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This prospectus describes the Investor Class offered by The FBR Funds. I Class and R Class of certain of the Funds are available through separate prospectuses dated February 26, 2010.

AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE INFORMATION IN THIS PROSPECTUS IS ADEQUATE OR ACCURATE. ANYONE WHO INDICATES OTHERWISE IS COMMITTING A FEDERAL CRIME.

The investment objective of the Pegasus Fund (the “Fund”) is capital appreciation.

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

Maximum Sales Charge (Load) Imposed on Purchases......................................................................................... NONE

Maximum Deferred Sales Charge...... ........................................................................................................................ NONE

Maximum Sales Charge (Load) Imposed on Reinvested Dividends.................................................................... NONE

Redemption Fee (including exchanges)*................................................................................................................. 1.00%

* A redemption fee applies only to redemptions (including exchanges) of Fund shares made within 90 days of purchase. See “Frequent Trading Policy and Redemption Fee” for more information. In addition, we charge a $10.00 wire fee for all redemption proceeds paid by federal wire made through the Fund’s transfer agent, except on certain institutional and broker/dealer accounts.

(expenses that that you pay each year as a percentage of the value of your investment)

¹ FBR Fund Advisers, Inc. (the “Adviser”) has agreed in writing to waive a portion of its investment advisory fees and assume certain expenses to the extent annual fund operating expenses exceed 1.25% of the Fund’s average daily net assets (excluding interest, taxes, brokerage commissions, acquired fund fees and expenses, extraordinary legal expenses, or any other extraordinary expenses). The Adviser has agreed to maintain this expense limitation through February 28, 2013. The Adviser may recoup any waived amount from the Fund pursuant to this agreement if such reimbursement does not cause the Fund to exceed existing expense limitations and the reimbursement is made within three years after the year in which the Adviser incurred the expense. The agreement may only be terminated by both the Adviser and the Fund.

This Example is intended to help you compare the cost of investing in the Investor Class shares of the Fund with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year, that the Fund’s operating expenses remain the same, and that the expense limitation agreement will continue only through February 28, 2013, the end of its current term. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was ____% of the average value of its portfolio.

PRINCIPAL INVESTMENT STRATEGY. Under normal market conditions, the Fund invests primarily in common stocks that, in the opinion of the Adviser, offer the potential for capital appreciation. The Adviser invests in the stocks of companies of any size without regard to market capitalization.

When evaluating securities to purchase, the Adviser will make investment decisions for the Fund on the basis of fundamental security analysis. Once an issuer is identified as an attractive candidate for the Fund’s portfolio, the Adviser assesses the relative value and growth potential of the security on the basis of various factors, which may include price to book ratio, price to earnings ratio, earnings yield, leverage and cash flow, among others.

Although the Fund invests primarily in common stocks, it may purchase preferred stocks, warrants and convertible bonds. While the Fund’s investments are primarily in domestic U.S. securities, the Fund’s investments may include foreign securities, including indirect investments such as American Depositary Receipts (“ADRs”) or other types of depositary receipts, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations.

MARKET RISKS. Loss of money is a risk of investing in the Fund. The net asset value of the Fund can be expected to change daily and you may lose money. As with any mutual fund, there is no guarantee that the Fund’s performance will be positive over any period of time, either short-term or long-term.

EQUITY INVESTMENTS. Because the Fund invests in equity securities, fluctuations in the stock market in general, as well as in the value of particular equity securities held by the Fund, can affect the Fund's performance. The value of equity securities will fluctuate due to many factors, including the past and predicted earnings of the issuer, the quality of the issuer’s management, general market conditions, forecasts for the issuer’s industry and the value of the issuer’s assets.

TEMPORARY DEFENSIVE POSITIONS. The Fund may, from time to time, take temporary defensive positions in response to adverse market, economic, political or other conditions. To the extent the assets of the Fund are invested in temporary defensive positions, the Fund may not achieve its investment objective. For temporary defensive purposes, the Fund may invest in cash and/or short-term obligations.

