497 1 clf497062606.htm Cheswold Lane Funds: 497 Filing dated 6/26/2006







                               CHESWOLD LANE FUNDS

                 Cheswold Lane International High Dividend Fund





                              Institutional Shares
                                   Prospectus

                                  June 21, 2006










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






                                TABLE OF CONTENTS

RISK/RETURN SUMMARY.................................................. 1
   WHAT IS THE FUND'S INVESTMENT OBJECTIVE?.......................... 1
   WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?.............. 1
   WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?............ 2
   WHO SHOULD INVEST IN THE FUND?.................................... 2
   PERFORMANCE INFORMATION........................................... 2

FEES AND EXPENSES.................................................... 3

MORE INFORMATION ABOUT THE FUND'S STRATEGIES AND INVESTMENTS......... 4

MORE INFORMATION ON THE RISKS OF INVESTING IN THE FUND............... 6

MANAGEMENT OF THE FUND............................................... 7
   PORTFOLIO MANAGERS................................................ 7
   SUPPLEMENTAL PERFORMANCE INFORMATION.............................. 8

SHAREHOLDER INFORMATION.............................................. 10
   PRICING OF FUND SHARES............................................ 10
   HOW TO BUY FUND SHARES............................................ 10
   HOW TO SELL FUND SHARES........................................... 12
   VALUATION OF PORTFOLIO SECURITIES AND USE OF FAIR VALUE PRICING... 14
   FREQUENT TRADING OF FUND SHARES................................... 15
   DISTRIBUTIONS AND TAXES........................................... 16

FINANCIAL HIGHLIGHTS................................................. 17

ADDITIONAL INFORMATION............................................... Back Cover





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                               RISK/RETURN SUMMARY
--------------------------------------------------------------------------------

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund seeks long-term growth of capital and income.

WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
Under  normal  circumstances,  the Fund  invests at least 80% of its net assets,
plus any  borrowings for  investment  purposes (the "80%  policy"),  in dividend
paying equity securities (including common, convertible and preferred stocks) of
companies  located in developed  markets outside of the United States.  The Fund
considers  foreign  developed  markets to consist  of those  countries  that are
represented in the Morgan  Stanley  Capital  International,  Inc.(R)EAFE(R)Index
(the "MSCI EAFE  Index").  The MSCI EAFE Index is currently  comprised of common
stocks of  companies  that are  located  in 21  developed  countries  in Europe,
Australasia  and the Far East.  The Fund  intends to diversify  its  investments
across  different  countries  and regions.  The  percentage of the Fund's assets
invested in particular  countries or regions will change from time to time based
on  the  judgment  of  the  Fund's  investment  advisor,   Cheswold  Lane  Asset
Management, LLC (the "Advisor").

The Fund invests in a diversified portfolio of medium-to-large  well-established
companies based on the standards of the applicable  country's stock market.  The
Fund will generally invest in companies with market capitalizations in excess of
U.S. $1.5 billion. Typically, the Fund's portfolio will include approximately 45
to 60 issuers.

The Advisor  follows a value style of  investing.  The Advisor  believes  that a
portfolio of stocks with high dividend  yields and low  valuations  will deliver
superior  risk-adjusted  returns  over time.  Under  normal  circumstances,  the
Advisor  anticipates  that the Fund will have a dividend  yield above the median
dividend yield of the MSCI EAFE Index.  Additionally,  the Advisor's  investment
strategy  seeks to  construct  a  portfolio  of  foreign  stocks  that  have the
potential to increase their dividends over time.

When  selecting  investments  for the Fund, the Advisor first uses the following
quantitative  characteristics  to highlight  attractive  stocks for  fundamental
research:

o    Dividend Yield
o    Enterprise Value/Cash Flow
o    Return on Invested Capital
o    Price/Earnings
o    Dividend Growth Rate
o    Balance Sheet Strength

The Advisor then performs  bottom-up,  fundamental  research to make  investment
decisions for the Fund.  Some of the factors that the Advisor  considers in this
process include:

o    Long term revenue, earnings and dividend growth prospects
o    Industry and company market trends
o    Competitive landscape
o    Research and development productivity/New product innovation
o    Quality of management
o    Capital intensity

Generally,  a security  is sold when it reaches  its target  price  based on the
Advisor's  fundamental  valuation  approach or when the Advisor concludes that a
company's business or an industry's fundamentals are


                                       1


weakening relative to the Advisor's  expectations or when the Advisor determines
that there are other more attractive investment opportunities.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
Investing in any mutual fund involves risk, including the risk that you may lose
part  or all of the  money  that  you  invest.  Over  time,  the  value  of your
investment  in the Fund will  increase and decrease  according to changes in the
value of the stocks in the Fund's portfolio. Because the Fund invests in foreign
stocks, it will be affected by risks not typically  associated with U.S. stocks.
These risks include political and economic  instability and different accounting
and regulatory standards, as well as reduced liquidity and transparency compared
to U.S. markets. In addition,  the Fund will be subject to the risk that changes
in the exchange rate between two currencies will adversely  affect the value (in
U.S.  dollar  terms) of an  investment.  Currency  exchange  rates may fluctuate
significantly over short periods of time, causing (along with other factors) the
Fund's net asset value to fluctuate,  which, in turn, may cause the value of the
Fund's shares to go up or down.

The Fund's investments in medium capitalization  companies may also increase the
volatility of its portfolio  because such companies often have narrower  markets
and limited managerial and financial resources compared to those of larger, more
established companies.

The Fund's  investment  strategies  may prevent or limit  investments in foreign
stocks that are included in the MSCI EAFE Index.  Thus,  the Fund's returns will
not necessarily be similar to, or track, the returns of the MSCI EAFE Index. The
investments  selected by the Fund's Advisor,  based on its investment style, may
also  underperform  the MSCI EAFE Index or other funds with  similar  investment
objectives and strategies.

An  investment  in the Fund is not a deposit  of any bank and is not  insured or
guaranteed by the Federal Deposit Insurance  Corporation or any other government
agency.

For more  information  about  the  risks  associated  with the  Fund,  see "More
Information on the Risks of Investing in the Fund" on page 6.

WHO SHOULD INVEST IN THE FUND?
The Fund may be an appropriate investment if you:

     o    Have long-term financial goals;
     o    Are  seeking  total  return,  including  dividend  income and  capital
          appreciation;
     o    Are seeking a diversified  portfolio which includes foreign,  dividend
          paying stocks; and
     o    Are willing to accept increased  volatility and currency  fluctuations
          associated with investments in foreign stocks.

PERFORMANCE INFORMATION
Because the Fund commenced operations on June 21, 2006 and has been in operation
for less than a full calendar  year,  there is no Fund  performance  information
included in this Prospectus.


                                       2


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                                FEES AND EXPENSES
--------------------------------------------------------------------------------

---------------------- ----------------------------------- -------------
Shareholder fees       Maximum sales charge (load)                 None
paid directly from     imposed on purchases as a
your investments.      percentage of offering price
                       ----------------------------------- -------------
                       Maximum contingent deferred sales           None
                       charge (load) as a percentage of
                       original purchase price or
                       redemption price, whichever is
                       lower
                       ----------------------------------- -------------
                       Maximum sales charge (load)                 None
                       imposed on reinvested dividends
                       ----------------------------------- -------------
                       Redemption fees(1)                         2.00%
                       ----------------------------------- -------------
                       Exchange fees                               None
---------------------- ----------------------------------- -------------

---------------------- ----------------------------------- -------------
Annual fund            Management fees                            0.90%
operating expenses     ----------------------------------- -------------
are deducted from      Distribution (12b-1) fees                   None
the Fund's assets.     ----------------------------------- -------------
                       Other expenses                             0.98%
                       ----------------------------------- -------------
                       Total operating expenses                   1.88%
                       ----------------------------------- -------------
                       Expenses limitation arrangement(2)        (0.73%)
                       ----------------------------------- -------------
                       Net operating expenses                     1.15%
---------------------- ----------------------------------- -------------

(1)  The 2.00% fee applies to shares sold within 90 days of purchase.
(2)  The Advisor  has  contractually  agreed to waive fees and/or make  payments
     through  June 30, 2008 in order to keep the Fund's net  operating  expenses
     (excluding any taxes, interest,  brokerage fees, extraordinary expenses and
     certain insurance costs) from exceeding 1.15%.

This  example is intended to help you compare the cost of  investing in the Fund
to the  cost  of  investing  in  other  mutual  funds  with  similar  investment
objectives. The example assumes that you invest $10,000 with an annual 5% return
over the time shown and that all  dividends and capital gain  distributions  are
reinvested.  This  example  reflects  the net  operating  expenses  with expense
waivers for the two-year  contractual  period and the total  operating  expenses
without  expense  waivers  for year three.  Because  the Fund had not  commenced
operations  prior to the date of this  Prospectus,  the  example is based on the
anticipated  expenses of the Fund for the current fiscal year, and do not extend
over five- and ten-year periods.  Although your actual expenses may be higher or
lower, based on these assumptions your cumulative estimated expenses would be:

                ------------------ -----------------------
                1 year                               $117
                ------------------ -----------------------
                3 years                              $522
                ------------------ -----------------------


                                       3


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          MORE INFORMATION ABOUT THE FUND'S STRATEGIES AND INVESTMENTS
--------------------------------------------------------------------------------

The Fund's investment  objective is non-fundamental,  which means that it may be
changed by the Board of Trustees  without  shareholder  approval.  If the Fund's
investment objective were changed, the Fund would notify shareholders before the
change  became  effective.  There is no guarantee  that the Fund will be able to
achieve its  investment  objective.  The Board of  Trustees  may also change the
Fund's 80% policy on 60-days' prior notice to the Fund's shareholders.

Other,  Non-Principal  Strategies.  In  addition  to  the  principal  strategies
previously described, the following are other, non-principal strategies that the
Fund may use:

Investment Company     Such    securities   may   include    registered   or
Securities             unregistered  funds  or  exchange-traded  funds  that
                       track the  performance of specific  industry  sectors
                       or broad market  indexes of a  particular  country or
                       region by investing in securities  that comprise such
                       sectors  or  indexes.  The Fund may not  invest  more
                       than  10%  or  its   total   assets   in   registered
                       investment  companies,  including  no more than 5% of
                       its  total  assets in any one  registered  investment
                       company.

Options on             A call option  gives the  purchaser of the option the
Securities,            right to buy,  and the writer  (seller) of the option
Securities Indices     the  obligation to sell,  the  underlying  instrument
and Foreign            during   the   option   period.   In  order  to  earn
Currencies             additional  income  for the Fund,  the Fund may write
                       (sell)  covered  call  options on any  securities  in
                       which the Fund may invest or on any securities  index
                       consisting  of  securities  in which  it may  invest.
                       The Fund may also, to the extent  consistent with its
                       investment  policies,  purchase  options  on  foreign
                       currencies.  The Fund will only  write  options  that
                       are  "covered,"  meaning  that the Fund will hold the
                       underlying  security or will designate cash or liquid
                       securities  sufficient to cover its obligations under
                       the option and will value such "covered"  assets on a
                       daily  basis.  Options  written  by the  Fund  may be
                       traded  on  either  U.S.  or  foreign   exchanges  or
                       over-the-counter.

Futures Contracts      Futures contracts are  standardized,  exchange-traded
and Options on         contracts  that provide for the sale or purchase of a
Futures Contracts      specified  financial  instrument  or  currency  at  a
                       future  time at a  specified  price.  An  option on a
                       futures  contract  gives the purchaser the right (and
                       the writer of the option the  obligation) to assume a
                       position  in  a  futures   contract  at  a  specified
                       exercise  price within a specified  period of time. A
                       futures   contract   may  be  based   on   particular
                       securities,  foreign  currencies,  securities indices
                       and other  financial  instruments  and  indices.  The
                       Fund may engage in futures  transactions on both U.S.
                       and foreign exchanges.


                                       4


Futures Contracts      The Fund may purchase  and sell futures  contracts in
and Options on         order to hedge against changes in foreign  securities
Futures Contracts      prices or currency  exchange  rates,  or to otherwise
(con't)                manage its  diversification  across various countries
                       or  industries.  The Fund may  write  (sell)  covered
                       call  options  on  futures  contracts  involving  any
                       security  in  which  the Fund  may  invest  or on any
                       securities  index  consisting  of securities in which
                       it may invest.  The Fund may also enter into  closing
                       purchase and sale  transactions  with respect to such
                       contracts  and  options.  The Fund  will  only  write
                       options  that are  "covered,"  meaning  that the Fund
                       will hold the  underlying  security or will designate
                       cash or  liquid  securities  sufficient  to cover its
                       obligations  under the  option  and will  value  such
                       "covered" assets on a daily basis.

Preferred Stock,       The Fund may  invest in  preferred  stock  (including
Warrants and Rights    convertible  preferred  stock),  warrants and rights.
                       Preferred  stocks are  securities  that  represent an
                       equity   ownership   interest   in  the   issuer  and
                       typically  provide  the  holder  with  claims  on the
                       issuer's  earnings  and assets  before  common  stock
                       owners   but   after   bond   owners.   Unlike   debt
                       securities,   the   obligations   of  an   issuer  of
                       preferred   stock,   including   dividend  and  other
                       payment    obligations,    may   not   typically   be
                       accelerated  by the holders of such  preferred  stock
                       on the  occurrence  of an event of  default  or other
                       non-compliance by the issuer of the preferred stock.

                       Convertible  preferred stocks are securities that are
                       convertible  into common  stock.  Convertible  stocks
                       generally    offer   dividend   yields   lower   than
                       non-convertible securities of similar quality.

                       Warrants  and  other  rights  are  options  to  buy a
                       stated   number  of  shares  of  common  stock  at  a
                       specified  price at any time  during  the life of the
                       warrant  or  right.   The  holders  of  warrants  and
                       rights have no voting  rights,  receive no  dividends
                       and have no rights with  respect to the assets of the
                       issuer.

Foreign Currency       The Fund may purchase or sell foreign  currencies  on
Transactions           a  cash  basis  or  through  forward   contracts.   A
                       forward  contract  involves an obligation to purchase
                       or sell a  specific  currency  at a future  date at a
                       price set at the time of the  contract.  The Fund may
                       engage in foreign  currency  transactions for hedging
                       purposes  (that  is,  to  seek  to  protect   against
                       anticipated   changes  in  future  foreign   currency
                       exchange  rates).  In  addition,  the Fund may  enter
                       into foreign  currency  transactions to seek a closer
                       correlation   between  the  Fund's  overall  currency
                       exposure.

Temporary Investments  To  meet  redemption  requests  or  when  waiting  to
                       invest  cash,  the Fund may  invest in  high-quality,
                       short-term  instruments,  including  U.S.  or foreign
                       government     securities,      commercial     paper,
                       certificates  of deposit,  bankers'  acceptances  and
                       repurchase    agreements.    The    Fund   may   also
                       temporarily  invest up to 100% of its  assets in cash
                       or cash  equivalents  in response to adverse  market,
                       economic  or  political  conditions.  To  the  extent
                       that the Fund holds these  investments,  the Fund may
                       be unable to achieve its investment objectives.


                                       5


Representative  Countries.  The  Fund may  purchase  securities  in any  foreign
country;  however,  the Advisor currently  anticipates  investing in: Australia,
Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Portugal,  Singapore, Spain,
Sweden, Switzerland and the United Kingdom. While this is a representative list,
the Fund may also invest in other countries.

Portfolio  Turnover.  The Advisor  anticipates  that the Fund's annual portfolio
turnover  rate  will be  significantly  below  100%.  A high  rate of  portfolio
turnover in any year may increase brokerage  commissions paid and could generate
taxes for shareholders on realized investment gains.

Disclosure  of  Portfolio  Holdings  Information.  A  description  of the Fund's
policies and procedures  with respect to the disclosure of the Fund's  portfolio
holdings is available in the Fund's Statement of Additional Information ("SAI").
A complete list of the Fund's portfolio holdings as of each calendar quarter-end
is available on the Fund's website at  www.cheswoldlanefunds.com no earlier than
30 days after a calendar quarter-end.  This information will remain available on
the website until the date on which the Fund files its next quarterly  portfolio
holdings report on Form N-CSR or Form N-Q with the U.S.  Securities and Exchange
Commission.  The Fund  will also list its top 10  holdings  as of each  calendar
month-end  on the  Fund's  website  no  earlier  than 10 days  after a  calendar
month-end.  Portfolio  holdings  information posted on the Fund's website may be
separately provided to any person commencing the day after it is first published
on the Fund's website.


--------------------------------------------------------------------------------
             MORE INFORMATION ON THE RISKS OF INVESTING IN THE FUND
--------------------------------------------------------------------------------

An investor should carefully evaluate the Fund's risks before investing. Because
of the nature of the Fund, it should be considered a long-term  investment  that
typically provides the best results when held for a number of years. The Fund is
not a complete,  balanced  investment  plan.  Like other mutual funds, it cannot
guarantee  that it will  achieve its  investment  objective.  In addition to the
Fund's  previously  described  principal  risks,  it is also  subject  to other,
non-principal  risks which are  described  below.  Please see the Fund's SAI for
further discussion of these risks and other risks not discussed here.

Currency Risk          The  market  in  forward  foreign  currency  exchange
                       contracts  and other  privately  negotiated  currency
                       instruments  offers less protection  against defaults
                       by the  other  party  to  such  instruments  than  is
                       available  for  currency  instruments  traded  on  an
                       exchange.  Such  contracts  are  subject  to the risk
                       that the  counterparty  to the contract  will default
                       on its  obligations.  Because these contracts are not
                       guaranteed  by  an  exchange  or   clearinghouse,   a
                       default  on a  contract  would  deprive  the  Fund of
                       unrealized   profits,   transaction   costs   or  the
                       benefits of a currency  hedge or could force the Fund
                       to cover its  purchase or sale  commitments,  if any,
                       at the current market price.


                                       6


Derivatives Risk       The  risk  that  loss  may  result  from  the  Fund's
                       investments in options,  futures and other derivative
                       instruments.  These  instruments  may be leveraged so
                       that  small  changes  may  produce   disproportionate
                       losses to the Fund.
                       The  writing   (selling)   of  options  is  a  highly
                       specialized    activity   that    involves    special
                       investment  risks.  The  successful  use  of  options
                       depends  in part on the  ability  of the  Advisor  to
                       anticipate  future price  fluctuations and the degree
                       of  correlation  between the  options and  securities
                       (or  currency)  markets.  If the Advisor is incorrect
                       in its  expectation  of changes  in market  prices or
                       its  estimation of the  correlation  between,  on the
                       one  hand,  the   instruments  or  indices  on  which
                       options are written and purchased  and, on the other,
                       the instruments in the Fund's  investment  portfolio,
                       the  Fund may  experience  losses  that it would  not
                       otherwise   incur.   The  use  of  options  can  also
                       increase the Fund's  transaction  costs.  Foreign and
                       over-the-counter   options   will   present   greater
                       possibility   of  loss   because  of  their   greater
                       illiquidity and credit risks.

                       In addition,  while the Fund may benefit from the use
                       of  futures  and  options on  futures,  unanticipated
                       changes in  securities  prices or  currency  exchange
                       rates may result in poorer overall  performance  than
                       if  the  Fund  had  not  entered   into  any  futures
                       contracts or options  transactions.  Futures  markets
                       are  highly  volatile  and  the  use of  futures  may
                       increase  the  volatility  of the  Fund's  net  asset
                       value.  Futures  contracts  and  options  on  futures
                       contracts  may be illiquid,  and  exchanges may limit
                       fluctuations  in  futures  contract  prices  during a
                       single  day.  Moreover,  foreign  exchanges  may  not
                       provide the same protections as U.S. exchanges.

Liquidity Risk         Liquidity  risk is the risk that  investments  cannot
                       be readily  sold within  seven days at  approximately
                       the price at which  they have been  valued.  The Fund
                       will not  invest  more than 15% of its net  assets in
                       illiquid securities.


