TRANS ADVISER FUNDS INC, 497, 1997-01-07

TRANS ADVISER FUNDS INC
497, 1997-01-07

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Rule 497(c)
Registration No. 33-94412

For Fund information, call (800) 308-TRAN or
contact us by E-mail at [email protected]

Trans Adviser Funds, Inc. (the "Company") is an open-end management investment
company incorporated under the laws of the State of Maryland. The Company
currently consists of six separate non-diversified investment funds, the
Growth/Value Fund, the Aggressive Growth Fund, the Intermediate Bond Fund, the
Kentucky Tax-Free Fund, the Tennessee Tax-Free Fund and the Money Market Fund.
This prospectus relates to the Growth/Value Fund, Aggressive Growth Fund,
Intermediate Bond Fund, Kentucky Tax-Free Fund and Money Market Fund only
(collectively, the "Funds"). Each of the Funds has a different investment
objective and the net asset value per share of each of the Funds (except the
Money Market Fund) will fluctuate as the value of its investment portfolio
changes in response to changing market conditions and other factors. The Money
Market Fund seeks to maintain a constant net asset value of $1.00 per share, but
there can be no assurance that net asset value will not vary.

Additional information about the Funds, contained in a Statement of
Additional Information dated January 1, 1997, has been filed with the Securities
and Exchange Commission and is available upon request without charge by writing
to the Company at its address or by calling the Company at the telephone number
(E-mail address) shown above. The Statement of Additional Information is
incorporated by reference in its entirety into this Prospectus.

This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing. Investors should read this
Prospectus and retain it for future reference.

THE COMPANY'S SHARES ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS OF, OR
ENDORSED OR GUARANTEED BY TRANS FINANCIAL BANK, N.A., ANY OF ITS AFFILIATES, OR
ANY OTHER BANK. THE COMPANY'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR BY ANY
OTHER AGENCY. AN INVESTMENT IN THE COMPANY'S SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION ("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.

The date of this Prospectus is January 1, 1997

<PAGE>

HIGHLIGHTS

Summary. The Trans Adviser Family of Funds consists of the Growth/Value Fund,
the Aggressive Growth Fund, the Intermediate Bond Fund, the Kentucky Tax-Free
Fund, the Tennessee Tax-Free Fund and the Money Market Fund. Trans Financial
Bank, N.A., headquartered in Bowling Green, Kentucky, is the Adviser and as such
provides the overall management necessary for the Funds' operations and oversees
the investment of their assets. The Adviser is a subsidiary of Trans Financial,
Inc. which is a full service financial services company with approximately $725
million in assets under management as of December 31, 1996. Mastrapasqua &
Associates, Inc. ("M&A"), located in Nashville, TN, is the sub-adviser of the
Funds and in this capacity will directly manage the Growth/Value and Aggressive
Growth Funds as well as provide an economic and strategic overview that will be
utilized by the entire Family of Funds.

Investment Style. The Fixed Income Funds will be actively managed using a
disciplined, relative-value investment style. Return enhancement and risk
control will be managed through interest rate and duration analysis, term
structure, and issue selection. The Growth Funds interrelate economic and
monetary factors such as liquidity, interest rates with sector analysis,
capitalization cycles and individual company fundamentals. In selecting
investments for the Growth Funds, M&A will purchase securities with a view
towards potential appreciation within a 36-month period.

Compensation. The Adviser receives monthly compensation from each Fund based on
the amount of assets under management. The Adviser, not the Funds, compensates
M&A pursuant to a sub-advisory agreement. See "Management of Trans Adviser
Funds."

How to Invest and Redeem Shares. Shares can be purchased or redeemed through
Forum Financial Services, Inc. ("Forum"), the principal distributor, at (800)
811-8258 or broker-dealers that have entered into a dealer agreement with Forum.
See: "How to Invest."

Investor Services and Privileges. Free telephone exchange and automatic
investment plan. See: "How to Invest" and "How to Redeem Shares."

Dividends. Growth Funds: declare and pay dividends at least annually from net
investment income; Fixed Income Funds: declare dividends daily and pay dividends
monthly from net investment income; election for automatic reinvestment or cash
receipt. See "Dividends and Taxes."

Risk Factors and Special Considerations. The Funds are non-diversified funds
(however, the Money Market Fund intends to comply with the diversification
requirements of Rule 2a-7 of the Investment Company Act of 1940) and all Funds
will comply with the diversification requirements of Section 851(6) of the
Internal Revenue Doce of 1986, as amended (the "Code"). Non-diversified Funds
may be invested in a limited number of issuers; thus, there may be greater risk
in an investment in these Funds than in diversified investment companies.
Moreover, there are potential risks associated with certain of the Funds'
investments and additional risk considerations that may be associated with
certain techniques and strategies employed by the Funds, including those
relating to futures and options transactions. Such risks may not be incurred by
other investment companies which have similar investment objectives, but which
do not use these techniques and strategies. See "Risk Factors."

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<PAGE>

FEE TABLE

For a better understanding of the expenses you will incur when investing in a
Fund offered pursuant to this Prospectus, a summary of expenses is set forth
below.
<TABLE>
<CAPTION>

Growth/ Aggressive Intermediate Kentucky Money
Value Growth Bond Tax-Free Market
Fund Fund Fund Fund Fund

<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Commission Imposed
on Purchases (as a percentage of
offering price) 4.50% 4.50% 4.50% 4.50% NONE
Maximum Sales Commission Imposed
on Reinvested Dividends (as a
percentage of offering price) NONE NONE NONE NONE NONE
Maximum Contingent Deferred
Sales Commission (as a percentage
of original purchase price or
redemption proceeds, as applicable) NONE NONE NONE NONE NONE
Redemption Fees (as a percentage of
amount redeemed, if applicable) NONE NONE NONE NONE NONE
Exchange Fee NONE NONE NONE NONE NONE
Annual Fund Operating Expenses
(as a percentage of net assets)
Advisory Fees .58% .00% .00% .00% .01%
12b-1 Fees NONE NONE NONE NONE NONE
Shareholder Servicing .24% .24% .25% .18% .25%
Other Expenses 1.13% 1.71% .43% .64% .39%
Total Fund Operating Expenses 1.95%* 1.95%* .68%* .82%* .65%*

</TABLE>

Example:

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth/Value Fund $64 $103 $145 $262
Aggressive Growth Fund $64 $103 $145 $262
Intermediate Bond Fund $52 $ 66 $ 81 $126
Kentucky Tax-Free Fund $53 $ 70 $ 88 $142
Money Market Fund $ 7 $ 21 $ 36 $ 81

</TABLE>

The purpose of the table above is to assist an investor in the Funds in
understanding the various costs and expenses that an investor in a Fund will
bear directly or indirectly. See "Management of Trans Adviser Funds" for a more
complete discussion of annual operating expenses of the Funds. The foregoing
example should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown.

* Total Fund Operating Expenses reflect the voluntary waiver of Advisory Fees,
Shareholder Servicing Fees and certain other expenses and the reimbursement
of certain expenses. Absent such voluntary waiver and expense reimbursement,
Advisory Fees, Shareholder Servicing Fees, Other Expenses and Total Fund
Operating Expenses, for each fund would be: Growth/Value Fund: 1.00%, .25%,
1.58% and

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<PAGE>

2.83%, respectively; Aggressive Growth Fund: 1.00%, .25%, 3.80% and 5.05%,
respectively; Intermediate Bond Fund: .40%, .25%, 1.39% and 2.04%,
respectively; Kentucky Tax-Free Fund: .40%, .25%, 1.00% and 1.65%,
respectively; and Money Market Fund: .20%,.25%, .54% and .99%,
respectively.

FINANCIAL HIGHLIGHTS

The table below sets forth certain financial information with respect to the
financial highlights for the Funds for the fiscal period ended August 31, 1996.
The information below has been audited by KPMG Peat Marwick LLP, independent
auditors for the Company, whose report thereon, together with the financial
statements of the Funds, is incorporated by reference into the Statement of
Additional Information.

SELECTED PER SHARE DATA AND
RATIOS FOR A SHARE

OUTSTANDING THROUGHOUT
THE PERIOD ENDED

AUGUST 31, 1996

AGGRESSIVE INTERMEDIATE KENTUCKY MONEY
GROWTH/VALUE GROWTH BOND TAX-FREE MARKET
FUND FUND FUND FUND FUND

<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value Per Share. $10.00 $10.00 $10.00 $10.00 $1.00
------ ------ ------ ------ -----
Net Investment Income/(Loss)(c).... (0.06) (0.11) 0.57 0.51 0.05

Net Realized and Unrealized Gain (Loss)

on Investments................... 1.24 1.06 (0.25) 0.06 -
------ ------ ------- ------ ------
Distributions from Net Investment Income - - (0.57) (0.51) (0.05)
------ ------ ------- ------ ------
Ending Net Asset Value Per Share.... $11.18 $10.95 $9.75 $10.06 $1.00
------- ------ ------ ------- ------

Ratios to Average Net Assets:

Expenses(b) (e)................ 1.95% 1.95% 0.68% 0.82% 0.65%
Net Investment Income (Loss)(e).. (0 .62)% (1.26)% 6.31% 5.30% 4.94%
Total Return (f).................... 11.80% 9.50% 3.23% 5 .80% 4.70%
Portfolio Turnover Rate............. 21.12% 15.70% 12.38% 145.12% N/A

Average Commission Rate............ 0.07(d) 0.08(d) N/A N/A N/A
Net Assets at End of Period (000's

omitted)......................... $15,108 $6,550 $13,357 $15,840 $76,363

(a) Date of commencement of operations:

9/29/95 9/29/95 10/3/95 9/27/95 9/29/95

(b) During the period, various fees and expenses were waived and reimbursed.
Had such waiver and reimbursement not occurred, the ratio of expenses to
average net assets would have been:

2.83%(e) 5.05%(e) 2.04%(e) 1.65%(e) 0.99%(e)
</TABLE>

(d) Amount represents the average commission per share paid to brokers on
the purchase or sale of equity securities.

(e) Annualized.

(f) Excludes applicable sales charge.

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<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives and policies of each Fund are described below.
Specific investment techniques that may be employed by the Funds are described
in a separate section of this Prospectus and in the Statement of Additional
Information. While each Fund's objective is fundamental and can only be changed
by vote of the majority of the outstanding shares of a particular Fund, the
Board of Directors of the Company reserves the right to change any of the
investment policies, strategies or practices of any of the Funds without
shareholder approval, except in those instances where shareholder approval is
expressly required.

The Growth/Value Fund seeks long-term capital appreciation primarily
through equity investments in companies whose valuation may not yet reflect the
prospect for accelerating earnings/cash flow growth. The Fund seeks to achieve
its objective by investing primarily in common stocks but also in preferred
stocks, convertible bonds and warrants of companies which, in the opinion of the
Fund's investment adviser, are expected to achieve growth of investment
principal over time. The investment style is to focus on companies that have a
demonstrated record of achievement with excellent prospects for earnings and/or
cash flow growth over a 3 to 5 year period. It is anticipated that the average
stock holding period will be within an 18 to 36 month time frame. Of course,
changes in fundamental outlook and market conditions can alter these time
horizons materially.

It is anticipated that common stocks will be the principal form of
investment by the Fund. The Fund's portfolio is comprised of securities of two
basic categories of companies: (1) "core" companies, which Fund management
considers to have experienced above-average and consistent long- term growth in
earnings/cash flow and to have excellent prospects for outstanding future
growth, and (2) "earnings/cash flow acceleration" companies, which Fund
management believes are either currently enjoying or are projected to enjoy a
dramatic increase in earnings and/or cash flow. Investments will largely be made
in companies of greater than $750 million capitalization. The Fund will invest
no more than 10% of its assets in companies with market capitalization of less
than $750 million at the time of purchase.

The Aggressive Growth Fund seeks long-term capital appreciation primarily
through equity investments. The Fund will seek growth opportunities among
companies of various sizes. The Fund seeks to achieve its objective by investing
primarily in common stocks but also in preferred stocks, convertible bonds,
options and warrants of companies which in the opinion of the Fund's investment
adviser are expected to achieve growth of investment principal over time. Many
of these companies are in the small to medium-sized category (companies with
market capitalizations of less than $750 million at the time of purchase). In
addition, up to 15% of the Fund's assets may be invested in illiquid investments
or in private companies whose common shares are not actively traded on any
national or regional exchange.

The investment style is to focus on companies that have an excellent
prospect for earnings cash flow growth over a 3 to 5 year period. Of course,
changes in fundamental outlook and market conditions can alter potential returns
substantially. It is intended that the Aggressive Growth Fund will assume a more
expanded risk profile than will be the case with the Growth/Value Fund. While
this could result in above-average appreciation, there is no assurance that this
will in fact be the case and the potential exists for above-average
depreciation.

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<PAGE>

to enjoy a dramatic increase in earnings and/or cash flow. Investments will
largely be made in companies of varying sizes, even those with less than $750
million capitalization.

Additionally, the Aggressive Growth Fund may invest a maximum of 20% of its
assets, and the Growth/Value Fund may invest a maximum of 30% of its assets, in
fixed-income securities rated Baa3 or better by Moody's Investors Service, Inc.
("Moody's") or BBB or better by Standard & Poor's Corporation ("S&P") or, if
unrated, deemed to be of comparable quality by M&A. The fixed income securities
in which such Funds may invest include U.S. Government obligations,
mortgage-backed securities, asset-backed securities, bank obligations, corporate
debt obligations and unrated obligations, including those of foreign issuers.

M&A will be particularly interested in growth companies that are likely to
benefit from new or innovative products, services or processes that should
enhance such companies' prospects for future growth in earnings/cash flow. As a
result of this policy, the market prices of many of the securities purchased and
held by the Growth/Value and Aggressive Growth Funds (the "Growth Funds") may
fluctuate widely. Any income received from securities held by the Growth Funds
will be incidental, and an investor should not consider a purchase of shares of
the Growth Funds as equivalent to a complete investment program.

The Intermediate Bond Fund seeks to provide as high a level of current
income as is consistent with the preservation of capital. The Fund invests
substantially all of its assets in marketable corporate debt securities, U.S.
Government securities, mortgage-related securities, other asset-backed
securities and cash or money market instruments. Normally, at least 65% of the
Fund's assets will be invested in bonds (debt securities of the types listed
below).

At least 60% of the value of the Intermediate Bond Fund's assets, measured
at the time of any purchase, must be invested in the following categories of
securities:

o marketable corporate debt securities, such as bonds, rated at the time of
purchase within the three highest investment grade ratings (A or better)
assigned by Moody's or S&P (all ratings discussed below refer to those assigned
by these two rating agencies) or, if not rated by either of these rating
agencies, determined by the Fund's investment adviser as being of investment
quality equivalent to securities rated A or better;

o U.S. Government securities including (1) direct obligations of the U.S.
Treasury (such as Treasury bills, notes and bonds), (2) obligations guaranteed
as to principal and interest by the U.S. Treasury such as Government National
Mortgage Association certificates (described below) and Federal Housing
Administration debentures, and (3) securities issued by U.S. Government
instrumentalities and certain Federal agencies that are neither direct
obligations of, nor guaranteed by, the U.S. Treasury;

o mortgage-related securities rated A or better, or unrated securities that
are determined to be of equivalent quality of (1) governmental issuers,
including Government National Mortgage Association certificates, which are
securities representing part ownership of a pool of mortgage loans on which
timely payment of interest and principal is guaranteed by the U.S. Government,
and securities issued and guaranteed as to the payment of interest and principal
by the Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation (but not backed by the U.S. Government); (2) private issuers,
including mortgage pass-through certificates or mortgage-backed bonds; and (3)
the governmental issuers mentioned above or private issuers, including
collateralized mortgage obligations and real estate mortgage investment conduits
which are issued in portions or tranches with varying maturities and
characteristics; some tranches may only receive the interest paid on the
underlying mortgages (IOs) and others may only receive the principal payments
(POs); the values of IOs and POs are extremely sensitive to interest rate
fluctuations and prepayment rates, and IOs are also subject to the

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<PAGE>

risk of early prepayment of the underlying mortgages which will substantially
reduce or eliminate interest payments (see the Statement of Additional
Information for more about these securities);

o other asset-backed securities rated A or better or unrated securities
that are determined by the Adviser to be of equivalent quality (unrelated to
mortgage loans) such as securities whose assets consist of a pool of motor
vehicle retail installment sales contracts and security interests in the
vehicles securing the contracts or a pool of credit card loan receivables (see
the Statement of Additional Information for more about these securities); and

o cash or money market instruments, including commercial bank obligations
(certificates of deposit, which are interest-bearing time deposits; bankers'
acceptances, which are time drafts on a commercial bank where the bank accepts
an irrevocable obligation to pay at maturity and demand or time deposits) and
commercial paper (short-term notes with maturities of up to nine months issued
by corporations or government bodies).

The remaining 40% of the Intermediate Bond Fund's assets, measured at the
time of purchase, may be invested in debt securities rated below A or unrated
securities that are determined to be of equivalent quality, including marketable
corporate debt securities, mortgage-related securities and other asset-backed
securities. Securities rated within the fourth highest category (BBB, Baa) may
have speculative characteristics and display a weakened ability to pay interest
and repay principal under adverse economic conditions or changing circumstances.
However, securities rated lower than Baa or BBB or unrated securities that are
determined to be of equivalent quality (commonly known as "junk" or "high-yield,
high-risk" bonds) will represent less than 20% of the Fund's net assets and are
subject to independent investment analysis by the Adviser before purchase. The
Fund may from time to time invest in fixed-income securities of corporations
outside the U.S. or governmental entities, and the Fund may purchase or sell
various currencies on either a spot or forward basis in connection with these
investments.

Maturity. The maturity composition of the Intermediate Bond Fund's portfolio of
fixed-income securities will be adjusted in response to market conditions and
expectations. There are no restrictions on the maturity composition of the
portfolio, although it is anticipated that the Fund normally will be invested
substantially in intermediate-term (3 to 10 years to maturity) and long-term
(over 10 years to maturity) securities and have a dollar-weighted average
portfolio maturity between 3 and 10 years.

Loan Participations. The Intermediate Bond Fund may invest, subject to an
overall 10% limit on loans, in loan participations, typically made by a
syndicate of banks to U.S. and non-U.S. corporate or governmental borrowers for
a variety of purposes. The underlying loans may be secured or unsecured, and
will vary in term and legal structure. When purchasing such instruments the Fund
may assume the credit risks associated with the original bank lender as well as
the credit risks associated with the borrower. Investments in loan
participations present the possibility that the Fund could be held liable as a
co-lender under emerging legal theories of lender liability. In addition, if the
loan is foreclosed, the Fund could be part owner of any collateral, and could
bear the costs and liabilities of owning and disposing of the collateral. Loan
participations are generally not rated by major rating agencies and may not be
protected by the securities laws. Also, loan participations are generally
considered to be illiquid and are therefore subject to the Fund's overall 15%
limitation on illiquid securities.

The Kentucky Tax-Free Fund seeks to provide as high a level of current
income exempt from Kentucky and Federal income taxes as is consistent with
preservation of capital by investing in municipal obligations which pay interest
exempt from Kentucky State and Federal income taxes. These municipal obligations
must, at the time of purchase, either be rated within the four highest credit
ratings (considered as investment grade) assigned by Moody's or S&P, or, if
unrated, be determined to be of comparable

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<PAGE>

quality by the Fund's Adviser. The Fund's shares are designed to be a suitable
investment for investors who seek income exempt from Kentucky State and regular
Federal income taxes.

Municipal Obligations. The Kentucky Tax-Free Fund (the "Tax-Free Fund") invests
in municipal obligations. Municipal obligations are issued by or on behalf of
states, territories and possessions of the United States and their political
subdivisions, agencies and instrumentalities to obtain funds for various public
purposes. The two principal classifications of municipal obligations are "notes"
and "bonds." Municipal notes are generally used to provide for short-term
capital needs and generally have maturities of one year or less while municipal
bonds have extended maturities. Municipal notes include: project notes, which
sometimes carry a U.S. Government guarantee; tax anticipation notes; revenue
anticipation notes; bond anticipation notes; construction loan notes; and
floating and variable rate demand notes. Municipal obligations also include
short-term debt, often issued for general purposes, known as "municipal
commercial paper." Municipal obligations include municipal lease/purchase
agreements which are similar to installment purchase contracts for property or
equipment. The purposes for which municipal obligations such as bonds are issued
include the construction of a wide range of public facilities such as airports,
highways, bridges, schools, hospitals, housing, mass transportation, streets and
water and sewer works. Other public purposes for which municipal obligations may
be issued include the refunding of outstanding obligations, the obtaining of
funds for general operating expenses and the obtaining of funds to lend to other
public institutions and facilities.

In general, there are nine separate ratings, ranging from the highest to
the lowest quality standards for municipal obligations. So that the Tax-Free
Fund will have a portfolio of quality oriented (investment grade) securities,
the municipal obligations which the Fund will purchase must, at the time of
purchase, either (i) be rated within the four highest credit ratings assigned by
Moody's or S&P; or (ii) if unrated, be determined to be of comparable quality to
municipal obligations so rated by the Adviser, subject to the direction and
control of the Company's Board of Directors. Municipal obligations rated in the
fourth highest credit rating are considered by such rating agencies to be of
medium quality and thus may present investment risks not present in more highly
rated obligations. Such bonds lack outstanding investment characteristics and
may in fact have speculative characteristics as well; changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case for higher grade bonds.
If after purchase, the rating of any rated municipal obligation is downgraded
such that it could not then be purchased by the Tax-Free Fund, or, in the case
of an unrated municipal obligation, if the Adviser determines that the unrated
obligation is no longer of comparable quality to those rated obligations which
the Fund may purchase, it is the current policy of the Fund to cause any such
obligation to be sold as promptly thereafter as the Adviser in its discretion
determines to be consistent with the Fund's objectives; such obligation remains
in the Fund's portfolio until it is sold. In addition, because a downgrade often
results in a reduction in the market price of a downgraded obligation, sale of
such an obligation may result in a loss. See Appendix A to the Statement of
Additional Information for further information as to these ratings.

In seeking its objective of providing as high a level of current income
which is exempt from both Kentucky State and regular Federal income taxes as is
consistent with the preservation of capital, the Tax-Free Fund will invest in
Kentucky Obligations (as defined below). There is no assurance that the Fund
will achieve its objective.

As used in this Prospectus and the Statement of Additional Information,
the term "Kentucky Obligations" means obligations, including those of certain
non-Kentucky issuers, of any maturity which pay interest which, in the opinion
of bond counsel or other appropriate counsel, is exempt from regular Federal
income taxes and Kentucky income taxes. Although exempt from regular Federal
income tax, interest paid on certain types of Kentucky Obligations and dividends
which the Fund might pay from this

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<PAGE>

interest are preference items as to the Federal alternative minimum tax; for
further information, see "Dividends and Taxes." As a fundamental policy, at
least 80% of the Fund's net assets will be invested in Kentucky Obligations the
income paid upon which will not be subject to the alternative minimum tax;
accordingly, the Fund can invest up to 20% of its net assets in obligations
which are subject to the Federal alternative minimum tax. The Fund may refrain
entirely from purchasing these types of Kentucky Obligations.

The non-Kentucky bonds or other obligations the interest on which is
exempt under present law from regular Federal and Kentucky income taxes are the
bonds or other obligations issued by or under the authority of Guam, the
Northern Mariana Islands, Puerto Rico and the Virgin Islands. As a
Kentucky-oriented fund, at least 65% of the Fund's total assets will be invested
in Kentucky Obligations of Kentucky issuers. The Fund invests in futures and
options on futures (see below) for protective (hedging) purposes. The Fund can
purchase industrial development bonds only if they meet the definition of
Kentucky Obligations, i.e., the interest on them is exempt from Kentucky State
and regular Federal income taxes.

Certain Stabilizing Measures

In attempting to protect against declines in the value of its investments and
other market risks, the Tax-Free Fund will employ such traditional measures as
varying maturities, upgrading credit standards for portfolio purchases,
broadening diversification and increasing its position in cash and cash
equivalents. Although the Fund has no current intention of using futures or
options, to the limited degree described below, these may be used to attempt to
hedge against changes in the market price of the Fund's municipal obligations
caused by interest rate fluctuations. Futures and options also may provide a
hedge against increases in the cost of securities the Fund intends to purchase.

Although it does not currently do so, the Tax-Free Fund may buy and sell
futures contracts relating to indices on municipal bonds ("municipal bond index
futures") and to U.S. Government securities ("U.S. Government securities
futures"); both kinds of futures contracts are "futures." The Fund may also
write and purchase put and call options on futures. As a matter of fundamental
policy,the Tax-Free Fund will not buy or sell a future or an option on a future
if thereafter more than 5% of the Fund's total assets would be in initial or
variation margin on such futures and options on them, and in premiums on such
options. (See the Statement of Additional Information).

Participation Interests

The Tax-Free Fund may purchase from financial institutions participation
interests in municipal obligations (such as industrial development bonds and
municipal lease/purchase agreements). A participation interest gives the Fund an
undivided interest in the underlying municipal obligations in the proportion
that the Fund's participation interest bears to the total amount of the
underlying municipal obligations. All such participation interests must meet the
Fund's credit requirements. Municipal lease obligations are issued by a state or
local government or authority to acquire land and a wide variety of equipment
and facilities. These obligations typically are not fully backed by the
municipality's credit, and their interest may become taxable if the lease is
assigned. If the funds are not available for the following year's lease
payments, the lease may terminate, with the possibility of default on the lease
obligation and significant loss to the Fund. Certificates of participation in
municipal lease obligations or installment sales contracts entitle the holder to
a proportionate interest in the lease-purchase payments made. The Tax-Free Fund
may invest up to 10% of its assets in participation interests.

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<PAGE>

Current Policy as to Certain Obligations

The Tax-Free Fund will not invest more than 25% of its total assets in (i)
municipal obligations the interest on which is paid from revenues of similar
type projects or (ii) industrial development bonds, unless this Prospectus
and/or the Statement of Additional Information are supplemented to reflect the
change and to give additional information.

Kentucky. Kentucky's economy in many ways resembles a scaled-down version of the
U.S. economy in its diversity. The Kentucky economy, once dominated by coal,
horses, bourbon and tobacco has become a diversified modern economy including
manufacturing of industrial machinery, automobiles and automobile parts,
consumer appliances, and nondurable goods such as apparel. In addition,
Kentucky's nonmanufacturing industries have grown considerably in recent years,
with strong gains in air transportation, health and business services, and
retail trade. Kentucky's parks, horsebreeding and racing industry, symbolized by
the Kentucky Derby, play an important role in expanding the tourism industry in
Kentucky.

The Money Market Fund seeks current income with liquidity and stability of
principal. The Money Market Fund seeks to achieve this objective by investing in
a portfolio of high-quality, U.S. dollar-denominated money market instruments.
All securities in which the Money Market Fund invests have remaining maturities
of 397 days or less. The dollar-weighted average maturity of the securities will
not exceed 90 days. The Fund invests in:

o obligations of domestic financial institutions including certificates of
deposit, bankers' acceptances and time deposits.

o obligations of foreign branches of U.S. banks (Eurodollars) consisting of
certificates of deposit, bankers' acceptances and time deposits.

o obligations of the U.S. Government or any of its agencies or
instrumentalities which may be backed by the credit-worthiness of the issuing
agency.

o short-term corporate obligations, consisting of commercial paper, notes,
and bonds, with remaining maturities of 397 days or less.

o repurchase agreements with member banks of the Federal Reserve System and
primary dealers in U.S. Government securities with respect to any security in
which the Fund is authorized to invest.

o other short-term debt obligations of domestic issuers discussed in this
Prospectus.

