Coventry Funds Trust, et al. – ‘485BPOS’ on 4/26/07

On:  Thursday, 4/26/07, at 5:05pm ET   ·   Effective:  5/1/07   ·   Accession #:  950152-7-3553   ·   File #s:  33-81800, 811-08644

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Document/Exhibit                   Description                      Pages   Size 

 1: 485BPOS     The Coventry Funds Trust 485BPOS                     160    705K 
 2: EX-99.I     Miscellaneous Exhibit                                  2±     8K 
 3: EX-99.J.1   Miscellaneous Exhibit                                  1      6K 
 4: EX-99.J.2   Miscellaneous Exhibit                                  1      6K 

485BPOS   —   The Coventry Funds Trust 485BPOS
Document Table of Contents

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As filed with the Securities and Exchange Commission on April 26, 2007

                                                              File Nos. 33-81800
                                                                        811-8644

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM N-lA

 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

 Post Effective Amendment No. 32 [X]

 and

 REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 34 [X]

THE COVENTRY FUNDS TRUST
 (formerly Variable Insurance Funds)
(Exact Name of Registrant as Specified in Charter)

 3435 Stelzer Road, Columbus, Ohio 43219
 (Address of Principal Executive Offices) (Zip Code)

 Registrant's Telephone Number, including area code:
1 800 257 5872

Michael V. Wible. 
Thompson Hine LLP 
10 W. Broad Street
     Columbus, OH 43215-3435

Copies to:

R. Jeffrey Young
 BISYS Fund Services, Inc.
 3435 Stelzer Road
 Columbus, Ohio 43219-3035

It is proposed that this filing will become effective (check appropriate box):  

[ ]  immediately upon filing pursuant to paragraph (b)                          

[X]  on May 1, 2007 pursuant to paragraph (b)                                   

[ ]  60 days after filing pursuant to paragraph (a)(1)                          

[ ]  on (date) pursuant to paragraph (a)(1)                                     

[ ]  75 days after filing pursuant to paragraph (a)(2)                          

[ ]  on (date) pursuant to paragraph (a)(2) of Rule 485                         

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FIFTH THIRD QUALITY GROWTH VIP FUND 
FIFTH THIRD BALANCED VIP FUND 
FIFTH THIRD MID CAP VIP FUND
FIFTH THIRD DISCIPLINED VALUE VIP FUND
THE COVENTRY FUNDS TRUST
3435 STELZER ROAD 
COLUMBUS, OHIO 43219-3035 
1-800-282-5706
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

   This prospectus describes four mutual funds offered by The Coventry Funds
Trust (the "Trust"):                                                            

- Fifth Third Quality Growth VIP Fund, which seeks long-term capital  
appreciation by investing primarily in equity securities of U.S.  
companies.                                                        

- Fifth Third Balanced VIP Fund, which seeks capital appreciation and 
current income by investing in equities, bonds and money market   
instruments.                                                      

    - Fifth Third Mid Cap VIP Fund, which seeks long-term capital appreciation
by investing primarily in equity securities of mid-cap companies. 

 - Fifth Third Disciplined Value VIP Fund, which seeks long-term capital
  appreciation by investing primarily in equity securities of mid- and
large-cap companies.                                              

The Funds' goals and investment programs are described in more detail 
inside. Fifth Third Asset Management, Inc. ("FTAM"), a subsidiary of Fifth Third
Bank, serves as each Fund's investment advisor.                                 

     The Funds sell their shares to insurance company separate accounts, so that
the Funds may serve as an investment option under variable life insurance       
policies and variable annuity contracts issued by insurance companies. The Funds
also may sell their shares to certain other investors, such as qualified pension
and retirement plans, insurance companies, and FTAM.                            

--------------------------------------------------------------------------------
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE SEPARATE ACCOUNT'S       
PROSPECTUS DESCRIBING THE VARIABLE INSURANCE CONTRACT. PLEASE READ BOTH         
PROSPECTUSES AND RETAIN THEM FOR FUTURE REFERENCE.                              
--------------------------------------------------------------------------------

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THE FUNDS' SHARES OR    
DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A CRIME.                                                
--------------------------------------------------------------------------------

THE DATE OF THIS PROSPECTUS IS MAY 1, 2007.                                     

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TABLE OF CONTENTS 

                                                                [Download Table]

                                                                 PAGE   
                                                                 ----   
                                                                        
RISK/RETURN SUMMARIES AND FUND EXPENSES.....................           3
  Quality Growth VIP Fund...................................           3
  Balanced VIP Fund.........................................           4
  Mid Cap VIP Fund..........................................           6
  Disciplined Value VIP Fund................................           7
INVESTMENT OBJECTIVES AND STRATEGIES........................           9
  Quality Growth VIP Fund...................................           9
  Balanced VIP Fund.........................................           9
  Mid Cap VIP Fund..........................................          10
  Disciplined Value VIP Fund................................          10
RISK CONSIDERATIONS.........................................          10
PORTFOLIO HOLDINGS..........................................          12
VALUATION OF SHARES.........................................          12
PURCHASING AND REDEEMING SHARES.............................          12
  Market Timing/Short-Term Trading..........................          13
  Servicing Agents..........................................          13
MANAGEMENT OF THE FUNDS.....................................          14
  Investment Advisor........................................          14
  Portfolio Managers........................................          14
  Administrator and Distributor.............................          15
TAXATION....................................................          16
GENERAL INFORMATION.........................................          16
  Description of the Trust and Its Shares...................          16
  Miscellaneous.............................................          16
FINANCIAL HIGHLIGHTS........................................          17
STATEMENT OF ADDITIONAL INFORMATION AND SHAREHOLDER                     
  REPORTS...................................................  back cover

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THE COVENTRY FUNDS TRUST                                                       3
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RISK/RETURN SUMMARIES AND FUND EXPENSES 

QUALITY GROWTH VIP FUND 

INVESTMENT OBJECTIVE

The Fund seeks long-term capital appreciation.                        

PRINCIPAL INVESTMENT STRATEGIES 

  Under normal market conditions, the Fund will invest primarily in equity
securities of U.S. companies each having at least $1 billion in market          
capitalization at the time of purchase. The Fund generally intends to invest its
assets in equity securities that FTAM believes have above-average potential for 
growth in revenues, earnings or assets. To determine whether a company has a    
strong potential for growth, FTAM generally looks for a strong record of        
earnings growth and examines the company's current ratio of debt to capital and 
the quality of its management. While the Fund generally anticipates investing in
common stocks, a portion of the Fund's assets may be invested in preferred      
stocks or bonds convertible into common stock. The Fund also may invest a       
portion of its assets in foreign securities or American Depositary Receipts     
("ADRs").                                                                       

PRINCIPAL INVESTMENT RISKS

    An investment in the Fund entails investment risk, including possible loss
of the principal amount invested. The Fund is subject to market risk, which is  
the risk that the market value of a portfolio security may move up and down,    
sometimes rapidly and unpredictably. This risk may be greatest for the Fund's   
investments in equity securities, and growth stocks may be particularly volatile
in the event of earnings disappointments or other financial difficulties. The   
Fund is subject to risks posed by foreign investments, including the risk that  
fluctuations in foreign exchange rates could affect the value of the Fund's     
investments. The Fund also is subject to interest rate risk, which is the risk  
that changes in interest rates will affect the value of the Fund's investments. 
In particular, the Fund's investments in fixed income securities, such as       
convertible bonds and preferred stocks, generally will change in value inversely
with changes in interest rates. Also, the Fund's investments may expose it to   
credit risk, which is the risk that the issuer of a security will default or not
be able to meet its financial obligations.                                      

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

FUND PERFORMANCE

  The following chart and table show how the Fund has performed. The chart
demonstrates how the Fund's performance varies from year to year, and the table 
compares the Fund's performance to the Russell 1000(R) Growth Index and the     
Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index"), both widely
recognized, unmanaged indices of common stocks. The information does not reflect
charges and fees associated with a separate account that invests in the Fund or 
an insurance contract for which the Fund is an investment option. These charges 
and fees will reduce returns. Absent limitation of the Fund's expenses, total   
returns would be lower. Investors should be aware that past performance does not
indicate how the Fund will perform in the future.                               

CALENDAR YEAR TOTAL RETURNS*                                                    
BAR CHART                                                                       

                                                                [Download Table]

2002  -30.02
----  ------
            
2003   30.62
2004    0.79
2005    6.07
2006    4.76

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

                                                                [Download Table]
                                 
Best Quarter:    13.30%   6/30/03
Worst Quarter:  -19.58%   6/30/02

AVERAGE ANNUAL TOTAL RETURN*                                                    

(for the periods ended December 31, 2006)                                       

                                                                [Download Table]

                                              SINCE INCEPTION  
                       PAST YEAR   5 YEARS   (JANUARY 26, 2001)
                       ---------   -------   ------------------
                                                               
Fund.................    4.76%      0.47%          -2.79%      
Russell 1000(R)                                                
  Growth Index.......    9.07%      2.69%          -2.70%      
S&P 500 Index........   15.79%      6.19%           2.51%      

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

* Assumes reinvestment of dividends and distributions.                          

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FUND EXPENSES 

 The following expense table indicates the expenses that an investor may
incur as a shareholder of the Fund during the current fiscal year. These        
expenses are reflected in the share price of the Fund. The table does not       
reflect separate account or insurance contract fees and charges.                

ANNUAL FUND OPERATING EXPENSES                                                  
(expenses that are deducted from Fund assets)                                   

                                                                [Download Table]
                                                    
Management Fees*.............................  0.70%
Other Expenses...............................  0.72%
                                               ---- 
Total Annual Fund Operating Expenses.........  1.42%
Less Waiver*.................................  0.42%
                                               ---- 
Net Operating Expenses*......................  1.00%

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

* FTAM has contractually agreed to waive all or a portion of its fees and       
reimburse certain expenses for the Fund through April 30, 2009 to the extent
total expenses exceed 1.00% of the Fund's average daily net assets. FTAM is 
entitled to reimbursement by the Fund of fees waived or expenses reimbursed 
 for a period of up to three years following the waiver or reimbursement if in
any month annualized Fund operating expenses are less than any expense      
limitation in place at that time.                                           

EXPENSE EXAMPLE                                                                 
   Use the following table to compare fees and expenses of the Fund to other
investment companies. It illustrates the amount of fees and expenses an investor
would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3)         
redemption at the end of each time period, and (4) no changes in the Fund's     
total operating expenses. It does not reflect separate account or insurance     
contract fees and charges. An investor's actual costs may be different.         

                                                                [Download Table]

1 YEAR   3 YEARS   5 YEARS   10 YEARS
------   -------   -------   --------
                                     
1$02..    $364      $694      $1,627 

BALANCED VIP FUND 

INVESTMENT OBJECTIVES 

The Fund seeks capital appreciation and current income.               

PRINCIPAL INVESTMENT STRATEGIES 

     Under normal market conditions, the Fund uses an asset allocation strategy,
investing in three primary categories of securities: equities, bonds and money  
market instruments. Under normal market conditions, the Fund intends to invest  
between 50% and 75% of total assets in equities, consisting of common stocks,   
convertible preferred stocks and convertible corporate bonds; 25% to 40% of     
total assets in bonds, consisting of U.S. Treasury bills, notes and bonds, debt 
securities of U.S. Government agencies and instrumentalities, and corporate debt
securities; and 0% to 25% in money market instruments. By analyzing financial   
trends and market conditions, FTAM may adjust its allocations from time to time.

PRINCIPAL INVESTMENT RISKS

    An investment in the Fund entails investment risk, including possible loss
of the principal amount invested. The Fund is subject to market risk, which is  
the risk that the market value of a portfolio security may move up and down,    
sometimes rapidly and unpredictably. This risk may be greatest for the Fund's   
investments in common stocks and other equity securities. The Fund is subject to
interest rate risk, which is the risk that changes in interest rates will affect
the value of the Fund's investments. In particular, the Fund's investments in   
fixed income securities, such as convertible bonds, preferred stocks, and debt  
securities, generally will change in value inversely with changes in interest   
rates. The Fund's investments may expose it to credit risk, which is the risk   
that the issuer of a security will default or not be able to meet its financial 
obligations. Further, the Fund is subject to asset allocation risk, which is the
risk that the Fund will not correctly anticipate the relative performance of the
different asset classes in which it may invest.                                 

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

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THE COVENTRY FUNDS TRUST                                                       5
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FUND PERFORMANCE

  The following chart and table show how the Fund has performed. The chart
demonstrates the Fund's performance during the last calendar year, and the table
compares the Fund's performance to the Standard & Poor's 500 Composite Stock    
Price Index ("S&P 500 Index") and the Lehman Brothers Aggregate Bond Index, both
widely recognized, unmanaged indices. The information does not reflect charges  
and fees associated with a separate account that invests in the Fund or an      
insurance contract for which the Fund is an investment option. These charges and
fees will reduce returns. Absent limitation of the Fund's expenses, total       
returns would be lower. Investors should be aware that past performance does not
indicate how the Fund will perform in the future.                               

CALENDAR YEAR TOTAL RETURNS*                                                    
[GRAPH]                                                                         

                                                                [Download Table]

2003  14.04
----  -----
           
2004  5.11 
2005  2.02 
2006  9.01 

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

                                                                [Download Table]
                                
Best Quarter:    6.80%  12/31/03
Worst Quarter:  -2.16%   6/30/06

AVERAGE ANNUAL TOTAL RETURN*                                                    

(for the periods ended December 31, 2006)                                       

                                                                [Download Table]

                                          SINCE INCEPTION
                              PAST YEAR   (JULY 15, 2002)
                              ---------   ---------------
                                                         
Fund........................     9.01%           7.91%   
S&P 500 Index...............    15.79%          12.15%(1)
Lehman Brothers Aggregate                                
  Bond Index................     4.33%           4.59%   

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

* Assumes reinvestment of dividends and distributions.                          

(1) Since July 12, 2002.                                                        

FUND EXPENSES 

 The following expense table indicates the expenses that an investor may
incur as a shareholder of the Fund during the current fiscal year. These        
expenses are reflected in the share price of the Fund. The table does not       
reflect separate account or insurance contract fees and charges.                

ANNUAL FUND OPERATING EXPENSES                                                  
(expenses that are deducted from Fund assets)                                   

                                                                [Download Table]
                                                    
Management Fees*...........................    0.80%
Other Expenses.............................    3.25%
Acquired Fund Fees and Expenses**..........    0.01%
                                              ----- 
Total Annual Fund Operating Expenses.......    4.06%
Less Waiver*...............................    3.10%
                                              ----- 
Net Operating Expenses*....................    0.96%

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

*  FTAM has contractually agreed to waive all or a portion of its fees and      
  reimburse certain expenses for the Fund through April 30, 2009 to the extent
 total expenses exceed 0.95% of the Fund's average daily net assets. FTAM is
 entitled to reimbursement by the Fund of fees waived or expenses reimbursed
   for a period of up to three years following the waiver or reimbursement if in
any month annualized Fund operating expenses are less than any expense    
limitation in place at that time. The addition of certain non-waivable    
  expenses may cause the Fund's Net Operating Expenses after waivers to exceed
the maximum amount of 0.95% agreed to by FTAM.                            

** The Total Annual Fund Operating Expenses in this fee table will not correlate
to the expense ratio in the Fund's financial statements (or the financial 
  highlights in this Prospectus) because the financial statements include only
   the direct operating expenses incurred by the Fund, not the indirect costs of
investing in other investment companies ("Acquired Funds"). Excluding the 
indirect costs of investing in Acquired Funds, Total Annual Fund Operating
 Expenses before fee waivers would be 4.05% and Net Operating Expenses would
be 0.95%.                                                                 

EXPENSE EXAMPLE                                                                 
   Use the following table to compare fees and expenses of the Fund to other
investment companies. It illustrates the amount of fees and expenses an investor
would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3)         
redemption at the end of each time period, and (4) no changes in the Fund's     
total operating expenses. It does not reflect separate account or insurance     
contract fees and charges. An investor's actual costs may be different.         

                                                                [Download Table]

1 YEAR    3 YEARS   5 YEARS   10 YEARS
-------   -------   -------   --------
                                      
  $98      $641     $1,537     $3,851 

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MID CAP VIP FUND

INVESTMENT OBJECTIVES 

The Fund seeks long-term capital appreciation.                        

PRINCIPAL INVESTMENT STRATEGIES 

  Under normal market conditions, the Fund will invest at least 80% of its
assets in equity securities issued by mid-cap companies. Mid-cap companies are  
companies with market capitalization no larger than 110%, and no smaller than   
90%, of the market capitalization of the companies represented in the Russell   
Midcap(R) Index (generally, between $0.26 billion and $22 billion). The Fund    
intends to invest primarily in equity securities of companies that FTAM believes
have the potential for long-term revenue and earnings growth, solid balance     
sheets and the potential to pay dividends. While the Fund generally anticipates 
investing in common stocks, a portion of the Fund's assets may be invested in   
preferred stocks or securities convertible into common stock. The Fund may earn 
current income mainly from stock dividends and from interest income paid on     
portfolio investments such as convertible securities.                           

PRINCIPAL INVESTMENT RISKS

    An investment in the Fund entails investment risk, including possible loss
of the principal amount invested. The Fund is subject to market risk, which is  
the risk that the market value of a portfolio security may move up and down,    
sometimes rapidly and unpredictably. This risk may be greatest for the Fund's   
investments in common stock. Growth stocks may be particularly volatile in the  
event of earnings disappointments or other financial difficulties. Further,     
investments in mid-cap companies typically involve greater risk than is         
customarily associated with larger, more established companies due to the       
greater business risks of smaller size, limited markets, and lesser financial   
resources.                                                                      

The Fund also is subject to interest rate risk, which is the risk that
changes in interest rates will affect the value of the Fund's investments. In   
particular, the Fund's investments in fixed income securities, such as          
convertible bonds and preferred stocks, generally will change in value inversely
with changes in interest rates. Also, the Fund's investments may expose it to   
credit risk, which is the risk that the issuer of a security will default or not
be able to meet its financial obligations.                                      

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

FUND PERFORMANCE

  The following chart and table show how the Fund has performed. The chart
demonstrates the Fund's performance during the last calendar year, and the table
compares the Fund's performance to the Russell MidCap(R) Index and the Russell  
MidCap(R) Growth Index, both widely recognized, unmanaged indices of common     
stocks. The information does not reflect charges and fees associated with a     
separate account that invests in the Fund or an insurance contract for which the
Fund is an investment option. These charges and fees will reduce returns. Absent
limitation of the Fund's expenses, total returns would be lower. Investors      
should be aware that past performance does not indicate how the Fund will       
perform in the future.                                                          

CALENDAR YEAR TOTAL RETURNS*                                                    
[GRAPH]                                                                         

                                                                [Download Table]

2003  35.66
----  -----
           
2004   9.28
2005  10.00
2006  10.04

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

                                                                [Download Table]
                                 
Best Quarter:    19.80%   6/30/03
Worst Quarter:   -5.96%   9/30/04

AVERAGE ANNUAL TOTAL RETURN*                                                    

(for the periods ended December 31, 2006)                                       

                                                                [Download Table]

                                          SINCE INCEPTION
                              PAST YEAR   (JULY 15, 2002)
                              ---------   ---------------
                                                         
Fund........................   10.04%         15.25%     
Russell MidCap(R) Index.....   15.26%         18.34%(1)  
Russell MidCap(R) Growth                                 
  Index.....................   10.66%         16.90%(1)  

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

* Assumes reinvestment of dividends and distributions.                          

(1) Since July 12, 2002.                                                        

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THE COVENTRY FUNDS TRUST                                                       7
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FUND EXPENSES 
 The following expense table indicates the expenses that an investor may
incur as a shareholder of the Fund during the current fiscal year. These        
expenses are reflected in the share price of the Fund. The table does not       
reflect separate account or insurance contract fees and charges.                

ANNUAL FUND OPERATING EXPENSES                                                  
(expenses that are deducted from Fund assets)                                   

                                                                [Download Table]
                                                    
Management Fees*............................   0.80%
Other Expenses..............................   0.75%
Acquired Fund Fees and Expenses**...........   0.01%
                                               ---- 
Total Annual Fund Operating Expenses........   1.56%
Less Waiver*................................   0.50%
                                               ---- 
Net Operating Expenses*.....................   1.06%

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

*  FTAM has contractually agreed to waive all or a portion of its fees and      
  reimburse certain expenses for the Fund through April 30, 2009 to the extent
 total expenses exceed 1.05% of the Fund's average daily net assets. FTAM is
 entitled to reimbursement by the Fund of fees waived or expenses reimbursed
   for a period of up to three years following the waiver or reimbursement if in
any month annualized Fund operating expenses are less than any expense    
limitation in place at that time. The addition of certain non-waivable    
  expenses may cause the Fund's Net Operating Expenses after waivers to exceed
the maximum amount of 1.05% agreed to by FTAM.                            

** The Total Annual Fund Operating Expenses in this fee table will not correlate
to the expense ratio in the Fund's financial statements (or the financial 
  highlights in this Prospectus) because the financial statements include only
   the direct operating expenses incurred by the Fund, not the indirect costs of
investing in other investment companies ("Acquired Funds"). Excluding the 
indirect costs of investing in Acquired Funds, Total Annual Fund Operating
 Expenses before fee waivers would be 1.55% and Net Operating Expenses would
be 1.05%.                                                                 

EXPENSE EXAMPLE                                                                 
   Use the following table to compare fees and expenses of the Fund to other
investment companies. It illustrates the amount of fees and expenses an investor
would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3)         
redemption at the end of each time period, and (4) no changes in the Fund's     
total operating expenses. It does not reflect separate account or insurance     
contract fees and charges. An investor's actual costs may be different.         

                                                                [Download Table]

1 YEAR   3 YEARS   5 YEARS   10 YEARS
------   -------   -------   --------
                                     
 $108     $392      $753      $1,769 

DISCIPLINED VALUE VIP FUND

INVESTMENT OBJECTIVE

The Fund seeks long-term capital appreciation.                        

PRINCIPAL INVESTMENT STRATEGIES 

  Under normal market conditions, the Fund will invest primarily in equity
securities of mid-and large-cap companies that FTAM believes have the potential 
to provide capital appreciation. FTAM attempts to identify undervalued          
securities through traditional measures of value, including low ratios of share 
price to book value, net asset value, earnings and cash flow. The Fund expects  
to earn income from stock dividends and from interest on convertible securities.

PRINCIPAL INVESTMENT RISKS

    An investment in the Fund entails investment risk, including possible loss
of the principal amount invested. The Fund is subject to market risk, which is  
the risk that the market value of a portfolio security may move up and down,    
sometimes rapidly and unpredictably. This risk may be greatest for the Fund's   
investments in common stocks. Large-cap stocks and mid-cap stocks may fall out  
of favor with investors. Investments in mid-cap companies typically involve     
greater risk than is customarily associated with larger, more established       
companies due to the greater business risks of smaller size, limited markets,   
and lesser financial resources. The market could favor growth stocks to the     
exclusion of value stocks. In addition, value stocks may, in fact, not be       
undervalued, or their value may never be recognized by the market.              

The Fund also is subject to interest rate risk, which is the risk that
changes in interest rates will affect the value of the Fund's investments. In   
particular, the Fund's investments in fixed income securities, such as          
convertible bonds and preferred stocks, generally will change in value inversely
with changes in interest rates. Also, the Fund's investments may expose it to   
credit risk, which is the risk that the issuer of a security will default or not
be able to meet its financial obligations.                                      

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

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FUND PERFORMANCE

  The following chart and table show how the Fund has performed. The chart
demonstrates the Fund's performance during the last calendar year, and the table
compares the Fund's performance to the Russell 1000(R) Value Index, a widely    
recognized, unmanaged index of common stocks. The information does not reflect  
charges and fees associated with a separate account that invests in the Fund or 
an insurance contract for which the Fund is an investment option. These charges 
and fees will reduce returns. Absent limitation of the Fund's expenses, total   
returns would be lower. Investors should be aware that past performance does not
indicate how the Fund will perform in the future.                               

CALENDAR YEAR TOTAL RETURNS*                                                    
GRAPH                                                                           

                                                                [Download Table]

2003  33.26
----  -----
           
2004  12.96
2005   6.44
2006  20.38

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

                                                                [Download Table]
                                 
Best Quarter:    18.79%   6/30/03
Worst Quarter:   -5.19%   3/31/03

AVERAGE ANNUAL TOTAL RETURN*                                                    

(for the periods ended December 31, 2006)                                       

                                                                [Download Table]

                                          SINCE INCEPTION
                              PAST YEAR   (JULY 15, 2002)
                              ---------   ---------------
                                                         
Fund........................   20.38%         16.76%     
Russell 1000(R) Value                                    
  Index.....................   22.25%         15.48%(1)  

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

* Assumes reinvestment of dividends and distributions.                          

(1) Since July 12, 2002.                                                        

FUND EXPENSES 
 The following expense table indicates the expenses that an investor may
incur as a shareholder of the Fund during the current fiscal year. These        
expenses are reflected in the share price of the Fund. The table does not       
reflect separate account or insurance contract fees and charges.                

ANNUAL FUND OPERATING EXPENSES                                                  
(expenses that are deducted from Fund assets)                                   

                                                                [Download Table]
                                                    
Management Fees*............................   0.80%
Other Expenses..............................   0.66%
Acquired Fund Fees and Expenses**...........   0.02%
                                               ---- 
Total Annual Fund Operating Expenses........   1.48%
Less Waiver*................................   0.46%
                                               ---- 
Net Operating Expenses*.....................   1.02%

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

* FTAM has contractually agreed to waive all or a portion of its fees and     
  reimburse certain expenses for the Fund through April 30, 2009 to the extent
 total expenses exceed 1.00% of the Fund's average daily net assets. FTAM is
 entitled to reimbursement by the Fund of fees waived or expenses reimbursed
   for a period of up to three years following the waiver or reimbursement if in
any month annualized Fund operating expenses are less than any expense    
limitation in place at that time. The addition of certain non-waivable    
  expenses may cause the Fund's Net Operating Expenses after waivers to exceed
the maximum amount of 1.00% agreed to by FTAM                             

** The Total Annual Fund Operating Expenses in this fee table will not correlate
to the expense ratio in the Fund's financial statements (or the financial 
  highlights in this Prospectus) because the financial statements include only
   the direct operating expenses incurred by the Fund, not the indirect costs of
investing in other investment companies ("Acquired Funds"). Excluding the 
indirect costs of investing in Acquired Funds, Total Annual Fund Operating
 Expenses before fee waivers would be 1.46% and Net Operating Expenses would
be 1.00%.                                                                 

EXPENSE EXAMPLE                                                                 
   Use the following table to compare fees and expenses of the Fund to other
investment companies. It illustrates the amount of fees and expenses an investor
would pay, assuming (1) a $10,000 investment, (2) 5% annual return, (3)         
redemption at the end of each time period, and (4) no changes in the Fund's     
total operating expenses. It does not reflect separate account or insurance     
contract fees and charges. An investor's actual costs may be different.         

                                                                [Download Table]

1 YEAR   3 YEARS   5 YEARS   10 YEARS
------   -------   -------   --------
                                     
 $104     $375      $718      $1,687 

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INVESTMENT OBJECTIVES 
AND STRATEGIES

Investors should be aware that the investments made by a Fund and the 
results achieved by a Fund at any given time are not expected to be the same as 
those made by other mutual funds for which FTAM acts as investment advisor,     
including mutual funds with names, investment objectives and policies similar to
the Funds. Investors should carefully consider their investment goals and       
willingness to tolerate investment risk before allocating their investment to a 
Fund.                                                                           

   Each Fund has the flexibility to make portfolio investments and engage in
other investment techniques that are different than its principal strategies    
mentioned here. More information on each Fund's investment strategies may be    
found in the Statement of Additional Information (see back cover).              

QUALITY GROWTH VIP FUND 

The Fund's investment objective is long-term capital appreciation. The
investment objective is not fundamental, and may be changed without shareholder 
approval. Under normal market conditions, the Fund will invest primarily in     
equity securities of U.S. companies having at least $1 billion in market        
capitalization.                                                                 

   FTAM uses a flexible investment approach under which the Fund will invest
primarily in "growth" stocks. Growth stocks typically offer strong revenue and  
earnings potential and accompanying capital growth, with less dividend income   
than value stocks and dividend-paying stocks. In evaluating prospective         
investments, FTAM may consider broad economic, industry or market trends,       
company-specific factors such as the company's record of earnings growth, its   
current level of debt and the quality of its management, and historical         
valuation measurements such as price-earnings ratios, profit margins and        
liquidation values. Subject to its stated investment policy, the Fund may invest
in companies of any size.                                                       

 The Fund may utilize convertible securities and preferred stocks, which
typically offer higher yields and good potential for capital appreciation. The  
portion of the Fund's total assets invested in common stock, preferred stock,   
and convertible securities varies according to FTAM's assessment of market and  
economic conditions and outlook.                                                

   The Fund may invest in securities issued by foreign companies, as well as
American Depositary Receipts ("ADRs"), which are U.S. dollar-denominated        
receipts (typically issued by a U.S. bank or trust company) evidencing ownership
of underlying foreign securities. The Fund may enter into currency swaps (an    
exchange of rights to make or receive payments in specified currencies) or      
engage in forward foreign currency exchange contracts in an attempt to hedge its
exposure to currency risks associated with its foreign investments, or to try to
enhance its return.                                                             

     FTAM also may use derivative instruments for risk management purposes or as
part of the Fund's investment strategies. Derivative instruments are financial  
contracts whose value depends on, or is derived from, the value of an underlying
asset, reference rate or index, and may relate to stocks, bonds, interest rates,
currencies or currency exchange rates, commodities, or related indexes. The     
types of derivative instruments that FTAM may use include, but are not limited  
to, futures contracts (an agreement to buy or sell an asset in the future at an 
agreed-upon price), options (which represent a right or obligation to buy or    
sell an asset at a predetermined price in the future), and hybrid instruments   
(which combine the characteristics of securities, futures and options).         

BALANCED VIP FUND 

The Fund's investment objectives are capital appreciation and current 
income. The investment objective is not fundamental, and may be changed without 
shareholder approval. Under normal market conditions, the Fund uses an asset    
allocation strategy, investing in three primary categories of securities:       
equities, bonds and money market securities.                                    

    The equity position of the Fund generally will be invested in high quality
mid- or large-cap growth companies. In choosing investments, FTAM looks for     
companies with a strong record of earnings growth, a favorable ratio of debt to 
capital, and high-quality management. While greater emphasis generally will be  
placed on larger companies, the Fund may favor mid-sized companies when FTAM    
believes that market conditions favor securities of mid-sized companies.        

 The bond position of the Fund's portfolio generally will be invested in
high quality debt securities with maturities ranging from overnight to thirty   
years in length. The Fund will attempt to maintain the average weighted         
portfolio maturity of the bond portion of the Fund's portfolio from between 5   
and 9 years. At the time of investment, corporate bonds and convertible         
securities in which the Fund will invest will be rated investment grade, that   
is, in the BBB major rating category or higher by Standard & Poor's Ratings     
Group or in the Baa rating category or higher by Moody's Investors Services,    
Inc., or their unrated equivalents. In selecting fixed income securities, FTAM  
considers, among other things, the remaining maturity, the stated interest rate 
and the price of the security, as well as the financial condition of the issuer 
and its prospects for long-term growth of earnings and revenues.                

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MID CAP VIP FUND

The Fund's investment objective is long-term capital appreciation. The
investment objective is not fundamental, and may be changed without shareholder 
approval. Under normal market conditions, the Fund will invest at least 80% of  
its assets in equity securities issued by mid-cap companies. Mid-cap companies  
are companies with market capitalization no larger than 110%, and no smaller    
than 90%, of the market capitalization of the companies represented in the      
Russell Midcap(R) Index (generally, between $0.26 billion and $22 billion).     

   In choosing stocks for the Fund, FTAM intends to invest in companies that
have the potential for long-term revenue and earnings growth, solid balance     
sheets and the potential to pay dividends. FTAM selects its investments using   
traditional research techniques, which include projections of earnings and      
dividend growth and the expected volatility of the markets in which the         
companies do business.                                                          

   The Fund also may invest in debt securities, securities issued by foreign
companies and ADRs, which are U.S. dollar-denominated receipts (typically issued
by a U.S. bank or trust company) evidencing ownership of underlying foreign     
securities.                                                                     

The Fund may earn dividend and interest income. The Fund may invest in
convertible securities that pay interest, and may invest up to 20% of its assets
in common stocks of large-cap companies, many of which pay dividends, fixed     
income securities, and small-cap companies. At the time of investment, debt     
securities and convertible securities will be rated investment grade, that is,  
in the BBB major rating category or higher by Standard & Poor's Ratings Services
or in the Baa rating category or higher by Moody's Investors Service, Inc., or  
their unrated equivalents.                                                      

  About the Russell Midcap(R) Index.  The Russell Midcap(R) Index measures
the performance of the 800 smallest companies in the Russell 1000(R) Index,     
which represent approximately 25% of the total market capitalization of the     
Russell 1000(R) Index. As of a recent date, the average market capitalization   
was approximately $8.1 billion; the median market capitalization was            
approximately $4.1 billion.                                                     

DISCIPLINED VALUE VIP FUND

The Fund's investment objective is long-term capital appreciation. The
investment objective is not fundamental, and may be changed without shareholder 
approval. Under normal market conditions, the Fund will invest primarily in     
equity securities of mid- and large-cap companies that FTAM believes have the   
potential to provide capital appreciation.                                      

     In choosing investments for the Fund, FTAM attempts to identify undervalued
securities through traditional measures of value, including securities having   
low ratios of share price to book value, net asset value, earnings and cash     
flow. FTAM also looks for companies that pay above-average dividends.           

    In addition to common stock, the Fund also utilizes convertible securities
and preferred stocks, which typically offer higher yields and good potential for
capital appreciation. The Fund also may invest in debt securities. The portion  
of the Fund's total assets invested in common stock, preferred stock,           
convertible securities, and debt securities varies according to FTAM's          
assessment of market and economic conditions and outlook.                       

RISK CONSIDERATIONS 

Each Fund's investment strategies may subject it to a number of risks,
including the following:                                                        

MARKET RISK (ALL FUNDS)                                                         
   Although equities historically have outperformed other asset classes over
the long term, their prices tend to fluctuate more dramatically over the shorter
term. These movements may result from factors affecting individual companies, or
from broader influences like changes in interest rates, market conditions,      
investor confidence or announcements of economic, political or financial        
information.                                                                    

     To the extent a Fund concentrates its investments in growth stocks, it will
be subject to the risks particular to growth stocks, as well as the risk that   
growth stocks may underperform other types of stocks. Growth stocks may be      
particularly susceptible to rapid price swings during periods of economic       
uncertainty or in the event of earnings disappointments, and they typically have
less dividend income to cushion the effect of adverse market conditions.        

All of the Funds, and particularly the Disciplined Value VIP Fund, may
invest in value stocks, which in theory limit downside risk because they are    
underpriced. Of course, FTAM's success in moderating market risk cannot be      
assured. There is no guarantee that a value stock is, in fact, undervalued, or  
that the market will ever recognize its true value. In addition, to the extent  
that a Fund invests in value stocks or attempts to moderate potential volatility
by investing in dividend-paying growth stocks, the Fund may produce more modest 
gains than equity funds with more aggressive investment profiles.               

     Because industries, companies or countries experiencing economic growth and
benefiting from demand trends and themes can change, a Fund's performance could 
suffer if FTAM is slow to respond to such changes.                              

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From time to time, the stock market may not favor the type of securities in     
which a Fund typically invests. Rather, the market could favor other types of   
securities, or it may not favor equities at all.                                

FOREIGN INVESTMENT RISK (QUALITY GROWTH VIP FUND AND MID CAP VIP FUND)          
    The securities of foreign companies may pose risks in addition to, or to a
greater degree than, the risks described above. Foreign companies may be subject
to disclosure, accounting, auditing and financial reporting standards and       
practices that are different from those to which U.S. issuers are subject.      
Accordingly, the Funds may not have access to adequate or reliable company      
information. Further, transaction costs in foreign jurisdictions may be higher, 
which can result in lower returns or decreased liquidity. In addition,          
political, economic and social developments in foreign countries and            
fluctuations in currency exchange rates may affect the operations of foreign    
companies or the value of their stocks. While investment in American and Global 
Depositary Receipts do not eliminate all of the risks inherent in foreign       
investing, investing in Depositary Receipts rather than directly in a foreign   
issuer's securities reduces currency risks during the settlement period for     
purchases and sales.                                                            

SMALL- AND MID-CAP INVESTMENT RISK (ALL FUNDS)                                  
  While potentially offering greater opportunities for capital growth than
larger, more established companies, the stocks of small- and mid-cap companies  
may be more volatile, especially during periods of economic uncertainty. These  
companies may face less certain growth prospects, or depend heavily on a limited
line of products and services or the efforts of a small number of key management
personnel. The securities of these companies may trade less frequently and in   
more limited volume than those of larger, more established companies. These     
risks may be particularly acute with respect to small-cap stocks. As a result,  
small- and mid-cap stocks, and thus a Fund's shares, may fluctuate more in value
than larger-cap stocks and funds that invest in them.                           

INTEREST RATE RISK (ALL FUNDS)                                                  
Although each Fund's primary investment focus is stocks, each Fund may
invest in fixed income securities, such as convertible bonds, preferred stocks  
and debt securities. Generally, the value of these securities will change       
inversely with changes in interest rates. In addition, changes in interest rates
may affect the operations of the issuers of stocks in which a Fund invests.     
Rising interest rates, which may be expected to lower the value of fixed income 
instruments and negatively impact the operations of many issuers, generally     
exist during periods of inflation or strong economic growth. While interest     
rates movements generally will impact most fixed income securities, mortgage-   
and asset-backed securities may be particularly sensitive to interest rate      
movements. When interest rates rise, the maturities of these securities may     
lengthen, leading to a significant decline in value. Further, as interest rates 
fall, these securities may be subject to the risk that the underlying loans will
be paid sooner than expected, which may reduce returns by forcing a Fund to     
invest at lower prevailing interest rates.                                      

CREDIT RISK (ALL FUNDS)                                                         
Each Fund's investments, and particularly investments in fixed income 
securities, may be affected by the creditworthiness of issuers in which a Fund  
invests. Changes in the financial strength, or perceived financial strength, of 
a company may affect the value of its securities and, therefore, impact the     
value of the Fund's shares.                                                     

DERIVATIVES RISK (QUALITY GROWTH VIP FUND)                                      
    The Fund's use of derivative instruments may involve risks different from,
or greater than, the risks associated with investing directly in securities or  
other traditional investments. Derivatives may be subject to market risk,       
interest rate risk, and credit risk, as discussed above. Certain derivatives may
be illiquid, which may reduce the return of the Fund if it cannot sell or       
terminate the derivative instrument at an advantageous time or price. Some      
derivatives may involve the risk of mispricing or improper valuation, or the    
risk that changes in the value of the instrument may not correlate well with the
underlying asset, rate or index, or with another portfolio investment that is   
being hedged. The Fund could lose the entire amount of its investment in a      
derivative and, in some cases, could lose more than the principal amount        
invested. Also, suitable derivative instruments may not be available in all     
circumstances, and there is no assurance that the Fund will be able to engage in
these transaction to reduce exposure to other risks.                            

ACTIVE TRADING (ALL FUNDS)                                                      
  The Funds will not generally trade in securities for short-term profits.
However, each Fund is actively managed and, under appropriate circumstances, may
purchase and sell securities without regard to the length of time held. A high  
portfolio turnover rate may increase transaction costs, which may negatively    
impact a Fund's performance.                                                    

TEMPORARY INVESTMENTS (ALL FUNDS)                                               
    FTAM may temporarily invest up to 100% of a Fund's assets in high quality,
short-term money market instruments if it believes adverse economic or market   
conditions, such as excessive volatility or sharp market declines, justify      
taking a defensive investment posture. If a Fund attempts to limit investment   
risk by temporarily taking a defensive investment position, it may be unable to 
pursue its investment objectives during that time, and it may miss              

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out on some or all of an upswing in the securities markets.                     

Please see the Statement of Additional Information for more detailed  
information about the Funds, their investment strategies, and their risks.      

PORTFOLIO HOLDINGS

 A description of the Funds' policies and procedures with respect to the
disclosure of the Funds' underlying portfolio securities is available in the    
Funds' Statement of Additional Information.                                     

VALUATION OF SHARES 

Each Fund prices its shares on the basis of the net asset value of the
Fund, which is determined as of the close of the New York Stock Exchange        
("NYSE") (generally 4:00 p.m., Eastern Time) on each Business Day. A Business   
Day is a day on which the NYSE is open for trading. The NYSE is generally open  
every week, Monday through Friday, except when the following holidays are       
celebrated: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good  
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and         
Christmas Day. If portfolio investments of a Fund are traded in markets on days 
that are not Business Days of the Fund, the Fund's net asset value may fluctuate
on days when investors cannot purchase or redeem shares.                        

    Net asset value per share for purposes of pricing sales and redemptions is
calculated by dividing the value of all securities and other assets belonging to
a Fund, less the liabilities charged to the Fund and any liabilities allocable  
to the Fund, by the number of the Fund's outstanding shares. The net asset value
per share of each Fund will fluctuate as the value of the investment portfolio  
of the Fund changes.                                                            

 The securities held by each Fund are generally valued at current market
prices. Securities listed or traded on domestic securities exchanges or the     
NASDAQ/NMS, including ADRs, are valued at the closing price on the exchange or  
system where the security is principally traded or at the Nasdaq Official       
Closing Price, if applicable. If there have been no sales for that day on any   
exchange or system, a security is valued at the mean between the closing bid and
asked quotes on the exchange or system where the security is principally traded.
Investments in securities maturing in 60 days or less may be valued at amortized
cost. Market quotations for securities prices may be obtained from automated    
pricing services. Bonds and other fixed-income securities are valued using      
market quotations provided by dealers, and also may be valued on the basis of   
prices provided by independent pricing services when Fund management, using     
guidelines adopted by the Board of Trustees, believes that such prices reflect  
the fair market value of such securities.                                       

   If market quotations are not readily available (which may include closing
prices deemed to be unreliable due to subsequent events), the securities will be
fair valued using guidelines adopted by the Board of Trustees of the Trust. The 
types of securities for which such fair value pricing may be required include,  
but are not limited to: foreign securities, where a significant event occurs    
after the close of the foreign market on which such security principally trades,
but before the close of the NYSE, that is likely to have changed the value of   
such security, or the closing value is otherwise deemed unreliable; securities  
of an issuer that has entered into a restructuring; securities whose trading has
been halted or suspended; fixed income securities that have gone into default   
and for which there is no current market value quotation; and securities that   
are restricted as to transfer or resale.                                        

     Valuing securities at fair value involves greater reliance on judgment than
valuing securities that have readily available market quotations. Fund          
management makes such determinations in good faith in accordance with the       
Trust's valuation guidelines. Fair value determinations can involve reliance on 
quantitative models employed by a fair value pricing service. There can be no   
assurance that the Fund could obtain the fair value assigned to a security if it
were to sell the security at approximately the time at which the Fund determines
its net asset value per share.                                                  

   For further information about valuation of investments, see the Statement
of Additional Information.                                                      

PURCHASING AND
REDEEMING SHARES

Shares of each Fund are available for purchase by insurance company   
separate accounts to serve as an investment medium for variable insurance       
contracts, and by qualified pension and retirement plans, certain insurance     
companies, and FTAM. Investors do not deal directly with the Funds to purchase  
or redeem shares. Please refer to the prospectus for the separate account for   
information on the allocation of premiums and on transfers of accumulated value 
among sub-accounts of the separate account that invests in the Funds.           

  Shares of each Fund are purchased or redeemed at the net asset value per
share next determined after receipt and acceptance by the Fund's distributor (or
other agent) of a purchase order or receipt of a redemption request. Each Fund  
reserves the right to reject or refuse, in its discretion, any order for the    
purchase of the Fund's                                                          

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THE COVENTRY FUNDS TRUST                                                      13
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shares, in whole or in part. Transactions in shares of a Fund will be effected  
only on a Business Day of the Fund.                                             

  Payment for shares redeemed normally will be made within seven days. The
Fund intends to pay cash for all shares redeemed, but under abnormal conditions 
which make payment in cash unwise, payment may be made wholly or partly in      
portfolio securities at their then market value equal to the redemption price. A
shareholder may incur brokerage costs in converting such securities to cash.    
Payment for shares may be delayed under extraordinary circumstances or as       
permitted by the Securities and Exchange Commission in order to protect         
remaining investors.                                                            

    The Trust currently does not foresee any disadvantages to investors if the
Funds served as an investment medium for both variable annuity contracts and    
variable life insurance policies. However, it is theoretically possible that the
interest of owners of annuity contracts and life insurance policies for which a 
Fund served as an investment medium might at some time be in conflict due to    
differences in tax treatment or other considerations. The Board of Trustees and 
each participating insurance company would be required to monitor events to     
identify any material conflicts between variable annuity contract owners and    
variable life insurance policy owners, and would have to determine what action, 
if any, should be taken in the event of such a conflict. If such a conflict     
occurred, an insurance company participating in the Fund might be required to   
redeem the investment of one or more of its separate accounts from the Fund,    
which might force the Fund to sell securities at disadvantageous prices.        

     Each Fund reserves the right to discontinue offering shares at any time, or
to cease investment operations entirely.                                        

MARKET TIMING/SHORT-TERM TRADING

  Some investors try to profit from various short-term or frequent trading
strategies commonly known as market timing. Investors that engage in market     
timing present risks to other investors. By realizing profits through short-    
term trading, investors that engage in rapid purchases and sales or exchanges of
the Funds' shares dilute the value of shares held by long term investors.       
Volatility resulting from excessive purchases and sales or exchanges of a Fund's
shares, especially involving large dollar amounts, may disrupt efficient        
portfolio management. In particular, a Fund may have difficulty implementing its
long-term investment strategies if it is forced to maintain a higher level of   
its assets in cash to accommodate significant short-term trading activity       
resulting from market timing.                                                   

  Excessive purchases and sale or exchanges of a Fund's shares may force a
Fund to sell portfolio securities at inopportune times to raise cash to         
accommodate short-term trading activity. In addition, a Fund may incur increased
expenses if one or more investors engage in excessive or short-term trading. For
example, a Fund may be forced to liquidate investments as a result of short-    
term trading and incur increased brokerage costs without attaining any          
investment advantage. Similarly, a Fund may bear increased administrative costs 
due to asset level and investment volatility that accompanies patterns of short 
term trading activity. All these factors may adversely affect Fund performance. 

THE BOARD OF TRUSTEES HAS ADOPTED POLICIES AND PROCEDURES INTENDED TO 
DISCOURAGE MARKET TIMING OR EXCESSIVE TRADING. IF YOU INTEND TO ENGAGE IN SUCH  
PRACTICES, DO NOT INVEST IN SHARES OF THE FUNDS AND NOTE THAT THE FUNDS WILL NOT
ACCOMMODATE MARKET TIMING. The Funds reserve the right to reject any request to 
purchase shares which it reasonably determines to be in connection with market  
timing or excessive trading by an investor or by accounts of investors under    
common control (for example, related contract owners, or a financial advisor    
with discretionary trading authority over multiple accounts).                   

