384 68,425
------------- ------------
256,962 240,613
------------- ------------
Tobacco - 2.78%
1,800 American Brands, Inc. ............. 82,295 81,900
------------- ------------

Utilities - 21.04%
2,400 Baltimore Gas & Electric Co. ...... 68,580 61,800
1,800 Carolina Power & Light Co. ........ 64,233 64,800
2,600 Consolidated Edison of New York ... 82,844 70,200
1,400 Duke Power Co. .................... 68,530 67,025
2,000 General Public Utilities Corp ..... 63,120 65,000
2,400 Nicor Inc. ........................ 66,043 68,100
2,600 Pacific Enterprises ............... 65,155 76,375
3,200 Peco Energy Co. ................... 78,369 75,200
3,200 Southern Co. ...................... 77,730 72,400
------------- ------------
634,604 620,900
------------- ------------

Total Investments - 80.65% ........ $2,463,085+ 2,380,069
=============
Cash and other assets, net of
liabilities - 19.35% ............. 571,151
------------
Net Assets - 100.00% .............. $2,951,220
============
+ Cost for book and tax purposes is substantially the same.
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.
The Life Cycle Bond Fund(TM)
Portfolio of Investments - July 31, 1996

<TABLE>
<CAPTION>
Principal Cost Value
----------- ----------- ----------
<S> <C> <C> <C>
U. S. Treasury Obligations -- 65.85%
$40,000 Bills, 4.93%, .................................... $ 39,887 $ 39,887
08/22/1996 ....................................... 19,706 19,377
20,000 Notes, 4.75%,
10/31/1998 ....................................... 20,006 19,605
20,000 Notes, 5.50%,
02/28/1999 ....................................... 39,926 38,413
40,000 Notes, 5.50%,
12/31/2000 ....................................... 29,173 28,910
----------- ----------
30,000 Notes, 5.625%,
02/28/2001 ....................................... 148,698 146,192
----------- ----------
Total Investments -- 65.85% ...................... $148,698+ 146,192
===========
Cash and other assets, net of liabilities -- 34.15% 75,827
----------
Net Assets - 100.00% ............................. $222,019
==========
</TABLE>

+ Cost for book and tax purposes is substantially the same.

See accompanying notes to financial statements.

F-4
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.
The Life Cycle Retirement Income Fund(TM)
Portfolio of Investments - July 31, 1996

<TABLE>
<CAPTION>
Principal Cost Value
----------- ----------- ----------
<S> <C> <C> <C>
U. S. Treasury Obligations -- 71.36%
$30,000 Bills, 4.93% ................................... $ 29,915 $ 29,915
08/22/1996 ..................................... 24,856 24,380
25,000 Notes, 5.125%,
11/30/1998 ..................................... 25,026 24,202
25,000 Notes, 5.50%,
04/15/2000 ..................................... 39,925 38,413
40,000 Notes, 5.50%,
12/31/2000 ..................................... 30,190 29,132
30,000 Notes, 5.75%,
10/31/2000 ..................................... 48,589 48,181
----------- ----------
50,000 Notes, 5.625%,
02/28/200 ...................................... 198,501 194,223
----------- ----------
Total Investments -- 71.36% .................... $198,501+ 194,223
===========
Cash and other assets, net of liabilities -- 28.64% 77,939
----------
Net Assets -- 100.00% .......................... $272,162
==========
</TABLE>

+ Cost for book and tax purposes is substantially the same.

See accompanying notes to financial statements.

F-5
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.
The Life Cycle Harvest Fund(TM)
Portfolio of Investments - July 31, 1996

<TABLE>
<CAPTION>
Principal Cost Value
----------- ----------- ----------
<S> <C> <C> <C>
U. S. Treasury Obligations -- 75.14%
$100,000 Bills, 4.87%,
08/15/1996 ..................................... $ 99,813 $ 99,813
100,000 Bills, 4.96%,
08/22/1996 ..................................... 99,715 99,715
100,000 Bills, 5.11%,
09/19/1996 ..................................... 99,314 99,314
100,000 Bills, 5.04%,
09/26/1996 ..................................... 99,227 99,227
100,000 Bills, 5.17%,
10/10/1996 ..................................... 99,008 99,008
100,000 Bills, 5.18%,
10/17/1996 ..................................... 98,907 98,907
100,000 Bills, 5.25%,
10/24/1996 ..................................... 98,791 98,791
----------- ----------
694,775 694,775
----------- ----------
Total Investments -- 75.14% .................... $694,775+ 694,775
===========
Cash and other assets, net of liabilities -- 24.86% 229,918
----------
Net Assets -- 100.00% .......................... $924,693

</TABLE>

+ Cost for book and tax purposes is substantially the same.

