STATEMENT OF ADDITIONAL INFORMATION

                               DECEMBER 29, 2000,
                             AS AMENDED MAY 15, 2001

                         CHARTWELL LARGE CAP VALUE FUND
                         CHARTWELL SMALL CAP VALUE FUND
                                    SERIES OF
                              ADVISORS SERIES TRUST
                         1235 WESTLAKES DRIVE, SUITE 330
                              BERWYN, PA 19312-2412

This Statement of Additional Information ("SAI") is not a prospectus, and should
be read in conjunction  with the  Prospectus  dated December 29, 2000, as may be
revised,  of the  Chartwell  Large  Cap  Value  Fund  ("Large  Cap Fund) and the
Chartwell  Small Cap Value Fund  ("Small Cap  Fund"),  each a series of Advisors
Series  Trust  (the  "Trust").  The  Large  Cap Fund and the  Small Cap Fund are
sometimes referred to herein  collectively as the "Funds." Chartwell  Investment
Partners  (the  "Advisor")  is the  advisor to the  Funds.  A copy of the Funds'
Prospectus  may be obtained  by  contacting  ICA Fund  Services  Corp.,  4455 E.
Camelback Rd., Suite 261E, Phoenix, AZ 85018; telephone: 1-800-576-8229.

                                TABLE OF CONTENTS

   The Trust.............................................................. B-2
   Investment Objective and Policies...................................... B-2
   Management ............................................................ B-10
   Portfolio Transactions and Brokerage .................................. B-14
   Portfolio Turnover .................................................... B-15
   Purchase and Redemption of Fund Shares ................................ B-15
   Determination of Net Asset Value ...................................... B-17
   Dividends and Distributions ........................................... B-18
   Tax Matters............................................................ B-19
   Performance Information ............................................... B-20
   General Information ................................................... B-21
   Financial Statements .................................................. B-23
   Appendix .............................................................. B-24

                                      B-1

                                    THE TRUST

Advisors  Series Trust is an  open-end,  non-diversified  management  investment
company  organized as a D business trust under the laws of the State of Delaware
on October 3, 1996. The Trust currently  consists of seventeen  series of shares
of beneficial interest,  par value $0.01 per share. This SAI relates only to the
Funds.

The Trust is registered with the Securities and Exchange Commission ("SEC") as a
management  investment company. Such a registration does not involve supervision
of the management or policies of the Funds. The Prospectus of the Funds and this
SAI omit  certain of the  information  contained in the  Registration  Statement
filed with the S Copies of such  information  may be obtained  from the SEC upon
payment of the prescribed fee.

                       INVESTMENT OBJECTIVES AND POLICIES

The  investment  objective  of each Fund is growth of capital,  with a secondary
objective to provide  current  income.  The Large Cap Fund primarily  invests in
common stocks of larger companies with a market  capitalization  in excess of $1
billion. The Small Cap Fund invests primarily in the stocks of smaller companies
with a market  capitalization  between $100 million and $2.5 billion.  The Funds
may also  invest  in  dollar  denominated  stocks of  foreign  companies  and in
American  Depositary  Receipts ("ADRs").  There is no assurance that either Fund
will achieve its objectives.

The Funds are classified as  "diversified"  under the federal  securities  laws,
which  means as to 75% of each  Ftota  assets  (1) no more than 5% may be in the
securities  of a single  issuer,  and (2) neither Fund may hold more than 10% of
the outstanding  voting securities of a single issuer . Under applicable federal
laws, the  diversification  of a mutual fund's  holdings is measured at the time
the fund purchases a security.  However, if a fund purchases a security ahold it
for a period of time, the security may become a larger  percentage of the fund's
total assets due to  movements  ith  financial  markets.  If the market  affects
several  securities  held by a fund,  the fund may have a greater pof its assets
invested in securities of fewer issuers. Then a fund is subject to the risk that
its  performance  may be hurt  disproportionately  by the  poor  performance  of
relatively  few  securities  despite the fund  qualifying as a diversified  fund
under applicable federal laws.

The discussion below supplements  information contained in the Funds' Prospectus
as to the investment policies of the Funds.

In addition to the risks associated with particular  types of securities,  which
are discussed  below,  the Funds are subject to general market risks.  The Funds
invest  primarily  in common  stocks.  The market risks  associated  with stocks
include the possibility  that the entire market for common stocks could suffer a
decline in price over a short or even an extended period.  This could affect the
net asset value of your Fund shares. The U.S. stock market tends to be cyclical,
with  periods  when stock  prices  generally  rise and periods when stock prices
generally decline.

FOREIGN SECURITIES

Each Fund may invest in dollar  denominated  securities  of  foreign  companies,
including sponsored and unsponsored American Depositary Receipts ("ADRs").  ADRs
are  receipts  typically  issued  by a U.S.  bank or  trust  company  evidencing
ownership of the underlying  securities of foreign  issuers,  and other forms of
depository  receipts for  securities  of foreign  issuers.  Generally,  ADRs, in
registered  form, are  denominated  in U.S.  dollars and adesigne for use in the
U.S. securities markets.  Thus, these securities are not denominated in the same
currency  as t  securities  in which they may be  converted.  In  addition,  the
issuers of the  securities  underlying  unsponsored  ADRs are not  obligated  to
disclose material information in the United States and, therefore,  there may be
less  information  available  regarding  such  issuers  and  there  may not be a
correlation between such information and the market value of the ADRs.

Investments in foreign securities  involve risks, costs and opportunities  which
are in addition to those inherent in domestic investments.  Political,  economic
or social  instability of the issuer or the country of issue, the possibility of
expropriation or confiscatory taxation,  limitations on the removal of assets or
diplomatic developments, and the possibility of adverse changes in investment or
exchange  control  regulations are among the inherent risks.  Securities of some

                                      B-2

foreign  companies are less liquid,  more  volatile and more  difficult to value
than securities of comparable U.S. companies.  Foreign companies are not subject
to the regulatory requirements of U.S. companies and, as such, there may be less
publicly available information about such companies. Moreover, foreign companies
are  not  subject  to  uniform  accounting,  auditing  and  financial  reporting
standards and requirements comparable to those applicable to U.S. companies.

ILLIQUID SECURITIES

Neither  Fund may  invest  more  than  15% of the  value  of its net  assets  in
securities  that at the time of purchase have legal or contractual  restrictions
on resale or are  otherwise  illiquid.  The Advisor  will  monitor the amount of
illiquid  securities  in the Funds'  portfolios,  under the  supervision  of the
Trust's  Board of  Trustees,  to ensure  compliance  with the Funds'  investment
restrictions.

Historically,   illiquid   securities  have  included   securities   subject  to
contractual  or  legal  restrictions  on  resale  because  they  have  not  been
registered under the Securities Act of 1933 (the "Securities  Act"),  securities
which are otherwise not readily  marketable and repurchase  agreements  having a
maturity of longer than seven days.  Securities  which have not been  registered
under the  Securities  Act are referred to as private  placement  or  restricted
securities  and are  purchased  directly  from the  issuer  or in the  secondary
market.  Mutual  funds  do not  typically  hold a  significant  amount  of these
restricted or other illiquid  securities  because of the potential for delays on
resale and  uncertainty in valuation.  Limitations on resale may have an adverse
effect on the  marketability  of  portfolio  securities  and the Funds  might be
unable to sell restricted or other illiquid securities promptly or at reasonable
prices amigh thereby experience difficulty satisfying redemption requests within
seven days. The Funds might also have to register such restricted  securities in
order to sell them,  resulting in additional  expense and delay.  Adverse market
conditions could impede such a public offering of securities.

In recent years, however, a large institutional market has developed for certain
securities  that  are  not  registered  under  the  Securities  Act,   including
repurchase   agreements,   commercial  paper,   foreign  securities,   municipal
securities and corporate bonds and notes.  Institutional  investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment.  The fact that
there are  contractual or legal  restrictions on resale to the general public or
to  certain   institutions   may  not  reflect  the  actual  liquidity  of  such
investments.  If such securities are subject to purchase by institutional buyers
in accordance  with Rule 144A  promulgated by the SEC under the Securities  Act,
the  Trust's  Board of  Trustees  may  determine  that such  securities  are not
illiquid  securities despite their legal or contractual  restrictions on resale.
Ial other cases,  however,  securities subject to restrictions on resale will be
deemed illiquid.

OPTIONS AND FUTURES STRATEGIES

Each Fund may purchase put and call options and engage in the writing of covered
call options and secured put options,  and employ a variety of other  investment
techniques.  Specifically,  a Fund may engage in the  purchase and sale of stock
index futures contracts and options on such futures, all as described more fully
below.  Such investment  policies and techniques may involve a greater degree of
risk than those inherent in more conservative  investment approaches.  The Funds
will engage in such  transactions to hedge existing  positions and in pursuit of
their  investment  objectives,  and not  for  the  purposes  of  speculation  or
leverage.

     OPTIONS  ON  SECURITIES.  A Fund  may  purchase  put and  call  options  on
securities held in its portfolio.  In addition,  a Fund may seek to increase its
income in an amount  designed to meet operating  expenses or may hedge a portion
of its portfolio  investments  through writing (that is, selling)  "covered" put
and call options.  A put option  provides its purchaser with the right to compel
the  writer of the  option to  purchase  from the  option  holder an  underlying
security  at a  specified  price at any time  during or at the end of the option
period.  In  contrast,  a call option gives the  purchaser  the right to buy the
underlying  security  covered by the option from the writer of the option at the
stated exercise price. A covered call option  contemplates  that, for so long as
the  Fund is o as the  writer  of the  option,  it will  own (1) the  underlying
securities  subject  to  the  option  or (2)  securities  convertible  into,  or
exchangeable  without  the  payment of any  consideration  for,  the  securities
subject to the option.  The value of the underlying  securities on which covered
call  options  will be  written at any one time by a Fund will not exceed 25% of
the Fund's total assets.

                                      B-3

The Funds may  purchase  options on  securities  that are  listed on  securities
exchanges or that are traded  over-the-counter  ("OTC").  As the holder of a put
option, a Fund has the right to sell the securities underlying the option and as
the holder of a call  option,  a Fund has the right to purchase  the  securities
underlying the option,  in each case at the option's  exercise price at any time
prior to, or on, the option's expiration date. A Fund may choose to exercise the
options  it  holds,  permit  them to  expire or  terminate  them  prior to their
expiration  by entering  into  closing  sale  transactions.  In entering  into a
closing  sale  transaction,  the Fund would sell an option of the same series as
the one it has purchased.