   While the Funds discourage market timing and excessive short-term trading
and apply their policies and procedures on a uniform basis, the Funds cannot    
always recognize or reasonably detect such trading, particularly if it is       
facilitated by financial intermediaries or done through omnibus account         
arrangements or insurance company separate accounts. In addition, monitoring and
discouraging market timing and excessive trading may require the cooperation of 
insurance companies or other financial intermediaries, which cannot necessarily 
be assured.                                                                     

SERVICING AGENTS

     The Trust has adopted a plan under which up to 0.25% of each Fund's average
daily net assets may be expended for support services to investors, such as     
establishing and maintaining accounts and records, providing account            
information, arranging for bank wires, responding to routine inquiries,         
forwarding investor communications, assisting in the processing of purchase and 
redemption requests, and assisting investors in changing account designations   
and addresses. For expenses incurred and services provided, a financial         
institution (or its affiliate) providing these services ("Servicing Agent") may 
receive a fee from a Fund, computed daily and paid monthly, at an annual rate of
up to 0.25% of the average daily net assets of the Fund allocable to variable   
insurance contracts owned by customers of the Servicing Agent. A Servicing Agent
may periodically waive all or a portion of its servicing fees with respect to   
the Fund to increase the net income of the Fund available for distribution as   
dividends.                                                                      

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MANAGEMENT OF THE FUNDS 

INVESTMENT ADVISOR

   Through its portfolio management team, Fifth Third Asset Management, Inc.
("FTAM") makes the day-to-day investment decisions for the Funds and            
continuously reviews, supervises and administers each Fund's investment program.

     FTAM, whose address is 38 Fountain Square Plaza, Cincinnati, Ohio 45263, is
an indirect, wholly-owned subsidiary of Fifth Third Bank, which is a financial  
services company located in Cincinnati, Ohio. As of December 31, 2006, FTAM     
managed approximately $22 billion in assets, including approximately $12 billion
of mutual fund assets in the Fifth Third Funds.                                 

    Under an investment advisory agreement between the Trust and FTAM, the fee
payable to FTAM by the Trust for investment advisory services is the lesser of  
(a) a fee calculated as a percentage of each Fund's average daily net assets,   
which is computed daily and paid monthly at the annual rates indicated below, or
(b) such amount as may from time to time be agreed upon in writing by the Trust 
and FTAM.                                                                       

                                                                [Download Table]

                               INVESTMENT   ADVISORY FEE
                                ADVISORY    PAID DURING 
                               AGREEMENT    2006 (AFTER 
                                FEE RATE      WAIVERS)  
                               ----------   ------------
                                                        
Quality Growth VIP Fund......    0.70%         0.42%    
Balanced VIP Fund............    0.80%         0.00%    
Mid Cap VIP Fund.............    0.80%         0.46%    
Disciplined Value VIP Fund...    0.80%         0.46%    

   A discussion regarding the basis of the Board of Trustees approval of the
investment advisory contracts of the Funds will be available in the Funds'      
semi-annual report for the fiscal half-year ending June 30, 2007.               

     FTAM or its affiliates may, out of their own resources and at no additional
costs to the Funds or shareholders, pay insurance companies, broker-dealers and 
other financial intermediaries ("Intermediaries") for providing services to the 
Funds or to investors. Such payments, commonly referred to as "revenue sharing,"
do not increase Fund expenses and are not reflected in the fees and expenses    
listed in the expense table of this prospectus. The compensation received by    
Intermediaries via these payments may be more or less than the overall          
compensation received by the Intermediaries in connection with the sale of other
investment products and may influence the products offered or recommended by the
Intermediary, including the investment options available under your variable    
insurance contract. Shareholders may obtain more information about these        
arrangements, including associated conflicts of interest, from their            
Intermediary, and should so inquire if they would like additional information.  
Shareholders also may inquire of an Intermediary how the Intermediary will be   
compensated for investments made in the Funds.                                  

PORTFOLIO MANAGERS

Quality Growth VIP Fund:  Steven E. Folker and Amy Denn serve as the  
co-portfolio managers of the Quality Growth VIP Fund. Mr. Folker is the Director
of Growth Equity Strategy for FTAM and is a Vice President of FTAM Bank. He also
is a Chartered Financial Analyst with over 24 years of investment experience,   
including service as portfolio manager of three series of the Fifth Third Funds 
since 1993, and is a member of the Cincinnati Society of Financial Analysts. Mr.
Folker earned a B.B.A. in Finance & Accounting and an M.S. in Finance,          
Investments & Banking from the University of Wisconsin. Amy Denn has been a     
portfolio manager for the Fifth Third Balanced Fund (equity portion) since      
January 2006 and for the Fifth Third Quality Growth Fund since November 2006.   
Ms. Denn joined Fifth Third Asset Management in March 2003 as Portfolio Manager 
of Core Strategies. Prior to joining FTAM, she spent thirteen years with        
Minneapolis-based Investment Advisers, Inc., and then over three years as a     
portfolio manager with Paladin Investment Associates. Ms. Denn graduated from   
Minnesota State University, Mankato in 1987 with a BS degree in Business        
Administration, majoring in Accounting and Finance. Ms. Denn has nine years of  
investment experience.                                                          

     Mid Cap VIP Fund:  Martin E. Hargrave and Scott A. Billeadeau, serve as the
co-portfolio managers of the Mid Cap VIP Fund. Mr. Hargrave joined FTAM in 2003 
as a portfolio manager of Mid Cap/Small Cap Growth Strategies. In 1991, Mr.     
Hargrave joined Sunkist Growers, Inc. where he was responsible for managing the 
employee benefits investments, banking relationships, and cash management       
operations. He joined Investment Advisers, Inc. in 1996 as an institutional     
client service representative and in August 2000, he joined the small/mid cap   
team as a portfolio manager. Mr. Hargrave graduated from the University of      
Southern California with a Bachelor of Science degree, followed by a Master's   
degree in Finance from the Anderson School at the University of California, Los 
Angeles. He earned the CFA designation in 1998. Mr. Billeadeau is Vice President
of Growth Strategy and Portfolio Manager for FTAM. Prior to joining FTAM in     
March 2003, Mr. Billeadeau spent four years as Senior Vice President and Senior 
Portfolio Manager for Investment Advisers, Inc. where he was responsible for mid
cap and small cap growth strategies. Additionally, he was a founding principal  
of Paladin Investment Associates, LLC on its formation in December 2000.        
Previously, he spent two years with TradeStreet Investment Associates, Inc., a  
subsidiary of NationsBank, where he was a Senior Portfolio Manger and the       
Director responsible for                                                        

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THE COVENTRY FUNDS TRUST                                                      15
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the mid cap and small cap growth strategies. He has also held positions with    
Bank of America Investment Management and American Express Financial Advisors.  
Mr. Billeadeau graduated from Princeton University with a degree in Economics in
1984 and earned his CFA designation in 1991. In 2001, he was elected to the     
Board of Directors of FactSet Research Systems Inc., an NYSE listed company.    

    Balanced VIP Fund:  Amy Denn and Jon Fisher serve as co-portfolio managers
of the equity portion of the Balanced VIP Fund. Amy Denn has been a portfolio   
manager for the Fifth Third Balanced Fund (equity portion) since January 2006   
and for the Fifth Third Quality Growth Fund since November 2006. Ms. Denn joined
Fifth Third Asset Management in March 2003 as Portfolio Manager of Core         
Strategies. Prior to joining FTAM, she spent thirteen years with                
Minneapolis-based Investment Advisers, Inc., and then over three years as a     
portfolio manager with Paladin Investment Associates. Ms. Denn graduated from   
Minnesota State University, Mankato in 1987 with a BS degree in Business        
Administration, majoring in Accounting and Finance. Ms. Denn has nine years of  
investment experience. Mr. Fisher is a Portfolio Manager of Core Strategies.    
Prior to joining FTAM in 2000, he worked for seven years at PNC as a Portfolio  
Manager and Equity Analyst and subsequently worked for two years at Dain        
Bosworth as an Equity Analyst. Mr. Fisher has taught courses in Economics and   
Basic Investments for the Cincinnati Chapter of the American Institute of       
Bankers, has served as President for the Cincinnati Society of Financial        
Analysts, and has over 15 years of investment experience. Mr. Fisher graduated  
from the University of Iowa with a B.S. degree in Business Administration,      
majoring in Finance and earned his MBA from the University of Chicago. He earned
the Chartered Financial Analyst designation in 1996.                            

    Mitchell L. Stapley and John L. Cassady III serve as co-portfolio managers
of the fixed income portion of the Balanced VIP Fund. Mr. Stapley has over 16   
years of portfolio management experience, including 12 years with FTAM and its  
predecessor, Lyon Street Asset Management Company. He has earned his CFA        
designation and his B.S. degree in economics and political science, with honors,
from Albion College in 1981. Mr. Cassady earned his CFA designation in 1999 and 
has over 16 years of investment experience, including 12 years of fixed income  
portfolio management. He earned his B.S. in industrial management from the      
Georgia Institute of Technology and is currently a member of the West Michigan  
chapter of the Investment Analysts Society of Chicago.                          

 Disciplined Value VIP Fund:  James R. Kirk and Mary Jane Matts serve as
co-portfolio managers of the Disciplined Value VIP Fund. Mr. Kirk is currently a
Vice President and Director of Disciplined Value Strategy for FTAM. Prior to    
joining FTAM, he spent almost three years as the chief investment strategist and
manager of a value equity fund for National City Investment Management Co., and 
then four years as the chief investment officer for National City Bank's Private
Investment Advisors Group. He earned a B.A. in Economics and an M.B.A. from Case
Western Reserve University and has also earned his Chartered Financial Analyst  
designation. He has accumulated over 30 years of investment experience in the   
capacities of portfolio manager, director of research, and chief investment     
officer. He is a member of the board of trustees of the Fairview/Lutheran       
Hospital Foundation and the Kidney Foundation of Ohio and is a director of the  
Cleveland Athletic Club. Mr Kirk is a member and past president of the Cleveland
Society of Security Analysts. Mary Jane Matts has been a portfolio manager of   
the Fifth Third Disciplined Cap Value Fund since July 2005. Prior to joining    
Fifth Third Asset Management, Inc., in July 2005, she spent 10 years in various 
functions with National City Bank. Most recently, from 2000 to 2005, she was    
Director of Research for the Wealth Management Group, which includes the Private
Client Group and NatCity Investments, a brokerage firm. From 2001-2002, Ms.     
Matts served as the interim Chief Investment Officer for the Wealth Management  
Group. In 2003, Ms. Matts assisted in the transition of the management of the   
Armada value funds, while continuing to function as the Director of Research for
the Wealth Management Group. Prior to that, Ms. Matts managed the Value Team on 
the institutional side. Before joining National City in 1995, Ms. Matts was the 
Director of Research at Society Asset Management, now known as Victory Capital  
Management. She has 19 years of investment experience. She earned a B.A. in     
Economics, cum laude and with honors, from Kenyon College and an M.B.A from Case
Western Reserve University. Ms. Matts earned the Chartered Financial Analyst    
designation in 1991.                                                            

    See the Statement of Additional Information for more information about the
portfolio managers' compensation, other accounts managed by the portfolio       
managers and the portfolio managers' ownership of equity securities of the      
Funds.                                                                          

ADMINISTRATOR AND DISTRIBUTOR 

BISYS Fund Services Ohio, Inc. is the administrator for the Funds, and
BISYS Fund Services, L.P. acts as the Funds' principal underwriter and          
distributor. The address of each is 3435 Stelzer Road, Columbus, Ohio           
43219-3035.                                                                     

   See the Statement of Additional Information for further information about
the Funds' service providers.                                                   

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TAXATION

  Each Fund intends to qualify and has elected to be taxed as a "regulated
investment company" under the provisions of Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). If a Fund qualifies as a "regulated      
investment company" and complies with the appropriate provisions of the Code,   
the Fund will not be liable for federal income tax on income it distributes.    

   Each Fund also intends to comply with the diversification requirements of
Section 817(h) of the Code and the underlying regulations for variable annuity  
and variable life insurance contracts so that owners of these contracts should  
not be subject to federal tax on distributions of dividends and income from a   
Fund to the insurance company's separate accounts.                              

Since the shareholders of each Fund will be separate accounts, no     
discussion is included here as to the federal income tax consequences at the    
shareholder level. For information concerning the federal income tax            
consequences to purchasers of the variable life insurance policies and variable 
annuity contracts, see the prospectus for the relevant variable insurance       
contract. See the Statement of Additional Information for more information on   
taxes.                                                                          

GENERAL INFORMATION 

DESCRIPTION OF THE TRUST AND ITS SHARES 

     The Coventry Funds Trust was organized as a Massachusetts business trust in
1994 and currently consists of multiple portfolios. Prior to the date of this   
prospectus, the Trust was named "Variable Insurance Funds". The Board of        
Trustees of the Trust may establish additional portfolios in the future and,    
unless a policy or procedure is expressly designated as fundamental, may change 
the Funds' policies and procedures without shareholder approval. Under          
Massachusetts law, shareholders could be held personally liable for the         
obligations of the Trust under certain circumstances. However, the Trust's      
declaration of trust disclaims liability of its shareholders and provides for   
indemnification out of Trust property for all loss and expense of any           
shareholder held personally liable for the obligations of the Trust.            
Accordingly, the risk of a shareholder incurring financial loss on account of   
shareholder liability should be considered remote.                              

MISCELLANEOUS 

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

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THE COVENTRY FUNDS TRUST                                                      17
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FINANCIAL HIGHLIGHTS

 The following tables are included to assist investors in evaluating the
financial performance of each Fund since its commencement of operations through 
December 31, 2006. Certain information reflects financial results of a single   
share of the Fund. "Total Return" represents how much an investment in a Fund   
would have earned (or lost) during the period. This information has been audited
by PricewaterhouseCoopers LLP. The information does not reflect charges and fees
associated with a separate account that invests in a Fund or any insurance      
contract for which a Fund is an investment option. This information, along with 
the Funds' financial statements, is included in the Funds' annual report, which 
may be obtained free of charge upon request.                                    

QUALITY GROWTH VIP FUND 

                                                        [Enlarge/Download Table]

                                                                       YEAR ENDED DECEMBER 31,             
                                                            ---------------------------------------------  
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:               2006      2005      2004      2003     2002   
----------------------------------------------              -------   -------   -------   ------   ------  
                                                                                                           
NET ASSET VALUE, BEGINNING OF PERIOD.......................    8.07   $  7.61   $  7.55   $ 5.78   $ 8.26  
                                                            -------   -------   -------   ------   ------  
INVESTMENT ACTIVITIES:                                                                                     
  Net investment income (loss).............................    0.02+    (0.03)    - -(+)   (0.02)   (0.01) 
  Net realized and unrealized gains (losses)...............    0.32      0.49      0.06     1.79    (2.47) 
                                                            -------   -------   -------   ------   ------  
       Total investment activities.........................    0.34      0.46      0.06     1.77    (2.48) 
                                                            -------   -------   -------   ------   ------  
DISTRIBUTIONS:                                                                                             
  From net investment income...............................   (0.06)    - -(+)      - -      - -      - -  
                                                            -------   -------   -------   ------   ------  
       Total distributions.................................   (0.06)    - -(+)      - -      - -      - -  
                                                            -------   -------   -------   ------   ------  
NET ASSET VALUE, END OF PERIOD............................. $  8.35   $  8.07   $  7.61   $ 7.55   $ 5.78  
                                                            =======   =======   =======   ======   ======  
TOTAL RETURN...............................................    4.26%     6.07%     0.79%   30.62%  (30.02%)
RATIOS/SUPPLEMENTAL DATA:                                                                                  
  Net assets, end of period (000's)........................ $19,021   $19,111   $16,724   $7,792   $3,067  
  Ratios of expenses to average net assets.................    1.00%     1.10%     1.10%    1.10%    1.10% 
  Ratios of net investment income (loss) to average net                                                    
     assets................................................    0.30%    (0.35%)    0.04%   (0.31%)  (0.25%)
  Ratios of expenses to average net assets(a)..............    1.42%     1.27%     1.49%    2.91%    6.30% 
  Portfolio turnover rate..................................   94.67%    91.45%    28.00%   16.45%   12.03% 

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

(+) Amount is less than $0.005 per share.                                       

+   Average Shares Method used in calculation.                                  

(a) During various periods, certain fees were reduced. The ratios shown do not  
include these fee reductions.                                           

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BALANCED VIP FUND 

                                                        [Enlarge/Download Table]

                                                                YEAR ENDED DECEMBER 31,        JULY 15, 2002 TO 
                                                           ---------------------------------     DECEMBER 31,   
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:              2006     2005     2004     2003         2002(A)     
----------------------------------------------             ------   ------   ------   ------   -----------------
                                                                                                                
NET ASSET VALUE, BEGINNING OF PERIOD...................... $11.81   $12.08   $11.72   $10.49        $10.00      
                                                           ------   ------   ------   ------        ------      
INVESTMENT ACTIVITIES:                                                                                          
  Net investment income...................................   0.23     0.17     0.18     0.09          0.05      
  Net realized and unrealized gains.......................   0.81     0.07     0.41     1.38          0.49      
                                                           ------   ------   ------   ------        ------      
       Total investment activities........................   1.04     0.24     0.59     1.47          0.54      
                                                           ------   ------   ------   ------        ------      
DISTRIBUTIONS:                                                                                                  
  From net investment income..............................  (0.31)   (0.18)   (0.10)   (0.11)        (0.05)     
  From net realized gains.................................  (0.12)   (0.33)   (0.13)   (0.13)          - -      
                                                           ------   ------   ------   ------        ------      
       Total distributions................................  (0.43)   (0.51)   (0.23)   (0.24)        (0.05)     
                                                           ------   ------   ------   ------        ------      
NET ASSET VALUE, END OF PERIOD............................ $12.42   $11.81   $12.08   $11.72        $10.49      
                                                           ======   ======   ======   ======        ======      
TOTAL RETURN..............................................   9.01%    2.02%    5.11%   14.04%         5.37%(b)  
RATIOS/SUPPLEMENTAL DATA:                                                                                       
  Net assets, end of period (000's)....................... $2,019   $2,037   $1,921   $1,507        $  708      
  Ratios of expenses to average net assets................   0.95%    1.10%    1.10%    1.10%         1.06%(c)  
  Ratios of net investment income to average net assets...   1.91%    1.56%    1.56%    0.91%         1.06%(c)  
  Ratios of expenses to average net assets(d).............   4.05%    3.88%    4.25%    6.36%        14.99%(c)  
  Portfolio turnover rate.................................  62.19%   73.35%   74.01%   69.22%        12.20%     

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

(a) Period from commencement of operations.                                     

(b) Not annualized.                                                             

(c) Annualized.                                                                 

(d) During various periods, certain fees were reduced. The ratios shown do not  
include these fee reductions.                                           

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THE COVENTRY FUNDS TRUST                                                      19
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MID CAP VIP FUND

                                                        [Enlarge/Download Table]

                                                          YEAR ENDED DECEMBER 31,          JULY 15, 2002 TO
                                                    ------------------------------------     DECEMBER 31,  
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:       2006      2005      2004      2003        2002(A)     
----------------------------------------------      -------   -------   -------   ------   ----------------
                                                                                                           
NET ASSET VALUE, BEGINNING OF PERIOD............... $ 17.08   $ 15.54   $ 14.22   $10.50        $10.00     
                                                    -------   -------   -------   ------        ------     
INVESTMENT ACTIVITIES:                                                                                     
  Net investment income (loss).....................   (0.06)     0.02     (0.06)   (0.05)        (0.02)    
  Net realized and unrealized gains................    1.78      1.53      1.38     3.79          0.52     
                                                    -------   -------   -------   ------        ------     
       Total investment activities.................    1.72      1.55      1.32     3.74          0.50     
                                                    -------   -------   -------   ------        ------     
DISTRIBUTIONS:                                                                                             
  From net investment income.......................   (0.01)    (0.01)      - -      - -           - -     
  From net realized gains..........................     - -       - -       - -    (0.02)          - -     
                                                    -------   -------   -------   ------        ------     
       Total distributions.........................   (0.01)    (0.01)      - -    (0.02)          - -     
                                                    -------   -------   -------   ------        ------     
NET ASSET VALUE, END OF PERIOD..................... $ 18.79   $ 17.08   $ 15.54   $14.22        $10.50     
                                                    =======   =======   =======   ======        ======     
TOTAL RETURN.......................................   10.04%    10.00%     9.28%   35.66%         5.00%(b) 
RATIOS/SUPPLEMENTAL DATA:                                                                                  
  Net assets, end of period (000's)................ $17,941   $17,352   $14,517   $5,682        $  762     
  Ratios of expenses to average net assets.........    1.05%     1.10%     1.10%    1.10%         1.10%(c) 
  Ratios of net investment (loss) to average net                                                           
     assets........................................   (0.36%)    0.12%    (0.54%)  (0.72%)       (0.59%)(c)
  Ratios of expenses to average net assets(d)......    1.55%     1.41%     1.67%    3.65%        14.16%(c) 
  Portfolio turnover rate..........................   70.77%    55.31%    37.35%   46.79%         0.00%    

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

(a) Period from commencement of operations.                                     

(b) Not annualized.                                                             

(c) Annualized.                                                                 

(d) During various periods, certain fees were reduced. The ratios shown do not  
include these fee reductions.                                           

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DISCIPLINED VALUE VIP FUND

                                                        [Enlarge/Download Table]

                                                           YEAR ENDED DECEMBER 31,          JULY 15, 2002 TO
                                                     ------------------------------------     DECEMBER 31,  
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:        2006      2005      2004      2003        2002(A)     
----------------------------------------------       -------   -------   -------   ------   ----------------
                                                                                                            
NET ASSET VALUE, BEGINNING OF PERIOD................ $ 15.70   $ 14.94   $ 13.34   $10.28        $10.00     
                                                     -------   -------   -------   ------        ------     
INVESTMENT ACTIVITIES:                                                                                      
  Net investment income.............................    0.24      0.20      0.14     0.14          0.07     
  Net realized and unrealized gains.................    2.90      0.76      1.58     3.24          0.28     
                                                     -------   -------   -------   ------        ------     
       Total investment activities..................    3.14      0.96      1.72     3.38          0.35     
                                                     -------   -------   -------   ------        ------     
DISTRIBUTIONS:                                                                                              
  From net investment income........................   (0.37)    (0.20)    (0.11)   (0.15)        (0.07)    
  From net realized gains...........................   (0.28)      - -     (0.01)   (0.17)          - -     
                                                     -------   -------   -------   ------        ------     
       Total distributions..........................   (0.65)    (0.20)    (0.12)   (0.32)        (0.07)    
                                                     -------   -------   -------   ------        ------     
NET ASSET VALUE, END OF PERIOD...................... $ 18.19   $ 15.70   $ 14.94   $13.34        $10.28     
                                                     =======   =======   =======   ======        ======     
TOTAL RETURN........................................   20.38%     6.44%    12.96%   33.26%         3.53%(b) 
RATIOS/SUPPLEMENTAL DATA:                                                                                   
  Net assets, end of period (000's)................. $27,011   $20,526   $15,652   $5,407        $  740     
  Ratios of expenses to average net assets..........    1.00%     1.10%     1.10%    1.10%         1.10%(c) 
  Ratios of net investment income to average net                                                            
     assets.........................................    1.51%     1.33%     1.12%    1.40%         1.80%(c) 
  Ratios of expenses to average net assets(d).......    1.46%     1.43%     1.64%    3.83%        14.83%(c) 
  Portfolio turnover rate...........................   45.43%    28.38%    19.86%   28.43%        36.68%    

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

(a) Period from commencement of operations.                                     

(b) Not annualized.                                                             

(c) Annualized.                                                                 

(d) During various periods, certain fees were reduced. The ratios shown do not  
include these fee reductions.                                           

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For more information about the Funds, the following documents are available free
upon request:                                                                   

ANNUAL/SEMI-ANNUAL REPORTS:                                                     

The Funds' annual and semi-annual reports to shareholders contain additional    
information on the Funds' investments. In the annual report, an investor will   
find a discussion of the market conditions and investment strategies that       
significantly affected each Fund's performance during the last fiscal year.     

STATEMENT OF ADDITIONAL INFORMATION (SAI):                                      

The SAI provides more detailed information about each Fund, including its       
operations and investment policies. It is incorporated by reference and is      
legally considered a part of this prospectus.                                   

AN INVESTOR CAN GET FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER        
INFORMATION AND DISCUSS ANY QUESTIONS ABOUT THE FUNDS, BY CONTACTING A BROKER OR
BANK THAT SELLS AN INSURANCE CONTRACT THAT OFFERS THE FUNDS AS INVESTMENT       
OPTIONS. THE FUNDS DO NOT HAVE AN INTERNET WEBSITE. INVESTORS ALSO MAY CONTACT  
THE FUNDS AT:                                                                   

        THE COVENTRY FUNDS TRUST
 3435 STELZER ROAD
         COLUMBUS, OHIO 43219-3035
         TELEPHONE: 1-800-282-5706

Investors can review and copy the SAI and other information about the Funds at  
the Public Reference Room of the Securities and Exchange Commission. Investors  
may call 1-202-942-8090 for more information about the Public Reference Room.   
Investors can get text-only copies of information about the Funds:              

 - For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-0102 or by electronic request at           
publicinfo@sec.gov.                                               

- Free from the EDGAR database on the Commission's Website at         
http://www.sec.gov.                                               

Investment Company Act file no. 811-8644.                                       

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 CORRECTION NOTICE

 FIFTH THIRD QUALITY GROWTH VIP FUND
 FIFTH THIRD BALANCED VIP FUND
FIFTH THIRD MID CAP VIP FUND
FIFTH THIRD DISCIPLINED VALUE VIP FUND

FIFTH THIRD QUALITY GROWTH VIP FUND                                             

The Expense Example on page 4 of the Prospectus should be deleted and replaced  
with the following:                                                             

 1 Year            3 Years          5 Years           10 Years
 ------            -------          -------           --------

$102              $364             $694              $1,627 

FIFTH THIRD BALANCED VIP FUND                                                   

The Expense Example on page 5 of the Prospectus should be deleted and replaced  
with the following:                                                             

 1 Year            3 Years          5 Years           10 Years
 ------            -------          -------           --------

$98               $641             $1,537            $3,851 

FIFTH THIRD MID CAP VIP FUND                                                    

The Expense Example on page 7 of the Prospectus should be deleted and replaced  
with the following:                                                             

 1 Year            3 Years          5 Years           10 Years
 ------            -------          -------           --------

$108              $392             $753              $1,769 

FIFTH THIRD DISCIPLINED VALUE VIP FUND                                          

The Expense Example on page 8 of the Prospectus should be deleted and replaced  
with the following:                                                             

 1 Year            3 Years          5 Years           10 Years
 ------            -------          -------           --------

$104              $375             $718              $1,687 

THIS SUPPLEMENT AND THE PROSPECTUS DATED MAY 1, 2007 PROVIDE THE INFORMATION
 A PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING AND SHOULD BE
RETAINED FOR FUTURE REFERENCE. A STATEMENT OF ADDITIONAL INFORMATION HAS BEEN 
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION DATED MAY 1, 2007, WHICH IS 
INCORPORATED HEREIN BY REFERENCE AND CAN BE OBTAINED WITHOUT CHARGE BY CALLING
1-800-282-5706. 

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Free Enterprise Action Fund 

THE COVENTRY FUNDS TRUST
3435 STELZER ROAD 
COLUMBUS, OHIO 43219-3035 
1-800-766-3960

PROSPECTUS

May 1, 2007 

The Fund seeks long-term capital appreciation through investments and advocacy
that promote the American system of free enterprise.

--------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND    
EXCHANGE COMMISSION ("SEC") OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC 
OR ANY STATE SECURITIES COMMISSION DETERMINED WHETHER THIS PROSPECTUS IS        
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.             
--------------------------------------------------------------------------------

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TABLE OF CONTENTS 

                                                                [Download Table]

                                                                 PAGE    
                                                              -----------
                                                                         
Investment Objective........................................            1
Principal Investment Strategies.............................            1
  Temporary Defensive Positions.............................            1
  Investment Evaluation Process: The Free Enterprise                     
     Guidelines.............................................            2
  Shareholder Advocacy......................................            3
Who Should Invest in the Fund?..............................            4
Specific Risk Considerations................................            5
General Risk Considerations.................................            5
  Market Risks Associated with Equity Securities............            5
  Active Trading Risk; Portfolio Turnover...................            5
  Borrowing.................................................            6
  Interest Rate Risk........................................            6
  Credit Risk...............................................            6
  Other Investments.........................................            6
  Fund Performance..........................................            7
Table Of Fees And Expenses..................................            8
Management Of The Fund......................................            9
  The Trust.................................................            9
  The Adviser...............................................            9
  Investment Advisory Fees; Other Advisory Expenses.........           11
  Expense Waivers and Reimbursements........................           11
Pricing Fund Shares.........................................           11
Buying Fund Shares..........................................           12
Redeeming Fund Shares.......................................           14
Dividends And Distributions.................................           15
Tax Considerations..........................................           16
Services To Help You Manage Your Account....................           17
Financial Highlights........................................           20
Statement of Additional Information and Shareholder                      
  Reports...................................................   back cover

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THE FREE ENTERPRISE ACTION FUND 

INVESTMENT OBJECTIVE

The investment objective of the Fund is to seek long-term capital     
appreciation, which it attempts to achieve through investments and advocacy that
promote the American system of free enterprise. The investment objective is     
non-fundamental and may be changed without shareholder approval.                

PRINCIPAL INVESTMENT STRATEGIES 

   The Fund attempts to achieve its investment objective by investing, under
normal market conditions, at least 65% of its assets in the common stocks of    
companies generally found among the Fortune 500 and in the S&P 500. The Fund    
will seek to enhance the return of this portfolio with certain additional       
strategies, as identified below.                                                

Because the companies that tend to be included in the Fund are market 
leaders and, oftentimes, trend-setters for other businesses, they are, in the   
opinion of the Action Fund Management, LLC ("AFM" or the "Adviser"), the        
companies typically targeted by social activists. Accordingly, as a shareholder 
in the companies typically targeted by social activists, the Fund will be in a  
position to advocate for change as may be deemed appropriate by the Adviser.    
Specifically, the Fund may take an activist position with respect to one or more
corporate managements if the Adviser believes advocacy may:                     

- Promote the American system of free enterprise;                     

    - Ensure that corporate management makes sound business decisions based on
long-term investor interests; and                                 

    - Protect businesses and their investors from what the Adviser believes is
harmful social activism.                                          

In general, the Fund intends to conduct its investment activities in a
manner designed to carry out the principles and standards it considers          
consistent with promoting the American system of free enterprise. For more      
detail, see the sections entitled "Investment Evaluation Process: The Free      
Enterprise Guidelines" and "Shareholder Advocacy."                              

TEMPORARY DEFENSIVE POSITIONS 

  For temporary defensive purposes, the Fund may make investments that are
inconsistent with its principal investment strategies in attempting to respond  
to adverse market, economic, political or other conditions. If that occurs, the 
Fund may not achieve its investment objective. Under these circumstances, the   
Fund may invest without limit in money market securities, U.S. government       
obligations and short-term debt securities, or any portion of its assets may be 
uninvested and held as cash.                                                    

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INVESTMENT EVALUATION PROCESS: THE FREE ENTERPRISE GUIDELINES 

    The Free Enterprise Guidelines are intended to promote the American system
of free enterprise. The Adviser will manage the investments of the Fund pursuant
to three basic principles. The Adviser will:                                    

1. Identify the universe of financially eligible investments;   

        2. Invest in companies the Adviser believes are potentially at risk from
social activism; and                                      

3. Conduct advocacy activities when the Adviser believes those  
        activities will be in the best interests of the companies in which
the Fund is a shareholder.                                

   More specifically, from the universe of financially eligible investments,
the Fund seeks to identify companies that, in the Adviser's view, have suffered 
or have the potential to suffer business harm as a result of social activism.   
Once the Fund becomes a shareholder of such a company, it may undertake measures
that, in the Adviser's view, have the potential to protect the company from     
social activists who may harm the company. These goals are accomplished by      
evaluating companies according to the criteria identified below, also referred  
to as Free Enterprise Guidelines. A "yes" answer signals to the Adviser that the
company is a potential investment for the Fund as well as a potential focus of  
the Adviser's advocacy efforts.                                                 

- Is the business' freedom to conduct its affairs within the scope of 
 federal and state law and regulations at risk of being inhibited by
social activists?                                                 

 - Is the business at risk of being extorted, threatened, blackmailed or
otherwise inappropriately interfered with by social activists?    

- Is the business at risk of appeasing or otherwise supporting harmful
social activists?                                                 

- Are the business' actions questionable from an economic perspective?

 - Are the business' actions questionable from a scientific perspective?

- Is the business' freedom to innovate at risk of being infringed?    

     - Is the business being diverted from its primary purpose of increasing its
    profits toward engaging in inappropriate social activity that might be
considered outside of the scope of the business?                  

  - Is the business taking or considering taking actions that might dilute
the long-term interests of profit-oriented investors?             

- Is the business making or considering decisions that tend to ignore 
individual liberties relevant to the business' products?          

 - Is the business taking or considering private action on social issues
that circumvents public debate and the American political process?

  - Is the business willing to aggressively challenge unfounded government
action that threatens its interests?                              

The Guidelines serve as criteria that the Adviser may choose to use in
connection with the investment selection process. The Fund may make investments 
that do not meet some or all of the criteria identified above. Likewise, the    
exclusion of a company otherwise within the Fund's investment guidelines may    
cause the Adviser to pass up opportunities to buy certain securities when it is 
otherwise advantageous to do so, or sell                                        

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certain securities when it is otherwise disadvantageous to do so. The evaluation
of any or all of these criteria is subjective in nature.                        

Following the identification of a business at risk of being harmed by 
social activists, the Adviser may, on behalf of the Fund, undertake any or all  
of the following activities:                                                    

- Communicate with corporate management to inform it of the Fund's    
position;                                                         

- Communicate with other institutional shareholders and significant   
   individual investors of the company to educate them on what corporate
management is doing and the Fund's position;                      

- Communicate with other affected or interested businesses;           

   - Conduct an educational outreach to individual investors and the general
public;                                                           

- Conduct a media outreach campaign;                                  

- Conduct an advertising campaign;                                    

- Take legal action;                                                  

- Call a shareholder meeting;                                         

- Nominate directors to the company's board;                          

- Offer shareholder proposals; and                                    

   - Take any other action deemed appropriate by the Advisor for the purpose
of advancing the Fund's objective.                                

 The costs of and risks associated with shareholder activism by the Fund
will be borne by the Adviser.                                                   

SHAREHOLDER ADVOCACY

The Fund intends to maintain a dialogue with representatives of the   
companies in which it is a shareholder. The goal of Fund communications would be
to further the objectives stated in the Free Enterprise Guidelines.             

  At times, dialogue initiatives do not yield the intended result. On such
occasions, it may be appropriate for the Fund to put forth a proposal for       
consideration by the entire shareholder body.                                   

 The Fund may also be presented with an opportunity each year to vote on
various issues proposed by other shareholders. These matters may or may not be  
related to the Fund's investment strategy. AFM intends to vote all proxies      
consistent, in the opinion of AFM, with the principles and standards adopted by 
the Fund. AFM intends to provide updates about its advocacy efforts on its      
website.                                                                        

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WHO SHOULD INVEST IN THE FUND?

    The Fund may be appropriate for investors who seek to promote the American
system of free enterprise while pursuing their long-term financial goals. The   
Fund's guiding principle is:                                                    

"THE SOCIAL RESPONSIBILITY OF BUSINESS IS TO INCREASE ITS PROFITS." 

Milton Friedman 
The New York Times Magazine (September 13, 1970)
(1976 recipient of the Nobel Prize for Economics) 

Businesses should be free to operate according to that principal and  
otherwise in the best interests of their investors. Increasingly, however, some 
social activists are threatening and reducing the ability of businesses to so   
operate.                                                                        

   Under the guise of activist-defined "corporate social responsibility" and
other similarly-rooted social behavior concepts, social activists often attempt 
to persuade, pressure and compel corporate managements to take actions that may 
not be based on sound business practices, sound economics or sound science. Many
corporate managements resist such ill-advised actions, but many do not.         

  Social activist-inspired decisions by corporate management may not be in
the best interests of a business and its investors. More generally, such actions
may also adversely affect the entire American system of free enterprise by      
setting precedents that may tend to induce other corporate managements to take  
similarly unfounded and undesirable actions.                                    

  The advocacy efforts of the social activists and corresponding corporate
management decisions may go unnoticed and unchallenged by investors. The        
long-term adverse impacts of social activist-inspired corporate actions may be  
underestimated or downplayed by corporate management.                           

  The Fund will be a shareholder of some companies that, in the opinion of
the Adviser, are at risk of being adversely impacted by social activists. As a  
shareholder, the Fund will work to help corporate managements make decisions    
based on sound business practices, sound economics and sound science. The Fund  
will work to ensure that businesses stay focused on meeting their true social   
responsibility, as articulated by Dr. Milton Friedman, thereby promoting the    
American system of free enterprise.                                             

     The Adviser exercises the rights of the Fund as a shareholder to attempt to
achieve the following goals:                                                    

- Promote the American system of free enterprise;                     

    - Ensure that corporate management makes decisions based on sound business
practices, sound economics and sound science; and                 

 - Protect businesses and their investors from social activists that are
harmful in the Adviser's opinion.                                 

  Investment companies and investors can play a critical role in promoting
sound decision-making by corporate managements and, thereby, the American system
of free enterprise. The Fund gives you the opportunity to help promote these    
ideals while pursuing your long-term financial goals.                           

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SPECIFIC RISK CONSIDERATIONS

Adherence to the Free Enterprise Guidelines may cause the Fund not to 
perform as well as other Funds that choose their investments based strictly on  
financial considerations. Some companies that are performing well financially   
but that no longer fit within the Free Enterprise Guidelines may be sold so as  
to provide an opportunity for the Fund to invest in other companies. This may   
have a negative impact on Fund performance.                                     

The Adviser was formed for the purpose of managing the Fund, and      
accordingly has no prior experience directing the investment activities of a    
mutual fund. The Adviser's principals, however, have significant experience with
respect to advocating the philosophical positions that serve as the basis for   
stock selection. Accordingly, initial analysis relating to the universe of      
companies eligible for investment by the Fund may be wholly or partially        
allocated to an investment sub-adviser to the Fund. (See the section entitled   
"Management of the Fund," which appears below.)                                 

GENERAL RISK CONSIDERATIONS 

  As with any investment, an investment in the Free Enterprise Action Fund
involves certain risks, including the loss of some or all of your investment.   
Those risks are described in greater detail below and in the SAI. The Fund may  
not be appropriate for all investors, and you should carefully consider your own
investment goals, time horizon and risk tolerance before investing in the Fund. 

MARKET RISKS ASSOCIATED WITH EQUITY SECURITIES                                  

     Although stocks historically have outperformed other asset classes over the
long term, their prices tend to fluctuate more dramatically over the shorter    
term. These movements may result from factors affecting individual companies, or
from broader influences like changes in interest rates, market conditions,      
investor confidence or announcements of economic, political or financial        
information. In addition to the risk of general stock market decline described  
above, the Fund is subject to risk by focusing on large companies versus the    
market as a whole. Funds focused on a particular company size may produce       
returns that trail those of other asset types, and strength of return tends to  
be cyclical. Regardless of sector strength, individual stocks may lose value for
any number of reasons, even when the market as a whole has increased.           

  To the extent the Fund concentrates its investments in growth stocks, it
will be subject to risks particular to growth stocks, as well as the risk that  
growth stocks may underperform other types of stocks. Growth stocks may be      
particularly susceptible to rapid price swings during periods of economic       
uncertainty or in the event of earnings disappointments, and they typically have
less dividend income to cushion the effect of adverse market conditions.        

The Fund may also focus its investments in value stocks. There is no  
guarantee that a value stock is, in fact, undervalued, or that the market will  
ever recognize its true value. The market could favor growth stocks and, to the 
extent that the Fund invests in value stocks, the Fund may produce more modest  
gains than stock funds with more aggressive investment profiles.                

ACTIVE TRADING RISK; PORTFOLIO TURNOVER                                         

   Although the Adviser seeks to minimize the frequency with which portfolio
securities are bought and sold (known as portfolio turnover) so as to avoid     
possible income tax consequences, portfolio turnover will not be a limiting     
factor when the Adviser believes portfolio changes are appropriate. A higher    
turnover rate (100% or                                                          

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more) will involve correspondingly greater transaction costs which will be borne
directly by the Fund and may increase the potential for more taxable dividends  
and distributions paid to shareholders.                                         

BORROWING                                                                       

  The Fund may borrow money as a temporary measure for emergency and other
purposes to facilitate redemption requests, or for other purposes consistent    
with the Fund's investment objectives and program. Such borrowings may be       
collateralized with Fund assets. To the extent that the Fund purchases          
securities while it has outstanding borrowings, it may be deemed to be using    
leverage, i.e., using borrowed funds for investment. Leveraging will exaggerate 
the effect on net asset value of any increase or decrease in the market value of
the Fund's portfolio. Money borrowed for leveraging will be subject to interest 
costs that may or may not be recovered by appreciation of the securities        
purchased; in certain cases, interest costs may exceed the return received on   
the securities purchased. The Fund may also be required to maintain minimum     
average balances in connection with such borrowing or to pay a commitment or    
other fee to maintain a line if credit; either of these requirements would      
increase the cost of borrowing over the stated interest rate.                   

INTEREST RATE RISK                                                              

  Although the Fund's primary investment focus is stocks, it may invest in
debt securities and other types of fixed income securities for temporary        
defensive purposes. Generally, the value of these securities will change        
inversely with changes in interest rates. In addition, changes in interest rates
may affect the operations of the issuers of stocks in which the Fund invests.   
Rising interest rates, which may be expected to lower the value of fixed income 
instruments and negatively impact the operations of many issuers, generally     
exist during periods of inflation or strong economic growth.                    

CREDIT RISK                                                                     

  The Fund's investments, and particularly investments in debt securities,
may be affected by the creditworthiness of issuers in which the Fund invests.   
Changes in the financial strength, or perceived financial strength, of a company
may affect the value of its securities and, therefore, impact the value of the  
Fund's shares.                                                                  

OTHER INVESTMENTS                                                               

     While the Fund has no present intention of doing so, the Fund may invest in
stocks issued by foreign companies. The Fund generally will do so only if the   
stocks are traded in the U.S. or available through American Depositary Receipts.
The stocks of foreign companies may pose risks in addition to, or to a greater  
degree than, the other risks described in this prospectus. Foreign companies may
be subject to disclosure, accounting, auditing and financial reporting standards
and practices that are different from those to which U.S. issuers are subject.  
Accordingly, the Fund may not have access to adequate or reliable company       
information. In addition, political, economic and social developments in foreign
countries and fluctuations in currency exchange rates may affect the operations 
of foreign companies or the value of their stocks.                              

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FUND PERFORMANCE                                                                

  The following chart and table show how the Fund has performed. The chart
demonstrates the Fund's performance during the last calendar year, and the table
compares the Fund's performance to the Standard & Poor's 500 Composite Stock    
Price Index ("S&P 500 Index"), a widely recognized unmanaged index of common    
stocks.                                                                         

CALENDAR YEAR TOTAL RETURNS*

[BAR CHART]                                                                     

                                                                [Download Table]
           
2006  10.88

* Assumes reinvestment of dividends and distributions.                          

                                                                [Download Table]
                                                                               
Best Quarter:...............................................     5.01%   4Q2006
Worst Quarter...............................................    -1.43%   2Q2006

AVERAGE ANNUAL TOTAL RETURNS*                                                   

(for the periods ended December 31, 2006)                                       

                                                        [Enlarge/Download Table]

                                                                       SINCE INCEPTION
                                                             ONE YEAR  (MARCH 1, 2005)
                                                             --------  ---------------
                                                                                      
The Fund                                                                              
  Return Before Taxes.......................................   10.88%        7.12%    
  Return After Taxes on Distributions(1)....................   10.87%        7.08%    
  Return After Taxes on Distributions and Sale of Fund                                
     Shares(1)..............................................    7.09%        6.08%    
S&P 500 Index(2)............................................   15.79%       11.11%    

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

(1) After-tax returns are 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 an investor's tax situation
    and may differ from those shown. After-tax returns shown are not relevant to
    investors who hold their Fund shares through tax-deferred arrangements, such
as 401(k) plans or individual retirement accounts.                      

(2) The S&P 500 Index is a widely recognized, unmanaged market                  
capitalization-weighted index that contains 500 stocks chosen to be     
representative of the U.S. equity market by focusing on the stocks of   
   publicly traded companies using factors such as market size, liquidity, and
  industry group representation. The index does not reflect the deduction of
fees and expenses associated with a mutual fund or the impact of taxes. 

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TABLE OF FEES AND EXPENSES

The following table is designed to help you understand the fees and   
expenses that you may pay, both directly and indirectly, by investing in the    
Fund.                                                                           

                                                                [Download Table]

SHAREHOLDER FEES                                                    
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)                           
-----------------------------------------                           
                                                                    
Maximum Sales Charge (Load).................................   None 
Maximum Deferred Sales Charge (Load)........................   None 
Maximum Sales Charge (Load) Imposed on Reinvested Dividends         
  and Distributions.........................................   None 
Redemption Fees.............................................   None 
Exchange Fees...............................................   None 
ANNUAL FUND OPERATING EXPENSES                                      
(Expenses that are deducted from fund assets as a percentage        
  of average net assets):                                           
Advisory Fee................................................   1.25%
Distribution (12b-1) Fees...................................   None 
Other Expenses..............................................   4.54%
Acquired Fund Fees and Expenses(1)..........................    .06%
Total Annual Fund Operating Expenses........................   5.85%
Fee Waiver and/or Expense Reimbursement(2)..................   4.04%
                                                               ---- 
Net Operating Expenses(2)...................................   1.81%

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

(1) The Total Annual Fund Operating Expenses in this fee table will not         
 correlate to the expense ratio in the Fund's financial statements (or the
 financial highlights in this Prospectus) because the financial statements
include only the direct operating expenses incurred by the Fund, not the
indirect costs of investing in other investment companies ("Acquired    
   Funds"). Excluding the indirect costs of investing in Acquired Funds, Total
Annual Fund Operating Expenses before fee waiver and/or expense         
reimbursements would be 5.79% and Net Operating Expenses would be 1.75%.

(2) The Adviser has contractually agreed to limit annual fund operating expenses
to 1.75% through April 30, 2008. An expense limitation lowers the Fund's
 expense ratio and increases overall returns to investors. For purposes of
this expense limit, operating expenses do not include interest expense, 
brokerage commissions, extraordinary expenses, taxes and capital items. 
  After April 30, 2008, the expense limitation may be terminated or revised,
    although the Fund and Adviser may agree to extend the term of the agreement.
 The Adviser may in the future recoup investment advisory fees not paid to
the Adviser due to the expense cap, subject to certain conditions. See  
"Expense Waivers and Reimbursements" for additional information. The    
   addition of certain non-waivable or non-reimbursable expenses may cause the
   Fund's Net Operating Expenses after waivers and/or reimbursements to exceed
the maximum amount of 1.75% agreed to by the Adviser.                   

EXAMPLE                                                                         

    This example is intended to help you compare the costs of investing in the
Fund with the costs of investing in other mutual funds.                         