See accompanying notes to financial statements.

F-6
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 1996

<TABLE>
<CAPTION>
EQUITY BOND RETIREMENT HARVEST
FUND FUND INCOME FUND FUND
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (cost
$2,463,085, $148,698; $198,501
$694,775) ....................... $2,380,069 $146,192 $194,223 $694,775
Cash ............................. 229,331 31,870 36,297 191,944
Receivable for investments sold .. 265,744 0 0 0
Receivable for fund shares sold .. 24,764 0 0 0
Interest and dividends receivable 9,601 1,838 2,636 1,870
Receivable from affiliate ........ 0 0 7,017 0
Receivable from Advisor (Note 3) . 51,678 32,037 27,646 28,792
Unamortized organization expense . 28,023 28,060 22,219 28,060
------------ ----------- ------------- -----------
Total assets .................. 2,989,210 239,997 290,038 945,441
------------ ----------- ------------- -----------
LIABILITIES
Payable for fund shares
repurchased ..................... 0 0 600 0
Organization expense payable ..... 9,431 9,431 9,431 9,430
Accrued expenses ................. 28,559 8,547 7,845 11,318
------------ ----------- ------------- -----------
Total liabilities ............. 37,990 17,978 17,876 20,748
------------ ----------- ------------- -----------
NET ASSETS ....................... $2,951,220 $222,019 $272,162 $924,693
============ =========== ============= ===========

NET ASSETS CONSIST OF:
Capital Stock .................... $ 276 $ 23 $ 28 $ 92
Additional paid-in capital ....... 2,917,439 224,502 276,412 924,901
Accumulated net realized gain /
(loss) on investments ........... 116,521 0 0 (300)
Net unrealized depreciation on
investments ..................... (83,016) (2,506) (4,278) 0
------------ ----------- ------------- -----------
NET ASSETS ....................... $2,951,220 $222,019 $272,162 $924,693
============ =========== ============= ===========
Shares of beneficial interest
outstanding .................... 276,239 22,605 27,883 92,499
============ =========== ============= ===========
Net Asset Value per share ........ $ 10.68 $ 9.82 $ 9.76 $ 10.00
============ =========== ============= ===========
Maximum Offering Price per share
($10.68, $9.82, $9.76, $10.00 /
0.9625, respectively) ........... $ 11.10 $ 10.20 $ 10.14 $ 10.39
============ =========== ============= ===========
</TABLE>

See accompanying notes to financial statements.

F-7
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
EQUITY BOND RETIREMENT HARVEST
FUND FUND INCOME FUND FUND
October 2, 1995* October 4, 1995* October 4, 1995* October 4, 1995*
through through through through
July 31, 1996 July 31, 1996 July 31, 1996 July 31, 1996
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest ......................... $ 3,965 $ 5,095 $ 6,616 $ 36,633
Dividend ......................... 52,140 0 0 0
---------------- ---------------- ---------------- ----------------
Total income ................... 56,105 5,095 6,616 36,633
---------------- ---------------- ---------------- ----------------
EXPENSES
Administrative (Note 3) .......... 52,083 52,083 52,083 52,083
Audit ............................ 16,690 1,885 1,975 6,025
Legal ............................ 13,230 1,405 1,270 5,931
Custodian ........................ 7,203 1,348 1,022 1,873
Amortization of organization
expenses ........................ 5,600 5,563 4,387 5,563
Registration ..................... 7,454 6,554 6,554 6,854
Directors' fees .................. 3,000 3,000 3,000 3,000
Advisory (Note 3) ................ 11,685 856 1,064 6,218
12b-1 Distribution fees .......... 10,880 795 938 5,055
Transfer agent (Note 3) .......... 5,571 4,048 1,714 1,648
Insurance ........................ 3,985 3,985 3,985 3,985
Miscellaneous .................... 7,118 5,681 5,495 5,126
---------------- ---------------- ---------------- ----------------
Total expenses before waivers 144,499 87,203 83,487 103,361
Less expenses waived /
reimbursed ................ (115,446) (84,976) (80,793) (87,093)
---------------- ---------------- ---------------- ----------------
Net expenses ................ 29,053 2,227 2,694 16,268
---------------- ---------------- ---------------- ----------------
Net investment income ............ 27,052 2,868 3,922 20,365
---------------- ---------------- ---------------- ----------------
REALIZED AND UNREALIZED ..........
GAIN/(LOSS) ON
INVESTMENTS
Net realized gain / (loss) on
investments .................... 116,521 0 0 (300)
Net unrealized depreciation on
investments .................... (83,016) (2,506) (4,278) 0
---------------- ---------------- ---------------- ----------------
Net realized and unrealized gain /
(loss) on investments .......... 33,505 (2,506) (4,278) (300)
---------------- ---------------- ---------------- ----------------
Net increase / (decrease) in net
assets resulting from operations $ 60,557 $ 362 $ (356) $ 20,065
================ ================ ================ ================
</TABLE>