A Fund  receives a premium  when it writes call  options,  which  increases  the
Fund's return on the u security in the event the option  expires  unexercised or
is closed out at a profit.  By writing a call, a Fund limits its  opportunity to
profit from an increase in the market value of the underlying security above the
exercise  price of the option for as long as the Fund's  obligation as writer of
the option  continues.  A Fund  receives a premium  when it writes put  options,
which  increases the Fund's return on the  underlying  security in the event the
option  expires  unexercised  or is closed out at a profit.  By writing a put, a
Fund limits its  opportunity  to profit from an increase in the market  value of
the  underlying  security  above the exercise price of the option for as long as
the Fund's obligation as writer of the option continues.  Thus, in some periods,
a Fund will receive less total return and in other periods  greater total return
from its  hedged  positions  than it would  have  received  from its  underlying
securities if unhedged.

In purchasing a put option, a Fund seeks to benefit from a decline in the market
price of the underlying security,  whereas in purchasing a call option, the Fund
seeks  to  benefit  from an  increase  in the  market  price  of the  underlying
security.  If an option purchased is not sold or exercised when it has remaining
value,  or if the market price of the  underlying  security  remains equal to or
greater than the exercise  price,  in the case of a put, or remains  equal to or
below the exercise price, in the case of a call,  during the life of the option,
the Fund will lose its  investment in the option.  For the purchase of an option
to  be  profitable,   the  market  price  of  the  underlying  security  mdeclin
sufficiently  below the exercise  price, in the case of a put, and must increase
sufficiently  above  the e p in the case of a call,  to cover  the  premium  and
transaction costs.  Because option premiums paid by a Fund are small in relation
to the market value of the  investments  underlying the options,  buying options
can result in lamount of leverage.  The  leverage  offered by trading in options
could  cause a Fund's net asset value to be subject to more  frequent  and wider
fluctuations than would be the case if the Fund did not invest in options.

     OTC OPTIONS.  OTC options  differ from  exchange-traded  options in several
respects.  They are  transacted  directly  with  dealers and not with a clearing
corporation,  and there is a risk of non-performance by the dealer. However, the
premium  is paid in advance by the  dealer.  OTC  options  are  available  for a
greater  variety of securities and foreign  currencies,  and in a wider range of
expiration dates and exercise prices than exchange-traded  options.  Since there
is no exchange,  pricing is normally  done by reference  to  information  from a
market maker, which information is carefully monitored or caused to be monitored
by the Advisor and verified in appropriate cases.

A writer or purchaser of a put or call option can terminate it voluntarily  only
by entering into a closing transaction. In the case of OTC options, there can be
no  assurance  that a  continuous  liquid  secondary  market  will exist for any
particular  option at any  specific  time.  Consequently,  a Fund may be able to
realize the value of an OTC oit has purchased  only by exercising it or entering
into a closing sale transaction with the dealer that issued it. Similarly,  when
a Fund writes an OTC option, it generally can close out that option prior to its
expiration only by entering into a closing purchase  transaction with the dealer
to which it originally wrote the option.  If a covered call option writer cannot
effect a closing transaction,  it cannot sell the underlying security or foreign
currency  until the option  expires or the option is exercised.  Therefore,  the
writer  of a  covered  OTC  call  option  may not be able to sell an  underlying
security even though it might otherwise be advantageous to do so. Likewise,  the
writer of a covered OTC put option may be unable to sell the securities  pledged
to secure the put for other  investment  purposes while it is obligated as a put
writer.  Similarly,  a purchaser of an OTC put or call option might also find it
difficult  to  terminate  its  position  on a timely  basis in the  absence of a
secondary market.

                                      B-4

A  Fund  may  purchase  and  write  OTC  put  and  call  options  in  negotiated
transactions.  The staff of the Sha previously taken the position that the value
of purchased  OTC options and the assets used as "cover" for written OTC options
are illiquid securities and, as such, are to be included in the calculation of a
Fund's 15%  limitation on illiquid  securities.  Each Fund will attempt to enter
into contracts with certain dealers with which it writes OTC options.  Each such
contract  will  provide  that a Fund has the absolute  right to  repurchase  the
options it writes at any time at a repurchase  price which  represents  the fair
market  value,  as  determined  in good faith  through  negotiation  between the
parties,  but which in no event will  exceed a price  determined  pursuant  to a
formula contained in the contract. Although the specific details of such formula
may vary among contracts, the formula will generally be based upon a multiple of
the premium received by a Fund for writing the option,  plus the amount, if any,
of the o intrinsic  value. The formula will also include a factor to account for
the  difference  between the price of the  security  and the strike price of the
option.  If such a contract is entered  into, a Fund will count as illiquid only
the initial formula price minus the option's intrinsic value.

The Funds will enter  into such  contracts  only with  primary  U.S.  Government
securities dealers recognized by the Federal Reserve Bank of New York. Moreover,
such primary  dealers will be subject to the same  standards as are imposed upon
dealers with which the Funds enter into repurchase agreements.

     STOCK INDEX OPTIONS.  The Funds may purchase and write put and call options
on  stock  indices  listed  on  securities  exchanges,   which  indices  include
securities held in a Fund's portfolio.

A stock index  measures the  movement of a certain  group of stocks by assigning
relative  values to the  securities  included  in the  index.  Options  on stock
indices are generally similar to options on specific securities.  Unlike options
on specific  securities,  however,  options on stock  indices do not involve the
delivery  of an  underlying  security;  the option in the case of an option on a
stock index  represents the holder's right to obtain from the writer in ca fixed
multiple  of the amount by which the  exercise  price  exceeds (in the case of a
put) or is less than (in the case of a call) the closing value of the underlying
stock index on the exercise date.

When a Fund writes an option on a securities  index,  it will  segregate  liquid
assets in an amount equal to the market value of the option,  and will  maintain
while the option is open.

Stock  index  options  are subject to  position  and  exercise  limits and other
regulations imposed by the exchange on which they are traded. If a Fund writes a
stock index  option,  it may  terminate  its  obligation  by effecting a closing
purchase transaction,  which is accomplished by purchasing an option of the same
series as the  option  previously  written.  The  ability of a Fund to engage in
closing purchase transactions with respect to stock index options depends on the
existence of a liquid secondary market.  Although a Fund generally  purchases or
writes  stock index  options only if a liquid  secondary  market for the options
purchased or sold appears to exist,  no such secondary  market may exist, or the
market may cease to exist at some future date,  for some  options.  No assurance
can be given that a closing  purchase  transaction  can be effected  when a Fund
desires to engage in such a transaction.

     RISKS RELATING TO PURCHASE AND SALE OF OPTIONS ON STOCK  INDICES.  Purchase
and sale of options on s indices by the Funds are subject to certain  risks that
are not  present  with  options on  securities.  Because  the  effectiveness  of
purchasing or writing stock index options depends upon the extent to which price
movements in a Fund's  portfolio  correlate with price movements in the level of
the index  rather than the price of a  particular  stock,  whether the Fund will
realize a gain or loss on the  purchase or writing of an option on a stock index
depends  upon  movements  in the  level  of stock  prices  in the  stock  market
generally or, in the case of certain indices, iindustr or market segment, rather
than movements in the price of a particular stock.  Accordingly,  successful uth
Funds of options on stock  indices will be subject to the ability of the Advisor
to correctly predict movements in the direction of the stock market generally or
of a particular  industry.  This requires  different  skills and techniques than
predicting  changes in the price of individual  stocks. In the event the Advisor
is  unsuccessful  in predicting  the movements of an index, a Fund could be in a
worse position than if it hadn't engaged in these transactions.

                                      B-5

Stock index prices may be distorted if trading of certain stocks included in the
index is interrupted.  Trading in stock index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks  included  in the index.  If this  occurred,  a Fund would not be able to
close out options which it h purchased or written and, if  restrictions on which
could result in substantial losses to the Fund.  However, it will be each Fund's
policy to  purchase  or w options  only on indices  which  include a  sufficient
number  of  stocks  so that the  likelihood  of a  trading  halt in the index is
minimized.

     FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS.  The Funds may purchase
and sell stock index futures  contracts.  The purpose of the acquisition or sale
of a futures contract by a Fund is to hedge against fluctuations in the value of
its  portfolio  without  actually  buying or  selling  securities.  The  futures
contracts in which the Funds may invest have been developed by and are traded on
national  commodity  exchanges.  Stock index futures contracts may be based upon
broad-based  stock  indices  such  as the S&P  500 or  upon  narrow-based  stock
indices.  A buyer  entering  into a stock  index  futures  contract  will,  on a
specified  future  date,  pay or  receive  a final  cash  payment  equal  to the
difference  between  the actual  value of the stock index on the last day of the
contract and the value of the stock index  established  by the contract.  A Fund
may assume both "long" and "short" positions with respect to futures  contracts.
A long position  involves  entering into a futures  contract to buy a commodity,
whereas a short  position  involves  entering into a futures  contract to sell a
commodity.

The purpose of trading futures  contracts is to protect a Fund from fluctuations
in the value of its investment  securities without necessarily buying or selling
the securities.  Because the value of a Fund's investment securities will exceed
the value of the futures contracts sold by the Fund, an increase in the value of
the futures contracts could only mitigate,  but not totally offset,  the decline
in the value of the Fund's  assets.  No  consideration  is paid or received by a
Fund upon trading a futures  contract.  Instead,  upon  entering  into a futures
contract, a Fund is rto deposit an amount of cash or U.S. Government  securities
generally  equal to 10% or less of the contract  value.  This amount is known as
"initial  margin"  and is in the  nature  of a  performance  bond or good  faith
deposit on the  contract  that is returned to the Fund upon  termination  of the
futures contract, assuming that all contractual obligations have been satisfied;
the broker will have  access to amounts in the margin  account if the Fund fails
to meet its contractual  obligations.  Subsequent payments,  known as "variation
margin," to and from the broker, will be made daily as the price of the currency
or securities  underlying the futures contract  fluctuates,  making the long and
short positions in the futures  contract more or less valuable,  a process known
as  "marking-to-market."  At any  time  prior  to the  expiration  of a  futures
contract,  a Fund may elect to close a position by taking an opposite  position,
which will operate to terminate the Fund's existing position in the contract.

Each short position in a futures or options  contract  entered into by a Fund is
secured by the Fund's ownership of underlying securities. Each Fund does not use
leverage  when it enters  into  long  futures  or  options  contracts;  the Fund
segregates,  with respect to each of its long positions,  liquid assets having a
value equal to the underlying commodity value of the contract.

The Funds may trade stock index futures  contracts to the extent permitted under
rules and  interpretations  ab the Commodity  Futures  Trading  Commission  (the
"CFTC").  U.S. futures  contracts have been designed by exchanges that have been
designated  as "contract  markets" by the CFTC,  and must be executed  through a
futures commission merchant, or brokerage firm, that is a member of the relevant
contract market.  Futures contracts trade on a number of contract markets,  and,
through their clearing corporations,  the exchanges guarantee performance of the
contracts as between the clearing members of the exchange.