--------------------------------------------------------------------------------
                             MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------

Under the  supervision  of the  Fund's  Board of  Trustees,  the  Advisor  makes
investment  decisions for the Fund. For its services to the Fund, the Advisor is
entitled  to  receive an annual  fee of 0.90% of the  Fund's  average  daily net
assets.  The Adviser has  contracted  to waive its fees and pay expenses so that
the Fund's net operating  expenses  (excluding  any taxes,  interest,  brokerage
fees, extraordinary expenses and certain insurance costs) do not exceed 1.15%.

A  discussion  regarding  the basis for the Board of  Trustees'  approval of the
investment advisory agreement will be available in the Fund's semi-annual report
to shareholders for the period ended June 30, 2006.

PORTFOLIO MANAGERS
Eric F. Scharpf and Matthew H. Taylor have day-to-day  responsibility for making
investment decisions for the Fund.

ERIC F.  SCHARPF,  a co-founder  of the Advisor,  is a portfolio  manager of the
Fund.  Prior to co-founding  the Advisor in 2006, Mr. Scharpf had been a Partner
and Senior Portfolio Manager at Chartwell


                                       7


Investment Partners ("Chartwell") since 2004. At Chartwell,  he managed U.S. and
international large cap value equity portfolios.  From 1997 to 2003, Mr. Scharpf
was a Portfolio Manager and Research Analyst for Miller Anderson & Sherrerd,  an
institutional  asset management division of Morgan Stanley & Co. He was a member
of the  portfolio  management  team that  managed  over $12 billion in large cap
equity  portfolios,  including  the Morgan  Stanley  Institutional  Value Trust,
Morgan  Stanley  Institutional  Equity Fund and Morgan Stanley  Dividend  Growth
Fund. Mr.  Scharpf earned a bachelor's  degree in Finance from the University of
Notre Dame and  received an MBA from The  Wharton  School at the  University  of
Pennsylvania.

MATTHEW H. TAYLOR,  a co-founder of the Advisor,  is a portfolio  manager of the
Fund.  Prior to  co-founding  the Advisor in 2006, Mr. Taylor had been a Partner
and Portfolio Manager at Chartwell Investment Partners ("Chartwell") since 2004.
At  Chartwell,  he managed  U.S.  large cap value equity  products.  He was also
co-portfolio  manager of the  Chartwell  Dividend  and Income Fund, a closed-end
fund.  Before joining  Chartwell,  he worked for Miller Anderson & Sherrerd,  an
institutional  asset  management  division of Morgan Stanley & Co., from 2000 to
2003 as a member of the portfolio management team of the Morgan Stanley Dividend
Growth Fund,  as well as an Analyst on the Morgan  Stanley  Institutional  Value
Trust.  Mr.  Taylor  earned a  bachelor's  degree in Economics  from  Swarthmore
College  and  received  an MBA from The  Wharton  School  at the  University  of
Pennsylvania.

The  SAI  provides   additional   information  about  the  portfolio   managers'
compensation, other accounts managed by the portfolio managers and the portfolio
managers' ownership of Fund shares.

SUPPLEMENTAL PERFORMANCE INFORMATION
Portfolio  Manager's Prior Performance.  Shown below is performance  information
for a  composite  of  separate  accounts  (the  "Composite")  managed by Eric F.
Scharpf,  one of the Fund's  portfolio  managers,  since  July,  2005,  using an
international high dividend strategy with an investment objective,  policies and
strategies that are substantially similar to the Fund. For the periods for which
performance is provided,  no other person played a significant  role in managing
the  Composite.  At May 31, 2006,  the  Composite  consisted of one account with
approximately $2.2 million in assets. The accounts  comprising the Composite are
separate and distinct from the Fund.

The  performance  of the Composite  presented  below does not guarantee  similar
results for the Fund and is not the Fund's own historical record. You should not
rely on the following performance data as an indication of future performance of
the Advisor or of the Fund. In addition,  the performance  information presented
for the Composite is current as of the date shown,  but may not be current as of
the date you are reviewing this Appendix.  Consequently,  the performance of the
Composite may vary from that shown below.

The investment objectives, policies and strategies of the Fund and the Composite
are substantially similar.  However, the performance of the Composite may differ
from the  performance of the Fund because of the following  differences  between
the Fund and the Composite:

     o    brokerage commissions and dealer spreads,
     o    expenses (including management fees),
     o    the size of the investment in a particular security in relation to the
          overall portfolio size,
     o    the  timing of  purchases  and sales  (including  the effect of market
          conditions at that time),
     o    the timing of cash flows into the portfolio, and
     o    the availability of cash for new investments.

The  performance  of the Composite  also may differ from the  performance of the
Fund  because  the  Composite,  unlike  the Fund,  is not  registered  under the
Investment  Company Act of 1940 or subject to


                                       8


certain  provisions  of  the  Internal  Revenue  Code,  and,  consequently,  the
Composite, unlike the Fund, may not be required to:

     o    redeem shares upon request;
     o    meet certain diversification requirements; or
     o    comply  with the tax  restrictions  and  investment  limitations  that
          govern mutual funds.

If the  Composite had to comply with the foregoing  regulatory  requirements  or
restrictions, its performance results may have been adversely affected.

The  foregoing  differences,  however,  do not  alter  the  conclusion  that the
investment objectives, strategies and policies of the Fund and the Composite are
substantially similar.

   Total Return of Composite of Similarly Managed International High Dividend
                                Paying Accounts

----------------- ----------------- -------------------- --------------- -------------
                      Composite       Composite Net of      MSCI EAFE      MSCI EAFE
     Period         Gross of Fees          Fees *          Value Index       Index
----------------- ----------------- -------------------- --------------- -------------
1st Quarter 2006        11.13%             10.84%             9.78%          9.40%
----------------- ----------------- -------------------- --------------- -------------
4th Quarter 2005         3.51%              3.20%             3.82%          4.08%
----------------- ----------------- -------------------- --------------- -------------
Since Inception         20.33%             19.43%            21.93%         21.94%
     8/1/05
----------------- ----------------- -------------------- --------------- -------------
* The  accounts  in the  Composite  have  been  charged a  management  fee since
inception.  Performance  of the  Composite  net of fees assumes the accounts had
been charged a management fee of 1.15%, which, pursuant to an expense limitation
with the Advisor,  will be the Fund's maximum net expense ratio through June 30,
2008.

Please read the  following  important  notes  concerning  the  Composite  return
information shown above:

1.   The results  shown above are for periods  less than one year.  Such results
     may not be sustained.

2.   The results shown above:  (i)  represent a composite of all  discretionary,
     fee paying, separate accounts managed using the international high dividend
     paying  strategy for at least one month;  (ii) reflect the  reinvestment of
     any  dividends  or  capital  gains;  (iii) are  shown  after  deduction  of
     advisory,  brokerage  or  other  expenses;  and  (iv)  do not  reflect  the
     reclamation of foreign tax withholding,  which the Advisor  estimates to be
     0.20% since inception; however, the Fund's performance will.

3.   All  returns  are  based  in  U.S.   dollars  and  are  computed   using  a
     time-weighted rate of return.

4.   If the Fund's  expenses  were  reflected  in the gross  performance  of the
     Composite,  such  performance  would be lower than shown.  The  Composite's
     results were calculated in accordance with the CFA Institute (formerly, the
     Association for Investment  Management  Research)  performance  calculation
     methodology.  The CFA Institute has not been involved in the preparation or
     review of this  information.  Results may have been  different  if the U.S.
     Securities and Exchange Commission methodology had been used instead of the
     CFA Institute methodology.

5.   The MSCI EAFE Index is a passive index that is comprised of common stock or
     ordinary  shares of  companies  that are located in 21 countries in Europe,
     Australasia  and the Far East. The MSCI EAFE Value Index is a subset of the
     MSCI EAFE  Index and  consists  of those  securities  classified


                                       9


     by Morgan Stanley  Capital  International,  Inc. as most  representing  the
     value style.  The indexes reflect the  reinvestment of dividends but do not
     reflect fees,  brokerage  commissions or other expenses of investment.  You
     cannot invest in an index.

6.   Past performance is not an indication of future results.


--------------------------------------------------------------------------------
                             SHAREHOLDER INFORMATION
--------------------------------------------------------------------------------

PRICING OF FUND SHARES
The price of the  Fund's  shares is based on its net asset  value  ("NAV").  The
Fund's NAV per share equals the total value of its assets, less its liabilities,
divided by the  number of its  outstanding  shares.  Shares are priced as of the
close of regular  trading on the New York Stock Exchange (the "NYSE"),  which is
usually 4:00 p.m.,  Eastern Time, on each day that the NYSE is open (a "Business
Day"). The NYSE normally is not open, and the Fund does not price its shares, on
most national holidays and on Good Friday.

HOW TO BUY SHARES
Account Minimums.  The minimum initial investment for the Fund is $500,000.  The
minimum  for  subsequent  investments  in the Fund is $1,000.  For  purposes  of
satisfying  the  investment  minimum,  the Fund will  aggregate  all of the Fund
accounts held by a shareholder or household.  The account  minimum is waived for
employees of the Advisor,  Trustees of the Cheswold Lane Funds (the "Trust") and
their families.  The Trust's  officers may, in their  discretion,  also waive or
lower the account  minimums:  (i) for customers of a financial  intermediary  or
investment  advisor if the aggregate  investments of the  investment  advisor or
financial  intermediary  meet the account minimum or are believed likely to meet
the account minimum in the future, or (ii) in such other  circumstances that are
consistent with the best interests of existing shareholders.

The Fund may, in its  discretion,  redeem your Fund shares if, in the aggregate,
the value of your Fund accounts falls below  $250,000.  The Fund will not redeem
your shares on this basis if the value of your  account  falls below the minimum
account balance solely as a result of market conditions.  The Fund will give you
60 days' prior  written  notice to allow you to purchase  sufficient  additional
shares of the Fund in order to avoid such redemption.

Methods of Buying  Shares.  You may purchase  shares  directly  from the Fund by
following one of the steps below:


By Mail         o   Complete and sign the account application or an IRA
                    application. If you do not complete the application
                    properly, your purchase may be delayed or rejected.

                o   Make your check payable to the "Cheswold Lane
                    Funds."  The Fund does not accept cash, money
                    orders, third party checks, travelers checks, credit
                    card checks, checks drawn on banks outside the
                    United States or other checks deemed to be high risk.

                o   For IRA accounts, please specify the year for which
                    the contribution is made.

                o   Mail your application and check to:
                    Cheswold Lane Funds
                    P.O. Box 2175
                    Milwaukee, WI 53201-2175


                                       10


                o   By overnight courier, send to:
                    Cheswold Lane Funds
                    803 West Michigan Street, Suite A
                    Milwaukee, WI 53233-2301


By Telephone    You may not make your initial purchase by telephone.

By Wire         o   To purchase shares by wire, the Transfer Agent must
                    have received a completed application and issued an
                    account number to you.  Call 1-800-771-4701 for
                    instructions prior to wiring the funds.

                o   Send your investment to UMB Bank, n.a. with these
                    instructions:

                    UMB Bank, n.a.
                    ABA# 101000695
                    For Credit to the Cheswold Lane Funds
                    A/C# 9871418316
                    For further credit to: Cheswold Lane International
                    High Dividend Fund; investor account number; name(s)
                    of investor(s); SSN or TIN



To Add to an  Account:  To add to an  account,  you  may  follow  any one of the
following steps:


By mail         o   Complete the investment slip that is included in
                    your account statement and write your account number
                    on your check.

                o   If you no longer have your investment slip, please
                    reference your name, account number and address on
                    your check, and the Fund's name.

                o   Make your check payable to the "Cheswold Lane Funds."

                o   Mail your application and check to:
                    Cheswold Lane Funds
                    P.O. Box 2175
                    Milwaukee, WI 53201-2175

                o   By overnight courier, send to:
                    Cheswold Lane Funds
                    803 West Michigan Street, Suite A
                    Milwaukee, WI 53233-2301

By Telephone    o   You automatically have the privilege to purchase
                    additional shares by telephone unless you have
                    declined this service on your account application.
                    You may call 1-800-771-4701 to purchase shares in an
                    existing account.

                o   Investments made by electronic funds transfer must
                    be in amounts of at least $1,000 and not greater
                    than $100,000.


                                       11


By wire             Send your investment to UMB Bank, n.a. with these
                    instructions:

                    UMB Bank, n.a.
                    ABA# 101000695
                    For Credit to the Cheswold Lane Funds
                    A/C# 9871418316
                    For further credit to: Cheswold Lane International High
                    Dividend Fund; investor account number; name(s) of
                    investor(s); SSN or TIN.


Timing of Request to Buy Shares.  You may  purchase  the Fund's  shares at their
offering price,  which is the NAV next determined after your purchase request is
received in good order.  All  requests  received in good order before 4:00 p.m.,
Eastern  Time,  on a Business  Day will be executed  on that same day.  Requests
received after 4:00 p.m.,  Eastern Time, on a Business Day will be processed the
next Business Day at the next Business Day's NAV. A purchase request is in "good
order" if it includes a completed  account  application and the dollar amount of
shares to be purchased.  If you are paying with federal funds (wire), your order
will considered received when the Fund or its agent receives the federal funds.

The Fund,  its  Advisor  and its  Distributor  reserve  the right to reject  any
purchase  request for any reason.  The Fund may accept  orders to purchase  Fund
shares  in-kind  with  securities,  rather  than  with  cash,  when the  offered
securities are consistent  with the Fund's  investment  objectives and policies.
Acceptance of such  purchases will be at the Advisor's  discretion,  and will be
valued in the same manner that the Fund uses to calculate its NAV.

Customer  Identification.  Mutual  funds,  including  the Fund,  must obtain and
verify information that identifies  investors opening new accounts.  If the Fund
is unable to collect the required information, the Fund or its agents may not be
able to open a Fund account. Investors must provide their full name, residential
or business address,  social security or tax  identification  number and date of
birth (as  applicable).  Entities  such as  trusts,  estates,  corporations  and
partnerships must provide other identifying information.  The Fund or its agents
may  share  identifying  information  with  third  parties  for the  purpose  of
verification.  If the Fund or its agents cannot verify  identifying  information
after opening an account, the Fund reserves the right to close the account.

Automatic Investment Plan (AIP). To make regular investing more convenient,  you
can open an AIP with an initial  investment  of $500,000 and a minimum of $1,000
per transaction after you start your plan. Purchases made pursuant to an AIP may
not exceed $50,000 per transaction. You tell us how much to invest for you every
month or  quarter.  On the day you select (you may choose the 5th,  10th,  15th,
20th, or 25th of the month), that amount is automatically  transferred from your
bank account. There is no fee for this service, but if there is not enough money
in your bank  account  to cover the  withdrawal  you will be charged  $20,  your
purchase  will be  cancelled,  your  AIP  will  be  terminated  and you  will be
responsible  for any  resulting  losses  to the  Fund.  Your  AIP  will  also be
terminated  in the event two  successive  mailings  to you are  returned  by the
United  States Post Office as  undeliverable.  If this occurs,  you must call or
write to reinstate  your AIP. You can terminate  your AIP at any time by calling
the Fund at least five business days before your next scheduled withdrawal date.
To  implement  this  plan,   please  fill  out  the  appropriate  area  of  your
application, or call 1-800-771-4701 for assistance.

HOW TO SELL SHARES
When you purchase shares through the Fund, you may sell the shares by any one of
the methods  described below. You may elect to have redemption  proceeds sent to
you by check (via regular mail or overnight  courier),  wire or electronic funds
transfer. If you elect to have your redemption check sent by


                                       12


overnight  courier to the address of record for your account,  a $15 fee will be
deducted from your  redemption  proceeds.  If you elect to have your  redemption
proceeds sent by wire to a previously designated bank account, a $15 fee will be
deducted from your redemption proceeds.

The Fund normally pays  redemption  proceeds  within two Business  Days, but may
take up to seven  business days. If you are selling shares you recently paid for
by check,  the Fund will pay you when your check has cleared,  which may take up
to 15 days.  Although the Fund may delay payment on your  redeemed  shares under
such circumstances,  they will be redeemed at the NAV next determined after your
redemption  request is received.  If the Federal Reserve Bank is closed on a day
that  redemption  proceeds  would  ordinarily  be wired,  wiring the  redemption
proceeds may be delayed one additional Business Day.

By mail         o   Send a letter of instruction that includes your account
                    number, the Fund name, the dollar value or number of
                    shares you want to redeem, and how and where to send
                    the proceeds.

                o   Sign the request exactly as the shares are registered.
                    All account owners must sign.

                o   Include a Medallion signature guarantee, if necessary
                    (see below).

                o   Send your request to:
                    Regular Mail               Overnight Courier
                    Cheswold Lane Funds        Cheswold Lane Funds
                    P.O. Box 2175              803 West Michigan Street, Suite A
                    Milwaukee, WI 53201-2175   Milwaukee, WI 53233-2301


By telephone    o   You automatically have the privilege to redeem shares
                    by telephone unless you have declined this option on
                    your account application.  See "Telephone Transactions"
                    below for information about possible limitations on
                    telephone redemptions.

                o   Call 1-800-771-4701, between 7:00 a.m. and 7:00 p.m.
                    Central Time.  You may redeem as little as $1,000 but
                    no more than $50,000.


Timing of Request to Sell Shares.  Redemption  requests received in "good order"
before the close of the NYSE  (usually  4:00 p.m.  Eastern Time) on any Business
Day will be processed at that day's NAV.  "Good order" means that all shares are
paid for, and that you have included all required  documentation  along with any
required Medallion signature guarantees.

Please note that the Fund may require  additional  documents for  redemptions by
corporations,   executors,   administrators,   trustees,   guardians   or  other
fiduciaries.  If you  have any  questions  about  how to  redeem  shares,  or to
determine if a Medallion signature guarantee or other documentation is required,
please call 1-800-771-4701.

Redemption  Fee.  Shares of the Fund sold  within  90 days of  purchase  will be
assessed a redemption fee of 2.00%. This redemption fee is imposed to discourage
short-term  trading and is paid to the Fund to help offset any costs  associated
with  fluctuations  in Fund  asset  levels  and cash flow  caused by  short-term
shareholder  trading.  The  redemption  fee will not  apply to  shares  acquired
through the reinvestment of dividends or distributions.  The redemption fee will
also not apply to  employer-sponsored  retirement plans such as 401(k) plans, or
to  other  accounts  to  which  the  application  of the  redemption  fee is not
technologically  feasible,  such as certain  omnibus  accounts  maintained  by a
financial  intermediary;  it will,  however,  apply to  custody,  trust or other
fiduciary  accounts  held directly by the Fund through its Transfer  Agent.  The
redemption  fee is  deducted  from the  proceeds of the  redemption  and is paid
directly to the


                                       13


Fund.  If you bought shares in the Fund on different  days,  the shares held the
longest  will  be  redeemed  first  for  purposes  of  determining  whether  the
redemption fee applies (i.e., "first-in, first-out").

The Trust  reserves the right to modify or eliminate the  redemption  fee at any
time and will give 60 days' prior written notice of any material changes to such
policy,  unless  otherwise  provided by law.  The  redemption  fee policy may be
modified or amended in the future to reflect,  among other  factors,  regulatory
requirements mandated by the U.S. Securities and Exchange Commission.

Systematic  Withdrawal Plan (SWP).  You can have shares  automatically  redeemed
from your account on a regular  basis by using our SWP. You may take  systematic
withdrawals  of between $1,000 and $50,000 on a monthly or quarterly  basis,  on
the 5th, 10th,  15th,  20th, or 25th of the month.  The proceeds of a withdrawal
can be sent by check to your address of record,  or sent by electronic  transfer
to  your  bank.  If you  want  to  implement  this  plan,  please  fill  out the
appropriate area of your application or call 1-800-771-4701 for assistance.