The Money Market Fund may invest in obligations of foreign branches of U.S.
banks (Eurodollars). Payment of interest and principal upon these obligations
may also be affected by governmental action in the country of domicile of the
branch (generally referred to as sovereign risk). In addition, evidences of
ownership of portfolio securities may be held outside of the U.S. and the Fund
may be subject to the risks associated with the holding of such property
overseas. Various provisions of Federal law governing the establishment and
operation of domestic branches do not apply to foreign branches of domestic
banks. The Adviser, subject to the overall supervision of the Company's Board of
Directors, carefully considers these factors when making investments. The Fund
does not limit the amount of its assets which can be invested in any one type of
instrument or in any foreign country in which a branch of a U.S. bank or the
parent of a U.S. branch is located. Investments in obligations of foreign banks
are subject to the overall limit of 25% of total assets which may be invested in
a single industry.

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Available cash invested in the Money Market Fund earns income at current
money market rates while remaining conveniently liquid. In order to provide full
liquidity, the Fund will seek to maintain a stable $1.00 share price; limit
portfolio average maturity to 90 days or less; buy U.S. dollar-denominated
securities which mature in 397 days or less; and buy only high quality
securities with minimal credit risks. As required by Rule 2a-7 under the
Investment Company Act of 1940, as amended ("Rule 2a-7"), the Company's Board of
Directors will monitor the quality of the Fund's investments.

Of course, a $1.00 share price cannot be guaranteed, but these practices
help to minimize any price fluctuations that might result from rising or
declining interest rates. Accordingly, while the Fund invests in high quality
securities, investors should be aware that an investment is not without risk
even if all securities are paid in full at maturity. All money market
instruments, including U.S. government securities, can change in value when
interest rates change or an issuer's creditworthiness changes.

Limiting Investment Risks

The Money Market Fund follows specific guidelines in buying portfolio
securities:

The Fund will only purchase obligations that (i) are rated high quality by
two of the following four nationally recognized rating services: Duff & Phelps
Inc. ("Duff"), Fitch Investors Service, Inc. ("Fitch"), Moody's, and S&P, if
rated by two or more services; (ii) are rated high quality if rated by only one
rating service; or (iii) if unrated, are determined to be of equivalent quality
pursuant to procedures reviewed by the Board of Directors. Obligations that are
not rated are not necessarily of lower quality than those which are rated, but
may be less marketable and therefore may provide higher yields.

Currently, only obligations in the top two categories are considered to be
rated high quality for commercial paper. The two highest rating categories of
Duff, Fitch, Moody's and S&P are Duff 1 and Duff 2, Fitch-1 and Fitch-2, Prime-1
and Prime-2, and A-1 and A-2, respectively. Under Rule 2a-7, the Fund is not
permitted to invest more than 5% of its total assets in securities that would be
considered to be in the second highest rating category, and, subject to this
limitation, the Fund may not invest more than the greater of 1% of its total
assets or $1 million in such securities of any one issuer. The Fund may purchase
an instrument rated below highest quality by a rating service if two other
services have given that instrument a highest quality rating ("split rated"
obligation), and if the Adviser considers that the instrument is of highest
quality and presents minimal credit risks.

For other corporate obligations, the two highest rating categories are AAA
and AA by Duff, AAA and AA by Fitch, Aaa and Aa by Moody's and AAA and AA by
S&P. For a more complete description of these ratings see the Appendix to the
Statement of Additional Information.

The Money Market Fund will commit no more than 10% of its net assets to
illiquid securities, including repurchase agreements maturing in more than seven
days.

In addition, the Money Market Fund has certain other limitations. As a
matter of nonfundamental policy, the Fund will limit the percentage allocation
of its investments so as to comply with Rule 2a-7, which generally limits to 5%
of total assets the amount which may be invested in the securities of any one
issuer and to no more than 25% of total assets the amount which would be
invested in a particular industry, except that the Fund may invest more than 25%
of total assets in the securities of banks.

Currently, the Commission defines the term "bank" to include U.S. banks and
their foreign branches if, in the case of foreign branches, the parent U.S. bank
is unconditionally liable for such obligations. These limitations do not apply
to obligations of the U.S. Government or any of its agencies or
instrumentalities. The Money Market Fund does not consider utilities or
companies engaged in finance generally to be one industry. Finance companies
will be considered a part of the industry they finance

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(e.g., GMAC auto; VISA credit cards). Utilities will be divided according to the
types of services they provide; for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry.

The Money Market Fund may borrow money from banks or from other lenders,
but not in an amount equal to or exceeding 33 1/3% of the current value of its
total assets.

As a matter of operating policy, the Money Market Fund does not intend to
purchase securities for investment during periods when the sum of temporary bank
borrowings entered into to facilitate redemptions exceeds 5% of its total
assets. This operating policy is not fundamental and may be changed without
shareholder notification.

Other Investment Practices

Securities lending. In order to generate additional income, the Funds may, from
time to time, lend their portfolio securities to broker-dealers, banks or
institutional borrowers of securities. While the lending of securities may
subject the Fund to certain risks, such as delays or the inability to regain the
securities in the event the borrower were to default on its lending agreement or
enter into bankruptcy, the Funds will receive at least 100% collateral in the
form of cash or U.S. Government securities. This collateral will be valued daily
by the Adviser (M&A) and should the market value of the loaned securities
increase, the borrower will furnish additional collateral to the Funds. During
the time portfolio securities are on loan, the borrower pays the Funds any
dividends or interest paid on such securities. Loans are subject to termination
by the Funds or the borrower at any time. While the Funds do not have the right
to vote securities on loan, the Funds intend to terminate the loan and regain
the right to vote if that is considered important with respect to the
investment. The Funds will only enter into loan arrangements with
broker-dealers, banks or other institutions which the Adviser (M&A) has
determined are creditworthy under guidelines established by the Company's Board
of Directors.Borrowing. The Funds may borrow money from banks (including their
custodian bank) or from other lenders to the extent permitted under applicable
law, for temporary or emergency purposes and to meet redemptions and may pledge
their assets to secure such borrowings. Additionally, the Aggressive Growth Fund
may borrow for purposes of leveraging. Borrowing for investment increases both
investment opportunity and investment risk. Such borrowings in no way affect the
Federal tax status of the Funds or their dividends. If the investment income on
securities purchased with borrowed money exceeds the interest paid on the
borrowing, the net asset value of the Aggressive Growth Fund's shares will rise
faster than would otherwise be the case. On the other hand, if the investment
income fails to cover the Aggressive Growth Fund's costs, including the interest
on borrowings or if there are losses, the net asset value of such Fund's shares
will decrease faster than would otherwise be the case. This is the speculative
factor known as leverage.

The Investment Company Act of 1940, as amended (the "1940 Act") requires
the Funds to maintain asset coverage of at least 300% for all such borrowings,
and should such asset coverage at any time fall below 300%, the Funds would be
required to reduce their borrowings within three days to the extent necessary to
meet the requirements of the 1940 Act. To reduce their borrowings, the Funds
might be required to sell securities at a time when it would be disadvantageous
to do so.

In addition, because interest on money borrowed is a Fund expense that it
would not otherwise incur, the Funds may have less net investment income during
periods when its borrowings are substantial. The interest paid by the Funds on
borrowings may be more or less than the yield on the securities purchased with
borrowed funds, depending on prevailing market conditions.

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<PAGE>

Short-term Trading. The Aggressive Growth Fund may engage in the technique of
short-term trading. Such trading involves the selling of securities held for a
short time, ranging from several months to less than a day. The object of such
short-term trading is to increase the potential for capital appreciation and/or
income of the Aggressive Growth Fund in order to take advantage of what M&A
believes are changes in market, industry or individual company conditions or
outlook. Any such trading would increase the turnover rate of the Aggressive
Growth Fund and its transaction costs.

When-issued Securities. Each of the Funds may also purchase securities on a
"when-issued" basis. When-issued securities are securities purchased for
delivery beyond the normal settlement date at a stated price and yield and
thereby involve a risk that the yield obtained in the transaction will be less
than that available in the market when delivery takes place. The Funds will
generally not pay for such securities or start earning interest on them until
they are received. When a Fund agrees to purchase securities on a "when-issued"
basis, the Company's custodian will set aside cash or liquid portfolio
securities equal to the amount of the commitment in a segregated account.
Securities purchased on a "when-issued" basis are recorded as an asset and are
subject to changes in value based upon changes in the general level of interest
rates. Each of the Funds expects that commitments to purchase "when-issued"
securities will not exceed 25% of the value of its total assets under normal
market conditions and that a commitment to purchase "when-issued" securities
will not exceed 60 days. In the event its commitment to purchase "when-issued"
securities ever exceeded 25% of the value of its assets, a Fund's liquidity and
the investment advisor's ability to manage it might be adversely affected. The
Funds do not intend to purchase "when-issued" securities for speculative
purposes, but only for the purpose of acquiring portfolio securities.

Variable and Floating Rate Securities. Each of the Funds may acquire variable
and floating rate securities, subject to each Fund's investment objectives,
policies and restrictions. A variable rate security is one whose terms provide
for the readjustment of its interest rate on set dates and which, upon such
readjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate security is one whose terms provide
for the readjustment of its interest rate whenever a specified interest rate
changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value.

Repurchase Agreements. The Money Market Fund, the Intermediate Bond Fund and the
Aggressive Growth Fund may enter into repurchase agreements. Under a repurchase
agreement, a Fund acquires a debt instrument for a relatively short period
(usually not more than one week), subject to the obligation of the seller to
repurchase and the Fund to resell such debt instrument at a fixed price. The
resale price is in excess of the purchase price in that it reflects an
agreed-upon market interest rate effective for the period of time during which
the Fund's money is invested. Each Fund's repurchase agreements will at all
times be fully collateralized in an amount at least equal to 100% of the
purchase price including accrued interest earned on the underlying securities.
The instruments held as collateral are valued daily by the Adviser (M&A) and as
the value of instruments declines, the Funds will require additional collateral.
If the seller defaults and the value of the collateral securing the repurchase
agreement declines, a Fund may incur a loss. If such a defaulting seller were to
become insolvent and subject to liquidation or reorganization under applicable
bankruptcy or other laws, disposition of the underlying securities could involve
certain costs or delays pending court action. Finally, it is not certain whether
the Funds would be entitled, as against a claim of the seller or its receiver,
trustee in bankruptcy or creditors, to retain the underlying securities.
Repurchase agreements are considered by the staff of the Commission to be loans
by the Funds.

Reverse Repurchase Agreements. The Aggressive Growth Fund may borrow funds for
temporary purposes by entering into reverse repurchase agreements. Pursuant to
such agreements, the Fund sells portfolio securities to financial institutions
such as banks and broker-dealers, and agrees to repurchase them at a mutually
agreed-upon date and price. At the time the Fund enters into a reverse
repurchase

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<PAGE>

agreement, it must place in a segregated custodial account cash and liquid,
high-grade debt securities having a value equal to the repurchase price
(including accrued interest); the collateral will be marked to market on a daily
basis, and will be continuously monitored to ensure that such equivalent value
is maintained. Reverse repurchase agreements involve the risk that the market
value of the securities sold by the Fund may decline below the price at which
the Fund is obligated to repurchase the securities. Reverse repurchase
agreements are considered to be borrowings under the 1940 Act.

Convertible Securities. The Growth Funds may invest in all types of common
stocks and equivalents (such as convertible debt securities and warrants) and
preferred stocks. The Funds may invest in convertible securities which may offer
higher income than the common stocks into which they are convertible. The
convertible securities in which the Funds may invest consist of bonds, notes,
debentures and preferred stocks which may be converted or exchanged at a stated
or determinable exchange ratio into underlying shares of common stock. The Funds
may be required to permit the issuer of a convertible security to redeem the
security, convert it into the underlying common stock or sell it to a third
party. Thus, the Funds may not be able to control whether the issuer of a
convertible security chooses to convert that security. If the issuer chooses to
do so, this action could have an adverse effect on a Fund's ability to achieve
its investment objectives.

Convertible securities are bonds, debentures, notes, preferred stock or
other securities which may be converted or exchanged by the holder into shares
of the underlying common stock at a stated exchange ratio. A convertible
security may also be subject to redemption by the issuer, but only after a date
and under certain circumstances (including a specified price) established on
issue. Adjustable rate preferred stocks are preferred stocks which adjust their
dividend rates quarterly based on specified relationships to certain indices of
U.S. Treasury securities. A Fund may continue to hold securities obtained as a
result of the conversion of convertible securities held by the Fund when M&A
believes retaining such securities is consistent with the Fund's investment
objectives.

Lower-rated Securities. The Aggressive Growth Fund may invest up to 20% of its
assets, the Growth/Value Fund may invest up to 10% of its assets and the
Intermediate Bond Fund may invest up to 30% of its assets in higher yielding
(and, therefore, higher risk), lower rated fixed-income securities, including
debt securities, convertible securities and preferred stocks and unrated fixed-
income securities. Lower rated fixed-income securities, commonly referred to as
"junk bonds", are considered speculative and involve greater risk of default or
price changes due to changes in the issuer's creditworthiness than higher rated
fixed-income securities. See "Risk Factors Lower Rated Fixed-Income Securities"
below for a discussion of certain risks.

Differing yields on fixed-income securities of the same maturity are a
function of several factors, including the relative financial strength of the
issuers. Higher yields are generally available from securities in the lower
categories of recognized rating agencies, i.e., Ba or lower by Moody's or BB or
lower by S&P. The Funds may invest in any security which is rated by Moody's or
by S&P, or in any unrated security which the Adviser (M&A) determines is of
suitable quality. Securities in the rating categories below Baa as determined by
Moody's and BBB as determined by S&P are considered to be of poor standing and
predominantly speculative. The rating services descriptions of these rating
categories, including the speculative characteristics of the lower categories,
are set forth in Appendix A of the Statement of Additional Information.

Securities ratings are based largely on the issuer's historical financial
information and the rating agencies' investment analysis at the time of rating.
Consequently, the rating assigned to any particular security is not necessarily
a reflection of the issuer's current financial condition, which may be better or
worse than the rating would indicate. Although the Adviser (M&A) will consider
security ratings when making investment decisions in the high yield market, it
will perform its own investment analysis and will not rely principally on the
ratings assigned by the rating services. The Adviser's (M&A's) analysis

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<PAGE>

generally may include, among other things, consideration of the issuer's
experience and managerial strength, changing financial conditions, borrowing
requirements or debt maturity schedules, and its responsiveness to changes in
business conditions and interest rates. It also considers relative values based
on anticipated cash flow, interest or dividend coverage, asset coverage and
earnings prospects.

ADRs. The Growth Funds may invest in foreign securities through the purchase of
American Depositary Receipts but will not do so if immediately after a purchase
and as a result of the purchase the total value of such foreign securities owned
by a Fund would exceed 10% of the value of the total assets of the Fund.
Investment in foreign securities is subject to special risks, such as future
adverse political and economic developments, possible seizure, nationalization,
or expropriation of foreign investments, less stringent disclosure requirements,
the possible establishment of exchange controls or taxation at the source and
the adoption of other foreign governmental restrictions. Additional risks
include less publicly available information, the risk that companies may not be
subject to the accounting, auditing and financial reporting standards and
requirements of U.S. companies, the risk that foreign securities markets may
have less volume and therefore less liquidity and greater price volatility than
U.S. securities, and the risk that custodian and brokerage costs may be higher.

Options. The Aggressive Growth Fund may engage in writing put and call options
from time to time as M&A deems to be appropriate. Such options must be listed on
a national securities exchange and issued by the Options Clearing Corporation.
In order to close out a written call option position, the Fund will enter into a
"closing purchase transaction" the purchase of a call option on the same
security with the same exercise price and expiration date as any call option
which it may previously have written on any particular securities. When the
portfolio security is sold, the Fund effects a closing purchase transaction so
as to close out any existing call option on that security. If the Fund is unable
to effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or the Fund delivers the underlying
security upon exercise. When writing a covered call option, the Fund, in return
for the premium, gives up the opportunity for profit from a price increase in
the underlying security above the exercise price, but retains the risk of loss
should the price of the security decline. The Fund seeks to terminate its
position in a put option it writes before exercise by closing out the option in
the secondary market at its current price. If the secondary market is not liquid
for a put option the Fund has written, however, the Fund must continue to be
prepared to pay the strike price while the option is outstanding, regardless of
price changes and must continue to set aside assets to cover its position.

The Aggressive Growth Fund may purchase put options from time to time as
M&A deems to be appropriate. A put is a right to sell a specified security (or
securities) within a specified period of time at a specified exercise price. The
Fund has no intention of investing more than 5% of its assets in put options.

Warrants. The Growth Funds may invest in warrants which entitle the holder to
buy equity securities at a specific price for a specific period of time.
Warrants may be considered more speculative than certain other types of
investments because they do not entitle a holder to dividends or voting rights
with respect to the securities which may be purchased, nor do they represent any
rights in the assets of the issuing company. The value of a warrant may be more
volatile than the value of the securities underlying the warrants. Also, the
value of the warrant does not necessarily change with the value of the
underlying securities and a warrant ceases to have value if it is not exercised
prior to the expiration date.

Short-Term Obligations. With respect to each Fund there may be times when, in
the opinion of the Adviser (M&A), adverse market conditions exist, including any
period during which it believes that the return on certain money market type
instruments would be more favorable than that obtainable through a Fund's normal
investment programs. Accordingly, for temporary defensive purposes, each Fund
may hold up to 100% of its total assets in cash and/or short-term obligations.
To the extent that a Fund's assets are so invested, they will not be invested so
as to meet its investment objective. The instruments

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may include high grade liquid debt securities such as variable amount master
demand notes, commercial paper, certificates of deposit, bankers' acceptances,
repurchase agreements which mature in less than seven days and obligations
issued or guaranteed by the U.S. Government, its agencies and instrumentalities.
Bankers' acceptances are instruments of United States banks which are drafts or
bills of exchange "accepted" by a bank or trust company as an obligation to pay
on maturity.

Futures Contracts. The Aggressive Growth Fund and the Tax-Free Fund may also
enter into contracts for the future delivery of securities and futures contracts
based on a specific security, class of securities or an index, purchase or sell
options on any such futures contracts and engage in related closing
transactions. A futures contract on a securities index is an agreement
obligating either party to pay, and entitling the other party to receive, while
the contract is outstanding, cash payments based on the level of a specified
securities index.

The Funds may enter into futures contracts in an effort to hedge against
market risks and in anticipation of future purchases or sales of securities. For
example, when interest rates are expected to rise or market values of portfolio
securities are expected to fall, a Fund can seek to offset a decline in the
value of its portfolio securities by entering into futures contract
transactions. When interest rates are expected to fall or market values are
expected to rise, the Fund, through the purchase of such contracts, can attempt
to secure better rates or prices than might later be available in the market
when it effects anticipated purchases.

The acquisition of put and call options on futures contracts will give a
Fund the right (but not the obligation), for a specified price, to sell or to
repurchase the underlying futures contract, upon exercise of the option, at any
time during the option period.

Aggregate initial margin deposits for futures contracts, and premiums paid
for related options, may not exceed 5% of a Fund's total assets (other than in
connection with bona fide hedging purposes), and the value of securities that
are the subject of such futures and options (both for receipt and delivery) may
not exceed one-third of the market value of the Fund's total assets. Futures
transactions will be limited to the extent necessary to maintain the Fund's
qualification as a regulated investment company.

Futures transactions involve brokerage costs and require a Fund to
segregate assets to cover contracts that would require it to purchase
securities. A Fund may lose the expected benefit of futures transactions if
interest rates, exchange rates or securities prices move in an unanticipated
manner. Such unanticipated changes may also result in poorer overall performance
than if the Fund had not entered into any futures transactions. In addition, the
value of the Fund's futures positions may not prove to be perfectly or even
highly correlated with the value of its portfolio securities, limiting the
Fund's ability to hedge effectively against interest rate, exchange rate and/or
market risk and giving rise to additional risks. There is no assurance of
liquidity in the secondary market for purposes of closing out futures positions.

Zero Coupon Bonds. The Growth/Value Fund, the Intermediate Bond Fund and the
Tax-Free Fund are permitted to purchase zero coupon securities ("zero coupon
bonds"). Zero coupon bonds are purchased at a discount from the face amount
because the buyer receives only the right to receive a fixed payment on a
certain date in the future and does not receive any periodic interest payments.
The effect of owning instruments which do not make current interest payments is
that a fixed yield is earned not only on the original investment but also, in
effect, on all discount accretion during the life of the obligations. This
implicit reinvestment of earnings at the same rate eliminates the risk of being
unable to reinvest distributions at a rate as high as the implicit yields on the
zero coupon bond, but at the same time eliminates the holder's ability to
reinvest at higher rates in the future. For this reason, zero coupon bonds are
subject to substantially greater price fluctuations during periods of changing
market interest rates than are comparable securities which pay interest
currently, which fluctuation increases the longer

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the period to maturity. Although zero coupon bonds do not pay interest to
holders prior to maturity, Federal income tax law requires a Fund to recognize
as interest income a portion of the bond's discount each year and this income
must then be distributed to shareholders along with other income earned by the
Fund. To the extent that any shareholders in a Fund elect to receive their
dividends in cash rather than reinvest such dividends in additional shares, cash
to make these distributions will have to be provided from the assets of the Fund
or other sources such as proceeds of sales of Fund shares and/or sales of
portfolio securities. In such cases, the Fund will not be able to purchase
additional income-producing securities with cash used to make such distributions
and its current income may ultimately be reduced as a result.

Receipts. The Growth/Value Fund and the Intermediate Bond Fund may also purchase
separately traded interest and principal component parts of such obligations
that are transferable through the Federal book entry system, known as Separately
Traded Registered Interest and Principal Securities ("STRIPS") and Coupon Under
Book Entry Safekeeping ("CUBES"). These instruments are issued by banks and
brokerage firms and are created by depositing Treasury notes and Treasury bonds
into a special account at a custodian bank; the custodian holds the interest and
principal payments for the benefit of the registered owner of the certificates
or receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
Treasury Receipts ("TRs"), Treasury Investment Growth Receipts ("TIGRs") and
Certificates of Accrual on Treasury Securities ("CATS").

STRIPS, CUBES, TRs, TIGRs and CATS are sold as zero coupon securities,
which means that they are sold at a substantial discount and redeemed at face
value at their maturity date without interim cash payments of interest or
principal. This discount is amortized over the life of the security, and such
amortization will constitute the income earned on the security for both
accounting and tax purposes. Because of these features, these securities may be
subject to greater interest rate volatility than interest-paying U.S. Treasury
obligations. Each Fund will limit its investment in such instruments to 20% of
its total assets.

Investment Company Securities. Each Fund may invest in the securities of other
investment companies to the extent permissible under the applicable regulations
and interpretations of the 1940 Act or an exemptive order.

Illiquid Investments and Restricted Securities. Each Fund may invest up to 15%
(but, as a non-fundamental policy, the Money Market Fund may invest up to 10%)
of its assets in illiquid investments (investments that cannot be readily sold
within seven days), including restricted securities which do not meet the
criteria for liquidity established by the Company's Board of Directors. The
Adviser, under the supervision of the Company's Board of Directors, and M&A,
under the supervision of the Company's Board of Directors and the Adviser,
determine the liquidity of a Fund's investments. The absence of a trading market
can make it difficult to ascertain a market value for illiquid investments.
Disposing of illiquid investments may involve time-consuming negotiation and
legal expenses. Restricted Securities are securities which cannot be sold to the
public without registration under the Securities Act of 1933. Unless registered
for sale, these securities can only be sold in privately negotiated transactions
or pursuant to an exemption from registration.

Private Placement Investments. The Aggressive Growth Fund and the Money Market
Fund may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) commercial paper is restricted as to disposition under Federal securities
laws and is generally sold to institutional investors who agree that they are
purchasing the paper for investment purposes and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) commercial paper is normally resold to other institutional
investors through or with the assistance of the issuer or investment dealers who
make a market in Section

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4(2) commercial paper, thus providing liquidity. The Company believes that
Section 4(2) commercial paper and possibly certain other restricted securities
which meet the criteria for liquidity established by the directors are quite
liquid. The Company intends therefore, to treat the restricted securities which
meet the criteria for liquidity established by the directors, including Section
4(2) commercial paper, as determined by the Adviser (M&A), as liquid and not
subject to the investment limitation applicable to illiquid securities. In
addition, because Section 4(2) commercial paper is liquid, the Company does not
intend to subject such paper to the limitation applicable to restricted
securities.

The ability of the Board of Directors to determine the liquidity of certain
restricted securities is permitted under a position of the staff of the
Commission set forth in the adopting release for Rule 144A under the Securities
Act of 1933 (the "Rule"). The Rule is a nonexclusive safe-harbor for certain
secondary market transactions involving securities subject to restrictions on
resale under Federal securities laws. The Rule provides an exemption from
registration for resales of otherwise restricted securities to qualified
institutional buyers. The Rule was expected to further enhance the liquidity of
the secondary market for securities eligible for resale under Rule 144A. The
staff of the Commission has left the question of determining the liquidity of
all restricted securities to the directors. The directors consider the following
criteria in determining the liquidity of certain restricted securities
(including Section 4(2) commercial paper): the frequency of trades and quotes
for the security; the number of dealers willing to purchase or sell the security
and the number of other potential buyers; dealer undertakings to make a market
in the security; and the nature of the security and the nature of the
marketplace trades. The directors have delegated to the Adviser (M&A) the daily
function of determining and monitoring the liquidity of restricted securities
pursuant to the above criteria and guidelines adopted by the Board of Directors.
The directors will continue to monitor and periodically review the Adviser's
(M&A's) selection of Rule 144A and Section 4(2) commercial paper as well as any
determinations as to their liquidity.

RISK FACTORS

Lower Rated Fixed-Income Securities. Lower quality fixed-income securities
generally produce a higher current yield than do fixed-income securities of
higher ratings. However, these fixed-income securities are considered
speculative because they involve greater price volatility and risk than do
higher rated fixed-income securities and yields on these fixed-income securities
will tend to fluctuate over time. Although the market value of all fixed-income
securities varies as a result of changes in prevailing interest rates (e.g.,
when interest rates rise, the market value of fixed-income securities can be
expected to decline), values of lower rated fixed-income securities tend to
react differently than the values of higher rated fixed-income securities. The
prices of lower rated fixed-income securities are less sensitive to changes in
interest rates than higher rated fixed-income securities. Conversely, lower
rated fixed-income securities also involve a greater risk of default by the
issuer in the payment of principal and income and are more sensitive to economic
downturns and recessions than higher rated fixed-income securities. The
financial stress resulting from an economic downturn could have a greater
negative effect on the ability of issuers of lower rated fixed-income securities
to service their principal and interest payments, to meet projected business
goals and to obtain additional financing than on more creditworthy issuers. In
the event of an issuer's default in payment of principal or interest on such
securities, or any other fixed-income securities in a Fund's portfolio, the net
asset value of the Fund will be negatively affected. Moreover, as the market for
lower rated fixed-income securities is a relatively new one, a severe economic
downturn might increase the number of defaults, thereby adversely affecting the
value of all outstanding lower rated fixed-income securities and disrupting the
market for such securities. Fixed-income securities purchased by a Fund as part
of an initial underwriting present an additional risk due to their lack of
market history. These risks are exacerbated with respect to fixed-income
securities rated Caa or lower by Moody's or CCC or lower by S&P. Unrated
fixed-income securities generally carry the same risks as do lower rated
fixed-income securities.