The Funds  intend to comply  with CFTC  regulations  and avoid  "commodity  pool
operator" or "commodity trading advisor" status.  These regulations require that
a Fund use futures and options  positions  (a) for "bona fide hedging  purposes"
(as defined in the  regulations)  or (b) for other purposes so long as aggregate
initial margins and premiums  required in connection with non-hedging  positions
do not exceed 5% of the liquidation value of the Fund's portfolio.
The Funds currently do not intend to engage in transactions in futures contracts
or options thereon for speculation,  but will engage in such  transactions  only
for bona fide hedging purposes.

     RISKS  OF  TRANSACTIONS  IN  FUTURES   CONTRACTS  AND  OPTIONS  ON  FUTURES
CONTRACTS.  There are several  risks in using stock index  futures  contracts as
hedging  devices.  First,  all participants in the futures market are subject to
initial margin and variation margin requirements.  Rather than making additional
variation margin payments,  investors may close the contracts through offsetting

                                      B-6

transactions  which could distort the normal  relationship  between the index or
security and the futures market.  Second, the margin requirements in the futures
market are lower than margin  requirements  in the securities  market,  and as a
result the futures market may attract more  speculators than does the securities
market.  Increased  participation  by speculators in the futures market may also
cause temporary price  distortions.  Because of possible price distortion in the
futures market and because of imperfect  correlation  between movements in stock
indices or securities and movements in the prices of futures  contracts,  even a
correct forecast of general market trends may not result in a successful hedging
transaction over a very short period.

Another risk arises because of imperfect  correlation  between  movements in the
value of the futures contracts and movements in the value of securities  subject
to the  hedge.  With  respect  to stock  index  futures  contracts,  the risk of
imperfect  correlation  increases  as  the  composition  of a  Fund's  portfolio
diverges from the securities
 included
in the applicable stock index. It is possible that a Fund might sell stock index
futures contracts to hedge its portfolio  against a decline in the market,  only
to have the  market  advance  and the  value of  securities  held in the  Fund's
portfolio  decline.  If this occurred,  a Fund would lose money on the contracts
and also  experience a decline in the value of its portfolio  securities.  While
this could  occur,  the  Advisor  believes  that over time the value of a Fund's
portfolio  should tend to move in the same  direction as the market  indices and
will  attempt to reduce this risk,  to the extent  possible,  by  entering  into
futures   contracts  on  indices  whose  movements  they  believe  will  have  a
significant  correlation  with  movements  in the value of the Fund's  portfolio
securities sought to be hedged.

Successful  use of futures  contracts by a Fund is subject to the ability of the
Advisor to predict correctly movements in the direction of the market. If a Fund
has hedged against the  possibility of a decline in the value of the stocks held
in its portfolio and stock prices increase instead,  the Fund would lose part or
all of the benefit of the  increased  value of its security  which it has hedged
because it will have offsetting losses in its futures positions. In addition, in
such situations, if a Fund has insufficient cash, it may have to sell securities
to meet daily variation margin requirements.
Such sales of securities may, but will not  necessarily,  be at increased prices
which reflect the rising  market.  A Fund may have to sell  securities at a time
when it may be disadvantageous to do so.

     LIQUIDITY  OF FUTURES  CONTRACTS.  A Fund may elect to close some or all of
its contracts prior to expiration. The purpose of making such a move would be to
reduce or eliminate  the hedge  position  held by the Fund. A Fund may close its
positions by taking opposite positions. Final determinations of variation margin
are then made, additional cash as required is paid by or to a Fund, and the Fund
realizes a loss or a gain.  Positions in futures contracts may be closed only on
an exchange or board of trade  providing  a  secondary  market for such  futures
contracts.  Although the Funds intend to enter into  futures  contracts  only on
exchanges  or boards of trade  where  there  appears  to be an active  secondary
market,  there is no assurance that a liquid secondary market will exist for any
pcontrac at any particular time.

In  addition,  most  domestic  futures  exchanges  and boards of trade limit the
amount of  fluctuation  permitted  in futures  contract  prices  during a single
trading day. The daily limit  establishes the maximum amount that the price of a
futures  contract may vary either up or down from the previous day's  settlement
price at the end of a trading session.  Once the daily limit has been reached in
a  particular  contract,  no trades may be made that day at a price  beyond that
limit.  The daily limit governs only price movement during a particular  trading
day and therefore does not limit potential  losses because the limit may prevent
the liquidation of unfavorable  positions.  It is possible that futures contract
prices could move to the daily limit for several  consecutive  trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting  some futures  traders to substantial  losses.  In such event, it
will not be  possible to close a futures  position  and, in the event of adverse
price  movements,  a Fund  would be  required  to make daily  cash  payments  of
variation margin. In such circumstances, an increase in the value of the portion
of the portfolio being hedged, if any, may partially or completely offset losses
on the futures contract. However, as described above, there is no guarantee that
the price of the securities being hedged will, in fact, correlate with the price
movements  in the  futures  contract  and thus  provide an offset to losses on a
futures contract.

     RISKS AND SPECIAL  CONSIDERATIONS OF OPTIONS ON FUTURES CONTRACTS.  The use
of options on stock index  futures  contracts  also  involves  additional  risk.
Compared to the purchase or sale of futures  contracts,  the purchase of call or
put options on futures contracts  involves less potential risk to a Fund because
the  maximum  amount  at  risk  is  the  premium  paid  for  the  options  (plus

                                      B-7

transactions  costs).  The  writing  of a  call  option  on a  futures  contract
generates  a premium  which  may  partially  offset a decline  in the value of a
Fund's portfolio  assets.  By writing a call option, a Fund becomes obligated to
sell a futures contract,  which may have a value higher than the exercise price.
Conversely,  the  writing  of a put  option on a futures  contract  generates  a
premium, but a Fund becomes obligated to purchase a futures contract,  which may
have a value lower than the exercise price. Thus, the loss incurred by a Fund in
writing  options on  futures  contracts  may  exceed  the amount of the  premium
received.

The effective use of options  strategies is dependent,  among other things, on a
Fund's ability to terminate  options  positions at a time when the Advisor deems
it desirable to do so.  Although a Fund will enter into an option  position only
if the Advisor  believes that a liquid  secondary market exists for such option,
there is no assurance that the Fund will be able to effect closing  transactions
at  any  particular  time  or at an  acceptable  price.  A  Fund's  transactions
involving  options on futures  contracts  will be conducted  only on  recognized
exchanges.

The Funds' purchase or sale of put or call options on futures  contracts will be
based upon  predictions  as to anticipated  market trends by the Advisor,  which
could  prove to be  inaccurate.  Even if the  expectations  of the  Advisor  are
correct,  there may be an imperfect  correlation between the change in the value
of the options and of a Fund's portfolio securities.

Investments in futures  contracts and related options by their nature tend to be
more  short-term  than other equity  investments  made by the Funds.  The Funds'
ability to make such  investments,  therefore,  may result in an  increase  in a
Fund's  portfolio  activity and thereby may result in the payment of  additional
transaction costs.

REPURCHASE AGREEMENTS

The Funds may enter  into  repurchase  agreements.  Under such  agreements,  the
seller of the security agrees t repurchase it at a mutually agreed upon time and
price.  The  repurchase  price  may be  higher  than  the  purchase  price,  the
difference being income to the Funds, or the purchase and repurchase  prices may
be the same,  with interest at a stated rate due to the Funds  together with the
repurchase  price on  repurchase.  In  either  case,  the  income  tth  Funds is
unrelated to the interest  rate on the U.S.  Government  security  itself.  Such
repurchase  agreements  will be made only with banks with assets of $500 million
or more that are insured by the Federal  Deposit  Insurance  Corporation or with
Government  securities  dealers  recognized  by the  Federal  Reserve  Board and
registered as broker-dealers with the SEC or exempt from such registration.  The
Funds will generally enter into repurchase  agreements of short durations,  from
overnight to one week, although the underlying  securities generally have longer
maturities.  A Fund may not enter  into a  repurchase  agreement  with more than
seven  days to  maturity  if,  as a  result,  more than 15% oth value of its net
assets  would be invested  in  illiquid  securities  including  such  repurchase
agreements.

For  purposes  of the  Investment  Company  Act of  1940  (the  "1940  Act"),  a
repurchase  agreement  is deemed  to be a loan from a Fund to the  seller of the
U.S.  Government security subject to the repurchase  agreement.  It is not clear
whether a court would consider the U.S.  Government  security acquired by a 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 e of the commencement of
bankruptcy  or  insolvency  proceedings  with  respect to the seller of the U.S.
Government security before its repurchase under a repurchase  agreement,  a Fund
could  encounter  delays and incur costs before being able to sell the security.
Delays may involve loss of interest or a decline in price of the U.S. Government
security.  If a court characterizes the transaction as a loan and a Fund has not
perfected a security interest in the U.S. Government  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,  a Fund would be at
the risk of losing  some or all of the  principal  and  income  involved  in the
transaction.  As with any unsecured debt instrument purchased for the Funds, the
Advisor  seeks to minimize the risk of loss  through  repurchase  agreements  by
analyzing the  creditworthiness  of the other party,  in this case the seller of
the U.S. Government security.

Apart from the risk of bankruptcy or insolvency  proceedings,  there is also the
risk that the seller may fail to  repurchase  the security.  However,  the Funds
will always receive as collateral for any repurchase  agreement to which they aa
party securities  acceptable to the Advisor,  the market value of which is equal
to at least 100% of the amount invested by the Funds plus accrued interest,  and

                                      B-8

the Funds will make payment against such securities only upon physical  delivery
or evidence  of book entry  transfer  to the  account of its  Custodian.  If the
market value of the U.S. Government security subject to the repurchase agreement
becomes less than the  repurchase  price  (including  interest),  the Funds will
direct  the  seller  of the  U.S.  Government  security  to  deliver  additional
securities so that the market value of all securities  subject to the repurchase
agreement  will equal or exceed the  repurchase  price.  It is possible that the
Funds  could be  unsuccessful  in seeking to impose on the seller a  contractual
obligation to deliver additional securities.

SHORT-TERM INVESTMENTS

The Funds may invest in any of the following securities and instruments:

     CERTIFICATES OF DEPOSIT,  BANKERS' ACCEPTANCES AND TIME DEPOSITS. The Funds
may hold  certificates  of  deposit,  bankers'  acceptances  and time  deposits.
Certificates  of  deposit  are  negotiable  certificates  issued  against  funds
deposited  in a  commercial  bank for a  definite  period of time and  earning a
specified  return.  B acceptances  are  negotiable  drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specific merchandise, which
are "accepted" by a bank, meaning in effect that the bank unconditionally agrees
to pay the face value of the instrument on maturity. Certificates of deposit and
bankers'   acceptances   acquired  by  the  Funds  will  be   dollar-denominated
obligations  of domestic  banks,  savings  and loan  associations  or  financial
institutions which, at the time of purchase, have capital, surplus and undivided
profits in excess of $100 million (including assets of both domestic and foreign
branches), based on latest published reports, or less than $100 million if the p
amount of such bank obligations are fully insured by the U.S. Government.