Telephone Transactions.  In times of drastic economic or market conditions,  you
may have difficulty  redeeming shares by telephone.  The Fund reserves the right
to  temporarily  discontinue  or limit  the  telephone  purchase  or  redemption
privileges  at any time  during such  periods.  The Fund  reserves  the right to
refuse a telephone  redemption  request if it believes it is advisable to do so.
The  Fund  uses  procedures   reasonably  designed  to  confirm  that  telephone
redemption  instructions  are  genuine.  These may include  recording  telephone
transactions,  testing  the  identity  of  the  caller  by  asking  for  account
information  and sending  prompt written  confirmations.  The Fund may implement
other procedures from time to time. If these  procedures are followed,  the Fund
and its service  providers will not be liable for any losses due to unauthorized
or fraudulent instructions.

Medallion  Signature  Guarantees.  The Fund will require the Medallion signature
guarantee  of each  account  owner in the  following  situations:  (1) to change
ownership  on your  account;  (2) to send  redemption  proceeds  to a  different
address  than is currently  on the  account;  (3) to have the  proceeds  paid to
someone other than the account's owner; (4) to transmit  redemption  proceeds by
federal funds wire or automated  clearinghouse to a bank other than your bank of
record; (5) to add telephone privileges;  (6) to change the name on your account
due to marriage or divorce; (7) to transfer your Fund IRA to another fund family
(on the IRA transfer form); (8) if a change of address request has been received
by the Transfer Agent within the last 60 days; or (10) if your redemption is for
$50,000 or more.

A Medallion signature  guarantee request may not be sent by facsimile.  The Fund
requires  Medallion  signature  guarantees to protect both you and the Fund from
possible  fraudulent  requests  to redeem  shares.  You can  obtain a  Medallion
signature  guarantee from most  broker-dealers,  national or state banks, credit
unions, federal savings and loan associations or other eligible institutions.  A
notary  public is not an acceptable  signature  guarantor.  Medallion  signature
guarantee  requirements also apply to certain transactions on accounts involving
executors,  administrators,  trustees or guardians.  To determine if a Medallion
signature guarantee is required, please call 1-800-771-4701.

VALUATION OF PORTFOLIO SECURITIES AND USE OF FAIR VALUE PRICING
The Fund  values  its  investments  for  which  market  quotations  are  readily
available at market value. Investments in other registered mutual funds, if any,
are  valued  based on the NAV of those  mutual  funds,  which may use fair value
pricing  as  discussed  in  their  prospectuses.   The  Fund  values  short-term
investments   that  will  mature  within  60  days  at  amortized  cost,   which
approximates  market value. The Fund values all other  investments and assets at
their fair value.

The Fund  translates  prices  for its  investments  that are  quoted in  foreign
currencies into U.S. dollars at current exchange rates. As a result,  changes in
the value of those currencies in relation to the U.S. dollar


                                       14


may affect the Fund's NAV.  Because  foreign  markets  may be open at  different
times  than the NYSE,  the value of the  Fund's  shares  may change on days when
shareholders  are not able to buy or sell them. If events  materially  affecting
the values of the Fund's  foreign  investments,  in the opinion of the  Advisor,
occur between the close of foreign  markets and the close of regular  trading on
the NYSE,  or if reported  prices are believed by the Advisor to be  unreliable,
these  investments  will be valued  at their  fair  value.  The Fund may rely on
third-party pricing vendors to monitor for events that may materially affect the
values of the Fund's foreign  investments during the period between the close of
foreign  markets and the close of regular  trading on the NYSE.  The Fund uses a
pricing service to assist in the  determination of market value. If events occur
following the close of foreign markets that materially  affect the values of the
Fund's  foreign  investments,  the  pricing  service  will  assist  the  Fund in
determining the fair market values of such foreign investments.

The use of fair  value  pricing  by the Fund may cause the NAV of its  shares to
differ from the NAV that would be calculated by using closing market prices. Due
to the  subjective  nature  of  fair  value  pricing,  the  Fund's  value  for a
particular security may be different from the last quoted market price.

FREQUENT TRADING OF FUND SHARES
The Fund is intended for long-term investors.  The Fund is not designed to serve
as a vehicle for frequent trading in response to short-term  fluctuations in the
foreign  securities  markets.  Frequent  trading  of  Fund  shares  may  lead to
increased transaction costs to the Fund, less efficient management of the Fund's
portfolios (by disrupting portfolio investment  strategies) and taxable gains to
the  remaining  shareholders,  resulting  in dilution of the value of the shares
held by  long-term  shareholders.  Accordingly,  the Fund,  its  Advisor  or its
Distributor  will reject  purchases  that they have  determined  could result in
actual or potential harm to the Fund.

The Fund may be  subject  to the risk of one  form of  frequent  trading  called
time-zone  arbitrage,  where  shareholders of the Fund seek to take advantage of
time-zone  differences  between the close of foreign markets in which the Fund's
investments  trade and the  close of the  NYSE.  The  Fund's  use of fair  value
pricing  as  described  above is  designed  to help  prevent  this  dilution  to
long-term shareholders that could result from time zone arbitrage.

Because the Fund is designed for long-term  shareholders,  the Board of Trustees
has adopted  policies  and  procedures  that are  designed to restrict  frequent
purchases and  redemptions  of the Fund's  shares.  The Fund will impose a 2.00%
redemption fee on the total  redemption  amount  (calculated at market value) if
you sell your shares after holding them for 90 days or less.  The redemption fee
is paid  directly to the Fund and is designed to offset  brokerage  commissions,
market impact and other costs associated with short-term trading.

This  redemption fee is intended to discourage  short-term  trading and the Fund
will monitor the  assessment of redemption  fees against your account as part of
its monitoring of frequent  trading in Fund shares.  The redemption fee will not
apply in the following circumstances:  redemptions to pay distributions or loans
from certain  defined  contribution  plans;  redemptions  from  certain  omnibus
accounts;  redemptions  in the  event  of  shareholder  death  or  post-purchase
disability;  redemptions  made as  part of a  systematic  withdrawal  plan;  and
transactions  for a discretionary  investment  management  client of the Advisor
when the  client has  provided  the  Advisor  with  advance  notice of a planned
redemption and the Advisor retains discretion to effect the redemption on behalf
of the client.

In  addition  to the  redemption  fee,  the  Board  has  adopted  the  following
additional  policies and procedures.  Any shareholder  that is confirmed to have
initiated four or more round trips (via purchases or redemptions),  all equal to
or greater than $10,000 in value within a 180-day period will receive a warning.


                                       15


If subsequent  activity of two or more round trips occurs  within 180 days,  the
shareholder will not be permitted to purchase additional shares of the Fund.

There is no assurance that these  policies and  procedures  will be effective in
limiting frequent trading in all accounts. For example, the Fund may not be able
to  effectively  monitor,  detect or limit  short-term  or excessive  trading by
underlying  shareholders  that occurs  through  omnibus  accounts  maintained by
broker-dealers or other financial intermediaries.

The Fund reserves the right to refuse future  purchases of shares of the Fund if
you are deemed to be engaging in illegal activities (such as late trading) or in
activities otherwise detrimental to the Fund (such as market timing).

DISTRIBUTIONS AND TAXES
Distributions.  The Fund has  elected to be treated  as a  regulated  investment
company  under  Subchapter  M of  the  Internal  Revenue  Code.  As a  regulated
investment company,  the Fund generally pays no federal income tax on the income
and gains it distributes to you.  Dividends and capital gains,  if any, are paid
semi-annually.  The  amount  of any  distribution  will  vary,  and  there is no
guarantee  the Fund  will pay  either  an  income  dividend  or a  capital  gain
distribution.  We  automatically  reinvest all  dividends  and any capital gains
unless you indicate otherwise.

Annual  Statements.  Every January,  you will receive a statement that shows the
tax status of  distributions  you received in the previous  year.  Distributions
declared  in  December  but paid in January  are taxable as if they were paid in
December.  Mutual funds may reclassify income after your tax reporting statement
is mailed to you. Prior to issuing your  statement,  the Fund makes every effort
to search for reclassified income to reduce the number of corrected forms mailed
to  shareholders.  However,  when necessary,  the Fund will send you a corrected
Form 1099-DIV to reflect reclassified information.

Avoid "Buying A Dividend."  If you invest in the Fund shortly  before the record
date of a taxable  distribution,  the  distribution  will lower the value of the
Fund's shares by the amount of the distribution and, in effect, you will receive
some of your investment back in the form of a taxable distribution.

Tax  Considerations.   In  general,   if  you  are  a  taxable  investor,   Fund
distributions  are taxable to you at either ordinary income or capital gains tax
rates.  This is true whether you reinvest your  distributions in additional Fund
shares or receive them in cash.

For federal income tax purposes,  Fund distributions of short-term capital gains
are taxable to you as ordinary income.  Fund  distributions of long-term capital
gains are taxable to you as long-term  capital gains no matter how long you have
owned your shares. A portion of income  dividends  designated by the Fund may be
qualified  dividend income  eligible for taxation by individual  shareholders at
long-term  capital gain rates provided  certain holding period  requirements are
met.

A sale or  redemption  of Fund  shares is a taxable  event and,  accordingly,  a
capital gain or loss may be recognized.


                                       16


Fund  distributions  and gains  from the sale or  exchange  of your Fund  shares
generally  are subject to state and local taxes.  If the Fund  qualifies to pass
through to you the tax benefits from foreign  taxes it pays on its  investments,
and elects to do so, then any foreign taxes it pays on these  investments may be
passed through to you as a foreign tax credit. Non-U.S. investors may be subject
to U.S.  withholding  and  estate  tax,  and are  subject to  special  U.S.  tax
certification requirements.

This  discussion of  "Distributions  and taxes" is not intended or written to be
used as tax advice.  Because  everyone's  tax  situation  is unique,  you should
consult  your tax  professional  about  federal,  state,  local or  foreign  tax
consequences before making an investment in a Fund.


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

No financial  information is presented for the Fund because it had not commenced
operations prior to the date of this Prospectus.


                                       17



                               INVESTMENT ADVISOR
                       Cheswold Lane Asset Management, LLC
                         West Conshohocken, Pennsylvania

                                   DISTRIBUTOR
                         UMB Distribution Services, LLC
                              Milwaukee, Wisconsin


                  INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                         Briggs Bunting & Dougherty, LLP
                           Philadelphia, Pennsylvania


                                  LEGAL COUNSEL
                       Stradley Ronon Stevens & Young, LLP
                           Philadelphia, Pennsylvania


                         ADMINISTRATOR, TRANSFER AGENT,
                               AND FUND ACCOUNTANT
                             UMB Fund Services, LLC
                              Milwaukee, Wisconsin


                                    CUSTODIAN
                                 UMB Bank, n.a.
                              Kansas City, Missouri



                                       18


--------------------------------------------------------------------------------
                             ADDITIONAL INFORMATION
--------------------------------------------------------------------------------

If you want more  information  about  the  Fund,  the  following  documents  are
available free, upon request:

SHAREHOLDER REPORTS
Additional  information  about the Fund's  investments  will be available in the
Fund's annual and semi-annual  reports to  shareholders.  As of the date of this
Prospectus,  annual and  semi-annual  reports are not yet available  because the
Fund has not commenced operations.  When available,  the Fund's annual report to
shareholders  will include a discussion of the market  conditions and investment
strategies that  significantly  affected the Fund's  performance during its last
fiscal year.

STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI  provides  more  information  about the Fund and is legally part of this
Prospectus (i.e., it is incorporated by reference).

HOW TO OBTAIN DOCUMENTS
You may obtain free copies of the Fund's annual and  semi-annual  reports,  when
available,    and   the   SAI    through    the    Fund's    internet    website
(www.cheswoldlanefunds.com) or by calling 1-800-771-4701.

You may also review and copy information about the Fund,  including  shareholder
reports and the SAI, at the Public Reference Room of the Securities and Exchange
Commission (the "SEC") in Washington,  D.C. You may obtain information about the
operations  of  the  SEC's  Public   Reference   Room  by  calling  the  SEC  at
1-202-551-8090. You may obtain copies of reports and other information about the
Fund for a fee, by electronic  request at  publicinfo@sec.gov  or by writing the
SEC's Public Reference Section,  Washington,  D.C. 20549-0102;  or for free from
the EDGAR Database on the SEC's website at www.sec.gov.

FUND SYMBOL
                                    CUSIP            NASDAQ
Institutional Shares              166684100          CLIDX










Cheswold Lane Funds Investment Company Act File No. 811-21891.










                               CHESWOLD LANE FUNDS
                 Cheswold Lane International High Dividend Fund


                       Statement of Additional Information
                                  June 21, 2006


                             803 W. Michigan Street
                               Milwaukee, WI 53233
                                 1-800-771-4701
                            www.cheswoldlanefunds.com

     This Statement of Additional  Information  ("SAI")  describes shares of the
Cheswold Lane International  High Dividend Fund (the "Fund"),  which is a series
of the  Cheswold  Lane Funds (the  "Trust").  Currently,  the Fund  offers  only
Institutional  Shares.  The Fund's  investment  advisor is  Cheswold  Lane Asset
Management, LLC (the "Advisor").

     This SAI  supplements  the  information  contained  in the  Fund's  current
Prospectus,  dated June 21, 2006,  as it may be amended from time to time.  This
SAI should be read in conjunction with the Prospectus.  This SAI is not itself a
prospectus  but  is,  in  its  entirety,  incorporated  by  reference  into  the
Prospectus.  A  Prospectus  may be  obtained  by writing  or calling  the Fund's
distributor,  UMB Distribution Services,  LLC (the "Distributor"),  at the above
address or by calling  the above  phone  number.  The  Fund's  annual  report to
shareholders   will  be  available  by  request,   without  charge,  by  calling
1-800-771-4701.


                                TABLE OF CONTENTS

                           Page                                         Page

Organization and
  Classification              2       Capital Structure                   22
Investment Restrictions               Purchase and Redemption of
  and Policies                2         Shares                            23
Investment Strategies                 Determining Offering Price and
  and Risks                   4         Net Asset Value                   24
Disclosure of Portfolio               Distributions and Taxes             25
  Holdings Information       15       Performance Information             31
Management of the Trust      16       Financial Statements and Report
Investment Advisor and                  of Independent Registered
  Other Service Providers    19         Public Accounting Firm            32
Portfolio Managers           21       Principal Holders                   33
Trading Practices and
  Brokerage                  22


                                       1


                         ORGANIZATION AND CLASSIFICATION

Organization
     The Trust was organized as a Delaware statutory trust on April 12, 2006.

Classification
     The  Trust  is  an  open-end  management  investment  company.  The  Fund's
portfolio of assets is "diversified" as defined by the Investment Company Act of
1940, as amended ("1940 Act").


                      INVESTMENT RESTRICTIONS AND POLICIES

Investment Objective
     There can be no  assurance  that the Fund will achieve its  objective.  The
Fund's  investment  objective  and policies,  and their  associated  risks,  are
discussed in the Fund's  Prospectus,  which should be read  carefully  before an
investment  is made.  All  investment  objectives  and  investment  policies not
specifically  designated  as  fundamental  may be  changed  without  shareholder
approval.  Additional  information  about the Fund and its  policies is provided
below.

Fundamental Investment Restrictions
     The investment  restrictions set forth below have been adopted by the Trust
as fundamental  policies that cannot be changed without the affirmative  vote of
the holders of a majority (as defined in the 1940 Act) of the outstanding voting
securities  of  the  Fund.  The  Fund's  investment  objectives  and  all  other
investment  policies or practices of the Fund are considered by the Trust not to
be fundamental and,  accordingly,  may be changed without shareholder  approval.
For purposes of the 1940 Act, a "majority of the outstanding  voting securities"
means  the  lesser  of the vote of:  (i) 67% or more of the  shares  of the Fund
present at a meeting,  if the holders of more than 50% of the outstanding shares
of the Fund are present or  represented  by proxy,  or (ii) more than 50% of the
shares of the Fund.

The Fund may not:

     (1)  borrow money or issue senior  securities,  except as the 1940 Act, any
          rules or orders thereunder, or U.S. Securities and Exchange Commission
          ("SEC") staff interpretation thereof, may permit;

     (2)  underwrite the  securities of other issuers,  except that the Fund may
          engage in  transactions  involving  the  acquisition,  disposition  or
          resale of its portfolio securities under circumstances where it may be
          considered to be an  underwriter  under the Securities Act of 1933, as
          amended (the "1933 Act");

     (3)  purchase or sell real estate, unless acquired as a result of ownership
          of securities or other  instruments and provided that this restriction
          does not prevent the Fund from investing in issuers which invest, deal
          or  otherwise  engage in  transactions  in real  estate  or  interests
          therein, or investing in securities that are secured by real estate or
          interests therein;

     (4)  make loans,  provided that this  restriction does not prevent the Fund
          from purchasing debt obligations, entering into repurchase agreements,
          and loaning its assets to  broker/dealers  or institutional  investors
          and  investing  in  loans,  including  assignments  and  participation
          interests;


                                       2


     (5)  make investments that will result in the  concentration  (as that term
          may be defined in the 1940 Act, any rules or orders thereunder, or SEC
          staff  interpretation  thereof) of its total assets in  securities  of
          issuers  in  any  one  industry  (other  than  securities   issued  or
          guaranteed  by  the  U.S.   government  or  any  of  its  agencies  or
          instrumentalities or securities of other investment companies); and

     (6)  purchase or sell commodities as defined in the Commodity Exchange Act,
          as amended, and the rules and regulations thereunder,  unless acquired
          as a result  of  ownership  of  securities  or other  instruments  and
          provided that this restriction does not prevent the Fund from engaging
          in  transactions  involving  futures  contracts and options thereon or
          investing in securities that are secured by physical commodities.

Non-Fundamental Investment Restrictions
     In  addition  to  the  fundamental  policies  and  investment  restrictions
described above, and the various general  investment  policies  described in the
Prospectus,  the Fund will be subject to the following investment  restrictions,
which are considered non-fundamental and may be changed by the Board of Trustees
without shareholder approval.

     (1)  The Fund may not invest more than 15% of its net assets in  securities
          which it cannot sell or dispose of in the ordinary  course of business
          within  seven  days at  approximately  the value at which the Fund has
          valued the investment.

     (2)  The  Fund  may  borrow  up to 5% of its  total  assets  for  temporary
          purposes and may also borrow from banks,  provided  that if borrowings
          exceed 5%,  the Fund must have  assets  totaling  at least 300% of the
          borrowing  when the  amount of the  borrowing  is added to the  Fund's
          other  assets.  The effect of this  provision  is to allow the Fund to
          borrow  from  banks  amounts  up to  one-third  (33 1/3%) of its total
          assets (including those assets represented by the borrowing);

     (3)  To avoid  concentration  of investments,  the Fund may not invest more
          than 25% of its  total  assets in  securities  of  issuers  in any one
          industry  (other  than  securities  issued or  guaranteed  by the U.S.
          government or any of its agencies or  instrumentalities  or securities
          of other investment companies).

Portfolio Turnover
     The  Fund  is  generally   expected  to  have  a  portfolio  turnover  rate
significantly  below 100%.  Portfolio trading will be undertaken  principally to
accomplish the Fund's investment objective, however. The Fund is free to dispose
of portfolio  securities  at any time,  subject to  complying  with the Internal
Revenue Code and the 1940 Act, when changes in  circumstances or conditions make
such a move desirable in light of the Fund's  investment  objective.  Therefore,
the Fund will not  attempt to achieve or be limited to a  predetermined  rate of
portfolio turnover.