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<PAGE>

Lower rated fixed-income securities are typically traded among a smaller
number of broker-dealers rather than in a broad secondary market. Purchasers of
lower rated fixed-income securities tend to be institutions, rather than
individuals, a factor that further limits the secondary market. To the extent
that no established retail secondary market exists, many lower rated
fixed-income securities may not be as liquid as Treasury and investment grade
bonds. The ability of a Fund to sell lower rated fixed-income securities will be
adversely affected to the extent that such securities are thinly traded or
illiquid. Moreover, the ability of a Fund to value lower rated fixed-income
securities becomes more difficult, and judgment plays a greater role in
valuation, as there is less reliable, objective data available with respect to
such securities that are thinly traded or illiquid.

Because investors may perceive that there are greater risks associated with
the lower rated fixed-income securities of the type in which a Fund may invest,
the yields and prices of such securities may tend to fluctuate more than those
for fixed-income securities with a higher rating. Changes in perception of
issuer's creditworthiness tend to occur more frequently and in a more pronounced
manner in the lower quality segments of the fixed-income securities market than
do changes in higher quality segments of the fixed-income securities market,
resulting in greater yield and price volatility. The speculative characteristics
of lower rated fixed-income securities are set forth in Appendix A of the
Statement of Additional Information.

The Adviser (M&A) believes that the risks of investing in such high
yielding, fixed-income securities may be minimized through careful analysis of
prospective issuers. Although the opinion of ratings services such as Moody's
and S&P is considered in selecting portfolio securities, they evaluate the
safety of the principal and the interest payments of the security, not their
market value risk. Additionally, credit rating agencies may experience slight
delays in updating ratings to reflect current events. The Adviser (M&A) relies,
primarily, on its own credit analysis. This may suggest, however, that the
achievement of a Fund's investment objective is more dependent on the Adviser's
(M&A's) proprietary credit analysis, than is otherwise the case for a fund that
invests exclusively in higher quality fixed-income securities.

Once the rating of a portfolio security or the quality determination
ascribed by the Adviser (M&A) to an unrated fixed-income security has been
downgraded, the Adviser (M&A) will consider all circumstances deemed relevant in
determining whether to continue to hold the security, but in no event will a
Fund retain such securities if it would cause the Fund to have 35% or more of
the value of its net assets invested in fixed-income securities rated lower than
Baa by Moody's or BBB by S&P, or if unrated, are judged by the Adviser (M&A) to
be of comparable quality.

The Funds may also invest in unrated fixed-income securities. Unrated
fixed-income securities are not necessarily of lower quality than rated
fixed-income securities, but they may not be attractive to as many buyers.

There is no minimum rating standard for a Fund's investments in the high
yield market; therefore, a Fund may at times invest in fixed-income securities
not currently paying interest or in default. The Funds will invest in such
fixed-income securities where the Adviser (M&A) perceives a substantial
opportunity to realize a Fund's objective based on its analysis of the
underlying financial condition of the issuer. It is not, however, the current
intention of any Fund to make such investments.

These limitations and the policies discussed in this Prospectus are
considered and applied by the Adviser (M&A) at the time of purchase of an
investment; the sale of securities by a Fund is not required in the event of a
subsequent change in circumstances.

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<PAGE>

Other Risk Factors

The portfolio turnover of each Fund may vary greatly from year to year as well
as within a particular year. High turnover rates will generally result in higher
transaction costs and higher levels of taxable realized gains to the Fund's
shareholders. For the fiscal period ended August 31, 1996, the portfolio
turnover rates for the Funds were: Growth/Value Fund: 21.12%; Aggressive Growth
Fund: 15.70%; Intermediate Bond Fund: 12.38%; and Kentucky Tax-Free Fund:
145.12%. (See "Additional Tax Information" in the Statement of Additional
Information.)

Particular portfolio securities and yields will differ due to differences
in the types of investments permitted, cash flow, and the availability of
particular portfolio investments. Market conditions and interest rates may
affect the types and yields of securities held in each Fund. The investment
objectives of the Funds are fundamental and may be changed only by a vote of a
majority of the outstanding shares of that Fund (as defined below under "General
Information Miscellaneous"). There can be, of course, no assurance that a Fund
will achieve its investment objective. Changes in prevailing interest rates may
affect the yield, and possibly the net asset value, of a Fund.

Each Fund is classified as a "non-diversified" investment company under the
1940 Act. Each Fund also intends to qualify as a "regulated investment company"
under the Code. One of the tests for such qualification under the Code is, in
general, that at the end of each fiscal quarter of each Fund, at least 50% of
its assets must consist of (i) cash and U.S. Government securities and (ii)
securities which, as to any one issuer, do not exceed 5% of the value of the
Fund's assets. If a Fund had elected to register under the 1940 Act as a
"diversified" investment company, it would have to meet the same test as to 75%
of its assets. Each Fund may therefore not have as much diversification among
securities, and thus diversification of risk, as if it had made this election
under the 1940 Act. In general, the more a Fund invests in the securities of
specific issuers, the more that Fund is exposed to risks associated with
investments in those issuers.

VALUATION OF SHARES

The net asset value per share of each Fund for purposes of pricing purchase and
redemption orders is determined as of the close of regular trading of the New
York Stock Exchange (the "Exchange") on each Business Day of the Fund. Fund
Business Days do not include the following holidays observed by the Exchange:
New Year's Day, Presidents' Day, Good Friday, Memorial Day (observed),
Independence Day (observed), Labor Day, Thanksgiving Day and Christmas Day
(observed). Days on which the Federal Reserve Wire Transfer Service is closed
(which include: Martin Luther King Day, Columbus Day and Veterans' Day), in
addition to Exchange holidays, are not Business Days for the Money Market Fund.
Net asset value per share for purposes of pricing sales and redemptions is
calculated by dividing the value of all securities and other assets belonging to
a Fund, less the liabilities charged to that Fund, by the number of the
outstanding shares of that Fund.

The securities in each Fund except the Money Market Fund will be valued at
market value. If market quotations are not available, the securities will be
valued by a method which the Board of Directors of the Company believes
accurately reflects fair value. Investments in debt securities with remaining
maturities of 60 days or less will be valued based upon the amortized cost
method. For further information about valuation of investments in the Funds, see
the Statement of Additional Information.

The assets in the Money Market Fund are valued based upon the amortized
cost method. Pursuant to rules and regulations of the Commission regarding the
use of the amortized cost method, the Money Market Fund will maintain a
dollar-weighted average portfolio maturity of 90 days or less. Although the
Company seeks to maintain the Money Market Fund's net asset value per share at
$1.00, there can be no assurance that net asset value will not vary.

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<PAGE>

PURCHASES AND REDEMPTIONS OF SHARES

Shares of each Fund are sold and redeemed on all Fund Business Days at their net
asset value, plus a sales charge where applicable, next determined after receipt
of an order in proper form.

HOW TO INVEST

General Information. Investments in a Fund may be made by an investor directly
or through certain brokers and financial institutions of which the investor is a
customer. All transactions in Fund shares are effected through the Transfer
Agent, which accepts orders for purchases and redemptions from shareholders of
record and new investors. Shareholders of record will receive from the Company
periodic statements listing all account activity during the statement period.
The Company reserves the right in the future to modify, limit or terminate any
shareholder privilege upon appropriate notice to shareholders and to charge a
fee for certain shareholder services, although no such fees are currently
contemplated.

Minimum Investment Required. The minimum initial investment in a Fund is $1,000.
There is no minimum subsequent investment. The Company and Forum Financial Corp.
("FFC") each reserves the right to waive the minimum investment requirement.

Purchases By Mail. To purchase shares of a Fund by mail, simply send a completed
Account Registration Form obtainable from the Fund, to Trans Adviser Funds,
Inc., P.O. Box 446, Portland, Maine 04112, together with a check payable to the
Trans Adviser Funds in payment for the shares. If you need assistance in
completing the Account Registration Form call (800) 811-8258.

All purchases must be made in United States dollars and checks must be
drawn on a United States bank. Payment for shares may not be made by third party
checks, however, second party checks are acceptable when properly endorsed. The
Company reserves the right to limit the number of checks from one account
processed at one time. If your check does not clear, your purchase will be
canceled and you could be responsible for any losses or fees incurred. Payments
transmitted by check are subject to collection at full face amount.

Purchases By Wire. To purchase shares of the Funds by federal reserve wire, call
FFC at (800) 811-8258 by 12:00 noon (Eastern time) for the Money Market Fund and
by 4:00 p.m. (Eastern time) for each of the other Funds to place an order. If
FFC receives an order in proper form prior to 12:00 noon for the Money Market
Fund and prior to 4:00 p.m. (Eastern time) for each of the other Funds and
federal funds are received by the custodian by 12:00 noon (Eastern time) for the
Money Market Fund and by 4:00 p.m. for each of the other Funds that same day,
purchases of shares of the Funds will become effective on that Fund Business Day
and purchases of shares of the Money Market Fund will begin to earn dividends on
that Fund Business Day. Orders received after 12:00 noon for the Money Market
Fund and after 4:00 p.m. (Eastern time) for each of the other Funds will become
effective on the next Fund Business Day upon receipt of federal funds. The
Company reserves the right to close early and advance the time by which the
Money Market Fund must receive purchase or redemption orders and payments on
days that the New York Stock Exchange closes early, the public Securities
Association recommends that the government securities markets close early or due
to other circumstances which may effect a Fund's trading hours.

The following procedure will help insure prompt receipt of your federal
funds wire:

A. Telephone FFC toll free at (800) 811-8258 and provide the following
information:

Your name
Address
Telephone number

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<PAGE>

Taxpayer ID number
The amount being wired
The identity of the bank wiring funds

You will then be provided with a wire control number as well as a Fund
account number. (Investors with existing accounts must also notify the Company
prior to wiring funds.)

B. Instruct your bank to wire the specified amount to the Funds' custodian:

First National Bank of Boston
Boston, Massachusetts
ABA # 011 000 390
For Credit To: Forum Financial Corp.

Account Number: 541-54171
Trans Adviser Funds (Name of Fund)
Account Number:
Account Name:

An investor may open an account when placing an initial order by telephone,
provided the investor thereafter submits an Account Registration Form by mail.
An Account Registration Form may be obtained from the Funds.

If you own securities meeting the criteria for investment by the Fund in
which you want to invest, you may exchange such securities for shares of such
Fund. All such exchanges are discretionary with the Fund. If you desire to make
such an exchange, you should contact the Fund prior to delivering any securities
in order to establish that the securities are acceptable for exchange, to
determine what transaction charges, if any, may be imposed and to obtain
delivery instructions for such securities. The value of the securities being
exchanged will be determined in the same manner as the value of such Fund's
portfolio securities is determined (see "Valuation of Shares"); the specific
method of determining the value will be provided to you on request. A Fund
reserves the right to refuse any such exchange, even if the securities offered
by an investor meet the general investment criteria of the Fund. A capital gain
or loss for Federal income tax purposes may be realized by the investor
following the exchange. Maturing bonds or detached coupons submitted within five
(5) business days of the payment date are credited on the payment date.

The Company and FFC each reserves the right to reject any purchase order
for any reason.

Share Certificates. FFC maintains a share account for each shareholder. No share
certificates will be issued for shares unless requested in writing. In order to
facilitate redemptions and transfers, most shareholders elect not to receive
certificates. Shares are held in unissued form by FFC. Shares for which
certificates have been issued cannot be redeemed unless the certificates are
received together with the redemption request in proper form. Share certificates
are not issued for fractional shares.

Sales Charges. The public offering price of a share of a Fund equals the Fund's
net asset value per share plus a sales charge (except the Money Market Fund,
shares of which are sold at net asset value), set forth below as a percentage of
the Fund's average daily net assets. The Distributor receives this sales charge,
and may reallow all or a portion of it as dealer discounts and brokerage
commissions. From time to time, dealers who receive dealer discounts and
brokerage commissions from the Distributor may reallow all or a portion of such
dealer discounts and brokerage commissions to other dealers or brokers. A broker
or dealer who receives reallowances in excess of 90% of the sales charge may be
deemed to be an

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<PAGE>

"underwriter" for purposes of the Securities Act of 1933. The Funds have a
reinstatement policy which allows an investor who redeems his/her shares to
reinvest within 90 days without incurring a sales charge.

Sales Charge as a
Percentage of:

Dealer Reallowance
Amount of Purchase Offering Price Amount Invested of Offering Price

The Distributor, at its expense, may also provide additional cash
compensation to dealers in connection with sales of shares of the Funds. The
maximum cash compensation payable by the Distributor is 90% of the sales charge
as a percent of the offering price. In addition, the Distributor will, from time
to time and at its own expense, provide compensation, including financial
assistance, to dealers in connection with conferences, sales or training
programs for their employees, seminars for the public, advertising campaigns
regarding one or more Funds and/or other dealer-sponsored special events
including payment for travel expenses, including lodging, incurred in connection
with trips taken by invited registered representatives and members of their
families to locations within or outside of the United States for meetings or
seminars of a business nature. Compensation will include the following types of
non-cash compensation offered through sales contests: (1) vacation trips
including the provision of travel arrangements and lodging; (2) tickets for
entertainment events (such as concerts, cruises and sporting events) and (3)
merchandise (such as clothing, trophies, clocks and pens). Dealers may not use
sales of a Fund's shares to qualify for this compensation to the extent such may
be prohibited by the laws of any state or any self-regulatory agency, such as
the National Association of Securities Dealers, Inc. None of the aforementioned
compensation is paid for by the Fund or its shareholders.

The sales charges set forth in the above table are applicable to purchases
made at one time by any investor, which includes: (i) an individual, his or her
spouse and children under the age of 21; (ii) a trustee or other fiduciary of a
single trust estate or single fiduciary account; or (iii) any other organized
group of persons, whether incorporated or not, provided that such organization
has been in existence for at least six months and has some purpose other than
the purchase of redeemable securities of a registered investment company. In
order to qualify for a lower sales charge, all orders from an investor will have
to be placed through a single investment dealer and identified at the time of
purchase as originating from the same investor, although such orders may be
placed into more than one account which identifies the investor.

Sales Charge Waivers

The following classes of investors may purchase shares of the Funds at no sales
charge (which classes may be changed or eliminated at any time):

(1) Current or retired directors of the Trans Adviser Funds; employees,
directors, trustees, and their family members (i.e., an employee's, director's
or trustee's spouse, parents and children) of Trans Financial, Inc. or an
Affiliated Provider (Affiliated Providers refer to affiliates and subsidiaries
of Trans Financial, Inc. and service providers to the Trans Adviser Funds),
dealers having an agreement with the Distributor and any trade organization to
which Trans Financial Bank, N.A. or the Administrator belongs;

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<PAGE>

(2) Investors who purchase shares for trust, investment management or
certain other advisory accounts established with Trans Financial, Inc. or any of
its affiliates;

(3) Investors who purchase shares through a 401(k) plan sponsored by an
Affiliated Provider;

(4) Investors who reinvest assets received in a distribution from a
qualified, non-qualified or deferred compensation plan, agency, trust or custody
account that was either (a) maintained by Trans Financial, Inc. or an Affiliated
Provider, or (b) invested in a fund of the Trans Adviser Funds; and

(5) Investors who, within 90 days of redemption, use the proceeds from the
redemption of shares of another mutual fund complex for which they previously
paid a front end sales charge or sales charge upon redemption of shares.

Purchases may also be made at net asset value provided that such purchases
are placed through an institution that maintains an omnibus account with a Fund
and such purchases are made by the following: Investment advisers or financial
planners who place trades for their own accounts or the accounts of their
clients and who charge a management, consulting or other fee for their services;
and clients of such investment advisers or financial planners who place trades
for their own accounts if the accounts are linked to the master account of such
investment adviser or financial planner on the books and records of the broker
or agent; retirement and deferred compensation plans and trusts used to fund
those plans, including, but not limited to, those defined in Sections 401(a),
403(b) or 457 of the Code and "rabbi trusts." Investors may be charged a fee if
they effect transactions in Fund shares through a broker or agent.

Letter of Intent

Investors may also obtain reduced sales charges based on cumulative purchases by
means of a written Letter of Intent. A Letter of Intent states your intention to
purchase shares of a Fund at a total public offering price within a period of 13
months. Each purchase of shares under a Letter of Intent will be subject to the
sales charges that would have applied if you had purchased the dollar amount
specified in the Letter of Intent in a single transaction.

A Letter of Intent is not a binding obligation to purchase the full amount
indicated. The minimum initial investment under a Letter of Intent is 5% of the
indicated amount. Shares purchased with the first 5% of the amount indicated in
the Letter of Intent will be held subject to a registered pledge (while
remaining registered in the name of the investor) to secure payment of the
higher sales charge applicable to the shares actually purchased if the full
amount indicated is not purchased within 13 months. Pledged shares will be
involuntarily redeemed to pay the additional sales charge, if necessary. When
the full amount indicated has been purchased, the shares will be released from
pledge. Share certificates are not issued for shares purchased under a Letter of
Intent. Investors wishing to enter into a Letter of Intent can obtain a form of
Letter of Intent from their broker or financial institution or by contacting
FFC.

A Letter of Intent may include purchases of shares of any fund of the Trans
Adviser Funds to which a sales charge applies or applied made not more than 90
days prior to the date on which you sign a Letter of Intent; however, the 13-
month period during which the Letter of Intent is in effect will begin on the
date of the earliest purchase to be included. You may combine purchases that are
made in your individual capacity with (1) purchases that are made by members of
your immediate household and (2) purchases made by businesses that you own as
sole proprietorships, for purposes of obtaining reduced sales charges by means
of a written Letter of Intent. In order to accomplish this, however, you must
designate on the account application the accounts that are to be combined for
this purpose. You can only designate accounts that are open at the time the
Letter of Intent is executed.

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<PAGE>

If you qualify for a further reduced sales charge because you have either
purchased more than the dollar amount indicated on the Letter of Intent or have
entered into a Letter of Intent which includes shares purchased prior to the
date of the Letter of Intent, the difference in the sales charge will be used to
purchase additional shares of a Fund on your behalf; thus, the total purchases
(included in the Letter of Intent) will reflect the applicable reduced sales
charge of the Letter of Intent.

If you purchase more than the dollar amount indicated on the Letter of
Intent, or you enter into a Letter of Intent that includes shares purchased
prior to the date of the Letter of Intent and qualify for a reduced sales
charge, all such additional shares will be purchased immediately in the form of
additional shares, credited to your account at the then-current public offering
price applicable to a single purchase of the total amount of the purchases.

For further information about Letters of Intent, contact FFC at (800)
811-8258. This program, however, may be modified or eliminated at any time or
from time to time without notice.

Automatic Investment Plan

Investors may also purchase shares by arranging systematic monthly, bi-monthly
or quarterly investments into the Funds with the Company's Automatic Investment
Plan ("AIP"). The minimum initial investment is $250, the minimum investment
amounts are $50 per transfer and the maximum amount with respect to any transfer
is $100,000. After investors give the Company proper authorization, their bank
accounts, which must be with banks that are members of the Automated Clearing
House, will be debited accordingly to purchase shares. Investors will receive a
confirmation from the Company for every transaction, and a withdrawal will
appear on their bank statements.

To participate in AIP, investors must complete the appropriate sections of
the Account Registration Form or the Automatic Investment/Withdrawal Plan Form.
These forms may be obtained by calling the Company at (800) 811-8258. The amount
investors specify will automatically be invested in shares at the specified
Fund's net asset value per share next determined after payment is received by
the Company.

To change the frequency or amount invested, written instructions must be
received by the Company at least seven Business Days in advance of the next
transfer. If the bank or bank account number is changed, instructions must be
received by the Company at least 20 Business Days in advance. In order to change
a bank or bank account number, investors also must have their signature
guaranteed by a bank, broker, dealer, credit union, securities exchange,
securities association, clearing agency or savings association, as those terms
are defined in Rule 17Ad-15 under the Securities Exchange Act of 1934 (an
"Eligible Guarantor Institution"). Signature guarantees are described more fully
under "HOW TO REDEEM SHARES" below. If there are insufficient funds in the
investor's designated bank account to cover the shares purchased using AIP, the
investor's bank may charge the investor a fee or may refuse to honor the
transfer instruction (in which case no Fund shares will be purchased).

Investors should check with their banks to determine whether they are
members of the Automatic Clearing House and whether their banks charge a fee for
transferring funds through the Automatic Clearing House. Expenses incurred by
the Funds related to AIP are borne by the Funds and therefore there is no direct
charge by the Funds to investors for use of these services.

Right of Accumulation and Concurrent Purchases

You may qualify for a reduced sales charge on purchases of a Fund's shares by
combining a current purchase with certain prior purchases of shares of any fund
of the Trans Adviser Funds. The applicable sales charge is based on the sum of
(i) your current purchase plus (ii) the current public offering price of

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<PAGE>

your previous purchases of (a) all shares held by you in such Fund and (b) all
shares held by you in any other fund of the Trans Adviser Funds, except the
Money Market Fund.

To receive the applicable public offering price pursuant to the right of
accumulation, you must provide FFC with sufficient information at the time of
purchase to permit confirmation of qualification. Accumulation privileges may be
amended or terminated without notice at any time by the Distributor.

Individual Retirement Accounts

Shares of the Funds are available to shareholders on a tax-deferred basis
through the following retirement plans:

Individual Retirement Account ("IRA")

An IRA enables individuals, even if they participate in an employer-sponsored
retirement plan, to establish their own retirement program. IRA contributions
may be tax-deductible and earnings are tax-deferred. Under the Tax Reform Act of
1986, the tax deductibility of IRA contributions is restricted or eliminated for
individuals who participate in certain employer pension plans and whose annual
income exceeds certain limits. Existing IRAs and future contributions up to the
IRA maximums, whether deductible or not, still earn income on a tax-deferred
basis.

Simplified Employee Pension Plan ("SEP/IRA")

A SEP/IRA may be established on a group basis by an employer who wishes to
sponsor a tax-sheltered retirement program by making contributions into IRAs on
behalf of all eligible employees.

The minimum initial investment for IRA and SEP/IRA accounts is $250. For
more information call (800) 308-TRAN. Shareholders are advised to consult a tax
adviser on IRA contribution and withdrawal requirements and restrictions.

Account Statements

Monthly account statements are sent to investors to report transactions such as
purchases and redemptions as well as dividends paid during the month.

HOW TO REDEEM SHARES

Redemption By Telephone. Redemption requests may be made by telephoning FFC at
(800) 811-8258. Shareholders must provide FFC with the shareholder's account
number, the exact name in which the shares are registered and some additional
form of identification such as a password. A redemption by telephone may be made
only if the telephone redemption privilege option has been elected on the
Account Registration Form. In an effort to prevent unauthorized or fraudulent
redemption requests by telephone, FFC will follow reasonable procedures to
confirm that such instructions are genuine. If such procedures are followed,
neither FFC, Forum nor the Company will be liable for any losses due to
unauthorized or fraudulent redemption requests. Redemptions for amounts of less
than $10,000 will be made by check. Redemptions of $10,000 or more may be wired
at the shareholder's request.

In times of drastic economic or market changes, it may be difficult to make
redemptions by telephone. If a shareholder cannot reach FFC by telephone,
redemption requests may be mailed or hand-delivered to FFC.

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Written Requests. Redemption requests may be made by writing to Trans Adviser
Funds, Inc., P.O. Box 446, Portland, Maine 04112. Written requests must be in
proper form. The shareholder will need to provide the exact name in which the
shares are registered, the Fund name, account number, and the share or dollar
amount requested.

A signature guarantee is required for any written redemption request made
through FFC and for any instruction to change the shareholder's record name or
address, a designated bank account, the dividend election, or the telephone
redemption or other option elected on an account. Signature guarantees may be
provided by any eligible institution acceptable to FFC, including a bank, a
broker, a dealer, a national securities exchange, a credit union, or a savings
association which is authorized to guarantee signatures. Other procedures may be
implemented from time to time.

FFC may request additional documentation to establish that a redemption
request has been authorized properly. A redemption request will not be
considered to have been received in proper form until such additional
documentation has been submitted to FFC.

Due to the cost to the Company of maintaining smaller accounts, the Company
reserves the right to redeem, upon 60 days' written notice, all shares in an
account with an aggregate net asset value of less than $500 unless an investment
is made to restore the minimum value. The Company will not redeem accounts that
fall below this amount solely as a result of a reduction in the net asset value
of a Fund's shares.

Exchanges

Shareholders may exchange shares of a Fund for shares of any other Trans
Adviser Fund so long as they maintain the respective minimum account balance in
each Fund in which they own shares. Exchanges between each Fund, except for
exchanges from the Money Market Fund, are at net asset value. Exchanges into
another Trans Adviser Fund from the Money Market Fund will be effected at net
asset value plus any applicable sales charge.

An exchange is considered to be a sale of shares for Federal income tax
purposes on which a shareholder may realize a capital gain or loss.

An exchange may be made by calling FFC at (800) 811-8258 or by mailing
written instructions to Trans Adviser Funds, Inc., P.O. Box 446, Portland, Maine
04112. Exchange privileges may be exercised only in those states where shares of
the other Trans Adviser Fund may legally be sold, and may be amended or
terminated at any time upon sixty (60) days' notice.

Automatic Withdrawal Plan

The Automatic Withdrawal Plan enables shareholders of the Funds to make
regular monthly or quarterly redemptions of shares. With shareholder
authorization, FFC will automatically redeem such shares at net asset value and
have the amount specified transferred according to the written instructions of
the shareholder. Shareholders participating in this Plan must maintain a minimum
account balance of $1,000. The required minimum withdrawal is $250, monthly,
quarterly, semi-annually or annually.

The Automatic Withdrawal Plan may be modified or terminated without notice.
In addition, the Funds may suspend a shareholder's withdrawal plan without
notice if the account contains insufficient funds to effect a withdrawal or in
the event that the account balance is less than the minimum $1,000 amount.

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To participate in the Automatic Withdrawal Plan, shareholders should call
(800) 811-8258 for more information. Purchases of additional shares concurrently
with withdrawals may be disadvantageous to certain shareholders because of tax
liabilities and sales charges. For a shareholder to change the Automatic
Withdrawal instructions, the request must be made in writing to the Distributor
and may take up to 15 days to implement.

Payments to Shareholders

Redemption orders are effected at the net asset value per share next
determined after the shares are properly tendered for redemption, as described
above. Payment to shareholders for shares redeemed will be made within seven
days after receipt by FFC of the request for redemption. However, with respect
to the Money Market Fund only, to the greatest extent possible, the Company will
attempt to honor requests from shareholders for same day payments upon
redemption of shares if the request for redemption is received by FFC before
12:00 noon, Eastern Time, on a Fund Business Day or, if the request for
redemption is received after 12:00 noon, Eastern Time, to honor requests for
payment on the next Fund Business Day, unless it would be disadvantageous to the
Company or the shareholders of the particular Fund to sell or liquidate
portfolio securities in an amount sufficient to satisfy requests for payments in
that manner.

At various times, the Company may be requested to redeem shares for which
it has not yet received good payment. In such circumstances, the Company may
delay the forwarding of proceeds only until payment has been collected for the
purchase of such shares which may take up to 15 days or more. To avoid delay in
payment upon redemption shortly after purchasing shares, investors should
purchase shares by certified or bank check or by wire transfer. The Company
intends to pay cash for all shares redeemed, but under abnormal conditions which
make payment in cash unwise, the Company may make payment wholly or partly in
portfolio securities at their then market value equal to the redemption price.
In such cases, an investor may incur brokerage costs in converting such
securities to cash.

See "Additional Purchase and Redemption Information" and "Valuation of the
Funds" in the Statement of Additional Information for examples of when the
Company may suspend the right of redemption or redeem shares involuntarily if it
appears appropriate to do so in light of the Company's responsibilities under
the 1940 Act.