In addition to buying  certificates  of deposit and  bankers'  acceptances,  the
Funds also may make interest-bearing time or other interest-bearing  deposits in
commercial  or  savings  banks.  Time  deposits  are   non-negotiable   deposits
maintained  at a  banking  institution  for a  specified  period  of  time  at a
specified interest rate.

     COMMERCIAL  PAPER AND SHORT-TERM  NOTES. A Fund may invest a portion of its
assets in commercial  paper and short-term  notes.  Commercial paper consists of
unsecured  promissory  notes  issued  by  corporations.   Commercial  paper  and
short-term  notes will  normally  have  maturities  of less than nine months and
fixed rates of ralthoug such instruments may have maturities of up to one year.

Commercial  paper and short-term  notes will consist of issues rated at the time
of purchase  "A-2" or higher by Standard & Poor's  Ratings  Group,  "Prime-1" or
"Prime-2" by Moody's  Investors  Service,  Inc.,  or similarly  rated by another
nationally  recognized  statistical rating organization or, if unrated,  will be
determined by the Advisor to be of comparable quality.  These rating symbols are
described in the Appendix.

INVESTMENT COMPANY SECURITIES

The Funds may invest in shares of other investment companies.  A Fund may invest
in money  market  mutual funds i connection  with its  management  of daily cash
positions.  In addition to the advisory and operational fees aFun bears directly
in  connection  with its own  operation,  the Fund  would also bear its pro rata
portions of each other investment company's advisory and operational expenses.

INVESTMENT RESTRICTIONS

Each Fund has  adopted the  following  investment  restrictions  that may not be
changed without  approval by a "majority of the outstanding  shares" of the Fund
which,  as used in this SAI,  means the vote of the lesser of (67 or more of the
shares of the Fund represented at a meeting,  if the holders of more than 50% of
the  outstanding  shares of the Fund are present or represented by proxy, or (b)
more than 50% of the outstanding shares of the Fund.

Each Fund is diversified.  This means that as to 75% of each Fund's total assets
(1) no more than 5% may be in the securities of a single issuer, and (2) neither
Fund may hold more than 10% of the  outstanding  voting  securities  of a single
issuer.

                                      B-9

In addition, neither Fund may:

(1) Make loans to others,  except (a) through the purchase of debt securities in
accordance with its investment objective and policies,  or (b) to the extent the
entry into a repurchase agreement is deemed to be a loan.

(2)  Borrow  money,  except  for  temporary  or  emergency  purposes.  Any  such
borrowings will be made only i immediately thereafter there is an asset coverage
of at least 300% of all borrowings.

(3) Mortgage,  pledge or hypothecate any of its assets except in connection with
any borrowings.

(4) Purchase  securities on margin,  participate on a joint or joint and several
basis in any securities  trading account,  or underwrite  securities.  (Does not
preclude the Fund from obtaining such short-term  credit as may be necessary for
the clearance of purchases and sales of its portfolio securities.)

(5) Purchase real estate,  commodities or commodity  contracts.  (As a matter of
operating policy,  the Board of Trustees may authorize the Fund in the future to
engage in certain  activities  regarding futures contracts for bona fide hedging
purposes; any such authorization will be accompanied by appropriate notification
to shareholders.)

(6) Issue  senior  securities,  as  defined  in the 1940 Act,  except  that this
restriction  shall not be  deemed  to  prohibit  the Fund  from (a)  making  any
permitted borrowings, mortgages or pledges or (b) entering into options, futures
or repurchase transactions.

(7) Invest 25% or more of the market  value of its assets in the  securities  of
companies  engaged in any one industry,  except that this  restriction  does not
apply to investments in the securities of the U.S.  Government,  its agencies or
instrumentalities.

Each Fund observes the following policies,  which are not deemed fundamental and
which may be changed without shareholder vote. A Fund may not:

(8) Invest in any issuer for purposes of exercising control or management.

(9) Invest in securities of other investment companies except as permitted under
the 1940 Act.

(10) Invest,  in the  aggregate,  more than 15% of its net assets in  securities
with  legal or  contractual  restrictions  on resale,  securities  which are not
readily  marketable  and  repurchase  agreements  with more than  seven  days to
maturity.

Except with respect to  borrowing,  if a  percentage  or rating  restriction  on
investment or use of assets set forth herein or in the  Prospectus is adhered to
at the time a transaction  is effected,  later  changes in percentage  resulting
from any cause other than actions by a Fund will not be  considered a violation.
If the value of a Fund's holdings of illiquid securities at any time exceeds the
percentage  limitation  applicable at the time of acquisition  due to subsequent
fluctuations in value or other reasons, the Board of Trustees will consider what
actions, if any, are appropriate to maintain adequate liquidity.

                                   MANAGEMENT

The overall  management  of the business and affairs of the Trust is vested with
its Board of Trustees. The Board approves all significant agreements between the
Trust  and  persons  or  companies  furnishing  services  to it,  including  the
agreements with the Advisor,  Administrator,  Custodian and Transfer Agent.  The
day to day operations of the Trust are delegated to its officers, subject to the
Funds'  investment  objectives  and policies and to general  supervision  by the
Board of Trustees.

The Trustees and officers of the Trust, their birth dates and positions with the
Trust, their business  addresses and principal  occupations during the past five
years are  listed  below.  Unless  noted  otherwise,  each  person  has held the
position listed for a minimum of five years.

                                      B-10

WALTER E. AUCH  (born 1921) Trustee
4455 E. Camelback Rd., Suite 261-E,  Phoenix, AZ 85018.  Management  Consultant;
Director, Nicholas-Applegate Funds, Salomon Smith Barney Funds, Banyan Strategic
Realty Trust, Legend Properties, Pimco Advisors LLP and Senele Group.

ERIC M. BANHAZL* (born 1957) Trustee, President and Treasurer
2020 E. Financial Way, Glendora, CA 91741. Executive Vice President,  Investment
Company  Administration,  LLC; Vice President,  First Fund  Distributors,  Inc.;
Treasurer, Investec Funds.

DONALD E. O'CONNOR (born 1936) Trustee
4455 E. Camelback Rd., Suite 261-E,  Phoenix,  AZ 85018.  Financial  Consultant;
formerly  Executive  Vice  President and Chief  Operating  Officer of ICI Mutual
Insurance Company (until January, 1997); Vice President, Operations,  Investment
Company Institute (until June, 1993);  Independent Director, The Parnassus Fund,
The Parnassus Income Fund, and The Forward Funds.

GEORGE T. WOFFORD III (born 1939) Trustee
4455 E. Camelback Rd., Suite 261-E,  Phoenix,  AZ 85018.  Senior Vice President,
Information Services, Federal Home Loan Bank of San Francisco.

STEVEN J. PAGGIOLI (born 1950) Vice President
915  Broadway,  Suite  1605,  New York,  NY  10010.  Executive  Vice  President,
Investment Company Administration, LLC; Vice President and Secretary, First Fund
Distributors,  Inc.; President and Trustee,  Professionally  Managed Portfolios;
Trustee, Managers Funds.

ROBERT H. WADSWORTH (born 1940) Vice President
4455 E. Camelback  Rd., Suite 261-E,  Phoenix,  AZ 85018.  President,  Robert H.
Wadsworth & Associates,  Inc., Investment Company Administration,  LLC and First
Fund  Distributors,  Inc.; Vice President,  Professionally  Managed  Portfolios;
President and Trustee,  Trust for Investment Managers;  Director,  Germany Fund,
Inc., New Germany Fund,  Inc.,  Central  European Equity Fund, Inc. and Deutsche
Funds, Inc.

THOMAS W. MARSCHEL (born 1970) Vice President
4455  E.  Camelback  Rd.,  Suite  261-E,  Phoenix,  AZ  85018.  Vice  President,
Investment  Company  Administration,   LLC;  Treasurer,   Trust  for  Investment
Managers; Assistant Vice President, Investment Company Administration,  LLC from
October 1995 to January 2000.

CHRIS O. MOSER (born 1949) Secretary
4455 E. Camelback Rd., Suite 261-E,  Phoenix,  AZ 85018.  Employed by Investment
Company Administration,  LLC (since July 1996); Secretary,  Trust for Investment
Managers;  Formerly  employed  by Bank One,  N.A.  (from  August 1995 until July
1996).

- ----------
*    denotes  Trustee who is an "interested  person" of the Trust under the 1940
     Act.

Name and Position                         Aggregate Compensation From the Trust
- -----------------                         -------------------------------------
Walter E. Auch, Trustee                                $12,000
Donald E. O'Connor, Trustee                            $12,000
George T. Wofford III, Trustee                         $12,000

Compensation  indicated  is for  the  calendar-year  ended  December  31,  1999.
Currently, each Independent Trustee receives $18,000 per year in fees, plus $500
for each  meeting  attended  and is  reimbursed  for  expenses.  This  amount is
allocated  among the  portfolios  of the  Trust.  The Trust  has no  pension  or
retirement plan. No other entity affiliated with the Trust pays any compensation
to the Trustees.

                                      B-11

For the fiscal year ended  August 31, 2000,  trustees'  fees and expenses in the
amount of $4,146 and $3,164 were  allocated  to the Small Cap Fund and the Large
Cap Fund, respectively. As of the date of this SAI, the Trustees and Officers of
the  Trust as a group  did not own more  than 1% of the  outstanding  shares  of
either Fund.

THE ADVISOR

Chartwell  Investment  Partners acts as investment advisor to the Funds pursuant
to an Investment Advisory Agreement (the "Advisory Agreement").  Subject to such
policies as the Board of Trustees may determine,  the Advisor is responsible for
investment  decisions  for the  Funds.  Pursuant  to the  terms of the  Advisory
Agreement,  the  Advisor  provides  the Funds  with such  investment  advice and
supervision  as it deems  necessary  for the  proper  supervision  of the Funds'
investments. The Advisor continuously provides investment programs and determine
from time to time what securities shall be purchased, sold or exchanged and what
portion of the Funds' assets shall be held uninvested.

The  Advisor  furnishes,  at its  own  expense,  all  services,  facilities  and
personnel  necessary in c with managing the investments and effecting  portfolio
transactions for the Funds. The Advisory  Agreement will continue in effect from
year to year only if such continuance is specifically approved at least annually
by the Board oTrustee or by vote of a majority of each Fund's outstanding voting
securities and by a majority of the Trustees who are not parties to the Advisory
Agreement or interested  persons of any such party,  at a meeting called for the
purpose of voting on such Advisory Agreement.