     The portfolio turnover rate tells you the amount of trading activity in the
Fund's  portfolio.  A turnover rate of 100% would occur, for example,  if all of
the Fund's  investments held at the beginning of a year were replaced by the end
of the year, or if a single investment was frequently  traded. The turnover rate
also may be affected by cash  requirements from purchases and redemptions of the
Fund's  shares.  A high  rate of  portfolio  turnover  in any year may  increase
brokerage commissions paid and could generate taxes for shareholders on realized
investment gains.


                                       3


                         INVESTMENT STRATEGIES AND RISKS

     The following information relates to and supplements the description of the
Fund's investment strategies and risks that are contained in the Prospectus.

Bank Obligations
     The Fund may invest in obligations  issued or guaranteed by U.S. or foreign
banks. Bank obligations,  including without limitation,  time deposits, bankers'
acceptances  and  certificates  of deposit,  may be general  obligations  of the
parent bank or may be limited to the issuing branch by the terms of the specific
obligations or by government regulation.

Commercial Paper and Other Short-Term Corporate Obligations
     The Fund may invest in commercial  paper and other  short-term  obligations
issued  or  guaranteed  by U.S.  corporations,  non-U.S.  corporations  or other
entities.  Commercial paper  represents  short-term  unsecured  promissory notes
issued in  bearer  form by banks or bank  holding  companies,  corporations  and
finance companies.

Convertible Securities
     The  Fund may  invest  in  convertible  preferred  securities.  Convertible
preferred  securities may be converted into or exchanged for a specified  amount
of common stock of the same or different  issuer  within a particular  period of
time at a specified price or formula. A convertible  preferred security entitles
the  holder to receive a dividend  that is paid or  accrued on  preferred  stock
until the convertible  security matures or is redeemed,  converted or exchanged.
Convertible  securities  have unique  investment  characteristics,  in that they
generally:  (i) have higher  yields than common  stocks,  but lower  yields than
comparable non-convertible  securities;  (ii) are less subject to fluctuation in
value   than  the   underlying   common   stock   due  to   their   fixed-income
characteristics; and (iii) provide the potential for capital appreciation if the
market price of the underlying common stock increases.

     A  convertible  security may be subject to  redemption at the option of the
issuer  at  a  price  established  in  the  convertible   security's   governing
instrument. If a convertible security held by the Fund is called for redemption,
the Fund will be required to permit the issuer to redeem the  security,  convert
it into the  underlying  common stock or sell it to a third party.  Any of these
actions  could have an  adverse  effect on the  Fund's  ability  to achieve  its
investment objectives, which, in turn, could result in losses to the Fund.

     In  evaluating  a  convertible  security,  the  Advisor  will give  primary
emphasis to the attractiveness of the underlying common stock.

Futures Contracts and Options on Futures Contracts
     The Fund may purchase and sell  futures  contracts  and may also write call
options on futures  contracts.  The Fund may purchase and sell futures contracts
based on various securities,  securities  indices,  foreign currencies and other
financial  instruments  and indices.  The Fund may engage in futures and related
options  transactions  in order to seek to hedge  against  changes in securities
prices,  currency exchange rates, or to otherwise manage its sector selection in
accordance with its investment objectives and policies.  The Fund may also enter
into closing purchase and sale  transactions  with respect to such contracts and
options.  The Trust,  on behalf of the Fund,  has claimed an exclusion  from the
definition of the term "commodity  pool operator"  under the Commodity  Exchange
Act and,  therefore,  the Fund is not subject to registration or regulation as a
pool operator under that Act.


                                       4


     Futures contracts entered into by the Fund may be traded on U.S.  exchanges
or boards of trade that are licensed  and  regulated  by the  Commodity  Futures
Trading  Commission  (the  "CFTC") or on foreign  exchanges.  Neither  the CFTC,
National Futures  Association  ("NFA"),  SEC nor any domestic exchange regulates
activities of any foreign exchange or boards of trade,  including the execution,
delivery and clearing of transactions, or has the power to compel enforcement of
the rules of a foreign exchange or board of trade or any applicable foreign law.
This is true even if the  exchange  is formally  linked to a domestic  market so
that a position  taken on the  market  may be  liquidated  by a  transaction  on
another market.  Moreover,  such laws or regulations  will vary depending on the
foreign  country in which the  foreign  futures or foreign  options  transaction
occurs. For these reasons,  the Fund's investments in foreign futures or foreign
options  transactions  may not provide the same  protections as  transactions on
U.S.  exchanges.  In  particular,  persons who trade foreign  futures or foreign
options  contracts may not be afforded the same protective  measures provided by
the Commodity  Exchange Act, the CFTC's regulations and the rules of the NFA and
any domestic exchange, including the right to use reparations proceedings before
the CFTC and arbitration proceedings provided by the NFA or any domestic futures
exchange.  Similarly,  these  persons  may not have the  protection  of the U.S.
securities laws.

     When securities  prices are falling,  the Fund can seek to offset a decline
in the value of its  current  portfolio  securities  through the sale of futures
contracts.  When securities prices are rising, the Fund, through the purchase of
futures  contracts,  can  attempt to secure  better  prices  than might later be
available in the market when it effects anticipated  purchases.  Similarly,  the
Fund can purchase and sell futures contracts on a specified currency in order to
seek to protect against changes in currency  exchange  rates.  For example,  the
Fund can purchase  futures  contracts on foreign currency to establish the price
in U.S. dollars of a security quoted or denominated in such currency that it has
acquired  or expects to  acquire.  As another  example,  the Fund may enter into
futures  transactions to seek a closer correlation  between its overall currency
exposures and the currency exposures of its performance benchmark.

     Positions  taken in the futures  market are not normally  held to maturity,
but are instead liquidated through offsetting transactions,  which may result in
a profit or a loss. While the Fund will usually  liquidate  futures contracts on
securities  or  currency  in this  manner,  the  Fund may  instead  make or take
delivery  of  the  underlying   securities  or  currency   whenever  it  appears
economically  advantageous  for  the  Fund  to do  so.  A  clearing  corporation
associated  with the exchange on which  futures are traded  guarantees  that, if
still open, the sale or purchase will be performed on the settlement date.

     The Fund may use futures  contracts as a hedge in seeking to establish with
more certainty the effective price,  rate of return or currency exchange rate on
portfolio  securities or  securities  that the Fund owns or proposes to acquire.
For example,  the Fund may, for example, to seek to hedge against an anticipated
decline in market prices or foreign  currency rates that would adversely  affect
the dollar value of the Fund's portfolio securities by taking a "short" position
in the futures market by selling futures contracts. Similarly, the Fund may sell
futures contracts on a currency in which its portfolio  securities are quoted or
denominated,  or sell futures contracts on one currency to seek to hedge against
fluctuations  in the value of securities  quoted or  denominated  in a different
currency.

     On other occasions,  the Fund may take a "long" position by purchasing such
futures contracts.  This may be done, for example, when the Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency  exchange  rates then available in the applicable
market to be less favorable than prices or rates that are currently available.

     Written Call Options on Futures Contracts.  The Fund may write call options
on  futures  contracts.  The  writing  of a call  option on a  futures  contract
generates  a premium  which may  partially  offset a decline in the value of the
Fund's assets. By writing a call option, the Fund becomes obligated, in exchange
for the premium,  to sell a futures  contract if the option is exercised,  which
may have a value


                                       5


higher than the exercise price. Thus, the "loss" (i.e., the forgone appreciation
of the amount by which the value of the futures  contract  exceeds the  exercise
price)  incurred by the Fund in writing call  options on futures is  potentially
unlimited and may exceed the amount of the premium received. The Fund will incur
transaction costs in connection with the writing of call options on futures.

     The holder or writer of an option on a futures  contract may  terminate its
position by selling or  purchasing an  offsetting  option on the same  financial
instrument.  There  is no  guarantee  that  such  closing  transactions  can  be
effected.  The  Fund's  ability to  establish  and close out  positions  on such
options will be subject to the  development  and maintenance of a liquid market.
Call options on futures contracts written by the Fund will be "covered," meaning
that the Fund will own the futures contract on which the call option is written.

     Other  Considerations.  The Fund will  engage in  transactions  in  futures
contracts and related options  transactions only to the extent such transactions
are consistent with the  requirements  of the Internal  Revenue Code of 1986, as
amended (the "Code") for maintaining its qualification as a regulated investment
company for federal income tax purposes.  Transactions in futures  contracts and
options on futures  involve  brokerage  costs,  require margin  deposits and, in
certain cases,  require the Fund to designate cash or liquid assets in an amount
equal to the underlying value of such contracts and options and adjust the value
of the designated assets to match changes in the obligations on a daily basis.

     While  transactions in futures  contracts and options on futures may reduce
certain risks,  such transactions  themselves entail certain other risks.  Thus,
unanticipated changes in securities prices or currency exchange rates may result
in a poorer overall performance for the Fund than if it had not entered into any
futures contracts or options transactions.

     In  addition,  it is not  possible for the Fund to hedge fully or perfectly
against  currency  fluctuations  affecting  the  value of  securities  quoted or
denominated in foreign currencies because the value of such securities is likely
to  fluctuate  as  a  result  of  independent   factors  unrelated  to  currency
fluctuations.  The  profitability  of the Fund's trading in futures depends upon
the ability of the Advisor to analyze correctly the futures markets.

Foreign Securities
     The  Fund  will  invest   primarily  in  securities  of  foreign   issuers.
Investments  in foreign  securities may offer  potential  benefits not available
from  investments  solely in U.S.  dollar-denominated  or quoted  securities  of
domestic issuers. Such benefits may include the opportunity to invest in foreign
issuers that appear,  in the opinion of the Advisor,  to offer the potential for
long-term  income and growth of capital and the opportunity to invest in foreign
countries with economic  policies or business cycles different from those of the
United States.

     Investing in foreign securities  involves certain special risks,  including
those  discussed in the Fund's  Prospectus and those set forth below,  which are
not typically  associated  with investing in U.S.  dollar-denominated  or quoted
securities of U.S. issuers.  Investments in foreign  securities  usually involve
currencies of foreign countries. Accordingly, the Fund may be affected favorably
or unfavorably by changes in currency rates and in exchange control  regulations
and may incur costs in connection with conversions  between various  currencies.
To the extent that the Fund is fully invested in foreign  securities  while also
maintaining currency positions, it may be exposed to greater combined risk.

     Currency exchange rates may fluctuate  significantly  over short periods of
time.  They  generally are  determined by the forces of supply and demand in the
foreign  exchange  markets and the relative  merits of  investments in different
countries,  actual or  anticipated  changes in interest  rates and other complex
factors, as seen from an international perspective. Currency exchange rates also
can be affected


                                       6


unpredictably  by  intervention  (or lack of  intervention)  by U.S.  or foreign
governments or central banks or by currency  controls or political  developments
in the United States or abroad.

     Because  foreign issuers  generally are not subject to uniform  accounting,
auditing  and  financial   reporting   standards,   practices  and  requirements
comparable  to those  applicable to U.S.  companies,  there may be less publicly
available information about a foreign company than about a U.S. company. Foreign
securities  markets  typically  have lower volume and less liquidity than in the
United States and securities of many foreign  companies are less liquid and more
volatile than securities of comparable U.S. companies. The securities of foreign
issuers  may be listed on  foreign  securities  exchanges  or traded in  foreign
over-the-counter  markets. Fixed commissions on foreign securities exchanges are
generally  higher than negotiated  commissions on U.S.  exchanges,  although the
Fund  endeavors  to achieve  the most  favorable  net  results on its  portfolio
transactions.  There is generally less government  supervision and regulation of
foreign securities exchanges, brokers, dealers and listed and unlisted companies
than in the United  States,  and the legal  remedies for  investors  may be more
limited than the remedies available in the United States.

     Foreign  markets also have different  clearance and settlement  procedures,
and in certain markets there have been times when  settlements  have been unable
to keep pace with the volume of securities transactions,  making it difficult to
conduct such  transactions.  Such delays in settlement could result in temporary
periods when some of the Fund's assets are uninvested and no return is earned on
such assets.  The inability of the Fund to make intended security  purchases due
to  settlement  problems  could  cause  the Fund to miss  attractive  investment
opportunities.   The  inability  to  dispose  of  portfolio  securities  due  to
settlement  problems could result either in losses to the Fund due to subsequent
declines in value of the portfolio securities or, if the Fund has entered into a
contract to sell the securities, could result in the Fund becoming liable to the
purchaser. In addition, with respect to certain foreign countries,  there is the
possibility  of  expropriation  or  confiscatory  taxation,  limitations  on the
movement of funds and other assets  between  different  countries,  political or
social instability,  or diplomatic developments which could adversely affect the
Fund's investments in those countries.

     The Fund may invest in foreign  securities which take the form of sponsored
and  unsponsored  American  Depositary  Receipts  ("ADRs"),   Global  Depositary
Receipts  ("GDRs") and European  Depositary  Receipts  ("EDRs") or other similar
instruments  representing  securities of foreign issuers (together,  "Depositary
Receipts").  ADRs represent the right to receive  securities of foreign  issuers
deposited  in a  domestic  bank or a  correspondent  bank.  ADRs are  traded  on
domestic exchanges or in the U.S. over-the-counter market and, generally, are in
registered  form.  EDRs and GDRs are receipts  evidencing an arrangement  with a
non-U.S.  bank similar to that for ADRs and are designed for use in the non-U.S.
securities  markets.  EDRs  and  GDRs  are not  necessarily  quoted  in the same
currency as the underlying security.

     To the extent the Fund acquires  Depositary  Receipts through banks that do
not have a  contractual  relationship  with the foreign  issuer of the  security
underlying  the  Depositary  Receipts  to issue  and  service  such  unsponsored
Depositary Receipts,  there may be an increased  possibility that the Fund would
not become aware of, and be able to respond to, corporate  actions such as stock
splits or rights offerings  involving the foreign issuer in a timely manner.  In
addition,  the lack of information may result in inefficiencies in the valuation
of such  instruments.  Investment in Depositary  Receipts does not eliminate all
the risks  inherent in investing in securities of non-U.S.  issuers.  The market
value  of  Depositary  Receipts  is  dependent  upon  the  market  value  of the
underlying  securities and  fluctuations in the relative value of the currencies
in which the  Depositary  Receipts  and the  underlying  securities  are quoted.
However, by investing in Depositary Receipts,  such as ADRs, which are quoted in
U.S. dollars, the Fund may avoid currency risks during the settlement period for
purchases and sales.


                                       7


     Investing  in Emerging  Countries.  The Fund may invest in emerging  market
countries but does not currently  anticipate doing so. The securities markets of
emerging  countries  are  typically  less  liquid and  subject to greater  price
volatility,  and typically have a smaller market  capitalization,  than the U.S.
securities  markets.  Issuers  and  securities  markets  in such  countries  are
typically  not subject to as extensive  and frequent  accounting,  financial and
other reporting  requirements or as comprehensive  government regulations as are
issuers  and  securities  markets  in  the  United  States.  Substantially  less
information  may be publicly  available  about emerging  country issuers than is
available about issuers in the United States.

     Transaction costs in emerging countries, including brokerage commissions or
dealer  mark-ups,  may be higher than in the United  States and other  developed
securities  markets.  In  addition,  existing  laws and  regulations  are  often
inconsistently applied. As legal systems in emerging countries develop,  foreign
investors may be adversely  affected by new or amended laws and regulations.  In
circumstances  where adequate laws exist, it may not be possible to obtain swift
and equitable  enforcement  of the law.  Foreign  investment  in the  securities
markets of certain  emerging  countries  is also  restricted  or  controlled  to
varying degrees.  These  restrictions may limit the Fund's investment in certain
emerging countries and may increase the expenses of the Fund.

     Emerging  countries  may be subject to a  substantially  greater  degree of
economic,  political and social  instability  and disruption than is the case in
the United States,  Japan and most Western  European  countries.  Such economic,
political and social  instability could disrupt the principal  financial markets
in which the Fund may  invest  and  adversely  affect  the  value of the  Fund's
assets. The Fund's investments can also be adversely affected by any increase in
taxes or by political, economic or diplomatic developments.

     The Fund's income and, in some cases, capital gains from foreign stocks and
securities will be subject to applicable taxation in certain of the countries in
which it invests,  and treaties  between the U.S. and such  countries may not be
available in some cases to reduce the otherwise applicable tax rates.

Forward Foreign Currency Exchange Contracts
     The Fund may enter into forward  foreign  currency  exchange  contracts for
hedging  purposes  to seek to  protect  against  anticipated  changes  in future
foreign currency  exchange rates. A forward foreign currency  exchange  contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract  agreed upon
by the parties, at a price set at the time of the contract.  These contracts are
traded  in  the  inter-bank  market  between  currency  traders  (usually  large
commercial  banks) and their  customers.  A forward  contract  generally  has no
deposit  requirement and no commissions  are generally  charged at any stage for
trades.

     At the maturity of a forward  contract  the Fund may either  accept or make
delivery of the currency  specified in the contract or, at or prior to maturity,
enter into a closing transaction involving the purchase or sale of an offsetting
contract.  Closing transactions with respect to forward contracts are often, but
not always,  effected  with the  currency  trader who is a party to the original
forward contract.

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


                                       8


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

     Additionally,  when the Advisor  believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar, it may
enter into a forward contract to sell, for a fixed amount of U.S.  dollars,  the
amount of foreign currency  approximating the value of some or all of the Fund's
portfolio securities quoted or denominated in such foreign currency. The precise
matching  of the  forward  contract  amounts  and the  value  of the  securities
involved  will not  generally  be  possible  because  the  future  value of such
securities  in  foreign  currencies  will  change  as a  consequence  of  market
movements  in the  value  of those  securities  between  the  date on which  the
contract is entered  into and the date it matures.  Using  forward  contracts to
protect the value of the Fund's  portfolio  securities  against a decline in the
value of a currency does not eliminate  fluctuations in the underlying prices of
the  securities.  It simply  establishes a rate of exchange,  which the Fund can
achieve at some future  point in time.  The  precise  projection  of  short-term
currency market  movements is not possible,  and short-term  hedging  provides a
means of fixing the U.S.  dollar  value of only a portion of the Fund's  foreign
assets.

     The Fund may engage in  cross-hedging  by using  forward  contracts  in one
currency to hedge  against  fluctuations  in the value of  securities  quoted or
denominated  in a  different  currency.  In  addition,  the Fund may enter  into
foreign currency  transactions to seek a closer  correlation  between the Fund's
overall currency  exposures and the currency exposures of the Fund's performance
benchmark.

     Unless otherwise covered in accordance with applicable regulations, cash or
liquid  assets of the Fund will be designated in an amount equal to the value of
the Fund's  total  assets  committed  to the  consummation  of  forward  foreign
currency  exchange  contracts.  If the value of the designated  assets declines,
additional  cash or liquid  assets will be  designated  so that the value of the
assets  will  equal the amount of the Fund's  commitments  with  respect to such
contracts.

     While the Fund may enter into forward contracts to reduce currency exchange
rate risks,  transactions in such contracts  involve certain other risks.  Thus,
while the Fund may  benefit  from such  transactions,  unanticipated  changes in
currency prices may result in a poorer overall  performance for the Fund than if
it had not engaged in any such  transactions.  Moreover,  there may be imperfect
correlation  between  the Fund's  portfolio  holdings  of  securities  quoted or
denominated in a particular  currency and forward  contracts entered into by the
Fund. Such imperfect correlation may cause the Fund to sustain losses which will
prevent the Fund from  achieving a complete  hedge or expose the Fund to risk of
foreign exchange loss.