DIVIDENDS AND TAXES

Net income is declared daily for the Money Market Fund, the Tax-Free Fund and
the Intermediate Bond Fund, and annually for the Growth/Value Fund and the
Aggressive Growth Fund, as a dividend to the shareholders of the Fund at the
close of business on the day of declaration. Dividends will generally be paid
monthly for the Money Market Fund, the Tax-Free Fund and the Intermediate Bond
Fund and annually for the Growth/Value Fund and the Aggressive Growth Fund.
Distributable net realized capital gains, if any, are distributed at least
annually to shareholders of record. A shareholder will automatically receive all
income dividends and capital gains distributions in additional full and
fractional shares at net asset value as of the date of payment unless the
shareholder elects to receive such dividends or distributions in cash.
Such election, or any revocation thereof, must be made in writing to FFC at Two
Portland Square, Portland, Maine 04101, and will become effective with respect
to dividends and distributions having record dates after its receipt by FFC.
Dividends are paid in cash not later than seven Fund Business Days after a
shareholder's complete redemption of his or her shares.

Each Fund intends to qualify as a regulated investment company by
satisfying the requirements of Subchapter M of the Code, including the
requirements with respect to diversification of assets, distribution of income
and sources of income. It is each Fund's policy to distribute to shareholders
all of its investment income (net of expenses) and any capital gains (net of
capital losses) in accordance with the timing requirements imposed by the Code,
so that each Fund will not be subject to Federal income taxes or the 4% excise
tax on undistributed income.

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<PAGE>

Distributions by a Fund of its net investment income and the excess, if
any, of its net short-term capital gain over its net long-term capital loss are
taxable to shareholders as ordinary income. Distributions by a Fund of the
excess, if any, of its net long-term capital gain over its net short-term
capital loss are designated as capital gain dividends and are taxable to
shareholders as long-term capital gains, regardless of the length of time
shareholders have held their shares.

Distributions by a Fund which are taxable to shareholders as ordinary
income are treated as dividends for Federal income tax purposes, but will not
qualify for the 70% dividends-received deduction for corporate shareholders.
Portions of a Fund's investment income may be subject to foreign income taxes
withheld at the source. If a Fund meets certain requirements, it may elect to
"pass-through" to shareholders any such foreign taxes, which may enable
shareholders to claim a foreign tax credit or a deduction with respect to their
share thereof.

If a Fund fails to satisfy any of the Code requirements for qualification
as a regulated investment company, it will be taxed at regular corporate tax
rates on all its taxable income (including capital gains) without any deduction
for distributions to shareholders, and distributions to shareholders will be
taxable as ordinary dividends (even if derived from a Fund's net long-term
capital gains) to the extent of the Fund's current and accumulated earnings and
profits.

Distributions to shareholders will be treated in the same manner for
Federal income tax purposes whether they elect to receive them in cash or
reinvest them in additional shares. In general, shareholders take distributions
into account in the year in which they are made. However, they are required to
treat certain distributions made during January as having been paid by the Fund
and received by them on December 31 of the preceding year. A statement setting
forth the Federal income tax status of all distributions made (or deemed made)
during the year, and any foreign taxes "passed-through" to shareholders, will be
sent to shareholders promptly after the end of each year.

If a shareholder is a non-resident alien or other foreign shareholder,
ordinary income dividends paid to such shareholder generally will be subject to
United States withholding tax at the rate of 30% (or a lower rate under an
applicable treaty). Non-U.S. shareholders are urged to consult their own tax
advisers concerning the applicability of the United States withholding tax.

Under the back-up withholding rules of the Code, shareholders may be
subject to 31% withholding of Federal income tax on ordinary income dividends,
capital gain dividends and redemption payments made by a Fund. In order to avoid
this back-up withholding, shareholders must provide the Fund with a correct
taxpayer identification number (which for an individual is usually his/her
Social Security number) and certify that they are corporations or otherwise
exempt from or not subject to back-up withholding.

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<PAGE>

Kentucky Tax Information. Since the Kentucky Tax-Free Fund may, except as
indicated above, purchase only Kentucky Obligations (which, as defined, means
obligations, including those of non-Kentucky issuers, of any maturity which pay
interest that, in the opinion of bond counsel, excludable from gross income for
federal and Kentucky income tax purposes, all of the exempt-interest dividends
paid by the Fund will be excludable from the shareholders' gross income for
Kentucky income tax purposes. The Fund may also pay "short-term gains
distributions" and "long-term gains distributions," each as discussed under
"Dividends and Distributions" above. Under Kentucky income tax law, short-term
gains distributions to Kentucky residents and corporations domiciled in Kentucky
are generally not exempt from Kentucky income tax unless the statute authorizing
the issuance of the particular obligations involved expressly exempts such
gains. Kentucky taxes long-term gains distributions to Kentucky residents and
corporations domiciled in Kentucky at its ordinary individual and corporate
income tax rates. Any gains on futures and options (including gains imputed
under the Code) paid as part or all of a short-term gains distribution or a
long-term gains distribution will be taxed as indicated above. Under the laws of
Kentucky relating to ad valorem taxation of property, the shareholders (rather
than the Fund) are considered the owners of the Fund's assets. Each shareholder
will be deemed to be the owner of a pro-rata portion of the Fund. According to
the Kentucky Revenue Cabinet, to the extent that such portion consists of
Kentucky Obligations, it will be exempt from property taxes, but it will be
subject to Kentucky intangible property tax to the extent it consists of cash on
hand, cash in out-of-state banks, futures, options and other non-exempt assets.

In the opinion of special Kentucky tax counsel to the Tax-Free Fund,
shareholders of the Tax-Free Fund who are individuals residing in Kentucky or
corporations with their corporate domicile in Kentucky will not be subject to
Kentucky income tax on distributions with respect to their shares in the
Tax-Free Fund to the extent that such distributions are attributable to interest
on Kentucky Obligations. Depending on the level and nature of its activities
within Kentucky, a corporate shareholder of the Tax-Free Fund may have a portion
or all of its Tax-Free shares deemed to constitute capital employed in Kentucky
for purposes of the Kentucky corporate license tax. To the extent that the
Tax-Free Fund's holdings consist of obligations of the Commonwealth of Kentucky
or its political subdivisions or instrumentalities and the balance are
obligations of the United States, shares in the Kentucky Fund will be exempt
from the Kentucky intangible property tax. Shareholders who are residents of
Kentucky or who have their corporate domicile in Kentucky will be required to
include the entire amount of capital gain dividends in income to the same extent
for Kentucky income tax purposes as for Federal income tax purposes, unless the
statute authorizing the issuance of the particular obligations involved
specifically exempts profits from the sale of those obligations.

Many local governments in Kentucky, including Louisville, Jefferson County,
Lexington-Fayette County, Bowling Green and Covington, impose taxes on the net
profits of businesses operating (in any form, including sole proprietorships)
within the local jurisdiction.

Persons contemplating an investment in the Kentucky Tax-Free Fund are
encouraged to consult their own tax advisers regarding the potential impact, if
any, that a particular local tax may have in connection with such an investment.

Shareholders will be advised at least annually as to the character for
Federal income tax purposes of distributions made to them during the year.

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<PAGE>

MANAGEMENT OF TRANS ADVISER FUNDS

Directors of the Company

Overall responsibility for management of the Company rests with the Board of
Directors of the Company, who are elected by the shareholders of the Company.

The Adviser

Trans Financial Bank, N.A. (the "Adviser") provides the overall management
necessary for the Funds' operations and oversees the investment of their assets
pursuant to an advisory agreement dated September 8, 1995 (the "Advisory
Agreement"). Trans Financial Bank, N.A. is a subsidiary of Trans Financial, Inc.
which is a full service financial services provider with approximately $725
million in assets under management as of December 31, 1996.

The Advisory Agreement

In managing the Funds and overseeing the investment of their assets, the Adviser
is subject at all times to the supervision of the Company's Board of Directors.
The Adviser also furnishes or procures on behalf of the Funds all services
necessary for the proper conduct of the Funds' business and administration. In
addition to the foregoing, the Adviser selects, monitors and evaluates the
Funds' Sub-Adviser. The Adviser, through its Fixed-Income Investment Management
Group, has primary responsibility for managing the Tax-Free Fund, the
Intermediate Bond Fund and the Money Market Fund. Marshall Cox manages the
Kentucky Tax-Free Fund, the Money Market Fund and the Intermediate Bond Fund.
Mr. Cox joined Trans Financial Trust and Investment Services as Manager of
Taxable Fixed Income Investments in September, 1995. Previously, he was Director
of Fixed Income at Bradford Investment Management.

Under the terms of the Advisory Agreement, the Funds pay all of their
expenses, including, but not limited to, the costs incurred in connection with
the registration and maintenance of registration of the Funds and their shares
with the Commission and various states and other jurisdictions, printing and
mailing prospectuses and statements of additional information to shareholders,
transfer taxes on the sales of portfolio securities, brokerage commissions,
custodial and transfer charges, legal and auditing expenses, certain insurance
premiums, out of pocket expenses of the Custodian, Transfer Agent and Fund
Accountants, preparation of shareholder reports, directors' fees and expenses of
director and shareholder meetings.

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<PAGE>

For the services it provides under the terms of the Advisory Agreement, the
Adviser receives a monthly fee of .20% per annum of the Money Market Fund's
average daily net assets, 1.00% per annum of each of the Growth/Value and
Aggressive Growth Fund's average daily net assets and .40% per annum of the
Intermediate Bond Fund's and each Tax-Free Fund's average daily net assets. The
Adviser may, from time to time, voluntarily agree to defer or waive fees or
absorb some or all of the expenses of the Funds. For the fiscal period ended
August 31, 1996, the advisory fees earned by the Adviser after voluntary fee
waivers were: Growth/Value Fund: .58%; Aggressive Growth Fund: .00%;
Intermediate Bond Fund: .00%; Kentucky Tax-Free Fund: .00%; and Money Market
Fund: .01%.

The Sub-Adviser

The Adviser has retained Mastrapasqua & Associates, Inc., 814 Church Street,
Nashville, Tennessee ("M&A") to provide sub-advisory services pursuant to a
Sub-Advisory Agreement dated September 8, 1995. M&A is a registered investment
adviser formed in March, 1993. Its core business is portfolio management for
institutions, individuals and business owners, including the Adviser. M&A
currently manages approximately $343 million in assets. M&A shares primary
responsibility for managing the Growth/Value and Aggressive Growth Funds with
the Adviser and provides the Adviser with economic forecasts and strategic
analysis for each of the other Funds. Frank Mastrapasqua, Ph.D., Chairman and
Chief Executive Officer of M&A, and Thomas A. Trantum, President of M&A,
co-manage the Growth/Value and Aggressive Growth Funds. Prior to forming M&A in
1993, Mr. Mastrapasqua was Partner, Director of Research and Chief Investment
Strategist, J.C. Bradford & Co. and Mr. Trantum was Partner and Senior Security
Analyst, J.C. Bradford & Co. Mr. Mastrapasqua also serves as a director of Trans
Financial, Inc. For its services, M&A is paid by the Adviser as follows: with
respect to the Aggressive Growth and the Growth/Value Funds, the Adviser (not
the Fund) pays to M&A an annual fee, calculated daily and paid monthly, of .50%
on the first $100 million of such Funds' combined average daily net assets plus
.25% of such Funds' combined average daily net assets in excess of $100 million
for its services, and, with respect to each other Trans Adviser Fund, the
Adviser (not the Fund) pays M&A an annual fee, calculated daily and paid
monthly, of .03% of average daily net assets for its services.

Administrator

Forum Administrative Services, LLC ("FAS") supervises administration of the
Company pursuant to an Administration Agreement with the Company. FAS, Forum
Financial Services Inc. ("Forum"), the Company's Distributor and Forum Financial
Corp., the Company's Transfer Agent, are members of the Forum Financial Group of
companies, and together provide a full range of services to the investment
company and financial services industry. As of the date of this Prospectus, FAS
and its affiliates acted as administrator and distributor of registered
investment companies with assets of approximately $16 billion. FAS's address is
Two Portland Square, Portland, Maine 04101. As of the date of this Prospectus,
Forum and Forum Financial Corp. are controlled by John Y. Keffer.

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<PAGE>

Under the Administration Agreement, Forum supervises the administration of
all aspects of the Company's operations, including the Company's receipt of
services for which the Company is obligated to pay, provides the Company with
general office facilities and provides, at the Company's expense, the services
of persons necessary to perform such supervisory, administrative and clerical
functions as are needed to effectively operate the Company. Those persons, as
well as certain employees and officers of the Company, may be directors,
officers or employees of (and persons providing services to the Company may
include) Forum and its affiliates. For these services and facilities, Forum
receives with respect to each Fund a fee computed and paid monthly at an annual
rate of 0.15% of the average daily net assets of the Fund, subject to an annual
minimum fee of $25,000 per Fund.

Distributor.

Under the Distribution Agreement, Forum acts as distributor of the Funds'
shares. Forum acts as the agent of the Company in connection with the offering
of shares of the Funds. Forum receives no compensation for its services under
the Distribution Agreement. Forum may enter into arrangements with banks,
broker-dealers or other financial institutions ("Selected Dealers") through
which investors may purchase or redeem shares. Forum may, at its own expense and
from its own resources, compensate certain persons who provide services in
connection with the sale or expected sale of shares of the Funds. Investors
purchasing shares of the Funds through another financial institution should read
any materials and information provided by the financial institution to acquaint
themselves with its procedures and any fees that it may charge. Forum, whose
address is Two Portland Square, Portland, Maine 04101, is a registered
broker-dealer and investment adviser and is a member of the National Association
of Securities Dealers.

Shareholder Servicing

Pursuant to the Shareholder Service Plan adopted by the Company, shareholder
services are provided to the Funds pursuant to agreements between Forum and
various shareholder servicing agents, including Trans Financial Bank, N.A. and
other financial institutions and securities brokers (each a "Shareholder
Servicing Agent"). Each Shareholder Servicing Agent generally will provide
support services to shareholders by establishing and maintaining accounts and
records, processing dividend and distribution payments, providing account
information, arranging for bank wires, responding to routine inquiries,
forwarding shareholder communications, assisting in the processing of purchase,
exchange and redemption requests, and assisting shareholders in changing
dividend options, account designations and addresses. For expenses incurred and
services provided as Shareholder Servicing Agent pursuant to its respective
Shareholder Servicing Agreement, a Fund pays Forum and Forum pays each
Shareholder Servicing Agent a fee computed daily and paid monthly, in amounts
aggregating not more than twenty-five one-hundredths of one percent (.25%) of
the average daily net assets of a Fund per year. A Shareholder Servicing Agent
may from time to time waive all or a portion of its respective shareholder
servicing fees with respect to a Fund.

Custodian

First National Bank of Boston, 150 Royall Street, Canton, MA 02021 serves as
Custodian for the Company.

- 33 -

<PAGE>

Transfer Agent

FFC, a registered transfer agent, acts as the Company's Transfer Agent and
Dividend Disbursing Agent. FFC maintains an account for each shareholder of the
Fund (unless such accounts are maintained by sub-transfer agents or processing
agents) and performs other transfer agency and related functions. For these
services, FFC will receive an annual fee of $12,000 plus account and series
charges. The Company will also reimburse FFC for certain expenses incurred on
behalf of the Funds.

FFC is authorized to subcontract any or all of its functions to one or more
qualified sub-transfer agents, shareholder servicing agents, or processing
agents, who may be affiliates of FFC, and who agree to comply with the terms of
FFC's agreement with the Company. Among the services provided by such agents are
processing trades through automated interfaces with brokers and institutions;
answering customer inquiries regarding account matters; assisting shareholders
in designating and changing various account options; aggregating and processing
purchase and redemption orders and transmitting and receiving funds for
shareholder orders; transmitting, on behalf of the Company, proxy statements,
prospectuses and shareholder reports to shareholders and tabulating proxies;
processing dividend payments and providing subaccounting services for Fund
shares held beneficially; and providing such other services as the Company or a
shareholder may request. The Fund will bear directly any fees or expenses
charged to FFC by such sub-transfer agents.

Expenses

The Adviser, M&A and Forum each bear all expenses in connection with the
performance of their services as Adviser, Sub-Adviser and
Administrator/Distributor, respectively, other than the cost of securities
(including brokerage commissions, if any) purchased for a Fund.

Banking Laws

The Adviser believes that it possesses the legal authority to perform the
advisory services for the Funds contemplated by its management agreement with
the Company and described in this Prospectus without violation of applicable
banking laws and regulations. Future changes in Federal or state statutes and
regulations relating to permissible activities of banks or bank holding
companies and their subsidiaries and affiliates as well as further judicial or
administrative decisions or interpretations of present and future statutes and
regulations could change the manner in which Trans Financial Bank, N.A. could
continue to perform such services for the Company. See "Management of the
Company Glass-Steagall Act" in the Statement of Additional Information for
further discussion of applicable banking laws and regulations.

GENERAL INFORMATION

Description of the Company and Its Shares

The Company was organized as a Maryland corporation on June 20, 1995. The
Company is authorized to issue shares of common stock, par value $.001 per
share, which may, without shareholder approval, be divided into an unlimited
number of series or classes of such shares, and which are presently divided into
seven series of shares, one for each of the following Funds: the Money Market
Fund, the Growth/Value Fund, the Aggressive Growth Fund, the Intermediate Bond
Fund, the Kentucky Tax-Free Fund, the Tennessee Tax-Free Fund and the
International Fund (the Tennessee Tax-Free Fund and the International Fund are
not currently offered). Each share represents an equal proportionate interest in
a Fund with other shares of the same series, and is entitled to such dividends
and distributions out of the income earned on the assets belonging to that Fund
as are declared at the discretion of the directors (see "Miscellaneous" below).

- 34 -

<PAGE>

Shareholders are entitled to one vote per share (with proportional voting
for fractional shares) on such matters as shareholders are entitled to vote.
Shareholders vote as a single class except (i) when required by the 1940 Act,
shares shall be voted by individual series and (ii) when the directors have
determined that the matter affects only the interests of one or more series,
then only shareholders of such series shall be entitled to vote thereon. The
Company will not hold annual meetings, however, shareholders with beneficial
ownership of 10% or more of the Company's shares have the right to call a
meeting for the purpose of voting upon the removal of a director or directors.

Overall responsibility for the management of the Company is vested in the
Board of Directors. See "Management of Trans Adviser Funds Directors of the
Company." Individual directors are elected by the shareholders and may be
removed by the Board of Directors or shareholders at a meeting held for such
purpose in accordance with the provisions of the Articles of Incorporation and
the By-laws of the Company and Maryland law. See "Additional Information
Miscellaneous" in the Statement of Additional Information for further
information.

Performance Information

From time to time performance information for a Fund showing its total return,
distribution rate and/or yield may be presented in advertisements and sales
literature. Average annual total return will be calculated for the past year and
the period since the establishment of the Fund. Total return is measured by
comparing the value of an investment in the Fund at the beginning of the
relevant period to the redemption value of the investment at the end of the
period (assuming the investor paid the maximum sales load on the investment and
assuming immediate reinvestment of any dividends or capital gains
distributions). Yield will be computed by dividing the Fund's net investment
income per share earned during a recent one-month period by the Fund's per share
net asset value (reduced by any undeclared earned income expected to be paid
shortly as a dividend) on the last day of the period and analyzing the result.
In addition, the Tax-Free Fund may present tax-equivalent yield in
advertisements and sales literature.

The Funds may also publish a distribution rate in investor communications
preceded or accompanied by a copy of the current Prospectus. The current
distribution rate for a Fund will be calculated by dividing the maximum offering
price per share into the annualization of the total distributions made by the
Fund during the same thirty-day period. The current distribution rate may differ
from current yield because the distribution rate may contain items of capital
gain and other items of income, while yield reflects only earned interest and
dividend items of income. In each case, the yield, distribution rates and total
return figures will reflect all recurring charges against Fund income and will
assume the payment of the maximum sales load.

Investors may also judge the performance of each Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices or
rankings and data published by various services such as that provided by Lipper
Analytical Services, Inc. Comparisons and references may also be made to indices
or data published in Money Magazine, Forbes, Barron's, The Wall Street Journal,
The New York Times, Business Week, American Banker, Institutional Investor,
Pensions and Investments, U.S.A. Today, Fortune, CDA/Wiesenberger, Ibbotson
Associates, Inc., MorningStar and local newspapers and periodicals. In addition
to performance information, general information about these Funds that appears
in a publication such as those mentioned above may be included in
advertisements, sales literature and in reports to shareholders.

Information about the performance of a Fund is based on a Fund's record up
to a certain date and is not intended to indicate future performance. Total
return, yield and distribution rate are functions of the type and quality of
instruments held in a Fund, operating expenses, and marketing conditions. Any
fees

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<PAGE>

charged by Trans Financial Bank or any of its affiliates or a broker-dealer with
respect to customer accounts investing in shares of a Fund will not be included
in performance calculations.

Miscellaneous

Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.

Inquiries regarding the Company may be directed in writing to the Company
at P.O. Box 90001, Bowling Green, KY 42102-9001, or by calling toll free (800)
308-TRAN.

TRANS ADVISER FUNDS
P.O. Box 90001
Bowling Green, KY 42102-9001

ADVISER
Trans Financial Bank
P.O. Box 90001
Bowling Green, KY 42102-9001

SUB-ADVISER
Mastrapasqua & Associates, Inc.
814 Church Street
Nashville, TN 37203

ADMINISTRATOR/DISTRIBUTOR
Forum Financial Services, Inc.
Two Portland Square
Portland, ME 04101

TRANSFER AGENT
Forum Financial Corp.
Two Portland Square
Portland, ME 04101

LEGAL COUNSEL
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP
99 High Street
Boston, MA 02110

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<PAGE>

Table of Contents

Page

Highlights.................................................................. 2
Fee Table................................................................... 3
Financial Highlights........................................................ 4
Investment Objectives and Policies.......................................... 5
Risk Factors................................................................ 19
Valuation of Shares......................................................... 21
Purchases and Redemptions of Shares......................................... 21
How to Invest............................................................... 21
How to Redeem Shares........................................................ 26
Dividends and Taxes......................................................... 28
Management of Trans Adviser Funds........................................... 31
General Information......................................................... 34

No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or Forum. This Prospectus does not constitute an offering by the Company or by
Forum in any jurisdiction in which such offering may not lawfully be made.

Growth/Value Fund
Aggressive Growth Fund
Intermediate Bond Fund
Kentucky Tax-Free Fund

Money Market Fund

PROSPECTUS

dated

January 1, 1997

Not FDIC Insured

- 37 -

<PAGE>

Rule 497(c)
Registration No. 33-94412

TRANS ADVISER FUNDS
GROWTH/VALUE FUND
AGGRESSIVE GROWTH FUND
INTERMEDIATE BOND FUND
KENTUCKY TAX-FREE FUND
MONEY MARKET FUND

Statement of Additional Information

January 1, 1997

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

This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectus of Trans Adviser Funds dated the same date
hereof (the "Prospectus"). This Statement of Additional Information is
incorporated by reference in its entirety into the Prospectus. Copies of the
Prospectus may be obtained by writing Trans Adviser Funds at P.O. Box 90001,
Bowling Green, KY 42102-9001, or by telephoning toll free (800) 308-TRAN.

<PAGE>

TABLE OF CONTENTS

Page

INVESTMENT OBJECTIVES AND POLICIES........................................... 1

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS....................... 1

WHEN-ISSUED SECURITIES......................................... 1
VARIABLE AND FLOATING RATE SECURITIES.......................... 1
PARTICIPATION INTERESTS........................................ 2
REPURCHASE AGREEMENTS.......................................... 2
U.S. GOVERNMENT OBLIGATIONS.................................... 2
BANKERS' ACCEPTANCES AND CERTIFICATES OF DEPOSIT............... 2
COMMERCIAL PAPER............................................... 3
VARIABLE AMOUNT MASTER DEMAND NOTES............................ 3
FOREIGN INVESTMENT............................................. 3
REVERSE REPURCHASE AGREEMENTS.................................. 4
CALLS.......................................................... 4
PUTS........................................................... 5
FUTURES CONTRACTS.............................................. 6
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS................... 8
RISK FACTORS IN FUTURES TRANSACTIONS........................... 9
AMERICAN DEPOSITORY RECEIPTS (ADRs)............................ 9
LOWER-RATED DEBT SECURITIES.................................... 9
ILLIQUID INVESTMENTS........................................... 10
LOANS AND OTHER DIRECT DEBT INSTRUMENTS........................ 10
RESTRICTED SECURITIES.......................................... 11
WARRANTS....................................................... 11
SECURITIES LENDING............................................. 11
OTHER INVESTMENT COMPANIES..................................... 11
FUTURE DEVELOPMENTS............................................ 11

INVESTMENT RESTRICTIONS............................................... 12

PORTFOLIO TURNOVER.................................................... 13

RISKS AND SPECIAL CONSIDERATIONS REGARDING INVESTMENT IN KENTUCKY
OBLIGATIONS .......................................................... 14

FISCAL YEAR 1995 (UNAUDITED).......................................... 14

VALUATION.................................................................... 16

VALUATION OF THE MONEY MARKET FUND.................................... 16
VALUATION OF THE FUNDS (OTHER THAN THE MONEY MARKET FUND)............. 17

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................... 17

PURCHASE OF SHARES.................................................... 17
MATTERS AFFECTING REDEMPTION.......................................... 17

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<PAGE>

REDEMPTION IN KIND................................................... 17

ADDITIONAL TAX INFORMATION.................................................. 18

QUALIFICATION AS A REGULATED INVESTMENT COMPANY...................... 18
ADDITIONAL TAX INFORMATION CONCERNING THE TAX-FREE FUND ............ 20
EXCISE TAX ON REGULATED INVESTMENT COMPANIES......................... 21
ADDITIONAL TAX INFORMATION CONCERNING OTHER FUNDS.................... 21
SALE OR REDEMPTION OF SHARES ....................................... 22
FOREIGN SHAREHOLDERS................................................. 22
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS............... 23

MANAGEMENT OF THE COMPANY................................................... 23

DIRECTORS............................................................ 23
REMUNERATION OF DIRECTORS AND CERTAIN EXECUTIVE OFFICERS............. 24
OFFICERS............................................................. 25
ADVISER AND SUB-ADVISER.................................................

THE ADVISER................................................................. 26
THE ADVISORY AGREEMENT............................................... 26
THE SUB-ADVISER...................................................... 27
PORTFOLIO TRANSACTIONS............................................... 27
GLASS-STEAGALL ACT................................................... 28
ADMINISTRATOR........................................................ 29
EXPENSES............................................................. 29
DISTRIBUTOR.......................................................... 29
CUSTODIAN............................................................ 30
TRANSFER AGENT....................................................... 30
PORTFOLIO ACCOUNTING................................................. 31
INDEPENDENT AUDITORS................................................. 31
LEGAL COUNSEL ....................................................... 31

FINANCIAL REPORTS ............................................................

PERFORMANCE INFORMATION..................................................... 31

YIELD OF THE MONEY MARKET FUND....................................... 31
YIELD OF THE FUNDS (OTHER THAN THE MONEY MARKET FUND) ............... 32
CALCULATION OF TOTAL RETURN.......................................... 32
CALCULATION OF DISTRIBUTION RATE.................................... 32
PERFORMANCE COMPARISONS.............................................. 33
YIELD AND TOTAL RETURN............................................... 33
ALL FUNDS............................................................ 33

ADDITIONAL INFORMATION...................................................... 34

ORGANIZATION AND DESCRIPTION OF SHARES............................... 34
MISCELLANEOUS........................................................ 34

APPENDIX A................................................................. A-1

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STATEMENT OF ADDITIONAL INFORMATION

TRANS ADVISER FUNDS

Trans Adviser Funds, Inc. (the "Company") is a non-diversified, open-end
management investment company. The Company consists of six separate investment
portfolios: the Growth/Value Fund, the Aggressive Growth Fund, the Intermediate
Bond Fund, the Kentucky Tax-Free Fund, the Tennessee Tax-Free Fund and the Money
Market Fund. This Statement of Additional Information relates to each Fund
except the Tennessee Tax-Free Fund (collectively, the "Funds"). Much of the
information contained in this Statement of Additional Information expands on
subjects discussed in the Prospectus. Capitalized terms not defined herein are
defined in the Prospectus. No investment in shares of a Fund should be made
without first reading the Prospectus.