MID-CAP AND SMALL-CAP INVESTMENTS. Investing in the securities of mid-cap and small-cap companies generally involves greater risk than investing in larger, more established companies. Generally, there is less publicly available information concerning small- and mid-cap companies than for larger, more established companies. Small- and mid-cap companies are typically subject to greater changes in earnings and business prospects than larger, more established companies and the market prices of the securities of small-cap companies may be more volatile. Additionally, because small- and mid-cap companies have fewer shares outstanding than larger companies, it also may be more difficult to buy or sell significant amounts of such shares without unfavorable impact on prevailing prices.

FOREIGN INVESTMENTS. Investing in foreign securities presents unique investment risks. The value of securities denominated in or indexed to foreign currencies, and of dividends and interest from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Many foreign countries lack uniform accounting and disclosure standards comparable to those applicable to U.S. companies, and it may be more difficult to obtain reliable information regarding an issuer's financial condition and operations.

The bar chart and table that follow provide some indication of the risk of an investment in the Investor Class shares of the Fund. The bar chart shows the Fund’s performance for each calendar year since its inception. The table shows how the Fund’s average annual total returns for different calendar periods over the life of the Fund, both before and after taxes, compared to those of a broad-based securities market index. Returns shown assume reinvestment of dividends and distributions.

Please note that the Fund’s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.

¹The after-tax returns shown were calculated using the historical highest individual federal marginal income tax rates, and do not reflect the impact of state and local taxes. Actual after-tax returns depend on your tax situation and may differ from those shown. If you hold your Fund shares through a tax-deferred arrangement, such as a 401(k) plan or individual retirement account, the after-tax returns are not relevant.

Robert C. Barringer, CFA, Portfolio Manager, and Ryan C. Kelley, CFA, Portfolio Manager, have served as co-portfolio managers of the Fund since its commencement of operations in November 2005.

For important information about the purchase and sale of Fund shares, tax information and financial intermediary compensation, please refer to the section entitled “Investing in the Funds” on page ___.

The investment objective of the Pegasus Mid Cap Fund (the “Fund”) is capital appreciation.

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

Maximum Sales Charge (Load) Imposed on Purchases......................................................................................... NONE

Maximum Deferred Sales Charge...... ........................................................................................................................ NONE

Maximum Sales Charge (Load) Imposed on Reinvested Dividends.................................................................... NONE

Redemption Fee (including exchanges)*................................................................................................................. 1.00%

(expenses that that you pay each year as a percentage of the value of your investment)

¹ FBR Fund Advisers, Inc. (the “Adviser”) has agreed in writing to waive a portion of its investment advisory fees and assume certain expenses to the extent annual fund operating expenses exceed 1.35% of the Fund’s average daily net assets (excluding interest, taxes, brokerage commissions, acquired fund fees and expenses, extraordinary legal expenses, or any other extraordinary expenses). The Adviser has agreed to maintain this expense limitation through February 28, 2013. The Adviser may recoup any waived amount from the Fund pursuant to this agreement if such reimbursement does not cause the Fund to exceed existing expense limitations and the reimbursement is made within three years after the year in which the Adviser incurred the expense. The agreement may only be terminated by both the Adviser and the Fund.

This Example is intended to help you compare the cost of investing in the Investor Class shares of the Fund with the cost of investing in other mutual funds.

PRINCIPAL INVESTMENT STRATEGY. Under normal market conditions, the Fund invests at least 80% of its net assets plus the amount of any borrowings for investment purposes in securities of mid-cap companies. The Fund’s policy of investing at least 80% of its net assets in mid-cap companies may only be changed upon 60 days notice to shareholders. The Fund considers mid-cap companies to have market capitalizations of greater than $2 billion and less than $15 billion at the time of purchase. The Fund may invest up to 20% of its net assets in equity securities of companies with smaller or larger market capitalizations.

When evaluating securities to purchase, the Adviser makes investment decisions for the Fund on the basis of fundamental security analysis. Once an issuer is identified as an attractive candidate for the Fund’s portfolio, the Adviser assesses the relative value and growth potential of the security on the basis of various factors, which may include price to book ratio, price to earnings ratio, earnings yield, leverage and cash flow, among others.