     Markets  for  trading  foreign  forward   currency   contracts  offer  less
protection   against  defaults  than  is  available  when  trading  in  currency
instruments on an exchange.  Forward  contracts are subject to the risk that the
counterparty to such contract will default on its obligations. Because a forward
foreign  currency  exchange  contract  is  not  guaranteed  by  an  exchange  or
clearinghouse,  a default on the contract  would  deprive the Fund of unrealized
profits, transaction costs or the benefits of a currency hedge or force the Fund
to cover its purchase or sale commitments,  if any, at the current market price.
In addition,  the institutions  that deal in forward currency  contracts are not
required  to  continue to make  markets in the  currencies  they trade and these
markets  can  experience  periods of  illiquidity.  The Fund will not enter into
forward  foreign  currency  exchange  contracts  or other  privately  negotiated
currency  instruments  unless the credit quality of the unsecured senior debt or
the  claims-paying  ability of the  counterparty  is considered to be investment
grade by the  Advisor.  To the extent that a  substantial  portion of the Fund's
total assets, adjusted to reflect the Fund's net position after giving effect to
currency  transactions,  is  denominated  or quoted in the currencies of foreign
countries, the Fund will be more susceptible to the risk of adverse economic and
political developments within those countries.


                                       9


Illiquid Securities
     The Fund may invest up to 15% of its net assets in  securities  that may be
considered  illiquid.  Illiquid securities are securities that cannot be sold or
disposed of in the ordinary  course of business  within seven  business  days at
approximately  the value at which they are being  carried  on the Fund's  books.
Illiquid  securities  may include a wide  variety of  investments,  such as: (i)
repurchase  agreements  maturing in more than seven days; (ii)  over-the-counter
option contracts and certain other  derivatives;  (iii) fixed time deposits that
are  not  subject  to  prepayment  or  provide  for  withdrawal  penalties  upon
prepayment  (other than overnight  deposits);  (iv) commercial paper maturing in
more than seven days issued  pursuant to Section  4(2) of the 1933 Act;  and (v)
securities whose  disposition is restricted under U.S. federal  securities laws.
Illiquid securities include restricted,  privately placed securities that, under
the U.S.  federal  securities  laws,  generally  may be resold only to qualified
institutional buyers. If a substantial market develops for a restricted security
(or other illiquid  investment)  held by the Fund, it may be treated as a liquid
security,  in accordance with procedures and guidelines approved by the Board of
Trustees. This generally includes securities that are unregistered,  that can be
sold to qualified  institutional  buyers in accordance  with Rule 144A under the
1933 Act,  or that are  exempt  from  registration  under the 1933 Act,  such as
commercial  paper.  The Board of Trustees has  delegated  to the Fund's  Advisor
responsibility for monitoring the liquidity of restricted  securities on a daily
basis and making  liquidity  determinations.  Several  factors  that the Advisor
considers in making these  determinations  include: the valuation of a security;
the  availability of qualified  institutional  buyers,  brokers and dealers that
trade in the security;  and the availability of information about the security's
issuer.

Investment Company Securities
     Under the 1940  Act,  the Fund may  invest  up to 10% of its total  assets,
calculated  at the time of  purchase,  in the  securities  of  other  investment
companies (including  exchange-traded  funds such as iShares(R)) but may neither
invest  more  than 5% of its  total  assets in any one  investment  company  nor
acquire more than 3% of the voting  securities of any other investment  company.
To the  extent it does so,  the Fund will  bear its  proportionate  share of any
management fees and other expenses paid by the investment  companies in which it
invests in addition to the management fees (and other expenses) paid by the Fund
to the Advisor.

     Exchange-traded  funds are  shares  of  unaffiliated  investment  companies
issuing shares that are traded like traditional  equity securities on a national
stock  exchange or the National  Association  of  Securities  Dealers  Automated
Quotations System ("NASDAQ") National Market System.

     The Fund may purchase shares of investment companies investing primarily in
foreign  securities,  including  "country  funds." Country funds have portfolios
consisting  primarily of  securities  of issuers  located in  specified  foreign
countries or regions.  The Fund may,  subject to the  limitations  stated above,
invest in iShares(R)and similar securities that invest in securities included in
specified indices, including the Morgan Stanley Capital  International(R)indices
for various countries and regions. iShares(R)are listed on a stock exchange. The
market prices of  iShares(R)are  expected to fluctuate in  accordance  with both
changes in the asset values of their underlying indices and supply and demand of
iShares(R)on a stock exchange.  However, some iShares(R)have a limited operating
history and information is lacking regarding the actual  performance and trading
liquidity of iShares(R)for  extended periods or over complete market cycles.  In
addition,  there is no  assurance  that  the  requirements  of a stock  exchange
necessary to maintain the listing of  iShares(R)will  continue to be met or will
remain unchanged. In the event substantial market or other disruptions affecting
iShares(R)should  occur in the  future,  the  liquidity  and value of the Fund's
shares could also be substantially and adversely  affected.  If such disruptions
were to occur,  the Fund could be required to reconsider the use of iShares(R)as
part of its investment strategy.


                                       10


Options on Currency
     The Fund may purchase put and call  options on foreign  currencies  for the
purpose of  protecting  against  declines  in the U.S.  dollar  value of foreign
portfolio  securities and against  increases in the U.S.  dollar cost of foreign
securities  to be acquired.  The  purchase of an option on foreign  currency may
constitute an effective hedge against exchange rate  fluctuations;  however,  in
the event of exchange rate movements adverse to its position,  the Fund may lose
the entire  amount of the premium plus  related  transaction  costs.  Options on
foreign   currencies   may  be  traded  on  U.S.   and  foreign   exchanges   or
over-the-counter. Over-the-counter options may be deemed to be illiquid.

     Options on  currency  may also be used for  cross-hedging  purposes,  which
involves  purchasing options on one currency to seek to hedge against changes in
exchange rates for a different currency with a pattern of correlation.

     The Fund may purchase call options on foreign  currency in  anticipation of
an increase in the U.S.  dollar  value of  currency  in which  securities  to be
acquired by the Fund are quoted or  denominated.  The  purchase of a call option
would entitle the Fund,  in return for the premium  paid, to purchase  specified
currency  at a  specified  price  during  the  option  period.  The  Fund  would
ordinarily  realize  a gain if,  during  the  option  period,  the value of such
currency  exceeded  the  sum  of  the  exercise  price,  the  premium  paid  and
transaction costs;  otherwise the Fund would realize either no gain or a loss on
the purchase of the call option. In addition, if the sum of the premium paid and
transaction  costs exceeds the value of the currency at the exercise price,  the
Fund would realize a loss on the purchase of the call option.

     The Fund may purchase put options in  anticipation of a decline in the U.S.
dollar value of a currency in which  securities  in its  portfolio are quoted or
denominated  ("protective puts"). The purchase of a put option would entitle the
Fund,  in  exchange  for the  premium  paid,  to sell  specified  currency  at a
specified  price during the option  period.  The purchase of protective  puts is
usually designed to offset or hedge against a decline in the dollar value of the
Fund's portfolio securities due to currency exchange rate fluctuations. The Fund
would ordinarily  realize a gain if, during the option period,  the value of the
underlying currency decreased below the exercise price sufficiently to more than
cover the premium and transaction costs; otherwise the Fund would realize either
no gain or a loss on the  purchase  of the put  option.  Gains and losses on the
purchase of  protective  put options  would tend to be offset by  countervailing
changes in the value of underlying currency or portfolio securities.

     Special Risks  Associated with Options on Currency.  Although the Fund will
generally  purchase  only those  options for which there appears to be an active
secondary  market,  there is no assurance that a liquid  secondary  market on an
exchange will exist for any particular  option,  or at any particular  time. For
some options no secondary market on an exchange may exist.

     The Fund may  purchase  over-the-counter  options to the extent  consistent
with  its  limitation  on  investments  in  illiquid   securities.   Trading  in
over-the-counter  options is  subject  to the risk that the other  party will be
unable or unwilling to close out options purchased by the Fund.

     The amount of the premiums that the Fund may pay may be adversely  affected
as new or existing institutions, including other investment companies, engage in
or increase their option purchasing and writing activities.

Options on Securities and Securities Indices
     The Fund may write (sell)  covered call options on any  securities in which
it may invest.  A call option written by the Fund obligates it to sell specified
securities to the holder of the option at a specified


                                       11


price if the option is exercised  before the  expiration  date. All call options
written  by the Fund will be  covered,  which  means  that the Fund will own the
securities  subject to the option as long as the  option is  outstanding  or the
Fund will use the other methods described below.

     A call option is "covered" if the Fund owns the  instrument  underlying the
call or has an absolute and immediate right to acquire that  instrument  without
additional cash consideration (or, if additional cash consideration is required,
liquid  assets in such amount are  designated)  upon  conversion  or exchange of
other  instruments held by it. A call option is also covered if the Fund holds a
call on the same  instrument as the option  written where the exercise  price of
the option held is: (i) equal to or less than the  exercise  price of the option
written,  or (ii) greater than the exercise price of the option written provided
the Fund designates liquid assets in the amount of the difference.

     The Fund may also write (sell) covered call options on any securities index
comprised of  securities in which it may invest.  Options on securities  indices
are similar to options on  securities,  except that the  exercise of  securities
index options requires cash payments and does not involve the actual purchase or
sale of  securities.  In  addition,  securities  index  options are  designed to
reflect price fluctuations in a group of securities or segment of the securities
market rather than price fluctuations in a single security.

     The Fund may cover call options on a securities index by owning  securities
whose price changes are expected to be similar to those of the underlying index,
or by having an absolute and immediate right to acquire such securities  without
additional cash  consideration (or for additional  consideration  which has been
designated by the Fund) upon  conversion or exchange of other  securities in its
portfolio.  The Fund  also may  cover  call  options  on a  securities  index by
designating cash or liquid assets, as permitted by applicable law, with a value,
when added to any margin on  deposit,  that is equal to the market  value of the
underlying  securities,  the exercise price or by owning  offsetting  options as
described above.

     The Fund may terminate its obligations under an exchange traded call option
by purchasing an option identical to the one it has written.  Obligations  under
over-the-counter  options may be terminated  only by entering into an offsetting
transaction with the counterparty to such option. Such purchases are referred to
as "closing purchase transactions."

     Risks  Associated with Options  Transactions.  There is no assurance that a
liquid  secondary  market on an options  exchange will exist for any  particular
exchange-traded  option  or at any  particular  time.  If the Fund is  unable to
effect a closing  purchase  transaction  with respect to covered  options it has
written, the Fund will not be able to sell the underlying  securities or dispose
of segregated assets until the options expire or are exercised.

     Reasons for the absence of a liquid secondary market on an exchange include
the  following:  (i) there  may be  insufficient  trading  interest  in  certain
options;  (ii)  restrictions may be imposed by an exchange on opening or closing
transactions or both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of options; (iv) unusual
or unforeseen  circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or the Options Clearing Corporation may not at all
times  be  adequate  to  handle  current  trading  volume;  or (vi)  one or more
exchanges could,  for economic or other reasons,  decide or be compelled at some
future date to  discontinue  the trading of options  (or a  particular  class or
series of options),  in which event the secondary market on that exchange (or in
that class or series of  options)  would  cease to exist,  although  outstanding
options  on  that  exchange  that  had  been  issued  by  the  Options  Clearing
Corporation  as a  result  of  trades  on that  exchange  would  continue  to be
exercisable in accordance with their terms.


                                       12


     The  Fund  may sell  both  options  that are  traded  on U.S.  and  foreign
exchanges  and options  traded  over-the-counter  with  broker-dealers  who make
markets in these options. The ability to terminate  over-the-counter  options is
more  limited  than with  exchange-traded  options and may involve the risk that
broker-dealers  participating  in  such  transactions  will  not  fulfill  their
obligations.

     Transactions  by the Fund in  options on  securities  and  indices  will be
subject to limitations established by each of the exchanges,  boards of trade or
other trading  facilities on which such options are traded governing the maximum
number of options in each class  which may be written or  purchased  by a single
investor  or group of  investors  acting in concert  regardless  of whether  the
options are written or purchased on the same or different  exchanges,  boards of
trade or other  trading  facility or are held in one or more accounts or through
one or more brokers.  An exchange,  board of trade or other trading facility may
order the liquidation of positions found to be in excess of these limits, and it
may impose certain other sanctions.

     The  writing of options is a highly  specialized  activity  which  involves
investment  techniques and risks  different from those  associated with ordinary
portfolio  securities  transactions.  The  successful use of options for hedging
purposes  depends in part on the ability of the Advisor to manage  future  price
fluctuations  and the degree of  correlation  between the options and securities
markets. If the Advisor is incorrect in its expectation of changes in securities
prices or  determination  of the correlation  between the securities  indices on
which options are written and the securities in the Fund's investment portfolio,
the Fund may incur  losses  that it would not  otherwise  incur.  The writing of
options  could  increase  the Fund's  portfolio  turnover  rate and,  therefore,
associated brokerage commissions or spreads.

Preferred Securities
     The Fund may invest in preferred  securities.  Unlike debt securities,  the
obligations  of an issuer  of  preferred  stock,  including  dividend  and other
payment  obligations,  may  not  typically  be  accelerated  by the  holders  of
preferred  stock on the  occurrence  of an event of default  (such as a covenant
default  or filing of a  bankruptcy  petition)  or other  non-compliance  by the
issuer with the terms of the preferred stock. Often,  however, on the occurrence
of any  such  event  of  default  or  non-compliance  by the  issuer,  preferred
stockholders  will be entitled to gain  representation  on the issuer's board of
directors  or  increase  their  existing  board  representation.   In  addition,
preferred  stockholders  may be granted  voting  rights with  respect to certain
issues on the occurrence of any event of default.

Repurchase Agreements
     The Fund may enter into  repurchase  agreements  with  banks,  brokers  and
securities  dealers that furnish  collateral  consisting  of domestic or foreign
government  securities  at least equal in value or market price to the amount of
their  repurchase  obligation.  A repurchase  agreement is an arrangement  under
which the Fund  purchases  securities  and the seller agrees to  repurchase  the
securities  within a particular  time and at a specified  price.  Custody of the
securities  is  maintained  by  the  Fund's  custodian  (or  subcustodian).  The
repurchase  price may be higher than the purchase  price,  the difference  being
income to the Fund, or the purchase and repurchase  prices may be the same, with
interest at a stated rate due to the Fund together with the repurchase  price on
repurchase.

     For purposes of the 1940 Act, and generally for tax purposes,  a repurchase
agreement is deemed to be a loan from the Fund to the seller of the  securities.
For other  purposes,  it is not always clear whether a court would  consider the
security purchased by the Fund subject to a repurchase  agreement as being owned
by the Fund or as being collateral for a loan by the Fund to the seller.  In the
event of  commencement of bankruptcy or insolvency  proceedings  with respect to
the seller of the security before  repurchase of the security under a repurchase
agreement,  the Fund may  encounter  delay and incur costs  before being able to
sell the  security.  Such a delay may  involve  loss of interest or a decline in
price of the security.  If the court characterizes the transaction as a loan and
the Fund has not perfected a security


                                       13


interest in the security, the Fund may be required to return the security to the
seller's  estate and be treated as an  unsecured  creditor of the seller.  As an
unsecured  creditor,  the  Fund  would be at risk of  losing  some or all of the
principal  and  interest  involved  in the  transaction.  The Fund seeks to help
control  these  credit  risks by only  engaging in  repurchase  agreements  with
counterparties having strong credit ratings,  which are monitored continually by
the Advisor.

     Apart from the risk of bankruptcy or insolvency proceedings,  there is also
the risk that the seller may fail to repurchase  the security.  However,  if the
market value of the security  subject to the repurchase  agreement  becomes less
than the repurchase price (including accrued interest), the Fund will direct the
seller of the security to deliver additional securities so that the market value
of all  securities  subject to the  repurchase  agreement  equals or exceeds the
repurchase price. Certain repurchase  agreements which provide for settlement in
more than seven days can be  liquidated  before the nominal  fixed term on seven
days or less  notice.  Such  repurchase  agreements  will be  regarded as liquid
instruments.

Securities Lending
     The Fund may lend portfolio securities.  Under present regulatory policies,
such loans may be made to  institutions,  such as brokers  or  dealers,  and are
required to be secured  continuously  by collateral in cash,  cash  equivalents,
letters of credit or U.S. Government securities maintained on a current basis at
an amount,  marked to market  daily,  at least equal to the market  value of the
securities   loaned.   Cash  received  as  collateral  for  securities   lending
transactions may be invested in short-term investments. Investing the collateral
subjects it to market depreciation or appreciation,  and the Fund is responsible
for any loss that may result from its investment of the borrowed collateral. The
Fund will have the right to  terminate  a loan at any time and recall the loaned
securities  within the  normal  and  customary  settlement  time for  securities
transactions.  For the duration of the loan,  the Fund will  continue to receive
the equivalent of the interest or dividends paid by the issuer on the securities
loaned and will also receive compensation from investment of the collateral. The
Fund will not have the right to vote any securities  having voting rights during
the existence of the loan, but the Fund will call the loan in anticipation of an
important  vote to be taken by the  holders of the  securities  or the giving or
withholding of their consent on a material matter  affecting the investment.  As
with other extensions of credit, there are risks of delay in recovering, or even
loss of rights in, the collateral and loaned  securities  should the borrower of
the securities fail financially.  However,  the loans will be made only to firms
deemed to be of good  standing,  and when the  consideration  that can be earned
currently from securities  loans of this type is deemed to justify the attendant
risk. In determining  whether to lend securities to a particular  borrower,  and
during the period of the loan,  the  creditworthiness  of the  borrower  will be
considered and monitored.  It is intended that the value of securities loaned by
the Fund will not  exceed  one-third  of the value of the  Fund's  total  assets
(including the loan  collateral).  Loan collateral  (including any investment of
the collateral) is not subject to the percentage limitations stated elsewhere in
this SAI or the Prospectus  regarding  investing in fixed-income  securities and
cash equivalents.

Warrants and Stock Purchase Rights
     The Fund may invest in warrants or rights (in addition to those acquired in
units or attached to other  securities)  which  entitle the holder to buy equity
securities  at a  specific  price for a specific  period of time.  The Fund will
invest  in  warrants  and  rights  only if such  equity  securities  are  deemed
appropriate by the Advisor for investment by the Fund.  Warrants and rights have
no voting  rights,  receive no dividends  and have no rights with respect to the
assets of the issuer.

U.S. Government Securities
     The Fund may invest in  securities  of the U.S.  Government,  its agencies,
instrumentalities  and sponsored  enterprises.  Some U.S. Government  securities
(such as Treasury  bills,  notes and bonds,  which differ only in their interest
rates,  maturities  and times of issuance)  are  supported by the full faith and
credit of the United States. Others, such as obligations issued or guaranteed by
U.S. Government


                                       14


agencies,  instrumentalities or sponsored enterprises,  are supported either by:
(i) the  right  of the  issuer  to  borrow  from  the  U.S.  Treasury;  (ii) the
discretionary  authority of the U.S.  Government to purchase certain obligations
of the issuer;  or (iii) only the credit of the issuer.  The U.S.  Government is
under no legal  obligation,  in general,  to  purchase  the  obligations  of its
agencies,  instrumentalities or sponsored enterprises. No assurance can be given
that the U.S.  Government will provide financial support to the U.S.  Government
agencies, instrumentalities or sponsored enterprises in the future.


                  DISCLOSURE OF PORTFOLIO HOLDINGS INFORMATION

     The Board of  Trustees  of the Trust has  adopted a policy  concerning  the
selective disclosure of portfolio holdings information that seeks to ensure that
disclosure of information about portfolio  securities is in the best interest of
Fund  shareholders  and to address the  conflicts  between the interests of Fund
shareholders  and its service  providers.  The policy  provides that neither the
Fund nor its Advisor or any  Trustee,  member,  officer or  employee  thereof (a
"Fund  Representative")  will disclose the Fund's portfolio holdings information
to any person  other than in  accordance  with the policy.  For  purposes of the
policy,  "portfolio  holdings  information"  means the Fund's  actual  portfolio
holdings,  as well as  non-public  information  about its trading  strategies or
pending  transactions.   Under  the  policy,  neither  the  Fund  nor  any  Fund
Representative may solicit or accept any compensation or other  consideration in
connection  with the  disclosure  of portfolio  holdings  information.  The Fund
Representative  may provide portfolio  holdings  information to third parties if
such  information has been included in the Fund's public filings with the SEC or
is     disclosed     on    the    Fund's     publicly     accessible     website
(www.cheswoldlanefunds.com).  Information  posted on the Fund's  website  may be
separately provided to any person commencing the day after it is first published
on the Fund's website.