INVESTMENT OBJECTIVES AND POLICIES

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS

The following policies supplement the investment objectives and policies
of each Fund as set forth in the Prospectus.

WHEN-ISSUED SECURITIES. As discussed in the Prospectus, each of the
Funds may purchase securities on a when-issued basis (i.e., for delivery beyond
the normal settlement date at a stated price and yield). When the Funds agree to
purchase securities on a when-issued basis, the Funds' custodian will set aside
cash or liquid portfolio securities equal to the amount of the commitment in a
separate account. Normally, the custodian will set aside portfolio securities to
satisfy the purchase commitment, and in such a case, the Funds may be required
subsequently to place additional assets in the separate account in order to
assure that the value of the account remains equal to the amount of the Funds'
commitment. It may be expected that the Funds' net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. In addition, because the Funds will
set aside cash or liquid portfolio securities to satisfy their purchase
commitments in the manner described above, the Funds' liquidity and the ability
of the Adviser (M&A) to manage them might be affected in the event their
commitment to purchase when-issued securities ever exceeded 25% of the value of
their assets.

When the Funds engage in when-issued transactions, they rely on the
seller to consummate the trade. Failure of the seller to do so may result in the
Funds incurring a loss or missing the opportunity to obtain a price considered
to be advantageous. The Funds do not intend to purchase when-issued securities
for speculative purposes but only in furtherance of their investment objectives,
the achievement of which is not dependent upon when-issued securities.

VARIABLE AND FLOATING RATE SECURITIES. Each Fund may acquire variable
and floating rate securities, subject to the relevant Fund's investment
objectives, policies and restrictions. A variable rate security is one whose
terms provide for the readjustment of its interest rate on set dates and which,
upon such readjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate security is one whose terms provide
for the readjustment of its interest rate whenever a specified interest rate
changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value. Such securities are frequently not rated
by credit rating agencies; however, unrated variable and floating rate
securities determined by the Adviser (M&A) under guidelines established by the
Company's Board of Directors to be of comparable quality at the time of purchase
to rated instruments eligible for purchase under a Fund's investment policies
may be purchased by a Fund. In making such determinations, the Adviser (M&A)
will consider the earning power, cash flow and other liquidity ratios of the
issuers of such securities (such issuers include financial, merchandising, bank
holding and other companies) and will continuously monitor their financial
condition. Although there may be no active secondary market with respect to a
particular variable or

<PAGE>

floating rate security purchased by a Fund, a Fund may resell the security at
any time to a third party. The absence of an active secondary market, however,
could make it difficult for a Fund to dispose of a variable or floating rate
security in the event the issuer of the security defaulted on its payment
obligations and the Fund could, as a result or for other reasons, suffer a loss
to the extent of the default. Variable or floating rate securities may be
secured by bank letters of credit.

PARTICIPATION INTERESTS. The Kentucky Tax-Free Fund may purchase
participation interests in loans to municipal issuers, which are made available
through a commercial bank that arranges the tax-exempt loan. Participation
interests are frequently backed by an irrevocable bank letter of credit or a
guarantee by a financial institution and give the Fund the right to demand, on
short notice (usually not more than seven days), payment of all or any part of
the principal amount and accrued interest. Banks retain fees for their role in
an amount equal to the excess of the interest paid on the municipal securities
over the negotiated yield at which the participation interests were purchased.
In the event that the participation interest that the Fund acquires includes the
right to demand payment of principal and accrued interest from the issuer of the
participation interest pursuant to a letter of credit or other commitment, the
maturity will be deemed to be equal to the time remaining until the principal
amount can be recovered from the issuer through demand, although the stated
maturity may be in excess of one year. To the extent that variable rate
instruments and loan participations may lack liquidity (unless payable on demand
or within seven days), they are subject to the restriction on illiquid
securities, described herein under the caption "Investment Restrictions". See
"Illiquid Investments" below for an explanation of how liquidity is determined.

REPURCHASE AGREEMENTS. Securities held by the Money Market Fund, the
Intermediate Bond Fund and the Aggressive Growth Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, the Fund would
acquire securities from member banks of the Federal Deposit Insurance
Corporation with capital, surplus, and undivided profits of not less than
$100,000,000 (as of the date of their most recently published financial
statements) and from registered broker-dealers which the Adviser (M&A) deems
creditworthy under guidelines approved by the Board of Directors, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon date
and price. The repurchase price would generally equal the price paid by the Fund
plus interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The seller
under a repurchase agreement will be required to maintain the value of
collateral held pursuant to the agreement at not less than the repurchase price
(including accrued interest) and the Adviser (M&A) will monitor the collateral's
value to ensure that it equals or exceeds the repurchase price (including
accrued interest). In addition, securities subject to repurchase agreements will
be held in a segregated account. If the seller were to default on its repurchase
obligation or become insolvent, the Fund, as the holder of such obligation,
would suffer a loss to the extent that the proceeds from a sale of the
underlying portfolio securities were less than the repurchase price under the
agreement, or to the extent that the disposition of such securities by the Fund
were delayed pending court action. Finally, it is not certain whether a Fund
would be entitled, as against a claim of the seller or its receiver, trustee in
bankruptcy or creditors, to retain the underlying securities. Securities subject
to repurchase agreements will be held by the Company's custodian or another
qualified custodian or in the Federal Reserve/Treasury book-entry system.
Repurchase agreements are considered by the staff of the Securities and Exchange
Commission (the "Commission") to be loans by a Fund.

U.S. GOVERNMENT OBLIGATIONS. The Funds may invest in bills, notes and
bonds issued by the U.S. Treasury. Such obligations are supported by the full
faith and credit of the U.S. Government.

BANKERS' ACCEPTANCES AND CERTIFICATES OF DEPOSIT. The Funds (other than
the Kentucky Tax-Free Fund) may invest in bankers' acceptances, certificates of
deposit, and demand and time deposits. Bankers' acceptances are negotiable
drafts or bills of exchange typically drawn by an importer or exporter to pay
for specific merchandise, which are "accepted" by a bank, meaning, in effect,
that the bank unconditionally agrees to pay the face value of the instrument on
maturity. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return.

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Bankers' acceptances will be those guaranteed by domestic and foreign
banks, if at the time of purchase, such banks have capital, surplus, and
undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements). Certificates of deposit and demand and
time deposits will be those of domestic and foreign banks and savings and loan
associations, if (a) at the time of purchase they have capital, surplus, and
undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements) or (b) the principal amount of the
instrument is insured in full by the Federal Deposit Insurance Corporation.

COMMERCIAL PAPER. The Funds (other than the Tax-Free Fund) may invest in
commercial paper. Commercial paper consists of unsecured promissory notes issued
by corporations. Issues of commercial paper normally have maturities of less
than nine months and fixed rates of return. The Funds (other than the Kentucky
Tax-Free and Money Market Funds) may invest in (i) Canadian Commercial Paper,
which is commercial paper issued by a Canadian corporation or a Canadian
counterpart of a U.S. corporation, and (ii) Europaper, which is U.S.
dollar-denominated commercial paper of an issue located in Europe.

The Kentucky Tax-Free Fund may invest in municipal obligations issued at
a discount, frequently referred to as municipal commercial paper, which are
likely to be issued to meet seasonal working capital needs of a municipality or
to provide interim construction financing and are to be paid from general
revenues of the municipality or refinanced with long-term debt. In most cases,
municipal commercial paper is backed by letters of credit, lending agreements,
note repurchase agreements, or other credit facility agreements offered by banks
or other institutions. The Kentucky Tax-Free Fund would be able to draw on these
agreements on a default under the terms of the documents of the security.

VARIABLE AMOUNT MASTER DEMAND NOTES. Variable amount master demand
notes, in which a Fund may invest, are unsecured demand notes that permit the
indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate according to the terms of the instrument. They are also referred
to as variable rate demand notes. Because these notes are direct lending
arrangements between the Fund and the issuer, they are not normally traded.
Although there may be no secondary market in the notes, the Fund may demand
payment of principal and accrued interest at any time or during specified
periods not exceeding one year, depending upon the instrument involved, and may
resell the note at any time to a third party. The absence of such an active
secondary market, however, could make it difficult for the Fund to dispose of a
variable amount master demand note if the issuer defaulted on its payment
obligations or during periods when the Fund is not entitled to exercise their
demand rights, and the Fund could, for this or other reasons, suffer a loss to
the extent of the default. While the notes are not typically rated by credit
rating agencies, issuers of variable amount master demand notes must satisfy the
same criteria as set forth above for commercial paper. The Adviser (M&A) will
consider the earning power, cash flow, and other liquidity ratios of the issuers
of such notes and will continuously monitor their financial status and ability
to meet payment on demand. Where necessary to ensure that a note is of "high
quality," the Fund will require that the issuer's obligation to pay the
principal of the note be backed by an unconditional bank letter or line of
credit, guarantee or commitment to lend. In determining dollar-weighted average
portfolio maturity, a variable amount master demand note will be deemed to have
a maturity equal to the period of time remaining until the principal amount can
be recovered from the issuer through demand.

FOREIGN INVESTMENT. The Growth Funds may, subject to their investment
objectives and policies, invest in certain obligations or securities of foreign
issuers. Permissible investments include Eurodollar Certificates of Deposit
("ECDs") which are U.S. dollar denominated certificates of deposit issued by
branches of foreign and domestic banks located outside the United States, Yankee
Certificates of Deposit ("Yankee CDs") which are certificates of deposit issued
by a U.S. branch of a foreign bank denominated in U.S. dollars and held in the
United States, Eurodollar Time Deposits ("ETDs") which are U.S. dollar
denominated deposits in a foreign branch of a U.S. bank or a foreign bank, and
Canadian Time Deposits ("CTDs") which are U.S. dollar denominated certificates
of deposit issued by Canadian offices of major Canadian Banks. Investments in
securities issued by foreign branches of U.S. banks, foreign banks, or other
foreign issuers, including American Depository Receipts ("ADRs") and securities
purchased on foreign securities exchanges and over-the-counter, may subject the
Growth Funds to investment risks that differ in some respects from those related
to investment

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in obligations of U.S. domestic issuers or in U.S. securities markets. Such
risks include future adverse political and economic developments, possible
seizure, nationalization or expropriation of foreign investments, less stringent
disclosure requirements, the possible establishment of exchange controls or
taxation at the source, and the adoption of other foreign governmental
restrictions. Additional risks include less publicly available information, the
risk that companies may not be subject to the accounting, auditing and financial
reporting standards and requirements of U.S. companies, the risk that foreign
securities markets may have less volume and therefore many securities traded in
these markets may be less liquid and their prices more volatile than U.S.
securities, and the risk that custodian and brokerage costs may be higher.
Foreign issuers of securities or obligations are often subject to accounting
treatment and engage in business practices different from those respecting
domestic issuers of similar securities or obligations. Foreign branches of U.S.
banks and foreign banks may be subject to less stringent reserve requirements
than those applicable to domestic branches of U.S. banks. The Growth Funds will
acquire such securities only when M&A believes the risk associated with such
investments are minimal.

REVERSE REPURCHASE AGREEMENTS. As discussed in the Prospectus, the
Aggressive Growth Fund may borrow funds for temporary purposes by entering into
reverse repurchase agreements in accordance with the Fund's investment
restrictions. Pursuant to such agreements, the Fund would sell portfolio
securities to financial institutions such as banks and broker-dealers, and agree
to repurchase the securities at a mutually agreed-upon date and price. The Fund
intends to enter into reverse repurchase agreements only to avoid otherwise
selling securities during unfavorable market conditions to meet redemptions. At
the time the Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account assets consistent with the Fund's investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. Such assets will include U.S. Government
securities or other liquid, high-grade debt securities. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Fund may decline below the price at which the Fund is obligated to repurchase
the securities. Reverse repurchase agreements are considered to be borrowings by
the Fund under the 1940 Act.

CALLS. The Aggressive Growth Fund may write (sell) "covered" call
options and purchase options to close out options previously written by it. Such
options must be listed on a National Securities Exchange and issued by the
Options Clearing Corporation. The purpose of writing covered call options is to
generate additional premium income for the Fund. This premium income will serve
to enhance the Fund's total return and will reduce the effect of any price
decline of the security involved in the option. Covered call options will
generally be written on securities which, in M&A's opinion, are not expected to
make any major price moves in the near future but which, over the long term, are
deemed to be attractive investments for the Fund. A call option gives the holder
(buyer) the "right to purchase" a security at a specified price (the exercise
price) at any time until a certain date (the expiration date). So long as the
obligation of the writer of a call option continues, the writer may be assigned
an exercise notice by the broker-dealer through whom such option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation terminates upon the expiration of the call
option, or such earlier time at which the writer effects a closing purchase
transaction by repurchasing an option identical to that previously sold. To
secure the writer's obligation to deliver the underlying security in the case of
a call option, a writer is required to deposit in escrow the underlying security
or other assets in accordance with the rules of the Options Clearing
Corporation. The Aggressive Growth Fund will write only covered call options.
This means that the Aggressive Growth Fund will only write a call option on a
security which it already owns. (In order to comply with the requirements of the
securities laws in several states the Fund will not write a covered call option
if, as a result, the aggregate market value of all portfolio securities covering
call options or subject to put options exceeds 25% of the market value of its
total assets.)

Aggressive Growth Fund securities on which call options may be written
will be purchased solely on the basis of investment considerations consistent
with the Fund's investment objectives. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk (in
contrast to the writing of naked or uncovered call options, which the Aggressive
Growth Fund will not do), but capable of enhancing the Fund's total return. When
writing a covered call option, the Fund, in return for the premium,

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gives up the opportunity for profit from a price increase in the underlying
security above the exercise price, but retains the risk of loss should the price
of the security decline. Unlike an owner of securities not subject to an option,
the Aggressive Growth Fund will not have any control over when it may be
required to sell the underlying securities, since it may be assigned an exercise
notice at any time prior to the expiration of its obligation as a writer. If a
call option which the Fund has written expires, the Fund will realize a gain in
the amount of the premium; however, such gain may be offset by a decline in the
market value of the underlying security during the option period. If the call
option is exercised, the Fund will realize a gain or loss from the sale of the
underlying security. The security covering the call will be maintained in a
segregated account of the Fund's custodian. The Aggressive Growth Fund will not
consider a security covered by a call to be "pledged" as that term is used in
its policy which limits the pledging or mortgaging of its assets.

The premium received is the market value of an option. The premium the
Aggressive Growth Fund will receive from writing a call option will reflect,
among other things, the current market price of the underlying security, the
relationship of the exercise price to such market price, the historical price
volatility of the underlying security, and the length of the option period. Once
the decision to write a call option has been made, the Adviser, in determining
whether a particular call option should be written on a particular security,
will consider the reasonableness of the anticipated premium and the likelihood
that a liquid secondary market will exist for those options. The premium
received by the Fund for writing covered call options will be recorded as a
liability in the Fund's statement of assets and liabilities. This liability will
be adjusted daily to the option's current market value, which will be the latest
sale price at the time at which the net asset value per share of the Fund is
computed (close of the New York Stock Exchange), or, in the absence of such
sale, the latest asked price. The liability will be extinguished upon expiration
of the option, the purchase of an identical option in the closing transaction,
or delivery of the underlying security upon the exercise of the option.

Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security from being called, or
to permit the sale of the underlying security. Furthermore, effecting a closing
transaction will permit the Aggressive Growth Fund to write another call option
on the underlying security with either a different exercise price or expiration
date or both. If the Fund desires to sell a particular security from its
portfolio on which it has written a call option, it will seek to effect a
closing transaction prior to, or concurrently with, the sale of the security.
There is, of course, no assurance that the Fund will be able to effect such
closing transactions at a favorable price. If the Fund cannot enter into such a
transaction, it may be required to hold a security that it might otherwise have
sold, in which case it would continue to be at market risk in the security. This
could result in higher transaction costs. The Fund will pay transaction costs in
connection with the writing of options to close out previously written options.
Such transaction costs are normally higher than those applicable to purchases
and sales of portfolio securities.

Call options written by the Aggressive Growth Fund will normally have
expiration dates of less than nine months from the date written. The exercise
price of the options may be below, equal to, or above the current market values
of the underlying securities at the time the options are written. From time to
time, the Fund may purchase an underlying security for delivery in accordance
with an exercise notice of a call option assigned to it, rather than delivering
such security from its portfolio. In such cases, additional costs will be
incurred.

The Aggressive Growth Fund will realize a profit or loss from a closing
purchase transaction if the cost of the 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, any loss resulting from the repurchase of a call option
is likely to be offset in whole or in part by appreciation of the underlying
security owned by the Fund.

PUTS. When the Fund writes a put option, it takes the opposite side of
the transaction from the option's purchaser. In return for receipt of the
premium, the Fund assumes the obligation to pay the strike price for the
option's underlying instrument if the other party to the option chooses to
exercise it. When writing an option on a futures contract the Fund will be
required to make margin payments to a futures commission merchant for futures
contracts. The Fund may seek to terminate its position in a put option it writes
before

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exercise by closing out the option in the secondary market at its current price.
If the secondary market is not liquid for a put option the Fund has written,
however, the Fund must continue to be prepared to pay the strike price while the
option is outstanding, regardless of price changes, and must continue to set
aside assets to cover its position.

If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it received. If
security prices remain the same over time, it is likely that the writer will
also profit, because it should be able to close out the option at a lower price.
If security prices fall, the put writer would expect to suffer a loss. This loss
should be less than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should mitigate the
effects of the decline. The Aggressive Growth Fund may acquire "puts" with
respect to securities held in its portfolio. A put is a right to sell a
specified security (or securities) within a specified period of time at a
specified exercise price. The Fund may sell, transfer, or assign a put only in
conjunction with the sale, transfer, or assignment of the underlying security or
securities.

The amount payable to the Aggressive Growth Fund upon its exercise of a
"put" is normally (i) the Fund's acquisition cost of the securities subject to
the put (excluding any accrued interest which the Fund paid on the acquisition),
less any amortized market premium or plus any amortized market or original issue
discount during the period the Fund owned the securities, plus (ii) all interest
accrued on the securities since the last interest payment date during that
period.

Puts may be acquired by the Aggressive Growth Fund to facilitate the
liquidity of portfolio assets. Puts may also be used to facilitate the
reinvestment of assets at a rate of return more favorable than that of the
underlying security.

FUTURES CONTRACTS. The Aggressive Growth Fund may enter into futures
contracts and options on futures contracts for the purposes of remaining fully
invested and reducing transaction costs. Futures contracts provide for the
future sale by one party and purchase by another party of a specified amount of
a specific security, class of securities, or an index at a specified future time
and at a specified price. A stock index futures contract is a bilateral
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the stock index value at the close of trading of the contracts and the price at
which the futures contract is originally struck. Futures contracts which are
standardized as to maturity date and underlying financial instrument are traded
on national futures exchanges. Futures exchanges and trading are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC"),
a U.S. Government Agency.

The Kentucky Tax-Free Fund is permitted to buy and sell futures
contracts relating to municipal bond indices ("Municipal Bond Index Futures")
and to U.S. Government securities ("U.S. Government Securities Futures,"
together referred to as "Futures"), and exchange traded options based on Futures
as a possible means to protect the asset value of the Fund during periods of
changing interest rates, although in fact the Funds may never do so.

Municipal Bond Index Futures currently are based on a long-term
municipal bond index developed by the Chicago Board of Trade ("CBT") and The
Bond Buyer (the "Municipal Bond Index"). Financial futures contracts based on
the Municipal Bond Index began trading on June 11, 1985. The Municipal Bond
Index is comprised of 40 tax-exempt municipal revenue and general obligation
bonds. Each bond included in the Municipal Bond Index must be rated A or higher
by Moody's or S&P and must have a remaining maturity of 19 years or more. Twice
a month new issues satisfying the eligibility requirements are added to, and an
equal number of old issues are deleted from, the Municipal Bond Index. The value
of the Municipal Bond Index is computed daily according to a formula based on
the price of each bond in the Municipal Bond Index, as evaluated by six
dealer-to-dealer brokers.

The Municipal Bond Index futures contract is traded only on the CBT.
Like other contract markets, the CBT assures performance under futures contracts
through a clearing corporation, a nonprofit organization

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managed by the exchange membership which is also responsible for handling daily
accounting of deposits or withdrawals of margin.

There are at present U.S. Government financial futures contracts based
on long-term Treasury bonds, Treasury notes, GNMA Certificates and three-month
Treasury bills. U.S. Government Securities Futures have traded longer than
Municipal Bond Index Futures, and the depth and liquidity available in the
trading markets for them are in general greater.

Although futures contracts by their terms call for actual delivery and
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold," or "selling" a contract previously
purchased) in an identical contract to terminate the position. A futures
contract on a securities index is an agreement obligating either party to pay,
and entitling the other party to receive, while the contract is outstanding,
cash payments based on the level of a specified securities index. The
acquisition of put and call options on futures contracts will, respectively,
give the Funds the right (but not the obligation) for a specified price, to sell
or to purchase the underlying futures contract, upon exercise of the option, at
any time during the option period. Brokerage commissions are incurred when a
futures contract is bought or sold.

Futures traders are required to make a good faith margin deposit in cash
or government securities with a broker or custodian to initiate and maintain
open positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Initial margin deposits on futures contracts are customarily set at
levels much lower than the prices at which the underlying securities are
purchased and sold, typically ranging upward from less than 5% of the value of
the contract being traded.

After a futures contract position is opened, the value of the contract
is marked-to-market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Funds
expect to earn interest income on their margin deposits.

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

When interest rates are expected to rise or market values of portfolio
securities are expected to fall, the Funds can seek through the sale of futures
contracts to offset a decline in the value of their portfolio securities. When
interest rates are expected to fall or market values are expected to rise, a
Fund, through the purchase of such contracts, can attempt to secure better rates
or prices for the Fund, than might later be available in the market when it
effects anticipated purchases.

Regulations of the CFTC require that a Fund enters into transactions in
futures contracts and options thereon for hedging purposes only, in order to
assure that it is not deemed to be a "commodity pool" under such regulations. In
particular, CFTC regulations require that all short futures positions be entered
into for the purpose of hedging the value of securities held in a Fund's
portfolio, and that all long futures positions either constitute bona fide
hedging transactions, as defined in such regulations, or have a total value not
in excess of an amount determined by reference to certain cash and securities
positions maintained for the Fund, and accrued

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profits on such positions. In addition, the Fund may not purchase or sell such
instruments if, immediately thereafter, the sum of the amount of initial margin
deposits on its existing futures positions and premiums paid for options on
futures contracts would exceed 5% of the market value of the Fund's total
assets.

When a Fund purchases a futures contract, an amount of cash or cash
equivalents or high quality debt securities will be deposited in a segregated
account with the Fund's custodian so that the amount so segregated, plus the
initial deposit and variation margin held in the account of its broker, will at
all times equal the value of the futures contract, thereby insuring that the use
of such futures is unleveraged.

The Funds will only sell futures contracts to protect securities they
own against price declines or purchase contracts to protect against an increase
in the price of securities they intend to purchase. As evidence of this hedging
interest, the Funds expect that approximately 75% of their futures contract
purchases will be "completed," that is, equivalent amounts of related securities
will have been purchased or are being purchased by the Funds upon sale of open
futures contracts.

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

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS. A Fund will not enter into
futures contract transactions to the extent that, immediately thereafter, the
sum of its initial margin deposits on open contracts exceeds 5% of the market
value of a Fund's total assets. In addition, a Fund will not enter into futures
contracts to the extent that the value of the futures contracts held would
exceed 10% of the Fund's total assets. Futures transactions will be limited to
the extent necessary to maintain a Fund's qualification as a regulated
investment company.

Each Fund has undertaken to restrict its futures contract trading as
follows: first, the Funds will not engage in transactions in futures contracts
for speculative purposes; second, a Fund will not market itself to the public as
a commodity pool or otherwise as a vehicle for trading in the commodities
futures or commodity options markets; third, each Fund will disclose to all
prospective shareholders the purpose of and limitations on its commodity futures
trading; fourth, each Fund will submit to the CFTC special calls for
information. Accordingly, registration as a commodities pool operator with the
CFTC is not required.

In addition to the margin restrictions discussed above, transactions in
futures contracts may involve the segregation of funds pursuant to requirements
imposed by the SEC. Under those requirements, where a Fund has a long position
in a futures contract, it may be required to establish a segregated account (not
with a futures commission merchant or broker) containing cash or certain liquid
assets equal to the purchase price of the contract (less any margin on deposit).
For a short position in futures or forward contracts held by a Fund, those
requirements may mandate the establishment of a segregated account (not with a
futures commission merchant or broker) with cash or certain liquid assets that,
when added to the amounts deposited as margin, equal the market value of the
instruments underlying the futures contracts (but are not less than the price at
which the short positions were established). However, segregation of assets is
not required if a Fund "covers" a long position. For example, instead of
segregating assets, a Fund, when holding a long position in a futures contract,
could purchase a put option on the same futures contract with a strike price as
high or higher than the price of the contract held by the Fund. In addition,
where a Fund takes short positions, or engages in sales of call options, it need
not segregate assets if it "covers" these positions. For example, where a Fund
holds a short position in a futures contract, it may cover by owning the
instruments underlying the contract. A Fund may also cover such a position by
holding a call option permitting it to purchase the same futures contract at a
price no higher than the price at which the short position was established.
Where a Fund sells a call option on a futures contract, it may cover either by
entering into a long position in the same contract at a price no higher than the
strike price of the call option or by owning the instruments underlying the
futures contract. A Fund

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<PAGE>

could also cover this position by holding a separate call option permitting it
to purchase the same futures contract at a price no higher than the strike price
of the call option sold by the Fund.

RISK FACTORS IN FUTURES TRANSACTIONS. Positions in futures contracts may
be closed out only on an exchange that provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, a Fund would continue to be required to make daily cash payments to
maintain the required margin. In such situations, if a Fund has insufficient
cash, it may have to sell portfolio securities to meet daily margin requirements
at a time when it may be disadvantageous to do so. In addition, a Fund may be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the ability to effectively hedge them. A Fund will minimize
the risk that it will be unable to close out a futures contract by only entering
into futures contracts that are traded on national futures exchanges and for
which there appears to be a liquid secondary market.

The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. Because the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities market, there may be increased participation by speculators in
the futures market which may also cause temporary price distortions. A
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the contract. A Fund would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.

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

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

AMERICAN DEPOSITORY RECEIPTS (ADRs) are certificates evidencing
ownership of shares of a foreign-based issuer held in trust by a bank or similar
financial institution. The Growth Funds may purchase ADRs. Designed for use in
U.S. markets, ADRs are alternatives to the purchase of the underlying securities
in their national markets and currencies. ADRs may be sponsored or unsponsored;
there is less publicly available information with respect to unsponsored ADRs.
It is anticipated that ADRs will not be relied upon to achieve the Growth Funds'
objectives.

LOWER-RATED DEBT SECURITIES. The Growth Funds and the Intermediate Bond
Fund may purchase lower-rated debt securities commonly referred to as "junk
bonds" (those rated Ba to C by Moody's or BB to C by S&P) that have poor
protection with respect to the payment of interest and repayment of principal,
or may be in default. These securities are often considered to be speculative
and involve greater risk of loss or

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<PAGE>

price changes due to changes in the issuer's capacity to pay. The market prices
of lower-rated debt securities may fluctuate more than those of higher-rated
debt securities and may decline significantly in periods of general economic
difficulty, which may follow periods of rising interest rates.