- ------
* Commencement of operations.

See accompanying notes to financial statements.

F-8
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.
STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
EQUITY BOND RETIREMENT HARVEST
FUND FUND INCOME FUND FUND
October 2, 1995* October 4, 1995* October 4, 1995* October 4, 1995*
through through through through
July 31, 1996 July 31, 1996 July 31, 1996 July 31, 1996
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income .................. $ 27,052 $ 2,868 $ 3,922 $ 20,365
Net realized gain/(loss) on investments 116,521 0 0 (300)
Net change in unrealized depreciation on
investments ........................... (83,016) (2,506) (4,278) 0
---------------- ---------------- ---------------- ----------------
Net increase/(decrease) in net assets
resulting from operations ............. 60,557 362 (356) 20,065
---------------- ---------------- ---------------- ----------------
DIVIDENDS TO SHAREHOLDERS
From net investment income ............. (27,052) (2,868) (3,922) (20,365)
---------------- ---------------- ---------------- ----------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares .......... 3,759,918 198,264 299,865 2,279,287
Net asset value of shares issued to
shareholders in reinvestment of
dividends ............................. 17,037 2,868 3,922 20,098
Net asset value of shares redeemed ..... (884,240) (1,607) (52,347) (1,399,392)
---------------- ---------------- ---------------- ----------------
Net increase in net assets from capital
share transactions .................... 2,892,715 199,525 251,440 899,993
---------------- ---------------- ---------------- ----------------
Total increase in net assets ........... 2,926,220 197,019 247,162 899,693
NET ASSETS
Beginning of period .................... 25,000 25,000 25,000 25,000
---------------- ---------------- ---------------- ----------------
End of period .......................... $2,951,220 $222,019 $272,162 $ 924,693
================ ================ ================ ================

</TABLE>

- ------
* Commencement of operations.

See accompanying notes to financial statements.

F-9
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.
Notes to Financial Statements -- July 31, 1996

1. DESCRIPTION. Life Cycle Mutual Funds(TM), Inc. (the "Fund") is
registered under the Investment Company Act of 1940, as amended, as an open
ended, management investment company and currently consists of four separate
investment portfolios (collectively the "Portfolios"): the Life Cycle Equity
Fund(TM) (the "Equity Fund"), the Life Cycle Bond Fund(TM) (the "Bond Fund"),
the Life Cycle Retirement Income Fund(TM) (the "Retirement Income Fund"), and
the Life Cycle Harvest Fund(TM) (the "Harvest Fund"). The Portfolios are
offered in connection with an age-based asset allocation program (the "Life
Cycle Program") which is designed to meet the long-term retirement investment
needs of individual investors. The Life Cycle Program is intended to manage
investors' retirement assets by making disciplined age-based asset allocation
decisions to achieve this overall objective.