Although the Fund invests primarily in common stocks, it may purchase preferred stocks, warrants and convertible bonds. While the Fund’s investments are primarily in domestic U.S. securities, the Fund’s investments may include foreign securities, including indirect investments such as ADRs or other types of depositary receipts, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations.

The Fund's investments focus on companies that have a demonstrated record of achievement and excellent prospects for earnings and/or cash flow growth over a 3- to 5-year period.

MID-CAP INVESTMENTS. Investing in the securities of mid-cap companies generally involves greater risk than investing in larger, more established companies. Generally, there is less publicly available information concerning mid-cap companies than for larger, more established companies. Mid-cap companies are typically subject to greater changes in earnings and business prospects than larger, more established companies and the market prices of the securities of mid-cap companies may be more volatile. Additionally, because mid-cap companies have fewer shares outstanding than larger companies, it also may be more difficult to buy or sell significant amounts of such shares without unfavorable impact on prevailing prices.

Please note that the Fund’s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.

²The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represents approximately 31% of the total market-capitalization of the Russell 1000 Index.

Ryan C. Kelley, CFA, Portfolio Manager, has served as portfolio manager of the Fund since its commencement of operations in February 2007.

The investment objective of the Pegasus Small Cap Fund (the “Fund”) is capital appreciation.

This table describes the fees and estimated expenses that you may pay if you buy and hold Investor Class shares of the Funds.

Maximum Sales Charge (Load) Imposed on Purchases......................................................................................... NONE

Maximum Deferred Sales Charge...... ........................................................................................................................ NONE

Maximum Sales Charge (Load) Imposed on Reinvested Dividends.................................................................... NONE

Redemption Fee (including exchanges)*................................................................................................................. 1.00%

(expenses that that you pay each year as a percentage of the value of your investment)

¹ FBR Fund Advisers, Inc. (the “Adviser”) has agreed in writing to waive a portion of its investment advisory fees and assume certain expenses to the extent annual fund operating expenses exceed 1.45% of the Fund’s average daily net assets (excluding interest, taxes, brokerage commissions, acquired fund fees and expenses, extraordinary legal expenses, or any other extraordinary expenses). The Adviser has agreed to maintain this expense limitation through February 28, 2013. The Adviser may recoup any waived amount from the Fund pursuant to this agreement if such reimbursement does not cause the Fund to exceed existing expense limitations and the reimbursement is made within three years after the year in which the Adviser incurred the expense. The agreement may only be terminated by both the Adviser and the Fund.

This Example is intended to help you compare the cost of investing in the Investor Class shares of the Fund with the cost of investing in other mutual funds.

PRINCIPAL INVESTMENT STRATEGY. Under normal market conditions, the Fund invests at least 80% of its net assets plus the amount of any borrowings for investment purposes in securities of small-cap companies. The Fund’s policy of investing at least 80% of its net assets in small-cap companies may only be changed upon 60 days notice to shareholders. The Fund considers small-cap companies to have market capitalizations of less than $3 billion, measured at the time of purchase. The Fund may invest up to 20% of its net assets in equity securities of companies with larger market capitalizations.

Although the Fund invests primarily in common stocks, it may purchase preferred stocks, warrants and convertible bonds. While the Fund’s investments are primarily in domestic U.S. securities, the Fund’s investments may include foreign securities, including indirect investments such as ADRs or other types of depositary receipts, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations.

The Fund's investments focus on companies that have a demonstrated record of achievement and excellent prospects for earnings and/or cash flow growth over a 3- to 5-year period.

SMALL-CAP INVESTMENTS. Investing in the securities of small-cap companies generally involves greater risk than investing in larger, more established companies. Generally, there is less publicly available information concerning small-cap companies than for larger, more established companies. Small-cap companies are typically subject to greater changes in earnings and business prospects than larger, more established companies and the market prices of the securities of small-cap companies may be more volatile. Additionally, because small-cap companies have fewer shares outstanding than larger companies, it also may be more difficult to buy or sell significant amounts of such shares without unfavorable impact on prevailing prices.