While the market for high-yield corporate debt securities has been in
existence for many years and has weathered previous economic downturns, the
1980s brought a dramatic increase in the use of such securities to fund highly
leveraged corporate acquisitions and restructuring. Past experience may not
provide an accurate indication of future performance of the high yield bond
market, especially during periods of economic recession.

The market for lower-rated securities may be thinner and less active
than that for higher-rated debt securities, which can adversely affect the
prices at which the former are sold. If market quotations are not available,
lower-rated debt securities will be valued in accordance with procedures
established by the Board of Directors, including the use of outside pricing
services. Judgment plays a greater role in valuing high-yield corporate debt
securities than is the case for securities for which more external sources for
quotations and last-sale information are available. Adverse publicity and
changing investor perceptions may affect the ability of outside pricing services
to value lower-rated debt securities and a Fund's ability to sell these
securities.

Since the risk of default is higher for lower-rated debt securities, the
Adviser's (M&A's) research and credit analysis are an especially important part
of managing securities of this type held by a Fund. In considering investments
for a Fund, the Adviser (M&A) will attempt to identify those issuers of
high-yielding debt securities whose financial condition is adequate to meet
future obligations, has improved, or is expected to improve in the future. The
Adviser's (M&A's) analysis focuses on relative values based on such factors as
interest or dividend coverage, asset coverage, earnings prospects, and the
experience and managerial strength of the issuer.

A Fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as security holder to seek to
protect the interests of security holders if it determines this to be in the
best interest of the Fund's shareholders.

ILLIQUID INVESTMENTS are investments that cannot be sold or disposed of
in the ordinary course of business, within seven days, at approximately the
prices at which they are valued. Each of the Funds may purchase illiquid
investments. Under the supervision of the Board Directors, the Adviser (M&A)
determines the liquidity of each Fund's investments and, through reports from
the Adviser (M&A), the Board monitors investments in illiquid instruments. In
determining the liquidity of a Fund's investments, the Adviser (M&A) may
consider various factors, including (1) the frequency of trades and quotations,
(2) the number of dealers and prospective purchasers in the marketplace, (3)
dealer undertakings to make a market, (4) the nature of the security (including
any demand or tender features), and (5) the nature of the marketplace for trades
(including the ability to assign or offset a Fund's rights and obligations
relating to the investment). Investments currently considered by a Fund to be
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days. Also, the Adviser (M&A), may determine
some over-the-counter options, restricted securities and loans and other direct
debt instruments, and swap agreements to be illiquid. However, with respect to
over-the-counter options the Aggressive Growth Fund writes, all or a portion of
the value of the underlying instrument may be illiquid depending on the assets
held to cover the option and the nature and terms of any agreement the
Aggressive Growth Fund may have to close out the option before expiration. In
the absence of market quotations, illiquid investments are priced at fair value
as determined in good faith by a committee appointed by the Board of Directors.
If through a change in values, net assets, or other circumstances, the
Aggressive Growth Fund were in a position where more than 10% of its net assets
were invested in illiquid securities, it would seek to take appropriate steps to
protect liquidity.

LOANS AND OTHER DIRECT DEBT INSTRUMENTS are interests in amounts owed by
a corporate, governmental, or other borrower to another party. They may
represent amounts owed to lenders or lending syndicates (loans and loan
participation), to suppliers of goods or services (trade claims or other
receivables), or to other parties. Direct debt instruments involve a risk of
loss in case of default or insolvency

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<PAGE>

of the borrower and may offer less legal protection to a Fund in the event of
fraud or misrepresentation. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate a Fund
to supply additional cash to the borrower on demand.

RESTRICTED SECURITIES generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933, or in a registered public offering. Where registration is required,
a Fund may be obligated to pay all or part of the registration expense and a
considerable period may elapse between the time it decides to seek registration
and the time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, a Fund might obtain a less favorable price than prevailed when it
decided to seek registration of the shares. However, in general, the Funds
anticipate holding restricted securities to maturity or selling them in an
exempt transaction.

WARRANTS. Warrants are securities that give the Aggressive Growth Fund
the right to purchase equity securities from the issuer at a specific price (the
strike price) for a limited period of time. The strike price of warrants
typically is much lower than the current market price of the underlying
securities, yet they are subject to greater price fluctuations. As a result,
warrants may be more volatile investments than the underlying securities and may
offer greater potential for capital appreciation as well as capital
depreciation.

Warrants do not entitle a holder to dividends or voting rights with
respect to the underlying securities and do not represent any rights in the
assets of the issuing company. Also, the value of the warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to the expiration date. These
factors can make warrants more speculative than other types of investments.

SECURITIES LENDING. The Funds may lend their portfolio securities to
broker-dealers, banks or institutional borrowers of securities. A Fund must
receive a minimum of 100% collateral, plus any interest due in the form of cash
or U.S. Government securities. This collateral must be valued daily and should
the market value of the loaned securities increase, the borrower must furnish
additional collateral to the Fund. During the time portfolio securities are on
loan, the borrower will pay the Fund any dividends or interest paid on such
securities plus any interest negotiated between the parties to the lending
agreement. Loans will be subject to termination by the Fund or the borrower at
any time. While the Funds will not have the right to vote securities on loan,
each Fund intends to terminate the loan and regain the right to vote if that is
considered important with respect to the investment. A Fund will only enter into
loan arrangements with broker-dealers, banks or other institutions which the
Adviser (M&A) has determined are creditworthy under guidelines established by
the Company's Board of Directors.

OTHER INVESTMENT COMPANIES. A Fund may invest in the securities of other
investment companies to the extent permissible under the applicable regulations
and interpretations of the 1940 Act or an exemptive order. It is anticipated
that investment in other investment companies will not be relied upon to achieve
the Growth Funds' objectives.

FUTURE DEVELOPMENTS. As discussed in the Prospectus, a Fund may take
advantage of other investment practices which are not at present contemplated
for use by the Fund or which currently are not available but which may be
developed, to the extent such investment practices are both consistent with the
Fund's investment objective and are legally permissible for the Fund. Such
investment practices, if they arise, may involve risks which exceed those
involved in the activities described in the Prospectus and Statement of
Additional Information. Prior to commencing any new investment practice, each
Fund will notify shareholders by means of a prospectus supplement.

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<PAGE>

INVESTMENT RESTRICTIONS

The following fundamental investment limitations cannot be changed
without approval by a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of a Fund.

A Fund may not (unless otherwise indicated):

(1) issue any senior security (as defined in the 1940 Act), except that
(a) a Fund may engage in transactions which may result in the issuance of senior
securities to the extent permitted under applicable regulations and
interpretation of the 1940 Act or an exemptive order; (b) a Fund may acquire
other securities that may be deemed senior securities to the extent permitted
under applicable regulations or interpretations of the 1940 Act; (c) subject to
the restrictions set forth below, the Fund may borrow money as authorized by the
1940 Act;

(2) borrow money, except that (a) a Fund may enter into commitments to
purchase securities in accordance with its investment program, including
delayed-delivery and when-issued securities and reverse repurchase agreements,
provided that the total amount of any such borrowing does not exceed 33 1/3% of
the Fund's total assets; and (b) a Fund may borrow money for temporary or
emergency purposes in an amount not exceeding 5% of the value of its total
assets at the time when the loan is made (the Aggressive Growth Fund is not
subject to this 5% limitation and may borrow money for purposes of leveraging).

(3) underwrite securities issued by others, except to the extent that a
Fund may be considered an underwriter within the meaning of the Securities Act
of 1933 in the disposition of restricted securities;

(4) purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of a Fund's total assets would
be invested in the securities of companies whose principal business activities
are in the same industry;

(5) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);

(6) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a Fund
from purchasing or selling options and futures contracts or from investing in
securities or other instruments backed by physical commodities); or

(7) lend any security or make any other loan if, as a result, more than
33 1/3% of a Fund's total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.

The following investment limitations are nonfundamental and may be
changed without shareholder approval:

(i) Each Fund does not currently intend to sell securities short, unless
it owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling securities short.

(ii) Each Fund does not currently intend to purchase securities on
margin, except that a Fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall not
constitute purchasing securities on margin.

(iii) Each Fund does not currently intend to purchase any security if,
as a result, more than 15% (10% with respect to the Money Market Fund) of its
net assets would be invested in securities that are deemed

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<PAGE>

to be illiquid because they are subject to legal or contractual restrictions on
resale or because they cannot be sold or disposed of in the ordinary course of
business at approximately the prices at which they are valued.

(iv) The Money Market Fund does not currently intend to invest in
securities of real estate investment trusts that are not readily marketable, or
to invest in securities of real estate limited partnerships that are not listed
on the New York Stock Exchange or the American Stock Exchange or traded on the
NASDAQ National Market System.

(v) Each Fund does not currently intend to make loans, but this
limitation does not apply to purchases of debt securities or to repurchase
agreements.

(vi) Each Fund shall not invest in the securities of other investment
companies, except that a Fund may invest in the securities of other investment
companies that are not "affiliated persons" of the Fund (unless permitted by SEC
regulations or exemptive relief) to the extent permissible under the applicable
regulations and interpretations of the 1940 Act or an exemptive order. M&A
and/or the Adviser will waive the portion of its fee attributable to the assets
of a Fund invested in such investment companies to the extent required by the
laws of any jurisdiction in which shares of the Fund are registered for sale.

(vii) The Money Market Fund will not purchase the securities of any
issuer (other than securities issued or guaranteed by the U.S. government or any
of its agencies or instrumentalities) if, as a result, (a) more than 5% of the
Fund's total assets would be invested in the securities of that issuer, or (b)
the Fund would hold more than 10% of the outstanding voting securities of that
issuer.

In addition to the above, at the close of each quarter of its taxable
year, at least 50% of the value of each Fund's assets must consist of cash and
cash items, U.S. Government securities, securities of other regulated investment
companies, and securities of other issuers (as to which a Fund has not invested
more than 5% of the value of the Fund's total assets in securities of any such
issuer and does not hold more than 10% of its outstanding voting securities),
and no more than 25% of the value of its total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which a Fund controls and which are engaged in the same or similar trades or
businesses.

As a condition to registration of their shares in the State of Arkansas,
the Intermediate Bond Fund, the Aggressive Growth Fund, the Growth/Value Fund
and the Money Market Fund will not (a) purchase securities of unseasoned
issuers, including their predecessors, which have been in operation for less
than three years, and equity securities of issuers which are not readily
marketable if by reason thereof the value of its aggregate investment in such
classes of securities will exceed 5% of a Fund's total assets or (b) invest in
interests in oil, gas or other mineral exploration or development programs; a
Fund may, however, purchase and sell securities engaged in the exploration,
development, production, refining, transporting and marketing of oil, gas or
minerals.

PORTFOLIO TURNOVER

The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of a Fund's purchases or sales of portfolio securities for
the year by the monthly average value of the portfolio securities. The
calculation excludes all securities whose maturities at the time of acquisition
were one year or less. Portfolio turnover with respect to the Money Market Fund
is expected to be zero percent for regulatory purposes. The portfolio turnover
rate with respect to a Fund may vary greatly from year to year as well as within
a particular year, and may also be affected by cash requirements for redemptions
of shares. A higher portfolio turnover rate may lead to increased taxes and
transaction costs. Portfolio turnover will not be a limiting factor in making
investment decisions. The portfolio turnover rates for the period ended August
31, 1996 were as follows: Growth/Value Fund: 21.12%; Aggressive Growth Fund:
15.70%; Intermediate Bond Fund: 12.38% and Kentucky Tax-Free Fund: 145.12%.

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<PAGE>

RISKS AND SPECIAL CONSIDERATIONS REGARDING INVESTMENT IN KENTUCKY OBLIGATIONS

The following is a discussion of the general factors that might
influence the ability of Kentucky issuers to repay principal and interest when
due on the Kentucky Obligations contained in the portfolio of the Kentucky Tax-
Free Fund. Such information is derived from sources that are generally available
to investors and is believed by the Kentucky Tax-Free Fund to be accurate, but
has not been independently verified and may not be complete.

Economic problems include a continuing high unemployment rate in the
non-urbanized area of the State. The Coal Severance Tax is a significant revenue
producer for the State and its political subdivisions, and any substantial
decrease in the amount of coal or other minerals produced could result in
revenue shortfalls. Additionally, any Federal legislation adversely affecting
the domestic and export tobacco and/or cigarette industry would have a negative
impact on Kentucky's economy. Although revenue obligations of the State or its
political subdivisions may be payable from a specific project, there can be no
assurances that further economic difficulties and the resulting impact on State
and local government finances will not adversely affect the market value of the
bonds issued by Kentucky municipalities or political subdivisions or the ability
of the respective entities to pay debt service. Major legislative initiatives in
the areas of education reform and medicaid expenses are having an impact on the
Commonwealth's financial profile.

The Commonwealth of Kentucky relies primarily upon sales and use tax,
individual income tax, property tax, corporate income tax, insurance premium
tax, alcohol beverage tax, corporate license tax, cigarette tax, and horse
racing tax for its revenue. The cities, counties and other local governments are
essentially limited to property taxes, occupational license taxes, transit and
restaurant meal taxes and various license fees for their revenue. Obligations of
non-Kentucky issuers are subject to the risks of general economic and other
factors affecting those issuers.

Because of constitutional limitations, the Commonwealth of Kentucky
cannot enter into a financial obligation of more than two years' duration, and
no other municipal issuer within the Commonwealth can enter into a financial
obligation of more than one year's duration. As a consequence, the payment and
security arrangements applicable to Kentucky revenue bonds differ significantly
from those generally applicable to municipal revenue bonds in other states.

FISCAL YEAR 1995 (UNAUDITED)

The Commonwealth of Kentucky continues to achieve structural balance in
its budget through consensus forecasting of state revenue and measures of fiscal
constraint. The General Fund ended the fiscal year with a budget surplus of $134
million. The surplus was comprised of excess revenues of $84 million above the
original estimate of $5.07 billion and expenditure reductions of $50 million.
Additionally, individual tax refunds for the second consecutive year were paid
prior to July 1.

An additional $10 million was deposited to the Budget Reserve Trust
Fund, on July 1, 1995, bringing the balance to the targeted level of $100
million. The Budget Reserve Trust Fund is a line item in the Commonwealth's
biennial budget.

On July 31, 1995, a special session of the Kentucky General Assembly
convened to address court ordered legislative redistricting, adding $100 million
to the Budget Reserve Trust Fund, and approval of $50 million in secondary road
improvements to be funded from excess Road Fund Revenues. The General Assembly
adopted each of the referenced items and adjourned August 4, 1995. However, the
legislative redistricting plan adopted for the House of Representatives was
vetoed by Governor Jones and will have to be addressed in the next regular or
special session of the General Assembly.

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<PAGE>

VALUATION

As indicated in the Prospectus, the net asset value per share ("NAV") of
each Fund for purposes of pricing purchase and redemption orders is determined
as of the close of regular trading of the New York Stock Exchange (the "NYSE"))
on each Business Day of the Fund. Fund Business Days do not include the
following observed by the NYSE: New Year's Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day (observed), Labor Day, Thanksgiving
Day and Christmas Day (observed). Days on which the Federal Reserve Wire
Transfer Service is closed (which include: Martin Luther King Day, Columbus Day
and Veterans Day), in addition to NYSE holidays, are not Business Days for the
Money Market Fund. Net asset value per share for purposes of pricing sales and
redemptions is calculated by dividing the value of all securities and other
assets belonging to a Fund, less the liabilities charged to that Fund, by the
number of the outstanding shares of that Fund.

VALUATION OF THE MONEY MARKET FUND

The Money Market Fund has elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost initially and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Fund would receive if it sold the instrument. The value of
securities in the Fund can be expected to vary inversely with changes in
prevailing interest rates.

Pursuant to Rule 2a-7, the Money Market Fund will maintain a
dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per share, provided that the Fund will not
purchase any security with a remaining maturity of more than 397 days nor
maintain a dollar-weighted average portfolio maturity which exceeds 90 days. The
Company's Board of Directors has also undertaken to establish procedures
reasonably designed, taking into account current market conditions and the
Fund's investment objective, to stabilize the net asset value per share of the
Fund for purposes of sales and redemptions at $1.00. These procedures include
review by the Directors, at such intervals as they deem appropriate, to
determine the extent, if any, to which the net asset value per share of the Fund
calculated by using available market quotations deviates from $1.00 per share.
In the event such deviation exceeds one-half of one percent, Rule 2a-7 requires
that the Board of Directors promptly consider what action, if any, should be
initiated. If the Directors believe that the extent of any deviation from the
Fund's $1.00 amortized cost price per share may result in material dilution or
other unfair results to new or existing investors, they will take such steps as
they consider appropriate to eliminate or reduce to the extent reasonably
practicable any such dilution or unfair results. These steps may include selling
portfolio instruments prior to maturity, shortening the dollar-weighted average
portfolio maturity, withholding or reducing dividends, reducing the number of
the Fund's outstanding shares without monetary consideration, or utilizing a net
asset value per share determined by using available market quotations.

VALUATION OF THE FUNDS (OTHER THAN THE MONEY MARKET FUND)

The value of the portfolio securities held by the Funds (other than the
Money Market Fund) for purposes of determining a Fund's net asset value per
share will be established on the basis of current valuations provided by Muller
Data Corporation or Kenny S&P Evaluation Services, whose procedures shall be
monitored by the Adviser and the Administrator, and which valuations shall be
the fair value of such securities. Investments in debt securities with remaining
maturities of 60 days or less will be valued based upon the amortized cost
method.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Forum Financial Services, Inc. (the "Distributor") acts as distributor
of the Funds' shares. (See "Management of the Company - Distributor"). In
addition to purchasing shares directly from the Distributor, shares may be
purchased through arrangements established by the Distributor with banks,
broker-dealers or

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<PAGE>

other financial institutions. Customers purchasing shares of the Company may
include officers, directors, or employees of the Adviser or M&A.

PURCHASE OF SHARES

As stated in the Prospectus, the public offering price of shares of each
Fund is its net asset value, plus a sales charge where applicable, next
determined after receipt of an order in proper form.

MATTERS AFFECTING REDEMPTION

The Company may suspend the right of redemption or postpone the date of
payment for shares during any period when (a) trading on the NYSE is restricted
by applicable rules and regulations of the Commission, (b) the NYSE is closed
for other than customary weekend and holiday closings, (c) the Commission has by
order permitted such suspension, or (d) an emergency exists as determined by the
Commission.

The Company may redeem shares involuntarily if redemption appears
appropriate in light of the Company's responsibilities under the 1940 Act. See
"Valuation" above.

REDEMPTION IN KIND

Although each Fund intends to redeem shares in cash, each Fund reserves
the right under certain circumstances to pay the redemption price in whole or in
part by a distribution of securities from a Fund. To the extent available, such
securities will be readily marketable. Redemption in kind will be made in
conformity with applicable Commission rules, taking such securities at the same
value employed in determining NAV and selecting the securities in a manner the
Directors determine to be fair and equitable.

The Funds have elected to be governed by Rule 18f-1 of the 1940 Act
under which each Fund is obligated to redeem shares for any one shareholder in
cash only up to the lesser of $250,000 or 1% of a Fund's net asset value during
any 90-day period.

ADDITIONAL TAX INFORMATION

The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Funds or their shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.

QUALIFICATION AS A REGULATED INVESTMENT COMPANY

Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As regulated investment companies, the Funds are not subject to Federal
income tax on the portion of their net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses,
including foreign currency gains and loss) and capital gain net income (i.e.,
the excess of capital gains over capital losses) that they distribute to
shareholders, provided that they distribute at least 90% of their investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfy certain other requirements of the
Code that are described below. Distributions by the Funds made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
for the taxable year and will therefore satisfy the Distribution Requirement.

- 16 -

<PAGE>

In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). For purposes of these calculations,
gross income includes tax-exempt income. However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, a Fund may have to limit
the sale of appreciated securities that it held for less than three months.
However, the Short-Short Gain Test will not prevent a Fund from disposing of
investments at a loss, since the recognition of a loss before the expiration of
the three-month holding period is disregarded for this purpose. Interest
(including original issue discount) received by a Fund at maturity or upon the
disposition of a security held for less than three months will not be treated as
gross income derived from the sale or other disposition of a security within the
meaning of the Short-Short Gain Test. However, income attributable to realized
market appreciation will be treated as gross income from such sale or other
disposition for that purpose.

In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by a Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued while the Fund held the debt obligation. In addition, under the rules of
Code Section 988, gain or loss recognized on a disposition of a debt obligation
denominated in a foreign currency or an option with respect thereto (but only to
the extent attributable to changes in foreign currency exchange rates), and gain
or loss recognized on the disposition of a forward foreign currency contract,
futures contract, option or similar financial instrument, or of foreign currency
itself, except for regulated futures contracts or non-equity options subject to
Section 1256, will generally be treated as ordinary income or loss.

Generally, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected (as applicable, depending on the
type of the Fund) if (i) the asset is used to close a "short sale" (which
includes for certain purposes the acquisition of a put option) or is
substantially identical to another asset so used, or (ii) the asset is otherwise
held by a Fund as part of a "straddle" (which term generally excludes a
situation where the asset is stock and the Fund grants a qualified covered call
option (which, among other things, must not be deep-in-the- money) with respect
thereto, or (iii) the asset is stock and the Fund grants an in-the-money
qualified covered call option with respect thereto. However, for purposes of the
Short-Short Gain Test, the holding period of the asset disposed of may be
reduced only in the case of clause (i) above. In addition, a Fund may be
required to defer the recognition of a loss on the disposition of an asset held
as part of a straddle to the extent of any unrecognized gain on the offsetting
position.

Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by a Fund from a closing transaction with respect to, an option
written by a Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by a Fund will commence on the date it is written and end on the date it lapses
or the date a closing transaction is entered into. Accordingly, a Fund may be
limited in its ability to write options which expire within three months or
enter into closing transactions at a gain within three months of the writing of
options.

- 17 -

<PAGE>

Certain transactions that may be engaged in by the Aggressive Growth
Fund (such as futures contracts and options on stock indexes and futures
contracts) will be subject to special tax treatment as "Section 1256 contracts."
Section 1256 contracts are treated as if they are sold for their fair market
value on the last business day of the taxable year, even though a taxpayer's
obligations (or rights) under such contract have not terminated (by delivery,
exercise, entering into a closing transaction or otherwise) as of such date. Any
gain or loss recognized as a consequence of the year-end deemed disposition of
Section 1256 contracts is combined with any other gain or loss that was
previously recognized upon the termination of actual Section 1256 contracts
during the taxable year. The net amount of such gain or loss for the entire year
(including any deemed gain or loss) is generally treated as 60% long-term and
40% short-term capital gain or loss. A Fund, however, may elect not to have this
special tax treatment apply to Section 1256 Contracts that are part of a "mixed
shaddle" with other investments of the Fund that are not Section 1256 Contracts.
The Internal Revenue Service has held in several private rulings (and Treasury
Regulations now provide) that deemed gains arising under Code Section 1256 will
be treated for purposes of the Short-Short Gain Test as derived from securities
held for not less than three months.

Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat all or any part of any net
capital loss, or any net long-term capital loss incurred after October 31 as if
it had been incurred in the succeeding year.

In addition to satisfying the requirements described above, the Funds
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of its taxable
year, at least 50% of the value of each Fund's assets must consist of cash and
cash items, U.S. Government securities, securities of other regulated investment
companies, and securities of other issuers (as to each of which a Fund has not
invested more than 5% of the value of the Fund's total assets in securities of
any such issuer and does not hold more than 10% of its outstanding voting
securities), and no more than 25% of the value of its total assets may be
invested in the securities of any one issuer (other than U.S. Government
securities and securities of other regulated investment companies), or in two or
more issuers which the Fund controls and which are engaged in the same or
similar trades or businesses. If for any taxable year a Fund does not qualify as
a regulated investment company, all of its taxable income (including its net
capital gain) will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions will be
taxable as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.

ADDITIONAL TAX INFORMATION CONCERNING THE TAX-FREE FUND

As indicated in the Prospectus, the Tax-Free Fund is designed to provide
shareholders with current interest income free from Federal income taxation and
the Kentucky personal income tax. The Tax-Free Fund is not intended to
constitute a balanced investment program and is not designed for investors
seeking capital appreciation. Shares of the Tax-Free Fund would not be suitable
for tax-exempt institutions and may not be suitable for retirement plans
qualified under Section 401 of the Code, so-called Keogh or H.R. 10 plans, and
individual retirement accounts. Such plans and accounts are generally tax-exempt
and, therefore, would not benefit from the fact that dividends from the Tax-Free
Fund are tax-exempt; moreover, such dividends would be ultimately taxable to the
beneficiaries when distributed to them. In addition, shareholders who under Code
section 147(a) are "substantial users" or "related persons" to substantial users
with respect to facilities financed through any tax-exempt obligations held by
the Tax-Free Fund should consult a tax adviser whether exempt-interest dividends
would remain excludable from gross income in their hands for federal tax
purposes under Section 103 of the Code.

- 18 -

<PAGE>

The Code permits a regulated investment company that invests at least
50% of its assets in tax-exempt Municipal Securities (for these purposes,
Kentucky Tax-Exempt Obligations are functionally equivalent to Municipal
Securities) to pass through to its investors, on a tax-exempt basis, net
Municipal Securities interest income. The policy of the Tax-Free Fund is to pay
each year as dividends substantially all of their Municipal Securities interest
income net of certain deductions, but not to exceed in the aggregate the net
exempt-interest income received by each Fund during the taxable year. An
exempt-interest dividend is any dividend or part thereof (other than a capital
gain dividend) paid by the Tax-Free Fund and designated as an exempt-interest
dividend in a written notice mailed to shareholders after the close of the
Fund's taxable year. The percentage of the total dividends paid for any taxable
year which qualifies as Federal exempt-interest dividends will be the same for
all shareholders receiving dividends from the Tax-Free Fund during such year,
regardless of the period for which the shares were held.

The Tax-Free Fund intends to qualify to pay exempt-interest dividends by
satisfying the requirement that at the close of each quarter of the Fund's
taxable year at least 50% of the Fund's assets consists of tax-exempt municipal
obligations. Distributions from the Fund will constitute exempt-interest
dividends to the extent of the Fund's tax-exempt interest income (net of
expenses and amortized bond premium). Exempt- interest dividends distributed to
shareholders of the Fund are excluded from income for federal income tax
purposes. However, shareholders required to file a federal income tax return
will be required to report the receipt of exempt-interest dividends on their
returns. Such dividends may also have to be included in the alternative minimum
income and may have other consequences as described below.

AMT is imposed in addition to, but only to the extent it exceeds, the
regular tax and is computed at a maximum marginal rate of 28% for non-corporate
taxpayers and 20% for corporate taxpayers on the excess of the taxpayer's
alternative minimum taxable income ("AMTI") over an exemption amount.
Exempt-interest dividends derived from certain "private activity" municipal
obligations issued after August 7, 1986 will generally constitute an item of tax
preference includable in AMTI for both corporate and non-corporate taxpayers. In
addition, exempt-interest dividends derived from all municipal obligations,
regardless of the date of issue, must be included in adjusted current earnings,
which are used in computing an additional corporate preference item (i.e., 75%
of the excess of a corporate taxpayer's adjusted current earnings over its AMTI
(determined without regard to this item and the AMT net operating loss
deduction)) includable in AMTI.