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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
and that the Fund's operating expenses remain the same. Although your actual    
costs may be higher or lower, based on these assumptions your costs would be:   

                                                                [Download Table]
                                                                    
1 Year......................................................  $  184
3 Years.....................................................  $  569
5 Years.....................................................  $  980
10 Years....................................................  $2,127

MANAGEMENT OF THE FUND

THE TRUST                                                                       

   The Fund is a series of The Coventry Funds Trust (the "Trust"), which was
organized as a Massachusetts business trust in 1994 and currently consists of   
multiple series. Prior to the date of this prospectus, the Trust was named      
"Variable Insurance Funds". The Board of Trustees of the Trust (the "Board") may
establish additional series in the future. Unless a policy or procedure is      
expressly designated as fundamental, the Board may change the Fund's policies   
and procedures without shareholder approval. Under Massachusetts law,           
shareholders may be held personally liable for the obligations of the Trust     
under certain circumstances. However, the Trust's Declaration of Trust disclaims
liability of its shareholders and provides for indemnification out of Trust     
property for all loss and expense of any shareholder held personally liable for 
the obligations of the Trust. Accordingly, the risk of a shareholder incurring  
financial loss on account of shareholder liability should be considered remote. 

THE ADVISER                                                                     

AFM serves as the Fund's investment adviser and provides management   
supervision over the Fund's business affairs. See "Investment Advisory and Other
Services" in the SAI.                                                           

  The Adviser is located at 12309 Briarbush Lane, Potomac, Maryland 20854.
The Adviser, which is owned and controlled by Steven J. Milloy and Thomas J.    
Borelli, was formed in 2003 for the purpose of providing investment advisory    
services to the Fund.                                                           

   Subject to the general control of the Board, a team of persons associated
with the Adviser makes investment decisions for the Fund. Investment decisions  
may include a determination to allocate all or a portion of the day-to-day      
management of the Fund's assets to an investment sub-adviser. Under normal      
circumstances the Adviser may rely on an investment sub-adviser to identify     
financially viable companies that will comprise the universe of investment      
opportunities available to the Fund, consistent with the Fund's investment      
objective, and then the Adviser may, together with an investment sub-adviser,   
make final determinations as to the companies in which the Fund should invest.  
The Adviser conducts research efforts relating to its advocacy activities, and  
is responsible for applying the Free Enterprise Guidelines to Fund investments. 
The Adviser conducts all advocacy efforts at its own expense and risk.          

 The Fund's investment team is headed by Steven J. Milloy, M.H.S., J.D.,
L.L.M. Mr. Milloy is a lawyer, consultant, columnist, adjunct scholar with the  
Competitive Enterprise Institute and publisher of JunkScience.com. He has also  
served as president of Steven J. Milloy, Inc., which provides customized,       
internet-based daily news services for companies desiring comprehensive and     
timely news updates from around the world involving themselves, their industries
and public policy issues relevant to their operations.                          

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Mr. Milloy holds a B.A. in Natural Sciences from the Johns Hopkins University, a
Master of Health Science (Biostatistics) from the Johns Hopkins University      
School of Public Health, a J.D. from the University of Baltimore and a Master of
Laws (Securities Regulation) from the Georgetown University Law Center.         

Thomas J. Borelli, PhD is a corporate public affairs specialist and   
biochemist who worked for the operating companies of the Altria Group, Inc. for 
25 years. Dr. Borelli directed an issues management group that supported the    
company's food, beer and tobacco units' legislative efforts on regulatory reform
and economic analysis. Additional areas of focus included biotechnology,        
environmental issues, and privacy. He served as Science Fellow for the U.S.     
House of Representatives' Committee on Science, Space and Technology during the 
100th Congress. Dr. Borelli has published scientific papers on interferon and   
human leukemia. He received his Bachelor of Science in Microbiology from        
Michigan State University and his Master of Science and Ph.D. in Biochemistry   
from New York Medical College.                                                  

    See the Statement of Additional Information for more information about the
portfolio managers' compensation, other accounts managed by the portfolio       
managers and the portfolio managers' ownership of equity securities of the Fund.

    A discussion regarding the basis of the Board's approval of the investment
advisory contracts of the Fund will be available in the Fund's semi-annual      
report for the period ended June 30, 2007.                                      

INVESTMENT ADVISORY FEES; OTHER ADVISORY EXPENSES                               

Under its Investment Advisory Agreement with the Fund, the Adviser is 
entitled to earn a fee of 1.25% based on the average daily net assets of the    
Fund. The agreement provides for "breakpoint" reductions in the advisory fee    
when certain Fund asset levels are reached. For the year ended December 31,     
2006, the Adviser waived the advisory fee in its entirety.                      

     AFM and its affiliates may, out of their own resources and at no additional
cost to the Fund or its investors, pay financial intermediaries, including the  
Fund's distributor, for providing distribution and/or administrative services to
the Fund or its investors.                                                      

EXPENSE WAIVERS AND REIMBURSEMENTS                                              

   In the interest of limiting expenses of the Fund, the Adviser has entered
into an Expense Limitation Agreement with the Fund. Pursuant to the agreement,  
the Adviser has agreed to waive or limit its fees and to assume other expenses  
so that total annual operating expenses are limited to 1.75% through April 30,  
2008. The limit does not apply to interest, taxes, brokerage commissions, other 
expenditures capitalized in accordance with generally accepted accounting       
principles or other extraordinary expenses not incurred in the ordinary course  
of business. There is no guarantee that the cap will remain in place or at the  
same level in the future.                                                       

 The Fund may reimburse the Adviser for fees waived or limited and other
expenses assumed and paid by the Adviser under the Expense Limitation Agreement 
for a period up to three years following any waiver granted for purposes of     
limiting expenses under the expense cap. Reimbursement is conditioned on the    
Fund having reached a sufficient asset size to permit the reimbursement to be   
made without causing the total annual expense ratio of the Fund to exceed the   
stated limit. Reimbursements must be approved in advance by the Board on a      
quarterly basis, and may only be approved if the Expense Limitation Agreement   
remains in place.                                                               

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Administrator and Distributor                                                   

     BISYS Fund Services Ohio, Inc. is the administrator for the Fund, and BISYS
Fund Services, L.P. acts as the Fund's principal underwriter and distributor.   
The address of each is 3435 Stelzer Road, Columbus, Ohio 43219.                 

Portfolio Holdings                                                              

 A description of the Fund's policies and procedures with respect to the
disclosure of the Fund's underlying portfolio securities is available in the    
Fund's Statement of Additional Information.                                     

PRICING FUND SHARES 

     The Fund prices its shares on the basis of the net asset value of the Fund,
which is determined as of the close of the New York Stock Exchange ("NYSE")     
(generally 4:00 p.m., Eastern Time) on each Business Day ("Pricing Time"). A    
Business Day is a day on which the NYSE is open for trading. The NYSE is        
generally open every week, Monday through Friday, except when the following     
holidays are celebrated: New Year's Day, Martin Luther King, Jr. Day,           
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,        
Thanksgiving Day and Christmas Day. On occasion, the NYSE closes before 4:00    
p.m. Eastern Time. When that happens, purchase orders received after the NYSE   
closes will be effective the following business day. If portfolio investments of
the Fund are traded in markets on days that are not Business Days of the Fund,  
the Fund's net asset value may fluctuate on days when investors cannot purchase 
or redeem shares.                                                               

    Net asset value per share for purposes of pricing sales and redemptions is
calculated by dividing the value of all securities and other assets belonging to
the Fund, less the liabilities charged to the Fund and any liabilities allocable
to the Fund, by the number of the Fund's outstanding shares. The net asset value
per share of the Fund will fluctuate as the value of the investment portfolio of
the Fund changes. Your order for purchase or sale is priced at the next NAV     
calculated after the Fund receives your order in good order by the Pricing Time 
an any Business Day.                                                            

The securities held by the Fund are generally valued at current market
prices. Securities listed or traded on domestic securities exchanges or the     
NASDAQ/NMS, including American Depositary Receipts (ADRs), are valued at the    
closing price on the exchange or system where the security is principally traded
or at the Nasdaq Official Closing Price, if applicable. If there have been no   
sales for that day on any exchange or system, a security is valued at the mean  
between the last bid and asked quotes on the exchange or system where the       
security is principally traded. Investments in securities maturing in 60 days or
less may be valued at amortized cost. Market quotations for securities prices   
may be obtained from automated pricing services.                                

   If market quotations are not readily available (which may include closing
prices deemed to be unreliable due to subsequent events), the securities will be
fair valued using procedures adopted by the Board. The types of securities for  
which such fair value pricing may be required include, but are not limited to:  
foreign securities, where a significant event occurs after the close of the     
foreign market on which such security principally trades, but before the close  
of the NYSE, that is likely to have changed the value of such security, or the  
closing value is otherwise deemed unreliable; securities of an issuer that has  
entered into a restructuring; securities whose trading has been halted or       
suspended; fixed income securities that have gone into default and for which    
there is no current market value quotation; and securities that are restricted  
as to transfer or resale.                                                       

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     Valuing securities at fair value involves greater reliance on judgment than
valuing securities that have readily available market quotations. Fund          
management makes such determinations in good faith in accordance with the       
Trust's valuation procedures. Fair value determinations can involve reliance on 
quantitative models employed by a fair value pricing service. There can be no   
assurance that the Fund could obtain the fair value assigned to a security if it
were to sell the security at approximately the time at which the Fund determines
its net asset value per share.                                                  

   For further information about valuation of investments, see the Statement
of Additional Information.                                                      

BUYING FUND SHARES

    Share Transactions.  You may purchase and redeem Fund shares by contacting
any broker authorized by the distributor to sell shares of the Fund or by       
contacting BISYS Fund Services, the Fund's transfer and dividend disbursing     
agent, at P.O. Box 182490, Columbus, Ohio 43218-2490, or by telephoning us      
toll-free at 1-800-766-3960. Brokers may charge transaction fees for the        
purchase or sale of Fund shares, depending on your arrangement with the broker. 
If you have an IRA, your account will be charged a maintenance fee of $20 per   
year.                                                                           

    Minimum Investments.  The following table provides you with information on
the various investment minimums and expenses that apply to share purchases.     
Under certain circumstances the Fund may waive the minimum initial investment   
for purchases by officers, directors and employees of the Adviser or services   
providers of the Fund, as well as for the Adviser's affiliated entities and for 
certain related advisory accounts, retirement accounts, custodial accounts for  
minors and automatic investment accounts.                                       

                                                                [Download Table]
                                                                      
Minimum Initial Investment..................................   $2,500 
Minimum Subsequent Investment...............................   $  250*

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

* For automatic investments made at least quarterly, the minimum subsequent     
investment is $100.                                                         

     By Mail.  You may buy shares of the Fund by sending a completed application
along with a check drawn on a U.S. bank in U.S. funds, to "Free Enterprise      
Action Fund," c/o BISYS Fund Services. BISYS Fund Services is the Company's     
transfer and dividend disbursing agent. See "Proper Form." Third-party checks,  
money orders, travelers checks, credit card convenience checks or checks drawn  
in a foreign currency are not accepted for the purchase of Fund shares.         
Additionally, bank starter checks for the initial purchase into the Fund are not
accepted.                                                                       

By Wire.  You may also wire payments for Fund shares to the wire bank 
account for the appropriate Fund. No fee will be charged for shares purchased by
wire. Your bank may charge you a fee for sending a wire transfer. Before wiring 
funds, please call us toll-free at 1-800-766-3960 to advise the Fund of your    
investment and to receive further instructions. Please remember to return your  
completed and signed application to BISYS Fund Services, P.O. Box 182490,       
Columbus, Ohio 43218-2490. See "Proper Form."                                   

   Public Offering Price.  When you buy shares of the Fund, you will receive
the public offering price per share as determined after your order is received  
in proper form and accepted for investment by the Fund, as defined below under  
the section entitled "Proper Form." The public offering price is equal to the   
Fund's NAV.                                                                     

Verification of Identity.  To help the government fight the funding of
terrorism and money laundering activities, federal law requires all financial   
institutions to obtain, verify and record information that identifies           

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each person who opens an account, and to determine whether such person's name   
appears on government lists of known or suspected terrorists and terrorist      
organizations. Accordingly, the Fund must obtain the following information about
each person who opens an account:                                               

- Name;                                                               

- Date of birth (for individuals);                                    

- Physical residential address (though post office boxes are still    
permitted for mailing); and                                       

- Social security number, taxpayer identification number, or other    
identifying number.                                               

You may also be asked to show your driver's license, passport or other
identifying documents in order to verify your identity. In addition, it may be  
necessary to verify your identity by cross-referencing your identification      
information with a consumer report or other electronic database. Additional     
information may be required to open accounts for corporations and other         
entities.                                                                       

FEDERAL LAW PROHIBITS THE FUND FROM OPENING ACCOUNTS UNLESS IT RECEIVES THE     
MINIMUM IDENTIFYING INFORMATION LISTED ABOVE.                                   

    After an account is opened, the Fund may restrict your ability to purchase
additional shares or may impose other restrictions until your identity is       
verified. The Fund also may close your account or take other appropriate action 
if it cannot verify your identity within a reasonable time. If your account is  
closed for this reason, your shares will be redeemed at the NAV next calculated 
after the account is closed. If your account is closed at the request of        
governmental or law enforcement authority, the Fund may be required to withhold 
the redemption proceeds.                                                        

MARKET TIMING/SHORT-TERM TRADING.  Some investors try to profit from  
various short-term or frequent trading strategies commonly known as market      
timing. Investors that engage in market timing present risks to other investors.
By realizing profits through short-term trading, investors that in engage in    
rapid purchases and sales or exchanges of the Fund's shares dilute the value of 
shares held by long-term investors. Volatility resulting from excessive         
purchases and sales or exchanges of the Fund's shares, especially involving     
large dollar amounts, may disrupt efficient portfolio management. In particular,
the Fund may have difficulty implementing its long-term investment strategies if
it is forced to maintain a higher level of its assets in cash to accommodate    
significant short-term trading activity resulting from market timing.           

  Excessive purchases and sale or exchanges of the Fund's shares may force
the Fund to sell portfolio securities at inopportune times to raise cash to     
accommodate short-term trading activity. In addition, the Fund may incur        
increased expenses if one or more investors engage in excessive or short-term   
trading. For example, the Fund may be forced to liquidate investments as a      
result of short-term trading and incur increased brokerage costs and realization
of taxable capital gain without attaining any investment advantage. Similarly,  
the Fund may bear increased administrative costs due to asset level and         
investment volatility that accompanies patterns of short-term trading activity. 
All these factors may adversely affect Fund performance.                        

     THE BOARD HAS ADOPTED POLICIES AND PROCEDURES INTENDED TO DISCOURAGE MARKET
TIMING OR EXCESSIVE TRADING. IF YOU INTEND TO ENGAGE IN SUCH PRACTICES, DO NOT  
INVEST IN SHARES OF THE FUND, AND NOTE THAT THE FUND WILL NOT ACCOMMODATE MARKET
TIMING. The Fund reserves the right to reject any request to purchase shares    
which it reasonably determines to be in connection with market timing or        
excessive trading by an investor or by accounts of investors under common       
control (for example, trading by a financial advisor with discretionary trading 
authority over multiple accounts).                                              

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   While the Fund discourages market timing and excessive short-term trading
and applies its policies and procedures on a uniform basis, the Fund cannot     
always recognize or reasonably detect such trading, particularly if it is       
facilitated by financial intermediaries or done through omnibus account         
arrangements or insurance company separate accounts. In addition, monitoring and
discouraging market timing and excessive trading may require the cooperation of 
other financial intermediaries, which cannot necessarily be assured.            

  GENERAL.  The Fund reserves the right in its sole discretion to withdraw
all or any part of the offering of shares of the Fund when, in the judgment of  
the Board, the withdrawal is in the best interest of the Fund and its           
shareholders. An order to purchase shares is not binding on, and may be rejected
by, the Distributor until it has been confirmed in writing by the Distributor   
and payment has been received.                                                  

REDEEMING FUND SHARES 

    You may redeem shares of the Funds by submitting your order either through
your authorized broker or by submitting it directly to the Fund. Redemption     
requests to the Fund should be directed in writing to BISYS Fund Services, P.O. 
Box 182490, Columbus, Ohio 43218-2490, or by telephoning us toll-free at 1-800- 
766-3960. See "Proper Form."                                                    

   REDEMPTION PRICE.  Your redemption request will be processed based on the
NAV of the Fund's shares as determined after receipt of your order in proper    
form.                                                                           

    SMALL ACCOUNT REDEMPTIONS.  Due to the relatively high cost of maintaining
accounts with smaller balances, the Fund reserves the right to redeem your      
shares if, as a result of redemptions, the value of your account drops below the
Fund's $1,000 minimum balance requirement ($250 in the case of IRAs, or other   
retirement plans and custodial accounts). The Fund will give you 30 days'       
advance written notice and a chance to increase your Fund balance to the minimum
requirement before the Fund redeems your shares.                                

  AUTOMATIC WITHDRAWAL PLAN.  If you have a minimum of $5,000 in your Fund
account, you may arrange to receive monthly redemptions from the Fund. The      
minimum amount required for each redemption is $100. Call us toll-free at       
1-800-766-3960 to set up an Automatic Withdrawal Plan.                          

 REDEMPTION PROCEEDS.  Redemption proceeds will generally be paid by the
next business day after processing, but in no event later than three business   
days after receipt by the Fund's transfer agent of your redemption order in     
proper form. If you are redeeming shares that you just purchased and paid for by
personal check, the mailing of your redemption proceeds may be delayed for up to
ten (10) business days to allow your check to clear. Additionally, the Fund may 
suspend the right of redemption or postpone the date of payment during any      
period that the Exchange is closed, trading in the markets that a Fund normally 
utilizes is restricted, or redemption is otherwise permitted to be suspended by 
the SEC.                                                                        

  Any check tendered in payment of a redemption transaction that cannot be
delivered by the post office or which remains uncashed for more than SIX MONTHS 
may be reinvested in the shareholder's account at the then-current NAV.         

   REDEMPTIONS IN KIND.  The Fund reserves the right to redeem its shares in
kind. In other words, upon tendering shares of a Fund, the Fund has the right to
pay you the value of your redemption in assets other than cash. You may incur   
brokerage and other costs in converting those assets to cash. See "Buying,      
Redeeming, and Exchanging Shares" in the SAI for more information.              

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DIVIDENDS AND DISTRIBUTIONS 

     The Fund currently intends to declare and pay applicable dividends from net
investment income and to make distributions of applicable realized capital      
gains, if any, on an annual basis. You may reinvest income dividends and capital
gain distributions in additional Fund shares at current net asset value. The    
Fund declares and pays income dividends from its net investment income, usually 
in December. Capital gains distributions, if any, are also made in December.    

 Income dividend payments are not guaranteed, are subject to the Board's
discretion, and may vary from time to time. THE FUND DOES NOT PAY "INTEREST" OR 
GUARANTEE ANY FIXED RATE OF RETURN ON AN INVESTMENT IN ITS SHARES.              

     The Fund will automatically reinvest any income dividends and capital gains
distributions in additional shares of the Fund unless you select another option 
on your application. You may change your distribution option at any time by     
notifying the transfer agent by mail at BISYS Fund Services, P.O. Box 182490,   
Columbus, Ohio 43218-2490. Please allow at least seven days prior to the record 
date for us to process the new option.                                          

Any check tendered in payment of dividends or other distributions that
cannot be delivered by the post office or which remains uncashed for more than  
SIX MONTHS may be reinvested in the shareholder's account at the then-current   
NAV, and the dividend option may be changed from cash to reinvest. Distributions
are reinvested on the ex-date at the NAV determined at the close of business on 
that date. No interest will accrue on amounts represented by uncashed redemption
checks.                                                                         

TAX CONSIDERATIONS

   THE FUND.  The Fund intends to qualify for special tax treatment afforded
to regulated investment companies under the Internal Revenue Code of 1986, as   
amended (the "Code"). To establish and continue its qualification, the Fund     
intends to diversify its assets as the Code requires. The Fund also intends to  
distribute substantially all of its net investment income and capital gains to  
its shareholders to avoid federal income tax on the income and gains so         
distributed.                                                                    

SHAREHOLDERS.  For federal income tax purposes, any dividend that you 
receive from the Fund, as well as any net short-term capital gain distribution, 
is generally taxable to you as ordinary income whether you have elected to      
receive it in cash or in additional shares.                                     

   Distributions of net long-term capital gains are generally taxable to you
as long-term capital gains, regardless of how long you have owned your Fund     
shares and regardless of whether you have elected to receive such distributions 
in cash or in additional shares.                                                

  Current tax law generally provides for a maximum tax rate for individual
taxpayers of 15% on long-term capital gains and certain qualifying dividends on 
corporate stock. In the absence of further legislation, these rate reductions   
are currently scheduled to expire for tax years beginning after December 31,    
2008. These rate reductions do not apply to corporate taxpayers. The following  
are guidelines for how certain distributions by each Fund are generally taxed to
individual taxpayers:                                                           

- Distributions of earnings from qualifying dividends and qualifying  
long-term capital gains will be taxed at a maximum rate of 15%.   

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- Note that distributions of earnings from dividends paid by certain  
       "qualified foreign corporations" can also qualify for the lower tax rates
on qualifying dividends.                                          

     - A shareholder will also have to satisfy a more than 60-day holding period
   with respect to any distributions of qualifying dividends in order to
obtain the benefit of the lower tax rate.                         

     - Distributions of earnings from non-qualifying dividends, interest income,
       other types of ordinary income and short-term capital gains will be taxed
at the ordinary income tax rate applicable to the taxpayer.       

  If you invest through a tax-deferred retirement account, such as an IRA,
you generally will not have to pay tax on dividends until they are distributed  
from the account. These accounts are subject to complex tax rules, and you      
should consult your tax advisor about investment through a tax-deferred account.

    Generally, distributions are taxable to you for the year in which they are
paid. In addition, certain distributions that are declared in October, November 
or December, but which, for operational purposes, are paid the following        
January, are taxable as though they were paid by December 31st of the year in   
which they are declared.                                                        

  Redemptions and exchanges of Fund shares are taxable events on which you
may realize a gain or loss. The amount of the gain or loss and the rate of tax  
will depend mainly upon how much you pay for the shares, how much you receive   
for them, and how long you hold them. If you sell Fund shares at a gain and you 
hold them for more than one year as a capital asset, then your gain would be    
taxed at the long-term capital gains rate. Various limitations may apply that   
could restrict the ability to deduct capital losses on any disposition of       
shares.                                                                         

  TAX INFORMATION.  The Funds will advise you promptly, after the close of
each calendar year, of the tax status for federal income tax purposes of all    
income dividends and capital gain distributions paid for such year.             

     The foregoing is only a general discussion of applicable federal income tax
provisions. For further information, see "Additional Information on             
Distributions and Taxes" in the SAI. YOU SHOULD CONSULT WITH YOUR TAX ADVISOR   
ABOUT YOUR PARTICULAR TAX SITUATION.                                            

SERVICES TO HELP YOU MANAGE YOUR ACCOUNT

AUTOMATIC INVESTMENT PLAN.  Our automatic investment plan offers a    
convenient way to invest in the Fund. Under the plan, you can automatically     
transfer money from your checking account to the Fund each month to buy         
additional shares. If you are interested in this plan, please refer to the      
automatic investment plan application. The value of the Fund's shares will      
fluctuate and the systematic investment plan will not assure a profit or protect
against a loss. You may discontinue the plan at any time by notifying the       
transfer agent by mail.                                                         

TRANSACTIONS THROUGH INTERMEDIARIES.  Certain broker-dealers and other
financial intermediaries are authorized to accept purchase, exchange or sales   
orders on behalf of a Fund at the Fund's NAV next determined after your order is
received by an organization in proper order before the Pricing Time or such     
earlier time as may be required by an organization. These organizations may be  
authorized to designate other intermediaries to act in this capacity. These     
intermediaries are responsible for transmitting requests and delivering funds on
a timely basis. For those interested in the intermediary's redemption           
procedures, please contact your financial intermediary.                         

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 TELEPHONE TRANSACTIONS.  You may redeem shares of the Fund, or exchange
shares of one Fund for that of another mutual fund (to the extent available), by
telephone. Please refer to the sections of this Prospectus that discuss the     
transaction you would like to make, or call us toll-free at 1-800-766-3960. We  
may be liable for losses resulting from unauthorized telephone transactions only
if we do not follow reasonable procedures designed to verify the identity of the
caller. When you call, we will request personal or other identifying            
information, and may also record calls. For your protection, we may delay a     
transaction or not implement one if we are not reasonably satisfied that        
telephone instructions are genuine. If this occurs, we will not be liable for   
any loss. If our lines are busy or you are otherwise unable to reach us by      
phone, you may wish to send written instructions to us, as described elsewhere  
in this Prospectus. If you are unable to execute a transaction by telephone, we 
will not be liable for any loss.                                                

 STATEMENTS AND REPORTS.  You will receive transaction confirmations and
account statements on a regular basis. Confirmations and account statements will
reflect transactions in your account, including additional purchases and        
reinvestments of income dividends and capital gain distributions. PLEASE VERIFY 
THE ACCURACY OF YOUR STATEMENTS WHEN YOU RECEIVE THEM. You will also receive    
annual and semi-annual financial reports for the Fund. To reduce Fund expenses, 
we attempt to identify related shareholders within a household and send only one
copy of a report. Please call us toll-free at 1-800-766-3960 if you would like  
an additional free copy of the Fund's financial reports.                        

PROPER FORM                                                                     

   Your order to buy shares is in proper form when your completed and signed
shareholder application and check or wire payment is received. Your written     
request to sell or exchange shares is in proper form when written instructions  
signed by all registered owners, with a signature guarantee if necessary, is    
received.                                                                       

WRITTEN INSTRUCTIONS.  Registered owners must sign any written        
instructions. To avoid any delay in processing your transaction, such           
instructions should include:                                                    

- your name,                                                          

- the Fund's name,                                                    

- a description of the request,                                       

- for exchanges, the name of the Fund into which you are exchanging,  

- your account number, the dollar amount or number of shares, and     

- your daytime or evening telephone number.                           

    SIGNATURE GUARANTEES.  For our mutual protection, we require a "Medallion"
signature guarantee in the following situations:                                

- if you wish to redeem over $50,000 worth of shares,                 

- if you want redemption proceeds to be paid to someone other than the
registered owners,                                                

   - if you want redemption proceeds to be sent to an address other than the
 address of record, a preauthorized bank account, or a preauthorized
brokerage firm account,                                           

   - if we receive instructions from an agent, not the registered owners, or
    if we believe a signature guarantee would protect us against potential
claims based on the instructions received.                        

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    A signature guarantee verifies the authenticity of your signature. You can
obtain a signature guarantee from certain banks, brokers or other eligible      
guarantors. YOU SHOULD VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR     
PRIOR TO SIGNING. A NOTARIZED SIGNATURE IS NOT SUFFICIENT.                      

  SHARE CERTIFICATES.  We do not issue share certificates. This eliminates
the costly problem of replacing lost, stolen or destroyed certificates. The     
Company reserves the right to issue share certificates on behalf of each of the 
Funds at any time.                                                              

RETIREMENT PLAN ACCOUNTS.  You may not change distribution options for
retirement plan accounts by telephone. While you may sell or exchange shares    
from some types of accounts by phone, certain restrictions may be imposed on    
retirement plans. To obtain any required forms or more information about        
distribution or transfer procedures, please call us toll-free at 1-800-766-3960.

     MISCELLANEOUS.  No person has been authorized to give any information or to
make any representation not contained in this prospectus in connection with the 
offering made by this prospectus. If you receive information other than the     
information contained in this prospectus, you must not rely on it in connection 
with your decisions to invest in the Fund. This prospectus does not constitute  
an offer by the Fund or its distributor in any jurisdiction in which the        
offering is not permitted.                                                      

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FINANCIAL HIGHLIGHTS

The following table is included to assist investors in evaluating the 
financial performance of the Fund since its commencement of operations through  
December 31, 2006. Certain information reflects financial results of a single   
share of the Fund. "Total Return" represents how much an investment in a Fund   
would have earned (or lost) during the period. This information has been audited
by Ernst & Young LLP. This information, along with the Fund's financial         
statement, is included in the Fund's annual report, which may be obtained free  
of charge upon request.                                                         

                                                        [Enlarge/Download Table]

                                                                YEAR ENDED      MARCH 1, 2005(C) TO 
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD INDICATED)    DECEMBER 31, 2006   DECEMBER 31, 2005  
---------------------------------------------------------    -----------------  --------------------
                                                                                                    
NET ASSET VALUE, BEGINNING OF PERIOD.......................       $10.19               $10.00       
INVESTMENT ACTIVITIES:                                                                              
  Net investment income/(loss).............................         0.01                (0.02)      
  Net realized/unrealized gains/(losses) on investments and                                         
     options...............................................         1.10                 0.25       
                                                                  ------               ------       
     Total from investment activities......................         1.11                 0.23       
                                                                  ------               ------       
DISTRIBUTIONS:                                                                                      
  From net investment income...............................        (0.01)                  --(d)    
  From net realized gains..................................           --                (0.04)      
  Return of capital tax distribution.......................           --(d)                --       
                                                                  ------               ------       
  Total distributions......................................        (0.01)               (0.04)      
                                                                  ------               ------       
CHANGE IN NET ASSET VALUE PER SHARE........................         1.10                 0.19       
                                                                  ------               ------       
NET ASSET VALUE, END OF PERIOD.............................       $11.29               $10.19       
                                                                  ======               ======       
TOTAL RETURN...............................................        10.88%                2.32%(b)   
RATIOS/SUPPLEMENTAL DATA:                                                                           
  Net assets, end of period (000's omitted)................       $8,941               $4,795       
  Ratio of expenses to average net assets..................         1.82%                2.00%(a)   
  Ratio of expenses to average net assets *................         5.79%                8.42%(a)   
  Ratio of net investment income/(loss) to average net                                              
     assets................................................         0.12%               (0.27%)(a)  
  Portfolio turnover rate..................................       182.66%                   0%(e)(b)

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

(a) Annualized.                                                                 

(b) Not annualized.                                                             

(c) Commencement of operations.                                                 

(d) Amount is less than $0.005.                                                 

(e) Rate is less than 0.5%.                                                     

* During the period, certain fees were contractually reduced and/or reimbursed. 
 If such contractual fee reductions and/or reimbursement had not occurred, the
ratio would have been as indicated.                                         

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STATEMENT OF ADDITIONAL INFORMATION AND SHAREHOLDER REPORTS 

    The Fund's Statement of Additional Information ("SAI") contains additional
and more detailed information about the Fund and is considered part of this     
Prospectus. In addition, the Fund's annual and semi-annual reports to           
shareholders contain additional information on the Fund's investments. In the   
annual report, an investor will find a discussion of the market conditions and  
investment strategies that significantly affected the Fund's performance during 
the last fiscal year. A copy of each of these documents may be obtained, without
charge, by calling the Fund's toll-free telephone number 1-800-766-3960.        
Shareholder inquiries should be addressed to:                                   

Free Enterprise Action Fund 
P.O. Box 182490 
Columbus, OH 43218-2490 

FOR MORE INFORMATION                                                            

BY TELEPHONE -- Call 1-800-766-3960                                             
BY MAIL -- Write to:                                                            
Free Enterprise Action Fund                                                 
P.O. Box 182490                                                             
Columbus, OH 43218-2490                                                     

ON THE INTERNET -- Reports and other information about the Fund can be viewed   
online or downloaded from:                                                      

SEC:  On the EDGAR Database at http://www.sec.gov                     

ACTION FUND MANAGEMENT, LLC: http://www.freeenterpriseactionfund.com  

You can review and copy information about the Fund, including the SAI, at the   
Securities and Exchange Commission's Public Reference Room in Washington, D.C.  
Information about the operation of the Public Reference Room can be obtained by 
calling the Commission at 1-202-942-8090. Copies can be obtained, upon payment  
of a duplicating fee, by electronic request at the following e-mail address:    
publicinfo@sec.gov, or by writing to the SEC's Public Reference Section,        
Washington, D.C. 20549-0001.                                                    

Investment Company Act file no: 811-8644.                                       

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THE COVENTRY FUNDS TRUST

 3435 Stelzer Road
 Columbus, Ohio 43219-3035
1-800-282-5706

 STATEMENT OF ADDITIONAL INFORMATION

 May 1, 2007

This Statement of Additional Information ("SAI") describes four investment      
portfolios (each a "Fund" and collectively the "Funds") of The Coventry Funds   
Trust (the "Trust"). The Funds are:                                             

-    Fifth Third Quality Growth VIP Fund;                             

-    Fifth Third Balanced VIP Fund;                                   

-    Fifth Third Mid Cap VIP Fund; and                                

-    Fifth Third Disciplined Value VIP Fund.                          

Prior to the date of this SAI, the Trust was named "Variable Insurance Funds."  

The Trust offers an indefinite number of transferable units ("Shares") of each  
Fund. Shares of the Funds may be sold to segregated asset accounts ("Separate   
Accounts") of insurance companies to serve as the investment medium for variable
life insurance policies and variable annuity contracts ("Variable Contracts")   
issued by the insurance companies. Shares of each Fund also may be sold to      
qualified pension and retirement plans, certain insurance companies, and the    
investment adviser and sub-adviser (if applicable) of the Funds but only in     
connection with the creation or management of Fund. The Separate Accounts invest
in Shares of the Funds in accordance with allocation instructions received from 
owners of the Variable Contracts ("Variable Contract Owners").                  

This SAI is not a Prospectus and is authorized for distribution only when       
preceded or accompanied by the Prospectus of the Funds, dated May 1, 2007, as   
supplemented from time to time. This SAI contains more detailed information than
that set forth in the Prospectus and should be read in conjunction with the     
Prospectus. This SAI incorporates the Funds' financial statements and related   
notes and auditors reports from the Funds' annual reports for the fiscal year   
ended December 31, 2006, and is incorporated by reference in its entirety into  
each Prospectus. Copies of the Prospectus may be obtained by writing the Trust  
at 3435 Stelzer Road, Columbus, Ohio 43219-3035, or by telephoning the toll free
number set forth above.                                                         

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 TABLE OF CONTENTS

[to be revised]                                                                 

                                                                [Download Table]
                                                                               
INVESTMENT OBJECTIVES AND POLICIES ......................................     1

Bank Obligations ........................................................     1

Commercial Paper ........................................................     2

Variable Amount Master Demand Notes .....................................     3

Variable and Floating Rate Demand Notes .................................     3

Short-Term Obligations ..................................................     3

Corporate Debt Securities ...............................................     3

Foreign Investments .....................................................     5

Securities Of Foreign Governments And Supranational Organizations .......     6

Currency Swaps ..........................................................     6

Foreign Currency Transactions ...........................................     7

Hybrid Instruments ......................................................     8

Funding Agreements ......................................................    10

Standard Poor's Depositary Receipts .....................................    10

U.S. Government Obligations .............................................    10

Options .................................................................    11

Forward Commitments, When-Issued and Delayed-Delivery Securities ........    13

Mortgage-Related and Asset-Backed Securities ............................    14

Illiquid and Restricted Securities ......................................    16

Investment Companies ....................................................    16

Lending of Portfolio Securities .........................................    16

Convertible Securities ..................................................    17

Warrants ................................................................    18

Repurchase Agreements ...................................................    18

Reverse Repurchase Agreements and Dollar Roll Agreements ................    18

Futures Contracts and Options Thereon ...................................    19

INVESTMENT RESTRICTIONS .................................................    20

Disclosure of Portfolio Holdings ........................................    21

Portfolio Turnover ......................................................    22

NET ASSET VALUE .........................................................    23

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 (continued)

                                                                [Download Table]

                                                                            PAGE
                                                                            ----
                                                                                
Valuation of the Funds ..................................................    23 

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ..........................    24 

MANAGEMENT OF THE TRUST .................................................    25 

Management Information ..................................................    25 

Board of Trustees .......................................................    27 

Trustee Compensation ....................................................    30 

Investment Advisor ......................................................    30 

Proxy Voting Policies and Procedures ....................................    36 

Portfolio Transactions ..................................................    38 

Federal Banking Law .....................................................    40 

Administrator ...........................................................    40 

Expenses ................................................................    41 

Distributor .............................................................    41 

Custodian, Transfer Agent and Fund Accounting Services ..................    42 

Independent Registered Public Accounting Firm ...........................    43 

Legal Counsel ...........................................................    43 

Codes of Ethics .........................................................    43 

ADDITIONAL INFORMATION ..................................................    44 

Description of Shares ...................................................    44 

Vote of a Majority of the Outstanding Shares ............................    45 

Principal Shareholders ..................................................    45 

Shareholder and Trustee Liability .......................................    45 

Additional Tax Information ..............................................    46 

Performance Information .................................................    49 

Miscellaneous ...........................................................    50 

FINANCIAL STATEMENTS ....................................................    51 

APPENDIX ................................................................     i 

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The Trust is an open-end management investment company which currently offers   
multiple separate portfolios. This SAI contains information about the Fifth     
Third Quality Growth VIP Fund ("Quality Growth VIP Fund"), the Fifth Third      
Balanced VIP Fund ("Balanced VIP Fund"), the Fifth Third Mid Cap VIP Fund ("Mid 
Cap VIP Fund"), and the Fifth Third Disciplined Value VIP Fund ("Disciplined    
Value VIP Fund"). The Funds are diversified series advised by Fifth Third Asset 
Management Inc. ("FTAM" or the "Adviser"), a subsidiary of Fifth Third Bank.    

Much of the information contained in this SAI expands upon subjects discussed in
the Prospectus of the Funds described above. Capitalized terms not defined      
herein are defined in the Prospectus. No investment in a Fund should be made    
without first reading the Fund's Prospectus.                                    

INVESTMENT OBJECTIVES AND POLICIES

The Mid Cap VIP Fund has a non-fundamental investment policy obligating such    
Fund to commit, under normal market conditions, at least 80% of its assets to   
particular types of investments suggested by the Fund's name. For purposes of   
such an investment policy, "assets" includes the Fund's net assets, as well as  
any amounts borrowed for investment purposes. The following information         
supplements the investment objectives and policies of the Funds as set forth in 
the Prospectus.                                                                 

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS                                 

The following information supplements the investment objectives and policies of 
the Funds as set forth in the Prospectuses.                                     

Bank Obligations. The Funds may invest in bank obligations consisting of        
bankers' acceptances, certificates of deposit, and time deposits.               

Bankers' acceptances are negotiable drafts or bills of exchange typically drawn 
by an importer or exporter to pay for specific merchandise, which are "accepted"
by a bank; meaning, in effect, that the bank unconditionally agrees to pay the  
face value of the instrument on maturity.                                       

Certificates of deposit are negotiable certificates issued against funds        
deposited in a commercial bank or a savings and loan association for a definite 
period of time and earning a specified return.                                  

Fixed time deposits are obligations of foreign branches of United States banks  
or foreign banks which are payable on a stated maturity date and bear a fixed   
rate of interest. Although fixed time deposits do not have a market, there are  
no contractual restrictions on the right to transfer a beneficial interest in   
the deposit to a third party.                                                   

The Funds may invest a portion of its assets in the obligations of foreign banks
and foreign branches of domestic banks. Such obligations include Eurodollar     
Certificates of Deposit ("ECDs") which are U.S. dollar-denominated certificates 
of deposit issued by offices of foreign and domestic banks located outside the  
United States; Eurodollar Time Deposits ("ETDs") which are U.S.                 
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign     
bank; Canadian Time                                                             

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Deposits ("CTDs") which are essentially the same as ETDs except they are issued 
by Canadian offices of major Canadian banks; Schedule Bs, which are obligations 
issued by Canadian branches of foreign or domestic banks; Yankee Certificates of
Deposit ("Yankee CDs") which are U.S. dollar-denominated certificates of deposit
issued by a U.S. branch of a foreign bank and held in the United States; and    
Yankee Bankers' Acceptances ("Yankee BAs") which are U.S. dollar-denominated    
bankers' acceptances issued by a U.S. branch of a foreign bank and held in the  
United States.                                                                  

Although the Funds may invest in obligations of foreign banks or foreign        
branches of U.S. banks only when the Adviser deems the instrument to present    
minimal credit risk, such investments nevertheless entail risks that are        
different from those of investments in domestic obligations of U.S. banks. These
additional risks include future political and economic developments, the        
possible imposition of withholding taxes on interest income, possible seizure or
nationalization of foreign deposits, the possible establishment of exchange     
controls, or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on such obligations. In  
addition, foreign branches of U.S. banks and U.S. branches of foreign banks may 
be subject to less stringent reserve requirements and to different accounting,  
auditing, reporting and record keeping standards than those applicable to       
domestic branches of U.S. banks.                                                

Commercial Paper. Commercial paper consists of unsecured promissory notes issued
by corporations. Except as noted below with respect to variable amount master   
demand notes, issues of commercial paper normally have maturities of less than  
nine months and fixed rates of return.                                          

The Funds may invest in short-term promissory notes (including variable amount  
master demand notes) issued by corporations and other entities, such as         
municipalities, rated at the time of purchase within the two highest categories 
assigned by two nationally recognized statistical rating organization ("NRSRO") 
(e.g., A-2 or better by Standard & Poor's Ratings Services ("S&P"), Prime-2 or  
better by Moody's Investors Service, Inc. ("Moody's") or F-2 or better by Fitch 
Investors Services ("Fitch") or, if not rated, determined to be of comparable   
quality to instruments that are so rated.                                       

Commercial paper issues include securities issued by corporations without       
registration under the Securities Act of 1933, as amended (the "1933 Act"), in  
reliance on the exemption in Section 3(a)(3), and commercial paper issued in    
reliance on the so-called "private placement" exemption in Section 4(2)         
("Section 4(2) Paper"). Section 4(2) Paper is restricted as to disposition under
the federal securities laws in that any resale must similarly be made in an     
exempt transaction. Section 4(2) Paper is normally resold to other institutional
investors through or with the assistance of investment dealers which make a     
market in Section 4(2) Paper, thus providing liquidity. For purposes of each    
Fund's limitation on purchases of illiquid instruments, Section 4(2) Paper will 
not be considered illiquid if the Adviser has determined, in accordance with    
guidelines approved by the Board of Trustees, that an adequate trading market   
exists for such securities.                                                     

Variable Amount Master Demand Notes. The Quality Growth VIP Fund may invest in  
variable amount master demand notes, which are unsecured demand notes that      
permit the indebtedness                                                         

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thereunder to vary and provide for periodic adjustments in the interest rate    
according to the terms of the instrument. Because master demand notes are direct
lending arrangements between the Fund and the issuer, they are not normally     
traded. Although there is no secondary market in the notes, the Fund may demand 
payment of principal and accrued interest at any time. While the notes are not  
typically rated by credit rating agencies, issuers of variable amount master    
demand notes (which are normally manufacturing, retail, financial, and other    
business concerns) must satisfy the same criteria as set forth above for        
commercial paper. The Adviser will consider the earning power, cash flow, and   
other liquidity ratios of the issuers of such notes and will continuously       
monitor their financial status and ability to meet payment on demand. In        
determining dollar weighted average portfolio maturity, a variable amount master
demand note will be deemed to have a maturity equal to the longer of the period 
of time remaining until the next interest rate adjustment or the period of time 
remaining until the principal amount can be recovered from the issuer through   
demand.                                                                         

Variable and Floating Rate Demand Notes. The Quality Growth VIP Fund may, from  
time to time, buy variable or floating rate demand notes issued by corporations,
bank holding companies and financial institutions and similar taxable and       
tax-exempt instruments issued by government agencies and instrumentalities.     
These securities will typically have a maturity over one year but carry with    
them the right of the holder to put the securities to a remarketing agent or    
other entity at designated time intervals and on specified notice. The          
obligation of the issuer of the put to repurchase the securities may be backed  
by a letter of credit or other obligation issued by a financial institution. The
purchase price is ordinarily par plus accrued and unpaid interest. Generally,   
the remarketing agent will adjust the interest rate every seven days (or at     
other specified intervals) in order to maintain the interest rate at the        
prevailing rate for securities with a seven-day or other designated maturity.   

Short-Term Obligations. The Funds may invest in high quality short-term         
obligations (with maturities of 12 months or less) such as domestic and foreign 
commercial paper (including variable amount master demand notes), bankers'      
acceptances, certificates of deposit, demand and time deposits of domestic and  
foreign branches of U.S. banks and foreign banks, and repurchase agreements, in 
order to acquire interest income combined with liquidity. Pending investment or 
to meet anticipated redemption requests, a Fund may invest without limitation in
short-term obligations. For temporary defensive purposes, these investments may 
constitute 100% of a Fund's portfolio and, in such circumstances, will          
constitute a temporary suspension of its attempts to achieve its investment     
objective.                                                                      

Corporate Debt Securities. The Funds may invest in U.S. dollar-denominated debt 
obligations issued or guaranteed by U.S. corporations or U.S. commercial banks, 
U.S. dollar-denominated obligations of foreign issuers and debt obligations of  
foreign issuers denominated in foreign currencies. Such debt obligations        
include, among others, bonds, notes, debentures and variable rate demand notes. 
In choosing corporate debt securities on behalf of a Fund, the Adviser may      
consider (i) general economic and financial conditions; (ii) the specific       
issuer's (a) business and management, (b) cash flow, (c) earnings coverage of   
interest and dividends, (d) ability to operate under adverse economic           
conditions, (e) fair market value of assets, and (f) in the case of foreign     

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issuers, unique political, economic or social conditions applicable to such     
issuer's country; and, (iii) other considerations deemed appropriate.           

As with other fixed-income securities, medium-grade securities are subject to   
credit risk and market risk. Market risk relates to changes in a security's     
value as a result of changes in interest rates. Credit risk relates to the      
ability of the issuer to make payments of principal and interest.               

Medium-grade securities are generally subject to greater credit risk than       
comparable higher-rated securities because issuers are more vulnerable to       
economic downturns, higher interest rates or adverse issuer-specific            
developments. In addition, the prices of medium-grade securities are generally  
subject to greater market risk and therefore react more sharply to changes in   
interest rates. The value and liquidity of medium-grade securities may be       
diminished by adverse publicity and investor perceptions.                       

Because certain medium-grade securities are traded only in markets where the    
number of potential purchasers and sellers, if any, is limited, the ability of a
Fund to sell such securities at their fair market value either to meet          
redemption requests or to respond to changes in the financial markets may be    
limited.                                                                        

Particular types of medium-grade securities may present special concerns. The   
prices of payment-in-kind or zero-coupon securities may react more strongly to  
changes in interest rates than the prices of other medium-grade securities. Some
medium-grade securities in which a Fund may invest may be subject to redemption 
or call provisions that may limit increases in market value that might otherwise
result from lower interest rates while increasing the risk that a Fund may be   
required to reinvest redemption or call proceeds during a period of relatively  
low interest rates.                                                             

The credit ratings issued by NRSROs are subject to various limitations. For     
example, while such ratings evaluate credit risk, they ordinarily do not        
evaluate the market risk of medium-grade securities. In certain circumstances,  
the ratings may not reflect in a timely fashion adverse developments affecting  
an issuer.                                                                      

After purchase, a security may cease to be rated or its rating may be reduced   
below the minimum required for purchase by a Fund. Neither event will require a 
sale of such security. However, the Adviser will consider such event in its     
determination of whether a Fund should continue to hold the security. A security
which has had its rating downgraded or revoked may be subject to greater risk to
principal and income, and often involve greater volatility of price, than       
securities in the higher rating categories. Such securities are also subject to 
greater credit risks (including, without limitation, the possibility of default 
by or bankruptcy of the issuers of such securities) than securities in higher   
rating categories.                                                              

Foreign Investments. The Funds may invest in foreign securities. Investment in  
foreign securities is subject to special investment risks that differ in some   
respects from those related to investments in securities of U.S. domestic       
issuers. Such risks include political, social or economic instability in the    
country of the issuer, the difficulty of predicting international trade         
patterns, expropriation, and nationalization of assets. Such securities may be  
subject to greater fluctuations in price than                                   

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securities issued by U.S. corporations or issued or guaranteed by the U.S.      
Government, its agencies or instrumentalities. In addition, there may be less   
publicly available information about a foreign company than about a U.S.        
domiciled company. Foreign companies generally are not subject to uniform       
accounting, auditing and financial reporting standards comparable to those      
applicable to U.S. domestic companies. In addition, diplomatic developments     
could also affect the value of a Fund's investments. Moreover, individual       
foreign economies may differ favorably or unfavorably from the U.S. economy in  
such respects as growth of gross national product, rate of inflation, capital   
reinvestment, resource self-sufficiency and balance of payments position.       