Pursuant to the terms of the  Advisory  Agreement,  the Advisor is  permitted to
render services to others.  The Advisory Agreement is terminable without penalty
by the Trust on  behalf  of a Fund on not more  than 60 days',  nor less than 30
days',  written notice when  authorized  either by a majority vote of the Fund's
shareholders  or by a vote of amajorit of the Board of Trustees of the Trust, or
by the  Advisor  on not more  than 60 days',  nor less  than 30  days',  written
notice,  and will  automatically  terminate in the event of its "assignment" (as
defined in the 1940 Act). The Advisory Agreement provides that the Advisor under
such  agreement  shall not be liable for any error of judgment or mistake of law
or for any loss arising out of any  investment or for any act or omission in the
execution  of  portfolio   transactions   for  the  Funds,   except  for  wilful
misfeasance,  bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties thereunder.

In the event the operating expenses of a Fund, including all investment advisory
and administration  fees, but excluding  brokerage  commissions and fees, taxes,
interest and extraordinary expenses such as litigation, for any fyear exceed the
Fund's expense limitation,  the Advisor shall reduce its advisory fee (which fee
is  described  below) to the extent of its share of such  excess  expenses.  The
amount of any such  reduction to be borne by the Advisor sbe  deducted  from the
monthly  advisory  fee  otherwise  payable  with respect to the Fund during such
fiscal  year;  and if such  amounts  should  exceed the monthly fee, the Advisor
shall pay to the Fund its share of such excess en later than the last day of the
first month of the next succeeding fiscal year.

In  consideration  of the  services  provided  by the  Advisor  pursuant  to the
Advisory  Agreement,  the A is entitled to receive from each Fund an  investment
advisory  fee  computed  daily  and  paid  monthly  based  on a rate  equal to a
percentage of the Fund's average daily net assets  specified in the  Prospectus.
However,  the  Advisor  may  voluntarily  agree to waive a  portion  of the fees
payable to it on a month-to-month basis.

Each  Fund is  responsible  for its own  operating  expenses.  The  Advisor  has
contractually  agreed to reduce fees  payable to it by the Funds and to pay Fund
operating expenses to the extent necessary to limit each Fund's aggregate annual
operating expenses  (excluding interest and tax expenses) to the limit set forth
in the Expense Table ( "expense  cap").  Any such reductions made by the Advisor
in its fees or payment of expenses which are a Fund's  obligation are subject to
reimbursement  by the Fund to the Advisor,  if so  requested by the Advisor,  in
subsequent fiscal years if the aggregate amount actually paid by the Fund toward
the   operating   expenses  for  such  fiscal  year  (taking  into  account  the
reimbursement) does not exceed the applicable  limitation on Fund expenses.  The
Advisor is  permitted  to be  reimbursed  only for fee  reductions  and  expense
payments made in the previous three fiscal years,  but is permitted to look back
five  years and four  years,  respectively,  during  the  initial  six years and
seventh year of a Fund's  operations.  Any such reimbursement is also contingent
upon Board of Trustees'  subsequent  review and  ratification  of the reimbursed
amounts. Such reimbursement may not be paid prior to a Fund's payment of current
ordinary operating expenses.

                                      B-12

For the period October 1, 1999  (commencement of operations)  through August 31,
2000,  the Large Cap Fund  accrued  $24,155 in advisory  fees,  all of which was
waived by the Advisor.  For the same period,  the Advisor reimbursed the Fund an
additional $79,061 in operating expenses.

For the period October 1, 1999  (commencement of operations)  through August 31,
2000,  the Large Cap Fund  accrued  $6,395 in  advisory  fees,  all of which was
waived by the Advisor.  For the same period,  the Advisor reimbursed the Fund an
additional $106,719 in operating expenses.

THE ADMINISTRATOR

Pursuant  to  an  Administration  Agreement  (the  "Administration  Agreement"),
Investment  Company  Administration,  LLC is the administrator of the Funds (the
"Administrator").  The Administrator provides certain administrative services to
the Funds, including, among other responsibilities, coordinating the negotiation
of contracts and fees with, and the  monitoring of  performance  and billing of,
the Funds' independent contractors and a preparation for signature by an officer
of the Trust of all documents  required to be filed for  compliance by the Trust
and the  Funds  with  applicable  laws and  regulations  excluding  those of the
securities laws of various states;  arranging for the computation of performance
data, including net asset value and yield;  responding to shareholder inquiries;
a  arranging  for the  maintenance  of  books  and  records  of the  Funds,  and
providing,  at its own  expense,  office  facilities,  equipment  and  personnel
necessary to carry out its duties. In this capacity,  the Administrator does not
have any  responsibility  or  authority  for the  management  of the Funds,  the
determination of investment policy,
 or  for
any  matter  pertaining  to the distribution of Fund shares.

The  Administration  Agreement  is  terminable  without  penalty by the Trust on
behalf of a Fund or by the  Administrator on 60 days' written notice (as defined
in the 1940 Act).  The  Administration  Agreement also provides that neither the
Administrator  or its personnel shall be liable for any error of judgment or mof
law or for any act or omission in the  administration  of the Funds,  except for
willful misfeasance,  bad faith or gross negligence in the performance of its or
their duties or by reason of reckless  disregard of its or their obligations and
duties under the Administration Agreement.

For its services, the Administrator receives a monthly fee from each Fund at the
following annual rate, subject to a $30,000 annual minimum:

Fund asset level                               Fee rate
- ----------------                               --------
First $50 million                              0.20% of average daily net assets
Next $50 million                               0.15% of average daily net assets
Next $50 million                               0.10% of average daily net assets
Next $50 million, and thereafter               0.05% of average daily net assets

For the  period  October 1, 1999  through  August 31,  2000,  the  Administrator
received fees of $27,616 from each of the Large Cap Fund and Small Cap Fund.

DISTRIBUTION AGREEMENT

The  Trust  has  entered  into  a  Distribution   Agreement  (the  "Distribution
Agreement") with First Fund Distributors, Inc. (the "Distributor"),  pursuant to
which  the  Distributor  acts  as  the  Funds'  underwriter,   provides  certain
administration  services  and  promotes  and arranges for the sale of the Funds'
shares. The Distributor is an affiliate of the Administrator.

The  Distribution  Agreement will continue in effect with respect to a Fund only
if such  continuance is specifically  approved at least annually by the Board of
Trustees or by vote of a majority of the Fund's  outstanding  voting  securities

                                      B-13

and, in either  case,  by a majority of the  Trustees who are not parties to the
Distribution  Agreement or "interested  persons" (as defined in the 1940 Act) of
any such party. The Distribution  Agreement is terminable without penalty by the
Trust on behalf of a Fund on 60 days' written notice when authorized either by a
majority vote of the Fund's  shareholders  or by vote of a majority of the Board
of Trustees  of the Trust,  including  a majority  of the  Trustees  who are not
"interested  persons"  (as  defined  in the 1940  Act) of the  Trust,  or by the
Distributor on 60 days' written notice, and will automatically  terminate in the
event of its "assignment" (as defined in the 1940 Act). T Distribution Agreement
also provides that neither the Distributor nor its personnel shall be liable for
any act oomissio in the course of, or connected with,  rendering  services under
the Distribution  Agreement,  except for willful  misfeasance,  bad faith, gross
negligence or reckless disregard of its obligations or duties.

                      PORTFOLIO TRANSACTIONS AND BROKERAGE

Pursuant to the Investment  Advisory  Agreement,  the Advisor  determines  which
securities  are to be purchased  and sold by the Funds and which  broker-dealers
will be used to execute the Funds' portfolio  transactions.  Purchases and sales
of securities in the  over-the-counter  market will be executed  directly with a
"market-maker"  unless,  in the  opinion  of the  Advisor,  a better  price  and
execution can otherwise be obtained by using a broker for the transaction.

Purchases of portfolio  securities  for the Funds also may be made directly from
issuers or from  underwriters.  Where possible,  purchase and sale  transactions
will be made through dealers  (including banks) which specialize in the types of
securities  which  the Funds  will be  holding,  unless  better  executions  are
available elsewhere. Dealers and underwriters usually act as principal for their
own account.  Purchases from  underwriters will include a concession paid by the
issuer to the  underwriter  and  purchases  from dealers will include the spread
between the bid and the asked price.  If the execution and price offered by more
than one  broker,  dealer  or  underwriter  are  comparable,  the  order  may be
allocated to a broker, dealer or underwriter that has provided research or other
services as discussed below.

In placing  portfolio  transactions,  the Advisor  will use its best  efforts to
choose a broker-dealer capable of providing the services necessary to obtain the
most  favorable  price and  execution  available.  The full range and quality of
services  available will be considered in making these  determinations,  such as
the size of the order, the difficulty of execution,  the operational  facilities
of the firm  involved,  the firm's  risk in  positioning  a block of s and other
factors. In those instances where it is reasonably determined that more than one
broker-dealer  can  offer the most  favorable  price  and  execution  available,
consideration  may be given to those  broker-dealers  which  furnish  or  supply
research  and  statistical  information  to the Advisor that it may lawfully and
appropriately  use in its  investment  advisory  capacities,  as well as provide
other  services in addition to execution  services.  The Advisor  considers such
information, which is in addition to and not in lieu of the services required to
be performed by it under its Agreement  with the Funds,  to be useful in varying
degrees, but of indeterminable value.  Portfolio transactions may be placed with
broker-dealers  who sell  shares of the Funds  subject  to rules  adopted by the
National Association of Securities Dealers, Inc.

While it is the Funds' general policy to seek first to obtain the most favorable
price and execution available, in selecting a broker-dealer to execute portfolio
transactions  for  the  Funds,  weight  is  also  given  to  the  ability  of  a
broker-dealer to furnish  brokerage and research services to the Funds or to the
Advisor,  even if the specific services are not directly useful to the Funds and
may be  useful  to  the  Advisor  in  advising  other  clients.  In  negotiating
commissions  with a broker or evaluating the spread to be paid to a dealer,  the
Funds may therefore pay a higher  commission or spread than would be the case if
no weight were given to the furnishing of these supplemental services,  provided
that the amount of such  commission or spread has been  determined in good faith
by the Advisor to be reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer. The standard of reasonableness
is to be  measured in light of the  Advisor's  overall  responsibilities  to the
Funds.