Please note that the Fund’s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.

²The Russell 2000 Index is comprised of the smallest 2000 companies of the Russell 3000 Index, representing approximately 8% of the Russell 3000’s total market-capitalization.

Robert C. Barringer, CFA, Portfolio Manager, has served as portfolio manager of the Fund since its commencement of operations in February 2007.

The investment objective of the Pegasus Small Cap Growth Fund (the “Fund”) is long-term capital appreciation.

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

Maximum Sales Charge (Load) Imposed on Purchases......................................................................................... NONE

Maximum Deferred Sales Charge...... ........................................................................................................................ NONE

Maximum Sales Charge (Load) Imposed on Reinvested Dividends.................................................................... NONE

Redemption Fee (including exchanges)*................................................................................................................. 1.00%

(expenses that that you pay each year as a percentage of the value of your investment)

¹ FBR Fund Advisers, Inc. (the “Adviser”) has agreed in writing to waive a portion of its investment advisory fees and assume certain expenses to the extent annual fund operating expenses exceed 1.45% of the Fund’s average daily net assets (excluding interest, taxes, brokerage commissions, acquired fund fees and expenses, extraordinary legal expenses, or any other extraordinary expenses). The Adviser has agreed to maintain this expense limitation through February 28, 2013. The Adviser may recoup any waived amount from the Fund pursuant to this agreement if such reimbursement does not cause the Fund to exceed existing expense limitations and the reimbursement is made within three years after the year in which the Adviser incurred the expense. The agreement may only be terminated by both the Adviser and the Fund.

This Example is intended to help you compare the cost of investing in the Investor Class shares of the Fund with the cost of investing in other mutual funds.

PRINCIPAL INVESTMENT STRATEGY. Under normal market conditions, the Fund invests at least 80% of its net assets plus the amount of any borrowings for investment purposes in securities of small-cap companies. The Fund’s policy of investing at least 80% of its net assets in small-cap companies may only be changed upon 60 days notice to shareholders. The Fund currently considers small-cap companies to be those companies with market capitalizations of less than $3 billion dollars, measured at the time of purchase. The Fund primarily invests in equity securities (which include common stocks, preferred stocks, warrants and other securities convertible into common stocks, including convertible bonds and convertible preferred stock) of small-cap companies listed on a U.S. securities exchange or NASDAQ expected to experience earnings growth. While the Fund’s investments will primarily be in domestic U.S. securities, the Fund’s investments may include foreign securities, including indirect investments such as ADRs or other types of depositary receipts, which are U.S. dollar-denominated receipts representing shares of foreign-based corporations. The Fund may invest up to 20% of net assets in equity securities of companies with larger market capitalizations.

The Adviser makes investment decisions for the Fund on the basis of fundamental security analysis. Once an issuer is identified as an attractive candidate for the Fund’s portfolio, the Adviser assesses the relative value and growth potential of the security on the basis of various factors, which may include price to book ratio, price to earnings ratio, earnings yield and cash flow, among others. The Fund may invest, to a limited degree, in securities issued in IPOs.

Many of the common stocks in which the Fund invests do not pay dividends; instead, stocks are bought for the potential that their prices will increase and provide capital appreciation for the Fund.

IPO INVESTMENTS. IPO shares are subject to market risk and liquidity risk. The market value of IPO shares will fluctuate considerably due to facts such as the absence of a prior public market, unseasoned trading, the small number of shares available for trading and limited public information about the issuer. The purchase of IPO shares may involve high transaction costs. When a fund’s asset base is small, a significant portion of the fund’s performance could be attributable to investments in IPOs, because such investments would have a magnified impact on the fund.

Please note that the Fund’s past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Prior to May 1, 2008, the Fund operated pursuant to a different investment strategy.

²The NASDAQ Composite Index is a broad-based capitalization-weighted index of all NASDAQ National Market and Small Cap Stocks.

³ The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher price-to-value ratios and higher forecasted growth values.

Robert C. Barringer, CFA, Portfolio Manager, has served as portfolio manager of the Fund since July 2004.

The investment objective of the Focus Fund (the “Fund”) is capital appreciation.