2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies followed by the Fund:

A. Portfolio Valuation. The net asset value per share of the Portfolios
is calculated as of 4:00 p.m. (Eastern Time). Securities listed on an
exchange are valued at the last sales price prior to the time the
valuation is made. If there has been no sale since the immediately
previous valuation, then current bid price is used. Quotations are
taken from the exchange where the security is primarily traded.
Over-the-counter securities are valued on the basis of the closing bid
price. Assets for which market quotations are not readily available
are valued in accordance with procedures established by the Fund's
Board of Directors, including use of an independent pricing service.
Short-term securities with maturities of 60 days or less are valued at
amortized cost, if their terms to maturity at purchase were 60 days or
less, or by amortizing their value on the 61st day prior to maturity,
if their original term to maturity at purchase exceeded 60 days.

B. Securities Transactions and Investment Income. Securities transactions
are recorded on a trade date basis. Realized gains and losses from
securities transactions are recorded on the identified cost basis.
Dividend income is recognized on the ex-dividend date and interest
income, including amortization of premium and accretion of discount,
is accrued daily.

C. Distributions to Shareholders. The Bond Fund, Retirement Income Fund,
and Harvest Fund declare dividends from net investment income daily
and distribute that income monthly. The Equity Fund declares and
distributes net investment income on a quarterly basis. Net realized
capital gains will be declared and distributed annually. Distributions
are recorded on the ex-dividend date.

D. Federal Income Tax. It is the policy of each of the Portfolios to
qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended. By so qualifying, the
Portfolios will not be subject to Federal income taxes to the extent
that they distribute all of their taxable income for the fiscal year.
The Portfolios also intend to meet the distribution requirements to
avoid the payment of an excise tax.

E. Organization Expenses. Costs incurred in connection with the
organization and initial registration of the Fund have been deferred
and are being amortized on a straight-line basis over sixty months
beginning with each Portfolio's commencement of operations. In the
event any of the initial shares of any of the Portfolios are redeemed,
the appropriate Portfolio will be reimbursed for any unamortized
organization expenses in the same proportion as the number of shares
redeemed bears to the number of initial shares held at time of
redemption.

F. Determination of Net Asset Value and Calculation of Expenses. Expenses
directly attributable to a Portfolio are charged to that Portfolio.
Other expenses are allocated proportionately among each Portfolio
within the Fund in relation to the net assets of each Portfolio or on
another reasonable basis.

G. Use of Estimates. Estimates and assumptions are required to be made
regarding assets, liabilities, and changes in net assets resulting
from operations when financial statements are prepared. Actual results
could differ from these amounts.

F-10
<PAGE>
LIFE CYCLE MUTUAL FUNDS(TM), INC.
Notes to Financial Statements -- July 31, 1996 - (Continued)

3. INVESTMENT ADVISORY, ADMINISTRATIVE AND OTHER TRANSACTIONS WITH
AFFILIATES. The Fund has entered into an investment advisory agreement (the
"Investment Advisory Agreement") with Benson White & Company (the "Advisor").
The Investment Advisory Agreement provides for the Advisor to supervise all
aspects of the Fund's operations and provide investment advice and portfolio
management services to the Fund. Subject to the supervision of the Fund's
Board of Directors, the Advisor makes each Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the portfolio investments. The Advisor is also responsible for the
management and implementation of the Life Cycle Program. Pursuant to the
terms of the Investment Advisory Agreement, the Advisor is paid a monthly
advisory fee equal to 0.75% of each Portfolio's average daily net assets per
annum. For the period ended July 31, 1996, the Advisor earned fees of
$11,685, $856, $1,064, $6,218, for the Equity, Bond, Retirement Income, and
Harvest Funds, respectively. For the period ended July 31, 1996, the Advisor
voluntarily waived fees of $11,685, $856, $1,064, $6,218, for the Equity,
Bond, Retirement Income, and Harvest Funds, respectively.

Furman Selz LLC ("Furman Selz") provides the Fund with administrative,
fund accounting, dividend disbursing and transfer agency services pursuant to
an administrative services agreement (the "Administrative Services
Agreement"). Pursuant to the Administrative Services Agreement, Furman Selz
receives a fee, payable monthly, equal to 0.20% of the Fund's aggregate
average net assets, subject to a minimum of $250,000 per year, plus out of
pocket expenses. For the period ended July 31, 1996, Furman Selz earned
$208,332 for services provided to the Fund, consisting of $52,083 from each
of the four individual portfolios.