Additionally, the Funds may invest in countries with emerging economies.        
Political and economic structures in many of these countries may be undergoing  
significant evolution and rapid development, and these countries may lack the   
social, political and economic stability characteristics of more developed      
countries. Some of these countries may have in the past failed to recognize     
private property rights and have at time nationalized or expropriated the assets
of private companies. As a result, the risks described above, including the     
risks of nationalization or expropriation of assets, may be heightened. In      
addition, unanticipated political or social developments may affect the value of
investments in issues located in these countries. There may be little financial 
or accounting information available with respect to issuers located in certain  
emerging market countries, and it may be difficult as a result to assess the    
value or prospects of an investment in such issuers.                            

In many instances, foreign debt securities may provide higher yields than       
securities of domestic issuers which have similar maturities and quality. Under 
certain market conditions these investments may be less liquid than the         
securities of U.S. corporations and are certainly less liquid than securities   
issued or guaranteed by the U.S. Government or its agencies or                  
instrumentalities. Finally, in the event of a default of any such foreign debt  
obligations, it may be more difficult to obtain or to enforce a judgment against
the issuers of such securities.                                                 

If a security is denominated in foreign currency, the value of the security to a
Fund will be affected by changes in currency exchange rates and in exchange     
control regulations. Such changes also may affect the income and distributions  
to Shareholders of a Fund. A change in the value of any foreign currency against
the U.S. dollar will result in a corresponding change in the U.S. dollar value  
of securities denominated in that currency. Currency risks generally increase in
lesser developed markets. Exchange rate movements can be large and can endure   
for extended periods of time, affecting either favorably or unfavorably the     
value of a Fund's assets. The value of the assets of a Fund as measured in U.S. 
dollars may be affected favorably or unfavorably by changes in foreign currency 
exchange rates and exchange control regulations.                                

For many foreign securities, U.S. dollar denominated American Depositary        
Receipts ("ADRs"), which are traded in the United States on exchanges or        
over-the-counter, are issued by domestic banks and trust companies. ADRs        
represent the right to receive securities of foreign issuers deposited in a     
domestic bank or a correspondent bank. ADRs do not eliminate all the risk       
inherent in investing in the securities of foreign issuers' stock. However, the 
Mid Cap and Balanced Funds                                                      

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can avoid currency risks during the settlement period for either purchase or    
sales by investing in ADRs rather than directly in foreign issuers' stock.      

In general, there is a large, liquid market in the United States for many ADRs. 
The information available for ADRs is subject to the accounting, auditing and   
financial reporting standards of the domestic market or exchange on which they  
are traded, which standards are more uniform and more exacting than those to    
which many foreign issuers may be subject. Certain ADRs, typically those        
denominated as unsponsored, require the holders thereof to bear most of the     
costs of such facilities, while issuers of sponsored facilities normally pay    
more of the costs thereof. The depository of an unsponsored facility frequently 
is under no obligation to distribute shareholder communications received from   
the issuer of the deposited securities or to pass through the voting rights to  
facility holders with respect to the deposited securities, whereas the          
depository of a sponsored facility typically distributes shareholder            
communications and passes through the voting rights. The Funds may invest in    
both sponsored and unsponsored ADRs.                                            

Securities Of Foreign Governments and Supranational Organizations. The Funds may
invest in U.S. dollar-denominated securities issued by foreign governments,     
their political subdivisions, governmental authorities, agencies and            
instrumentalities and supranational organizations. A supranational organization 
is an entity designated or supported by the national government of one or more  
countries to promote economic reconstruction or development. Examples of        
supranational organizations include, among others, the International Bank for   
Reconstruction and Development (World Bank), the European Economic Community,   
the European Coal and Steel Community, the European Investment Bank, the        
Inter-American Development Bank, the Asian Development Bank, and the African    
Development Bank. The Funds may also invest in "quasi-government securities"    
which are debt obligations issued by entities owned by either a national, state 
or equivalent government or are obligations of such a government jurisdiction   
which are not backed by its full faith and credit and general taxing powers.    

Investing in foreign government and quasi-government securities involves        
considerations and possible risks not typically associated with investing in    
obligations issued by the U.S. Government. The values of foreign investments are
affected by changes in governmental administration or economic or monetary      
policy (in the U.S. or other countries) or changed circumstances in dealings    
between countries. In addition, investments in foreign countries could be       
affected by other factors not present in the United States, as discussed above  
in "Foreign Investments."                                                       

Currency Swaps. The Quality Growth VIP Fund may also enter into currency swaps  
for hedging purposes or to increase total return. Currency swaps involve the    
exchange of the rights of the Fund and another party to make or receive payments
in specific currencies. The net amount of the excess, if any, of the Fund's     
obligations over its entitlements with respect to each currency swap will be    
accrued on a daily basis and an amount of liquid assets, such as cash, U.S.     
Government securities or other liquid securities, having an aggregate net asset 
value at least equal to such accrued excess will be segregated by the Fund.     
Inasmuch as these transactions are entered into for good faith hedging purposes,
the Adviser believes that such obligations do not constitute senior securities  
as defined in the Investment Company Act of 1940, as amended                    

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("1940 Act") and, accordingly, will not treat them as being subject to the      
Fund's borrowing restrictions.                                                  

The use of currency swaps is a highly specialized activity which involves       
investment techniques and risks different from those associated with ordinary   
portfolio securities transactions. If the Adviser is incorrect in its forecasts 
of market values, interest rates and currency exchange rates, the investment    
performance of the Fund would be less favorable than it would have been if this 
investment technique was not used.                                              

The Fund will not enter into a currency swap unless the unsecured commercial    
paper, senior debt or the claims-paying ability of the other party thereto is   
rated either A or A-1 or better by S&P or Moody's. If there is a default by the 
other party to such transaction, the Fund will have contractual remedies        
pursuant to the agreements related to the transaction.                          

Foreign Currency Transactions. The value of the assets of the Quality Growth VIP
Fund as measured in U.S. dollars may be affected favorably or unfavorably by    
changes in foreign currency exchange rates and exchange control regulations, and
the Fund may incur costs in connection with conversions between various         
currencies. The Fund will conduct foreign currency exchange transactions either 
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through forward contracts to purchase or sell foreign       
currencies. A forward foreign currency exchange contract ("forward currency     
contract") involves an obligation to purchase or sell a specific currency at a  
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These   
forward currency contracts are traded directly between currency traders (usually
large commercial banks) and their customers. The Fund may enter into forward    
currency contracts in order to hedge against adverse movements in exchange rates
between currencies.                                                             

By entering into a forward currency contract in U.S. dollars for the purchase or
sale of the amount of foreign currency involved in an underlying security       
transaction, the Fund is able to protect itself against a possible loss between 
trade and settlement dates resulting from an adverse change in the relationship 
between the U.S. dollar and such foreign currency. However, this tends to limit 
potential gains which might result from a positive change in such currency      
relationships. The Fund also may hedge foreign currency exchange rate risk by   
engaging in currency financial futures and options transactions, which are      
described below. The forecasting of short-term currency market movements is     
extremely difficult and whether such a short-term hedging strategy will be      
successful is highly uncertain.                                                 

It is impossible to forecast with precision the market value of portfolio       
securities at the expiration of a forward currency contract. Accordingly, it may
be necessary for the Fund to purchase additional currency on the spot market if 
the market value of the security is less than the amount of foreign currency the
Fund is obligated to deliver when a decision is made to sell the security and   
make delivery of the foreign currency in settlement of a forward currency       
contract. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of                                      

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the portfolio security if its market value exceeds the amount of foreign        
currency the Fund is obligated to deliver.                                      

If the Fund retains the portfolio security and engages in an offsetting         
transaction, it will incur a gain or a loss to the extent that there has been   
movement in forward currency contract prices. If the Fund engages in an         
offsetting transaction, it may subsequently enter into a new forward currency   
contract to sell the foreign currency. Although such contracts tend to minimize 
the risk of loss due to a decline in the value of the hedged currency, they also
tend to limit any potential gain which might result should the value of such    
currency increase. The Fund will have to convert its holdings of foreign        
currencies into U.S. dollars from time to time. Although foreign exchange       
dealers do not charge a fee for conversion, they do realize a profit based on   
the difference (the "spread") between the prices at which they are buying and   
selling various currencies.                                                     

Hybrid Instruments. The Quality Growth VIP Fund may invest in Hybrid            
Instruments. Hybrid Instruments (a type of potentially high-risk derivative)    
combine the elements of futures contracts or options with those of debt,        
preferred equity, or a depository instrument. Generally, a Hybrid Instrument    
will be a debt security, preferred stock, depository share, trust certificate,  
certificate of deposit, or other evidence of indebtedness on which a portion of 
or all interest payments, and/or the principal or stated amount payable at      
maturity, redemption, or retirement, is determined by reference to prices,      
changes in prices, or differences between prices, of securities, currencies,    
intangibles, goods, articles or commodities (collectively "Underlying Assets")  
or by another objective index, economic factor, or other measure, such as       
interest rates, currency exchange rates, commodity indices, and securities      
indices (collectively "Benchmarks"). Thus, Hybrid Instruments may take a variety
of forms, including but not limited to, debt instruments with interest or       
principal payments or redemption terms determined by reference to the value of a
currency or commodity or securities index at a future point in time, preferred  
stock with dividend rates determined by reference to the value of a currency, or
convertible securities with the conversion terms related to a particular        
commodity.                                                                      

Hybrid Instruments can be an efficient means of creating exposure to a          
particular market, or segment of a market, with the objective of enhancing total
return. For example, the Fund may wish to take advantage of expected declines in
interest rates in several European countries, but avoid the transaction costs   
associated with buying and currency-hedging its securities. One solution would  
be to purchase a U.S. dollar-denominated Hybrid Instrument whose redemption     
price is linked to the average three-year interest rate in a designated group of
countries. The redemption price formula would provide for payoffs of greater    
than par if the average interest rate was lower than a specified level, and     
payoffs of less than par if rates were above the specified level. Furthermore,  
the Fund could limit the downside risk of the security by establishing a minimum
redemption price so that the principal paid at maturity could not be below a    
predetermined minimum level if interest rates were to rise significantly. The   
purpose of this arrangement, known as structured security with an embedded put  
option, would be to give the Fund the desired European security exposure while  
avoiding currency risk, limiting downside market risk, and lowering transactions
costs. Of course, there is no guarantee that the strategy will                  

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be successful, and the Fund could lose money, if, for example, interest rates do
not move as anticipated or credit problems develop with the issuer of the Hybrid
Instrument.                                                                     

The risks of investing in Hybrid Instruments reflect a combination of the risks 
of investing in securities, options, futures and currencies. Thus, an investment
in a Hybrid Instrument may entail significant risks that are not associated with
a similar investment in a traditional debt instrument that has a fixed principal
amount, is denominated in U.S. dollars, or bears interest either at a fixed rate
or a floating rate determined by reference to a common, nationally published    
benchmark. The risks of a particular Hybrid Instrument will, of course, depend  
upon the terms of the instrument, but may include, without limitation, the      
possibility of significant changes in the Benchmarks or the prices of Underlying
Assets to which the instrument is linked. Such risks generally depend upon      
factors which are unrelated to the operations or credit quality of the issuer of
the Hybrid Instrument and which may not be readily foreseen by the purchaser,   
such as economic and political events, the supply and demand for the Underlying 
Assets, and interest rate movements. In recent years, various Benchmarks and    
prices for Underlying Assets have been highly volatile, and such volatility may 
be expected in the future. Reference is also made to the discussion of futures, 
options, and forward contracts herein for a discussion of the risks associated  
with such investments.                                                          

Hybrid Instruments are potentially more volatile and carry greater market risks 
than traditional debt instruments. Depending on the structure of the particular 
Hybrid Instrument, changes in a Benchmark may be magnified by the terms of the  
Hybrid Instrument and have an even more dramatic and substantial effect upon the
value of the Hybrid Instrument. Also, the prices of the Instrument and the      
Benchmark or Underlying Asset may not move in the same direction or at the same 
time. Hybrid Instruments may bear interest or pay preferred dividends at below  
market (or even relatively nominal) rates. Alternatively, Hybrid Instruments may
bear interest at above market rates but bear an increased risk of principal loss
(or gain). The latter scenario may result if "leverage" is used to structure the
Hybrid Instrument. Leverage risk occurs when the Hybrid Instrument is structured
so that a given change in a Benchmark or Underlying Asset is multiplied to      
produce greater value change in the Hybrid Instrument, thereby magnifying the   
risk of loss as well as the potential for gain. Hybrid Instruments may also     
carry liquidity risk since the instruments are often "customized" to meet the   
portfolio needs of a particular investor, and therefore, the number of investors
that are willing and able to buy such instruments in the secondary market may be
smaller than that for more traditional debt securities. In addition, because the
purchase and sale of the Hybrid Instruments could take place in an              
over-the-counter market without the guarantee of a central clearing organization
or in a transaction between the Fund and the issuer of the Hybrid Instrument,   
the creditworthiness of the counter party or issuer of the Hybrid Instrument    
would be an additional risk factor which the Fund would have to consider and    
monitor. Hybrid Instruments also may not be subject to regulation of the        
Commodities Futures Trading Commission, which generally regulates the trading of
commodity futures by U.S. persons, the Securities and Exchange Commission, which
regulates the offer and sale of securities by and to U.S. persons, or any other 
governmental regulatory authority.                                              

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The various risks discussed above, particularly the market risk of such         
instruments, may in turn cause significant fluctuations in the net asset value  
of the Fund. Accordingly, the Fund will limit its investments in Hybrid         
Instruments to 10% of total assets. However, because of their volatility, it is 
possible that the Fund's investment in Hybrid Instruments will account for more 
than 10% of the Fund's return (positive or negative).                           

Funding Agreements. With the exception of the Quality Growth VIP Fund, the Funds
may purchase funding agreements, under which a Fund invests an amount of cash   
with an insurance company and the insurance company credits such investment on a
monthly basis with guaranteed interest which is based on an index. These        
agreements provide that the guaranteed interest will not be less than a certain 
minimum rate. These agreements also provide for adjustment of the interest rate 
monthly and are considered variable rate instruments.                           

Standard & Poor's Depositary Receipts. The Funds may invest in Standard & Poor's
Depositary Receipts ("SPDRs"). SPDRs represent interests in trusts sponsored by 
a subsidiary of the American Stock Exchange, Inc. and are structured to provide 
investors proportionate undivided interests in a securities portfolio           
constituting substantially all the common stocks (in substantially the same     
weighting) as the component common stocks of a particular Standard & Poor's     
Index ("S&P Index"), such as the S&P 500. SPDRs are not redeemable, but are     
exchange traded. SPDRs represent interests in an investment company that is not 
actively managed, and instead holds securities in an effort to track the        
performance of the pertinent S&P Index and not for the purpose of selecting     
securities that are considered superior investments. The results of SPDRs will  
not replicate exactly the performance of the pertinent S&P Index due to         
reductions in the SPDRs' performance attributable to transaction and other      
expenses, including fees to service providers, borne by the SPDRs. SPDRs        
distribute dividends on a quarterly basis.                                      

U.S. Government Obligations. The Funds may invest in obligations issued or      
guaranteed by the U.S. Government, its agencies and instrumentalities, including
bills, notes and bonds issued by the U.S. Treasury, as well as "stripped" U.S.  
Treasury obligations such as Treasury Receipts issued by the U.S. Treasury      
representing either future interest or principal payments. Stripped securities  
are issued at a discount to their "face value," and may exhibit greater price   
volatility than ordinary debt securities because of the manner in which their   
principal and interest are returned to investors. The stripped Treasury         
obligations in which the Funds may invest do not include Certificates of Accrual
on Treasury Securities ("CATS") or Treasury Income Growth Receipts ("TIGRs").   

Obligations of certain agencies and instrumentalities of the U.S. Government,   
such as the Government National Mortgage Association ("GNMA"), are supported by 
the full faith and credit of the U.S. Treasury; others, such as those of the    
Federal National Mortgage Association ("FNMA"), are supported by the right of   
the issuer to borrow from the Treasury; others, such as those of the Student    
Loan Marketing Association ("SLMA"), are supported by the discretionary         
authority of the U.S. Government to purchase the agency's obligations; still    
others, such as those of the Federal Farm Credit Bank, are supported only by the
credit of the instrumentality. No                                               

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assurance can be given that the U.S. Government would provide financial support 
to U.S. Government-sponsored agencies or instrumentalities if it is not         
obligated to do so by law.                                                      

Options. The Funds may purchase put and call options on securities and          
securities indices and may write (sell) covered put and call options.           

A call option gives the purchaser the right to buy, and a writer has the        
obligation to sell, the underlying security at the stated exercise price at any 
time prior to the expiration of the option, regardless of the market price or   
exchange rate of the security, as the case may be. The premium paid to the      
writer is consideration for undertaking the obligations under the option        
contract. A put option gives the purchaser the right to sell the underlying     
security at the stated exercise price at any time prior to the expiration date  
of the option, regardless of the market price or exchange rate of the security, 
as the case may be. A call option is covered if a Fund owns the underlying      
security covered by the call or has an absolute and immediate right to acquire  
that security without additional cash consideration (or for additional cash     
consideration if the underlying security is held in a segregated account by its 
custodian) upon conversion or exchange of other securities held in its          
portfolio. A put option is covered if a Fund maintains cash, or other liquid    
assets with a value equal to the exercise price in a segregated account with its
custodian. Put and call options will be valued at the last sale price, or in the
absence of such a price, at the mean between bid and asked price.               

When a portfolio security or currency subject to a call option is sold, a Fund  
will effect a "closing purchase transaction"--the purchase of a call option on  
the same security or currency with the same exercise price and expiration date  
as the call option which the Fund previously has written. If a Fund is unable to
effect a closing purchase transaction, it will not be able to sell the          
underlying security or currency until the option expires or the Fund delivers   
the underlying security or currency upon exercise. In addition, upon the        
exercise of a call option by the holder thereof, a Fund will forego the         
potential benefit represented by market appreciation over the exercise price.   

When a Fund writes an option, an amount equal to the net premium (the premium   
less the commission) received by the Fund is included in the liability section  
of its statement of assets and liabilities as a deferred credit. The amount of  
the deferred credit will be subsequently marked-to-market to reflect the current
value of the option written. The current value of the traded option is the last 
sale price or, in the absence of a sale, the average of the closing bid and     
asked prices. If an option expires on the stipulated expiration date, or if the 
Fund enters into a closing purchase transaction, it will realize a gain (or a   
loss if the cost of a closing purchase transaction exceeds the net premium      
received when the option is sold) and the deferred credit related to such option
will be eliminated. If an option is exercised, a Fund may deliver the underlying
security in the open market. In either event, the proceeds of the sale will be  
increased by the net premium originally received and the Fund will realize a    
gain or loss.                                                                   

Covered call options must be listed on a national securities exchange and issued
by the Options Clearing Corporation. The purpose of writing covered call options
is to generate additional premium income for a Fund. This premium income will   
serve to enhance a Fund's total return and will reduce the effect of any price  
decline of the security involved in the option. Covered call                    

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options will generally be written on securities which are not expected to make  
any major price moves in the near future but which, over the long term, are     
deemed to be attractive investments for a Fund.                                 

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

Exercise prices of options may be below, equal to, or above the current market  
values of the underlying securities at the time the options are written. From   
time to time, a Fund may purchase an underlying security for delivery in        
accordance with an exercise notice of a call option assigned to it, rather than 
delivering such security from its portfolio. In such cases, additional costs    
will be incurred. A Fund will realize a profit or loss from a closing purchase  
transaction if the cost of the transaction is less or more than the premium     
received from the writing of the option. Because increases in the market price  
of a call option will generally reflect increases in the market price of the    
underlying security, any loss resulting from the repurchase of a call option is 
likely to be offset in whole or in part by appreciation of the underlying       
security owned by a Fund.                                                       

Where a Fund may purchase put options, that Fund is purchasing the right to sell
a specified security (or securities) within a specified period of time at a     
specified exercise price. Puts may be acquired to facilitate the liquidity of   
the portfolio assets. Puts may also be used to facilitate the reinvestment of   
assets at a rate of return more favorable than that of the underlying security. 
A Fund may sell, transfer, or assign a put only in conjunction with the sale,   
transfer, or assignment of the underlying security or securities. The amount    
payable to a Fund upon its exercise of a "put" is normally (i) the Fund's       
acquisition cost of the securities subject to the put (excluding any accrued    
interest which the Fund paid on the acquisition), less any amortized market     
premium or plus any accreted market or original issue discount during the period
the Fund owned the securities, plus (ii) all interest accrued on the securities 
since the last interest payment date during that period. A Fund generally will  
acquire puts only where the puts are available without the payment of any direct
or indirect consideration. However, if necessary or advisable, a Fund may pay   
for puts either separately in cash or by paying higher price for portfolio      
securities which are acquired subject to the puts (thus reducing the yield to   
maturity otherwise available for the same securities).                          

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Index options (or options on securities indices) are similar in many respects to
options on securities, except that an index option gives the holder the right to
receive, upon exercise, cash instead of securities, if the closing level of the 
securities index upon which the option is based is greater than, in the case of 
a call, or less than, in the case of a put, the exercise price of the option.   

Because index options are settled in cash, a call writer cannot determine the   
amount of its settlement obligations in advance and, unlike call writing on     
specific securities, cannot provide in advance for, or cover, its potential     
settlement obligations by acquiring and holding the underlying securities. A    
Fund will segregate assets or otherwise cover index options that would require  
it to pay cash upon exercise.                                                   

A principal reason for writing put and call options is to attempt to realize,   
through the receipt of premiums, a greater current return than would be realized
on the underlying securities alone. In return for the premium received for a    
call option, a Fund foregoes the opportunity for profit from a price increase in
the underlying security above the exercise price so long as the option remains  
open, but retains the risk of loss should the price of the security decline. In 
return for the premium received for a put option, a Fund assumes the risk that  
the price of the underlying security will decline below the exercise price, in  
which case the put would be exercised and the Fund would suffer a loss. A Fund  
may purchase put options in an effort to protect the value of a security it owns
against a possible decline in market value.                                     

Forward Commitments, When-Issued and Delayed-Delivery Securities. The Funds may 
purchase securities on a "when-issued" or "delayed-delivery" basis (i.e., for   
delivery beyond the normal settlement date at a stated price and yield). In     
addition, the Quality Growth VIP Fund may purchase and sell securities on a     
"forward commitment" basis. The Funds will engage in when-issued and            
delayed-delivery transactions only for the purpose of acquiring portfolio       
securities consistent with its investment objective and policies, not for       
investment leverage. When-issued securities involve a risk that the yield       
obtained in the transaction will be less than that available in the market when 
delivery takes place. The Funds will not pay for such securities or start       
earning interest on them until they are received.                               

When a Fund agrees to purchase securities on a "when-issued" or                 
"delayed-delivery" basis, its custodian will segregate cash or liquid securities
equal to the amount of the commitment. Normally, the custodian will set aside   
securities to satisfy the purchase commitment, and in such a case, a Fund may be
required subsequently to segregate additional assets in order to assure that the
value of the segregated assets remains equal to the amount of its commitment. It
may be expected that a Fund investing in securities on a when-issued or delayed 
delivery basis, net assets will fluctuate to a greater degree when it sets aside
securities to cover such purchase commitments than when it sets aside cash. In  
addition, because a Fund will set aside cash or liquid securities to satisfy its
purchase commitments in the manner described above, its liquidity and the       
ability of its investment adviser to manage it might be affected in the event   
its commitments to purchase "when-issued" or "delayed-delivery" securities ever 
exceeded 25% of the value of its assets. Under normal market conditions,        
however, a Fund's commitment to purchase "when-issued" or "delayed-delivery"    
securities will not exceed 25% of the value of the Fund's total assets.         

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When a Fund engages in "when-issued" or "delayed-delivery" transactions, it     
relies on the seller to consummate the trade. Failure of the seller to do so may
result in a Fund incurring a loss or missing the opportunity to obtain a price  
or yield considered to be advantageous.                                         

Mortgage-Related and Asset-Backed Securities. Investments in these and other    
derivative securities will not be made for purposes of leverage or speculation, 
but rather primarily for conventional investment or hedging purposes, liquidity,
flexibility and to capitalize on market inefficiencies. Each Fund may invest in 
mortgage-related securities issued or guaranteed by the U.S. Government, its    
agencies and instrumentalities. In addition, each Fund may invest in            
mortgage-related securities issued by nongovernmental entities, provided,       
however, that to the extent that a Fund purchases mortgage-related securities   
from such issuers which may, solely for purposes of the 1940 Act, be deemed to  
be investment companies, the Fund's investment in such securities will be       
subject to the limitations on its investment in investment company securities.  

Mortgage-related securities, for purposes of the Funds' Prospectuses and this   
SAI, represent pools of mortgage loans assembled for sale to investors by       
various governmental agencies such as GNMA and government-related organizations 
such as FNMA and the Federal Home Loan Mortgage Corporation ("FHLMC"), as well  
as by nongovernmental issuers such as commercial banks, savings and loan        
institutions, mortgage bankers and private mortgage insurance companies.        
Although certain mortgage-related securities are guaranteed by a third party or 
otherwise similarly secured, the market value of the security, which may        
fluctuate, is not so secured. If a Fund purchases a mortgage-related security at
a premium, that portion may be lost if there is a decline in the market value of
the security whether resulting from changes in interest rates or prepayments in 
the underlying mortgage collateral. As with other interest-bearing securities,  
the prices of such securities are inversely affected by changes in interest     
rates. However, though the value of a mortgage-related security may decline when
interest rates rise, the converse is not necessarily true, since in periods of  
declining interest rates the mortgages underlying the securities are prone to   
prepayment, thereby shortening the average life of the security and shortening  
the period of time over which income at the higher rate is received. When       
interest rates are rising, though, the rate of prepayment tends to decrease,    
thereby lengthening the period of time over which income at the lower rate is   
received. For these and other reasons, a mortgage-related security's average    
maturity may be shortened or lengthened as a result of interest rate            
fluctuations and, therefore, it is not possible to predict accurately the       
security's return. In addition, regular payments received in respect of         
mortgage-related securities include both interest and principal. No assurance   
can be given as to the return a Fund will receive when these amounts are        
reinvested.                                                                     

There are a number of important differences among the agencies and              
instrumentalities of the U.S. Government that issue mortgage related securities 
and among the securities that they issue. Mortgage-related securities issued by 
GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie     
Maes") which are guaranteed as to the timely payment of principal and interest  
by GNMA and such guarantee is backed by the full faith and credit of the United 
States. GNMA is a wholly-owned U.S. Government corporation within the Department
of Housing and Urban Development. GNMA certificates also are supported by the   
authority of GNMA to borrow funds from the U.S. Treasury to make payments under 
its guarantee. Mortgage-related securities                                      

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issued by FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates (also 
known as "Fannie Maes") which are solely the obligations of FNMA and are not    
backed by or entitled to the full faith and credit of the United States. FNMA is
a government-sponsored organization owned entirely by private stockholders.     
Fannie Maes are guaranteed as to the timely payment of the principal and        
interest by FNMA. Mortgage-related securities issued by FHLMC include FHLMC     
Mortgage Participation Certificates (also known as "Freddie Macs" or "Pcs").    
FHLMC is a corporate instrumentality of the United States, created pursuant to  
an Act of Congress. Freddie Macs are not guaranteed by the United States or by  
any Federal Home Loan Banks and do not constitute a debt or obligation of the   
United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder 
to the timely payment of interest, which is guaranteed by FHLMC. FHLMC          
guarantees either ultimate collection or the timely payment of all principal    
payments on the underlying mortgage loans. When FHLMC does not guarantee timely 
payment of principal, FHLMC may remit the amount due on account of its guarantee
of ultimate payment of principal at any time after default on an underlying     
mortgage, but in no event later than one year after it becomes payable.         

Like mortgages underlying mortgage-backed securities, automobile sales contracts
or credit card receivables underlying asset-backed securities are subject to    
prepayment, which may reduce the overall return to certificate holders.         
Nevertheless, principal prepayment rates tend not to vary much with interest    
rates, and the short-term nature of the underlying car loans or other           
receivables tends to dampen the impact of any change in the prepayment level.   
Certificate holders may also experience delays in prepayment on the certificates
if the full amounts due on underlying sales contracts or receivables are not    
realized because of unanticipated legal or administrative costs of enforcing the
contracts or because of depreciation or damage to the collateral (usually       
automobiles) securing certain contracts, or other factors. In certain market    
conditions, asset-backed securities may experience volatile fluctuations in     
value and periods of illiquidity. If consistent with its investment objective   
and policies, a Fund may invest in other asset-backed securities that may be    
developed in the future.                                                        

Illiquid and Restricted Securities. "Section 4(2) securities" are securities    
which are issued in reliance on the "private placement" exemption from          
registration which is afforded by section 4(2) of the Securities Act of 1933    
(the "1933 Act"). A Fund will not purchase section 4(2) securities which have   
not been determined to be liquid in excess of 15% of its net assets. Section    
4(2) securities are restricted as to disposition under the federal securities   
laws, and generally are sold to institutional investors such as the Fund which  
agree that they are purchasing the securities for investment and not with a view
to public distribution. Any resale must also generally be made in an exempt     
transaction. Section 4(2) securities are normally resold to other institutional 
investors through or with the assistance of the issuer or investment dealers who
make a market in such section 4(2) securities, thus providing liquidity. The    
Adviser has been delegated the day-to-day authority to determine whether a      
particular issue of section 4(2) securities, including those eligible for resale
under Rule 144A under the 1933 Act, should be treated as liquid. Rule 144A      
provides a safe-harbor exemption from the registration requirements of the 1933 
Act for resales to "qualified institutional buyers" as defined in Rule 144A.    
With the exception of registered                                                

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broker-dealers, a qualified institutional buyer must generally own or invest on 
a discretionary basis at least $100 million in securities.                      

The Adviser may deem section 4(2) securities liquid if it believes that, based  
on the trading markets for such security, such security can be disposed of      
within seven days in the ordinary course of business at approximately the amount
at which the Funds valued the security. In making such determination, the       
following factors, among others, may be deemed relevant: (i) the credit quality 
of the issuer; (ii) the frequency of trades and quotes for the security; (iii)  
the number of dealers willing to purchase or sell the security and the number of
other potential purchasers; (iv) dealer undertakings to make a market in the    
security; and (v) the nature of the security and the nature of market-place     
trades.                                                                         

Treatment of section 4(2) securities as liquid could have the effect of         
decreasing the level of a Fund's liquidity to the extent that qualified         
institutional buyers become, for a time, uninterested in purchasing these       
securities.                                                                     

Investment Companies. The Funds may invest in securities issued by other        
investment companies, including, but not limited to, money market investment    
companies, within the limits prescribed by the 1940 Act. As a shareholder of    
another investment company, a Fund would bear, along with other shareholders,   
its pro rata portion of the expenses of such other investment company, including
advisory fees. These expenses would be in addition to the advisory and other    
expenses that a Fund bears directly in connection with its own operations, and  
may represent a duplication of fees to Shareholders of a Fund.                  

Lending of Portfolio Securities. In order to generate additional income, the    
Funds may, from time to time, lend portfolio securities to broker-dealers, banks
or institutional borrowers of securities. The Funds must receive at least 100%  
collateral, in the form of cash or U.S. Government securities. This collateral  
must be valued daily, and should the market value of the loaned securities      
increase, the borrower must furnish additional collateral to the lender. During 
the time portfolio securities are on loan, the borrower pays the lender any     
dividends or interest paid on such securities. Loans are subject to termination 
by the lender or the borrower at any time. While the Funds do not have the right
to vote securities on loan, each intends to terminate the loan and regain the   
right to vote if that is considered important with respect to the investment. In
the event the borrower defaults on its obligation to a Fund, it could experience
delays in recovering its securities and possible capital losses. The Funds will 
only enter into loan arrangements with broker-dealers, banks or other           
institutions determined to be creditworthy under guidelines established by the  
Board of Trustees that permit each Fund to loan up to 33 1/3% of the value of   
its total assets.                                                               

Convertible Securities. The Funds may invest in convertible securities.         
Convertible securities are fixed income securities that may be exchanged or     
converted into a predetermined number of the issuer's underlying common stock at
the option of the holder during a specified time period. Convertible securities 
may take the form of convertible preferred stock, convertible bonds or          
debentures, units consisting of "usable" bonds and warrants or a combination of 
the features of several of these securities. The Funds will invest in           
convertible securities that are rated "BBB"                                     

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by S&P and "Baa" by Moody's, or higher, at the time of investment, or if        
unrated, are of comparable quality.                                             

Convertible bonds and convertible preferred stocks are fixed income securities  
that generally retain the investment characteristics of fixed income securities 
until they have been converted but also react to movements in the underlying    
equity securities. The holder is entitled to receive the fixed income of a bond 
or the dividend preference of a preferred stock until the holder elects to      
exercise the conversion privilege. Usable bonds are corporate bonds that can be 
used in whole or in part, customarily at full face value, in lieu of cash to    
purchase the issuer's common stock.                                             

When owned as part of a unit along with warrants, which are options to buy the  
common stock, they function as convertible bonds, except that the warrants      
generally will expire before the bond's maturity. Convertible securities are    
senior to equity securities, and, therefore, have a claim to assets of the      
corporation prior to the holders of common stock in the case of liquidation.    
However, convertible securities are generally subordinated to similar           
non-convertible securities of the same company. The interest income and         
dividends from convertible bonds and preferred stocks provide a stream of income
with generally higher yields than common stocks, but lower than non-convertible 
securities of similar quality.                                                  

A Fund will exchange or convert the convertible securities held in its portfolio
into shares of the underlying common stock in instances in which, in the opinion
of the Adviser, the investment characteristics of the underlying common shares  
will assist the Fund in achieving its investment objective. Otherwise, a Fund   
will hold or trade the convertible securities. In selecting convertible         
securities for the Funds, the Adviser evaluates the investment characteristics  
of the convertible security as a fixed income instrument, and the investment    
potential of the underlying equity security for capital appreciation. In        
evaluating these matters with respect to a particular convertible security, FTAM
may consider numerous factors, including the economic and political outlook, the
value of the security relative to other investment alternatives, trends in the  
determinants of the issuer's profits, and the issuer's management capability and
practices.                                                                      

As with all fixed income securities, the market values of convertible securities
tend to increase when interest rates decline and, conversely, tend to decline   
when interest rates increase.                                                   

Warrants. The Funds may purchase warrants and similar rights, which are         
privileges issued by corporations enabling the owners to subscribe to and       
purchase a specified number of shares of the corporation at a specified price   
during a specified period of time. The purchase of warrants involves the risk   
that a Fund could lose the purchase value of a warrant if the right to subscribe
to additional shares is not exercised prior to the warrant's expiration. Also,  
the purchase of warrants involves the risk that the effective price paid for the
warrant added to the subscription price of the related security may exceed the  
value of the subscribed security's market price such as when there is no        
movement in the level of the underlying security.                               

Repurchase Agreements. Securities held by the Funds may be subject to repurchase
agreements. Under the terms of a repurchase agreement, a Fund would acquire     
securities from member banks of the Federal Deposit Insurance Corporation and   
registered broker-dealers that the Adviser                                      

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deem creditworthy, subject to the seller's agreement to repurchase such         
securities at a mutually agreed-upon date and price, which includes interest    
negotiated on the basis of current short-term rates. The seller under a         
repurchase agreement will be required to maintain at all times the value of     
collateral held pursuant to the agreement at not less than the repurchase price 
(including accrued interest). If the seller were to default on its repurchase   
obligation or become insolvent, a Fund holding such obligation would suffer a   
loss to the extent that the proceeds from a sale of the underlying portfolio    
securities were less than the repurchase price under the agreement. Securities  
subject to repurchase agreements will be held by a Fund's custodian or another  
qualified custodian, as appropriate, or in the Federal Reserve/Treasury         
book-entry system.                                                              

Reverse Repurchase Agreements and Dollar Roll Agreements. The Funds may also    
enter into reverse repurchase agreements and dollar roll agreements in          
accordance with applicable investment restrictions. Pursuant to such reverse    
repurchase agreements, a Fund would sell certain of its securities to financial 
institutions such as banks and broker-dealers, and agree to repurchase them, or 
substantially similar securities in the case of a dollar roll agreement, at a   
mutually agreed upon date and price. A dollar roll agreement is analogous to a  
reverse repurchase agreement, with a Fund selling mortgage-backed securities for
delivery in the current month and simultaneously contracting to repurchase      
substantially similar (same type, coupon and maturity) securities on a specified
future date. At the time a Fund enters into a reverse repurchase agreement or   
dollar roll agreement, it will segregate assets such as U.S. Government         
securities or other liquid securities consistent with its investment            
restrictions having a value equal to the repurchase price (including accrued    
interest), and will subsequently continually monitor the account to ensure that 
such equivalent value is maintained at all times. Reverse repurchase agreements 
and dollar roll agreements involve the risk that the market value of securities 
to be purchased by a Fund may decline below the price at which it is obligated  
to repurchase the securities, or that the other party may default on its        
obligation, so that a Fund is delayed or prevented from completing the          
transaction.                                                                    

Futures Contracts and Options Thereon. The Funds may enter into contracts for   
the future delivery of securities and futures contracts based on a specific     
security, class of securities, interest rate, index, and may purchase or sell   
options on any such futures contracts and engage in related closing             
transactions. A futures contract on a securities index is an agreement          
obligating either party to pay, and entitling the other party to receive, while 
the contract is outstanding, cash payments based on the level of a specified    
securities index. Each Fund may engage in such futures transactions in an effort
to hedge against market risks and to manage its cash position, but not for      
leveraging purposes. This investment technique is designed primarily to hedge   
against anticipated future changes in market conditions which otherwise might   
adversely affect the value of securities which these Funds hold or intend to    
purchase. For example, when interest rates are expected to rise or market values
of portfolio securities are expected to fall, a Fund can seek through the sale  
of futures contracts to offset a decline in the value of its portfolio          
securities. When interest rates are expected to fall or market values are       
expected to rise, a Fund, through the purchase of such contracts, can attempt to
secure better rates or prices than might later be available in the market when  
it effects anticipated purchases.                                               

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

The value of a Fund's contracts may equal or exceed 100% of its total assets,   
although it will not purchase or sell a futures contract unless immediately     
following such sale or purchase the aggregate amount of margin deposits on its  
existing futures positions plus the amount of premiums paid for related futures 
options entered into for other than bona fide hedging purposes is 5% or less of 
the its net assets. Futures transactions will be limited to the extent necessary
to maintain the qualification of these Funds as a regulated investment          
companies.                                                                      

The Funds also may purchase and sell put and call options on futures contracts. 
An option on a futures contract gives the purchaser the right, but not the      
obligation, in return for the premium paid, to assume (in the case of a call) or
sell (in the case of a put) a position in a specified underlying futures        
contract (which position may be a long or short position) a specified exercise  
price at any time during the option exercise period. Sellers of options on      
futures contracts, like buyers and sellers of futures contracts, make an initial
margin deposit and are subject to calls for variation margin.                   

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

Pursuant to claims for exemption filed with the Commodity Futures Trading       
Commission ("CFTC") and/or the National Futures Association on behalf of the    
Funds and the Adviser, the Funds and the Adviser are not deemed to be a         
"commodity pool" or "commodity pool operator" under the Commodity Exchange Act  
and are not subject to registration or regulation as such under the Commodity   
Exchange Act. By virtue of changes to CFTC regulations, the substantive         
limitations set forth in the Funds' exemption filing with respect to their use  
of futures contracts are no longer applicable.                                  

 INVESTMENT RESTRICTIONS

The following investment restrictions may be changed with respect to a          
particular Fund only by a vote of a majority of the outstanding Shares of that  
Fund (as defined under "ADDITIONAL INFORMATION--Vote of a Majority of the       
Outstanding Shares" in this SAI). Unless expressly designated as fundamental,   
all policies and procedures of the Funds may be changed by the Board of Trustees
without shareholder approval.                                                   

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The Funds will not:                                                             

    1. Purchase any securities which would cause more than 25% of the value of
the Fund's total assets at the time of purchase to be invested in securities of 
one or more issuers conducting their principal business activities in the same  
industry, provided that: (a) there is no limitation with respect to obligations 
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
and repurchase agreements secured by obligations of the U.S. Government or its  
agencies or instrumentalities; (b) wholly owned finance companies will be       
considered to be in the industries of their parents if their activities are     
primarily related to financing the activities of their parents; and (c)         
utilities will be divided according to their services. For example, gas, gas    
transmission, electric and gas, electric and telephone will each be considered a
separate industry;                                                              

   2. Borrow money or issue senior securities, except as permitted under the
Investment Company Act of 1940, as amended, and as interpreted, modified or     
otherwise permitted by regulatory authority having jurisdiction from time to    
time;                                                                           

3. Make loans, except as permitted under the Investment Company Act of
1940, as amended, and as interpreted, modified or otherwise permitted by        
regulatory authority having jurisdiction from time to time;                     

     4. Underwrite securities issued by other persons, except to the extent that
a Fund may be deemed to be an underwriter under certain securities laws in the  
disposition of "restricted securities";                                         

 5. Purchase or sell commodities or commodities contracts, except to the
extent disclosed in the current Prospectus and/or SAI of the Fund; and          

6. Purchase or sell real estate (although investments in marketable   
securities of companies engaged in such activities and securities secured by    
real estate or interests therein are not prohibited by this restriction).       

The following additional investment restriction is not a fundamental policy and 
therefore may be changed without the vote of a majority of the outstanding      
Shares of a Fund. Except as provided in the fundamental policies described      
above, the Funds may not purchase or otherwise acquire any securities if, as a  
result, more than 15% of a Fund's net assets would be invested in securities    
that are illiquid.                                                              

If any percentage restriction described above is satisfied at the time of       
purchase, a later increase or decrease in such percentage resulting from a      
change in net asset value will not constitute a violation of such restriction.  
However, should a change in net asset value or other external events cause a    
Fund's investments in illiquid securities to exceed the limitation set forth in 
such Fund's Prospectus, that Fund will act to cause the aggregate amount of     
illiquid securities to come within such limit as soon as reasonably practicable.
In such an event, however, that Fund would not be                               

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required to liquidate any portfolio securities where the Fund would suffer a    
loss on the sale of such securities.                                            

DISCLOSURE OF PORTFOLIO HOLDINGS                                                

It is the policy of the Funds to protect the confidentiality of their holdings  
and prevent the selective disclosure of non-public information about the Funds' 
portfolio holdings. The Funds' service providers, to which the Funds may        
disclose non-public information about their portfolio holdings, are required to 
comply with this policy. No information concerning the portfolio holdings of the
Funds may be disclosed to any unaffiliated third party, except as provided      
below. The Funds' Board of Trustees has adopted formal procedures governing     
compliance with these policies.                                                 

The Funds, or their duly authorized service providers, may publicly disclose    
holdings of a Fund in accordance with regulatory requirements, such as periodic 
portfolio disclosure in filings with the Securities and Exchange Commission.    
There are numerous mutual fund evaluation services such as Standard & Poor's,   
Morningstar or Lipper Analytical Services, and due diligence departments of     
broker-dealers and wirehouses that regularly analyze the portfolio holdings of  
mutual funds in order to monitor and report on various attributes including     
style, capitalization, maturity, yield, beta, etc. These services and           
departments then distribute the results of their analysis to the public, paid   
subscribers and/or in-house brokers. In order to facilitate the review of the   
Funds by these services and departments, the Funds may distribute (or authorize 
their service providers to distribute) portfolio holdings information to such   
services and departments before public disclosure is required provided the Fund 
has a legitimate business purpose for doing so and the recipients are subject to
a confidentiality agreement and a duty or undertaking to not trade on the basis 
of non-public information, or the Board has otherwise determined that the       
policies of the recipient are adequate to protect the information that is       
disclosed. Such disclosures shall be authorized by the Funds' Chief Executive   
Officer or Chief Financial Officer and shall be reported periodically to the    
Board. The Funds also may provide this information to such services and         
departments, and to others, provided the portfolio holdings disclosed in the    
materials have previously been publicly disclosed.                              

Neither the Funds nor their service providers received any compensation from    
such services and departments. The Board and the CCO will periodically review   
the Funds' policy on the disclosure of the portfolio securities holdings of a   
Fund and may, on a case-by-case basis, impose additional restrictions on the    
dissemination of portfolio information and waive certain requirements. To the   
extent required by law, the CCO reports to the Board of Trustees any violations 
of a Fund's policies and procedures on disclosure of portfolio holdings.        

Any disclosure of a Fund's securities holdings must serve a legitimate business 
purpose of the Funds and must be in the best interest of the Funds'             
shareholders. In making such a determination, the CCO and the Board must        
conclude that the anticipated benefits and risks to the Funds and their         
shareholders justify the purpose of the disclosure. A further determination must
be made to ensure that any conflicts of interest between the Funds, their       
shareholders, and any third party are resolved prior to disclosure. The Funds   
reserve the right to request certifications from senior officers of authorized  
recipients that the recipient is using the portfolio                            

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holdings information only in a manner consistent with the Funds' policy and any 
applicable confidentiality agreement.                                           

PORTFOLIO TURNOVER                                                              

Changes may be made in a Fund's portfolio consistent with the investment        
objective and policies of the Fund whenever such changes are believed to be in  
the best interests of the Fund and its Shareholders. Each Fund will be managed  
without regard to its portfolio turnover rate. The portfolio turnover rate for  
the Funds may vary greatly from year to year as well as within a particular     
year, and may be affected by cash requirements for redemptions of Shares. High  
portfolio turnover rates will generally result in higher transaction costs to a 
Fund, including brokerage commissions.                                          

The portfolio turnover rate of a Fund is calculated by dividing the lesser of a 
Fund's purchases or sales of portfolio securities for the year by the monthly   
average value of the securities. The Securities and Exchange Commission requires
that the calculation exclude all securities whose remaining maturities at the   
time of acquisition are one year or less.                                       

 NET ASSET VALUE

The net asset value of each Fund is determined and the Shares of each Fund are  
priced as of the close of the New York Stock Exchange ("NYSE") (generally 4:00  
p.m. Eastern Time) on each Business Day of the Trust (other than a day on which 
there are insufficient changes in the value of a Fund's portfolio securities to 
materially affect the Fund's net asset value or a day on which no Shares of the 
Fund are tendered for redemption and no order to purchase any Shares is         
received). A "Business Day" is a day on which the NYSE is open for trading. The 
NYSE generally is open every week, Monday through Friday, except when the       
following holidays are celebrated: New Year's Day, Martin Luther King, Jr. Day  
(the third Monday in January), President's Day (the third Monday in February),  
Good Friday, Memorial Day (the last Monday in May), Independence Day, Labor Day 
(the first Monday in September), Thanksgiving Day (the fourth Thursday in       
November) and Christmas Day.                                                    

VALUATION OF THE FUNDS                                                          

Portfolio securities, the principal market for which is a securities exchange,  
generally will be valued at the closing price on that exchange on the day of    
computation, or, if there have been no sales during such day, at the last sales 
price on any other exchange or trading system. Portfolio securities, the        
principal market for which is not a securities exchange, generally will be      
valued on the basis of the mean between the last bid and ask quotes furnished by
primary market makers for those securities. For NASDAQ/NMS traded securities,   
market value may also be determined on the basis of the Nasdaq Official Closing 
Price (NOCP) instead of the closing price. Foreign securities generally are     
valued based on quotations from the primary market in which they are traded and 
are translated from the local currency into U.S. dollars using current exchange 
rates. The value of foreign securities may be affected significantly on a day   
that the NYSE is closed and an investor is unable to purchase or redeem Shares. 
Shares of investment companies are valued on                                    

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the basis of their net asset values, subject to any applicable sales charge.    
Portfolio securities with a remaining maturity of 60 days or less will be valued
either at amortized cost or original cost plus accrued interest, which          
approximates current value.                                                     

All other assets and securities, including securities for which market          
quotations are not readily available, will be valued at their fair market value 
as determined in good faith under the general supervision of the Board of       
Trustees. If a significant market event impacting the value of a portfolio      
security occurs subsequent to the close of trading in the security, but prior to
the calculation of a Fund's net asset value per share, market quotations for    
that security may not be readily available. If the impact of such a significant 
market event materially affects the net asset value per share of a Fund, an     
affected portfolio security will be valued at fair market value as determined in
good faith under the general supervision of the Board of Trustees.              