Exempt-interest dividends must be taken into account in computing the
portion, if any, of social security or railroad retirement benefits that must be
included in an individual shareholder's gross income and subject to federal
income tax. Further, a shareholder of the Tax-Free Fund is denied a deduction
for interest on indebtedness incurred or continued to purchase or carry shares
of the Tax-Free Fund. Moreover, a shareholder who is (or is related to) a
"substantial user" of a facility financed by industrial development bonds held
by the Tax-Free Fund will likely be subject to tax on dividends paid by the
Tax-Free Fund which are derived from interest on such bonds. Receipt of
exempt-interest dividends may result in other collateral federal income tax
consequences to certain taxpayers, including financial institutions, property
and casualty insurance companies, and foreign corporations engaged in a trade or
business in the United States. Prospective investors should consult their own
advisers as to such consequences.

While the Tax-Free Fund does not expect to realize any significant
amount of long-term capital gains, any net realized capital gains (the excess,
if any, of net long-term capital gains over net short-term capital losses) will
be distributed annually. Distributions of net capital gain will be taxable to
shareholders as long-term capital gains, regardless of how long a shareholder
has held the Fund's shares. If a shareholder disposes of shares of the Fund, at
a loss, before holding such shares longer than 6 months, the loss will be
treated as a long-term capital loss (unless disallowed as specified in the next
sentence) to the extent that the shareholder has received a capital gain
dividend on the shares. In addition, if a shareholder receives any
exempt-interest dividends with respect to any shares held for 6 months or less,
any loss on the sale or exchange of such shares will be disallowed to the extent
of the amount of such dividends.

While the Tax-Free Fund does not expect to earn a significant amount of
taxable investment income or short-term gains, such income or short-term gains
earned by it will be distributed to shareholders and will be taxable to them as
ordinary income (whether paid in cash or in additional shares).

- 19 -

<PAGE>

Although the Tax-Free Fund expects to qualify as a regulated investment
company and to be relieved of all or substantially all Federal income taxes, the
Fund may be subject to the tax laws of states or localities in which its offices
are maintained, in which its agents or independent contractors are located, or
in which it is otherwise deemed to be conducting business, depending upon the
extent of its activities in such states and localities. In addition, if for any
taxable year the Tax-Free Fund does not qualify for the special Federal tax
treatment afforded regulated investment companies, all of its taxable income
will be subject to Federal income tax at the Fund level at regular corporate
rates (without any deduction for distributions to shareholders). When
distributed, such income, as well as the Fund's Municipal Securities interest
income, would be taxable to shareholders as an ordinary dividend.

EXCISE TAX ON REGULATED INVESTMENT COMPANIES

A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
its ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or, at
the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year (a "taxable year election")).
(Tax-exempt interest on municipal obligations is not subject to the excise tax).
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in the calendar year.

Each Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Funds may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.

ADDITIONAL TAX INFORMATION CONCERNING OTHER FUNDS

Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for Federal income
tax purposes. Distributions from the Growth-Value Fund and the Aggressive Growth
Fund may qualify for the 70% dividends-received deduction for corporations as
discussed below. Distributions received from the other funds will not qualify
for the dividends received deduction.

Ordinary income dividends paid by the Growth-Value Fund and the
Aggressive Growth Fund with respect to a taxable year will qualify for the 70%
dividends-received deduction generally available to corporations (other than
corporations, such as S corporations, which are not eligible for the deduction
because of their special characteristics and other than for purposes of special
taxes such as the accumulated earnings tax and the personal holding company tax)
to the extent of the amount of qualifying dividends received by the Funds from
domestic corporations for the taxable year. Dividends received by the Funds will
not be treated as qualifying dividends (1) if they have been received with
respect to any share of stock that a Fund has held for less than 46 days (91
days in the case of certain preferred stock), excluding for this purpose under
the rules of Code Section 246(c)(3) and (4): (i) any day more than 45 days (or
90 days in the case of certain preferred stock) after the date on which the
stock becomes ex-dividend and (ii) any period during which the Fund has an
option to sell, is under a contractual obligation to sell, has made and not
closed a short sale of, is the grantor of a deep-in-the-money or otherwise
nonqualified option to buy, or has otherwise diminished its risk of loss by
holding other positions with respect to, such (or substantially identical)
stock; (2) to the extent that the Fund is under an obligation (pursuant to a
short sale or otherwise) to make related payments with respect to positions in
substantially similar or related property; or (3) to the extent the stock on
which the dividend is paid is treated as debt-financed under the rules of Code
Section 246A. Moreover, the dividends-received deduction for a corporate
shareholder may be disallowed or reduced (1) if the corporate shareholder fails
to satisfy the foregoing requirements with respect to its shares of the Fund or
(2) by application of Code Section 246(b) which in general limits the
dividends-received deduction to 70% of the shareholder's taxable income
(determined without regard to the dividends-received deduction and certain other
items).

- 20 -

<PAGE>

For purposes of the corporate AMT, the corporate dividends received
deduction is not itself an item of tax preference that must be added back to
taxable income or is otherwise disallowed in determining a corporation's AMTI.
However, corporate shareholders will generally be required to take the full
amount of any dividend received from the Funds into account (without a
dividends-received deduction) in determining their adjusted current earnings.

Each Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. Each Fund currently intends to distribute
any such amounts. Net capital gain that is distributed and designated as a
capital gain dividend will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by a Fund prior to the date on which the shareholder
acquired his shares.

Investment income that may be received by a Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle such Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of a Fund's assets to be invested in various countries is not known.
If more than 50% of the value of a Fund's total assets at the close of its
taxable year consists of the stock or securities of foreign corporations, the
Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. If the Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, its pro
rata share of the foreign taxes paid by the Fund, but would be treated as having
paid its pro rata share of such foreign taxes and would therefore be allowed to
either deduct such amount in computing taxable income or use such amount
(subject to various Code limitations) as a foreign tax credit against Federal
income tax (but not both). For purposes of the foreign tax credit limitation
rules of the Code, each shareholder would treat as foreign source income its pro
rata share of such foreign taxes plus the portion of dividends received from the
Fund representing income derived from foreign sources. No deduction for foreign
taxes could be claimed by an individual shareholder who does not itemize
deductions.

Distributions by the Funds that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of such shares, as discussed
below.

Distributions by the Funds will be treated in the manner described above
regardless of whether they are paid in cash or reinvested in additional shares
of a Fund (or of another fund). Shareholders receiving a distribution in the
form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date. In addition, if the net asset value at the time a
shareholder purchases shares of a Fund reflects undistributed net investment
income, recognized capital gain net income, or unrealized appreciation in the
value of the assets of the Fund, distributions of such amounts will be taxable
to the shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.

Ordinarily, shareholders are required to take distributions by a Fund
into account in the year in which they are made. However, dividends declared in
October, November or December of any year and payable to shareholders of record
on a specified date in such a month will be deemed to have been received by the
shareholders (and made by the Fund) on December 31 of such calendar year if such
dividends are actually paid by January 31 of the following year. Shareholders
will be advised annually as to the U.S. federal income tax consequences of
distributions made (or deemed made) during the year.

The Funds will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding for failure to report the receipt of
interest or dividend income properly, or (3) who has failed to certify to the
Funds that it is not subject to backup withholding or that it is an "exempt
recipient" (such as a corporation).

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<PAGE>

SALE OR REDEMPTION OF SHARES

A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a Fund will be considered capital gain
or loss and will be long-term capital gain or loss if the shares were held for
longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be disallowed to the
extent of the amount of exempt-interest dividends received on such shares and
(to the extent not disallowed) will be treated as a long-term capital loss to
the extent of the amount of capital gain dividends received on such shares. For
this purpose, the special holding period rules of Code Section 246(c)(3) and (4)
generally will apply in determining the holding period of shares. Long-term
capital gains of noncorporate taxpayers are currently taxed at a maximum rate
11.6% lower than the maximum rate applicable to ordinary income. Capital losses
in any year are deductible only to the extent of capital gains plus, in the case
of a noncorporate taxpayer, $3,000 of ordinary income.

If a shareholder (i) incurs a sales load in acquiring shares of a Fund,
(2) disposes of such shares less than 91 days after they are acquired and (3)
subsequently acquires shares of the Fund or another fund at a reduced sales load
pursuant to a right acquired in connection with the acquisition of the shares
disposed of, then the sales load on the shares disposed of (to the extent of the
reduction in the sales load on the shares subsequently acquired) shall not be
taken into account in determining gain or loss on such shares but shall be
treated as incurred on the acquisition of the subsequently acquired shares.

FOREIGN SHAREHOLDERS

Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from a Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.

If the income from a Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends will
be subject to U.S. withholding tax at the rate of 30% (or lower applicable
treaty rate) upon the gross amount of the dividend (including any adjustment on
account of a Fund's election to treat foreign taxes paid by it as paid by its
shareholders). Such a foreign shareholder would generally be exempt from U.S.
Federal income tax on gains realized on the sale or redemption of shares of a
Fund and capital gain dividends, exempt-interest dividends and amounts retained
by a Fund that are designated as undistributed capital gains.

If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of shares of a Fund
will be subject to U.S. Federal income tax at the rates applicable to U.S.
citizens or domestic corporations.

In the case of a foreign noncorporate shareholder, a Fund may be
required to withhold U.S. Federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding (or taxable at a reduced treaty rate)
unless the shareholder furnishes the Fund with proper notification of its
foreign status.

The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Funds, including the applicability of foreign taxes.

EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS

The foregoing general discussion of U.S. Federal income tax consequences
is based on the Code and the Treasury Regulations issued thereunder as in effect
on the date of this Statement of Additional Information. Future legislative,
administrative changes or court decisions may significantly affect the
conclusions expressed herein, perhaps with retroactive effect.

Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. Federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investments in the Funds.

- 22 -

<PAGE>

MANAGEMENT OF THE COMPANY

DIRECTORS

The directors of the Company, their addresses, ages and principal
occupations during the past five years are as follows:

Name, Address Position(s) Held Principal Occupation During Past
With the Company 5 Years

Gordon B. Davidson, 70 Chairman and Chairman of Executive
Wyatt, Tarrant & Combs Director Committee, and Senior Counsel,
Citizens Plaza Wyatt, Tarrant & Combs (a law
Louisville, KY 40202 firm); Director, Duff & Phelps
Utilities Income, Inc.; Alliant
Healthcare System, Inc.; (Ret)
Director, BellSouth Corp.;
Director, Kentucky Center for the
Arts Foundation, Inc.; Trustee,
Centre College.

Jerry E. Baker, 64* Director Chairman of the Board, Mid
P.O. Box 1117 America Airgas, Inc. (a
Bowling Green, KY 42102 subsidiary of Airgas, Inc.);
President, Mid America Airgas,
Inc., July 1986-May 1995.

Kevin P. Lavender, 35 Director Founder and Senior Vice President,
Symmetry Health Partners Symmetry Health Partners, Inc. (a
3100 West End Avenue, physician practice management
Suite 630 company), June 1996 - present;
Nashville, TN 37203 Corporate Lender, Sun Trust Banks,
Inc., May 1986-July 1996.

William H. Lomicka, 59 Director President, Mayfair Capital;
Mayfair Capital Director, Regal Cinemas, Inc.,
Providian Center Vencor, Inc., Regent
Regal 400 West Market, Communications, Spectra
Suite 2510 Care and Sabratek, Inc.; Member,
Louisville, KY 40202 Board of Advisors, the Tiber
Group.

Charles K. McClure, III, 52 Director Retired and working on several
1442 Cherokee Road not-for-profit and community
Louisville, KY 40204 projects, January 1995-present;
Executive Director, Isaac W.
Bernheim Foundation, April
1971-January 1995.

- ---------------------
* Interested Person

The Board of Directors has appointed an audit committee, a valuation
committee, and a nominating committee. The members of each committee are William
H. Lomicka and Charles K. McClure, III. The function of the audit committee is
to recommend independent auditors and review and report on accounting and

- 23 -

<PAGE>

financial matters. The function of the valuation committee is to determine and
monitor the value of the Funds' assets. The function of the nominating committee
is to nominate persons to serve as disinterested directors and directors to
serve on committees of the Board.

REMUNERATION OF DIRECTORS AND CERTAIN EXECUTIVE OFFICERS

Each director receives a fee of $500 for each meeting attended plus
expenses.

COMPENSATION TABLE
<TABLE>
<CAPTION>

Name and Position Aggregate Pension or Estimated Total Compensation
Compensation Retirement Benefits Annual From Registrant and

from Registrant Accrued as Part of Benefits Upon Fund Complex
Fund Expenses Retirement Paid to Directors

<S> <C> <C> <C> <C>
Gordon B. Davidson, $1,500 -0- -0- $1,500
Director

Jeffrey E. Baker, 1,500 -0- -0- 1,500
Director

Kevin P. Lavender, -0- -0- -0- -0-
Director*

William H. Lomicka, 2,000 -0- -0- 2,000
Director

Charles K. McClure, 1,500 -0- -0- 1,500
Director

Aubrey B. Preston, 1,500 -0- -0- 1,500
Director**

</TABLE>

* Mr. Lavender became a Director on July 18, 1996.

** Resigned.

OFFICERS

The officers of each Fund of the Company and their principal
occupations during the past five years are as follows (if no address is listed,
the address is Trans Adviser Funds, Inc., P.O. Box 90001, Bowling Green,
Kentucky 42101-9001):

Name, Address Position(s) Held Principal Occupation During Past
With the Company 5 Years

Thomas A. Trantum, 51 President President, Mastrapasqua &
Associates, Inc.; Secretary,
Management Plus Associates;
director, Phonex Ventures; Adjunct
Professor, Massey Graduate School
of Business

- 24 -

<PAGE>

Richard C. Butt, 40 Treasurer Director, Forum Financial Corp.
Two Portland Square with which he has been associated
Portland, Maine 04101 since 1996. Prior thereto, Mr. Butt
served as a consultant in the
financial services division of KMPG
Peat Marwick LLP. Prior thereto,
Mr. Butt was President of 440
Financial Distributors, Inc., the
distribution subsidiary of 440
Financial Group, of which Mr. Butt
was a Senior Vice President.

Max Berueffy, 43 Vice President Counsel, Forum Financial Services,
Two Portland Square and Secretary Inc., with which he has been
Portland, Maine 04101 associated since 1994. Prior
thereto, Mr. Berueffy was on the
staff of the U.S. Securities and
Exchange Commission for seven years,
first in the appellate branch of
the Office of the General Counsel,
then as a counsel to Commissioner
Grundfest and finally as a senior
special counsel in the Division of
Investment Management.

David L. Goldstein, 34 Vice President Counsel, Forum Financial with
Two Portland Square and Assistant which he has been associated since
Portland, Maine 04101 Secretary 1991. Prior thereto, Mr. Goldstein
was associated with the law firm of
Kirkpatrick & Lockhart. Mr.
Goldstein is also an officer of
various registered investment
companies for which Forum
Financial Services, Inc. serves as
manager, administrator and/or
distributor.

Michael J. McKeen, 24 Assistant Fund Accounting Manager, forum
Two Portland Square Treasurer Financial Forum Services, Inc.,
Portland, Maine 04101 which he has been associated since
1993. Prior thereto, Mr. McKeen
attended the University of Maine.

The officers of the Company receive no compensation directly from the
Company performing the duties of their offices.

ADVISER AND SUB-ADVISER

THE ADVISER

Trans Financial Bank, N.A. (the "Adviser"), provides the overall
management necessary for each Fund's operations and oversees the investment of
their assets pursuant to an advisory agreement dated September 8, 1995 (the
"Advisory Agreement"). Trans Financial Bank, N.A., is a subsidiary of Trans
Financial, Inc. which is a full service financial services provider with
approximately $725 million in assets under management as of December 31, 1996.

- 25 -

<PAGE>

THE ADVISORY AGREEMENT

In managing the Funds and overseeing the investment of their assets,
the Adviser is subject at all times to the supervision of the Company's
Directors. The Adviser also furnishes or procures on behalf of the Funds all
services necessary for the proper conduct of the Funds' business and
administration. In addition to the foregoing, the Adviser selects, monitors and
evaluates the Funds' Sub-Adviser. Trans Financial Bank, N.A., through its
Fixed-Income Investment Management Group, has primary responsibility for
managing the Tax-Free Fund, the Intermediate Bond Fund and the Money Market
Fund.

Under the terms of the Advisory Agreement, the Funds pay all of their
expenses, including, but not limited to, the costs incurred in connection with
the registration and maintenance of registration of the Funds and their shares
with the SEC and various states and other jurisdictions, printing and mailing
prospectuses and statements of additional information to shareholders, transfer
taxes on the sales of portfolio securities, brokerage commissions, custodial and
transfer charges, legal and auditing expenses, certain insurance premiums, out
of pocket expenses of the Custodian, Transfer Agent and Fund Accountants,
preparation of shareholder reports, directors' fees and expenses of director and
shareholder meetings.

For the services it provides under the terms of the Advisory
Agreement, the Adviser receives a monthly fee of .20% per annum of the Money
Market Fund's average daily net assets, 1.00% per annum of each of the
Growth/Value and Aggressive Growth Fund's average daily net assets and .40% per
annum of the Intermediate Bond Fund's average daily net assets and of the
Tax-Free Fund's average daily net assets. The Adviser may, from time to time,
voluntarily agree to defer or waive fees or absorb some or all of the expenses
of the Funds. For the fiscal period ended August 31, 1996, the Adviser earned
fees as follows: Growth/Value Fund: $81,961, of which $34,323 was voluntarily
waived; Aggressive Growth Fund: $31,177, all of which was voluntarily waived;
Intermediate Bond Fund: $38,478, all of which was voluntarily waived; Kentucky
Tax-Free Fund: $63,051, all of which was voluntarily waived; and Money Market
Fund: $99,711, of which $93,026 was voluntarily waived.

THE SUB-ADVISER

The Adviser has retained Mastrapasqua & Associates, Inc., West End
Avenue, Nashville, Tennessee ("M&A") to provide sub-advisory services pursuant
to a Sub-Advisory Agreement dated September 8, 1995. M&A is a registered
investment adviser incorporated in March, 1993. Its core business is portfolio
management for institutions, individuals and business owners. M&A currently
manages approximately $343 million in assets. M&A shares primary responsibility
for managing the Growth/Value and Aggressive Growth Funds with the Adviser and
provides economic forecasts and strategic analysis for each of the other Funds.
For its services, M&A is paid by the Adviser as follows: with respect to the
Aggressive Growth and he Growth/Value Funds, the Adviser (not the Fund) pays to
M&A an annual fee, calculated daily, and paid monthly, of .50% on the first $100
million of such Funds' combined average daily net assets, plus .25% of such
Funds' combined average daily net assets in excess of $100 million for its
services, and, with respect to each other Trans Adviser Fund, the Adviser (not
the Fund) pays M&A an annual fee, calculated daily, and paid monthly, of .03% of
average daily net assets for its services. For the fiscal period ended August
31, 1996, the Adviser paid M&A sub-advisory fees of $40,980.46, $15,588.79,
$2,885.79, $4,728.83 and $14,956.56, respectively, for the Growth/Value Fund,
Aggressive Growth Fund, Intermediate Bond Fund, Kentucky Tax-Free Fund and Money
Market Fund, respectively.

PORTFOLIO TRANSACTIONS

Pursuant to an Advisory Agreement entered into with each Fund (the
"Advisory Agreement"), the Adviser determines, subject to the overall
supervision of the Board of Directors of the Company and in accordance with each
Fund's investment objective and restrictions, which securities are to be
purchased and sold by the Money Market Fund, the Intermediate Bond Fund and the
Tax-Free Funds, and which brokers are to be eligible to execute such Funds'
portfolio transactions. Pursuant to a Sub-Advisory Agreement entered into with
the Adviser on behalf of the Funds (the "Sub-Advisory Agreement"), M&A
determines, subject to review by

- 26 -

<PAGE>

the Adviser and the overall supervision of the Board of Directors of the Company
and in accordance with each Fund's investment objective and restrictions, which
securities are to be purchased and sold by the Growth Funds, and which brokers
are to be eligible to execute such Funds' portfolio transactions. Purchases and
sales of government securities and debt securities usually are principal
transactions in which portfolio securities are normally purchased directly from
the issuer or from an underwriter or market maker for the securities. 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 may include the spread between the bid and asked prices.
Transactions on stock exchanges involve the payment of a negotiated brokerage
commissions. Transactions in the over-the-counter market are generally principal
transactions with dealers. With respect to over-the-counter market, the Company,
where possible, will deal directly with dealers who make a market in the
securities involved except in those circumstances where better price and
execution are available elsewhere. While the Adviser (M&A) generally seeks
competitive spreads or commissions, the Company may not necessarily pay the
lowest spread or commission available on each transaction, for reasons discussed
below.

Allocation of transactions, including their frequency, to various
dealers is determined by the Adviser (M&A) in its best judgment and in a manner
deemed fair and reasonable to shareholders. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price. Subject
to this consideration, dealers who provide supplemental investment research to
the Adviser (M&A) may receive orders for transactions on behalf of the Company.
Information so received is in addition to and not in lieu of services required
to be performed by the Adviser (M&A) and does not reduce the advisory fees
payable to the Adviser (M&A). Such information may be useful to the Adviser in
serving both the Company and other clients and, conversely, supplemental
information obtained by the placement of business of other clients may be useful
to the Adviser in carrying out its obligations to the Company.

The Adviser (M&A) is authorized, subject to best price and execution,
to place portfolio transactions with brokerage firms that have provided
assistance in the distribution of shares of the Fund and is authorized to use
the Distributor or an affiliated broker-dealer on an agency basis, to effect a
substantial amount of the portfolio transactions which are executed on the New
York or American Stock Exchanges, Regional Exchanges where relevant, or which
are traded in the Over-the-Counter market. The Advisory and Sub-Advisory
Agreements do not provide for any reduction in the management fee as a result of
profits resulting from brokerage commissions effected through an affiliated
broker-dealer.

The Directors have adopted certain procedures incorporating the
standards of Rule 17e-1 issued under the 1940 Act which requires that the
commissions paid the Distributor or an affiliated broker-dealer must be
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities during a comparable period of time."
The Rule and the procedures also contain review requirements and require the
Adviser (M&A) to furnish reports to the Directors and to maintain records in
connection with such views.

Investment decisions for each Fund of the Company are made
independently from those for another Fund or any other investment company or
account managed by the Adviser (M&A). Any such other investment company or
account may also invest in the same securities as the Company. When a purchase
or sale of the same security is made at substantially the same time on behalf of
a Fund and another Fund, investment company or account, the transaction will be
averaged as to price and available investments will be allocated as to amount in
a manner which the Adviser (M&A) believes to be equitable to the Fund(s) and
such other investment company or account. In some instances, this investment
procedure may adversely affect the price paid or received by a Fund or the size
of the position obtained by a Fund. To the extent permitted by law, the Adviser
(M&A) may aggregate the securities to be sold or purchased for a Fund with those
to be sold or purchased for the other Fund or for other investment companies or
accounts in order to obtain best execution.

- 27 -

<PAGE>

GLASS-STEAGALL ACT

In 1971, the United States Supreme Court held in Investment Company
Institute v. Camp that the Federal statute commonly referred to as the Glass-
Steagall Act prohibits a national bank from operating a mutual fund for the
collective investment of managing agency accounts. Subsequently, the Board of
Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981, the United States
Supreme Court held in Board of Governors of the Federal Reserve System v.
Investment Company Institute that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment companies. In the Board
of Governors case, the Supreme Court also stated that if a national bank
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisers to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.

The Adviser believes that it possesses the legal authority to perform
the services for each Fund contemplated by the Advisory Agreement regarding that
Fund and described in the Prospectus of that Fund and this Statement of
Additional Information. Future changes in either Federal or state statutes and
regulations relating to the permissible activities of banks or bank holding
companies and the subsidiaries or affiliates of those entities, as well as
further judicial or administrative decisions or interpretations of present and
future statutes and regulations, could prevent or restrict the Adviser from
continuing to perform such services for the Company. Depending upon the nature
of any changes in the services which could be provided by the Adviser, the Board
of Directors of the Company would review the Company's relationship with the
Adviser and consider taking all action necessary in the circumstances.

Should future legislative, judicial, or administrative action
prohibit or restrict the proposed activities of the Adviser in connection with
customer purchases of shares of the Company, the Adviser might be required to
alter materially or discontinue the services offered to its customers. It is not
anticipated, however, that any change in the Company's method of operations
would affect its net asset value per share or result in financial losses to any
customer.

ADMINISTRATOR

Forum Financial Services, Inc. ("Forum") acts as administrator to the
Company and its Funds pursuant to an Administration Agreement. As administrator,
Forum provides certain management and administrative services necessary to the
operation of the Company (which include, among other responsibilities,
negotiation of contracts and fees with, and monitoring of performance and
billing of, the transfer agent and custodian and arranging for maintenance of
books and records of the Company), and provides the Company with general office
facilities. The Administration Agreement will remain in effect for a period of
twelve months and thereafter is automatically renewed each year for an
additional term of one year.

The Administration Agreement terminates automatically if it is
assigned and may be terminated without penalty with respect to a Fund by vote of
the Fund's shareholders or by either party on not more than 60 days' written
notice. The Administration Agreement also provides that Forum shall not be
liable for any error of judgment or mistake of law or for any act or omission in
the administration or management of the Company, except for willful misfeasance,
bad faith or gross negligence in the performance of Forum's duties or by reason
of reckless disregard of its obligations and duties under the Administration
Agreement.

- 28 -

<PAGE>

EXPENSES

Each Fund bears the following expenses relating to its operations:
taxes, interest, any brokerage fees and commissions, fees of the Directors of
the Company, Commission fees, state securities qualification fees, costs of
preparing and printing prospectuses for regulatory purposes and for distribution
to current shareholders, outside auditing and legal expenses, management and
administration fees, fees and out-of-pocket expenses of the Custodian and the
Transfer Agent, dividend disbursing agents fees, fees and out-of-pocket expenses
for fund accounting services, expenses incurred for pricing securities owned by
it, certain insurance premiums, costs of maintenance of its existence, costs of
shareholders' and Directors' reports and meetings, and any extraordinary
expenses incurred in its operation.

DISTRIBUTOR

Forum is also the Company's distributor and acts as the agent of the
Company in connection with the offering of shares of the Fund pursuant to a
Distribution Agreement. The Distribution Agreement will continue in effect for
twelve months and will continue in effect thereafter only if its continuance is
specifically approved at least annually by the Board or by vote of the
shareholders entitled to vote thereon, and in either case, by a majority of the
Directors who (i) are not parties to the Distribution Agreement, (ii) are not
interested persons of any such party or of the Company and (iii) with respect to
any class for which the Company has adopted a distribution plan, have no direct
or indirect financial interest in the operation of that distribution plan or in
the Distribution Agreement, at a meeting called for the purpose of voting on the
Distribution Agreement. All subscriptions for shares obtained by Forum are
directed to the Company for acceptance and are not binding on the Company until
accepted by it. Forum receives no compensation or reimbursement of expenses for
the distribution services provided pursuant to the Distribution Agreement and is
under no obligation to sell any specific amount of Fund shares.

The Distribution Agreement provides that Forum shall not be liable
for any error of judgment or mistake of law or in any event whatsoever, except
for willful misfeasance, bad faith or gross negligence in the performance of
Forum's duties or by reason of reckless disregard of its obligations and duties
under the Distribution Agreement.

The Distribution Agreement is terminable with respect to a Fund
without penalty by the Company on 60 days' written notice when authorized either
by vote of the Fund's shareholders or by a vote of a majority of the Board, or
by Forum on 60 days' written notice. The Distribution Agreement will
automatically terminate in the event of its assignment.

Forum may enter into agreements with selected broker-dealers, banks,
or other financial institutions for distribution of shares of the Funds. These
financial institutions may charge a fee for their services and may receive
shareholders service fees even though shares of a Fund are sold at net asset
value. These financial institutions may otherwise act as processing agents, and
will be responsible for promptly transmitting purchase, redemption and other
requests to a Fund.