The Fund entered into a distribution agreement (the "Distribution
Agreement") with Life Cycle Mutual Funds Distributors, Inc., an affiliate of
Furman Selz. Under the Distribution Agreement, Life Cycle Mutual Funds
Distributors, Inc., as agent for the Fund, agrees to use its best efforts as
sole distributor of the Funds' shares. Under the agreement, the distributor
will receive an annual fee of up to 0.75% of average daily net assets in
return for financing certain distribution and shareholder related activities
related to the Funds' shares. During the period ended July 31, 1996, the
actual rates incurred by the Funds were: 0.73%, 0.69%, 0.67% and 0.60% for
the Equity, Bond, Retirement Income and Harvest Funds, respectively.

The Advisor has voluntarily agreed to cap the expense ratios at 1.95% for
each Portfolio. In order to maintain that expense ratio, the Advisor has
agreed to reimburse expenses as follows: Equity Fund - $103,761; Bond Fund -
$84,120; Retirement Income Fund - $79,729; Harvest Fund - $80,875

4. SECURITIES TRANSACTIONS.

A. Purchase and Sale Transactions. The aggregate amount of purchases and
sales of investment securities, other than short-term securities, for
the period ended July 31, 1996 were as follows:

<TABLE>
<CAPTION>
U.S. Government
Common Stocks Obligations
---------------------------- ----------------------
Purchases Sales Purchases Sales
------------ ------------ ----------- -------
<S> <C> <C> <C> <C>
Equity Fund .......... $4,525,975 $2,179,412 $ 0 $0
Bond Fund ............ 0 0 108,653 0
Retirement Income Fund 0 0 170,036 0

</TABLE>

B. Federal Income Tax Basis. Cost for book and Federal income tax
purposes were substantially the same as of July 31, 1996. Gross
unrealized appreciation and depreciation of investment securities at
July 31, 1996, based on cost for Federal income tax purposes was as
follow:

<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Net Unrealized
Appreciation Depreciation Depreciation
-------------- -------------- --------------
<S> <C> <C> <C>
Equity Fund .......... $28,786 $ (111,802) $(83,016)
Bond Fund ............ 0 (2,506) (2,506)
Retirement Income Fund 0 (4,278) (4,278)
Harvest Fund ......... 0 0 0
</TABLE>

F-11
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.
Notes to Financial Statements -- July 31, 1996 - (Continued)

5. CAPITAL SHARE TRANSACTIONS. The Fund is authorized to issue 20 billion
shares of beneficial interest with a par value of $0.001 each. Transactions
in shares of the Portfolios are as follows:

<TABLE>
<CAPTION>
Retirement
Equity Fund Bond Fund Income Fund Harvest Fund
October 2, 1995* October 4, 1995* October 4, 1995* October 4, 1995*
through through through through
July 31, 1996 July 31, 1996 July 31, 1996 July 31, 1996
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Beginning balance .............. 2,500 2,500 2,500 2,500
---------------- ---------------- ---------------- ----------------
Shares sold .................... 351,123 19,977 30,286 227,927
Shares issued in reinvestment of
dividends ..................... 1,598 291 397 2,010
Shares redeemed ................ (78,982) (163) (5,300) (139,938)
---------------- ---------------- ---------------- ----------------
Net increase in shares ......... 273,739 20,105 25,383 89,999
---------------- ---------------- ---------------- ----------------
Ending Balance ................. 276,239 22,605 27,883 92,499
================ ================ ================ ================

</TABLE>

- ------
* Commencement of Operations.

6. SUBSEQUENT EVENT. On July 1, 1996, Furman Selz announced that it had
entered into an agreement pursuant to which its mutual funds division would
be acquired by BISYS Group, Inc. ("BISYS") subject to certain conditions. It
is anticipated that, following consummation of that transaction, services
currently provided to the Funds by Furman Selz will be provided by BISYS and
certain affiliates under terms and conditions substantially the same as those
currently in effect with respect to such services.

F-12
<PAGE>

LIFE CYCLE MUTUAL FUNDS(TM), INC.
FINANCIAL HIGHLIGHTS+
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

</TABLE>

- ------
* Commencement of operations.
+ Per share amounts based on the average number of shares outstanding during
the period from commencement of operations to July 31, 1996.
** Annualized.

See accompanying notes to financial statements.

F-13
<PAGE>

LCPRO