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Shares of each Fund are sold on a continuous basis by the Distributor, and  
the Distributor has agreed to use appropriate efforts to solicit all purchase   
orders. The public offering price of Shares of the Funds is their net asset     
value per Share.                                                                

The Trust may suspend the right of redemption or postpone the date of payment   
for Shares during any period when (a) trading on the NYSE is restricted by      
applicable rules and regulations of the Securities and Exchange Commission, (b) 
the NYSE is closed for other than customary weekend and holiday closings, (c)   
the Securities and Exchange Commission has by order permitted such suspension,  
or (d) an emergency exists as a result of which (i) disposal by the Trust of    
securities owned by it is not reasonably practical or (ii) it is not reasonably 
practical for the Trust to determine the fair market value of its net assets.   

Shares may be redeemed without charge on any day that net asset value is        
calculated. All redemption orders are effected at the net asset value per Share 
next determined after receipt by the Distributor of a redemption request.       
Payment for Shares redeemed normally will be made within seven days.            

The Trust intends to pay cash for all Shares redeemed, but under conditions     
which make payment in cash unwise, payment may be made wholly or partly in      
portfolio securities at their then market value equal to the redemption price.  
In such cases, a Shareholder may incur brokerage costs in converting such       
securities to cash.                                                             

Variable Contract Owners do not deal directly with the Funds to purchase,       
redeem, or exchange Shares, and Variable Contract Owners should refer to the    
prospectus for the applicable Separate Account for information on the allocation
of premiums and on transfers of accumulated value among sub-accounts of the     
pertinent Separate Account that invests in the Funds.                           

Each Fund reserves the right to discontinue offering Shares at any time or to   
cease operations entirely.                                                      

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 MANAGEMENT OF THE TRUST

MANAGEMENT INFORMATION                                                          

The names of the Trustees, their addresses, dates of birth, positions, principal
occupation(s) during the past five years, number of portfolios in the fund      
complex overseen, and other directorships held by each Trustee and executive    
officer who is an "interested person" (as defined in the 1940 Act) and each     
non-interested Trustee are set forth below:                                     

Trustees                                                                        

                                                        [Enlarge/Download Table]

                                                                                       NUMBER OF                        
                                                                                      PORTFOLIOS                        
                                                                                        IN FUND                         
                                             TERM OF OFFICE                             COMPLEX                         
      NAME, ADDRESS,         POSITION(S)       AND LENGTH    PRINCIPAL OCCUPATION(S)   OVERSEEN       OTHER TRUSTEESHIPS
    AND DATE OF  BIRTH     HELD WITH TRUST   OF TIME SERVED    DURING PAST 5 YEARS    BY TRUSTEE       HELD BY TRUSTEE* 
    ------------------     ---------------   --------------  -----------------------  ----------      ------------------
                                                                                                                        
NON-INTERESTED TRUSTEES                                                                                                 
James H. Woodward          Trustee          Indefinite;      Chancellor Emeritus,         15      The Coventry Group    
9201 University City Blvd.                  4/97 to present  University of North                                        
Charlotte, NC 28223                                          Carolina at Charlotte                                      
Date of Birth: 11/24/1939                                    - 7/05 to present;                                         
                                                             Chancellor, University                                     
                                                             of North Carolina at                                       
                                                             Charlotte - 7/89 to                                        
                                                             7/05                                                       

Michael Van Buskirk        Trustee and      Indefinite;      Chief Executive              15      The Coventry Group    
3435 Stelzer Road          Chairman of the  4/97 to present  Officer, Ohio Bankers                                      
Columbus, OH 43219         Board                             Assoc. (industry trade                                     
Date of Birth: 2/22/1947                                     association) -                                             
                                                             5/91 to  present                                           

Maurice Stark              Trustee          Indefinite;      Consultant, (part-time)      15      The Coventry Group    
7662 Cloister Drive                         3/04 to present  Battelle Memorial                                          
Columbus, OH 43235                                           Institute -- 1/95 to                                       
Date of Birth: 9/23/1935                                     present                                                    

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                                                        [Enlarge/Download Table]

                                                                                      NUMBER OF                            
                                                                                     PORTFOLIOS                            
                                                                                       IN FUND                             
                                            TERM OF OFFICE                             COMPLEX                             
      NAME, ADDRESS,        POSITION(S)       AND LENGTH    PRINCIPAL OCCUPATION(S)   OVERSEEN        OTHER TRUSTEESHIPS   
    AND DATE OF  BIRTH    HELD WITH TRUST   OF TIME SERVED    DURING PAST 5 YEARS    BY TRUSTEE        HELD BY TRUSTEE*    
    ------------------    ---------------   --------------  -----------------------  ----------       ------------------   
                                                                                                                           
Diane E. Armstrong        Trustee          Indefinite;      Principal of King           15       The Coventry Group        
3435 Stelzer Road                          2/06 to present  Dodson Armstrong                                               
Columbus, OH 43219                                          Financial Advisors,                                            
Date of Birth: 7/02/1964                                    Inc. - 8/03 to                                                 
                                                            present; Director of                                           
                                                            Financial Planning,                                            
                                                            Hamilton Capital                                               
                                                            Management - 4/00 to                                           
                                                            8/03                                                           

INTERESTED TRUSTEE                                                                                                         
Walter B. Grimm(1)        Trustee          Indefinite;      Co-Owner, Leigh             15       American Performance Funds
3435 Stelzer Road                          4/97 to present  Investments, Inc.                                              
Columbus, OH 43219                                          (Real Estate) -                      The Coventry Group        
                                                            1/06 to present;                                               
Date of Birth: 6/30/1945                                    Employee of BISYS Fund               Legacy Funds Group        
                                                            Services                                                       
                                                            6/92 to 9/05                         Performance Funds Trust   

----------                                                                      
*    Not reflected in prior column.                                             

(1)  Mr. Grimm may be deemed to be an "interested person," as defined by the    
   Investment Company Act of 1940, due to his previous employment with BISYS
Fund Services, the Funds' distributor.                                

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Executive Officers                                                              

                                                        [Enlarge/Download Table]

                                                                        TERM OF OFFICE AND LENGTH      PRINCIPAL OCCUPATION(S)  
  NAME, ADDRESS, AND DATE OF BIRTH     POSITION(S) HELD WITH TRUST            OF TIME SERVED             DURING PAST 5 YEARS    
  --------------------------------  ---------------------------------  ----------------------------  ---------------------------
                                                                                                                                
R. Jeffrey Young                    President                          Indefinite; 9/05 to present   Employee of BISYS Fund     
3435 Stelzer Road                                                                                    Services (10/93 to present)
Columbus, OH 43219                                                                                                              
Date of Birth: 8/22/1964                                                                                                        

Eric Phipps                         Anti-Money Laundering Officer and  Indefinite; 11/06 to present  Employee of BISYS Fund     
3435 Stelzer Road                   Chief Compliance Officer                                         Services (6/06 to present);
Columbus, OH 43219                                                                                   employee of the United     
Date of Birth: 6/20/1971                                                                             States Securities and      
                                                                                                     Exchange Commission (10/04 
                                                                                                     to 05/06); employee for    
                                                                                                     BISYS Fund Services a      
                                                                                                     Director in Compliance     
                                                                                                     Services (12/95 to 10/04). 

Linda A. Durkin                     Treasurer                          Indefinite; 11/06 to present  Employee of BISYS Fund     
3435 Stelzer Road                                                                                    Services (9/06 to present);
Columbus, OH 43219                                                                                   employee of Investors Bank 
Date of Birth: 11/1/1960                                                                             and Trust (2/06 to 9/06;   
                                                                                                     employee of RR Donnelly    
                                                                                                     (6/03 to 1/06); Vice       
                                                                                                     President - Director of    
                                                                                                     Fund Administration at     
                                                                                                     Mercantile - Safe Deposit  
                                                                                                     and Trust Co. (5/93 to     
                                                                                                     6/02).                     

The officers of the Trust are "interested persons" (as defined in the 1940 Act) 
and receive no compensation directly from the Funds for performing the duties of
their offices.                                                                  

BOARD OF TRUSTEES                                                               

Overall responsibility for management of the Trust rests with its Board of      
Trustees, who are elected by the Shareholders of the Trust. The Trustees elect  
the officers of the Trust to supervise actively its day-to-day operations.      

Valuation Committee                                                             

The Board of Trustees has a Valuation Committee whose function is to monitor the
valuation of portfolio securities and other investments and, as required by the 
Trust's valuation policies, when the Board is not in session it shall determine 
the fair value of portfolio holdings after consideration of all relevant        
factors, which determinations shall be reported to the full Board. The Valuation
Committee consists of at least two Independent Trustees. The Valuation Committee
held no meetings during the last year.                                          

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Audit Committee                                                                 

The Board of Trustees has an Audit Committee, composed of the independent       
Trustees, whose function is to oversee the financial reporting and internal     
controls of the Trust. The audit committee (i) recommends to the Board of       
Trustees the selection of an independent public accounting firm; (ii) annually  
reviews the scope of the proposed audit, the audit procedures to be utilized and
the proposed audit fees; (iii) reviews the annual audit with the independent    
auditors; (iv) reviews the adequacy and effectiveness of internal controls and  
procedures. Members of the Audit Committee receive additional compensation for  
serving on this Committee. The Audit Committee held two meetings during the     
fiscal year ended December 31, 2006.                                            

Nominating Committee                                                            

The Board's Nominating Committee recommends nominations for membership on the   
Board. It evaluates candidates' qualifications for Board membership and, with   
respect to nominees for positions as Independent Trustees, their independence   
from the Funds' investment advisors and other principal service providers. The  
Committee meets as necessary to identify and evaluate nominees for Trustee and  
to make its recommendations to the Board. The Nominating Committee is composed  
of all Independent Trustees of the Trust. The Nominating Committee did not meet 
during the fiscal year ended December 31, 2006.                                 

Listed below for each Trustee is a dollar range of securities beneficially owned
in the Funds together with the aggregate dollar range of equity securities in   
all registered investment companies overseen by each Trustee that are in the    
same family of investment companies as the Trust, as of December 31, 2006.      

                                                                [Download Table]

                                                AGGREGATE DOLLAR RANGE OF EQUITY
                                                  SECURITIES IN ALL REGISTERED  
                                                INVESTMENT COMPANIES OVERSEEN BY
                       DOLLAR RANGE OF EQUITY    TRUSTEE IN FAMILY OF INVESTMENT
  NAME OF TRUSTEE     SECURITIES IN THE TRUST               COMPANIES           
  ---------------     -----------------------   --------------------------------
                                                                                
James H. Woodward               None                          None              
Michael Van Buskirk     $50,001 - $100,000                Over $100,000         
Walter B. Grimm                 None                          None              
Maurice Stark                   None                          None              
Diane E. Armstrong              None                          None              

As of April 1, 2007 the Trustees and officers of the Trust, as a group, owned   
Variable Contracts that entitled them to give voting instructions with respect  
to less than one percent of the Shares of any portfolio of the Trust.           

No non-interested Trustee (or an immediate family member thereof) had any direct
or indirect interest, the value of which exceeds $60,000, in the Advisor, the   
principal underwriter of the Trust, or any entity controlling, controlled by or 
under common control with the Advisor or the                                    

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principal underwriter of the Trust (no including registered investment          
companies). Set forth in the table below is information regarding each          
non-interested Trustee's (and his immediate family members') share ownership in 
securities of the Advisor, the principal underwriter of the Trust, and any      
entity controlling, controlled by or under common control with the Advisor or   
principal underwriter of the Trust (not including registered investment         
companies).                                                                     

                                                        [Enlarge/Download Table]

                        NAME OF OWNERS AND                               VALUE OF   PERCENT OF
  NAME OF TRUSTEE    RELATIONSHIPS TO TRUSTEE  COMPANY  TITLE OF CLASS  SECURITIES     CLASS  
  ---------------    ------------------------  -------  --------------  ----------  ----------
                                                                                              
James H. Woodward              None              None        None          None        None   
Michael Van Buskirk            None              None        None          None        None   
Maurice Stark                  None              None        None          None        None   
Diane E. Armstrong             None              None        None          None        None   

No non-interested Trustee or immediate family member has during the two most    
recently completed calendar years had: (i) any material interest, direct or     
indirect, in any transaction or series of similar transactions, in which the    
amount involved exceeds $60,000; (ii) any securities interest in the principal  
underwriter of the Trust or the Advisor or their affiliates (other than the     
Trust); or (iii) any direct or indirect relationship of any nature, in which the
amount involved exceeds $60,000, with:                                          

-    the Funds;                                                                 

-    an officer of the Funds;                                                   

-    an investment company, or person that would be an investment company but   
 for the exclusions provided by sections 3(c)(1) and 3(c)(7) of the 1940
 Act, having the same investment advisor or principal underwriter as the
Funds or having an investment advisor or principal underwriter that   
directly or indirectly controls, is controlled by, or is under common 
control with the Advisor or principal underwriter of the Funds;       

-    an officer of an investment company, or a person that would be an          
    investment company but for the exclusions provided by sections 3(c)(1) and
  3(c)(7) of the 1940 Act, having the same investment advisor or principal
underwriter as the Funds or having an investment advisor or principal 
   underwriter that directly or indirectly controls, is controlled by, or is
under common control with the Advisor or principal underwriter of the 
Funds;                                                                

-    the Advisor or principal underwriter of the Funds,                         

-    an officer of the Advisor or principal underwriter of the Funds;           

-    a person directly or indirectly controlling, controlled by, or under common
control with the Advisor or principal underwriter of the Funds; or    

-    an officer of a person directly or indirectly controlling, controlled by,  
  or under common control with the Advisor or principal underwriter of the
Funds.                                                                

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TRUSTEE COMPENSATION                                                            

The Trust pays each Trustee who is not an employee of BISYS Fund Services       
("BISYS") or its affiliates a retainer fee at the rate of $500 per calendar     
quarter, reasonable out-of-pocket expenses, $750 for each regular meeting of the
Board of Trustees attended in person, and $250 for each regular meeting of the  
Board of Trustees attended by telephone. The Trust also pays each such Trustee  
$500 for each special meeting of the Board of Trustees attended in person, and  
$250 for each special meeting of the Board of Trustees attended by telephone.   
For the fiscal year ended December 31, 2006, the Trust paid the following       
compensation to the Trustees of the Trust:                                      

                                                        [Enlarge/Download Table]

                                                   PENSION OR RETIREMENT  ESTIMATED ANNUAL  TOTAL COMPENSATION FROM FUNDS
                          AGGREGATE COMPENSATION   BENEFITS ACCRUED AS      BENEFITS UPON     AND FUND COMPLEX** PAID TO 
NAME OF PERSON, POSITION         FROM FUNDS       PART OF FUND EXPENSES*     RETIREMENT                TRUSTEES          
------------------------  ----------------------  ----------------------  ----------------  -----------------------------
                                                                                                                         
James H. Woodward,                                                                                                       
Trustee                           $2,464                    --                   --                    $22,000           

Michael Van Buskirk,                                                                                                     
Trustee                           $2,464                    --                   --                    $20,250           

Walter B. Grimm,                                                                                                         
Trustee                           $2,366                    --                   --                    $19,750           

Maurice Stark,                                                                                                           
Trustee                           $2,431                    --                   --                    $20,750           

Diane Armstrong,***                                                                                                      
Trustee                           $2,431                    --                   --                    $20,750           

*    The Trust does not accrue pension or retirement benefits as part of Fund   
expenses, and Trustees of the Trust are not entitled to benefits upon 
retirement from the Board of Trustees.                                

**   The Fund Complex consists of the Trust and The Coventry Group.             

***  Ms. Armstrong began serving as a Trustee effective February, 2006.         

The officers of the Trust receive no compensation directly from the Trust for   
performing the duties of their offices. BISYS Fund Services Ohio, Inc. ("BISYS  
Ohio") receives fees from the Trust for providing certain administration, fund  
accounting and transfer agency services.                                        

INVESTMENT ADVISER                                                              

Subject to the general supervision of the Trust's Board of Trustees and in      
accordance with the Fund's investment objective and restrictions, investment    
advisory services are provided to each Fund by Fifth Third Asset Management     
Inc., 38 Fountain Square Plaza, Cincinnati, Ohio 45263,                         

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pursuant to an Investment Advisory Agreement dated April 1, 2002 (the           
"Investment Advisory Agreement").                                               

Under the Investment Advisory Agreement, FTAM has agreed to provide, either     
directly or through one or more sub-advisors, investment advisory services for  
each of the Funds as described in the Prospectus and this SAI. Pursuant to an   
Expense Limitation Agreement, FTAM agrees to reduce the fees payable to it      
under the Investment Advisory Agreement (but not below zero) and make any       
additional payments to the extent necessary to limit the operating expenses     
(exclusive of brokerage costs, interest, taxes, dividends, litigation,          
indemnification, and extraordinary expenses (as determined under generally      
accepted accounting principals)) of each Fund to an annual rate (as a           
percentage of the Fund's average daily net assets) as set forth in the          
Prospectus. For the services provided and expenses assumed pursuant to the      
Investment Advisory Agreement, each of the Funds is obligated to pay the        
Adviser a fee, computed daily and paid monthly, at the following annual rates,  
calculated as a percentage of the average daily net assets of such: 0.70% for   
the Quality Growth VIP Fund, 0.80% for the Balanced VIP Fund, 0.80% for the     
Mid Cap VIP Fund, and 0.80% for the Disciplined Value VIP Fund. For the fiscal  
years ended December 31, 2004, December 31, 2005 and December 31, 2006, the     
Quality Growth VIP Fund incurred investment advisory fees equal to $82,845,     
$125,444, and $131,940, respectively, of which $19,268, $3,630 and $52,095,     
respectively, was waived or reimbursed by the Adviser. For the fiscal years     
ended December 31, 2004, December 31, 2005, and December 31, 2006 the Balanced  
VIP Fund incurred investment advisory fees equal to $13,780, $15,719 and        
$16,147, respectively, of which $29,069, $29,272 and $37,357, respectively was  
waived or reimbursed by the Adviser. For the fiscal years ended December 31,    
2004, December 31, 2005 and December 31, 2006, the Mid Cap VIP Fund incurred    
investment advisory fees equal to $79,241, $127,676 and $140,466, of which      
$30,116, $22,330 and $59,990, respectively, was waived or reimbursed by the     
Adviser. For the fiscal years ended December 31, 2004, December 31, 2005 and    
December 31, 2006, the Disciplined Value VIP Fund incurred investment advisory  
fees equal to $80,135, $148,735 and $187,808, respectively of which $28,111,    
$19,441 and $78,879, respectively was waived or reimbursed by the Adviser.      

FTAM has contractually undertaken to limit the Funds' annual operating expenses 
to the indicated levels through April 30, 2009 (expressed as an annual          
percentage of average daily net assets): Quality Growth VIP Fund - 1.00%;       
Balanced VIP Fund - 0.95%; Mid Cap VIP Fund - 1.05%; and Disciplined Value VIP  
Fund - 1.00%.                                                                   

Portfolio Managers. Steven E. Folker and Amy Denn share the responsibility for  
managing the Quality Growth VIP Fund; Martin E. Hargrave and Scott A. Billeadeau
share responsibility for managing the Mid Cap VIP Fund Amy Denn and Jon Fisher  
share responsibility for managing the equity portion of the Balanced VIP Fund   
and Mitchell L. Stapley and John L. Cassady, III, share responsibility for      
managing the fixed-income portion of the Balanced VIP Fund; and James R. Kirk   
and Mary Jane Matts share responsibility for managing the Disciplined Value VIP 
Fund.                                                                           

Other Accounts Managed. Each portfolio manager also has responsibility for the  
day-to-day management of accounts other than the Fund(s) for which he or she    
serves as portfolio manager. As of December 31, 2006, information regarding     
these other accounts is set forth below.                                        

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                                                        [Enlarge/Download Table]

                          OTHER REGISTERED          OTHER POOLED                             
                        INVESTMENT COMPANIES    INVESTMENT VEHICLES        OTHER ACCOUNTS    
                      -----------------------  ---------------------  -----------------------
  Portfolio Manager   Number    Total Assets   Number   Total Assets  Number    Total Assets 
  -----------------   ------   --------------  ------   ------------  ------   --------------
                                                                                             
Steven E. Folker         1     $  723,868,870     1     $ 14,667,074     99    $  794,100,956
Martin E. Hargrave       2     $  522,916,111     1     $  8,917,716     26    $   69,381,634
Scott Billeadeau         2     $  582,135,218     1     $  8,917,716     32    $  104,344,686
Jon Fisher               1     $   76,487,209     0     $          0      9    $   10,551,436
Amy Denn                 2     $  800,356,079     2     $ 16,530,563     97    $  725,020,615
Mitchell L. Stapley      6     $1,211,181,338     2     $123,224,711     85    $1,656,745,399
John L. Cassady, III     4     $  872,375,206     1     $ 32,951,040     82    $1,034,747,792
Mary Jane Matts          1     $  649,580,090     2     $ 33,078,491    170    $  830,302,767
James R. Kirk            2     $1,007,252,518     2     $ 33,078,491   1308    $1,252,381,723

As of December 31, 2006, the indicated portfolio managers managed the following 
numbers of accounts in each of the indicated categories, having the indicated   
total assets in each category, with respect to which the advisory fee is based  
on the performance of the account.                                              

                                                        [Enlarge/Download Table]

                         OTHER REGISTERED         OTHER POOLED                           
                       INVESTMENT COMPANIES   INVESTMENT VEHICLES       OTHER ACCOUNTS   
                      ---------------------  ---------------------  ---------------------
  Portfolio Manager   Number   Total Assets  Number   Total Assets  Number   Total Assets
  -----------------   ------   ------------  ------   ------------  ------   ------------
                                                                                         
Steven E. Folker         0           0          0           0          0                0
Martin E. Hargrave       0           0          0           0          0                0
Scott Billeadeau         0           0          0           0          0                0
Jon Fisher               0           0          0           0          0                0
Amy Denn                 0           0          0           0          0                0
Mitchell L. Stapley      0           0          0           0          0                0
John L. Cassady, III     0           0          0           0          0                0
Mary Jane Matts          0           0          0           0          1      $25,399,094
James R. Kirk            0           0          0           0          1      $25,399,094

CONFLICTS OF INTERESTS                                                          

From time to time, potential conflicts of interest may arise between a portfolio
manager's management of the investments of a Fund on the one hand, and the      
management of other registered investment companies, pooled investment vehicles 
and other accounts (collectively, "other accounts") on the other. The other     
accounts might have similar investment objectives or                            

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strategies as the Fund, track the same indexes the Fund tracks or otherwise     
hold, purchase, or sell securities that are eligible to be held, purchased or   
sold by the Fund. The other accounts might also have different investment       
objectives or strategies than the Fund.                                         

Knowledge and Timing of Fund Trades. A potential conflict of interest may arise 
as a result of the portfolio manager's day-to-day management of a Fund. Because 
of their positions with the Fund, the portfolio managers know the size, timing  
and possible market impact of the Fund's trades. It is theoretically possible   
that the portfolio manager could use this information to the advantage of other 
accounts they manage and to the possible detriment of the Fund.                 

Investment Opportunities A potential conflict of interest may arise as a result 
of the portfolio manager's management of a number of accounts with varying      
investment guidelines. Often, an investment opportunity may be suitable for both
the Fund and other accounts managed by the portfolio manager, but may not be    
available in sufficient quantities for both the Fund and the other accounts to  
participate fully. Similarly, there may be limited opportunity to sell an       
investment held by the Fund and another account. FTAM has adopted policies and  
procedures reasonably designed to allocate investment opportunities on a fair   
and equitable basis over time.                                                  

Compensation. Fifth Third Asset Management, Inc. offers investment professionals
a compensation plan which includes three distinct elements: base compensation,  
investment incentive plan (variable comp), and long-term non-cash incentives    
(stock/option grants).                                                          

The majority of the total cash compensation is derived by the investment        
incentive plan, which could ultimately make up more than half of the investment 
professionals compensation.                                                     

All elements of the plan are formulated on the subjective components of being   
benchmark oriented and a 2/3rd measure for the 3-year result and on a 1/3rd     
measure for the 1-year result.                                                  

The non-cash incentives are particularly focused on the key investment          
professionals. Long-term non-cash incentives are used as a                      
retention/discriminatory tool and based on the dynamics for potential wealth    
creation and vesting parameters facilitates long-term commitment from key       
investment professionals.                                                       

Ownership of Fund Shares. The table below sets forth the amount of shares       
beneficially owned by each portfolio manager in each Fund(s) for which he or she
serves as portfolio manager as of December 31, 2006, stated as one of the       
following dollar ranges: None; $1-$10,000; $10,001-$50,000; $50,001-$100,000;   
$100,001-$500,000; $500,001-$1,000,000; or over $1,000,000.                     

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                                                                [Download Table]

  PORTFOLIO MANAGER    DOLLAR RANGE
  -----------------    ------------
                                   
Steven E. Folker             0     
Martin E. Hargrave           0     
Scott Billeadeau             0     
Amy Denn                     0     
Jon Fisher                   0     
Mitchell L. Stapley          0     
John L. Cassady, III         0     
Mary Jane Matts              0     
James R. Kirk                0     

Unless sooner terminated, the Investment Advisory Agreement continues in effect 
as to a particular Fund for an initial term of up to two years, and thereafter  
for successive one-year periods if such continuance is approved at least        
annually by the Board of Trustees or by vote of a majority of the outstanding   
Shares of such Fund and a majority of the Trustees who are not parties to the   
Investment Advisory Agreement or interested persons (as defined in the 1940 Act)
of any party to the Investment Advisory Agreement by votes cast in person at a  
meeting called for such purpose. The Investment Advisory Agreement is terminable
as to a particular Fund at any time on 60 days' written notice without penalty  
by the Trustees, by vote of a majority of the outstanding Shares of that Fund,  
or by the Adviser. The Investment Advisory Agreement also terminates            
automatically in the event of any assignment, as defined in the 1940 Act.       

The Investment Advisory Agreement provides that the Adviser shall not be liable 
for any error of judgment or mistake of law or for any loss suffered by the     
Trust in connection with the performance of its duties, except a loss resulting 
from a breach of fiduciary duty with respect to the receipt of compensation for 
services or a loss resulting from willful misfeasance, bad faith, or gross      
negligence on the part of the Adviser in the performance of its duties, or from 
reckless disregard of its duties and obligations thereunder.                    

From time to time, advertisements, supplemental sales literature, and           
information furnished to present or prospective Shareholders of the Fund may    
include descriptions of the Adviser including, but not limited to, (i)          
descriptions of the Adviser's operations; (ii) descriptions of certain personnel
and their functions; and (iii) statistics and rankings related to the Adviser's 
operations.                                                                     

The Adviser and certain of its affiliates, have entered into arrangements with  
Jackson National Life Insurance Company and Jackson National Life Distributors, 
Inc. to pay out of their own assets and at no cost to the Funds, amounts in     
connection with services provided to the Funds, including, but not limited to,  
proprietary product development, administrative support, contract owner         
servicing and marketing support. These arrangements may require, among other    
things, the Adviser to give                                                     

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"preferred product" status to all Jackson National Life Insurance Company       
products and may require the Adviser or its affiliates to reimburse Jackson     
National Life Insurance Company for certain marketing-related expenses, if sales
of proprietary variable annuity contracts developed under these arrangements    
fail to meet certain enumerated levels. For services provided and expenses, the 
Adviser is obligated to pay a fee, computed daily and paid quarterly in arrears,
at the rate of 0.20%, calculated as a percentage of the average daily net assets
of each Fund attributable to Jackson National Life Insurance Company contract   
values allocated to the Funds.                                                  

The Adviser may pay, out of its own assets and at no additional cost to the     
Funds, amounts to certain broker-dealers or other financial intermediaries in   
connection with the provision of administrative services and/or with the        
distribution of the Funds' Shares. For the fiscal year ended December 31, 2006, 
the Adviser paid $0 to Hartford Life Insurance Co., broker-dealers and other    
intermediaries out of its own assets for costs associated with these            
administrative and distribution services.                                       

PROXY VOTING POLICIES AND PROCEDURES                                            

The Board of Trustees has adopted proxy voting policies and procedures for the  
Trust ("Trust Proxy Voting Policies and Procedures") with respect to voting     
proxies relating to the portfolio securities held by the Funds. The Board of    
Trustees has delegated the authority to vote proxies related to portfolio       
securities of each of the Funds to the Adviser. Under this authority, the       
Adviser is required to vote proxies related to the portfolio securities in the  
best interests of the Funds. The Trust Proxy Voting Policies and Procedures     
require that the Board of Trustees annually review the policies, procedures and 
other guidelines for voting proxies for the Adviser. The Proxy Voting Policies  
and Procedures also require the Adviser to report annually with respect to all  
proxies it has received for action. With respect to proxies identified as       
involving a conflict of interest, the Adviser will submit a report indicating   
the nature of the conflict and how it was resolved.                             

Under the Trust Proxy Voting Policies and Procedures, the Board of Trustees will
provide the Trust's consent to vote in matters where the Adviser seeks such     
consent because of a conflict of interest that arises in connection with a      
particular vote, or for other reasons.                                          

The Adviser has implemented written Proxy Policies and Procedures that describe 
how the Adviser will vote proxies relating to certain proposals. The Proxy      
Voting Policies and Procedures are designed to reasonably ensure that proxies   
are voted prudently and in the best interest of their advisory clients for whom 
they have voting authority, including the Funds, as appropriate.                

The Adviser has engaged Institutional Shareholders Service (ISS) to administer  
the proxy voting policy. The Adviser's Investment Committee reviews and adopts  
annually the proxy voting recommendations contained in the ISS Proxy Voting     
Guidelines Summary. The Chief Investment Officer of the Adviser must approve any
deviations from these guidelines.                                               

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With respect to any proxy vote made on behalf of the Trust that involves a      
material conflict of interest for the Adviser, the Adviser will refer such proxy
vote to the Special Proxy Voting Committee. The Special Proxy Voting Committee  
is composed exclusively of the independent Trustees of the Board of Trustees of 
the Funds and will conduct its activities according to the Special Proxy Voting 
Committee Charter.                                                              

On matters of corporate governance, generally ISS will vote for proposals to:   
require independent tabulation of proxies and/or confidential voting by         
shareholders; reorganize in another jurisdiction when the economic factors      
outweigh any neutral or negative governance changes; and, with respect to       
shareholder proposals, ask a company to submit its poison pill for shareholder  
ratification.                                                                   

On matters of capital structure, generally ISS will vote: against proposals to  
authorize or issue shares that are senior in priority or voting rights to the   
securities being voted; for proposals to reduce the par value of common stock,  
and for proposals to implement a reverse stock split when the number of         
authorized shares will be proportionately reduced.                              

On matters relating to management compensation, generally ISS will vote: for    
stock incentive plans that provide a dollar-for-dollar cash for stock exchange; 
and against proposals that would permit retirement plans for nonemployee        
directors.                                                                      

On matters relating to corporate transactions, ISS will vote proxies relating to
proposed mergers, capital reorganizations, and similar transactions in          
accordance with the general policy, based upon its analysis of the proposed     
transaction. ISS will vote proxies in contested elections of directors in       
accordance with the general policy, based upon its analysis of the opposing     
slates and their respective proposed business strategies. Some transactions may 
also involve proposed changes to the company's corporate governance, capital    
structure or management compensation. ISS will vote on such changes based on its
evaluation of the proposed transaction or contested election. In these          
circumstances, the Adviser may vote in a manner contrary to the general practice
for similar proposals made outside the context of such a proposed transaction or
change in the board. For example, if ISS decides to vote against a proposed     
transaction, it may vote for anti-takeover measures reasonably designed to      
prevent the transaction, even though ISS typically votes against such measures  
in other contexts.                                                              

Information on how the Funds voted proxies for the twelve month period ended    
June 30 of each year, is available without charge (i) from the Funds, upon      
request by calling 1-800-282-5706; and (2) on the Securities and Exchange       
Commission's website at http://www.sec.gov.                                     

PORTFOLIO TRANSACTIONS                                                          

The Adviser determines, subject to the general supervision of the Board of      
Trustees and in accordance with each Fund's investment objective and            
restrictions, which securities are to be purchased and sold by a Fund, and which
brokers or dealers are to be eligible to execute such Fund's portfolio          
transactions.                                                                   

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Purchases and sales of portfolio securities which are debt securities usually   
are principal transactions in which portfolio securities are normally purchased 
directly from the issuer or from an underwriter or market maker for the         
securities. Purchases from underwriters of portfolio securities generally       
include a commission or concession paid by the issuer to the underwriter, and   
purchases from dealers serving as market makers may include the spread between  
the bid and asked price. Transactions on stock exchanges involve the payment of 
negotiated brokerage commissions. Transactions in the over-the-counter market   
are generally principal transactions with dealers. With respect to the          
over-the-counter market, a Fund, where possible, will deal directly with dealers
who make a market in the securities involved except in those circumstances where
better price and execution are available elsewhere.                             

Unless otherwise directed by the Board of Trustees, allocation of transactions, 
including their frequency, to various brokers and dealers is determined in good 
faith by the Adviser in its best judgment and in a manner deemed fair and       
reasonable to Shareholders. In selecting a broker or dealer, the Adviser        
evaluates wide range of criteria, including the commission rate or dealer       
mark-up, execution capability, the broker's/dealer's positioning and            
distribution capabilities, back office efficiency, ability to handle difficult  
trades, financial stability, reputation, prior performance, and, in the case of 
brokerage commissions, research. The primary consideration is the broker's      
ability to provide "best execution," which is the best overall qualitative      
execution of the Fund's brokerage transactions, so that the total costs or      
proceeds to the Funds are the most favorable under the circumstances. Subject to
this consideration, brokers and dealers who provide supplemental investment     
research to the Adviser may receive orders for transactions on behalf of a Fund.
Research may include brokers' analyses of specific securities, performance and  
technical statistics, and information databases. It may also include maintenance
research, which is the information that keeps the Adviser informed concerning   
overall economic, market, political and legal trends. Under some circumstances, 
the Adviser's evaluation of research and other broker selection criteria may    
result in one or a few brokers executing a substantial percentage of a Fund's   
trades. This might occur, for example, where a broker can provide best execution
at a cost that is reasonable in relation to its services and the broker offers  
unique or superior research facilities, special knowledge or expertise in a     
Fund's relevant markets, or access to proprietary information about companies   
that are a majority of a Fund's investments.                                    

Research information so received is in addition to and not in lieu of services  
required to be performed by the Adviser and does not reduce the fees payable to 
the Adviser by a Fund. Such information may be useful to the Adviser in serving 
both a Fund and other clients and, conversely, supplemental information obtained
by the placement of business of other clients may be useful in carrying out its 
obligations to a Fund. While the Adviser generally seeks competitive            
commissions, a Fund may not necessarily pay the lowest commission available on  
each brokerage transaction for the reasons discussed above.                     

Investment decisions for each Fund are made independently from those for the    
other Funds or any other portfolio, investment company or account managed by the
Adviser. Any such other portfolio, investment company or account may also invest
in the same securities as a Fund. When a purchase or sale of the same security  
is made at substantially the same time on behalf of a Fund                      

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and another portfolio, investment company or account, the transaction will be   
averaged as to price and available investments will be allocated as to amount in
a manner which the Adviser believes to be equitable to the Fund(s) and such     
other portfolio, investment company or account. In some instances, this         
investment procedure may adversely affect the price paid or received by a Fund  
or the size of the position obtained by a Fund. To the extent permitted by law, 
the Adviser may aggregate the securities to be sold or purchased for a Fund with
those to be sold or purchased for the other Funds or for other portfolio,       
investment companies or accounts in order to obtain best execution. In making   
investment recommendations for the Fund, the Adviser will not inquire or take   
into consideration whether an issuer of securities proposed for purchase or sale
by the Fund is a customer of the Adviser or BISYS, their parents or their       
subsidiaries or affiliates and, in dealing with its customers, the Adviser, its 
parents, subsidiaries, and affiliates will not inquire or take into             
consideration whether securities of such customers are held by the Funds.       

For the fiscal years ended December 31, 2004, December 31, 2005, and December   
31, 2006, the Quality Growth VIP Fund paid aggregate brokerage commissions equal
to $27,200, $40,704 and $42,193, respectively. For the fiscal years ended       
December 31, 2004, December 31, 2005 and December 31, 2006, the Balanced VIP    
Fund paid aggregate brokerage commissions equal to $2,659, $2,817 and $2,621,   
respectively. For the fiscal years ended December 31, 2004, December 31, 2005,  
and December 31, 2006, the Mid Cap VIP Fund paid aggregate brokerage commissions
equal to $25,868, $27,376 and $37,151, respectively. For the fiscal years ended 
December 31, 2004, December 31, 2005 and December 31, 2006, the Disciplined     
Value VIP Fund paid aggregate brokerage commissions equal to $15,319, $18,210   
and $28,064.                                                                    

For the fiscal year ended December 31, 2006, the Adviser may have directed      
brokerage transactions to brokers because of research services provided         
("research commission transactions"). For the Quality Growth VIP Fund, $38,487  
of commissions was paid on $28,651,554 of research commission transactions, for 
Balanced VIP Fund, $2,405 commissions was paid on $1,854,128 of research        
commission transactions, for Mid Cap VIP Fund $34,021 of commissions was paid on
$23,841,675 in research commissions transactions, and for Disciplined Value VIP 
Fund $27,908 of commissions was paid on $23,060,718 of research commission      
transactions.                                                                   

FEDERAL BANKING LAW                                                             

The Gramm-Leach-Bliley Act of 1999 repealed certain provisions of the           
Glass-Steagall Act that had previously restricted the ability of banks and their
affiliates to engage in certain mutual fund activities. Nevertheless, the       
Adviser's activities remain subject to, and may be limited by, applicable       
federal banking law and regulations. The Adviser believes that it possesses the 
legal authority to perform the services for the Funds contemplated by the       
Prospectus, this SAI, and the Investment Advisory Agreements without violation  
of applicable statutes and regulations. If future changes in these laws and     
regulations were to limit the ability of the Adviser to perform these services, 
the Board of Trustees would review the Trust's relationship with the Adviser and
consider taking all action necessary in the circumstances, which could include  
recommending to                                                                 

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Shareholders the selection of another qualified adviser or, if that course of   
action appeared impractical, that the Funds be liquidated.                      

ADMINISTRATOR                                                                   

BISYS Fund Services Ohio, Inc. ("BISYS Ohio" or "Administrator"), 3435 Stelzer  
Road, Columbus, Ohio 43219-3035, serves as general manager and administrator to 
the Trust pursuant to a Management and Administration Agreement dated March 1,  
1999 (the "Administration Agreement"). Prior to that date, BISYS served as      
general manager and administrator to the Trust. The Administrator assists in    
supervising all operations of each Fund (other than those performed by the      
Adviser under the Investment Advisory Agreement, by BISYS Ohio as fund          
accountant and dividend disbursing agent, and by the Trust's custodians). The   
Administrator provides financial services to institutional clients.             

Under the Administration Agreement, the Administrator has agreed to maintain    
office facilities for the Trust; furnish statistical and research data, clerical
and certain bookkeeping services and stationery and office supplies; prepare the
periodic reports to the Securities and Exchange Commission on Form N-SAR or any 
replacement forms therefor; compile data for, prepare for execution by the Funds
and file certain federal and state tax returns and required tax filings; prepare
compliance filings pursuant to state laws with the advice of the Trust's        
counsel; keep and maintain the financial accounts and records of the Funds,     
including calculation of daily expense accruals; and generally assist in all    
aspects of the Trust's operations other than those performed by the Adviser     
under the Investment Advisory Agreement, by the other investment advisors of the
Trust's portfolios, by the fund accountant and dividend disbursing agent, and by
the Trust's custodians. Under the Administration Agreement, the Administrator   
may delegate all or any part of its responsibilities thereunder.                

The Administrator receives a fee from each Fund for its services as             
Administrator and expenses assumed pursuant to the Administration Agreement,    
calculated daily and paid periodically, equal to the lesser of (a) a fee        
calculated at the annual rate of 0.045% of each Fund's average daily net assets,
or (b) such other fee as may from time to time be agreed upon by the Trust and  
the Administrator. The Administrator may voluntarily reduce all or a portion of 
its fee with respect to any Fund in order to increase the net income of one or  
more of the Funds available for distribution as dividends. For the fiscal years 
ended December 31, 2004, December 31, 2005 and December 31, 2006, the Quality   
Growth VIP Fund incurred administration fees equal to $5,326, $8,064 and        
$8,482, respectively, of which $3,551, $5,376 and $5,654, respectively, was     
waived or reimbursed by BISYS Ohio. For the fiscal years ended December 31,     
2004, December 31, 2005 and December 31, 2006, the Balanced VIP Fund incurred   
administration fees equal to $775, $884 and $908, respectively,of which $517,   
$589 and $605, respectively, was waived or reimbursed by BISYS Ohio. For fiscal 
years ended December 31, 2004, December 31, 2005 and December 31, 2006, the     
Mid Cap VIP Fund incurred administration fees equal to $4,457, $7,182 and       
$7,901, respectively, of which $2,972, $4,788 and $5,267, respectively, was     
waived or reimbursed by BISYS Ohio. For the fiscal years ended                  
December 31, 2004, December 31, 2005, December 31,                              

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2005, December 31, 2006 the Disciplined Value VIP Fund incurred administration  
fees equal to $4,508, $8,367 and $10,564, respectively, of which $3,005,        
$5,577 and $7,043, respectively, was waived or reimbursed by BISYS Ohio.        

The Administration Agreement is terminable with respect to a particular Fund    
upon mutual agreement of the parties to the Administration Agreement, upon      
notice given at least 60 days prior to the expiration of the Agreement's        
then-current term, and for cause (as defined in the Administration Agreement) by
the party alleging cause, on no less than 60 days' written notice by the Board  
of Trustees or by the Administrator.                                            

The Administration Agreement provides that the Administrator shall not be liable
for any error of judgment or mistake of law or any loss suffered by the Trust in
connection with the matters to which the Administration Agreement relates,      
except a loss resulting from willful misfeasance, bad faith, or gross negligence
in the performance of its duties, or from the reckless disregard by the         
Administrator of its obligations and duties thereunder.                         

EXPENSES                                                                        

The Adviser and the Administrator each bears all expenses in connection with the
performance of its services other than the cost of securities (including        
brokerage commissions) purchased for the Funds. The Funds will bear the         
following expenses relating to their operations: taxes, interest, fees of the   
Trustees of the Trust, Securities and Exchange Commission fees, outside auditing
and legal expenses, advisory and administration fees, fees and out-of-pocket    
expenses of the custodian and fund accountant, certain insurance premiums, costs
of maintenance of the Trust's existence, costs of Shareholders' reports and     
meetings, and any extraordinary expenses incurred in the Funds' operations. Any 
expense reimbursements will be estimated daily and reconciled and paid on a     
monthly basis. Fees imposed upon customer accounts for cash management services 
are not included within Trust expenses for purposes of any such expense         
limitation.                                                                     

DISTRIBUTOR                                                                     

BISYS serves as distributor to the Trust pursuant to the Distribution Agreement 
dated June 1, 1997 (the "Distribution Agreement"). As a distributor, BISYS acts 
as agent for the Funds in the distribution of their Shares and, in such         
capacity, advertises and pays the cost of advertising, office space and         
personnel involved in such activities. BISYS serves as distributor without      
remuneration from the Funds. Unless otherwise terminated, the Distribution      
Agreement continues for successive one-year periods if approved at least        
annually (i) by the Board of Trustees or by the vote of a majority of the       
outstanding Shares of the Trust, and (ii) by the vote of a majority of the      
Trustees who are not parties to the Distribution Agreement or interested persons
(as defined in the 1940 Act) of any party to the Distribution Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The      
Distribution Agreement automatically terminates in the event of any assignment, 
as defined in the 1940 Act.                                                     

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CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTING SERVICES                          

Fifth Third Bank has been retained, pursuant to a Custodian Agreement, to act as
custodian for the Funds. Fifth Third Bank's address is 38 Fountain Square Plaza,
Cincinnati, Ohio 45263. Under the Custodian Agreement, the Custodian maintains a
custody account or accounts in the name of each Fund; receives and delivers all 
assets for each Fund upon purchase and upon sale or maturity; collects and      
receives all income and other payments and distributions on account of the      
assets of each Fund; pays all expenses of each Fund; and receives and pays out  
cash for purchases and redemptions of shares of each Fund and pays out cash if  
requested for dividends on shares of each Fund. Under the Custodian Agreement,  
each Fund has agreed to pay the Custodian for furnishing custodian services a   
fee for certain administration and transaction charges and out-of-pocket        
expenses.                                                                       

BISYS Ohio serves as transfer agent and dividend disbursing agent for the Trust 
pursuant to an agreement dated as of March 1, 1999. Under this agreement, BISYS 
Ohio performs the following services, among others: maintenance of Shareholder  
records for each of the Trust's Shareholders of record; processing Shareholder  
purchase and redemption orders; processing transfers and exchanges of Shares on 
the Shareholder files and records; processing dividend payments and             
reinvestments; and assistance in the mailing of Shareholder reports and proxy   
solicitation materials.                                                         

In addition, BISYS Ohio provides certain fund accounting services to the Trust  
pursuant to a Fund Accounting Agreement dated March 1, 1999. Under the Fund     
Accounting Agreement, BISYS Ohio maintains the accounting books and records for 
the Funds, including journals containing an itemized daily record of all        
purchases and sales of portfolio securities, all receipts and disbursements of  
cash and all other debits and credits, general and auxiliary ledgers reflecting 
all asset, liability, reserve, capital, income and expense accounts, including  
interest accrued and interest received, and other required separate ledger      
accounts; maintains a monthly trial balance of all ledger accounts; performs    
certain accounting services for the Funds, including calculation of the daily   
net asset value per Share, calculation of the dividend and capital gain         
distributions, if any, and of yield, reconciliation of cash movements with the  
custodian, affirmation to the custodian of portfolio trades and cash            
settlements, verification and reconciliation with the custodian of daily trade  
activity; provides certain reports; obtains dealer quotations, prices from a    
pricing service or matrix prices on all portfolio securities in order to mark   
the portfolio to the market; and prepares an interim balance sheet, statement of
income and expense, and statement of changes in net assets for the Funds.       