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

Maximum Sales Charge (Load) Imposed on Purchases......................................................................................... NONE

Maximum Deferred Sales Charge...... ........................................................................................................................ NONE

Maximum Sales Charge (Load) Imposed on Reinvested Dividends.................................................................... NONE

Redemption Fee (including exchanges)*................................................................................................................. 1.00%

* A redemption fee applies only to redemptions (including exchanges) of Fund shares made within 90 days of purchase. See “Frequent Trading Policy and Redemption Fee” for more information. In addition, we charge a $10.00 wire fee for all redemption proceeds paid by federal wire made through the Funds’ transfer agent, except on certain institutional and broker/dealer accounts.

(expenses that that you pay each year as a percentage of the value of your investment)

¹ FBR Fund Advisers, Inc. (the “Adviser”) has agreed in writing to waive a portion of its investment advisory fees and assume certain expenses to the extent annual fund operating expenses exceed 1.95% of the Fund’s average daily net assets (excluding interest, taxes, brokerage commissions, acquired fund fees and expenses, extraordinary legal expenses, or any other extraordinary expenses). The Adviser has agreed to maintain this expense limitation through February 28, 2013. The Adviser may recoup any waived amount from the Fund pursuant to this agreement if such reimbursement does not cause the Fund to exceed existing expense limitations and the reimbursement is made within three years after the year in which the Adviser incurred the expense. The agreement may only be terminated by both the Adviser and the Fund.

This Example is intended to help you compare the cost of investing in the Investor Class shares of the Fund with the cost of investing in other mutual funds.

PRINCIPAL INVESTMENT STRATEGY. Under normal market conditions, the Fund invests primarily in securities of companies traded in domestic markets. Investments will consist primarily of common stocks, but may include preferred stocks, warrants, options, equity-like instruments and debt instruments.

The Adviser implements the Fund’s strategy by focusing on companies whose valuations in the market are modest and that earn higher than average returns on shareholders’ equity, are managed by individuals who have a history of treating public shareholders like partners and have ample opportunity to reinvest excess profits at above average rates. Once a potential investment is identified, the Adviser attempts to purchase shares at a price it believes represents a discount to a conservative estimate of the company’s intrinsic value.

The Fund may from time to time hold a significant portion of its portfolio in cash or cash equivalent instruments. If market conditions reduce the availability of securities with acceptable valuations, the Fund may, for extended periods, hold larger than usual cash reserves until securities with acceptable valuations become available. During rising markets, holding larger than usual cash reserves may be detrimental to the Fund’s performance. During declining markets, holding larger than usual cash reserves may allow the Fund to purchase securities at a discount.

MID-CAP AND SMALL-CAP INVESTMENTS. Investing in the securities of mid-cap and small-cap companies generally involves greater risk than investing in larger, more established companies. Generally, there is less publicly available information concerning small- and mid-cap companies than for larger, more established companies. Small- and mid-cap companies are typically subject to greater changes in earnings and business prospects than larger, more established companies and the market prices of the securities of small-cap companies may be more volatile. Additionally, because small- and mid-cap companies have fewer shares outstanding than larger companies, it also may be more difficult to buy or sell significant amounts of such shares without unfavorable impact on prevailing prices.

The bar chart and table that follow provide some indication of the risk of an investment in the Investor Class shares of the Fund. The bar chart shows the Fund’s performance for each of the last ten calendar years. The table shows how the Fund’s average annual total returns for different calendar periods over the last ten calendar periods of the Fund, both before and after taxes, compared to those of a broad-based securities market index. Returns shown assume reinvestment of dividends and distributions.

²The Russell 2000 Index is comprised of the smallest of the 2000 companies of the Russell 3000 Index, representing approximately 8% of the Russell 3000’s total market capitalization.

David S. Rainey, CFA, Portfolio Manager, Brian E. Macauley, CFA, Portfolio Manager, and Ira Rothberg, CFA, Portfolio Manager, have served as co-portfolio managers of the Fund since August 2009.

The investment objective of the Large Cap Financial Fund (the “Fund”) is capital appreciation.