     Portfolio holdings  information that is not filed with the SEC or posted on
the Funds's publicly  available website may be provided to third parties only if
the  third  party  recipients  are  required  to  keep  all  portfolio  holdings
information confidential and are prohibited from trading on the information they
receive.  Disclosure  to such third  parties  must be approved in advance by the
Trust's chief  compliance  officer.  Disclosure  will  generally be permitted to
providers of auditing,  custody, proxy voting and other similar services for the
Fund, as well as rating and ranking organizations;  however,  information may be
disclosed to other third parties (including,  without  limitation,  individuals,
institutional  investors and  intermediaries  that sell shares of the Fund) only
upon approval by the Fund's chief compliance  officer,  who must first determine
that the Fund has a legitimate business purpose for doing so.

     In general,  each recipient of non-public  portfolio  holdings  information
must sign a confidentiality and non-trading agreement, although this requirement
will  not  apply  when  the  recipient  is  otherwise   subject  to  a  duty  of
confidentiality. In accordance with the policy, the identity of those recipients
who receive non-public  portfolio holdings information on an ongoing basis is as
follows: the Advisor, the Fund's independent  registered public accounting firm,
the Fund's custodian, the Fund's legal counsel, the Fund's administrator and the
Fund's  Distributor.  These  entities  are  obligated  to keep such  information
confidential.  Third party providers of custodial or accounting  services to the
Fund may release non-public portfolio holdings information of the Fund only with
the permission of Fund  Representatives  who have been pre-approved by the Board
to authorize disclosures.

     The  Fund   currently   intends   to   publish   on  the   Fund's   website
(www.cheswoldlanefunds.com)  complete  portfolio holdings for the Fund as of the
end of each  calendar  quarter  subject to a 30 day lag  between the date of the
information and the date on which the information is disclosed. In addition, the
Fund will  publish  on its  website  its top 10  holdings  as of the end of each
calendar month no earlier than 10 days after the end of a calendar month.


                                       15


     Under  the  policy,  Fund  Representatives  will  supply  the  Board of the
Trustees with a list of third parties who receive portfolio holdings information
pursuant  to any  ongoing  arrangement.  In  addition,  the Board  will  receive
information, on a quarterly basis, regarding any other disclosures of non-public
portfolio holdings  information that were permitted during the preceding quarter
and  will  approve  at its  meetings  a list  of  Fund  Representatives  who are
authorized to disclose  portfolio  holdings  information under the policy. As of
the date of this SAI, only the Trust's chief compliance officer (who is also the
Advisor's chief  compliance  officer) has been approved by the Board of Trustees
to authorize disclosure of portfolio holdings information.


                             MANAGEMENT OF THE TRUST

Trustees and Officers
     The  business and affairs of the Trust are managed  under the  direction of
its Board of Trustees.  The Trust's  Trustees and  principal  officers are noted
below  along  with their ages and their  business  experience  for the past five
years. The Trustees serve for indefinite terms until their resignation, death or
removal.  The Fund's officers are elected  annually by the Board of Trustees and
serve at the Board's pleasure.

-------------------- ------------- ------------ -------------------------- ------------ --------------------
                                                                           Number of
                                                                           Portfolios
                                                                           in Fund        Other
                                                                           Complex        Directorships
                     Position(s)                                           Overseen by    Held by
Name, Address        Held with     Length of       Principal Occupation(s) Trustee or     Trustee or
and Age              the Trust     Time Served     During Past 5 Years     Officer        Officer
-------------------- ------------- ------------ -------------------------- ------------ --------------------
Interested Trustee
-------------------- ------------- ------------ -------------------------- ------------ --------------------
Eric F. Scharpf      Trustee,      Since 2006        Partner/Senior             1          Director,
Cheswold Lane Funds  President                     Portfolio Manager,                      Amboy
100 Front Street     and CEO                      Chartwell Investment                     Bancorporation
W. Conshohocken,                                 Partners (2004-2006);
PA  19428                                              Portfolio
                                                    Manager/Research
Age: 36                                                 Analyst,
                                                   Miller Anderson &
                                                  Sherrerd (1997-2003)

-------------------- ------------- ------------ -------------------------- ------------ --------------------
Independent Trustees
-------------------- ------------- ------------ -------------------------- ------------ --------------------
George E. Boudreau   Trustee       Since 2006      Founder and Partner,         1          None
Cheswold Lane Funds                              the Pennsylvania Dental
100 Front Street                                          Group
W. Conshohocken,
PA  19428

Age: 59

-------------------- ------------- ------------ -------------------------- ------------ --------------------
Paul Chi             Trustee       Since 2006        Senior Managing            1          None
Cheswold Lane Funds                                    Director/
100 Front Street                                 Senior Vice President,
W. Conshohocken,                                   PFPC Trust Company
PA  19428                                         (9/2002 to Present);
                                                  Student, the Wharton
Age: 34                                              School of the
                                                     University of
                                                Pennsylvania (9/2000 to
                                                        9/2002)

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


                                       16


-------------------- ------------- ------------ -------------------------- ------------ --------------------
Eugenie G. Logue     Trustee       Since 2006          Principal,               1          None
Cheswold Lane Funds                               Rosemont Investment
100 Front Street                                     Partners, LLC
W. Conshohocken,                                 (07/2002 to Present);
PA  19428                                              Associate,
                                                      SGI Capital
Age: 37                                           (09/1999 - 07/2002)

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

The officers of the Trust not named above are:
---------------------- ------------ -------------- ----------------------- ------------------- -----------------
                                                                           Number of
                                                                           Portfolios in
                       Position(s)                 Principal               Fund Complex        Other
Name, Address          Held with    Length of      Occupation(s) During    Overseen by         Directorships
and Age                the Trust    Time Served    Past 5 Years            Officer             Held by Officer
---------------------- ------------ -------------- ----------------------- ------------------- -----------------
Matthew Taylor          Executive    Since 2006      Partner/Portfolio             1                 None
Cheswold Lane Funds       Vice                            Manager,
100 Front Street       President,                   Chartwell Investment
W. Conshohocken, PA     Treasurer                  Partners (2004-2006);
19428                   and Chief                        Portfolio
                        Financial                     Manager/Research
Age:  34                 Officer                          Analyst,
                                                     Miller Anderson &
                                                    Sherrerd (2000-2004)

---------------------- ------------ -------------- ----------------------- ------------------- -----------------
Colleen Quinn Scharpf   Secretary    Since 2006         Director of                1                 None
Cheswold Lane Funds     and Chief                       Investments,
100 Front Street       Compliance                   Board of Pensions of
W. Conshohocken, PA      Officer                      the Presbyterian
19428                                                 Church (U.S.A.)
                                                        (2003-2006);
Age:  36                                               Senior Member,
                                                         Strategic
                                                     Relationship Team,
                                                     Putnam Investments
                                                       (1996 - 2003)

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

Share Ownership
     As of June 21, 2006,  Ms. Quinn  Scharpf and Mr.  Scharpf  jointly  owned a
controlling  interest in the Fund's Advisor. Mr. Scharpf is the only Trustee who
owns any  interest  in the Advisor or the  Trust's  Distributor,  or any company
controlling,  controlled  by or under  common  control  with the  Advisor or the
Distributor.  As of June 21,  2006,  the  Trustees  did not own any  outstanding
shares of the Fund.


                                       17


Trustee Compensation
     The following table describes an estimate of the aggregate  compensation to
be received by the Trustees from the Trust during the Trust's fiscal year.  Only
the Trustees of the Trust who are not  "interested  persons" of the Trust or the
Advisor,  as  defined  by the  1940 Act (the  "Independent  Trustees"),  receive
compensation from the Fund.

------------------- -------------- ----------------------- ---------------- ---------------------
                      Aggregate     Pension or Retirement     Estimated      Total Compensation
                    Compensation     Benefits Accrued as       Annual       from the Investment
                      from the          Part of Fund        Benefits Upon     Companies in the
Trustee(1)              Trust            Expenses(2)         Retirement         Fund Complex
------------------- -------------- ----------------------- ---------------- ---------------------
Eric F. Scharpf        $5,000                n/a                 n/a               $5,000
------------------- -------------- ----------------------- ---------------- ---------------------
George E. Boudreau     $5,000                n/a                 n/a               $5,000
------------------- -------------- ----------------------- ---------------- ---------------------
Paul Chi               $5,000                n/a                 n/a               $5,000
------------------- -------------- ----------------------- ---------------- ---------------------
Eugenie G. Logue       $5,000                n/a                 n/a               $5,000
------------------- -------------- ----------------------- ---------------- ---------------------

(1)  Each Independent  Trustee currently receives a total annual retainer fee of
     $1,000 for  serving  as a Trustee,  plus  $1,000 for each  in-person  Board
     meeting  attended and $250 for each telephonic Board meeting  attended.  In
     addition,  the Trust  reimburses  each Trustee for  out-of-pocket  expenses
     incurred in connection with travel and attendance at Board meetings.
(2)  The Trust has not  established a pension or retirement  plan for members of
     its Board of Trustees.

Board Committees
     The Board of Trustees has the following committees:

     Audit Committee: This committee monitors accounting and financial reporting
policies and practices,  and internal  controls for the Trust.  It also oversees
the  quality  and  objectivity  of the  Trust's  financial  statements  and  the
independent audit thereof, and acts as a liaison between the Trust's independent
registered  public  accounting firm and the full Board of Trustees.  The Trust's
Audit  Committee  consists  of the  following  Independent  Trustees:  George E.
Boudreau, Eugenie G. Logue and Paul Chi. The committee has held one meeting.

     Nominating  Committee:  This  committee  recommends  Board  members,  fills
vacancies and considers the qualifications of Board members.  The committee will
consider  shareholder  recommendations  for  nomination to the Board of Trustees
only in the event that there is a vacancy on the Board. Shareholders who wish to
submit  recommendations  for  nominations  to the Board to fill a  vacancy  must
submit  their  recommendations  in  writing  to the  Nominating  Committee,  c/o
Cheswold Lane Funds, 100 Front Street, W. Conshohocken,  PA 19428.  Shareholders
should include  appropriate  information on the background and qualifications of
any person  recommended  (e.g., a resume),  as well as the  candidate's  contact
information  and a written  consent from the candidate to serve if nominated and
elected.  Shareholder  recommendations  for  nominations  to the  Board  will be
accepted on an ongoing basis and such  recommendations  will be kept on file for
consideration  when there is a vacancy on the Board.  The committee  consists of
the following  Independent  Trustees:  George E. Boudreau,  Eugenie G. Logue and
Paul Chi. The committee has not yet held a meeting.

Codes of Ethics
     The Trust and the Advisor have adopted a Code of Ethics in compliance  with
the  requirements  of Rule  17j-1  under the 1940  Act,  which  govern  personal
securities  transactions.  Under the Code of Ethics, persons subject to the Code
are  permitted  to  engage  in  personal  securities   transactions,   including
securities  that  may  be  purchased  or  held  by  the  Fund,  subject  to  the
requirements set forth in Rule 17j-1


                                       18


under the 1940 Act and certain other procedures set forth in the Code of Ethics.
The Code of Ethics is on public file with, and are available from, the SEC.

Proxy Voting Policies
     The Board of Trustees  has adopted  Proxy Voting  Policies  and  Procedures
("Policies")  on behalf of the Trust,  which  delegates the  responsibility  for
voting proxies to the Advisor,  subject to the Board's continuing oversight. The
Policies require that the Advisor vote proxies  received in a manner  consistent
with the best  interests of the Fund and its  shareholders.  The  Policies  also
require the Advisor to present to the Board,  at least  annually,  the Advisor's
proxy voting  policies and a record of each proxy voted by the Advisor on behalf
of the Fund,  including a report on the resolution of all proxies  identified by
the Advisor as involving a conflict of interest.

     The Advisor has adopted Proxy Voting  Policies and  Procedures  ("Advisor's
Proxy  Policies")  which require that all proxy voting  decisions be made in the
best  interest of the Fund and that the Advisor  acts in a prudent and  diligent
manner intended to enhance the economic value of the assets of the Fund.

     Where a proxy  proposal  raises a material  conflict  between the Advisor's
interests  and the Fund's  interests,  the Advisor  will resolve the conflict by
disclosing the conflict to the Board and obtaining the Board's consent to vote.

     The Trust is required to  annually  file Form N-PX,  which lists the Fund's
complete proxy voting record for the most recent 12-month period ending June 30.
Once filed,  the Fund's proxy voting  record will be available  without  charge,
upon request,  by calling toll-free  1-800-471-7701  and on the SEC's website at
www.sec.gov.


                 INVESTMENT ADVISOR AND OTHER SERVICE PROVIDERS

Investment Advisor
     The Advisor,  located at 100 Front Street,  Suite 960, W. Conshohocken,  PA
19428,  furnishes  investment  management  services to the Fund,  subject to the
supervision  and  direction of the Trust's  Board of Trustees.  The Advisor also
provides  investment  management  services to other investment  accounts.  While
investment  decisions for the Fund are made  independently from other investment
accounts,  investment  decisions for such other accounts may be made at the same
time as investment  decisions for the Fund. The Advisor pays the salaries of all
Trustees,  officers  (including the chief compliance  officer) and employees who
are  affiliated  with both the Advisor and the Trust.  The Advisor is registered
with the SEC as an investment adviser under the Investment Advisers Act of 1940,
as amended.

     The Advisor provides  investment advisory services to the Trust pursuant to
an Investment Advisory Agreement (the "Advisory  Agreement") dated June 2, 2006,
which was approved by the Fund's sole  shareholder on that date. Under the terms
of the Advisory Agreement, the Trust employs the Advisor generally to manage the
investment and reinvestment of the Fund's assets.  The Advisory Agreement has an
initial  term of two  years  and may be  renewed  each year only so long as such
renewal and continuance are specifically approved at least annually by the Board
of Trustees or by vote of a majority of the outstanding voting securities of the
Fund,  and only if the terms and the renewal  thereof have been  approved by the
vote of a majority  of the  Trust's  Independent  Trustees  who are not  parties
thereto or  interested  persons of any such  party,  cast in person at a meeting
called for the purpose of voting on such approval. The Advisory Agreement may be
terminated  without  penalty on 60 days'  notice by the Trust or by the Advisor.
The  Advisory  Agreement  will  terminate  automatically  in  the  event  of its
assignment.


                                       19


     As compensation for the services rendered under the Advisory Agreement, the
Fund shall pay the Advisor an annual  management fee of 0.90% as a percentage of
average daily net assets.

Distributor
     The Distributor,  located at 803 West Michigan Street,  Suite A, Milwaukee,
Wisconsin 53233, serves as the principal underwriter of the Trust's shares under
a Distribution  Agreement  dated June 16, 2006 (the  "Distribution  Agreement").
Shares of the Fund are offered on a continuous  basis by the Distributor and may
be  purchased   directly  by  contacting  the  Distributor  or  the  Trust.  The
Distributor is a registered  broker-dealer  under the Securities Exchange Act of
1934,  as amended (the "1934 Act"),  and each state's  securities  laws and is a
member of the National  Association  of  Securities  Dealers,  Inc. The Board of
Trustees annually reviews fees paid to the Distributor.

     The Distribution  Agreement may be terminated at any time: (i) by the Board
of Trustees of the Trust or by a vote of a majority  of the  outstanding  voting
securities of the Trust on 60 day's written notice to the  Distributor;  or (ii)
by the Distributor. If not so terminated, the agreement shall continue in effect
from year to year only so long as such  continuance is approved  annually by the
Board of  Trustees  of the Trust or by a vote of a majority  of the  outstanding
voting  securities  of the Fund,  and,  in either  event,  by a majority  of the
Independent  Trustees  who  are  not  interested  persons  of any  party  to the
agreement.  The  Agreement  will  terminate  automatically  in the  event of its
assignment.

Fund Administration
     UMB Fund Services,  Inc.  ("UMBFS"),  located at 803 West Michigan  Street,
Milwaukee,  Wisconsin  53233,  provides  administrative  personnel and services,
including blue sky services, to the Trust.  Administrative services include, but
are  not  limited  to,  providing  equipment,   telephone  facilities,   various
personnel,  including clerical and supervisory, and computers as is necessary or
beneficial to provide compliance services to the Trust. UMBFS is an affiliate of
the Fund's Distributor.

Fund Accounting
     UMBFS provides fund accounting personnel and services to the Trust pursuant
to a Fund Accounting  Service  Agreement.  Under the Fund  Accounting  Servicing
Agreement,  UMBFS provides portfolio  accounting  services,  expense accrual and
payment  services,   fund  valuation  and  financial  reporting  services,   tax
accounting services and compliance control services.

Transfer Agent
     UMBFS  acts  as  the  Fund's  transfer  agent,  dividend-paying  agent  and
shareholder servicing agent pursuant to a Transfer Agency Agreement.

Custodian
     UMB Bank,  n.a.,  located at 1010 Grand  Boulevard,  Kansas City,  Missouri
64141,  acts as custodian of the cash and securities of the Trust. The custodian
holds  all cash  and,  directly  or  through  a book  entry-system  or an agent,
securities of the Fund; delivers and receives payment for securities sold by the
Fund;  collects income from  investments of the Fund; and performs other duties,
all as directed by officers of the Fund.  The  custodian  does not  exercise any
supervisory  function  over  the  management  of,  or the  purchase  and sale of
securities by, the Fund.

Legal Counsel
     Stradley Ronon Stevens & Young, LLP serves as the Trust's legal counsel.


                                       20


Independent Registered Public Accounting Firm
     Briggs Bunting & Dougherty,  LLP,  located at Two Penn Center Plaza,  Suite
820,  Philadelphia,  PA 19102,  has been selected as the independent  registered
public accounting firm for the Trust. As such, they are responsible for auditing
the Trust's annual financial statements.


                               PORTFOLIO MANAGERS

Other Accounts Managed
     The following chart lists certain information about types of other accounts
for which each portfolio manager is primarily responsible as of May 31, 2006.

Name                                                     Number of
                                                       Accounts with        Total Assets in
                            No. of    Total Assets   Performance-Based       Accounts with
                           Accounts     Managed            Fees          Performance-Based Fees
Eric F. Scharpf
 Registered Investment         -           -                 -                     -
   Companies
 Other Pooled Investment       -           -                 -                     -
   Vehicles
 Other Accounts                1      $2.2 million           -                     -

Matthew H. Taylor
 Registered Investment         -           -                 -                     -
   Companies
 Other Pooled Investment       -           -                 -                     -
   Vehicles
 Other Accounts                1      $2.2 million           -                     -

Description of Potential Material Conflicts of Interest
     The portfolio  managers have day-to-day  management  responsibilities  with
respect to other investments  accounts and,  accordingly,  may be presented with
potential or actual conflicts of interest.

     The  management  of other  accounts  may result in the  portfolio  managers
devoting  unequal time and attention to the  management of the Fund and/or other
accounts.  In  approving  the  Advisory  Agreement,  the Board of  Trustees  was
satisfied  that  the  portfolio  managers  would  be able to  devote  sufficient
attention  to the  management  of the Fund and that the Advisor  seeks to manage
such competing interests for the time and attention of the portfolio managers.