BISYS Ohio receives an annual fee per Variable Contract Owner account, subject  
to certain base fees, for its services as transfer agent and, for its services  
as fund accountant, BISYS Ohio receives a fee, computed daily and paid          
periodically, at an annual rate equal to the greater of 0.03% of the Fund's     
average daily net assets or $30,000.                                            

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                   

The firm of PricewaterhouseCoopers LLP, 100 East Broad Street, Suite 2100,      
Columbus, OH, serves as independent registered public accounting firm for the   
Funds. Its services comprise                                                    

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auditing the Funds' financial statements and advising the Funds as to certain   
accounting and tax matters.                                                     

LEGAL COUNSEL                                                                   

Thompson Hine LLP, 10 West Broad Street, Colombus, Ohio 43215-3435, is counsel  
to the Trust and has passed upon the legality of the Shares offered hereby.     

CODES OF ETHICS                                                                 

The Trust, the Adviser, and BISYS each have adopted a code of ethics, under Rule
17j-1 of the Investment Company Act of 1940, which is designed to prevent       
affiliated persons of the Trust, the Adviser, and BISYS from engaging in        
deceptive, manipulative, or fraudulent activities in connection with securities 
held or to be acquired by the Funds (which may also be held by persons subject  
to a code of ethics). There can be no assurance that the codes will be effective
in preventing such activities.                                                  

ADDITIONAL INFORMATION

DESCRIPTION OF SHARES                                                           

The Trust is a Massachusetts business trust that was organized on July 20, 1994.
Prior to the date of this SAI, the Trust was named "Variable Insurance Funds."  
The Trust's Declaration of Trust was filed with the Secretary of State of the   
Commonwealth of Massachusetts on the same date. The Declaration of Trust, as    
amended and restated, authorizes the Board of Trustees to issue an unlimited    
number of Shares, which are units of beneficial interest, without par value. The
Trust currently has multiple series of Shares which represent interests in each 
series of the Trust. The Trust's Declaration of Trust authorizes the Board of   
Trustees to divide or redivide any unissued Shares of the Trust into one or more
additional series or classes by setting or changing in any one or more respects 
their respective preferences, conversion or other rights, voting power,         
restrictions, limitations as to dividends, qualifications, and terms and        
conditions of redemption.                                                       

Shares have no subscription or preemptive rights and only such conversion or    
exchange rights as the Board of Trustees may grant in its discretion. When      
issued for payment as described in the Prospectus and this SAI, the Trust's     
Shares will be fully paid and non-assessable by the Trust. In the event of a    
liquidation or dissolution of the Trust, Shareholders of a Fund are entitled to 
receive the assets available for distribution belonging to that Fund, and a     
proportionate distribution, based upon the relative asset values of the         
respective series, of any general assets not belonging to any particular series 
which are available for distribution.                                           

Each Share represents an equal proportionate interest in the Fund with other    
Shares of the Fund, and is entitled to such dividends and distributions out of  
the income earned on the assets belonging to the Fund as are declared at the    
discretion of the Trustees. Shares are without par value. Shareholders are      
entitled to one vote for each dollar of value invested and a proportionate      

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fractional vote for any fraction of a dollar invested. Shareholders will vote in
the aggregate and not by portfolio except as otherwise expressly required by    
law.                                                                            

An annual or special meeting of Shareholders to conduct necessary business is   
not required by the Trust's Declaration of Trust, the 1940 Act or other         
authority except, under certain circumstances, to elect Trustees, amend the     
Declaration of Trust, approve an investment advisory agreement and to satisfy   
certain other requirements. To the extent that such a meeting is not required,  
the Trust may elect not to have an annual or special meeting.                   

The Trust will call a special meeting of Shareholders for purposes of           
considering the removal of one or more Trustees upon written request therefor   
from Shareholders holding not less than 10% of the outstanding votes of the     
Trust. At such a meeting, a quorum of Shareholders (constituting a majority of  
votes attributable to all outstanding Shares of the Trust), by majority vote,   
has the power to remove one or more Trustees. In accordance with current laws,  
it is anticipated that an insurance company issuing a variable contract that    
participates in the Fund will request voting instructions from variable contract
owners and will vote shares or other voting interests in the separate account in
proportion of the voting instructions received.                                 

Rule 18f-2 under the 1940 Act provides that any matter required to be submitted 
to the holders of the outstanding voting securities of an investment company    
such as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding Shares of each Fund    
affected by the matter. For purposes of determining whether the approval of a   
majority of the outstanding Shares of a Fund will be required in connection with
a matter, a Fund will be deemed to be affected by a matter unless it is clear   
that the interests of each Fund in the matter are identical, or that the matter 
does not affect any interest of the Fund. Under Rule 18f-2, the approval of an  
investment advisory agreement or any change in investment policy submitted to   
Shareholders would be effectively acted upon with respect to a series only if   
approved by a majority of the outstanding Shares of such Fund. However, Rule    
18f-2 also provides that the ratification of independent public accountants, the
approval of principal underwriting contracts, and the election of Trustees may  
be effectively acted upon by Shareholders of the Trust voting without regard to 
Fund.                                                                           

VOTE OF A MAJORITY OF THE OUTSTANDING SHARES                                    

As used in the Funds' Prospectus and the SAI, "vote of a majority of the        
outstanding Shares of the Trust or the Fund" means the affirmative vote, at an  
annual or special meeting of Shareholders duly called, of the lesser of (a) 67% 
or more of the votes of Shareholders of the Trust or the Fund present at such   
meeting at which the holders of more than 50% of the votes attributable to the  
Shareholders of record of the Trust or the Fund are represented in person or by 
proxy, or (b) the holders of more than 50% of the outstanding votes of          
Shareholders of the Trust or the Fund.                                          

PRINCIPAL SHAREHOLDERS                                                          

As of April 1, 2007, the Hartford Life Insurance Company at P.O. Box 2999       
Hartford, CT 06104 beneficially owned 62% and Jackson National Life Insurance   
Company at 1 Corporation Way, Lansing, MI 48951 beneficially owned 38% of the   
outstanding Shares of the Balanced VIP Fund, 68% and 32%,                       

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respectively of the outstanding Shares of the Disciplined Value VIP Fund, 78%   
and 22%, respectively of the outstanding Shares of the Mid Cap VIP Fund, and    
65% and 35%, respectively of the outstanding Shares of the Quality Growth       
VIP Fund and thus may be deemed to be able to control the outcome of any matter 
submitted to a vote of the Shareholders of these Funds.                         

SHAREHOLDER AND TRUSTEE LIABILITY                                               

Under Massachusetts law, holders of units of interest in a business trust may,  
under certain circumstances, be held personally liable as partners for the      
obligations of the trust. However, the Trust's Declaration of Trust provides    
that Shareholders shall not be subject to any personal liability for the        
obligations of the Trust. The Declaration of Trust provides for indemnification 
out of the trust property of any Shareholder held personally liable solely by   
reason of his or her being or having been a Shareholder. The Declaration of     
Trust also provides that the Trust shall, upon request, reimburse any           
Shareholder for all legal and other expenses reasonably incurred in the defense 
of any claim made against the Shareholder for any act or obligation of the      
Trust, and shall satisfy any judgment thereon. Thus, the risk of a Shareholder  
incurring financial loss on account of Shareholder liability is limited to      
circumstances in which the Trust itself would be unable to meet its obligations.

The Declaration of Trust states further that no Trustee, officer, or agent of   
the Trust shall be personally liable in connection with the administration or   
preservation of the assets of the Trust or the conduct of the Trust's business; 
nor shall any Trustee, officer, or agent be personally liable to any person for 
any action or failure to act except for his own bad faith, willful misfeasance, 
gross negligence, or reckless disregard of his duties. The Declaration of Trust 
also provides that all persons having any claim against the Trustees or the     
Trust shall look solely to the assets of the Trust for payment.                 

ADDITIONAL TAX INFORMATION                                                      

The following discussion summarizes certain U.S. federal tax considerations     
concerning an investment in a Fund. This discussion does not purport to be      
complete or to deal with all aspects of federal income taxation that may be     
relevant. This discussion is based upon the provisions of the Internal Revenue  
Code of 1986, as amended (the "Code"), the regulations promulgated thereunder,  
and judicial and administrative ruling authorities, all of which are subject to 
change, which change may be retroactive. Prospective investors should consult   
their own tax advisors with regard to the federal, state, local and foreign tax 
aspects of an investment in a Fund.                                             

Each Fund intends to qualify annually and has elected to be treated as a        
regulated investment company under Subchapter M of the Code. If a Fund so       
qualifies, it generally will not be subject to federal income taxes to the      
extent that it distributes on a timely basis its investment company taxable     
income and its net capital gains.                                               

To qualify to be taxed as a regulated investment company, each Fund generally   
must, among other things: (i) derive in each taxable year at least 90% of its   
gross income from dividends, interest,                                          

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payments with respect to securities loans, and gains from the sale or other     
disposition of stock, securities or foreign currencies, net income derived from 
an interest in a qualified publicly traded partnership or other income derived  
with respect to its business in such stock, securities or currencies; (ii)      
diversify its holdings so that, at the end of each quarter of the taxable year  
(a) at least 50% of the market value of the Fund's assets is represented by     
cash, U.S. Government securities, the securities of other regulated investment  
companies and other securities, with such other securities of any one issuer    
limited for the purposes of this calculation to an amount not greater than 5% of
the value of the Fund's total assets and 10% of the outstanding voting          
securities of such issuer, and (b) not more than 25% of the value of its total  
assets is invested in the securities of any one issuer (other than U.S.         
Government securities or the securities of other regulated investment           
companies), of two or more issuers which the Fund controls and which are        
determined to be engaged in the same or similar trades or businesses, or of one 
or more qualified publicly traded partnerships; and (iii) distribute at least   
90% of its investment company taxable income (which includes, among other items,
dividends, interest, and net short-term capital gains in excess of any net      
long-term capital losses) each taxable year.                                    

As a regulated investment company, each Fund generally will not be subject to   
U.S. federal income tax on its investment company taxable income and net capital
gains (any net long-term capital gains in excess of the sum of net short-term   
capital losses and capital loss carryovers from prior years), if any, that it   
distributes to Shareholders. Each Fund intends to distribute to its             
Shareholders, at least annually, all or substantially all of its investment     
company taxable income and any net capital gains. In addition, amounts not      
distributed by a Fund on a timely basis in accordance with a calendar year      
distribution requirement may be subject to a nondeductible 4% excise tax. To    
avoid the tax, each Fund may be required to distribute (or be deemed to have    
distributed) during each calendar year, (i) at least 98% of its ordinary income 
(not taking into account any capital gains or losses) for the calendar year,    
(ii) at least 98% of its capital gains in excess of its capital losses for the  
twelve month period ending on October 31 of the calendar year (adjusted for     
certain ordinary losses), and (iii) all ordinary income and capital gains for   
previous years that were not distributed during such years. The excise tax      
generally does not apply to any regulated investment company whose shareholders 
are solely either tax-exempt pension trusts or separate accounts of life        
insurance companies funding variable contracts. Although the Funds believe they 
are not subject to the excise tax, each Fund intends to make its distributions  
in accordance with the calendar year distribution requirement.                  

Each Fund also intends to comply with the separate diversification requirements 
imposed by Section 817(h) of the Code and the regulations thereunder on certain 
insurance company separate accounts. These requirements, which are in addition  
to the diversification requirements imposed on a Fund by the 1940 Act and       
Subchapter M of the Code, place certain limitations on assets of each insurance 
company separate account used to fund variable contracts. Because Section 817(h)
and those regulations treat the assets of a Fund as assets of the related       
separate account, these regulations are imposed on the assets of a Fund.        
Specifically, the regulations provide that, after a one year start-up period or 
except as permitted by the "safe harbor" described below, as of the end of each 
calendar quarter or within 30 days thereafter no more than 55% of the total     
assets of a Fund may be represented by any one investment, no more than 70% by  
any two investments, no more                                                    

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than 80% by any three investments and no more than 90% by any four investments. 
For this purpose, all securities of the same issuer are considered a single     
investment, and each U.S. Government agency and instrumentality is considered a 
separate issuer.                                                                

Section 817(h) provides, as a safe harbor, that a separate account will be      
treated as being adequately diversified if the diversification requirements     
under Subchapter M are satisfied and no more than 55% of the value of the       
account's total assets is attributable to cash and cash items (including        
receivables), U.S. Government securities and securities of other regulated      
investment companies. Failure by a Fund to both qualify as a regulated          
investment company and satisfy the Section 817(h) requirements would generally  
cause the variable contracts to lose their favorable tax status and require a   
contract holder to include in ordinary income any income accrued under the      
contracts for the current and all prior taxable years. Under certain            
circumstances described in the applicable Treasury regulations, inadvertent     
failure to satisfy the applicable diversification requirements may be corrected,
but such a correction would require a payment to the Internal Revenue Service   
based on the tax contract holders would have incurred if they were treated as   
receiving the income on the contract for the period during which the            
diversification requirements were not satisfied. Any such failure may also      
result in adverse tax consequences for the insurance company issuing the        
contracts. Failure by a Fund to qualify as a regulated investment company would 
also subject a Fund to federal and state income taxation on all of its taxable  
income and gain, whether or not distributed to shareholders.                    

For purposes of these diversification tests, a segregated asset account         
investing in shares of a regulated investment company will be entitled to "look 
through" the regulated investment company to its pro rata portion of the        
regulated investment company's assets, provided that the shares of such         
regulated investment company are generally held only by segregated asset        
accounts of insurance companies and certain fund managers in connection with the
creation or management of the Fund (a "Closed Fund").                           

If the segregated asset account upon which a variable contract is based is not  
"adequately diversified" under the foregoing rules for each calendar quarter,   
then (a) the variable contract is not treated as a life insurance contract or   
annuity contract under the Code for all subsequent periods during which such    
account is not "adequately diversified" and (b) the holders of such contract    
must include as ordinary income, "the income on the contract" for each taxable  
year. Further, the income on a life insurance contract for all prior taxable    
years is treated as received or accrued during the taxable year of the          
policyholder in which the contract ceases to meet the definition of a "life     
insurance contract" under the Code. The "income on the contract" is, generally  
the excess of (i) the sum of the increase in the net surrender value of the     
contract during the taxable year and the cost of the life insurance protection  
provided under the contract during the year, over (ii) the premiums paid under  
the contract during the taxable year. In addition, if a Fund does not constitute
a Closed Fund, the holders of the contracts and annuities which invest in the   
Fund through a segregated asset account may be treated as owners of Portfolio   
shares and may be subject to tax on distributions made by the Fund.             

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The Treasury Department has issued and has announced that it will issue further 
regulations or rulings addressing the circumstances in which a variable contract
owner's control of the investments of the separate account may cause the        
contract owner, rather than the insurance company, to be treated as the owner of
the assets held by the separate account. If the contract owner is considered the
owner of the securities underlying the separate account, income and gains       
produced by those securities would be included currently in the contract owner's
gross income. It is not known what standards will be set forth in any future    
regulations or rulings.                                                         

In the event that any future rules or regulations are adopted, there can be no  
assurance that a given Fund will be able to operate as currently described, or  
that the Trust will not have to change a Fund's investment objective or         
investment policies. A Fund's investment objective and the investment policies  
of a Fund may be modified as necessary to prevent any such prospective rules and
regulations from causing Variable Contract Owners to be considered the owners of
the Shares of the Fund.                                                         

If a Fund invests in shares of a passive foreign investment company, the Fund   
may be subject to U.S. federal income tax on a portion of an "excess            
distribution" from, or of the gain from the sale of part or all of the shares   
in, such company. In addition, an interest charge may be imposed with respect to
deferred taxes arising from such distributions or gains. A Fund may, however, be
able to elect alternative tax treatment for such investments that would avoid   
this unfavorable result.                                                        

Under the Code, gains or losses attributable to fluctuations in foreign currency
exchange rates which occur between the time a Fund accrues income or other      
receivables or accrues expenses or other liabilities denominated in a foreign   
currency and the time that Fund actually collects such receivables or pays such 
liabilities generally are treated as ordinary income or ordinary loss.          
Similarly, on disposition of debt securities denominated in a foreign currency  
and on disposition of certain futures contracts, forward contracts, and options,
gains or losses attributable to fluctuations in the value of foreign currency   
between the date of acquisition of the security or contract and the date of     
disposition also are treated as ordinary gain or loss. These gains or losses,   
referred to under the Code as "Section 988" gains or losses, may increase or    
decrease the amount of a Fund's investment company taxable income to be         
distributed to its Shareholders.                                                

Hedging Transactions                                                            

The diversification requirements applicable to each Fund's assets may limit the 
extent to which a Fund will be able to engage in transactions in options,       
futures contracts, or forward contracts.                                        

Other Taxes                                                                     

Distributions may also be subject to additional state, foreign and local taxes, 
depending on each Shareholder's situation. Shareholders (such as Separate       
Accounts) are advised to consult their own tax advisers with respect to the     
particular tax consequences to them of an investment in a Fund.                 

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PERFORMANCE INFORMATION                                                         

Each Fund may, from time to time, include its yield or total return in          
advertisements or reports to Shareholders or prospective investors. Performance 
information for the Funds will not be advertised or included in sales literature
unless accompanied by comparable performance information for a separate account 
to which the Funds offer their Shares.                                          

Yields of the Funds are computed by analyzing net investment income per Share   
for a recent 30-day period and dividing that amount by a Share's maximum        
offering price (reduced by any undeclared earned income expected to be paid     
shortly as a dividend) on the last trading day of that period. Net investment   
income will reflect amortization of any market value premium or discount of     
fixed income securities (except for obligations backed by mortgages or other    
assets) and may include recognition of a pro rata portion of the stated dividend
rate of dividend paying portfolio securities. The yield of each Fund will vary  
from time to time depending upon market conditions, the composition of the      
Fund's portfolio and operating expenses of the Trust allocated to a Fund. Yield 
should also be considered relative to changes in the value of a Fund's Shares   
and to the relative risks associated with the investment objective and policies 
of the Funds.                                                                   

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

Standardized quotations of average annual total return for Fund Shares will be  
expressed in terms of the average annual compounded rate of return for a        
hypothetical investment in Shares over periods of 1, 5 and 10 years or up to the
life of the Fund), calculated pursuant to the following formula: P(1 + T)(n) =  
ERV (where P = a hypothetical initial payment of $1,000, T = the average annual 
total return, n = the number of years, and ERV = the ending redeemable value of 
a hypothetical $1,000 payment made at the beginning of the period). All totals  
return figures reflect the deduction of expenses (on an annual basis), and      
assume that all dividends and distributions on Shares are reinvested when paid. 

Performance information for the Funds may be compared in reports and promotional
literature to the performance of other mutual funds with comparable investment  
objectives and policies through various mutual fund or market indices such as   
those prepared by Dow Jones & Co., Inc., S&P, Lehman Brothers, Inc., the Russell
2000 Index, the Russell Midcap Growth Index, the Consumer Price Index, and to   
data prepared by Lipper Analytical Services, Inc., a widely recognized          
independent service which monitors the performance of mutual funds, or          
Morningstar, Inc. Comparisons may also be made to indices or data published in  
Money Magazine, Forbes, Barron's, The Wall Street Journal, The Bond Buyer's     
Weekly 20-Bond Index, The Bond Buyer's Index, The Bond Buyer, The New York      
Times, Business Week, Pensions and Investments, and U.S.A. Today. In addition to
performance information, general information about the Funds that appears in a  
publication such as those mentioned above may be included in advertisements and 
in reports to Variable Contract Owners.                                         

Each Fund may also compute aggregate total return for specified periods. The    
aggregate total return is determined by dividing the net asset value of this    
account at the end of the specified period by the value of the initial          
investment and is expressed as a percentage. Calculation of                     

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aggregate total return assumes reinvestment of all income dividends and capital 
gain distributions during the period.                                           

The Funds also may quote annual, average annual and annualized total return and 
aggregate total return performance data for various periods other than those    
noted above. Such data will be computed as described above, except that the     
rates of return calculated will not be average annual rates, but rather, actual 
annual, annualized or aggregate rates of return.                                

Quotations of yield or total return for the Funds will not take into account    
charges and deductions against a Separate Account to which the Funds' Shares are
sold or charges and deductions against the Variable Contracts. The Funds' yield 
and total return should not be compared with mutual funds that sell their shares
directly to the public since the figures provided do not reflect charges against
the Separate Accounts or the Variable Contracts. Performance information for any
Fund reflects only the performance of a hypothetical investment in the Fund     
during the particular time period in which the calculations are based.          
Performance information should be considered in light of the Funds' investment  
objectives and policies, characteristics and quality of the portfolios and the  
market conditions during the given time period, and should not be considered as 
a representation of what may be achieved in the future.                         

MISCELLANEOUS                                                                   

Individual Trustees are elected by the Shareholders and, subject to removal by  
the vote of two-thirds of the Board of Trustees, serve for a term lasting until 
the next meeting of Shareholders at which Trustees are elected. Such meetings   
are not required to be held at any specific intervals. Individual Trustees may  
be removed by vote of the Shareholders voting not less than a majority of the   
Shares then outstanding, cast in person or by proxy at any meeting called for   
that purpose, or by a written declaration signed by Shareholders voting not less
than two-thirds of the Shares then outstanding. In accordance with current laws,
it is anticipated that an insurance company issuing a Variable Contract that    
participates in the Funds will request voting instructions from variable        
contract owners and will vote shares or other voting interests in the Separate  
Account in proportion of the voting instructions received.                      

The Trust is registered with the Securities and Exchange Commission as a        
management investment company. Such registration does not involve supervision by
the Securities and Exchange Commission of the management or policies of the     
Trust.                                                                          

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

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

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FINANCIAL STATEMENTS

Financial statements for the Trust with respect to the Quality Growth VIP Fund, 
Balanced VIP Fund, Mid Cap VIP Fund, and Disciplined Value VIP Fund as of       
December 31, 2006 for its fiscal years then ended, including notes thereto and  
the report of PricewaterhouseCoopers LLP thereon dated February 22, 2007, are   
incorporated by reference from the Trust's 2006 Annual Reports filed on Form    
N-CSR. A copy of the reports delivered with this SAI should be retained for     
future reference.                                                               

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APPENDIX

 DESCRIPTION OF BOND RATINGS

DESCRIPTION OF MOODY'S BOND RATINGS:                                            

Excerpts from Moody's description of its bond ratings are listed as   
follows: Aaa - judged to be the best quality and they carry the smallest degree 
of investment risk; Aa - judged to be of high quality by all standards -        
together with the Aaa group, they comprise what are generally known as          
high-grade bonds; A - possess many favorable investment attributes and are to be
considered as "upper medium grade obligations"; Baa - considered to be medium   
grade obligations, i.e., they are neither highly protected nor poorly secured   
-interest payments and principal security appear adequate for the present but   
certain protective elements may be lacking or may be characteristically         
unreliable over any great length of time; Ba - judged to have speculative       
elements, their future cannot be considered as well assured; B - generally lack 
characteristics of the desirable investment; Caa - are of poor standing - such  
issues may be in default or there may be present elements of danger with respect
to principal or interest; Ca - speculative in a high degree, often in default; C
- lowest rated class of bonds, regarded as having extremely poor prospects.     

     Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating   
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.                                 

DESCRIPTION OF S&P'S BOND RATINGS:                                              

    Excerpts from S&P's description of its bond ratings are listed as follows:
AAA - highest grade obligations, in which capacity to pay interest and repay    
principal is extremely strong; AA - has a very strong capacity to pay interest  
and repay principal, and differs from AAA issues only in a small degree; A - has
a strong capacity to pay interest and repay principal, although they are        
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories; BBB - regarded as     
having an adequate capacity to pay interest and repay principal; whereas it     
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay    
interest and repay principal for debt in this category than in higher rated     
categories. This group is the lowest which qualifies for commercial bank        
investment. BB, B, CCC, CC, C - predominantly speculative with respect to       
capacity to pay interest and repay principal in accordance with terms of the    
obligations; BB indicates the highest grade and C the lowest within the         
speculative rating categories. D - interest or principal payments are in        
default.                                                                        

     S&P applies indicators "+," no character, and "-" to its rating categories.
The indicators show relative standing within the major rating categories.       

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DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:                                

     Excerpts from Moody's commercial paper ratings are listed as follows: PRIME
- 1 - issuers (or supporting institutions) have a superior ability for repayment
of senior short-term promissory obligations; PRIME - 2 - issuers (or supporting 
institutions) have a strong ability for repayment of senior short-term          
promissory obligations; PRIME - 3 - issuers (or supporting institutions) have an
acceptable ability for repayment of senior short-term promissory obligations;   
NOT PRIME - issuers do not fall within any of the Prime categories.             

DESCRIPTION OF S&P'S RATINGS FOR CORPORATE AND MUNICIPAL BONDS:                 

INVESTMENT GRADE RATINGS: AAA - the highest rating assigned by S&P,   
capacity to pay interest and repay principal is extremely strong; AA - has a    
very strong capacity to pay interest and repay principal and differs from the   
highest rated issues only in a small degree; A - has strong capacity to pay     
interest and repay principal although it is somewhat more susceptible to the    
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories; BBB - regarded as having an adequate capacity to pay   
interest and repay principal - whereas it normally exhibits adequate protection 
parameters, adverse economic conditions or changing circumstances are more      
likely to lead to a weakened capacity to pay interest and repay principal for   
debt in this category than in higher rated categories.                          

SPECULATIVE GRADE RATINGS: BB, B, CCC, CC, C - debt rated in these    
categories is regarded as having predominantly speculative characteristics with 
respect to capacity to pay interest and repay principal - while such debt will  
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; CI - reserved
for income bonds on which no interest is being paid; D -in default, and payment 
of interest and/or repayment of principal is in arrears. PLUS (+) OR MINUS (-) -
the ratings from "AA" to "CCC" may be modified by the addition of a plus or     
minus sign to show relative standing within the major rating categories.        

DESCRIPTION OF S&P'S RATINGS FOR SHORT-TERM CORPORATE DEMAND OBLIGATIONS AND    
COMMERCIAL PAPER:                                                               

     An S&P commercial paper rating is a current assessment of the likelihood of
timely repayment of debt having an original maturity of no more than 365 days.  
Excerpts from S&P's description of its commercial paper ratings are listed as   
follows: A-1 - the degree of safety regarding timely payment is strong - those  
issues determined to possess extremely strong safety characteristics will be    
denoted with a plus (+) designation; A-2 - capacity for timely payment is       
satisfactory - however, the relative degree of safety is not as high as for     
issues designated "A-1;" A-3 - has adequate capacity for timely payment -       
however, is more vulnerable to the adverse effects of changes in circumstances  
than obligations carrying the higher designations; B - regarded as having only  
speculative capacity for timely payment; C - a doubtful capacity for payment; D 
- in payment default - the "D" rating category is used when interest payments or
principal payments are not made on the date due, even if the applicable grace   
period has not expired, unless S&P believes that such payments will be made     
during such grace period.                                                       

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 FREE ENTERPRISE ACTION FUND

P.O. Box 182490 
 Columbus, OH 43218-2490

1-800-766-3960

 STATEMENT OF ADDITIONAL INFORMATION

 May 1, 2007

This Statement of Additional Information ("SAI") describes an investment        
portfolio (the "Fund") of The Coventry Funds Trust (the "Trust"). The Fund is:  

-     Free Enterprise Action Fund                                   

The Trust offers an indefinite number of transferable shares ("Shares") of the  
Fund.                                                                           

This SAI is not a Prospectus and is authorized for distribution only when       
preceded or accompanied by a Prospectus of the Fund, dated May 1, 2007 as       
supplemented from time to time. This SAI contains more detailed information than
that set forth in a Prospectus and should be read in conjunction with the       
Prospectus. This SAI incorporates the Fund's financial statements and related   
notes and auditors reports from the Fund's annual report for the fiscal year    
ended December 31, 2006, and is incorporated in its entirety into the           
Prospectus. Copies of the Prospectus may be obtained by writing the Free        
Enterprise Action Fund at P.O. Box 182490, Columbus, Ohio 43218-2490, or by     
telephoning the toll free number set forth above.                               

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The Prospectus describes the investment objective and certain investment        
policies and restrictions applicable to the Fund. The following is additional   
information for your consideration.                                             

 TABLE OF CONTENTS

                                                        [Enlarge/Download Table]
                                                                                               
INVESTMENT OBJECTIVES AND POLICIES.........................................................  1 
Additional Information on Portfolio Instruments............................................  1 
Bank Obligations...........................................................................  1 
Commercial Paper...........................................................................  1 
Insurance Company Funding Agreements.......................................................  2 
Variable Amount Master Demand Notes........................................................  2 
Variable and Floating Rate Notes and Bonds.................................................  2 
Short-Term Obligations.....................................................................  3 
Short-Term Trading.........................................................................  3 
Foreign Investments........................................................................  3 
Investment Companies.......................................................................  5 
U.S. Government Obligations................................................................  5 
Supranational Organizational Obligations...................................................  6 
Options Trading............................................................................  6 
When-Issued and Delayed-Delivery Securities................................................  8 
Mortgage-Related and Asset-Backed Securities...............................................  8 
Real Estate Investment Trusts.............................................................. 10 
Restricted Securities...................................................................... 10 
Lending of Portfolio Securities............................................................ 11 
Convertible Securities..................................................................... 11 
Corporate Debt Securities.................................................................. 12 
High Yield Securities...................................................................... 13 
Repurchase Agreements...................................................................... 14 
Reverse Repurchase Agreements and Dollar Roll Agreements................................... 14 
Futures Contracts.......................................................................... 14 
Foreign Currency Transactions.............................................................. 15 
Foreign Currency Options................................................................... 16 
Foreign Currency Futures Transactions...................................................... 16 

INVESTMENT RESTRICTIONS.................................................................... 17 
Disclosure of Portfolio Holdings........................................................... 18 
Portfolio Turnover......................................................................... 19 

NET ASSET VALUE............................................................................ 19 
Valuation of the Fund...................................................................... 19 

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................................. 20 

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TABLE OF CONTENTS 
(continued) 

                                                        [Enlarge/Download Table]

                                                                                            PAGE
                                                                                                
MANAGEMENT OF THE TRUST....................................................................  21 
Management Information.....................................................................  21 
Board of Trustees..........................................................................  23 
Trustee Compensation.......................................................................  25 
Investment Adviser.........................................................................  26 
Board Consideration of Advisory Arrangements...............................................  28 
Proxy Voting Policies and Procedures.......................................................  30 
Portfolio Transactions.....................................................................  31 
Administrator..............................................................................  33 
Expenses...................................................................................  34 
Distributor................................................................................  34 
Custodians, Transfer Agent and Fund Accounting Services....................................  34 
Independent Registered Public Accounting Firm..............................................  35 
Legal Counsel..............................................................................  35 
Code of Ethics.............................................................................  35 
ADDITIONAL INFORMATION.....................................................................  35 
Description of Shares......................................................................  35 
Vote of a Majority of the Outstanding Shares...............................................  36 
Principal Shareholders.....................................................................  37 
Shareholder and Trustee Liability..........................................................  37 
Additional Tax Information.................................................................  37 
Performance Information....................................................................  45 
Miscellaneous..............................................................................  46 

FINANCIAL STATEMENTS.......................................................................  47 

APPENDIX...................................................................................   i 

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The Trust is an open-end management investment company which currently offers   
multiple separate portfolios, each with different investment objectives. This   
SAI contains information about one of the Trust's diversified portfolios, the   
Free Enterprise Action Fund, which is advised by Action Fund Management, LLC    
("AFM" or the "Adviser").                                                       

Much of the information contained in this SAI expands upon subjects discussed in
the Prospectus of the Fund. Capitalized terms not defined herein are defined in 
the Prospectus. No investment in the Fund should be made without first reading  
the Fund's Prospectus.                                                          

INVESTMENT OBJECTIVES AND POLICIES

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS                                 

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

Bank Obligations. The Fund may invest in bank obligations consisting of bankers'
acceptances, certificates of deposit, and time deposits.                        

Bankers' acceptances are negotiable drafts or bills of exchange typically drawn 
by an importer or exporter to pay for specific merchandise, which are "accepted"
by a bank, meaning, in effect, that the bank unconditionally agrees to pay the  
face value of the instrument on maturity. Bankers' acceptances invested in by   
the Fund will be those guaranteed by domestic and foreign banks having, at the  
time of investment, capital, surplus, and undivided profits in excess of        
$100,000,000 (as of the date of their most recently published financial         
statements).                                                                    

Certificates of deposit are negotiable certificates issued against funds        
deposited in a commercial bank or a savings and loan association for a definite 
period of time and earning a specified return. Certificates of deposit and time 
deposits will be those of domestic and foreign banks and savings and loan       
associations, if (a) at the time of investment the depository institution has   
capital, surplus, and undivided profits in excess of $100,000,000 (as of the    
date of its most recently published financial statements), or (b) the principal 
amount of the instrument is insured in full by the Federal Deposit Insurance    
Corporation.                                                                    

The Fund may also invest in Eurodollar Certificates of Deposit, which are U.S.  
dollar denominated certificates of deposit issued by offices of foreign and     
domestic banks located outside the United States; Yankee Certificates of        
Deposit, which are certificates of deposit issued by a U.S. branch of a foreign 
bank denominated in U.S. dollars and held in the United States; Eurodollar Time 
Deposits ("ETDs"), which are U.S. dollar denominated deposits in a foreign      
branch of a U.S. bank or a foreign bank; and Canadian Time Deposits, which are  
basically the same as ETDs except they are issued by Canadian offices of major  
Canadian banks.                                                                 

Commercial Paper. Commercial paper consists of unsecured promissory notes issued
by corporations. Except as noted below with respect to variable amount master   
demand notes, issues of commercial paper normally have maturities of less than  
nine months and fixed rates of return.                                          

The Fund may invest in short-term promissory notes (including variable amount   
master demand notes) issued by corporations and other entities, such as         
municipalities, rated at the time of                                            

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purchase within the two highest categories assigned by a nationally recognized  
statistical rating organization ("NRSRO") (e.g., A-2 or better by Standard &    
Poor's Ratings Services ("S&P"), Prime-2 or better by Moody's Investors Service,
Inc. ("Moody's") or F-2 or better by Fitch Investors Service ("Fitch")) or, if  
not rated, determined to be of comparable quality to instruments that are so    
rated. The Fund may also invest in Canadian Commercial Paper, which is          
commercial paper issued by a Canadian corporation or a Canadian counterpart of a
U.S. corporation, and in Europaper, which is U.S. dollar denominated commercial 
paper of a foreign issuer.                                                      

Insurance Company Funding Agreements. The Fund may invest in funding agreements 
("Funding Agreements"), also known as guaranteed investment contracts, issued by
insurance companies. Pursuant to such agreements, the Fund may invest an amount 
of cash with an insurance company and the insurance company credits such        
investment on a monthly basis with guaranteed interest which is based on an     
index. The Funding Agreements provide that this guaranteed interest will not be 
less than a certain minimum rate. The Fund will only purchase a Funding         
Agreement (i) when the Adviser has determined, under guidelines established by  
the Board of Trustees, that the Funding Agreement presents minimal credit risks 
to the Fund and is of comparable quality to instruments that are rated high     
quality by a nationally recognized statistical rating organization that is not  
an affiliated person, as defined in the Investment Company Act of 1940, as      
amended, ("1940 Act"), of the issuer, on any insurer, guarantor, provider of    
credit support for the instrument and (ii) if it may receive all principal of   
and accrued interest on a Funding Agreement at any time upon thirty days'       
written notice. Because the Fund may not receive the principal amount of a      
Funding Agreement from the insurance company on seven days' notice or less, the 
Funding Agreement is considered an illiquid investment, and, together with other
instruments in the Fund which are not liquid, will not exceed 15% of the Fund's 
net assets.                                                                     

Variable Amount Master Demand Notes. Variable amount master demand notes, in    
which the Fund may invest, are unsecured demand notes that permit the           
indebtedness thereunder to vary and provide for periodic adjustments in the     
interest rate according to the terms of the instrument. Because master demand   
notes are direct lending arrangements between the Fund and the issuer, they are 
not normally traded. Although there is no secondary market in the notes, the    
Fund may demand payment of principal and accrued interest at any time. While the
notes are not typically rated by credit rating agencies, issuers of variable    
amount master demand notes (which are normally manufacturing, retail, financial,
and other business concerns) must satisfy the same criteria as set forth above  
for commercial paper. In determining dollar weighted average portfolio maturity,
a variable amount master demand note will be deemed to have a maturity equal to 
the longer of the period of time remaining until the next interest rate         
adjustment or the period of time remaining until the principal amount can be    
recovered from the issuer through demand. The period of time remaining until the
principal amount can be recovered under a variable amount master demand note    
shall not exceed seven days.                                                    

Variable and Floating Rate Notes and Bonds. The Fund may acquire variable and   
floating rate notes and bonds, subject to the Fund's investment objective,      
policies and restrictions. A variable rate note is one whose terms provide "for 
the readjustment of its interest rate on set dates and which, upon such         
readjustment, can reasonably be expected to have a market value that            
approximates its par value." A floating rate note is one whose terms provide for
the readjustment of its interest rate whenever a specified interest rate changes
and which, at any time, can reasonably be expected to have a market value that  
approximates its par value. Such notes are frequently not rated by credit rating
agencies; however, unrated variable and floating rate notes                     

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purchased by the Fund will be determined by the Adviser under guidelines        
established by the Trust's Board of Trustees to be of comparable quality at the 
time of purchase to rated instruments eligible for purchase under the Fund's    
investment policies. In making such determinations, the Adviser will consider   
the earning power, cash flow and other liquidity ratios of the issuers of such  
notes (such issuers include financial, merchandising, bank holding and other    
companies) and will continuously monitor their financial condition. Although    
there may be no active secondary market with respect to a particular variable or
floating rate note purchased by the Fund, the Fund may resell the note at any   
time to a third party. The absence of an active secondary market, however, could
make it difficult for the Fund to dispose of a variable or floating rate note in
the event the issuer of the note defaulted on its payment obligations and the   
Fund could, as a result or for other reasons, suffer a loss to the extent of the
default. Variable or floating rate notes may be secured by bank letters of      
credit or drafts.                                                               

For purposes of the Fund, the maturities of the variable and floating rate notes
will be determined in accordance with Rule 2a-7 under the 1940 Act.             

Short-Term Obligations. The Fund may invest in high quality, short-term         
obligations (with maturities of 12 months or less) such as domestic and foreign 
commercial paper (including variable amount master demand notes), bankers'      
acceptances, certificates of deposit, demand and time deposits of domestic and  
foreign branches of U.S. banks and foreign banks, and repurchase agreements, in 
order to acquire interest income combined with liquidity. Such investments will 
be limited to those obligations which, at the time of purchase (i) possess one  
of the two highest short-term ratings from NRSROs, or (ii) do not possess a     
rating (i.e., are unrated) but are determined to be of comparable quality to    
rated instruments eligible for purchase. For temporary defensive purposes, these
investments may constitute 100% of the Fund's portfolio and, in such            
circumstances, will constitute a temporary suspension of its attempts to achieve
its investment objective.                                                       

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

Foreign Investments. The Fund may invest in foreign securities through the      
purchase of American Depositary Receipts ("ADRs") or the purchase of securities 
on domestic or foreign securities exchanges.                                    

Investment in foreign securities is subject to special investment risks that    
differ in some respects from those related to investments in securities of U.S. 
domestic issuers. Such risks include political, social or economic instability  
in the country of the issuer, the difficulty of predicting international trade  
patterns, the possibility of the imposition of exchange controls, expropriation,
limits on removal of currency or other assets, nationalization of assets,       
foreign withholding and income taxation, and foreign trading practices          
(including higher trading commissions, custodial charges and delayed            
settlements). Such securities may be subject to greater fluctuations in price   
than securities issued by U.S. corporations or issued or guaranteed by the U.S. 
Government, its agencies or instrumentalities. In addition, foreign branches of 
U.S. banks, foreign banks and                                                   

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foreign issuers may be subject to less stringent reserve requirements and to    
different accounting, auditing, reporting, and recordkeeping standards than     
those applicable to domestic branches of U.S. banks and U.S. domestic issuers.  

Because foreign companies are not subject to uniform accounting, auditing and   
financial reporting standards, practices and requirements comparable to those   
applicable to U.S. companies, there may be less publicly available information  
about a foreign company than about a U.S. company. Volume and liquidity in most 
foreign markets are less than in the U.S., and securities of many foreign       
companies are less liquid and more volatile than securities of comparable U.S.  
companies. Fixed commissions on foreign securities exchanges are generally      
higher than negotiated commissions on U.S. exchanges. There is generally less   
government supervision and regulation of securities exchanges, brokers, dealers 
and listed companies than in the U.S., thus increasing the risk of delayed      
settlements of portfolio transactions or loss of certificates for portfolio     
securities.                                                                     

Foreign markets also have different clearance and settlement procedures, and in 
certain markets, there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to conduct 
such transactions. Such delays in settlement could result in temporary periods  
when a portion of the assets of the Fund investing in foreign markets is        
uninvested and no return is earned thereon. The inability of the Fund to make   
intended security purchases due to settlement problems could cause the Fund to  
miss attractive investment opportunities. Losses to the Fund due to subsequent  
declines in the value of portfolio securities, or losses arising out of an      
inability to fulfill a contract to sell such securities, could result in        
potential liability to the Fund. In addition, with respect to certain foreign   
countries, there is the possibility of expropriation or confiscatory taxation,  
political or social instability, or diplomatic developments which could affect  
the investments in those countries. Moreover, individual foreign economies may  
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment, resource    
self-sufficiency and balance of payments position.                              

In many instances, foreign debt securities may provide higher yields than       
securities of domestic issuers which have similar maturities and quality. Under 
certain market conditions these investments may be less liquid than the         
securities of U.S. corporations and are certainly less liquid than securities   
issued or guaranteed by the U.S. Government or its agencies or                  
instrumentalities. Finally, in the event of a default of any such foreign debt  
obligations, it may be more difficult to obtain or to enforce a judgment against
the issuers of such securities.                                                 

If a security is denominated in foreign currency, the value of the security to  
the Fund will be affected by changes in currency exchange rates and in exchange 
control regulations, and costs will be incurred in connection with conversions  
between currencies. Currency risks generally increase in lesser developed       
markets. Exchange rate movements can be large and can endure for extended       
periods of time, affecting either favorably or unfavorably the value of the     
Fund's assets. The value of the assets of the Fund as measured in U.S. dollars  
may be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations.                                         

A change in the value of any foreign currency against the U.S. dollar will      
result in a corresponding change in the U.S. dollar value of securities         
denominated in that currency. Such changes will also affect the income and      
distributions to Shareholders of the Fund investing in foreign markets. In      
addition, although the Fund will receive income on foreign securities in such   
currencies, it will be                                                          

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required to compute and distribute income in U.S. dollars. Therefore, if the    
exchange rate for any such currency declines materially after income has been   
accrued and translated into U.S. dollars, the Fund could be required to         
liquidate portfolio securities to make required distributions. Similarly, if an 
exchange rate declines between the time the Fund incurs expenses in U.S. dollars
and the time such expenses are paid, the amount of such currency required to be 
converted into U.S. dollars in order to pay such expenses in U.S. dollars will  
be greater.                                                                     

For many foreign securities, U.S. dollar denominated ADRs, which are traded in  
the United States on exchanges or over-the-counter, are issued by domestic      
banks. ADRs represent the right to receive securities of foreign issuers        
deposited in a domestic bank or a correspondent bank. ADRs do not eliminate all 
the risk inherent in investing in the securities of foreign issuers' stock.     
However, by investing in ADRs rather than directly in foreign issuers' stock,   
the Fund can avoid currency risks during the settlement period for either       
purchase or sales.                                                              

In general, there is a large, liquid market in the United States for many ADRs. 
The information available for ADRs is subject to the accounting, auditing and   
financial reporting standards of the domestic market or exchange on which they  
are traded, which standards are more uniform and more exacting than those to    
which many foreign issuers may be subject. Certain ADRs, typically those        
denominated as unsponsored, require the holders thereof to bear most of the     
costs of such facilities, while issuers of sponsored facilities normally pay    
more of the costs thereof. The depository of an unsponsored facility frequently 
is under no obligation to distribute shareholder communications received from   
the issuer of the deposited securities or to pass through the voting rights to  
facility holders with respect to the deposited securities, whereas the          
depository of a sponsored facility typically distributes shareholder            
communications and passes through the voting rights.                            

Investment Companies. The Fund may invest in securities issued by other         
investment companies, including, but not limited to, money market investment    
companies, within the limits prescribed by the 1940 Act, and also may invest in 
other types of pooled investment vehicles. As a shareholder of another          
investment company or pooled investment vehicle, the Fund would bear, along with
other shareholders, its pro rata portion of the expenses of such other          
investment company or pooled investment vehicle, including advisory fees. These 
expenses would be in addition to the advisory and other expenses that the Fund  
bears directly in connection with its own operations, and may represent a       
duplication of fees to Shareholders of the Fund.                                

U.S. Government Obligations. The Fund may invest in obligations issued or       
guaranteed by the U.S. Government, its agencies and instrumentalities, including
bills, notes and bonds issued by the U.S. Treasury, as well as "stripped" U.S.  
Treasury obligations such as Treasury Receipts issued by the U.S. Treasury      
representing either future interest or principal payments. Stripped securities  
are issued at a discount to their "face value," and may exhibit greater price   
volatility than ordinary debt securities because of the manner in which their   
principal and interest are returned to investors. The stripped Treasury         
obligations in which the Fund may invest do not include Certificates of Accrual 
on Treasury Securities ("CATS") or Treasury Income Growth Receipts ("TIGRs").   