Investment  decisions for the Funds are made  independently  from those of other
client accounts or mutual funds managed or advised by the Advisor. Nevertheless,
it is possible that at times  identical  securities  will be acceptable for both
the Funds and one or more of such client  accounts.  In such event, the position
of the Funds and such  client  account(s)  in the same  issuer  may vary and the
length of time that each may choose to hold its  investment  in the same  issuer
may likewise vary.  However, to the extent any of these client accounts seeks to
acquire the same  security as a Fund at the same time,  the Fund may not be able

                                      B-14

to acquire as large a portion of such security as it desires,  or it may have to
pay a higher price or obtain a lower yield for such security.  Similarly, a Fund
may not be able to obtain as high a price for, or as large an  execution  of, an
order to sell any  particular  security at the same time. If one or more of such
client accounts simultaneously  purchases or sells the same security that a Fund
is  purchasing  or selling,  each day's  transactions  in such  security will be
allocated  between  the Fund and all such  client  accounts  in a manner  deemed
equitable  by the  Advisor,  taking  into  account the  respective  sizes of the
accounts and the amount being  purchased or sold. It is recognized  that in some
cases this system could have a  detrimental  effect on the price or value of the
security  insofar  as the Fund is  concerned.  In other  cases,  however,  it is
believed that the ability of a Fund to  participate in volume  transactions  may
produce better executions for the Fund.

The  Funds do not place  securities  transactions  through  brokers  solely  for
selling shares of the Funds,  although the Funds may consider the sale of shares
as a factor in allocating  brokerage.  However, as stated above,  broker-dealers
who execute  brokerage  transactions may effect purchases of shares of the Funds
for their customers.

For the period  October 1, 1999 through August 31, 2000, the Large Cap Fund paid
$24,380 in brokerage commissions with respect to portfolio transactions. Of such
amount $3,704 was paid to firms for research,  statistical or oservice  provided
to the Advisor.

For the period  October 1, 1999 through August 31, 2000, the Small Cap Fund paid
$3.534 in brokerage commissions with respect to portfolio transactions.  Of such
amount $1,336 was paid to firms for research,  statistical or oservice  provided
to the Advisor.

                               PORTFOLIO TURNOVER

Although the Funds  generally will not invest for short-term  trading  purposes,
portfolio  securities may be sold without regard to the length of them they have
been held when, in the opinion of the Advisor, investment considerations warrant
such action.  The Large Cap Fund  anticipates  that its portfolio  will be 125%.
Portfolio  turnover rate is cby dividing (1) the lesser of purchases or sales of
portfolio  securities  for the fiscal  year by (2) the m average of the value of
portfolio  securities  owned during the fiscal year. A 100%  turnover rate would
occur  if all the  securities  in a Fund's  portfolio,  with  the  exception  of
securities  whose  maturities at the time of acquisition  were one year or less,
were sold and either  repurchased  or replaced  within one year.  A high rate of
portfolio  turnover (100% or more) generally leads to higher  transaction  costs
and may  result in a greater  number of  taxable  transactions.  For the  period
October 1, 1999 through  August 31, 2000,  the Large Cap Fund and Small Cap Fund
had a portfolio turnover rate of 169.14% and 68.77%, respectively.

                     PURCHASE AND REDEMPTION OF FUND SHARES

The information  provided below  supplements  the  information  contained in the
Funds' Prospectus regarding the purchase and redemption of Fund shares.

HOW TO BUY SHARES

Fund  shares are  purchased  at the net asset  value next  determined  after the
Transfer  Agent  receives your order in proper form. In most cases,  in order to
receive that day's public offering  price,  the Transfer Agent must receive your
order in proper form before the close of regular trading on the NYSE,  currently
4:00 p.m.,  Eastern Time.  Orders are in proper form only after investment money
is  converted to U.S.  dollars.  Orders paid by check and received by 4:00 p.m.,
Eastern  Time,  will  generally  be  available  for the  purchase  of shares the
following business day.

If you are  considering  redeeming  or  transferring  shares to  another  person
shortly after  purchase,  you should pay for those shares with a certified check
to avoid any delay in redemption or transfer. Otherwise a Fund may delay payment
until the purchase price of those shares has been  collected,  which may take up
to 15 calender days. To eliminate the need for  safekeeping,  the Funds will not
issue certificates for your shares unless you request them.

                                      B-15

The Trust reserves the right in its sole discretion (1) to suspend the continued
offering of the Funds' shares,  (rejec  purchase orders in whole or in part when
in the  judgment of the Advisor or the  Distributor  such  rejection  is in tbes
interest  of the Funds,  and (3) to reduce or waive the  minimum for initial and
subsequent  investments for certain  fiduciary  accounts or under  circumstances
where certain economies can be achieved in sales of the Funds' shares.

Selected  securities  brokers,  dealers or  financial  intermediaries  may offer
shares  of the  Funds.  Investors  should  contact  these  agents  directly  for
appropriate instructions,  as well as information pertaining to accounts and any
service or transaction fees that may be charged by those agents. Purchase orders
through  securities  brokers,  dealers and other  financial  intermediaries  are
effected at the  next-determined  net asset value after  receipt of the order by
such agent before the Funds' daily cutoff time,  currently  the close of regular
trading on the NYSE.  Orders  received  after that time will be purchased at the
next-determined net asset value.

The Funds and the Advisor have  arrangements  with certain  brokerage  firms and
financial institutions to provide administrative,  shareholder subaccounting and
other services,  including  sales-related  services. The Advisor, not the Funds,
compensates  these  organizations  for  their  services  based on the  amount of
customer assets  maintained in the Funds by such  organizations.  The payment of
such compensation by the Advisor will not affect the expense ratio of the Funds.

HOW TO SELL SHARES

You can sell  your Fund  shares  any day the NYSE is open for  regular  trading,
either  directly to the Fund or through your investment  representative.  A Fund
will forward  redemption  proceeds or redeem  shares for which it has  collected
payment of the purchase price.

Payments to  shareholders  for shares of a Fund redeemed  directly from the Fund
will be made as promptly as possible but no later than seven days after  receipt
by the Fund's  Transfer  Agent of the written  request in proper form,  with the
appropriate  documentation  as stated in the Prospectus,  except that a Fund may
suspend  the right of  redemption  or  postpone  the date of payment  during any
period when (a) trading on the NYSE is restricted  as determined  bth SEC or the
NYSE is closed for other than weekends and holidays;  (b) an emergency exists as
determined  by the SEC making  disposal of portfolio  securities or valuation of
net assets of the Fund not reasonably practicable;  or (c) for such other period
as the SEC may permit for the protection of the Fund's shareholders.  At various
times,  a Fund  may be  requested  to  redeem  shares  for  which it has not yet
received confirmation of good payment; in this circumstance,  the Fund may delay
the payment of the  redemption  proceeds  until payment for the purchase of such
shares has been collected and confirmed to the Fund.

SELLING SHARES DIRECTLY TO THE FUND

Send a signed  letter of  instruction  to the  Transfer  Agent,  along  with any
certificates  that represent shares you want to sell. The price you will receive
is the next net asset value  calculated  after the Fund receives your request in
proper form. In order to receive that day's net asset value,  the Transfer Agent
must receive your request before the close of regular trading on the NYSE.

SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE

Your  investment  representative  must receive your request  before the close of
regular  trading  on the NYSE to  receive  that  day's  net  asset  value.  Your
investment  representative  will be  responsible  for  furnishing  all necessary
documentation to the Transfer Agent, and may charge you for its services. If you
sell shares having a net asset value of $100,000 or more, a signature  guarantee
is required.

If you want your redemption  proceeds sent to an address other than your address
as it  appears  on the  Transfer  Agent's  records,  a  signature  guarantee  is
required. The Funds may require additional  documentation for the sale of shares
by a corporation,  partnership,  agent or fiduciary, or a surviving joint owner.
Contact the Transfer Agent for details.

                                      B-16

Signature  guarantees may be obtained from a bank,  broker-dealer,  credit union
(if authorized under state law),  securities  exchange or association,  clearing
agency or  savings  institution.  A notary  public  cannot  provide a  signature
guarantee.

DELIVERY OF PROCEEDS

The Funds generally send you payment for your shares the business day after your
request is received in proper form, assuming the Funds have collected payment of
the purchase price of your shares.  Under unusual  circumstances,  the Funds may
suspend redemptions,  or postpone payment for more than seven days, as permitted
by federal securities law.

TELEPHONE REDEMPTIONS

Telephone   transaction   privileges   are  made   available   to   shareholders
automatically  upon opening an account  unless the  privilege is declined in the
Account Application.  Upon receipt of any instructions or inquiries by telephone
from a shareholder  or, if held in a joint account,  from either party,  or from
any  person  claiming  to be the  shareholder,  the  Funds  or  their  agent  is
authorized, without notifying the shareholder or joint account parties, to carry
out the instructions or to respond to the inquiries, consistent with the service
options chosen by the  shareholder or joint  shareholders in his or their latest
Account Application or other written request for services,  including purchasing
or redeeming shares of the Funds and depositing and withdrawing  monies from the
bank  account  specified  in  the  Bank  Account  Registration  section  of  the
shareholder's  latest Account  Application or as otherwise properly specified to
the Funds in writing.

The Transfer Agent will employ these and other reasonable  procedures to confirm
that instructions  communicated by telephone are genuine; if such procedures are
observed,  neither  the  Funds  nor their  agents  will be liable  for any loss,
liability, cost or expense arising out of any redemption request,  including any
fraudulent or unauthorized request. For information, consult the Transfer Agent.

REDEMPTIONS-IN-KIND

Subject to compliance  with applicable  regulations,  each Fund has reserved the
right to pay the redemption price of its shares, either totally or partially, by
a distribution in kind of readily marketable  portfolio  securities  (instead of
cash). The securities so distributed  would be valued at the same amount as that
assigned to them in  calculating  the net asset value for the shares being sold.
If a shareholder  received a distribution in kind, the  shareholder  could incur
brokerage or other charges in converting  the  securities to cash. The Trust has
filed an election  under Rule 1 committing to pay in cash all  redemptions  by a
shareholder  of  record  up to  amounts  specified  by the  rule  (approximately
$250,000).

                        DETERMINATION OF NET ASSET VALUE

The net asset value of each Fund's shares will fluctuate and is determined as of
the close of trading on the New York Stock Exchange (the "NYSE") (generally 4:00
p.m.  Eastern time) each  business day. The NYSE annually  announces the days on
which it will not be open for trading.  The most recent  announcement  indicates
that it will not be open for the  following  holidays:  New Year's  Day,  Martin
Luther King, Jr. Day, Presidents' Day, Good Friday,  Memorial Day,  Independence
Day, Labor Day,  Thanksgiving Day and Christmas Day. However, the NYSE may close
on days not included in that announcement.

The net  asset  value  per  share  is  computed  by  dividing  the  value of the
securities held by a Fund plus any cash or other assets (including  interest and
dividends accrued but not yet received) minus all liabilities (including accrued
expenses) by the total number of shares in the Fund outstanding at such time.

Generally, Fund's investments are valued at market value or, in the absence of a
market  value,  at fair value as determined in good faith by the Advisor and the
Trust's  Valuation  Committee  pursuant to  procedures  approved by or under the
direction of the Board.