Investors who purchase shares in this manner will be subject to the
procedures of the institution through whom they purchase shares, which may
include charges, investment minimums, cutoff times and other restrictions in
addition to, or different from, those listed herein. Information concerning any
charges or services will be provided to customers by the financial institution.
Investors purchasing shares of the Funds in this manner should acquaint
themselves with their institution's procedures and should read this Prospectus
in conjunction with any materials and information provided by their institution.
The financial institution and not its customers will be the shareholder of
record, although customers may have the right to vote shares depending upon
their arrangement with the institution.

- 29 -

<PAGE>

CUSTODIAN

First National Bank of Boston, 150 Royall Street, Canton, MA 02021
(the "Custodian") serves as custodian to each Fund of the Company pursuant to a
Custodial Services Agreement with the Company. The Custodian's responsibilities
include safeguarding and controlling the Company's cash and securities, handling
the receipt and delivery of securities, and collecting interest and dividends on
the Company's investments.

TRANSFER AGENT

Forum Financial Corp. ("FFC") acts as Transfer Agent and Dividend
Disbursing Agent for the Company pursuant to a Transfer Agency Agreement. The
Transfer Agency Agreement will remain in effect for a period of twelve months
and thereafter is automatically renewed each year for an additional term of one
year.

Among the responsibilities of FFC as agent for the Company are, with
respect to shareholders of record: (1) answering shareholder inquiries regarding
account status and history, the manner in which purchases and redemptions of
shares of a Fund may be effected and certain other matters pertaining to the
Fund; (2) assisting shareholders in initiating and changing account designations
and addresses; (3) providing necessary personnel and facilities to establish and
maintain shareholder accounts and records, assisting in processing purchase and
redemption transactions and receiving wired funds; (4) transmitting and
receiving funds in connection with customer orders to purchase or redeem shares;
(5) verifying shareholder signatures in connection with changes in the
registration of shareholder accounts; (6) furnishing periodic statements and
confirmations of purchases and redemptions; (7) arranging for the transmission
of proxy statements, annual reports, prospectuses and other communications from
the Company to its shareholders; (8) arranging for the receipt, tabulation and
transmission to the Company of proxies executed by shareholders with respect to
meetings of shareholders of the Company; and (9) providing such other related
services as the Company or a shareholder may reasonably request.

[For these services, FFC will receive a fee of $12,000 per year and
annual account fees of $25.00 per shareholder account. The Company will also
reimburse FFC for certain expenses incurred on behalf of the Funds. These fees
are fixed through December 31, 1996 and are subject to adjustment thereafter.]

FFC or any sub-transfer agent or processing agent may also act and
receive compensation for acting as custodian, investment manager, nominee, agent
or fiduciary for its customers or clients who are shareholders of the Funds with
respect to assets invested in the Portfolio. FFC or any sub-transfer agent or
other processing agent may elect to credit against the fees payable to it by its
clients or customers all or a portion of any fee received from the Company or
from FFC with respect to assets of those customers or clients invested in the
Funds. The sub-transfer agents or processing agents retained by FFC may be
affiliated persons of FFC or Forum.

PORTFOLIO ACCOUNTING

FFC performs portfolio accounting services for each Fund pursuant to
a Fund Accounting Agreement with the Company. Under its Agreement, FFC prepares
and maintains books and records of each Fund on behalf of the Company as
required under the 1940 Act, calculates the net asset value per share of each
Fund and dividends and capital gain distributions and prepares periodic reports
to shareholders and the Securities and Exchange Commission. For its services,
FFC receives from the Company with respect to each Fund a fee of $36,000 per
year plus surchages of $6,000 to $24,000 for specified asset levels. FFC is paid
additional surchages of $12,000 per year for tax-free money market funds and for
each of the following: a portfolio with more than a specified number of
securities positions and/or international positions; investments in derivative
instruments; percentages of assets invested in asset backed securities; and a
monthly portfolio turnover rate of 10% or greater. FFC is required to use its
best judgment and efforts in rendering fund accounting services and is not
liable to the Company for any action or inaction in the absence of bad faith,
willful misconduct or gross negligence. FFC is not responsible or liable for any
failure or delay in performance of its fund accounting obligations arising out
of or caused, directly or indirectly, by circumstances beyond its reasonable
control and the Company has agreed to indemnify and hold harmless FFC, its
employees, agents, officers and directors against and from any and all claims,
demands, actions, suits, judgments, liabilities, losses,

- 30 -

<PAGE>

damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way related to FFC's actions taken or failure
to act with respect to a Fund or based, if applicable, upon information,
instructions or requests with respect to a Fund given or made to FFC by an
officer of the Company duly authorized. This indemnification does not apply to
FFC's actions taken or failure to act in cases of FFC's own bad faith, willful
misconduct or gross negligence.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts, 02110
serves as independent auditors to the Company.

LEGAL COUNSEL

Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York, New
York 10022 are counsel to the Company.

FINANCIAL REPORTS

The audited financial statements for the fiscal period ended August
31, 1996 have been audited by KPMG Peat Marwick LLP as set forth in their report
incorporated by reference herein, in reliance upon such report and on the
authority of said firm as experts in auditing and accounting.

PERFORMANCE INFORMATION

YIELD OF THE MONEY MARKET FUND

As summarized in the Prospectus under the heading "General
Information - Performance Information," the "yield" of the Money Market Fund for
a seven-day period (a "base period") will be computed return by 365/7 with the
resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares, but will not include
realized gains or losses or unrealized appreciation or depreciation on portfolio
investments. Yield may also be calculated on a compound basis (the "effective
yield") which assumes that net income is reinvested in Fund shares at the same
rate as net income is earned for the base period. For the seven days ended
August 31 , 1996, the Money Market Fund's yield and effective yield were 4.92%
and 5.04%, respectively.

YIELD OF THE FUNDS (OTHER THAN THE MONEY MARKET FUND)

As summarized in the Prospectus under the heading "General
Information - Performance Information," yield of the Funds (other than the Money
Market Fund) will be computed by analyzing net investment income per share for a
recent 30-day period and dividing that amount by the maximum offering price per
share (reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last trading day of that period. Net investment income will
reflect amortization of any market value premium or discount of fixed-income
securities (except for obligations backed by mortgages or other assets) and may
include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The yield of the Funds will vary from time
to time depending upon market conditions, the composition of the Fund's
portfolio and operating expenses of the Company allocated to the Fund. These
factors and possible differences in the methods used in calculating yield should
be considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of a Fund's shares and to the
relative risks associated with the investment objectives and policies of the
Fund. For the 30-day period ended August 31, 1996, the Funds' yields were as
follows: Intermediate Bond Fund: 6.13% and Kentucky Tax-Free Fund: 5.18%.

- 31 -

<PAGE>

Each Tax-Free Fund's tax-equivalent yield is the rate an investor
would have to earn from a fully taxable investment after taxes to equal a Tax-
Free Fund's tax-free yield. Tax-equivalent yields are calculated by dividing a
Tax-Free Fund's yield by the result of one minus a stated combined Federal and
state tax rate. (If only a portion of a Tax-Free Fund's yield was tax-exempt,
only that portion is adjusted in the calculation.) For the 30-day period ended
August 31, 1996, the tax-equivalent yield for the Kentucky Tax-Free Fund was
7.72%.

At any time in the future, yield and total return may be higher or
lower than past yields and there can be no assurance that any historical results
will continue.

Investors in the Funds are specifically advised that share prices,
expressed as the net asset values per share, will vary just as yield will vary.

CALCULATION OF TOTAL RETURN

Total Return is a measure of the change in value of an investment in
a Fund over the period covered, assuming the investor paid the current maximum
applicable sales charge on the investment and that any dividends or capital
gains distributions were reinvested in the Fund immediately rather than paid to
the investor in cash. The formula for calculating Total Return includes four
steps: (1) adding to the total number of shares purchased by a hypothetical
$1,000 investment in the Fund all additional shares which would have been
purchased if all dividends and distributions paid or distributed during the
period had been immediately reinvested; (2) calculating the value of the
hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing this account value for the
hypothetical investor by the initial $1,000 investment and analyzing the result
for periods of less than one year. For the period ended August 31, 1996, the
Funds' total returns were as follows: Growth/Value Fund: 11.80%; Aggressive
Growth Fund: 9.50%; Intermediate Bond Fund: 3.23% and Kentucky Tax-Free Fund:
5.80%.

CALCULATION OF DISTRIBUTION RATE

The Funds may also publish a distribution rate in investor
communications preceded or accompanied by a copy of the current Prospectus. The
current distribution rate for a Fund will be calculated by dividing the maximum
offering price per share into the annualization of the total distributions made
by the Fund during the same thirty-day period. The current distribution rate may
differ from current yield because the distribution rate may contain items of
capital gain and other items of income, while yield reflects only earned
interest and dividend items of income. In each case, the yield, distribution
rates and total return figures will reflect all recurring charges against Fund
income and will assume the payment of the maximum sales load. For the 30-day
period ended August 31, 1996, the Funds' distribution rates were as follows:
Intermediate Bond Fund: 5.85% and Kentucky Tax-Free Fund: 4.95%.

PERFORMANCE COMPARISONS

YIELD AND TOTAL RETURN. from time to time, performance information
for the Funds showing their average annual total return and/or yield may be
included in advertisements or in information furnished to present or prospective
shareholders and the ranking of those performance figures relative to such
figures for groups of mutual funds categorized by Lipper Analytical Services as
having the same investment objectives may be included in advertisements.

Total return and/or yield may also be used to compare the performance
of the Funds against certain widely acknowledged standards or indices for stock
and bond market performance. The Standard & Poor's Composite Index of 500 Stocks
(the "S&P 500") is a market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 Stocks relative to the base period
1941-43. The S&P 500 is composed almost entirely of common stocks of companies
listed on the New York Stock Exchange, although the

- 32 -

<PAGE>

common stocks of a few companies listed on the American Stock Exchange or traded
over-the-counter are included. The 500 companies represented include 400
industrial, 60 transportation and 40 financial services concerns. The S&P 500
represents about 80% of the market value of all issues traded on the New York
Stock Exchange.

The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market value-
weighted and unmanaged index showing the changes in the aggregate market value
of approximately 3,500 stocks relative to the base measure of 100.00 on February
5, 1971. The NASDAQ Index is composed entirely of common stocks of companies
traded over-the-counter and often through the National Association of Securities
Dealers Automated Quotations ("NASDAQ") system. Only those over-the-counter
stocks having only one market maker or traded on exchanges are excluded.

The Shearson Lehman Government Bond Index (the "SL Government Index")
is a measure of the market value of all public obligations of the U.S. Treasury;
all publicly issued debt of all agencies of the U.S. Government and all quasi-
federal corporations; and all corporate debt guaranteed by the U.S. Government.
Mortgage backed securities, flower bonds and foreign targeted issues are not
included in the SL Government Index.

The Shearson Lehman Government/Corporate Bond Index (the "SL
Government/Corporate Index") is a measure of the market value of approximately
5,300 bonds with a face value currently in excess of $1.3 trillion. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher ("investment grade") by a nationally recognized
statistical rating agency.

ALL FUNDS. Current yields or performance will fluctuate from time to
time and are not necessarily representative of future results. Accordingly, a
Fund's yield or performance may not provide for comparison with bank deposits or
other investments that pay a fixed return for a stated period of time. Yield and
performance are functions of quality, composition, and maturity, as well as
expenses allocated to a Fund.

ADDITIONAL INFORMATION

ORGANIZATION AND DESCRIPTION OF SHARES

The Company was incorporated under the laws of the State of Maryland
on June 20, 1995. A copy of the company's Charter is on file with the Department
of Assessments and Taxation of the State of Maryland. The Charter authorizes the
Board of Directors to issue shares of common stock, par value $.001 per share.
The Company presently has seven series of shares which represent interests in
the Growth/Value Fund, the Aggressive Growth Fund, the Fixed Income Fund
(presently being marketed as the Intermediate Bond Fund), the Kentucky Tax-Free
Fund, the Tennessee Tax-Free Fund, the Money Market Fund and the International
Fund (the Tennessee Tax-Free Fund and the International Fund are not currently
offered). The Company's Articles of Incorporation authorize the Board of
Directors to classify or reclassify any unissued shares of the Company into one
or more additional series.

Shares have no subscription, preemptive, conversion or exchange
rights. When issued for payment as described in the Prospectus and this
Statement of Additional Information, the shares will be fully paid and non-
assessable. In the event of a liquidation or dissolution of the Company,
shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Funds, of any general assets
not belonging to any particular Fund which are available for distribution.

As of December 12, 1996 the following entities were shareholders of
record of the outstanding shares of the following funds:
<TABLE>
<CAPTION>
Number of Shares
Growth/Value Fund Outstanding % of Shares Outstanding
- ----------------- ----------- -----------------------

<S> <C> <C>
Trans Financial Bank, NA 1,032,880.616 74.80%
500 Main Street
Bowling Green, KY 42101

Charles Schwab & Co. Inc. 111,948.732 8.11%
Special Custody Account for
Exclusive Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104

Administrative Data Management Corp. 80,671.517 5.84%
581 Main Street
Woodbridge, NJ 07095-1198

Aggressive Growth Fund

Trans Financial Bank, NA 448,575.249 71.65%
500 Main Street
Bowling Green, KY 42101

Administrative Data Management Corp. 80,671.517 12.88%
581 Main Street
Woodbridge, NJ 07095-1198

Charles Schwab & Co. Inc. 42,541.230 6.79%
Special Custody Account for
Exclusive Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104

Intermediate Bond Fund

Trans Financial Bank, NA 1,412,555.649 97.07%
500 Main Street
Bowling Green, KY 42101
</TABLE>

- 33 -

<PAGE>

As described in the text of the Prospectus following the caption
"GENERAL INFORMATION --Description of the Company and its Shares," shares of the
Company are entitled to one vote per share (with proportional voting for
fractional shares) on such matters as shareholders are entitled to vote.
Shareholders vote as a single class on all matters except (i) when required by
the 1940 Act, shares shall be voted by individual series, and (ii) when the
Directors have determined that the matter affects only the interests of one or
more series, then only shareholders of such series shall be entitled to vote
thereon. There will normally be no meetings of shareholders for the purposes of
electing Directors unless and until such time as less than a majority of the
Directors have been elected by the shareholders, at which time the Directors
then in office will call a shareholders' meeting for the election of Directors.
If requested to do so by the holders of at least 10% of the Company's
outstanding shares, a shareholder meeting will be called for the purpose of
voting upon the removal of a director or directors. Except as set forth above,
the Directors shall continue to hold office and may appoint their successors.

MISCELLANEOUS

The Company may include information in its Annual Reports and
Semi-Annual Reports to shareholders that (1) describes general economic trends,
(2) describes general trends within the financial services industry or the
mutual fund industry, (3) describes past or anticipated portfolio holdings for
one or more of the Funds within the Company, or (4) describes investment
management strategies for such Funds. Such information is provided to inform
shareholders of the activities of the Company for the most recent fiscal year or
half-year and to provide the views of the Adviser and M&A regarding expected
trends and strategies.

The Company is registered with the Commission as a non-diversified
management investment company. Such registration does not involve supervision by
the Commission of the management or policies of the Company.

As used in the Prospectus and in this Statement of Additional
Information, "assets belonging to a Fund" means the consideration received by
the Company upon the issuance or sale of shares in that Fund, together with all
income, earnings, profits and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange, or liquidation of such
investments, and any funds or payments derived from any reinvestment of such
proceeds, and any general assets of the Company not readily identified as
belonging to a particular Fund that are allocated to that Fund by the Company's
Board of Directors. The Board of Directors may allocate such general assets in
any manner it deems fair and equitable. It is anticipated that the factor that
will be used by the Board of Directors in making allocations of general assets
to particular Funds will be the relative net assets of the respective Funds at
the time of allocation. Assets belonging to a particular Fund are charged with
the direct liabilities and expenses in respect of that Fund, and with a share of
the general liabilities and expenses of the Company not readily identified as
belonging to a particular Fund that are allocated to that Fund in proportion to
the relative net assets of the respective Funds at the time of allocation. The
timing of allocations of general assets and general liabilities and expenses of
the Company to particular Funds will be determined by the Board of Directors of
the Company and will be in accordance with generally accepted accounting
principles. Determinations by the Board of Directors of the Company as to the
timing of the allocation of general liabilities and expenses and as to the
timing and allocable portion of any general assets with respect to a particular
Fund are conclusive.

As used in the Prospectus and in this Statement of Additional
Information, a "vote of a majority of the outstanding shares" of the Company or
a particular Fund means the affirmative vote, at a meeting of shareholders duly
called, of the lesser of (a) 67% or more of the votes of shareholders of the
Company or such Fund present at such meeting at which the holders of more than
50% of the votes attributable to the shareholders of record of the Company or
such Fund are represented in person or by proxy, or (b) the holders of more than
50% of the outstanding votes of shareholders of the Company or such Fund.

- 34 -

<PAGE>

The Code of Ethics of the Funds prohibits all affiliated personnel
from engaging in personal investment activities which compete with or attempt to
take advantage of the Funds' planned portfolio transactions. The objective of
the Code of Ethics of the Funds is that their operations be carried out for the
exclusive benefit of the Funds' shareholders. The Funds maintain careful
monitoring of compliance with the Code of Ethics.

As of December 12, 1996 the directors and officers of the company,
as a group, owned less than 1% of the outstanding shares of any Fund.

The Prospectus of the Funds and this Statement of Additional
Information omit certain of the information contained in the Registration
Statement filed with the Commission. Copies of such information may be obtained
from the Commission upon payment of the prescribed fee.

The Prospectus of the Funds and this Statement of Additional
Information are not an offering of the securities herein described in any state
in which such offering may not lawfully be made. No salesman, dealer, or other
person is authorized to give any information or make any representation other
than those contained in the Prospectus of the Funds and this Statement of
Additional Information.

- 35 -

<PAGE>

APPENDIX A

CORPORATE DEBT RATINGS

MOODY'S INVESTORS SERVICE, INC. (MOODY'S)

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 the 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 fluctuation 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 possess many 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
characterize bonds in this class.

B: Bonds which are 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.

NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.

STANDARD & POOR'S RATINGS GROUP (S&P)

AAA: Debt rated AAA has the highest rating assigned by the S & P. Capacity to
pay interest and repay principal is extremely strong.

A-1

<PAGE>

AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only to a small degree.

A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

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

BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.

B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to default and is
dependent upon favorable business, financial, or economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC: The rating CC is typically applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.

C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy has been filed but debt service payments
are continued.

CI: The rating CI is reserved for income bonds on which no interest is being
paid.

D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition of debt service payments are jeopardized.

NOTE: Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.

S&P applies numerical modifiers (1, 2, and 3) with respect to bonds
rated Aa, A or Baa. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier

A-2

<PAGE>

2 indicates a mid- range ranking; and the modifier 3 indicates that the bond
ranks in the lower end of its generic rating category.

PREFERRED STOCK RATINGS

The following summarizes the three highest ratings used by Moody's
for preferred stock:

"aaa" An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.

"aa" An issue which is rated "aa" is considered a highgrade preferred
stock. This rating indicates that there is a reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.

"a" An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classification, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.

The following summarizes the three highest ratings used by S &P for
preferred stock:

"AAA" This is the highest rating that may be assigned by S &P to a
preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations. "

AA" A preferred stock issue rated "AA" also qualifies as a high-
quality fixed income security. The capacity to pay preferred stock obligations
is very strong, although not as overwhelming as for issues rated "AAA".

"A" An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.

The nationally recognized statistical rating organizations
(individually, an "NRSRO") that may be utilized by the Adviser with regard to
portfolio investments for the Money Market Fund are Moody's, S&P, Duff & Phelps,
Inc. ("Duff"), Fitch Investors Service, Inc. ("Fitch"), IBCA Limited and its
affiliate, IBCA Inc. (collectively, "IBCA"), and Thomson BankWatch, Inc.
("Thomson"). Set forth below is a description of the relevant ratings of each
such NRSRO. The NRSROs that may be utilized by the Adviser and the description
of each NRSRO's ratings is as of the date of this Statement of Additional
Information, and may subsequently change.

LONG-TERM DEBT RATINGS (may be assigned, for example, to corporate
and municipal bonds)

Description of the five highest long-term debt ratings by Moody's
(Moody's applies numerical modifiers (E.G., 1, 2, and 3) in each rating category
to indicate the security's ranking within the category):

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 edged." 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 the 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 fluctuation of protective

A-3

<PAGE>

elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.

A. Bonds which are rated A possess many 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 some time 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 in the future. Uncertainty of
position characterizes bonds in this class.

Description of the five highest long-term debt ratings by S&P (S&P
may apply a plus (+) or minus (-) to a particular rating classification to show
relative standing within that classification):

AAA. Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.

AA. Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small degree.

A. Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

BBB. Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB. Debt rated BB is regarded, on balance, as predominately
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. While such debt will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposure to adverse conditions.

Description of the three highest long-term debt ratings by Duff:

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

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

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

Description of the three highest long-term debt ratings by Fitch
(plus or minus signs are used with a rating symbol to indicate the relative
position of the credit within the rating category):

A-4

<PAGE>

AAA. Bonds 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. Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issues is generally rated "[-]+."

A. Bonds 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 bonds with higher ratings.

IBCA's description of its three highest long-term debt ratings:

AAA. Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly.

AA. Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic, or financial conditions may
increase investment risk albeit not very significantly.

A. Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial conditions may lead
to increased investment risk.

SHORT-TERM DEBT RATINGS (may be assigned, for example, to commercial
paper, master demand notes, bank instruments, and letters of credit)

Moody's description of its three highest short-term debt ratings:

Prime-1. Issuers rated Prime-1 (or supporting institutions) have a
superior capacity for repayment of senior short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by many of the following
characteristics:

- Leading market positions in well-established industries.

- High rates of return on funds employed.

- Conservative capitalization structures with moderate reliance on
debt and ample asset protection.

- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.

- Well-established access to a range of financial markets and assured
sources of alternate liquidity.

Prime-2. Issuers rated Prime-2 (or supporting institutions) have a
strong capacity for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

A-5

<PAGE>

Prime-3. Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

S&P's description of its three highest short-term debt ratings:

A-1. This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to have extremely strong
safety characteristics are denoted with a plus sign (+).

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

A-3. Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.

Duff's description of its five highest short-term debt ratings (Duff
incorporates gradations of "1+" (one plus) and "1-" (one minus) to assist
investors in recognizing quality differences within the highest rating
category):

Duff 1+. Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to alternative sources of
funds, is outstanding, and safety is just below risk-free U.S.

Treasury short-term obligations.

Duff 1. Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors are
minor.

Duff 1-. High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors. Risk factors are
very small.

Duff 2. Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.

Duff 3. Satisfactory liquidity and other protection factors qualify
issue as to investment grade.

Risk factors are larger and subject to more variation. Nevertheless,
timely payment is expected.

Fitch's description of its four highest short-term debt ratings:

F-1+. Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of assurance for timely
payment.

F-1. Very Strong Credit Quality. Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than issues rated
F-1+.

F-2. Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the margin of safety is
not as great as for issues assigned F-1+ or F-1 ratings.

F-3. Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for timely payment is
adequate, however, near-term adverse changes could cause these securities to be
rated below investment grade.

A-6

<PAGE>

IBCA's description of its three highest short-term debt ratings:

A+. Obligations supported by the highest capacity for timely
repayment.

A1. Obligations supported by a very strong capacity for timely
repayment.

A2. Obligations supported by a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in business,
economic or financial conditions.

SHORT-TERM LOAN/MUNICIPAL NOTE RATINGS

Moody's description of its two highest short-term loan/municipal note
ratings:

MIG-1/VMIG-1. This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.

MIG-2/VMIG-2. This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.

S&P's description of its two highest municipal note ratings:

SP-1. Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.

SP-2. Satisfactory capacity to pay principal and interest.

SHORT-TERM DEBT RATINGS

Thomson BankWatch, Inc. ("TBW") ratings are based upon a qualitative
and quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries.

BankWatch Ratings do not constitute a recommendation to buy or sell
securities of any of these companies. Further, BankWatch does not suggest
specific investment criteria for individual clients.

The TBW Short-Term Ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned.

The TBW Short-Term Ratings apply only to unsecured instruments that
have a maturity of one year or less.

The TBW Short-Term Ratings specifically assess the likelihood of an
untimely payment of principal or interest.

TBW-1. The highest category; indicates a very high degree of
likelihood that principal and interest will be paid on a timely basis.

TBW-2. The second highest category; while the degree of safety
regarding timely repayment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1".

TBW-3. The lowest investment grade category; indicates that while
more susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest in a
timely fashion is considered adequate.

A-7

<PAGE>

TBW-4. The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.

COMMERCIAL PAPER

DESCRIPTION OF STANDARD AND POOR'S CORPORATION'S COMMERCIAL PAPER RATINGS:

An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. The top category is as follows:

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 are denoted with a plus (+) sign
designation.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S COMMERCIAL PAPER RATINGS:

The term "commercial paper" as used by Moody's means promissory obligations not
having an original maturity in excess of nine months. Moody's commercial paper
ratings are opinions of the ability of issuers to repay punctually promissory
obligations not having an original maturity in excess of nine months. Moody's
employs the following designation, judged to be investment grade, to indicate
the relative repayment capacity for rated issuers.

PRIME-1 - Highest commercial paper rating assigned by Moody's. Issuers rated
Prime-1 (or related supporting institutions) are deemed to have a superior
capacity for repayment of short term promissory obligations. Repayment capacity
of Prime-1 issuers is normally evidenced by the following characteristics:

1) Leading market positions in well-established industries;

2) High rates of return on funds employed;

3) Conservative capitalization structures with moderate reliance on
debt and ample asset protection;

4) Broad margins in earnings coverage of fixed financial charges and
high internal cash generation; and

5) Well-established access to a range of financial markets and
assured sources of alternative liquidity.

In assigning ratings to issuers whose commercial paper obligations are supported
by the credit of another entity or entities, Moody's evaluates the financial
strength of the affiliated corporations, commercial banks, insurance companies,
foreign governments or other entities, but only as one factor in the total
rating assessment.

DESCRIPTION OF FITCH INVESTORS SERVICE, INC.'S COMMERCIAL PAPER RATINGS:

FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.

FITCH-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

A-8

<PAGE>

DESCRIPTION OF DUFF & PHELPS, INC.'S COMMERCIAL PAPER RATINGS:

DUFF-1 -- Very high certainty of timely payment. Liquidity factors are excellent
and supported by strong fundamental protection factors. Risk factors are minor.

DUFF-2 -- Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing internal funds needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.

BONDS

DESCRIPTION OF STANDARD & POOR'S CORPORATION'S HIGH-GRADE CORPORATE BOND

RATINGS:

AAA -- Debt rated `AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA -- Debt rated `AA' has a very strong capacity to pay interest and repay
principal and differs from highest rated debt issues only in small degree.

A -- Debt rated `A' has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S HIGH-GRADE 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 the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protections may not be as large as in Aaa securities or fluctuation 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 Aaa
securities.

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

DESCRIPTION OF DUFF AND PHELPS INC.'S HIGH-GRADE 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+, AA, AA- -- High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.

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

A-9

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DESCRIPTION OF FITCH INVESTORS SERVICE, INC.'S HIGH-GRADE CORPORATE BOND
RATINGS:

AAA -- rated bonds are considered to be investment grade and are of the highest
quality. The obligor has an extraordinary ability to pay interest and repay
principal, which is unlikely to be affected by foreseeable events.

AA -- rated bonds are considered to be investment grade and of high quality. The
obligor's ability to pay interest and repay principal, while very strong, is
somewhat less than for AAA rated securities or more subject to change over the
term of the issue.

A-10