Obligations of certain agencies and instrumentalities of the U.S. Government,   
such as the Government National Mortgage Association ("GNMA"), are supported by 
the full faith and credit of the U.S. Treasury; others, such as those of the    
Federal National Mortgage Association ("FNMA"), are supported by the right of   
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those of the Student Loan Marketing Association ("SLMA"), are supported by the  
discretionary authority of the U.S. Government to purchase the agency's         
obligations; still others, such as those of the Federal Farm Credit Bank, are   
supported only by the credit of the instrumentality. No assurance can be given  
that the U.S. Government would provide financial support to U.S.                
Government-sponsored agencies or instrumentalities if it is not obligated to do 
so by law. The Fund will invest in the obligations of such agencies or          
instrumentalities only when the Adviser believes that the credit risk with      
respect thereto is minimal.                                                     

Supranational Organizational Obligations. The Fund may purchase debt securities 
of supranational organizations such as the European Coal and Steel Community,   
the European Economic Community and the World Bank, which are chartered to      
promote economic development.                                                   

Options Trading. The Fund may purchase put and call options on securities. The  
Fund may also engage in writing covered call options (options on securities or  
currencies owned by the Fund). A call option gives the purchaser the right to   
buy, and a writer has the obligation to sell, the underlying security or foreign
currency at the stated exercise price at any time prior to the expiration of the
option, regardless of the market price or exchange rate of the security or      
foreign currency, as the case may be. The premium paid to the writer is         
consideration for undertaking the obligations under the option contract. A put  
option gives the purchaser the right to sell the underlying security or foreign 
currency at the stated exercise price at any time prior to the expiration date  
of the option, regardless of the market price or exchange rate of the security  
or foreign currency, as the case may be. Put and call options will be valued at 
their closing mid-price. Mid-price is the average of the sum of the closing bid 
and closing ask prices.                                                         

When a portfolio security or currency subject to a call option is sold, the Fund
will effect a "closing purchase transaction"--the purchase of a call option on  
the same security or currency with the same exercise price and expiration date  
as the call option which the Fund previously has written. If the Fund is unable 
to effect a closing purchase transaction, it will not be able to sell the       
underlying security or currency until the option expires or the Fund delivers   
the underlying security or currency upon exercise. In addition, upon the        
exercise of a call option by the holder thereof, the Fund will forego the       
potential benefit represented by market appreciation over the exercise price.   
Under normal conditions, it is not expected that the Fund will cause the        
underlying value of portfolio securities and/or currencies subject to such      
options to exceed 25% of its total assets.                                      

When the Fund writes an option, an amount equal to the net premium (the premium 
less the commission) received by the Fund is included in the liability section  
of its statement of assets and liabilities as a deferred credit. The amount of  
the deferred credit will be subsequently marked-to-market to reflect the current
value of the option written. The current value of the traded option is the last 
sale price or, in the absence of a sale, the average of the closing bid and     
asked prices. If an option expires on the stipulated expiration date, or if the 
Fund enters into a closing purchase transaction, it will realize a gain (or a   
loss if the cost of a closing purchase transaction exceeds the net premium      
received when the option is sold) and the deferred credit related to such option
will be eliminated. If an option is exercised, the Fund may deliver the         
underlying security in the open market. In either event, the proceeds of the    
sale will be increased by the net premium originally received and the Fund will 
realize a gain or loss.                                                         

The Fund may write only covered call options. This means that the Fund will only
write a call option on a security which it already owns. Such options must be   
listed on a national securities                                                 

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exchange and issued by the Options Clearing Corporation. The purpose of writing 
covered call options is to generate additional premium income for the Fund. This
premium income will serve to enhance the Fund's total return and will reduce the
effect of any price decline of the security involved in the option. Covered call
options will generally be written on securities which are not expected to make  
any major price moves in the near future but which, over the long term, are     
deemed to be attractive investments for the Fund.                               

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

The exercise price of the options may be below, equal to, or above the current  
market values of the underlying securities at the time the options are written. 
From time to time, the Fund may purchase an underlying security for delivery in 
accordance with an exercise notice of a call option assigned to it, rather than 
delivering such security from its portfolio. In such cases, additional costs    
will be incurred. The Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium     
received from the writing of the option. Because increases in the market price  
of a call option will generally reflect increases in the market price of the    
underlying security, any loss resulting from the repurchase of a call option is 
likely to be offset in whole or in part by appreciation of the underlying       
security owned by the Fund.                                                     

The Fund may purchase put options from time to time. A put is a right to sell a 
specified security (or securities) within a specified period of time at a       
specified exercise price. Puts may be acquired by the Fund to facilitate the    
liquidity of the portfolio assets. Puts may also be used to facilitate the      
reinvestment of assets at a rate of return more favorable than that of the      
underlying security. The Fund may sell, transfer, or assign a put only in       
conjunction with the sale, transfer, or assignment of the underlying security or
securities. The amount payable to the Fund upon its exercise of a "put" is      
normally (i) the Fund's acquisition cost of the securities subject to the put   
(excluding any accrued interest which the Fund paid on the acquisition), less   
any amortized market premium or plus any accreted market or original issue      
discount during the period the Fund owned the securities, plus (ii) all interest
accrued on the securities since the last interest payment date during that      
period. The Fund will generally acquire puts only where the puts are available  
without the payment of any direct or indirect consideration. However, if        
necessary or advisable, the Fund may pay for puts either separately in cash or  
by paying higher price for portfolio securities which are acquired subject to   
the puts (thus reducing the yield to maturity otherwise available for the same  

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securities). The Fund intends to enter into puts only with dealers, banks, and  
broker-dealers which, in the opinion of the Adviser, present minimal credit     
risks.                                                                          

When-Issued and Delayed-Delivery Securities. The Fund may purchase securities on
a "when-issued" or "delayed-delivery" basis (i.e., for delivery beyond the      
normal settlement date at a stated price and yield). In addition, the Fund may  
sell securities on a "forward commitment" basis. The Fund will engage in        
when-issued and delayed-delivery transactions only for the purpose of acquiring 
portfolio securities consistent with its investment objective and policies, not 
for investment leverage. When-issued securities involve a risk that the yield   
obtained in the transaction will be less than that available in the market when 
delivery takes place. The Fund will not pay for such securities or start earning
interest on them until they are received.                                       

When the Fund agrees to purchase securities on a "when-issued" or               
"delayed-delivery" basis, its custodian will set aside cash or liquid securities
equal to the amount of the commitment in a separate account. Normally, the      
custodian will set aside securities to satisfy the purchase commitment, and in  
such a case, the Fund may be required subsequently to place additional assets in
the separate account in order to assure that the value of the account remains   
equal to the amount of its commitment. It may be expected that the Fund         
investing in securities on a when-issued or delayed delivery basis, net assets  
will fluctuate to a greater degree when it sets aside securities to cover such  
purchase commitments than when it sets aside cash. In addition, because the Fund
will set aside cash or liquid securities to satisfy its purchase commitments in 
the manner described above, its liquidity and the ability of its investment     
adviser to manage it might be affected in the event its commitments to purchase 
"when-issued" or "delayed-delivery" securities ever exceeded 25% of the value of
its assets. Under normal market conditions, however, the Fund's commitment to   
purchase "when-issued" or "delayed-delivery" securities will not exceed 25% of  
the value of the Fund's total assets.                                           

When the Fund engages in "when-issued" or "delayed-delivery" transactions, it   
relies on the seller to consummate the trade. Failure of the seller to do so may
result in the Fund incurring a loss or missing the opportunity to obtain a price
or yield considered to be advantageous.                                         

Mortgage-Related and Asset-Backed Securities. Investments in these and other    
derivative securities will not be made for purposes of leverage or speculation, 
but rather primarily for conventional investment or hedging purposes, liquidity,
flexibility and to capitalize on market inefficiencies. The Fund may invest in  
mortgage-related securities issued or guaranteed by the U.S. Government, its    
agencies and instrumentalities. In addition, the Fund may invest in             
mortgage-related securities issued by nongovernmental entities, provided,       
however, that to the extent the Fund purchases mortgage-related securities from 
such issuers which may, solely for purposes of the 1940 Act, be deemed to be    
investment companies, the Fund's investment in such securities will be subject  
to the limitations on its investment in investment company securities.          

Mortgage-related securities, for purposes of the Fund's Prospectus and this SAI,
represent pools of mortgage loans assembled for sale to investors by various    
governmental agencies such as GNMA and government-related organizations such as 
FNMA and the Federal Home Loan Mortgage Corporation ("FHLMC"), as well as by    
nongovernmental issuers such as commercial banks, savings and loan institutions,
mortgage bankers and private mortgage insurance companies. Although certain     
mortgage-related securities are guaranteed by a third party or otherwise        
similarly secured, the market value of the security, which may fluctuate, is not
so secured. If the Fund                                                         

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purchases a mortgage-related security at a premium, that portion may be lost if 
there is a decline in the market value of the security whether resulting from   
changes in interest rates or prepayments in the underlying mortgage collateral. 
As with other interest-bearing securities, the prices of such securities are    
inversely affected by changes in interest rates. However, though the value of a 
mortgage-related security may decline when interest rates rise, the converse is 
not necessarily true, since in periods of declining interest rates the mortgages
underlying the securities are prone to prepayment, thereby shortening the       
average life of the security and shortening the period of time over which income
at the higher rate is received. When interest rates are rising, though, the rate
of prepayment tends to decrease, thereby lengthening the period of time over    
which income at the lower rate is received. For these and other reasons, a      
mortgage-related security's average maturity may be shortened or lengthened as a
result of interest rate fluctuations and, therefore, it is not possible to      
predict accurately the security's return. In addition, regular payments received
in respect of mortgage-related securities include both interest and principal.  
No assurance can be given as to the return the Fund will receive when these     
amounts are reinvested.                                                         

There are a number of important differences among the agencies and              
instrumentalities of the U.S. Government that issue mortgage related securities 
and among the securities that they issue. Mortgage-related securities issued by 
GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie     
Maes") which are guaranteed as to the timely payment of principal and interest  
by GNMA and such guarantee is backed by the full faith and credit of the United 
States. GNMA is a wholly-owned U.S. Government corporation within the Department
of Housing and Urban Development. GNMA certificates also are supported by the   
authority of GNMA to borrow funds from the U.S. Treasury to make payments under 
its guarantee. Mortgage-related securities issued by FNMA include FNMA          
Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes")     
which are solely the obligations of FNMA and are not backed by or entitled to   
the full faith and credit of the United States. FNMA is a government-sponsored  
organization owned entirely by private stockholders. Fannie Maes are guaranteed 
as to the timely payment of the principal and interest by FNMA. Mortgage-related
securities issued by FHLMC include FHLMC Mortgage Participation Certificates    
(also known as "Freddie Macs" or "Pcs"). FHLMC is a corporate instrumentality of
the United States, created pursuant to an Act of Congress. Freddie Macs are not 
guaranteed by the United States or by any Federal Home Loan Banks and do not    
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to the timely payment of interest, which  
is guaranteed by FHLMC. FHLMC guarantees either ultimate collection or the      
timely payment of all principal payments on the underlying mortgage loans. When 
FHLMC does not guarantee timely payment of principal, FHLMC may remit the amount
due on account of its guarantee of ultimate payment of principal at any time    
after default on an underlying mortgage, but in no event later than one year    
after it becomes payable.                                                       

The Fund may invest in Collateralized Mortgage Obligation ("CMOs"). CMOs may    
include stripped mortgage securities. Such securities are derivative multi-class
mortgage securities issued by agencies or instrumentalities of the U.S.         
Government, or by private originators of, or investors in, mortgage loans,      
including savings and loan associations, mortgage banks, commercial banks,      
investment banks and special purpose subsidiaries of the foregoing. Stripped    
mortgage securities are usually structured with two classes that receive        
different proportions of the interest and principal distributions on a pool of  
mortgage assets. A common type of stripped mortgage security will have one class
receiving all of the interest from the mortgage assets (the interest-only or    
"IO" class), while the other class will receive all of the principal (the       
principal-only or "PO" class). The                                              

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yield to maturity on an IO class is extremely sensitive to the rate of principal
payments (including prepayments) on the related underlying mortgage assets, and 
a rapid rate of principal payments may have a material adverse effect on the    
securities' yield to maturity. Generally, the market value of the PO class is   
unusually volatile in response to changes in interest rates. If the underlying  
mortgage assets experience greater than anticipated prepayments of principal,   
the Fund may fail to fully recoup its initial investment in these IO securities 
even if the security is rated in the highest rating category.                   

Like mortgages underlying mortgage-backed securities, automobile sales contracts
or credit card receivables underlying asset-backed securities are subject to    
prepayment, which may reduce the overall return to certificate holders.         
Nevertheless, principal prepayment rates tend not to vary much with interest    
rates, and the short-term nature of the underlying car loans or other           
receivables tends to dampen the impact of any change in the prepayment level.   
Certificate holders may also experience delays in prepayment on the certificates
if the full amounts due on underlying sales contracts or receivables are not    
realized because of unanticipated legal or administrative costs of enforcing the
contracts or because of depreciation or damage to the collateral (usually       
automobiles) securing certain contracts, or other factors. In certain market    
conditions, asset-backed securities may experience volatile fluctuations in     
value and periods of illiquidity. If consistent with its investment objective   
and policies, the Fund may invest in other asset-backed securities that may be  
developed in the future.                                                        

Real Estate Investment Trusts. The Fund may invest in real estate investment    
trusts. Real estate investment trusts are sensitive to factors such as changes  
in real estate values and property taxes, interest rates, cash flow of          
underlying real estate assets, overbuilding, and the management skill and       
creditworthiness of the issuer. Real estate may also be affected by tax and     
regulatory requirements, such as those relating to the environment.             

Restricted Securities. "Section 4(2) securities" are securities which are issued
in reliance on the "private placement" exemption from registration which is     
afforded by Section 4(2) of the Securities Act of 1933 (the "1933 Act"). The    
Fund will not purchase section 4(2) securities which have not been determined to
be liquid in excess of 15% of its net assets. Section 4(2) securities are       
restricted as to disposition under the federal securities laws, and generally   
are sold to institutional investors such as the Fund which agrees that they are 
purchasing the securities for investment and not with a view to public          
distribution. Any resale must also generally be made in an exempt transaction.  
Section 4(2) securities are normally resold to other institutional investors    
through or with the assistance of the issuer or investment dealers who make a   
market in such Section 4(2) securities, thus providing liquidity. The Adviser or
the Sub-Adviser has been delegated the day-to-day authority to determine whether
a particular issue of Section 4(2) securities, including those eligible for     
resale under Rule 144A under the 1933 Act, should be treated as liquid. Rule    
144A provides a safe-harbor exemption from the registration requirements of the 
1933 Act for resales to "qualified institutional buyers" as defined in Rule     
144A. With the exception of registered broker-dealers, a qualified institutional
buyer must generally own or invest on a discretionary basis at least $100       
million in securities.                                                          

The Adviser or a Sub-Adviser may deem Section 4(2) securities liquid if it      
believes that, based on the trading markets for such security, such security can
be disposed of within seven days in the ordinary course of business at          
approximately the amount at which the Fund valued the security. In making such  
determination, the following factors, among others, may be deemed relevant: (i) 
the                                                                             

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credit quality of the issuer; (ii) the frequency of trades and quotes for the   
security; (iii) the number of dealers willing to purchase or sell the security  
and the number of other potential purchasers; (iv) dealer undertakings to make a
market in the security; and (v) the nature of the security and the nature of    
market-place trades.                                                            

Treatment of Section 4(2) securities as liquid could have the effect of         
decreasing the level of the Fund's liquidity to the extent that qualified       
institutional buyers become, for a time, uninterested in purchasing these       
securities.                                                                     

Lending of Portfolio Securities. In order to generate additional income, the    
Fund may, from time to time, lend portfolio securities to broker-dealers, banks 
or institutional borrowers of securities. The Fund must receive at least 100%   
collateral, in the form of cash or U.S. Government securities. This collateral  
must be valued daily, and should the market value of the loaned securities      
increase, the borrower must furnish additional collateral to the lender. During 
the time portfolio securities are on loan, the borrower pays the lender any     
dividends or interest paid on such securities. Loans are subject to termination 
by the lender or the borrower at any time. While the Fund does not have the     
right to vote securities on loan, each intends to terminate the loan and regain 
the right to vote if that is considered important with respect to the           
investment. In the event the borrower defaults on its obligation to the Fund, it
could experience delays in recovering its securities and possible capital       
losses. The Fund will only enter into loan arrangements with broker-dealers,    
banks or other institutions determined to be creditworthy under guidelines      
established by the Board of Trustees that permit the Fund to loan up to 33 1/3% 
of the value of its total assets.                                               

Convertible Securities. The Fund may invest in convertible securities.          
Convertible securities are fixed income securities that may be exchanged or     
converted into a predetermined number of the issuer's underlying common stock at
the option of the holder during a specified time period. Convertible securities 
may take the form of convertible preferred stock, convertible bonds or          
debentures, units consisting of "usable" bonds and warrants or a combination of 
the features of several of these securities.                                    

There is no lower limit with respect to rating categories for convertible       
securities in which the Fund may invest. Corporate debt obligations are         
"investment grade" if they are rated "BBB" or higher by S&P or "Baa" or higher  
by Moody's or, if unrated, are determined to be of comparable quality.          

Convertible bonds and convertible preferred stocks are fixed income securities  
that generally retain the investment characteristics of fixed income securities 
until they have been converted but also react to movements in the underlying    
equity securities. The holder is entitled to receive the fixed income of a bond 
or the dividend preference of a preferred stock until the holder elects to      
exercise the conversion privilege. Usable bonds are corporate bonds that can be 
used in whole or in part, customarily at full face value, in lieu of cash to    
purchase the issuer's common stock.                                             

When owned as part of a unit along with warrants, which are options to buy the  
common stock, they function as convertible bonds, except that the warrants      
generally will expire before the bond's maturity. Convertible securities are    
senior to equity securities, and, therefore, have a claim to assets of the      
corporation prior to the holders of common stock in the case of liquidation.    
However, convertible securities are generally subordinated to similar           
non-convertible securities of the same company. The interest income and         
dividends from convertible bonds and preferred stocks provide                   

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a stream of income with generally higher yields than common stocks, but lower   
than non-convertible securities of similar quality.                             

The Fund will exchange or convert the convertible securities held in its        
portfolio into shares of the underlying common stock in instances in which, in  
the opinion of the Adviser, the investment characteristics of the underlying    
common shares will assist the Fund in achieving its investment objective.       
Otherwise, the Fund will hold or trade the convertible securities. In selecting 
convertible securities for the Fund, the Adviser evaluates the investment       
characteristics of the convertible security as a fixed income instrument, and   
the investment potential of the underlying equity security for capital          
appreciation. In evaluating these matters with respect to a particular          
convertible security, the Adviser may consider numerous factors, including the  
economic and political outlook, the value of the security relative to other     
investment alternatives, trends in the determinants of the issuer's profits, and
the issuer's management capability and practices.                               

As with all fixed income securities, the market values of convertible securities
tend to increase when interest rates decline and, conversely, tend to decline   
when interest rates increase.                                                   

Corporate Debt Securities. The Fund may invest in U.S. dollar-denominated debt  
obligations issued or guaranteed by U.S. corporations or U.S. commercial banks, 
U.S. dollar-denominated obligations of foreign issuers and debt obligations of  
foreign issuers denominated in foreign currencies. Such debt obligations        
include, among others, bonds, notes, debentures and variable rate demand notes. 
In choosing corporate debt securities on behalf of the Fund, the Adviser may    
consider (i) general economic and financial conditions; (ii) the specific       
issuer's (a) business and management, (b) cash flow, (c) earnings coverage of   
interest and dividends, (d) ability to operate under adverse economic           
conditions, (e) fair market value of assets, and (f) in the case of foreign     
issuers, unique political, economic or social conditions applicable to such     
issuer's country; and (iii) other considerations deemed appropriate.            

As with other fixed-income securities, medium-grade securities are subject to   
credit risk and market risk. Market risk relates to changes in a security's     
value as a result of changes in interest rates. Credit risk relates to the      
ability of the issuer to make payments of principal and interest.               

Medium-grade securities are generally subject to greater credit risk than       
comparable higher-rated securities because issuers are more vulnerable to       
economic downturns, higher interest rates or adverse issuer-specific            
developments. In addition, the prices of medium-grade securities are generally  
subject to greater market risk and therefore react more sharply to changes in   
interest rates. The value and liquidity of medium-grade securities may be       
diminished by adverse publicity and investor perceptions.                       

Because certain medium-grade securities are traded only in markets where the    
number of potential purchasers and sellers, if any, is limited, the ability of  
the Fund to sell such securities at their fair market value either to meet      
redemption requests or to respond to changes in the financial markets may be    
limited.                                                                        

Particular types of medium-grade securities may present special concerns. The   
prices of payment-in-kind or zero-coupon securities may react more strongly to  
changes in interest rates than the prices of other medium-grade securities. Some
medium-grade securities in which the value that                                 

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might otherwise result from lower interest rates while increasing the risk that 
the Fund may be required to reinvest redemption or call proceeds during a period
of relatively low interest rates.                                               

The credit ratings issued by NRSROs are subject to various limitations. For     
example, while such ratings evaluate credit risk, they ordinarily do not        
evaluate the market risk of Medium Grade Securities. In certain circumstances,  
the ratings may not reflect in a timely fashion adverse developments affecting  
an issuer.                                                                      

After purchase, a security may cease to be rated or its rating may be reduced.  
Neither event will require a sale of such security. However, the Adviser will   
consider such event in its determination of whether the Fund should continue to 
hold the security. A security which has had its rating downgraded or revoked may
be subject to greater risk to principal and income, and often involve greater   
volatility of price, than securities in the higher rating categories. Such      
securities are also subject to greater credit risks (including, without         
limitation, the possibility of default by or bankruptcy of the issuers of such  
securities) than securities in higher rating categories.                        

High Yield Securities. The Fund may invest in high yield convertible securities.
High yield securities are securities that are rated below investment grade by an
NRSRO (e.g., "BB" or lower by S&P and "Ba" or lower by Moody's). Other terms    
used to describe such securities include "lower rated bonds," "non-investment   
grade bonds" and "junk bonds." Generally, lower rated securities provide a      
higher yield than higher rated securities of similar maturity, but are subject  
to a greater degree of risk with respect to the ability of the issuer to meet   
its principal and interest obligations. Issuers of high yield securities may not
be as strong financially as those issuing higher rated securities. To a greater 
extent than investment grade securities, lower rated securities tend to reflect 
short-term corporate, economic and market developments as well as investor      
perceptions of the issuer's credit quality. The securities are regarded as      
predominantly speculative. The market value of high yield securities may        
fluctuate more than the market value of higher rated securities, since high     
yield securities tend to reflect short-term corporate and market developments to
a greater extent than higher rated securities, which fluctuate primarily in     
response to the general level of interest rates, assuming that there has been no
change in the fundamental interest rates and assuming that there has been no    
change in the fundamental quality of such securities. The market prices of fixed
income securities generally fall when interest rates rise. Conversely, the      
market prices of fixed income securities generally rise when interest rates     
fall.                                                                           

Additional risks of high yield securities include limited liquidity and         
secondary market support. As a result, the prices of high yield securities may  
decline rapidly in the event that a significant number of holders decide to     
sell. Changes in expectations regarding an individual issuer, an industry or    
high yield securities generally could reduce market liquidity for such          
securities and make their sale by the Fund more difficult, at least in the      
absence of price concessions. Reduced liquidity also could adversely affect the 
Fund's ability to accurately value high yield securities. Issuers of high yield 
securities also are more vulnerable to real or perceived economic changes (for  
instance, an economic downturn or prolonged period of rising interest rates),   
political changes or adverse developments specific to the issuer. Adverse       
economic, political or other developments may impair the issuer's ability to    
service principal and interest obligations, to meet projected business goals and
to obtain additional financing, particularly if the issuer is highly leveraged. 
In the event of a default, the Fund would experience a reduction of its income  
and could expect a decline in the market value of the defaulted securities.     

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Repurchase Agreements. Securities held by the Fund may be subject to repurchase 
agreements. Under the terms of a repurchase agreement, the Fund would acquire   
securities from member banks of the Federal Deposit Insurance Corporation and   
registered broker-dealers that the Adviser deems creditworthy, subject to the   
seller's agreement to repurchase such securities at a mutually agreed-upon date 
and price, which includes interest negotiated on the basis of current short-term
rates. The seller under a repurchase agreement will be required to maintain at  
all times the value of collateral held pursuant to the agreement at not less    
than the repurchase price (including accrued interest). If the seller were to   
default on its repurchase obligation or become insolvent, the Fund holding such 
obligation would suffer a loss to the extent that the proceeds from a sale of   
the underlying portfolio securities were less than the repurchase price under   
the agreement. Securities subject to repurchase agreements will be held by the  
Fund's custodian or another qualified custodian, as appropriate, or in the      
Federal Reserve/Treasury book-entry system.                                     

Reverse Repurchase Agreements and Dollar Roll Agreements. The Fund may also     
enter into reverse repurchase agreements and dollar roll agreements in          
accordance with applicable investment restrictions. Pursuant to such reverse    
repurchase agreements, the Fund would sell certain of its securities to         
financial institutions such as banks and broker-dealers, and agree to repurchase
them, or substantially similar securities in the case of a dollar roll          
agreement, at a mutually agreed upon date and price. A dollar roll agreement is 
analogous to a reverse repurchase agreement, with the Fund selling              
mortgage-backed securities for delivery in the current month and simultaneously 
contracting to repurchase substantially similar (same type, coupon and maturity)
securities on a specified future date. At the time the Fund enters into a       
reverse repurchase agreement or dollar roll agreement, it will segregate assets 
such as U.S. Government securities or other liquid securities consistent with   
its investment restrictions having a value equal to the repurchase price        
(including accrued interest), and will subsequently continually monitor the     
account to ensure that such equivalent value is maintained at all times. Reverse
repurchase agreements and dollar roll agreements involve the risk that the      
market value of securities to be purchased by the Fund may decline below the    
price at which it is obligated to repurchase the securities, or that the other  
party may default on its obligation, so that the Fund is delayed or prevented   
from completing the transaction.                                                

Futures Contracts. The Fund may enter into contracts for the future delivery of 
securities or foreign currencies and futures contracts based on a specific      
security, class of securities, foreign currency or an index, purchase or sell   
options on any such futures contracts and engage in related closing             
transactions. A futures contract on a securities index is an agreement          
obligating either party to pay, and entitling the other party to receive, while 
the contract is outstanding, cash payments based on the level of a specified    
securities index. The Fund may engage in such futures contracts in an effort to 
hedge against market risks and to manage its cash position, but not for         
leveraging purposes. This investment technique is designed primarily to hedge   
against anticipated future changes in market conditions or foreign exchange     
rates which otherwise might adversely affect the value of securities which the  
Fund holds or intends to purchase. For example, when interest rates are expected
to rise or market values of portfolio securities are expected to fall, the Fund 
can seek through the sale of futures contracts to offset a decline in the value 
of its portfolio securities. When interest rates are expected to fall or market 
values are expected to rise, the Fund, through the purchase of such contracts,  
can attempt to secure better rates or prices than might later be available in   
the market when it effects anticipated purchases.                               

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

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

Pursuant to claims for exemption filed with the Commodity Futures Trading       
Commission ("CFTC") and/or the National Futures Association on behalf of the    
Fund, the Adviser and the Fund are not deemed to be a "commodity pool" or       
"commodity pool operator" under the Commodity Exchange Act and are not subject  
to registration or regulation as such under the Commodity Exchange Act. By      
virtue of changes to CFTC regulations, the substantive limitations set forth in 
the Fund's exemption filing with respect to their use of futures contracts are  
no longer applicable.                                                           

Foreign Currency Transactions. The value of the assets of the Fund as measured  
in U.S. dollars may be affected favorably or unfavorably by changes in foreign  
currency exchange rates and exchange control regulations, and the Fund may incur
costs in connection with conversions between various currencies. The Fund will  
conduct foreign currency exchange transactions either on a spot (i.e., cash)    
basis at the spot rate prevailing in the foreign currency exchange market, or   
through forward contracts to purchase or sell foreign currencies. A forward     
foreign currency exchange contract ("forward currency contract") involves an    
obligation to purchase or sell a specific currency at a future date, which may  
be any fixed number of days from the date of the contract agreed upon by the    
parties, at a price set at the time of the contract. These forward currency     
contracts are traded directly between currency traders (usually large commercial
banks) and their customers. The Fund may enter into forward currency contracts  
in order to hedge against adverse movements in exchange rates between           
currencies.                                                                     

By entering into a forward currency contract in U.S. dollars for the purchase or
sale of the amount of foreign currency involved in an underlying security       
transaction, the Fund is able to protect themselves against a possible loss     
between trade and settlement dates resulting from an adverse change in the      
relationship between the U.S. dollar and such foreign currency. However, this   
tends to limit potential gains which might result from a positive change in such
currency relationships. The Fund may also hedge foreign currency exchange rate  
risk by engaging in a currency financial futures and options transactions, which
are described below. The forecasting of short-term currency market movements is 
extremely difficult and whether such a short-term hedging strategy will be      
successful is highly uncertain.                                                 

It is impossible to forecast with precision the market value of portfolio       
securities at the expiration of a forward currency contract. Accordingly, it may
be necessary for the Fund to purchase                                           

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additional currency on the spot market if the market value of the security is   
less than the amount of foreign currency the Fund is obligated to deliver when a
decision is made to sell the security and make delivery of the foreign currency 
in settlement of a forward contract. Conversely, it may be necessary to sell on 
the spot market some of the foreign currency received upon the sale of the      
portfolio security if its market value exceeds the amount of foreign currency   
the Fund is obligated to deliver.                                               

If to the extent that there has been movement in forward currency contract      
prices. If the Fund engages in an offsetting transaction, it may subsequently   
enter into a new forward currency contract to sell the foreign currency.        
Although such contracts tend to minimize the risk of loss due to a decline in   
the value of the hedged currency, they also tend to limit any potential gain    
which might result should the value of such currency increase. The Fund will    
have to convert its holdings of foreign currencies into U.S. dollars from time  
to time. Although foreign exchange dealers do not charge a fee for conversion,  
they do realize a profit based on the difference (the "spread") between the     
prices at which they are buying and selling various currencies.                 

Foreign Currency Options. A foreign currency option provides the Fund with the  
right to buy or sell a stated amount of foreign currency at the exercise price  
at a specified date or during the option period. A call option gives its owner  
the right, but not the obligation, to buy the currency, while a put option gives
its owner the right, but not the obligation, to sell the currency. The option   
seller (writer) is obligated to fulfill the terms of the option sold if it is   
exercised. However, either seller or buyer may close its position during the    
option period in the secondary market for such options any time prior to        
expiration.                                                                     

A call rises in value if the underlying currency appreciates. Conversely, a put 
rises in value if the underlying currency depreciates. While purchasing a       
foreign currency option can protect the Fund against an adverse movement in the 
value of a foreign currency, it does not limit the gain which might result from 
a favorable movement in the value of such currency. For example, if the Fund was
holding securities denominated in an appreciating foreign currency and had      
purchased a foreign currency put to hedge against a decline in the value of the 
currency, it would not have to exercise its put. Similarly, if the Fund has     
entered into a contract to purchase a security denominated in a foreign currency
and had purchased a foreign currency call to hedge against a rise in the value  
of the currency but instead the currency had depreciated in value between the   
date of purchase and the settlement date, the Fund would not have to exercise   
its call but could acquire in the spot market the amount of foreign currency    
needed for settlement.                                                          

Foreign Currency Futures Transactions. As part of its financial futures         
transactions, the Fund may use foreign currency futures contracts and options on
such futures contracts. Through the purchase or sale of such contracts, the Fund
may be able to achieve many of the same objectives as through forward foreign   
currency exchange contracts more effectively and possibly at a lower cost.      

Unlike forward foreign currency exchange contracts, foreign currency futures    
contracts and options on foreign currency futures contracts are standardized as 
to amount and delivery period and may be traded on boards of trade and          
commodities exchanges or directly with a dealer which makes a market in such    
contracts and options. It is anticipated that such contracts may provide greater
liquidity and lower cost than forward foreign currency exchange contracts.      

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 INVESTMENT RESTRICTIONS

The following investment restrictions may be changed with respect to the Fund   
only by a vote of a majority of the outstanding Shares of the Fund (as defined  
under "ADDITIONAL INFORMATION -- Vote of a Majority of the Outstanding Shares"  
in this SAI). Unless expressly designated as fundamental, all policies and      
procedures of the Fund may be changed by the Board of Trustees without          
shareholder approval.                                                           

The Fund will not:                                                              

      1. Purchase any securities which would cause more than 25% of the value of
the Fund's total assets at the time of purchase to be invested in securities of 
one or more issuers conducting their principal business activities in the same  
industry, provided that: (a) there is no limitation with respect to obligations 
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
and repurchase agreements secured by obligations of the U.S. Government or its  
agencies or instrumentalities; (b) wholly owned finance companies will be       
considered to be in the industries of their parents if their activities are     
primarily related to financing the activities of their parents; and (c)         
utilities will be divided according to their services. For example, gas, gas    
transmission, electric and gas, electric and telephone will each be considered a
separate industry;                                                              

     2. Borrow money or issue senior securities, except as permitted under the
1940 Act, and as interpreted, modified or otherwise permitted by regulatory     
authority having jurisdiction from time to time;                                

      3. Make loans, except as permitted under the 1940 Act, and as interpreted,
modified or otherwise permitted by regulatory authority having jurisdiction from
time to time;                                                                   

  4. Underwrite securities issued by other persons, except to the extent
that the Fund may be deemed to be an underwriter under certain securities laws  
in the disposition of "restricted securities";                                  

   5. Purchase or sell commodities or commodities contracts, except to the
extent disclosed in the current Prospectus and/or SAI of the Fund; and          

6. Purchase or sell real estate (although investments in marketable 
securities of companies engaged in such activities and securities secured by    
real estate or interests therein are not prohibited by this restriction).       

The following additional investment restrictions are not fundamental policies   
and therefore may be changed without the vote of a majority of the outstanding  
Shares of the Fund. Except as provided in the fundamental polices described     
above, the Fund may not purchase or otherwise acquire any securities if, as a   
result, more than 15% of the Fund's net assets would be invested in securities  
that are illiquid.                                                              

If any percentage restriction described above is satisfied at the time of       
purchase, a later increase or decrease in such percentage resulting from a      
change in net asset value will not constitute a violation of such restriction.  
However, should a change in net asset value or other external events cause the  
Fund's investments in illiquid securities to exceed the limitation set forth in 
the Fund's                                                                      

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Prospectus, the Fund will act to cause the aggregate amount of illiquid         
securities to come within such limit as soon as reasonably practicable. In such 
an event, however, the Fund would not be required to liquidate any portfolio    
securities where the Fund would suffer a loss on the sale of such securities.   

DISCLOSURE OF PORTFOLIO HOLDINGS                                                

It is the policy of the Fund to protect the confidentiality of its holdings and 
prevent the selective disclosure of non-public information about the Fund's     
portfolio holdings. The Fund's service providers, to which the Fund may disclose
non-public information about its portfolio holdings, are required to comply with
this policy. No information concerning the portfolio holdings of the Fund may be
disclosed to any unaffiliated third party, except as provided below. The Fund's 
Board of Trustees has adopted formal procedures governing compliance with these 
policies.                                                                       

The Fund, or their duly authorized service providers, may publicly disclose     
holdings of the Fund in accordance with regulatory requirements, such as        
periodic portfolio disclosure in filings with the Securities and Exchange       
Commission. A summary or list of the Fund's completed purchases and sales may   
only be made available after the public disclosure of the Fund's portfolio      
holdings.                                                                       

There are numerous mutual fund evaluation services such as Standard & Poor's,   
Morningstar or Lipper Analytical Services, and due diligence departments of     
broker-dealers and wirehouses that regularly analyze the portfolio holdings of  
mutual funds in order to monitor and report on various attributes including     
style, capitalization, maturity, yield, beta, etc. These services and           
departments then distribute the results of their analysis to the public, paid   
subscribers and/or in-house brokers. In order to facilitate the review of the   
Fund by these services and departments, the Fund may distribute (or authorize   
their service providers to distribute) portfolio holdings information to such   
services and departments before their public disclosure is required or          
authorized provided that: (i) the recipient agrees not to distribute the        
portfolio holdings or results of the analysis to third parties, other           
departments, or persons who are likely to use the information for purposes of   
purchasing or selling the Fund, before the portfolio holdings or results of the 
analysis become public information; and (ii) the recipient signs a written      
confidentiality agreement. Persons and entities unwilling to execute an         
acceptable confidentiality agreement may only receive portfolio holdings        
information that has otherwise been publicly disclosed.                         

Neither the Fund nor its service providers received any compensation from such  
services and departments. Subject to such departures as the Fund's chief        
compliance officer ("CCO") believes reasonable and consistent with protecting   
the confidentiality of the portfolio information, each confidentiality agreement
should generally provide that, among other things: the portfolio information is 
the confidential property of the Fund (and its service providers, if applicable)
and may not be shared or used directly or indirectly for any purpose except as  
expressly provided in the confidentiality agreement; the recipient of the       
portfolio information agrees to limit access to the portfolio information to its
employees (and agents) who, on a need to know basis, are (1) authorized to have 
access to the portfolio information and (2) subject to confidentiality          
obligations, including duties not to trade on non-public information, no less   
restrictive than the confidentiality obligations contained in the               
confidentiality agreement; and upon written request, the recipient agrees to    
promptly return or destroy, as directed, the portfolio information.             

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The Board and the CCO may authorize disclosure of the portfolio securities      
holdings of the Fund and may, on a case-by-case basis, impose additional        
restrictions on the dissemination of portfolio information and waive certain    
requirements. To the extent required by law, the CCO reports to the Board of    
Trustees any violations of the Fund's policies and procedures on disclosure of  
portfolio holdings.                                                             

Any disclosure of the Fund's securities holdings must serve a legitimate        
business purpose of the Fund and must be in the best interest of the Fund's     
shareholders. In making such a determination, the CCO must conclude that the    
anticipated benefits and risks to the Fund and its shareholders justify the     
purpose of the disclosure. A further determination must be made to ensure that  
any conflicts of interest between the Fund, its shareholders, and any third     
party are resolved prior to disclosure. The Fund reserve the right to request   
certifications from senior officers of authorized recipients that the recipient 
is using the portfolio holdings information only in a manner consistent with the
Fund's policy and any applicable confidentiality agreement.                     

PORTFOLIO TURNOVER                                                              

Changes may be made in the Fund's portfolio consistent with the investment      
objective and policies of the Fund whenever such changes are believed to be in  
the best interests of the Fund and its Shareholders. The portfolio turnover     
rates for the Fund may vary greatly from year to year as well as within a       
particular year, and may be affected by cash requirements for redemptions of    
Shares and by requirements which enable the Fund to receive certain favorable   
tax treatments. High portfolio turnover rates will generally result in higher   
transaction costs to the Fund, including brokerage commissions.                 

The Fund will be managed without regard to its portfolio turnover rate.         

The portfolio turnover rate for the Fund is calculated by dividing the lesser of
the Fund's purchases or sales of portfolio securities for the year by the       
monthly average value of the securities. The Securities and Exchange Commission 
requires that the calculation exclude all securities whose remaining maturities 
at the time of acquisition are one year or less.                                

 NET ASSET VALUE

The net asset value of the Fund is determined and the Shares of the Fund are    
priced as of the close of the NYSE (generally 4:00 p.m. Eastern Time) on each   
Business Day of the Trust (other than a day on which there are insufficient     
changes in the value of the Fund's portfolio securities to materially affect the
Fund's net asset value or a day on which no Shares of the Fund are tendered for 
redemption and no order to purchase any Shares is received). A "Business Day" is
a day on which the NYSE is open for trading. The NYSE generally is open every   
week, Monday through Friday, except when the following holidays are celebrated: 
New Year's Day, Martin Luther King, Jr. Day (the third Monday in January),      
President's Day (the third Monday in February), Good Friday, Memorial Day (the  
last Monday in May), Independence Day, Labor Day (the first Monday in           
September), Thanksgiving Day (the fourth Thursday in November) and Christmas    
Day.                                                                            

VALUATION OF THE FUND                                                           

Portfolio securities, the principal market for which is a securities exchange,  
generally will be valued at the closing price on that exchange on the day of    
computation, or, if there have been no                                          

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sales during such day, at the last sales price on any other exchange or trading 
system. Portfolio securities, the principal market for which is not a securities
exchange, generally will be valued on the basis of the mean between the last bid
and ask quotes furnished by primary market makers for those securities. For     
NASDAQ/NMS traded securities, market value may also be determined on the basis  
of the Nasdaq Official Closing Price (NOCP) instead of the closing price.       
Foreign securities generally are valued based on quotations from the primary    
market in which they are traded and are translated from the local currency into 
U.S. dollars using current exchange rates. The value of foreign securities may  
be affected significantly on a day that the NYSE is closed and an investor is   
unable to purchase or redeem Shares. Shares of investment companies are valued  
on the basis of their net asset values, subject to any applicable sales charge. 
Portfolio securities with a remaining maturity of 60 days or less will be valued
either at amortized cost or original cost plus accrued interest, which          
approximates current value.                                                     

All other assets and securities, including securities for which market          
quotations are not readily available, will be valued at their fair market value 
as determined in good faith under the general supervision of the Board of       
Trustees. If a significant market event impacting the value of a portfolio      
security occurs subsequent to the close of trading in the security, but prior to
the calculation of the Fund's net asset value per share, market quotations for  
that security may not be readily available. If the impact of such a significant 
market event materially affects the net asset value per share of the Fund, an   
affected portfolio security will be valued at fair market value as determined in
good faith under the general supervision of the Board of Trustees.              

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Shares of the Fund are sold on a continuous basis by the Distributor, and   
the Distributor has agreed to use appropriate efforts to solicit all purchase   
orders. The public offering price of Shares of the Fund is their net asset value
per Share.                                                                      

The Trust may suspend the right of redemption or postpone the date of payment   
for Shares during any period when (a) trading on the NYSE is restricted by      
applicable rules and regulations of the Securities and Exchange Commission, (b) 
the NYSE is closed for other than customary weekend and holiday closings, (c)   
the Securities and Exchange Commission has by order permitted such suspension,  
or (d) an emergency exists as a result of which (i) disposal by the Trust of    
securities owned by it is not reasonably practical or (ii) it is not reasonably 
practical for the Trust to determine the fair market value of its net assets.   

Shares may be redeemed without charge on any day that net asset value is        
calculated. All redemption orders are effected at the net asset value per Share 
next determined after receipt by the Distributor of a redemption request.       
Payment for Shares redeemed normally will be made within seven days.            

The Trust intends to pay cash for all Shares redeemed, but under conditions     
which make payment in cash unwise, payment may be made wholly or partly in      
portfolio securities at their then market value equal to the redemption price.  
In such cases, a Shareholder may incur brokerage costs in converting such       
securities to cash.                                                             

The Fund reserves the right to discontinue offering Shares at any time, or to   
cease operations entirely.                                                      

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 MANAGEMENT OF THE TRUST

MANAGEMENT INFORMATION                                                          

The names of the Trustees, their addresses, dates of birth, positions, principal
occupation(s) during the past five years, number of portfolios in the fund      
complex overseen, and other directorships held by each Trustee and executive    
officer who is an "interested person" (as defined in the 1940 Act) and each     
non-interested Trustee are set forth below:                                     

Trustees                                                                        

                                                        [Enlarge/Download Table]

                                                                                 NUMBER OF                            
                                                                                PORTFOLIOS                            
                                               TERM OF          PRINCIPAL        IN FUND                              
                            POSITION(S)       OFFICE AND      OCCUPATION(S)      COMPLEX                              
   NAME, ADDRESS, AND        HELD WITH         LENGTH OF      DURING PAST 5      OVERSEEN       OTHER TRUSTEESHIPS    
     DATE OF BIRTH             TRUST          TIME SERVED         YEARS         BY TRUSTEE        HELD BY TRUSTEE*    
--------------------------  -----------     ----------------  --------------    -----------  -------------------------
                                                                                                                      
NON-INTERESTED TRUSTEES                                                                                               

James H. Woodward             Trustee        Indefinite;      Chancellor            15        The Coventry Group      
9201 University City Blvd.                   4/97 to present  Emeritus,                                               
Charlotte, NC 28223                                           University of                                           
Date of Birth:  11/24/1939                                    North Carolina                                          
                                                              at Charlotte -                                          
                                                              7/05 to present;                                        
                                                              Chancellor,                                             
                                                              University of                                           
                                                              North Carolina                                          
                                                              at Charlotte --                                         
                                                              7/89 to 7/05                                            

Michael Van Buskirk           Trustee        Indefinite;      Chief Executive       15        The Coventry Group      
3435 Stelzer Road             and Chairman   4/97 to present  Officer, Ohio                                           
Columbus, OH 43219            of the Board                    Bankers Assoc.                                          
Date of Birth:  2/22/1947                                     (industry trade                                         
                                                              association)                                            
                                                              -- 5/91 to                                              
                                                              present                                                 

Maurice Stark                 Trustee        Indefinite;      Consultant,           15        The Coventry Group      
7662 Cloister Drive                          3/04 to present  (part-time)                                             
Columbus, OH 43235                                            Battelle                                                
Date of Birth: 9/23/1935                                      Memorial                                                
                                                              Institute --                                            
                                                              1/95 to present                                         

Diane E. Armstrong            Trustee        Indefinite;      Principal of          15        The Coventry Group      
3435 Stelzer Road                            2/06 to present  King Dodson                                             
Columbus, OH  43219                                           Armstrong                                               
Date of Birth: 7/02/1964                                      Financial                                               
                                                              Advisors, Inc.-                                         
                                                              8/03 to present;                                        

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                                                        [Enlarge/Download Table]
                                                                                                     
                                                     Director of                                     
                                                     Financial                                       
                                                     Planning,                                       
                                                     Hamilton Capital                                
                                                     Management -                                    
                                                     4/00 to 8/03                                    
INTERESTED TRUSTEE                                                                                   

Walter B. Grimm(1)         Trustee  Indefinite;      Co-Owner, Leigh   15  American Performance Funds
3435 Stelzer Road                   4/97 to present  Investments, Inc.                               
Columbus, OH 43219                                   (Real Estate) -       The Coventry Group        
Date of Birth:  6/30/1945                            1/06 to present;                                
                                                     Employee of           Legacy Funds Group        
                                                     BISYS Fund                                      
                                                     Services -- 6/92      Performance Funds Trust   
                                                     to 9/05                                         

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

*     Not reflected in prior column.                                            

(1)   Mr. Grimm may be deemed to be an "interested person," as defined by the   
  Investment Company Act of 1940, due to his prior employment with BISYS
Fund Services, the Fund's distributor.                              

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Executive Officers                                                              

                                                        [Enlarge/Download Table]

                                                                                       PRINCIPAL          
   NAME, ADDRESS, AND      POSITION(S) HELD WITH      TERM OF OFFICE AND         OCCUPATION(S) DURING     
     DATE OF BIRTH                 TRUST             LENGTH OF TIME SERVED           PAST 5 YEARS         
-------------------------  -----------------------  -------------------------  -------------------------  
                                                                                                          
R. Jeffrey Young           President                 Indefinite; 9/05 to        Employee of BISYS         
3435 Stelzer Road                                    present                    Fund Services (10/93 to   
Columbus, OH 43219                                                              present).                 
Date of Birth: 8/22/1964                                                                                  

Eric Phipps                Anti-Money                Indefinite; 11/06 to       Employee of BISYS         
3435 Stelzer Road          Laundering Officer        present                    Fund Services (06/06      
Columbus, OH 43219         and Chief Compliance                                 to present); employee     
Date of Birth: 6/20/1971   Officer                                              of the United States      
                                                                                Securities and Exchange   
                                                                                Commission (10/04 to      
                                                                                05/06); employee for      
                                                                                BISYS Fund Services       
                                                                                a Director in Compliance  
                                                                                Services (12/95 to 10/04).

Linda A. Durkin            Treasurer                 Indefinite; 11/06 to       Employee of BISYS         
3435 Stelzer Road                                    present                    Fund Services (9/06 to    
Columbus, OH 43219                                                              present); employee of     
Date of Birth:                                                                  Investors Bank and Trust  
11/1/1960                                                                       (2/06 to 9/06); employee  
                                                                                of RR Donnelly (6/03 to   
                                                                                1/06); Vice President -   
                                                                                Director of Fund          
                                                                                Administration at         
                                                                                Mercantile - Safe Deposit 
                                                                                and Trust Co. (5/93 to    
                                                                                6/02).                    