     With  respect  to  securities   transactions  for  the  Fund,  the  Advisor
determines which broker to use to execute each transaction,  consistent with its
duty to seek best  execution of the  transaction.  For buy or sell  transactions
considered  simultaneously for the Fund and other accounts, orders are placed at
the same time.  The portfolio  managers use their best efforts to ensure that no
client is treated  unfairly  in  relation  to any other  client over time in the
allocation  of securities  or the order of the  execution of  transactions.  The
portfolio  managers  generally  allocate  trades on the  basis of  assets  under
management  so that the  securities  positions  represent  equal  exposure  as a
percentage of total assets of each client.  The Fund and client accounts are not
generally invested in thinly traded or illiquid securities; therefore, conflicts
in  fulfilling  investment  opportunities  are to some extent  minimized.  If an
aggregated  trade  order  is not  substantially  filled,  it will  generally  be
allocated in accordance with an alphabetical allocation utilized by the Advisor.

     Other than the general potential  conflicts noted above,  neither portfolio
manager is subject to any other specific potential conflicts of interest.


                                       21


Compensation
     Mr. Taylor receives a base salary from the Advisor and both Messrs.  Taylor
and Scharpf share a portion of the Advisor's after-tax profits.

Fund Shares Owned by the Portfolio Managers
     As of June 21, 2006, the portfolio managers did not own shares of the Fund.

                              TRADING AND BROKERAGE

     The  Advisor is  responsible  for  selecting  brokers and dealers to effect
purchases or sales of securities  for the account of the Fund. In selecting such
brokers,  the Advisor seeks best execution of orders at the most favorable price
in light of the overall quality of brokerage and research services provided,  as
described in this and the following  paragraph.  In selecting  brokers to effect
portfolio transactions,  the determination of what is expected to result in best
execution at the most favorable  price  involves a number of largely  judgmental
considerations.  Among these  considerations  is the  Advisor's  evaluation of a
broker's:  efficiency  in executing  and clearing  transactions;  block  trading
capability   (including  a  broker's   willingness   to  position   securities);
familiarity with the security;  and financial  strength and stability.  The most
favorable  price to the Fund means the best net price without  regard to the mix
between purchase or sale price and commission, if any.

     Although it does not  currently  intend to do so, the Advisor may also take
into consideration the research,  analytical,  statistical and other information
and  services  provided  by the broker  (such as general  economic  reports  and
information,  reports or analyses of particular companies or industry groups and
technical information) and the availability of the brokerage firm's analysts for
consultation  in allocating  the Fund's  brokerage.  While the Advisor  believes
these services have substantial  value, they are considered  supplemental to the
Advisor's  own  efforts  in the  performance  of its duties  under the  Advisory
Agreement  and, to the extent these  services are used,  it will be on a limited
basis.  As permitted by the Advisory  Agreement and in  accordance  with Section
28(e) of the 1934 Act, the Advisor may pay brokers higher brokerage  commissions
than might be available  from other  brokers if the Advisor  determines  in good
faith  that such  amount  paid is  reasonable  in  relation  to the value of the
overall quality of the brokerage, research and other services provided viewed in
terms  of  either  the  particular   transactions   or  the  Advisor's   overall
responsibilities with respect to the accounts over which it exercises investment
discretion.  Other  clients  of the  Advisor  may  therefore  benefit  from  the
availability  of these  services to the  Advisor,  and the Fund may benefit from
services  available to the Advisor as a result of similar  transactions  for the
Advisor's other clients.


                                CAPITAL STRUCTURE

     The Trust  currently has  authorized and allocated to the Fund an unlimited
number  of  shares  of  beneficial  interest  with no par  value  to the  Fund's
Institutional  Shares.  The Trustees of the Trust may, at any time and from time
to time, by resolution,  authorize the  establishment and division of additional
shares of the Trust into an  unlimited  number of series and the division of any
series (including the Fund) into two or more classes.  When issued in accordance
with the Trust's registration  statement,  governing  instruments and applicable
law (all as may be amended  from time to time),  all of the  Trust's  shares are
fully paid and non-assessable. Shares do not have preemptive rights.

     All shares of the Fund represent an undivided proportionate interest in the
assets of the Fund.  Shareholders of the Trust are entitled to one vote for each
full share and to a proportionate fractional vote


                                       22


for each fractional share standing in the shareholder's name on the books of the
Trust. However, matters affecting only one particular fund or class can be voted
on only by shareholders  in such fund or class.  The shares of the Trust are not
entitled to  cumulative  voting,  meaning  that  holders of more than 50% of the
Trust's  shares may elect the entire Board of  Trustees.  All  shareholders  are
entitled to receive  dividend  and/or  capital gains when and as declared by the
Trustees from time to time and as discussed in the Prospectus.

                        PURCHASE AND REDEMPTION OF SHARES

Purchasing Shares
     Shares of the Fund are sold in a  continuous  offering and may be purchased
on any Business Day (as defined in the Prospectus) through authorized investment
dealers or directly from the Fund's Distributor. The Trust reserves the right to
suspend  sales of Fund  shares,  and reject any order for the  purchase  of Fund
shares if, in the opinion of  management,  such  rejection is in the Fund's best
interest.

     Share  Certificates  and  Confirmations.  The  Fund  does not  issue  share
certificates  representing shares purchased.  Confirmations of the opening of an
account and of all subsequent  transactions  in the account are forwarded by the
Fund to the shareholder's address of record.

     Anti-Money  Laundering  Program.  The Trust has  established  an Anti-Money
Laundering  Compliance  Program (the  "Program")  as required by the Uniting and
Strengthening  America by Providing  Appropriate Tools Required to Intercept and
Obstruct  Terrorism Act of 2001 ("USA PATRIOT Act").  To ensure  compliance with
this  law,  the  Trust's  Program  provides  for  the  development  of  internal
practices,   procedures  and  controls;  designation  of  anti-money  laundering
compliance  officers;  an ongoing  training  program;  and an independent  audit
function to determine the effectiveness of the Program.  Procedures to implement
the  Program  include,  but are not  limited  to,  determining  that the Trust's
Distributor and transfer agent have  established  proper  anti-money  laundering
procedures,  including to report suspicious  and/or  fraudulent  activity and to
undertake a complete and thorough  review of all new account  applications.  The
Trust will not transact business with any person or entity whose identity cannot
be adequately verified under the provisions of the USA PATRIOT Act.

     The Fund may be  required  to freeze the  account of a  shareholder  if the
shareholder  appears to be involved in suspicious activity or if certain account
information  matches information on government lists of known terrorist or other
suspicious  persons,  or the Fund may be  required  to  transfer  the account or
proceeds of the account to a government agency.

Redeeming Shares
     Under the 1940 Act, the Fund may suspend redemption  privileges or postpone
the date of payment  during  any  period:  (i) when the New York Stock  Exchange
("NYSE") is closed or trading on the NYSE is  restricted  as  determined  by the
SEC;  (ii) when an emergency  exists,  as defined by the SEC,  that makes it not
reasonably  practicable  for the Fund to  dispose of  securities  owned by it or
fairly to determine  the value of its assets;  or (iii) as the SEC may otherwise
permit.  The redemption price may be more or less than the  shareholder's  cost,
depending on the market value of the Fund's portfolio at the time of redemption.

     Signature  Guarantees.  A signature  guarantee  of each  shareholder  on an
account is required to redeem shares if a shareholder requests: (i) a redemption
from an IRA account;  (ii) redemption  proceeds be sent to an address other than
that on record with the Fund; or (iii) proceeds be made payable to someone other
than the shareholder(s) of record.


                                       23


     Signature  guarantees are designed to protect both the  shareholder and the
Fund from fraud.  Signature  guarantees can be obtained from most banks,  credit
unions or savings  associations,  or from  broker/dealers,  municipal securities
broker/dealers,   government  securities  broker/dealers,   national  securities
exchanges,  registered securities exchanges or clearing agencies deemed eligible
by the SEC. The Fund does not accept signatures  certified by a notary public as
the equivalent of a signature guarantee.

     Additional  Documentation.  Additional  documents  are required for certain
types of shareholders, such as corporations,  partnerships, executors, trustees,
administrators or guardians.  The Fund's transfer agent requires  documents from
entities to identify individuals  possessing authority to redeem shares from the
Fund. The documentation may include certified corporate resolutions, partnership
agreements,  trust  instruments  or  plans  that  give  such  authority  to  the
individual.

     Redemption In-Kind. The Fund has elected to be governed by Rule 18f-1 under
the 1940 Act, which obligates the Fund to redeem shares in cash, with respect to
any one shareholder during any 90-day period, up to the lesser of $250,000 or 1%
of the assets of the Fund. Subject to Rule 18f-1, if the Advisor determines that
existing conditions make cash payments  undesirable,  redemption payments may be
made in whole or in part in securities  or other  financial  assets,  valued for
this  purpose as they are valued in computing  the NAV for the Fund's  shares (a
"redemption  in-kind").  Shareholders  receiving  securities or other  financial
assets in a redemption in-kind may realize a gain or loss for tax purposes,  and
will incur any costs of sale, as well as the associated  inconveniences.  If you
expect to make a  redemption  in excess of the lesser of  $250,000  or 1% of the
Fund's assets  during any 90-day period and would like to avoid any  possibility
of being paid with securities in-kind,  you may do so by providing the Fund with
an unconditional  written  instruction to redeem at least 15 calendar days prior
to the date on which the  redemption  transaction  is to occur,  specifying  the
dollar  amount  or  number  of  shares  to be  redeemed  and  the  date  of  the
transaction.  This will provide the Fund with  sufficient time to raise the cash
in an orderly manner to pay the  redemption  and thereby  minimize the effect of
the redemption on the Fund's remaining shareholders.


                 DETERMINING OFFERING PRICE AND NET ASSET VALUE

     Orders for  purchases and  redemptions  of the Fund are effected at the NAV
per share next  calculated  after receipt of the order by the Fund, its agent or
certain other authorized persons.  The Fund's NAV is computed as of the close of
regular  trading on the NYSE,  which is normally 4 p.m.,  Eastern  Time, on days
when the NYSE is open for  business.  The NYSE is  scheduled  to be open  Monday
through Friday  throughout the year except for days when the following  holidays
are observed:  New Year's Day, Martin Luther King,  Jr.'s Birthday,  Presidents'
Day, Good Friday,  Memorial Day,  Independence Day, Labor Day,  Thanksgiving and
Christmas.  When the NYSE is closed, the Fund will generally be closed,  pricing
calculations  will not be made and  purchase and  redemption  orders will not be
processed.

     The NAV per share for the Fund is  calculated  by  subtracting  the  Fund's
liabilities  from its total  assets and  dividing  the  resulting  number by the
number of Fund shares  outstanding.  In determining the Fund's total net assets,
portfolio  securities  primarily  listed  or  traded on a  national  or  foreign
securities exchange, except for bonds, are generally valued at the closing price
on that  exchange,  unless such closing  prices are determined to be not readily
available pursuant to the Fund's pricing procedures. Exchange traded options are
valued at the last reported sale price or, if no sales are reported, at the mean
between bid and asked  prices.  Non-exchange  traded  options are valued at fair
value using a mathematical  model.  Futures  contracts are valued at their daily
quoted   settlement   price.   Securities  not  traded  on  a  particular   day,
over-the-counter  securities, and government and agency securities are valued at
the mean value between bid and asked prices.  Money market  instruments having a
maturity of less than 60 days are valued at amortized


                                       24


cost, which  approximates  market value.  Debt securities (other than short-term
obligations) are valued on the basis of valuations provided by a pricing service
when such  prices are  believed  to reflect  the fair value of such  securities.
Foreign securities and the prices of foreign  securities  denominated in foreign
currencies are translated to U.S.  dollars at the mean between the bid and offer
quotations  of such  currencies  based on rates in effect as of the close of the
London Stock  Exchange.  Use of a pricing service has been approved by the Board
of Trustees.  Prices provided by a pricing service take into account appropriate
factors such as  institutional  trading in similar groups of securities,  yield,
quality, coupon rate, maturity, type of issue, trading characteristics and other
market data.  Subject to the foregoing,  securities for which market  quotations
are not  readily  available  and  other  assets  are  valued  at fair  value  as
determined in good faith and in a method approved by the Board of Trustees.  The
Trust  will  also  use the  fair  value  of a  foreign  security  at the time of
calculating  its NAV when events  following the close of the foreign  markets on
which the foreign  security  trades  indicate  that such closing  price does not
reflect the foreign securities fair value.


                             DISTRIBUTIONS AND TAXES

Distributions
     The Fund will normally make payments from net investment income, if any, on
a semi-annual basis.  Payments from net realized securities profits of the Fund,
if any,  will also be  distributed  semi-annually  in the quarter  following the
close of the fiscal year.

     Any check in payment of  dividends or other  distributions  which cannot be
delivered  by the United  States Post  Office or which  remains  uncashed  for a
period of more than one year may be reinvested in the  shareholder's  account at
the  then-current  net asset value and the  dividend  option may be changed from
cash to reinvest.  The Fund or the transfer  agent,  UMBFS,  may retain a search
company  and  deduct  from a  shareholder's  account  the costs of the Fund's or
UMBFS's effort to locate a shareholder in accordance with Rule 17Ad-17 under the
1934 Act.  These costs may  include a  percentage  of the account  when a search
company charges a percentage fee in exchange for their location services.

Taxes
     Distributions of Net Investment  Income. The Fund receives income generally
in  the  form  of  dividends  and  interest  on  its  investments  in  portfolio
securities.  This income,  less expenses  incurred in the operation of the Fund,
constitutes  its net investment  income from which dividends may be paid to you.
If you are a taxable  investor,  any  distributions by the Fund from such income
(other than qualified  dividends)  will be taxable to you at ordinary income tax
rates, whether you take them in cash or in additional shares.

     Distributions  of Capital Gains.  The Fund may derive capital gain and loss
in connection  with sales or other  dispositions  of its  portfolio  securities.
Distributions  derived from the excess of net  short-term  capital gain over net
long-term capital loss will be taxable to you as ordinary income.  Distributions
paid from the excess of net long-term  capital gain over net short-term  capital
loss will be taxable to you as long-term  capital  gain,  regardless of how long
you have held your shares in the Fund. Any net  short-term or long-term  capital
gain realized by the Fund (net of any capital loss carryovers) generally will be
distributed once each year and may be distributed more frequently,  if necessary
in order to reduce or eliminate federal excise or income taxes on the Fund.

     Effect of  Foreign  Withholding  Taxes.  The Fund may be subject to foreign
withholding  taxes on income from certain  foreign  securities.  This,  in turn,
could reduce the Fund's distributions paid to you.

     Pass-through  of foreign tax credits.  If more than 50% of the Fund's total
assets at the end of a fiscal year is invested in foreign  securities,  the Fund
may elect to pass  through to you your pro rata  share


                                       25


of foreign taxes paid by the Fund. If this election is made, the Fund may report
more  taxable  income  to you than it  actually  distributes.  You will  then be
entitled  either to deduct your share of these taxes in  computing  your taxable
income,  or to claim a foreign  tax credit  for these  taxes  against  your U.S.
federal income tax (subject to limitations for certain  shareholders).  The Fund
will  provide you with the  information  necessary  to claim this  deduction  or
credit on your personal income tax return if it makes this election. Your use of
foreign  dividends,  designated by the Fund as qualified dividend income subject
to taxation at long-term capital gain rates, may reduce the otherwise  available
foreign tax credits on your  federal  income tax return.  Shareholders  in these
circumstances  should talk with their  personal tax advisors about their foreign
tax credits and the procedures that they should follow to claim these credits on
their personal income tax returns.

     Effect of foreign debt investments on distributions.  Most foreign exchange
gains realized on the sale of debt  securities are treated as ordinary income by
the  Fund.  Similarly,  foreign  exchange  losses  realized  on the sale of debt
securities   generally  are  treated  as  ordinary  losses.   These  gains  when
distributed  are taxable to you as ordinary  income,  and any losses  reduce the
Fund's  ordinary  income  otherwise  available  for  distribution  to you.  This
treatment could increase or decrease a Fund's ordinary income  distributions  to
you, and may cause some or all of the Fund's previously distributed income to be
classified as a return of capital.  A return of capital generally is not taxable
to you,  but  reduces  the tax basis of your  shares in the Fund.  Any return of
capital in excess of your basis, however, is taxable as a capital gain.

     PFIC securities. The Fund may invest in securities of foreign entities that
could be deemed for tax  purposes  to be passive  foreign  investment  companies
(PFICs).  When investing in PFIC securities,  the Fund intends to mark-to-market
these  securities  and  recognize  any gains at the end of its fiscal and excise
(described  below) tax years.  Deductions  for losses are allowable  only to the
extent of any current or previously  recognized  gains.  These gains (reduced by
allowable  losses) are  treated as ordinary  income that the Fund is required to
distribute, even though it has not sold the securities. You should also be aware
that the  designation  of a foreign  security as a PFIC  security will cause its
income  dividends  to  fall  outside  of the  definition  of  qualified  foreign
corporation  dividends.  These  dividends  generally  will not  qualify  for the
reduced rate of taxation on qualified  dividends when  distributed to you by the
Fund.

     Information on the Amount and Tax Character of Distributions. The Fund will
inform you of the amount and  character of your  distributions  at the time they
are  paid,  and will  advise  you of the tax  status of such  distributions  for
federal  income tax purposes  shortly after the close of each calendar  year. If
you have not held  Fund  shares  for a full  year,  the Fund may  designate  and
distribute to you, as ordinary income,  qualified  dividends or capital gains, a
percentage  of income  that is not  equal to the  actual  amount of such  income
earned during the period of your investment in the Fund.  Taxable  distributions
declared by the Fund in December,  but paid in January, are taxable to you as if
they were paid in December.

     Election  to be  Taxed  as a  Regulated  Investment  Company.  The Fund has
elected to be treated as a regulated  investment  company under  Subchapter M of
the Internal  Revenue Code and intends to so qualify  during the current  fiscal
year.  As regulated  investment  companies,  the Fund  generally  pay no federal
income tax on the income and gains they distribute to you. The Board of Trustees
reserves the right not to distribute  the Fund's net  long-term  capital gain or
not to maintain the qualification of the Fund as a regulated  investment company
if it determines  such a course of action to be beneficial to  shareholders.  If
net long-term capital gain is retained, the Fund would be taxed on the gain, and
shareholders  would be notified that they are entitled to a credit or refund for
the tax paid by the Fund. If the Fund fails to qualify as a regulated investment
company,  the Fund would be subject to federal,  and possibly  state,  corporate
taxes on its taxable income and gains, and distributions to you will be taxed as
dividend income to the extent of the Fund's earnings and profits.


                                       26


     In order to qualify as a regulated  investment  company for federal  income
tax purposes, the Fund must meet certain specific requirements, including:

     (i)  The Fund must maintain a diversified portfolio of securities,  wherein
no security, including the securities of a qualified publicly traded partnership
(other  than  U.S.  government  securities  and  securities  of other  regulated
investment  companies)  can exceed 25% of the Fund's  total  assets,  and,  with
respect to 50% of the Fund's total assets,  no  investment  (other than cash and
cash  items,  U.S.  government  securities  and  securities  of other  regulated
investment  companies)  can exceed 5% of the Fund's  total  assets or 10% of the
outstanding voting securities of the issuer;

     (ii) The Fund must derive at least 90% of its gross income from  dividends,
interest,  payments  with respect to  securities  loans,  gains from the sale or
disposition of stock, securities or foreign currencies,  or other income derived
with  respect  to its  business  of  investing  in such  stock,  securities,  or
currencies,  and net income  derived  from an interest  in a qualified  publicly
traded partnership; and

     (iii)  The Fund must  distribute  to its  shareholders  at least 90% of its
investment  company  taxable  income and net  tax-exempt  income for each of its
fiscal years.