Each Fund's securities, including ADRs, which are traded on securities exchanges
are valued at the last sale price on the exchange on which such  securities  are
traded,  as of the close of business on the day the  securities are being valued
or, lacking any reported  sales,  at the mean between the last available bid and
asked price.  Securities that are traded on more than one exchange are valued on
the  exchange  determined  by the Advisor to be the primary  market.  Securities
primarily  traded  in  the  NASDAQ  National  Market  System  for  which  market

                                      B-17

quotations are readily  available  shall be valued at the last sale price on the
day of valuation,  or if there has been no sale on such day, at the mean between
the bid and asked  prices.  OTC  securities  which are not  traded in the NASDAQ
National  Market  System  shall  be  valued  at the  most  recent  trade  price.
Securities  and assets for which  market  quotations  are not readily  available
(including  restricted  securities  which are subject to limitations as to their
sale)  are  valued at fair  value as  determined  in good  faith by or under the
direction of the Board.

Short-term debt obligations  with remaining  maturities in excess of 60 days are
valued at current market prices, as discussed above.  Short-term securities with
60 days or less remaining to maturity are, unless conditions indicate otherwise,
amortized to maturity  based on their cost to a Fund if acquired  within 60 days
of maturity or, if already held by the Fund on the 60th day,  based on the value
determined on the 61st day.

An option that is written by a Fund is  generally  valued at the last sale price
or, in the absence of the last sale price,  the last offer price. An option that
is  purchased  by Fund is  generally  valued at the last  sale  price or, in the
absence  of the last sale  price,  the last bid price.  If an  options  exchange
closes after the time at which A Fund's net asset vis calculated,  the last sale
or last bid and asked prices as of that time will be used to  calculate  the net
asset value.

All other  assets of the  Funds are  valued in such  manner as the Board in good
faith deems appropriate to reflect their fair value.

                           DIVIDENDS AND DISTRIBUTIONS

Each Fund will receive  income in the form of dividends  and interest  earned on
its investments in securities.  This income,  less the expenses  incurred in its
operations,  is a Fund's net investment income,  substantially all of which will
be declared as dividends to the Fund's shareholders.

The amount of income dividend payments by a Fund is dependent upon the amount of
net investment income received by the Fund from its portfolio  holdings,  is not
guaranteed and is subject to the  discretion of the Board.  The Funds do not pay
"interest" or guarantee any fixed rate of return on an investment in its shares.

Each Fund also may derive  capital gains or losses in  connection  with sales or
other dispositions of its portfolio securities.  Any net gain a Fund may realize
from transactions  involving  investments held less than the period required for
long-term  capital gain or loss  recognition or otherwise  producing  short-term
capital gains and losses  (taking into account any  carryover of capital  losses
from the eight previous  taxable  years),  although a distribution  from capital
gains,  will be  distributed  to  shareholders  with and as a part of  dividends
giving rise to ordinary  income.  Idurin any year a Fund  realizes a net gain on
transactions  involving  investments  held more  than the  period  required  for
long-term gain or loss  recognition  or otherwise  producing  long-term  capital
gains and losses,  the Fund w have a net long-term capital gain. After deduction
of the amount of any net short-term capital loss, the balance (to the extent not
offset by any capital losses carried over from the eight previous taxable years)
will be dand treated as long-term capital gains in the hands of the shareholders
regardless  of the  length  of time a Fund's  shares  may have  been held by the
shareholders.  For more  information  concerning  applicable  capital  gains tax
rates, see your tax advisor.

Any dividend or  distribution  paid by a Fund reduces the Fund's net asset value
per share on the date paid by the amount of the  dividend  or  distribution  per
share. Accordingly,  a dividend or distribution paid shortly after a purchase of
shares by a  shareholder  would  represent,  in substance,  a partial  return of
capital (to the extent it is pon the shares so purchased),  even though it would
be subject to income taxes.

Dividends and other  distributions will be made in the form of additional shares
of the  distributing  Fund  unless  the  shareholder  has  otherwise  indicated.
Investors  have  the  right  to  change  their  election  with  respect  to  the
reinvestment of dividends and  distributions  by notifying the Transfer Agent in
writing,  but any such change will be effective  only as to dividends  and other
distributions for which the record date is seven or more business days after the
Transfer Agent has received the written request.

                                      B-18

                                   TAX MATTERS

Each series of the Trust is treated as a separate  entity for federal income tax
purposes.  Each Fund  intends to qualify  and elect to be treated as a regulated
investment  company under Subchapter M of the Internal Revenue Code of 1986 (the
"Code"),  provided it complies with all  applicable  requirements  regarding the
source of its income, diversification of its assets and timing of distributions.
Each Fund's policy is to distribute to its  shareholders  all of its  investment
company  taxable  income and any net realized  long-term  capital gains for each
fiscal year in a manner that complies with the distribution  requirements of the
Code,  so that the Fund  will not be  subject  to any  federal  income or excise
taxes.  To comply with the  requirements,  each Fund must also distribute (or be
deemed to have  distributed)  by December 31 of each  calendar year (i) at least
98% of its ordinary income for such year, (ii) at least 98% of the excess of its
realized  capital gains over its realized capital losses for the 12-month period
ending on  October  31 during  such  year and (iii) any  amounts  from the prior
calendar  year that were not  distributed  and on which the Fund paid no federal
income tax.

Net investment  income consists of interest and dividend income,  less expenses.
Net  realized  capital  gains for a fiscal  period are  computed  by taking into
account any capital loss carryforward of a Fund.

Distributions  of net  investment  income and net  short-term  capital gains are
taxable  to  shareholders  as  ordinary   income.   In  the  case  of  corporate
shareholders,  a portion of the distributions may qualify for the intercorporate
dividends-received  deduction  to  the  extent  a  Fund  designates  the  amount
distributed as a qualifying  dividend.  This designated amount cannot,  however,
exceed the aggregate amount of qualifying  dividends  received by a Fund for its
taxable year.  In view of the Funds'  investment  policies,  it is expected that
dividends from domestic corporations will be part of the Funds' gross income and
that,  accordingly,  part of the  distributions by the Funds may be eligible for
the  dividends-received  deduction  for  corporate  shareholders.  However,  the
portion of a Fund's gross income attributable to qualifying dividends is largely
dependent  on that  Fund's  investment  activities  for a  particular  year  and
therefore  cannot be predicted with any certainty.  The deduction may be reduced
or  eliminated  if the Fund shares held by a corporate  investor  are treated as
debt-financed or are held for less than 46 days.

Any  long-term  capital  gain  distributions  are  taxable  to  shareholders  as
long-term  capital gains regardless of the length of time shares have been held.
Capital  gains  distributions  are  not  eligible  for  the   dividends-received
deduction  referred  to in the  previous  paragraph.  Distributions  of any  net
investment  income and net realized  capital  gains will be taxable as described
above, whether received in shares or in cash. Shareholders who choose to receive
distributions  in the form of  additional  shares  will  have a cost  basis  for
federal  income tax  purposes in each share so  received  equal to the net asset
value of a share on the reinvestment  date.  Distributions are generally taxable
when received. However,  distributions declared in October, November or December
to  shareholders  of  record  on a date in such a month  and paid the  following
January are taxable as if received on December 31.  Distributions are includable
in alternative minimum taxable income in computing a shareholder's liability for
the alternative minimum tax.

A redemption of Fund shares may result in recognition of a taxable gain or loss.
Any loss realized upon a redemption of shares within six months from the date of
their purchase will be treated as a long-term  capital loss to the extent of any
amounts  treated  as  distributions  of  long-term  capital  gains  during  such
six-month  period.  Any loss realized upon a redemption may be disallowed  under
certain  wash sale  rules to the extent  shares of the same Funds are  purchased
(through  reinvestment of distributions  or otherwise)  within 30 days before or
after the redemption.

Under the Code,  the Funds will be  required to report to the  Internal  Revenue
Service ("IRS") all distributions of taxable income and capital gains as well as
gross proceeds from the redemption of Fund shares,  except in the case of exempt
shareholders,   which  includes  most  corporations.   Pursuant  to  the  backup
withholding  provisions  of the Code,  distributions  of any taxable  income and
capital gains and proceeds from the  redemption of Fund shares may be subject to
withholding  of  federal  income  tax at the rate of 31  percent  in the case of
non-exempt  shareholders  who fail to  furnish  the Funds  with  their  taxpayer
identification numbers and with required  certifications  regarding their status

                                      B-19

under the federal income tax law. If the withholding  provisions are applicable,
any such  distributions  and  proceeds,  whether  taken in cash or reinvested in
additional  shares,  will be reduced by the  amounts  required  to be  withheld.
Corporate  and other  exempt  shareholders  should  provide the Funds with their
taxpayer identification numbers or certify their exempt status in order to avoid
possible  erroneous  application  of backup  withholding.  The Funds reserve the
right to refuse to open an account for any person failing to provide a certified
taxpayer identification number.

The use of hedging  strategies,  such as entering  into  futures  contracts  and
purchasing options, involves complex rules that will determine the character and
timing of recognition of the income received in connection  therewith by a Fund.
Income from transactions in options and futures contracts derived by a Fund with
respect to its business of investing in securities  will qualify as  permissible
income under Subchapter M of the Code.

For accounting  purposes,  when a Fund purchases an option,  the premium paid by
the Fund is  recorded  as an asset and is  subsequently  adjusted to the current
market  value  of the  option.  Any  gain or loss  realized  by a Fund  upon the
expiration  or sale of such options held by the Fund  generally  will be capital
gain or loss.

Any  security,  option,  or other  position  entered into or held by a Fund that
substantially diminishes the Fund's risk of loss from any other position held by
the Fund may  constitute  a  "straddle"  for  federal  income tax  purposes.  In
general,  straddles  are  subject to certain  rules that may affect the  amount,
character  and timing of a Fund's  gains and  losses  with  respect to  straddle
positions  by  requiring,   among  other  things,  that  the  loss  realized  on
disposition  of one position of a straddle be deferred until gain is realized on
disposition  of the  offsetting  position;  that the  Fund's  holding  period in
certain straddle positions not begin until the straddle is terminated  (possibly
resulting in the gain being tas  short-term  capital gain rather than  long-term
capital  gain);  and that losses  recognized  with  respect to certain  straddle
positions,  which would  otherwise  constitute  short-term  capital  losses,  be
treated as long-term capital losses. Different elections are available to a Fund
that may mitigate the effects of the straddle rules.

Certain  options and futures  contracts  that are subject to Section 1256 of the
Code  ("Section 1256  Contracts")  and that are held by a Fund at the end of its
taxable  year  generally  will be  required to be "marked to market" for federal
income tax purposes,  that is,  deemed to have been sold at market value.  Sixty
percent of any net gain or loss  recognized on these deemed sales and 60% of any
net gain or loss realized from any actual sales of Section 1256  Contracts  will
be treated as long-term capital gain or loss, and the balance will be treated as
short-term capital gain or loss.