     Excise Tax  Distribution  Requirements.  To avoid federal excise taxes, the
Code  requires the Fund to  distribute  to you by December 31 of each year, at a
minimum, the following amounts: 98% of its taxable ordinary income earned during
the  calendar  year;  98% of its  capital  gain net  income  earned  during  the
twelve-month  period ending November 30; and 100% of any  undistributed  amounts
from the prior year. The Fund intends to declare and pay these  distributions in
December  (or to pay them in  January,  in which  case  you must  treat  them as
received in December), but can give no assurances that its distributions will be
sufficient to eliminate all taxes.

     Sales and  Redemption  of Fund  Shares.  Sales and  redemptions  (including
redemptions in kind) are taxable  transactions  for federal and state income tax
purposes.  If you redeem your Fund shares the Internal  Revenue Service requires
you to report any gain or loss on your redemption.  If you held your shares as a
capital  asset,  the gain or loss that you realize  will be capital gain or loss
and will be long-term or  short-term,  generally  depending on how long you have
held your shares.

     Redemptions at a Loss Within Six Months of Purchase. Any loss incurred on a
redemption  of shares  held for six months or less will be treated as  long-term
capital loss to the extent of any long-term  capital gain  distributed to you by
the Fund on those shares.

     Wash Sales.  All or a portion of any loss that you realize on a  redemption
of your Fund shares will be  disallowed  to the extent that you buy other shares
in the Fund  (through  reinvestment  of dividends or  otherwise)  within 30 days
before or after your share  redemption.  Any loss  disallowed  under these rules
will be added to your tax basis in the new shares.

     U.S.  Government  Securities.  Income  earned by the Fund on  certain  U.S.
government  obligations is exempt from state and local personal  income taxes if
earned  directly by you.  States also grant tax-free status to dividends paid to
you by the Fund from interest  earned by the Fund on direct  obligations  of the
U.S.  government,  subject in some  states to minimum  investment  or  reporting
requirements  that must be met by the Fund.  Income on  investments by a Fund in
certain other obligations,  such as repurchase agreements collateralized by U.S.
government obligations,  commercial paper and federal agency-backed  obligations
(e.g.,  Government  National  Mortgage  Association  (GNMA) or Federal  National
Mortgage  Association  (FNMA)  obligations),  generally  does  not  qualify  for
tax-free  treatment.  The rules on  exclusion of this income are  different  for
corporations.


                                       27


     Qualified Dividend Income for Individuals.  For individual shareholders,  a
portion of the dividends paid by a Fund may be qualified  dividends eligible for
taxation at  long-term  capital  gain rates.  This  reduced  rate  generally  is
available for dividends  paid by the Fund out of dividends  earned on the Fund's
investment   in  stocks  of  domestic   corporations   and   qualified   foreign
corporations.

     Both the Fund and an investor must meet certain holding period requirements
to qualify Fund dividends for this treatment.  Specifically,  the Fund must hold
the stock for at least 61 days  during  the  121-day  period  beginning  60 days
before the stock becomes ex-dividend.  Similarly, investors must hold their Fund
shares for at least 61 days during the 121-day  period  beginning 60 days before
the Fund distribution  goes ex-dividend.  The ex-dividend date is the first date
following the  declaration  of a dividend on which the purchaser of stock is not
entitled to receive the dividend  payment.  When counting the number of days you
held your Fund shares,  include the day you sold your shares but not the day you
acquired these shares.

     While the income  received in the form of a qualified  dividend is taxed at
the same rates as long-term capital gains, such income will not be considered as
a long-term capital gain for other federal income tax purposes. For example, you
will not be allowed to offset your long-term  capital  losses against  qualified
dividend income on your federal income tax return. Any qualified dividend income
that  you  elect  to be taxed at these  reduced  rates  also  cannot  be used as
investment income in determining your allowable investment interest expense. For
other  limitations on the amount of or use of qualified  dividend income on your
income tax return, please contact your personal tax advisor.

     After the close of its fiscal year,  the Fund will designate the portion of
its ordinary  dividend  income that meets the  definition of qualified  dividend
income  taxable  at  reduced  rates.  If 95% or more of a Fund's  income is from
qualified  sources,  it will be allowed to designate 100% of its ordinary income
distributions as qualified dividend income.

     Dividends-Received  Deduction  for  Corporations.  Because  of  the  Fund's
investment  policy, it is expected that either none or only a nominal portion of
the Fund's dividends will be eligible for the  dividends-received  deduction for
corporations.  The portion of dividends  paid by the Fund that so qualifies will
be  designated  each year in a notice  mailed to the  Fund's  shareholders,  and
cannot  exceed the gross amount of dividends  received by the Fund from domestic
(U.S.)  corporations  that  would  have  qualified  for  the  dividends-received
deduction  in  the  hands  of the  Fund  if it was a  regular  corporation.  The
availability of the  dividends-received  deduction is subject to certain holding
period and debt financing restrictions imposed under the Code on the corporation
claiming the  deduction.  The amount that the Fund may designate as eligible for
the dividends-received  deduction will be reduced or eliminated if the shares on
which the dividends  earned by the Fund were  debt-financed  or held by the Fund
for less than a minimum period of time, generally 46 days during a 91-day period
beginning 45 days before the stock becomes ex-dividend.  Similarly, if your Fund
shares are  debt-financed  or held by you for less than a 46-day period then the
dividends-received  deduction  for Fund  dividends  on your  shares  may also be
reduced  or  eliminated.  Even  if  designated  as  dividends  eligible  for the
dividends-received  deduction,  all dividends  (including any deducted  portion)
must be included in your alternative minimum taxable income calculation.

     Investment in Complex Securities. The Fund may invest in complex securities
that could be subject to numerous  special  and  complex tax rules.  These rules
could  accelerate the  recognition  of income by the Fund (possibly  causing the
Fund to sell  securities to raise the cash for necessary  distributions)  and/or
defer a Fund's ability to recognize a loss,  and, in limited cases,  subject the
Fund to U.S. federal income tax on income from certain foreign securities. These
rules could also affect  whether gain or loss  recognized by the Fund is treated
as ordinary or capital, or as interest or dividend income.


                                       28


These rules  could,  therefore,  affect the amount,  timing or  character of the
income distributed to you by a Fund. For example:

     Derivatives.  The Fund is permitted to invest in certain options,  futures,
forwards or foreign currency  contracts.  If a Fund makes these investments,  it
could be required to  mark-to-market  these contracts and realize any unrealized
gains and losses at its fiscal  year end even  though it  continues  to hold the
contracts.  Under these rules, gains or losses on the contracts  generally would
be treated as 60% long-term  and 40%  short-term  gains or losses,  but gains or
losses on certain foreign currency contracts would be treated as ordinary income
or losses. In determining its net income for excise tax purposes,  the Fund also
would be required to mark-to-market  these contracts  annually as of November 30
(for capital gain net income) and December 31 (for taxable ordinary income), and
to realize and distribute any resulting income and gains.

     Short sales and  securities  lending  transactions.  A Fund's  entry into a
short sale  transaction  or an option or other  contract could be treated as the
"constructive  sale"  of an  "appreciated  financial  position,"  causing  it to
realize gain, but not loss, on the position. Additionally, the Fund's entry into
securities  lending  transactions may cause the replacement income earned on the
loaned  securities  to fall  outside of the  definition  of  qualified  dividend
income. This replacement income generally will not be eligible for reduced rates
of taxation on qualified dividend income and, to the extent that debt securities
are loaned,  will generally not qualify as qualified interest income for foreign
withholding tax purposes.

     Tax straddles.  The Fund's  investment in options,  futures,  forwards,  or
foreign currency contracts in connection with certain hedging transactions could
cause it to hold offsetting positions in securities.  If the Fund's risk of loss
with respect to specific securities in its portfolio is substantially diminished
by the fact that it holds  other  securities,  the Fund  could be deemed to have
entered  into a tax  "straddle"  or to hold a  "successor  position"  that would
require any loss realized by it to be deferred for tax purposes.

     Backup  Withholding.  By law,  the Fund must  withhold  a  portion  of your
taxable dividends and sales proceeds unless you:

     o    provide  your  correct  social  security  or  taxpayer  identification
          number,
     o    certify that this number is correct,
     o    certify that you are not subject to backup withholding, and
     o    certify that you are a U.S. person (including a U.S. resident alien).

     The  Fund  also  must  withhold  if the  IRS  instructs  it to do so.  When
withholding  is  required,  the amount will be 28% of any  dividends or proceeds
paid.  The special U.S. tax  certification  requirements  applicable to non-U.S.
investors are described under the "Non-U.S. Investors" heading below.

     Non-U.S.  Investors.  Non-U.S. Investors may be subject to U.S. withholding
and estate tax and are subject to special U.S. tax  certification  requirements.
Foreign  persons should consult their tax advisors  about the  applicability  of
U.S.  tax  withholding  and the use of the  appropriate  forms to certify  their
status.

     In general.  The United States imposes a flat 30% withholding tax (or lower
treaty rate) on U.S. source dividends.

     Capital Gain  Dividends & Short-Term  Capital Gain  Dividends.  In general,
capital gain  dividends  paid by the Fund from either  long-term  or  short-term
capital  gains (other than gain  realized on  disposition  of U.S. real property
interests) are not subject to U.S.  withholding tax unless you are a nonresident
alien  individual  present  in  the  United  States  for  a  period  or  periods
aggregating 183 days or


                                       29


more during the taxable year.

     Interest-Related  Dividends.  Also,  interest-related dividends paid by the
Fund from qualified  interest  income are not subject to U.S.  withholding  tax.
"Qualified interest income" includes,  in general,  U.S. source (1) bank deposit
interest,  (2) short-term original discount and (3) interest (including original
issue discount,  market discount, or acquisition discount) on an obligation that
is in  registered  form,  unless  it is  earned  on an  obligation  issued  by a
corporation or  partnership in which the Fund is a 10-percent  shareholder or is
contingent  interest,  and  (4)  any  interest-related   dividend  from  another
regulated  investment  company.  On any payment date,  the amount of an ordinary
dividend that is designated by the Fund as an  interest-related  dividend may be
more or  less  than  the  amount  that is so  qualified.  This  is  because  the
designation is based on an estimate of the Fund's qualified  interest income for
its entire fiscal year,  which can only be determined  with  exactness at fiscal
year  end.  In  addition,   the  Fund   reserves  the  right  not  to  designate
interest-related  dividends where the amount designated would be de minimis on a
per share basis. As a consequence,  the Fund may  overwithhold a small amount of
U.S. tax from a dividend  payment.  In this case, the non-U.S.  investor's  only
recourse may be to either forgo recovery of the excess withholding, or to file a
United States nonresident income tax return to recover the excess withholding.

     Further  Limitations  on Tax Reporting for  Interest-Related  dividends and
Short-term Capital Gain dividends for non-U.S.  investors.  While the Fund makes
every  effort  to  disclose  any  amounts  of  interest-related   dividends  and
short-term   capital   gains   distributed   to   its   non-U.S.   shareholders,
intermediaries  who  have  assumed  tax  reporting   responsibilities  on  these
distributions  may not have fully  developed  systems  that will allow these tax
withholding benefits to be passed through to them.

     Disposition  of a U.S.  Real  Property  Interest.  The Funds may  invest in
securities of corporations or real estate  investment trusts (REITs) that invest
in real  property.  The  Foreign  Investment  in Real  Property  Tax Act of 1980
(FIRPTA)  makes  non-U.S.  persons  subject to U.S. tax on disposition of a U.S.
real  property  interest  as if he or she  were  a U.S.  person.  Such  gain  is
sometimes  referred to as FIRTPA  gain.  To the extent that the Fund  realizes a
gain  on  its  investment  in a U.S.  real  property  interest,  or  receives  a
distribution from the gain on the sale of a U.S. real property interest realized
on one of its  investments,  and passes that gain  through to its  shareholders,
such a distribution  when made to a non-U.S.  shareholder may be subject to U.S.
withholding  tax at a rate of 35% and may  require  the filing of a  nonresident
U.S. income tax return.

     Disposition  of Fund  shares  as gain  from  sale of a U.S.  Real  Property
Interest.  In addition,  a sale or redemption of Fund shares will be FIRPTA gain
only if -
     o    The non-U.S.  shareholder  owns more than 5% of a class of RIC shares;
          and
     o    More than 50% of the Fund's assets consist of
          --   more-than 5% interests in publicly traded companies that are U.S.
               real property holding corporations (USRPHCs),
          --   interests in non-publicly traded companies that are USRPHCs, and
          --   interests in REITs that are not  controlled by U.S.  shareholders
               where the REIT  shares  are  either  not  publicly  traded or are
               publicly traded and the Fund owns more than 5%; and
     o    Non-U.S. shareholders own 50% or more of the value of the Fund shares;
          this last  requirement  sunsets and does not apply after  December 31,
          2007.

In the unlikely  event a sale of Fund shares  results in FIRPTA  gain,  the gain
will be taxed as income  "effectively  connected with a U.S. trade or business."
As a result, the non-U.S. shareholder will be required to pay U.S. income tax on
such gain and file a nonresident U.S. income tax return.


                                       30


     Other.  Ordinary  dividends  paid by the Fund to non-U.S.  investors on the
income earned on portfolio  investments in (i) the stock of domestic and foreign
corporations,  and (ii) the debt of foreign  issuers  continue  to be subject to
U.S.  withholding  tax. If you hold your Fund shares in  connection  with a U.S.
trade  or  business,  your  income  and  gains  will be  considered  effectively
connected  income and taxed in the U.S. on a net basis, in which case you may be
required to file a  nonresident  U.S.  income tax  return.  The  exemption  from
withholding for short-term capital gain dividends and interest-related dividends
paid by the Fund is effective for  dividends  paid with respect to taxable years
of the Fund beginning after December 31, 2004 and before January 1, 2008.

     U.S. Estate Tax. A partial exemption from U.S estate tax may apply to stock
in the Fund held by the estate of a nonresident decedent.  The amount treated as
exempt is based upon the proportion of the assets held by the Fund at the end of
the  quarter   immediately   preceding  the  decedent's   death  that  are  debt
obligations,  deposits,  or other  property  that would  generally be treated as
situated  outside  the  United  States  if held  directly  by the  estate.  This
provision  applies to decedents dying after December 31, 2004 and before January
1, 2008.

     U.S Tax Certification  Rules.  Special U.S. tax certification  requirements
apply to non-U.S. shareholders both to avoid U.S. back up withholding imposed at
a rate of 28% and to obtain the benefits of any treaty between the United States
and the shareholder's country of residence.  In general, a non-U.S.  shareholder
must provide a Form W-8 BEN (or other applicable Form W-8) to establish that you
are not a U.S. person,  to claim that you are the beneficial owner of the income
and, if applicable,  to claim a reduced rate of, or exemption from,  withholding
as a  resident  of a country  with  which the  United  States  has an income tax
treaty. A Form W-8BEN provided  without a U.S.  taxpayer  identification  number
will  remain in effect for a period  beginning  on the date signed and ending on
the last day of the third  succeeding  calendar year unless an earlier change of
circumstances makes the information on the form incorrect.

     This discussion of "Distributions  and Taxes" is not intended or written to
be used as tax  advice  and does  not  purport  to deal  with  all  federal  tax
consequences  applicable to all  categories  of investors,  some of which may be
subject to special rules. You should consult your own tax advisor regarding your
particular circumstances before making an investment in the Fund.


                             PERFORMANCE INFORMATION

     To obtain the Fund's  most  current  performance  information,  please call
1-800-471-7701 or visit www.cheswoldlanefunds.com.

     From time to time,  the Fund's  performance  information,  such as yield or
total return, may be quoted in advertisements or in communications to present or
prospective  shareholders.  Performance  quotations  represent  the Fund's  past
performance  and should not be considered as  representative  of future results.
The Fund will calculate its performance in accordance  with the  requirements of
the rules and  regulations  under the 1940 Act, as they may be revised from time
to time by the SEC.


                                       31


         FINANCIAL STATEMENT AND REPORT OF INDEPENDENT REGISTERED PUBLIC
                                ACCOUNTING FIRM

 Set forth below is the Statement of Assets and Liabilities as of June 12, 2006,
        and the Report of Independent Registered Public Accounting Firm,
                              dated June 13, 2006.

                 Cheswold Lane International High Dividend Fund
                       Statement of Assets and Liabilities
                                  June 12, 2006


ASSETS:

Cash                                                       $105,000
                                                           --------
TOTAL ASSETS                                               $105,000
                                                           --------
LIABILITIES:                                                   ----
                                                           --------



Net Assets for shares of beneficial interest               $105,000
outstanding                                                ========

Shares Outstanding                                            7,000
                                                              =====

NET asset value, offering and redemption price per
share                                                        $15.00
                                                             ======

Net Assets consist of:
         Paid-in capital                                   $105,000
                                                           --------

The accompanying  notes to the financial  statement are an integral part of this
statement.

                 Cheswold Lane International High Dividend Fund

                          Notes to Financial Statements

                                  June 12, 2006

1.   Cheswold Lane Funds (the "Trust"),  which  consists  solely of the Cheswold
     Lane  International  High Dividend Fund (the "Fund"),  was formed under the
     laws of the  state of  Delaware  on April  12,  2006.  The Trust has had no
     operations   through   June  12,   2006  other  than  those   relating   to
     organizational  matters and the sale and  issuance of 7,000 shares at $15 a
     share  of  beneficial   interests  in  the  Fund  to  Cheswold  Lane  Asset
     Management, LLC. The Trust is an open-end diversified management investment
     company  registered  under the  Investment  Company  Act of 1940 (the "1940
     Act").

2.   The Trust has an agreement  with Cheswold Lane Asset  Management,  LLC (the
     "Adviser"),  with  whom  certain  officers  and  trustees  of the Trust are
     affiliated,  to furnish investment advisory services to the Fund. Under the
     terms of this agreement,  the Fund will pay the Adviser a monthly fee based
     on the Fund's  average  daily net assets at the annual  rate of


                                       32


     0.90%.  The  Adviser has assumed all  start-up  costs  associated  with the
     organization of the Trust.

     Under an expense  limitation  agreement,  if the aggregate annual operating
     expenses  (including  the investment  advisory fee but excluding  interest,
     taxes,  brokerage  commissions  and other costs incurred in connection with
     the  purchase or sale of  portfolio  securities  and  extraordinary  items)
     exceed  1.15%,  the Adviser will  reimburse the Fund for the amount of such
     excess.


             Report of Independent Registered Public Accounting Firm

To the Board of Trustees of the Cheswold Lane Funds
and the Shareholders of the Cheswold Lane International High Dividend Fund
West Conshohocken, Pennsylvania

We have  audited the  accompanying  statement of assets and  liabilities  of the
Cheswold  Lane  International  High  Dividend  Fund,  (a series of Cheswold Lane
Funds) as of June 12, 2006. This financial  statement is the  responsibility  of
the  Fund's  management.  Our  responsibility  is to  express an opinion on this
financial statement based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material  misstatement.  An audit includes examining,  on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statement.  An audit also includes assessing the accounting  principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statement  referred to above presents fairly, in
all material respects, the financial position of the Cheswold Lane International
High Dividend Fund as of June 12, 2006, in conformity with accounting principles
generally accepted in the United States of America.


                                                BRIGGS, BUNTING & DOUGHERTY, LLP


Philadelphia, Pennsylvania
June 13, 2006

                                      * * *

                                PRINCIPAL HOLDERS

     As of June 21, 2006, the Advisor,  as the Trust's sole  shareholder,  owned
100% of all outstanding shares of the Trust and thus may be deemed a controlling
shareholder of the Trust until additional shareholders purchase shares.

     Any person who owns  beneficially,  either  directly or through one or more
controlled  companies,  more than 25% of the voting  securities  of the Trust is
presumed  to  control  the  Trust  under  the  provisions  of the  1940  Act.  A
controlling  person  possesses  the  ability to control  the  outcome of matters
submitted for shareholder vote of the Trust.


                                       33