Section 475 of the Code requires that a "dealer" in  securities  must  generally
"mark to market" at the end of its taxable  year all  securities  which it owns.
The  resulting  gain or loss is treated as ordinary  (and not  capital)  gain or
loss, except to the extent allocable to periods during which the dealer held the
security for investment.  The "mark to market" rules do not apply, however, to a
security held for investment which is clearly identified in the dealer's records
as being held for investment before the end of the day in which the security was
acquired.  The IRS has issued guidance under Section 475 that provides that, for
example,  a bank  that  regularly  originates  and  sells  loans is a dealer  in
securities,  and subject to the "mark to market" rules. Shares of a Fund held by
a dealer in securities will be subject to the "mark to market" rules unless they
are held by the dealer for  investment  and the dealer  property  identifies the
shares as held for investment.

The foregoing  discussion of U.S.  federal  income tax law relates solely to the
application  of  that  law  to  U  citizens  or  residents  and  U.S.   domestic
corporations, partnerships, trusts and estates. Each shareholder who is not aU.S
person  should  consider the U.S. and foreign tax  consequences  of ownership of
shares of the Funds,  including the  possibility  that such a shareholder may be
subject to a U.S.  withholding  tax at a rate of 30 percent  (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary income.

This discussion and the related  discussion in the Prospectus have been prepared
by Fund management, and counsel to the Funds has expressed no opinion in respect
thereof.

                                      B-20

                             PERFORMANCE INFORMATION

From time to time,  each Fund may state its total return in  advertisements  and
investor  communications.  Total return may be stated for any relevant period as
specified in the advertisement or communication.  Any statements of total return
will be accompanied by information on a Fund's average annual compounded rate of
return  over the most  recent  four  calendar  quarters  and the period from the
Fund's inception of operations.  A Fund may also advertise aggregate and average
total return information over different periods of time.

A Fund's  total  return may be compared  to any  relevant  indices,  such as the
Standard & Poor's 500 Composite Stock Index,  Russell 2000 Value Index,  Russell
1000 Value Index and indices published by Lipper Analytical Services,  Inc. From
time to time,  evaluations of a Fund's  performance  by independent  sources may
also be used in  advertisements  and in  information  furnished  to  present  or
prospective investors in the Fund.

Investors  should note that the  investment  results of the Funds will fluctuate
over time, and any  presentation  of a Fund's total return for any period should
not be considered as a representation  of what an investment may earn or what an
investor's total return may be in any future period.

Each Fund's average annual  compounded rate of return is determined by reference
to a hypothetical  $1,000  investment  that includes  capital  appreciation  and
depreciation for the stated period, according to the following formula:

                                        n
                                  P(1+T)  = ERV

Where:  P   =  a hypothetical initial purchase order of $1,000
        T   =  average annual total return
        n   =  number of years
        ERV =  ending redeemable value of the hypothetical $1,000 purchase at
               the end of the period

Aggregate  total  return is  calculated  in a similar  manner,  except  that the
results are not annualized.

The total return for the period  October 1, 1999 through August 31, 2000 for the
Large Cap Fund and the Small Cap Fund was 7.22% and 30.66%, respectively. During
this  period,  certain  fees and  expenses  of the  Funds  have  been  waived or
reimbursed. Accordingly, return figures are higher than they would have been had
such fees and expenses not been waived or reimbursed.

                               GENERAL INFORMATION

Investors in the Funds will be informed of the Funds' progress  through periodic
reports.  Financial  statements certified by independent public accountants will
be submitted to shareholders at least annually.

Firstar  Bank,  425 Walnut St.,  Cincinnati,  OH 45202 acts as  Custodian of the
securities  and other assets of tFunds The  Custodian  does not  participate  in
decisions  relating to the purchase and sale of  securities  by the Funds.  IFun
Services,  4455 E.  Camelback  Rd., Ste.  261-E,  Phoenix,  AZ 85018 acts as the
Funds' transfer and shareholder service agent.

Price WaterhouseCoopers LLP, 1177 Avenue of The Americas, New York, NY 10036 are
the independent accountants for the Funds.

Morgan, Lewis & Bockius, 1800 M St. NW, Washington, DC 230036 are counsel to the
Funds.

Paul,  Hastings,  Janofsky & Walker, LLP ,345 California St., San Francisco,  CA
94104 are counsel to the Trust.

                                      B-21

The following  owned of record or  beneficially or of record more than 5% of the
Large Cap Fund's  outstanding  voting  securities  as of  December  1, 2000.  An
asterisk (*) denotes an account  affiliated with the Fund's investment  advisor,
officers or trustees:

Charles H. Barris*, Berwyn, PA 19312 - 21.50%
Draper & Company, F/B/O 740708115 DVIT, Bryn Mawr, PA 19010 - 13.70%
Draper & Company, F/B/A 740708214 DVWLT, Bryn Mawr, PA 19010
Firstnat Co. F/B/O West Chester Boro Non-Uniformed Pension Plan, West Chester,
PA 19381 - 5.60%
Firstnat Co. F/B/O West Chester Boro Police Pension Plan, West Chester, PA 19381
- - 15.60%
First Union National Bank Custodian, F/B/O Upper Dublin Township, Philadelphia,
PA 19109 - 15.24%
Byrd Company, Philadelphia, PA 19109 - 13.26%

The following  owned of record or  beneficially or of record more than 5% of the
Small Cap Fund's  outstanding  voting  securities  as of  December  1, 2000.  An
asterisk (*) denotes an account  affiliated with the Fund's investment  advisor,
officers or trustees:

First Union National Bank, Charlotte, NC 28262-1151 - 24.44% Charles H. Barris*,
Berwyn, PA 19312 - 44.71% Joan M. Riddle, Chester Springs, PA 19425 - 12.38%
Salomon Smith Barney Custodian, F/B/O Winthrop & Jessup IRA Rollover,
Philadelphia, PA 19103 - 7.99%
David C. Dalrymple and Caroline A. Dalrymple, Jt. Ten, Devon, PA 19333 - 5.81%

With  respect  to  certain  funds,  the Trust  may offer  more than one class of
shares.  The Trust has reserved the right to create and issue additional  series
or classes.  Each share of a series or class  represents an equal  proportionate
interest  in that series or class with each other share of that series or class.
Currently, the Funds have only one class oshares

The  shares  of each  series  or  class  participate  equally  in the  earnings,
dividends and assets of the  particular  series or class.  Expenses of the Trust
which are not  attributable to a specific  series or class are allocated  amount
all the series in a manner  believed by  management  of the Trust to be fair and
equitable.  Shares have no pre-emptive or conversion rights.  Shares when issued
are fully paid and non-assessable,  except as set forth below.  Shareholders are
entitled  to one  vote for each  share  held.  Shares  of each  series  or class
generally vote together,  except when required under federal  securities laws to
vote  separately  on matters  that only affect a particular  class,  such as the
approval of distribution plans for a particular class.

The Trust is not required to hold annual meetings of shareholders  but will hold
special meetings of sof a series or class when, in the judgment of the Trustees,
it  is  necessary  or  desirable  to  submit  matters  for a  shareholder  vote.
Shareholders  have, under certain  circumstances,  the right to communicate with
other  shareholders in connection with requesting a meeting of shareholders  for
the purpose of removing one or more Trustees. Shareholders also have, in certain
circumstances,  the right to remove one or more Trustees  without a meeting.  No
material ama be made to the Trust's Declaration of Trust without the affirmative
vote of the holders of a majority of the  outstanding  shares of each  portfolio
affected by the  amendment.  The Trust's  Declaration of Trust provides t at any
meeting of  shareholders  of the Trust or of any series or class,  a Shareholder
Servicing Agent may vote ashare as to which such Shareholder  Servicing Agent is
the agent of record and which are not  represented  in person or by proxy at the
meeting,  proportionately  in  accordance  with the votes cast by holders of all
shares of that  portfolio  otherwise  represented at the meeting in person or by
proxy as to which such Shareholder  Servicing Agent is the agent of record.  Any
shares so voted by a Shareholder  Servicing Agent will be deemed  represented at
the meeting for purposes of quorum  requirements.  Shares have no  preemptive or
conversion  rights.  Shares,  when  issued,  are fully paid and  non-assessable,
except as set forth below.  Any series or class may be  terminated  (i) upon the
merger or consolidation with, or the sale or disposition of all or substantially

                                      B-22

all of its assets to, another entity,  if approved by the vote of the holders of
two-thirds  of its  outstanding  shares,  except  that if the Board of  Trustees
recommends  such merger,  consolidation  or sale or disposition  of assets,  the
approval  by  vote  of the  holders  of a  majority  of the  series'  or  class'
outstanding  shares will be sufficient,  or (ii) by the vote of the holders of a
majority of its outstanding shares, or (iii) by the Board of Trustees by written
notice to the  series'  or class'  shareholders.  Unless  eserie and class is so
terminated, the Trust will continue indefinitely.

The Trust's  Declaration  of Trust also provides  that the Trust shall  maintain
appropriate  insurance (for example,  fidelity  bonding and errors and omissions
insurance)  for  the  protection  of  the  Trust,  its  shareholders,  Trustees,
officers,  employees and agents  covering  possible tort and other  liabilities.
Thus,  the  risk  of a  shareholder  incurring  financial  loss  on  account  of
shareholder  liability  is limited  to  circumstances  in which both  inadequate
insurance existed and the Trust itself was unable to meet its obligations.

The Boards of the Trust,  the Advisor and the Distributor  have adopted Codes of
Ethics under Rule 17j-1 of the 1940 Act. These Codes permit,  subject to certain
conditions,  personnel of the Advisor and  Distributor  to invest in  securities
that may be purchased or held by the Funds.

                              FINANCIAL STATEMENTS

The annual  report to  shareholders  for the Funds for the fiscal  period  ended
August 31, 2000 is a separate  document supplied with this SAI and the financial
statements,  accompanying notes and report of independent  accountants appearing
therein are incorporated by reference in this SAI.

                                      B-23

                                    APPENDIX
                            COMMERCIAL PAPER RATINGS

MOODY'S INVESTORS SERVICE, INC.

Prime-1--Issuers  (or related  supporting  institutions)  rated "Prime-1" have a
superior ability for repayment of senior short-term debt obligations.  "Prime-1"
repayment   ability  will  often  be   evidenced   by  many  of  the   following
characteristics:  leading market positions in well-established  industries, high
rates of return on funds e conservative  capitalization structures with moderate
reliance on debt and ample asset protection,  broad margins in earnings coverage
of  fixed   financial   charges  and  high   internal   cash   generation,   and
well-established  access to a range of financial  markets and assured sources of
alternate liquidity.

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

STANDARD & POOR'S RATINGS GROUP

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

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

                                      B-24