The officers of the Trust are "interested persons" (as defined in the 1940 Act) 
and receive no compensation directly from the Fund for performing the duties of 
their offices.                                                                  

BOARD OF TRUSTEES                                                               

Overall responsibility for management of the Trust rests with its Board of      
Trustees, who are elected by the Shareholders of the Trust. The Trustees elect  
the officers of the Trust to supervise actively its day-to-day operations.      

Valuation Committee                                                             

The Board of Trustees has a Valuation Committee whose function is to monitor the
valuation of portfolio securities and other investments and, as required by the 
Trust's valuation policies, when the Board is not in session it shall determine 
the fair value of portfolio holdings after consideration of all relevant        
factors, which determinations shall be reported to the full Board. The Valuation
Committee consists of at least two Independent Trustees.                        
The Valuation Committee held no meetings during the last year.                  

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Audit Committee                                                                 

The Board of Trustees has an Audit Committee, composed of the independent       
Trustees, whose function is to oversee the financial reporting and internal     
controls of the Trust. The audit committee (i) recommends to the Board of       
Trustees the selection of an independent public accounting firm; (ii) annually  
reviews the scope of the proposed audit, the audit procedures to be utilized and
the proposed audit fees; (iii) reviews the annual audit with the independent    
auditors; (iv) reviews the adequacy and effectiveness of internal controls and  
procedures. The Audit Committee held two meetings during the fiscal year ended  
December 31, 2006                                                               

Nominating Committee                                                            

The Board of Trustees' Nominating Committee recommends nominations for          
membership on the Board. It evaluates candidates' qualifications for Board      
membership and, with respect to nominees for positions as Independent Trustees, 
their independence from the Fund's investment advisors and other principal      
service providers. The Committee meets as necessary to identify and evaluate    
nominees for Trustee and to make its recommendations to the Board. The          
Nominating Committee is composed of all Independent Trustees of the Trust. The  
Nominating Committee held no meetings during the fiscal year ended December 31, 
2006.                                                                           

Listed below for each Trustee is a dollar range of securities beneficially owned
in the Fund together with the aggregate dollar range of equity securities in all
registered investment companies overseen by each Trustee that are in the same   
family of investment companies as the Trust, as of December 31, 2006.           

                                                                [Download Table]

                                              AGGREGATE DOLLAR RANGE OF EQUITY 
                                                SECURITIES IN ALL REGISTERED   
                                               INVESTMENT COMPANIES OVERSEEN BY
                      DOLLAR RANGE OF EQUITY   TRUSTEE IN FAMILY OF INVESTMENT 
  NAME OF TRUSTEE    SECURITIES IN THE TRUST            COMPANIES              
-------------------  -----------------------  ---------------------------------
                                                                               
James H. Woodward             None                           None              
Michael Van Buskirk    $50,001 - $100,000               Over $100,000          
Diane E. Armstrong            None                           None              
Walter B. Grimm               None                           None              
Maurice Stark                 None                           None              

As of April 1, 2007, the Trustees and officers of the Trust, as a group, owned  
less than one percent of the Shares of any portfolio of the Trust.              

No non-interested Trustee (or an immediate family member thereof) had any direct
or indirect interest, the value of which exceeds $60,000, in the Adviser, the   
principal underwriter of the Trust, or any entity controlling, controlled by or 
under common control with the Adviser or the principal underwriter of the Trust 
(no including registered investment companies). Set forth in the table below is 
information regarding each non-interested Trustee's (and his immediate family   
members') share ownership in securities of the Adviser, the principal           
underwriter of the Trust, and any entity controlling, controlled by or under    
common control with the Adviser or principal underwriter of the Trust (not      
including registered investment companies).                                     

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                                                                [Download Table]

                      NAME OF OWNERS AND                                            
                       RELATIONSHIPS TO            TITLE OF   VALUE OF   PERCENT OF 
 NAME OF TRUSTEE           TRUSTEE        COMPANY    CLASS   SECURITIES     CLASS   
--------------------  ------------------  -------  --------  ----------  -----------
                                                                                    
James H. Woodward            None          None       None      None       None     
Michael Van Buskirk          None          None       None      None       None     
Maurice Stark                None          None       None      None       None     
Diane E. Armstrong           None          None       None      None       None     

No non-interested Trustee or immediate family member has during the two most    
recently completed calendar years had: (i) any material interest, direct or     
indirect, in any transaction or series of similar transactions, in which the    
amount involved exceeds $60,000; (ii) any securities interest in the principal  
underwriter of the Trust or the Adviser or their affiliates (other than the     
Trust); or (iii) any direct or indirect relationship of any nature, in which the
amount involved exceeds $60,000, with:                                          

- the Fund;                                                   

- an officer of the Fund;                                     

        - an investment company, or person that would be an investment company
        but for the exclusions provided by sections 3(c)(1) and 3(c)(7) of
   the 1940 Act, having the same investment adviser or principal
          underwriter as the Fund or having an investment adviser or principal
         underwriter that directly or indirectly controls, is controlled by,
          or is under common control with the Adviser or principal underwriter
of the Fund;                                              

     - an officer of an investment company, or a person that would be an
    investment company but for the exclusions provided by sections
     3(c)(1) and 3(c)(7) of the 1940 Act, having the same investment
          adviser or principal underwriter as the Fund or having an investment
  adviser or principal underwriter that directly or indirectly
     controls, is controlled by, or is under common control with the
Adviser or principal underwriter of the Fund;             

- the Adviser or principal underwriter of the Fund,           

   - an officer of the Adviser or principal underwriter of the Fund;

        - a person directly or indirectly controlling, controlled by, or under
           common control with the Adviser or principal underwriter of the Fund;
or                                                        

         - an officer of a person directly or indirectly controlling, controlled
           by, or under common control with the Adviser or principal underwriter
of the Fund.                                              

TRUSTEE COMPENSATION                                                            

The Trust pays each Trustee who is not an employee of BISYS or its affiliates a 
retainer fee at the rate of $500 per calendar quarter, reasonable out-of-pocket 
expenses, $750 for each regular meeting of the Board of Trustees attended in    
person, and $250 for each regular meeting of the Board of Trustees attended by  
telephone. The Trust also pays each such Trustee $750 for each                  

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special meeting of the Board of Trustees attended in person, and $250 for each  
special meeting of the Board of Trustees attended by telephone. For the fiscal  
year ended December 31, 2006, the Trust paid the following compensation to the  
Trustees of the Trust:                                                          

                                                        [Enlarge/Download Table]

                                                                                            TOTAL COMPENSATION  
                                 AGGREGATE      PENSION OR RETIREMENT   ESTIMATED ANNUAL    FROM FUNDS AND FUND 
                            COMPENSATION FROM   BENEFITS ACCRUED AS      BENEFITS UPON       COMPLEX** PAID TO  
 NAME OF PERSON, POSITION         FUNDS        PART OF FUND EXPENSES*     RETIREMENT             TRUSTEES       
--------------------------  -----------------  -----------------------  -----------------  ---------------------
                                                                                                                
James H. Woodward, Trustee        $985                   -                     -                 $22,000        

Michael Van Buskirk,                                                                                            
Trustee                           $985                   -                     -                 $20,250        

Walter B. Grimm, Trustee          $976                   -                     -                 $19,750        

Maurice Stark, Trustee            $982                   -                     -                 $20,750        

Diane E. Armstrong,***            $982                   -                     -                 $20,750        
Trustee                                                                                                         

*     The Trust does not accrue pension or retirement benefits as part of Fund  
 expenses, and Trustees of the Trust are not entitled to benefits upon
retirement from the Board of Trustees.                              

**    The Fund Complex consists of the Trust and The Coventry Group.            

***   Ms. Armstrong began serving as a Trustee effective February, 2006.        

The officers of the Trust receive no compensation directly from the Trust for   
performing the duties of their offices. BISYS Fund Services Ohio, Inc. receives 
fees from the Trust for providing certain administration, fund accounting and   
transfer agency services.                                                       

INVESTMENT ADVISER                                                              

Subject to the general supervision of the Trust's Board of Trustees and in      
accordance with the Fund's investment objectives and restrictions, investment   
advisory services are provided to the Fund by AFM, 12309 Briarbush Lane,        
Potomac, Maryland 20854-1032 pursuant to an Investment Advisory Agreement dated 
March 1, 2005 (the "Investment Advisory Agreement").                            

Unless sooner terminated, the Investment Advisory Agreement continues in effect 
as to the Fund for an initial term of up to two years, and thereafter for       
successive one-year periods if such continuance is approved at least annually by
the Board of Trustees or by vote of a majority of the outstanding Shares of the 
Fund and a majority of the Trustees who are not parties to the Investment       
Advisory Agreement or interested persons (as defined in the 1940 Act) of any    
party to the Investment Advisory Agreement by votes cast in person at a meeting 
called for such purpose. The                                                    

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Investment Advisory Agreement is terminable as to the Fund at any time on 60    
days' written notice without penalty by the Trustees, by vote of a majority of  
the outstanding Shares of the Fund, or by AFM. The Investment Advisory Agreement
also terminates automatically in the event of any assignment, as defined in the 
1940 Act.                                                                       

The Investment Advisory Agreement provides that AFM shall not be liable for any 
error of judgment or mistake of law or for any loss suffered by the Trust in    
connection with the performance of its duties, except a loss resulting from a   
breach of fiduciary duty with respect to the receipt of compensation for        
services or a loss resulting from willful misfeasance, bad faith, or gross      
negligence on the part of AFM or a Sub-Adviser in the performance of their      
duties, or from reckless disregard of their duties and obligations thereunder.  

Under the Investment Advisory Agreement, AFM has agreed to provide, either      
directly or through one or more sub-advisers, investment advisory services for  
the Fund as described in the Prospectus and this SAI. For the services provided 
and expenses assumed pursuant to the Investment Advisory Agreement, AFM is      
entitled to a fee of 1.25% of average daily net assets of the Fund, computed    
daily and paid monthly. For the fiscal years ended December 31, 2005 and        
December 31, 2006, the Fund incurred investment advisory fees equal to $44,727, 
and $75,261, respectively, of which all was waived by AFM.                      

AFM contractually agreed to waive all or a portion of its fees and reimburse    
certain expenses for the Fund through April 30, 2006 to the extent that         
expenses exceeded 2.00%, and as of May 1, 2006, to the extent that expenses     
exceeded 1.75% of the average daily net assets of the Fund. Under the terms of  
that agreement, AFM may request and receive reimbursement of the investment     
advisory fees waived and other expenses reimbursed by it at a later date not to 
exceed three years from the period ending April 30 in which they were taken.    
Such reimbursement shall be made monthly, but only if the operating expenses of 
the Fund are at an annualized rate less than the expense limit for the payments 
made through the period ended December 31. As of December 31, 2005, and for the 
fiscal year ended December 31, 2006, AFM waived and/or reimbursed $230,343 and  
$239,564, respectively.                                                         

From time to time, advertisements, supplemental sales literature, and           
information furnished to present or prospective Shareholders of the Fund may    
include descriptions of AFM including, but not limited to, (i) descriptions of  
AFM's operations; (ii) descriptions of certain personnel and their functions;   
and (iii) statistics and rankings related to AFM's operations.                  

INVESTMENT SUB-ADVISER                                                          

Prior to its termination on February 15, 2007, investment sub-advisory services 
had been provided to the Fund by Thinkorswim Advisors, Inc. ("TOS"), 600 West   
Chicago Avenue Chicago, Illinois 60610 pursuant to a sub-advisory agreement     
with TOS dated March 1, 2005. The agreement between AFM and a Sub-Adviser may   
be referred to as the "Sub-Advisory Agreement."                                 

Under the Sub-Advisory Agreement with TOS, TOS agreed to provide investment     
advisory services for the Fund as described in the Prospectus. For its services 
and expenses incurred under the Sub-Advisory Agreement, TOS was entitled to a   
fee payable by AFM. The fee was computed daily and paid monthly at an annual    
rate of 0.35% of the Fund's average daily net assets or such lower fee as may be
agreed upon in writing by AFM and TOS; provided that if AFM waived some or all  
of its investment advisory fee, TOS would waive its fee so that it would receive
no more than seventy                                                            

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percent (70%) of the net investment advisory fee paid to AFM. For the fiscal    
years ended December 31, 2005 and December 31, 2006, TOS was entitled to receive
advisory fees of $12,519 and $75,261, respectively.                             

The Adviser may pay, out of its own assets and at no cost to the Fund, amounts  
to certain broker-dealers or other financial intermediaries in connection with  
the provision of administrative services and/or with the distribution of the    
Fund's Shares. Investors may be able to obtain more information about these     
payments and services from their brokers and other financial intermediaries and 
should so inquire if they would like additional information.                    

Portfolio Managers. Steven J. Milloy and Thomas J. Borelli are jointly and      
primarily responsible for managing the Fund.                                    

Other Accounts Managed. Each portfolio manager also has responsibility for the  
day-to-day management of accounts other than the Fund for which he or she serves
as portfolio manager. As of December 31, 2006, information regarding these other
accounts is set forth below.                                                    

                                                        [Enlarge/Download Table]

                       OTHER REGISTERED INVESTMENT                                                                
                                COMPANIES            OTHER POOLED INVESTMENT VEHICLES      OTHER ACCOUNTS         
                       ----------------------------  --------------------------------  -------------------------- 
  PORTFOLIO MANAGER      NUMBER       TOTAL ASSETS     NUMBER           TOTAL ASSETS   NUMBER        TOTAL ASSETS 
---------------------  ---------      ------------   ---------          ------------   ------        -------------
                                                                                                                  
Steven J. Milloy             0              0             0                  0            0               0       

Thomas J. Borelli            0              0             0                  0            0               0       

As of December 31, 2006, the indicated portfolio managers managed the following 
numbers of accounts in each of the indicated categories, having the indicated   
total assets in each category, with respect to which the advisory fee is based  
on the performance of the account.                                              

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                                                        [Enlarge/Download Table]

                         REGISTERED INVESTMENT                                                                 
                               COMPANIES           OTHER POOLED INVESTMENT VEHICLES      OTHER ACCOUNTS        
                         ------------------------  --------------------------------  --------------------------
 PORTFOLIO MANAGER       NUMBER      TOTAL ASSETS    NUMBER           TOTAL ASSETS   NUMBER        TOTAL ASSETS
-----------------------  ------      ------------  ---------          ------------   ------        ------------
                                                                                                               
Steven J. Milloy            0              0            0                  0            0               0      

Thomas J. Borelli           0              0            0                  0            0               0      

CONFLICTS OF INTERESTS:                                                         

ACTION                                                                          

Action currently does not manage other registered investment companies, pooled  
investment vehicles and other investment vehicles.                              

COMPENSATION.                                                                   

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AFM                                                                             

The portfolio managers of the Fund currently are not compensated and there is no
compensation structure in place.                                                

Ownership of Fund Shares. The table below sets forth the amount of shares       
beneficially owned by each portfolio manager in the Fund for which he or she    
serves as portfolio manager as of December 31, 2006, stated as one of the       
following dollar ranges: None; $1-$10,000; $10,001-$50,000; $50,001-$100,000;   
$100,001-$500,000; $500,001-$1,000,000; or over $1,000,000.                     

                                                                [Download Table]

  PORTFOLIO MANAGER     DOLLAR RANGE     
--------------------  -------------------
                                         
Steven J. Milloy          $1-$10,000     

Thomas J. Borelli     $100,000-$500,000  

PROXY VOTING POLICIES AND PROCEDURES                                            

The Board of Trustees has adopted proxy voting policies and procedures for the  
Trust ("Trust Proxy Voting Policies and Procedures") with respect to voting     
proxies relating to the portfolio securities held by the Fund. The Board of     
Trustees has delegated the authority to vote proxies related to portfolio       
securities of the Fund to the Adviser. Under this authority, the Adviser is     
required to vote proxies related to the portfolio securities in the best        
interests of the Fund. The Trust Proxy Voting Policies and Procedures require   
that the Board of Trustees annually review the policies, procedures and other   
guidelines for voting proxies for the Adviser. The Proxy Voting Policies and    
Procedures also require the Adviser to report annually with respect to all      
proxies it has received for action. The report will show all proxies voted in a 
manner inconsistent with the Adviser's Proxy Voting Policies and Procedures or  
not voted. With respect to proxies identified as involving a conflict of        
interest, the Adviser will submit a report indicating the nature of the conflict
and how it was resolved.                                                        

The Adviser has implemented written Proxy Policies and Procedures that describe 
how the Adviser will vote proxies relating to certain proposals. The            

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Proxy Voting Policies and Procedures are designed to reasonably ensure that     
proxies are voted prudently and in the best interest of their advisory clients  
for whom they have voting authority, including the Fund, as appropriate.        

Under the Trust Proxy Voting Policies and Procedures, the Board of Trustees will
provide the Trust's consent to vote in matters where the Adviser seeks such     
consent because of a conflict of interest that arises in connection with a      
particular vote, or for other reasons.                                          

Under the Adviser's Proxy Voting Policies and Procedures, the Adviser will vote 
proxies based solely with regard to the decisions impact on the stocks held in  
portfolios managed by the Adviser. The Adviser will not be responsible for      
proxies not received from the Custodian but will monitor whether the custodian  
is delivering proxy statements in a timely manner. Additionally, decisions with 
respect to voting proxies are in the discretion of the Adviser's portfolio      
manager.                                                                        

If the Fund invests in other mutual funds that have specific screens disclosed  
in their registration statement, the Adviser will vote proxies consistent with  
these screens.                                                                  

Information on how the Fund voted proxies for the 12-month period ended June 30 
of each year is available without charge: (1) from the Fund, upon request by    
calling 1-800-766-3960 and (2) on the SEC's web site at http://www.sec.gov.     

PORTFOLIO TRANSACTIONS                                                          

AFM determines, subject to the general supervision of the Board of Trustees and 
in accordance with the Fund's investment objective and restrictions, which      
securities are to be purchased and sold by the Fund, and which brokers or       
dealers are to be eligible to execute the Fund's portfolio transactions.        

Purchases and sales of portfolio securities which are debt securities usually   
are principal transactions in which portfolio securities are normally purchased 
directly from the issuer or from an underwriter or market maker for the         
securities. Purchases from underwriters of portfolio securities generally       
include a commission or concession paid by the issuer to the underwriter, and   
purchases from dealers serving as market makers may include the spread between  
the bid and asked price. Transactions on stock exchanges involve the payment of 
negotiated brokerage commissions. Transactions in the over-the-counter market   
are generally principal transactions with dealers. With respect to the          
over-the-counter market, the Trust, where possible, will deal directly with     
dealers who make a market in the securities involved except in those            
circumstances where better price and execution are available elsewhere.         

Allocation of transactions, including their frequency, to various brokers and   
dealers is determined by AFM in its best judgment and in a manner deemed fair   
and reasonable to Shareholders. In selecting a broker or dealer, AFM evaluates a
wide range of                                                                   

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criteria, including the commission rate or dealer mark-up, execution capability,
the broker's/dealer's positioning and distribution capabilities, back office    
efficiency, ability to handle difficult trades, financial stability, reputation,
prior performance, and, in the case of brokerage commissions, research. The     
primary consideration is the broker's ability to provide "best execution," which
is the best overall qualitative execution of the Fund's brokerage transactions, 
so that the total costs or proceeds to the Fund are the most favorable under the
circumstances. Subject to this consideration, brokers and dealers who provide   
supplemental investment research to AFM  may receive orders for transactions on 
behalf of the Trust. Research may include brokers' analyses of specific         
securities, performance and technical statistics, and information databases. It 
may also include maintenance research, which is the information that keeps AFM  
informed concerning overall economic, market, political and legal trends. Under 
some circumstances, AFM's evaluation of research and other broker selection     
criteria may result in one or a few brokers executing a substantial percentage  
of the Fund's trades. This might occur, for example, where a broker can provide 
best execution at a cost that is reasonable in relation to its services and the 
broker offers unique or superior research facilities, special knowledge or      
expertise in the Fund's relevant markets, or access to proprietary information  
about companies that are a majority of the Fund's investments.                  

Research information so received is in addition to and not in lieu of services  
required to be performed by AFM and does not reduce the fees payable to AFM by  
the Trust. Such information may be useful to AFM in serving both the Trust and  
other clients and, conversely, supplemental information obtained by the         
placement of business of other clients may be useful in carrying out its        
obligations to the Trust. While AFM generally seeks competitive commissions, the
Trust may not necessarily pay the lowest commission available on each brokerage 
transaction for the reasons discussed above.                                    

Investment decisions for the Fund are made independently from other portfolio,  
investment company or account managed by AFM. Any such other portfolio,         
investment company or account may also invest in the same securities as the     
Trust. When a purchase or sale of the same security is made at substantially the
same time on behalf of the Fund, portfolio, investment company or account, the  
transaction will be averaged as to price and available investments will be      
allocated as to amount in a manner which AFM believes to be equitable to the    
Fund and such other portfolio, investment company or account. In some instances,
this investment procedure may adversely affect the price paid or received by the
Fund or the size of the position obtained by the Fund. In making investment     
recommendations for the Trust, AFM will not inquire or take into consideration  
whether an issuer of securities proposed for purchase or sale by the Trust is a 
customer of AFM or BISYS, their parents or their subsidiaries or affiliates and,
in dealing with its customers, AFM, their parents, subsidiaries, and affiliates 
will not inquire or take into consideration whether securities of such customers
are held by the Trust.                                                          

For the fiscal years ended December 31, 2005 and December 31, 2006, the Fund    
paid aggregate brokerage commissions equal to $24,099 and $25,308, respectively.
For the fiscal years ended December 31, 2005 and December 31, 2006, AFM may     
have directed brokerage transactions to brokers because of research services    
provided ("research commission transactions"). For the Fund, $0 of commissions  
was paid on $0 of research commission transactions.                             

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ADMINISTRATOR                                                                   

BISYS Ohio (or "Administrator"), 3435 Stelzer Road, Columbus, Ohio 43219-3035,  
serves as general manager and administrator to the Trust pursuant to a          
Management and Administration Agreement dated March 1, 1999 (the "Administration
Agreement"). Prior to that date, BISYS served as general manager and            
administrator to the Trust. The Administrator assists in supervising all        
operations of the Fund (other than those performed by AFM under the Investment  
Advisory Agreement, by BISYS Ohio as fund accountant and dividend disbursing    
agent, and by the Trust's custodians). The Administrator provides financial     
services to institutional clients.                                              

Under the Administration Agreement, the Administrator has agreed to maintain    
office facilities for the Trust; furnish statistical and research data, clerical
and certain bookkeeping services and stationery and office supplies; prepare the
periodic reports to the Securities and Exchange Commission on Form N-SAR or any 
replacement forms therefor; compile data for, prepare for execution by the Fund 
and file certain federal and state tax returns and required tax filings; prepare
compliance filings pursuant to state laws with the advice of the Trust's        
counsel; keep and maintain the financial accounts and records of the Fund,      
including calculation of daily expense accruals; and generally assist in all    
aspects of the Trust's operations other than those performed by AFM under the   
Investment Advisory Agreement by the fund accountant and dividend disbursing    
agent, and by the Trust's custodians. Under the Administration Agreement, the   
Administrator may delegate all or any part of its responsibilities thereunder.  

The Administrator receives a fee from the Fund for its services as Administrator
and expenses assumed pursuant to the Administration Agreement, calculated daily 
and paid periodically, equal to the greater of (a) a fee calculated at the      
annual rate of 0.10% of the Fund's average daily net assets, or (b) $45,000 or  
such other fee as may from time to time be agreed upon by the Trust and the     
Administrator. The Administrator may voluntarily reduce all or a portion of its 
fee with respect to the Fund in order to increase the net income of the Fund    
available for distribution as dividends. For the fiscal years ended December 31,
2005 and December 31, 2006, the Fund incurred administration fees equal to      
$35,237 and $51,692 respectively of which $0 was waived or reimbursed by BISYS  
Ohio.                                                                           

The Administration Agreement is terminable with respect to the Fund upon mutual 
agreement of the parties to the Administration Agreement, upon notice given at  
least 60 days prior to the expiration of the Agreement's then-current term, and 
for cause (as defined in the Administration Agreement) by the party alleging    
cause, on no less than 60 days' written notice by the Board of Trustees or by   
the Administrator.                                                              

The Administration Agreement provides that the Administrator shall not be liable
for any error of judgment or mistake of law or any loss suffered by the Trust in
connection with the matters to which the Administration Agreement relates,      
except a loss resulting from willful misfeasance, bad faith, or gross negligence
in the performance of its duties, or from the reckless disregard by the         
Administrator of its obligations and duties thereunder.                         

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EXPENSES                                                                        

AFM and the Administrator bear all expenses in connection with the performance  
of its services other than the cost of securities (including brokerage          
commissions) purchased for the Fund. The Fund will bear the following expenses  
relating to their operations: taxes, interest, fees of the Trustees of the      
Trust, Securities and Exchange Commission fees, outside auditing and legal      
expenses, advisory and administration fees, fees and out-of-pocket expenses of  
the custodian and fund accountant, certain insurance premiums, costs of         
maintenance of the Trust's existence, costs of Shareholders' reports and        
meetings, and any extraordinary expenses incurred in the Fund's operations. Any 
expense reimbursements will be estimated daily and reconciled and paid on a     
monthly basis. Fees imposed upon customer accounts for cash management services 
are not included within Trust expenses for purposes of any such expense         
limitation.                                                                     

DISTRIBUTOR                                                                     

BISYS serves as distributor to the Trust pursuant to the Distribution Agreement 
dated June 1, 1997 (the "Distribution Agreement"). As distributor, BISYS acts as
agent for the Fund in the distribution of their Shares and, in such capacity,   
advertises and pays the cost of advertising, office space and personnel involved
in such activities. BISYS serves as distributor without remuneration from the   
Fund. Unless otherwise terminated, the Distribution Agreement continues for     
successive one-year periods if approved at least annually (i) by the Board of   
Trustees or by the vote of a majority of the outstanding Shares of the Trust,   
and (ii) by the vote of a majority of the Trustees who are not parties to the   
Distribution Agreement or interested persons (as defined in the 1940 Act) of any
party to the Distribution Agreement, cast in person at a meeting called for the 
purpose of voting on such approval. The Distribution Agreement automatically    
terminates in the event of any assignment, as defined in the 1940 Act.          

CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTING SERVICES                          

The Huntington National Bank serves as custodian to the Trust with respect to   
the Fund pursuant to a Custody Agreement dated as of March 1, 2005. As          
custodian, its responsibilities include safeguarding and controlling the Fund's 
cash and securities, handling the receipt and delivery of securities, and       
collecting interest and dividends on the Fund's investments.                    

BISYS Ohio serves as transfer agent and dividend disbursing agent for the Fund  
pursuant to an agreement dated as of March 1, 2005. Under this agreement, BISYS 
Ohio performs the following services, among others: maintenance of Shareholder  
records for each of the Trust's Shareholders of record; processing Shareholder  
purchase and redemption orders; processing transfers and exchanges of Shares on 
the Shareholder files and records; processing dividend payments and             
reinvestments; and assistance in the mailing of Shareholder reports and proxy   
solicitation materials.                                                         

In addition, BISYS Ohio provides certain fund accounting services to the Trust  
pursuant to a Fund Accounting Agreement dated March 1, 1999. Under the Fund     
Accounting Agreement, BISYS Ohio maintains the accounting books and records for 
the Fund, including journals containing an itemized daily record of all         
purchases and sales of portfolio securities, all receipts and disbursements of  
cash and all other debits and credits, general and auxiliary ledgers reflecting 
all asset, liability, reserve, capital, income and expense accounts, including  
interest accrued and                                                            

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interest received, and other required separate ledger accounts; maintains a     
monthly trial balance of all ledger accounts; performs certain accounting       
services for the Fund, including calculation of the daily net asset value per   
Share, calculation of the dividend and capital gain distributions, if any, and  
of yield, reconciliation of cash movements with custodians, affirmation to      
custodians of portfolio trades and cash settlements, verification and           
reconciliation with custodians of daily trade activity; provides certain        
reports; obtains dealer quotations, prices from a pricing service or matrix     
prices on all portfolio securities in order to mark the portfolio to the market;
and prepares an interim balance sheet, statement of income and expense, and     
statement of changes in net assets for the Fund.                                

BISYS Ohio receives an annual fee of $17,000, subject to certain per-Fund base  
fees, for its services as transfer agent and, for its services as fund          
accountant, BISYS Ohio receives a fee, computed daily and paid periodically, at 
an annual rate equal to the greater of 0.03% of the Fund's average daily net    
assets or $37,500.                                                              

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                   

The firm of Ernst & Young LLP, 1100 Huntington Center, 41 South High Street     
Columbus, Ohio 43215 serves as the independent registered public accounting firm
for the Fund. Its services comprise auditing the Fund's financial statement and 
preparing the Fund's federal tax return.                                        

LEGAL COUNSEL                                                                   

Thompson Hine LLP, 10 W.Broad Street Columbus, OH 43215 is counsel to the Trust 
and has passed upon the legality of the Shares offered hereby.                  

CODE OF ETHICS                                                                  

The Trust, AFM, and BISYS each have adopted a code of ethics under Rule 17j-1 of
the Investment Company Act of 1940, which is designed to prevent affiliated     
persons of the Trust, AFM, and BISYS from engaging in deceptive, manipulative,  
or fraudulent activities in connection with securities held or to be acquired by
the Fund (which may also be held by persons subject to a code of ethics). There 
can be no assurance that the codes will be effective in preventing such         
activities.                                                                     

ADDITIONAL INFORMATION

DESCRIPTION OF SHARES                                                           

The Trust is a Massachusetts business trust that was organized on July 20, 1994.
Prior to the date of this SAI, the Trust was named "Variable Insurance Funds."  
The Trust's Declaration of Trust was filed with the Secretary of State of the   
Commonwealth of Massachusetts on the same date. The Declaration of Trust, as    
amended and restated, authorizes the Board of Trustees to issue an unlimited    
number of Shares, which are units of beneficial interest, without par value. The
Trust currently has multiple series of Shares which represent interests in each 
series of the Trust. The Trust's Declaration of Trust authorizes the Board of   
Trustees to divide or redivide any unissued Shares of the Trust into one or more
additional series or classes by setting or changing in any one or more respects 
their respective preferences, conversion or other rights, voting power,         
restrictions, limitations as to dividends, qualifications, and terms and        
conditions of redemption.                                                       

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Shares have no subscription or preemptive rights and only such conversion or    
exchange rights as the Board of Trustees may grant in its discretion. When      
issued for payment as described in the Prospectus and this SAI, the Trust's     
Shares will be fully paid and non-assessable by the Trust. In the event of a    
liquidation or dissolution of the Trust, Shareholders of the Fund are entitled  
to receive the assets available for distribution belonging to the Fund, and a   
proportionate distribution, based upon the relative asset values of the         
respective series, of any general assets not belonging to any particular series 
which are available for distribution.                                           

Each Share represents an equal proportionate interest in the Fund, and is       
entitled to such dividends and distributions out of the income earned on the    
assets belonging to the Fund as are declared at the discretion of the Trustees. 
Shares are without par value. Shareholders are entitled to one vote for each    
dollar of value invested and a proportionate fractional vote for any fraction of
a dollar invested. Shareholders will vote in the aggregate and not by portfolio 
except as otherwise expressly required by law.                                  

An annual or special meeting of Shareholders to conduct necessary business is   
not required by the Trust's Declaration of Trust, the 1940 Act or other         
authority except, under certain circumstances, to elect Trustees, amend the     
Declaration of Trust, approve an investment advisory agreement and to satisfy   
certain other requirements. To the extent that such a meeting is not required,  
the Trust may elect not to have an annual or special meeting.                   

The Trust will call a special meeting of Shareholders for purposes of           
considering the removal of one or more Trustees upon written request therefor   
from Shareholders holding not less than 10% of the outstanding votes of the     
Trust. At such a meeting, a quorum of Shareholders (constituting a majority of  
votes attributable to all outstanding Shares of the Trust), by majority vote,   
has the power to remove one or more Trustees. In accordance with current laws,  
it is anticipated that an insurance company issuing a variable contract that    
participates in the Fund will request voting instructions from variable contract
owners and will vote shares or other voting interests in the separate account in
proportion of the voting instructions received.                                 

Rule 18f-2 under the 1940 Act provides that any matter required to be submitted 
to the holders of the outstanding voting securities of an investment company    
such as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding Shares of the Fund     
affected by the matter. For purposes of determining whether the approval of a   
majority of the outstanding Shares of the Fund will be required in connection   
with a matter, the Fund will be deemed to be affected by a matter unless it is  
clear that the interests of the Fund in the matter are identical, or that the   
matter does not affect any interest of the Fund. Under Rule 18f-2, the approval 
of an investment advisory agreement or any change in investment policy submitted
to Shareholders would be effectively acted upon with respect to a series only if
approved by a majority of the outstanding Shares of the Fund. However, Rule     
18f-2 also provides that the ratification of independent public accountants, the
approval of principal underwriting contracts, and the election of Trustees may  
be effectively acted upon by Shareholders of the Trust voting without regard to 
the Fund.                                                                       

VOTE OF A MAJORITY OF THE OUTSTANDING SHARES                                    

As used in the Fund's Prospectus and the SAI, "vote of a majority of the        
outstanding Shares of the Trust or the Fund" means the affirmative vote, at an  
annual or special meeting of Shareholders                                       

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duly called, of the lesser of (a) 67% or more of the votes of Shareholders of   
the Trust or the Fund present at such meeting at which the holders of more than 
50% of the votes attributable to the Shareholders of record of the Trust or the 
Fund are represented in person or by proxy, or (b) the holders of more than 50% 
of the outstanding votes of Shareholders of the Trust or the Fund.              

PRINCIPAL SHAREHOLDERS                                                          

                                                                [Download Table]

                                                                      Percent   
                                                                      of Fund   
Principal Shareholders                                             Beneficially 
as of April 1, 2007               Address                              Held     
------------------------------   -----------------------------     ------------ 

                                                                                
William A Dunn                   309 SE Osceola Street Suite            19%     
                                 208 Stuart, FL 34994                           
Dunn's Foundation for the                                                       
Advancement of Right                                                            
Thinking                                                                        

--------------------------------------------------------------------------------
Arthur Dantchik                  401 City Line Ave Suite 220            10%     
                                 Bala Cynwyd, PA 19004                          

--------------------------------------------------------------------------------
Thomas L. Phillips               1019 Basil Road                        10%     

Thomas L. Phillips Revocable     Mc Lean, VA 22101                              
Trust                                                                           

--------------------------------------------------------------------------------
Robert A Levy LLC                c/o Lavaughn T Davis                   10%     
                                 10018 Colesville Road                          
                                 Silver Spring, MD 20901                        

--------------------------------------------------------------------------------
Claws Foundation                 11921 Freedom Dr Suite 730             9%      

--------------------------------------------------------------------------------
The Randolph Foundation          255 E 49th St #23D                     9%      
                                 New York, NY 10017                             

--------------------------------------------------------------------------------
Donors Capital Fund              PO Box 1305                            9%      
                                 Alexandria, VA 22313                           

--------------------------------------------------------------------------------
The Ken and Laurie Levy          312 Boulevard                          6%      
Foundation Inc.                  Mountain Lakes, NJ 07046                       
--------------------------------------------------------------------------------

The principal shareholders may be deemed to be able to control the outcome of   
any matter submitted to a vote of the Shareholders of the Fund.                 

SHAREHOLDER AND TRUSTEE LIABILITY                                               

Under Massachusetts law, holders of units of interest in a business trust may,  
under certain circumstances, be held personally liable as partners for the      
obligations of the trust. However, the Trust's Declaration of Trust provides    
that Shareholders shall not be subject to any personal liability for the        
obligations of the Trust. The Declaration of Trust provides for indemnification 
out of the trust property of any Shareholder held personally liable solely by   
reason of his or her being or having been a Shareholder. The Declaration of     
Trust also provides that the Trust shall, upon request, reimburse any           
Shareholder for all legal and other expenses reasonably incurred in the defense 
of any claim made against the Shareholder for any act or obligation of the      
Trust, and shall satisfy any judgment thereon. Thus, the risk of a Shareholder  
incurring financial loss on account of Shareholder liability is limited to      
circumstances in which the Trust itself would be unable to meet its obligations.

The Declaration of Trust states further that no Trustee, officer, or agent of   
the Trust shall be personally liable in connection with the administration or   
preservation of the assets of the Trust or the conduct of the Trust's business; 
nor shall any Trustee, officer, or agent be personally liable to any person for 
any action or failure to act except for his own bad faith, willful misfeasance, 
gross negligence, or reckless disregard of his duties. The Declaration of Trust 
also provides that all persons having any claim against the Trustees or the     
Trust shall look solely to the assets of the Trust for payment.                 

ADDITIONAL TAX INFORMATION                                                      

Set forth below is a discussion of U.S. federal income tax issues concerning the
Fund and the purchase, ownership, and disposition of the Fund's shares. This    
discussion does not purport to be complete or deal with all aspects of federal  
income taxation that may be relevant to shareholders in light of their          
particular circumstances. This discussion is based upon the provisions of the   
Internal Revenue Code of 1986, as amended (the "Code"), the regulations         
promulgated thereunder, and judicial and administrative ruling authorities, all 
of which are subject to change, which change may be retroactive. Prospective    
investors should consult their own tax advisors with regard to the federal tax  
consequences of the purchase, ownership, or disposition of Fund shares, as well 
as the tax consequences arising under the laws of any state, foreign country, or
other taxing jurisdiction.                                                      

Taxation of the Fund                                                            

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The Fund intends to be taxed as a regulated investment company ("RIC") under    
Subchapter M of the Code. Accordingly, the Fund must, among other things, (a)   
derive in each taxable year at least 90% of its gross income from dividends,    
interest, payments with respect to certain securities loans, and gains from the 
sale or other disposition of stock, securities, or foreign currencies, net      
income derived from interest in a publicly traded partnership, or other income  
derived with respect to its business of investing in such stock, securities or  
currencies; and (b) diversify its holdings so that, at the end of the fiscal    
quarter, (i) at least 50% of the value of the Fund's total assets is represented
by cash and cash items, U.S. government securities, the securities of other     
regulated investment companies and other securities, with greater than 5% of the
value of the Fund's total assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is     
invested in the securities of any one issuer (other than U.S. government        
securities and the securities of other regulated investment companies), of two  
or more issuers which the Fund controls and which are determined to be engaged  
in the same or similar trades or businesses, or of one or more qualified        
publicly traded partnerships.                                                   

        As a RIC, the Fund generally is not subject to U.S. federal income tax
on income and gains that it distributes to shareholders, if at least 90% of the 
Fund's investment company taxable income (which includes, among other items,    
dividends, interest and the excess of any net short-term capital gains over net 
long-term capital losses) for the taxable year is distributed. The Fund intends 
to distribute all or substantially all of such income.                          

If, in any taxable year, the Fund fails to qualify as a RIC under the Code or   
fails to meet the distribution requirement, it would be taxed in the same manner
as an ordinary corporation and distributions to its shareholders would not be   
deductible by the Fund in computing its taxable income. In addition, the Fund's 
distributions, to the extent derived from its current or accumulated earnings   
and profits, would constitute dividends (which may be eligible for the corporate
dividends-received deduction) which are taxable to shareholders as ordinary     
income, even though those distributions might otherwise (at least in part) have 
been treated in the shareholders' hands as long-term capital gains. Such        
dividends would generally be eligible to be treated as "qualified dividends"    
(see below). If the Fund fails to qualify as a RIC in any year, it must pay out 
its earnings and profits accumulated in that year in order to qualify again as a
RIC. Moreover, if the Fund failed to qualify as a RIC for a period greater than 
one taxable year, the Fund may be required to recognize any net built-in gains  
with respect to certain of its assets (the excess of the aggregate gains,       
including items of income, over aggregate losses that would have been realized  
if the Fund had been liquidated) in order to qualify as a RIC in a subsequent   
year.                                                                           

Amounts not distributed on a timely basis in accordance with a calendar year    
distribution requirement are subject to a nondeductible 4% excise tax at the    
Fund level. To avoid the tax, the Fund must distribute during each calendar year
an amount equal to the sum of (1) at least 98% of its ordinary income (not      
taking into account any capital gains in excess of its capital losses) for the  
calendar year, (2) at least 98% of its capital gains in excess of its capital   
losses (adjusted for certain ordinary losses) for a one-year period generally   
ending on October 31 of the calendar year, and (3) all ordinary income and      
capital gains for previous years that were not distributed during such years. To
avoid application of the excise tax, the Fund intends to make distributions in  
accordance with the calendar year distribution requirement.                     

Distributions                                                                   

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Except as described below, distributions generally are taxable to each U.S.     
shareholder as ordinary income, whether paid in cash or shares. Dividends paid  
by the Fund to a corporate shareholder, to the extent such dividends are        
attributable to dividends received by the Fund from U.S. corporations, may,     
subject to limitation, be eligible for the dividends received deduction.        
However, the alternative minimum tax applicable to corporations may reduce the  
value of the dividends received deduction. In addition, distributions of        
investment company taxable income may be eligible to be treated as qualified    
dividend income, as discussed below, and taxed at long-term capital gain rates  
if received by non-corporate shareholders. Distributions of net capital gains   
(the excess of net long-term capital gains over net short-term capital losses)  
designated by the Fund as capital gain dividends, whether paid in cash or       
reinvested in Fund shares, will generally be taxable to shareholders as         
long-term capital gain, regardless of how long a shareholder has held Fund      
shares.                                                                         

Shareholders will be notified annually as to the U.S. federal tax status of     
distributions, and shareholders receiving distributions in the form of newly    
issued shares will receive a report as to the net asset value of the shares     
received. A distribution will be treated as paid on December 31 of a calendar   
year if it is declared by the Fund in October, November, or December of that    
year with a record date in such a month and paid by the Fund during January of  
the following year. Such distributions will be taxable to shareholders in the   
calendar year in which the distributions are declared, rather than the calendar 
year in which the distributions are received.                                   

If the net asset value of shares is reduced below a shareholder's cost as a     
result of a distribution by any Fund, such distribution generally will be       
taxable even though it represents a return of invested capital. Investors should
be careful to consider the tax implications of buying shares of the Fund just   
prior to a distribution. The price of shares purchased at this time will include
the amount of the forthcoming distribution, but the distribution will generally 
be taxable to the shareholder.                                                  

Current tax law generally provides for a maximum tax rate for individual        
taxpayers of 15% on long-term capital gains. The new law also provides for      
"qualified dividend income" to be taxed to non-corporate shareholders at        
individual long-term capital gain rates to the extent the Fund receives         
qualified dividend income. Qualified dividend income generally includes         
dividends from domestic corporations and dividends from foreign corporations    
that meet certain specified criteria, although dividends paid by REITs will not 
generally be eligible to qualify as qualified dividend income. The Fund         
generally can pass the tax treatment of qualified dividend income it receives   
through to Fund shareholders. For the Fund to receive qualified dividend income,
the Fund must meet certain holding period requirements (typically more than 60  
days) for the stock on which the otherwise qualified dividend is paid. In       
addition, the Fund cannot be obligated to make payments (pursuant to a short    
sale or otherwise) with respect to substantially similar or related property.   
The same provisions, including the more than 60-day holding period requirements,
apply to each shareholder's investment in the applicable Fund. The provisions of
the Code applicable to qualified dividend income and the 15% maximum individual 
tax rate on long-term capital gains are currently effective through 2008.       
Thereafter, qualified dividend income will no longer be taxed at the rates      
applicable to long-term capital gains, and the maximum individual tax rate on   
long-term capital gains will increase to 20%, unless Congress enacts legislation
providing otherwise. Distributions from the Fund attributable to investments in 
bonds and other debt instruments will not generally qualify for the lower rates.
Note that distributions of earnings from dividends paid by "qualified foreign   
corporations" can also qualify                                                  

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for the lower tax rates on qualifying dividends. Qualified foreign corporations 
are corporations incorporated in a U.S. possession, corporations whose stock is 
readily tradable on an established securities market in the U.S., and           
corporations eligible for the benefits of a comprehensive income tax treaty with
the United States which satisfy certain other requirements. Passive foreign     
investment companies are not treated as "qualified foreign corporations." The   
rate reductions do not apply to corporate taxpayers or to foreign shareholders. 
The Fund will be able to separately designate distributions of any qualifying   
long-term capital gains or qualifying dividends earned by the Fund that would be
eligible for the lower maximum rate. Further, because many companies in which   
the Fund invests do not pay significant dividends on their stock, the Fund may  
not derive significant amounts of qualifying dividend income that would be      
eligible for the lower rate on qualifying dividends.                            

Capital losses after October 31 ("post-October losses") within the taxable year 
are deemed to arise on the first business day of the Fund's next taxable year.  
After October 31, 2006, the Ford incurred and will elect to defer net capital   
losses in the approximate amount of $22,654.                                    

As of the latest tax year ended December 31, 2006, the Fund had net capital loss
carry forwards in the amount of $65,011, which will expire in 2014. These       
capital loss carry forwards can be used to offset future net capital gains, if  
any, to the extent provided by Treasury regulations                             

Foreign Taxes                                                                   

The Fund may be subject to certain taxes imposed by the countries in which it   
invests or operates. If the Fund qualifies as a RIC and if more than 50% of the 
value of the Fund's total assets at the close of any taxable year consists of   
stocks or securities of foreign corporations, such Fund may elect, for U.S.     
federal income tax purposes, to treat any foreign taxes paid by the Fund that   
qualify as income or similar taxes under U.S. income tax principles as having   
been paid by the Fund's shareholders. For any year for which the Fund makes such
an election, each shareholder will be required to include in its gross income an
amount equal to its allocable share of such taxes paid by the Fund and the      
shareholders will be entitled, subject to certain limitations, to credit their  
portions of these amounts against their U.S. federal income tax liability, if   
any, or to deduct their portions from their U.S. taxable income, if any. No     
deduction for foreign taxes may be claimed by individuals who do not itemize    
deductions. No credit may be claimed by a shareholder with respect to Fund      
shares that have been held less than 16 days. In any year in which it elects to 
"pass through" foreign taxes to shareholders, the Fund will notify shareholders 
within 60 days after the close of the Fund's taxable year of the amount of such 
taxes and the sources of its income.                                            

Generally, a credit for foreign taxes paid or accrued is subject to the         
limitation that it may not exceed the shareholder's U.S. tax attributable to his
or her total foreign source taxable income. For this purpose, if the            
pass-through election is made, the source of the Fund's income flows through to 
its shareholders. With respect to the Fund, gains from the sale of securities   
may have to be treated as derived from U.S. sources and certain currency        
fluctuation gains, including Section 988 gains (defined below), may have to be  
treated as derived from U.S. sources. The limitation of the foreign tax credit  
is applied separately to foreign source passive income, including foreign source
passive income received from the Fund. Shareholders may be unable to claim a    
credit for the full amount of their proportionate share of the foreign taxes    
paid by the Fund. If the Fund is not eligible to make the election to           
"pass-through" to its shareholders its foreign taxes, the foreign income taxes  
it pays generally will reduce investment company taxable income, and the        
distribution by the Fund will be treated as United States source income.        

Investment income on certain foreign securities in which the Fund may invest may
be subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries, 
however, may reduce or eliminate the amount of foreign taxes to which the Fund  
would be subject.                                                               

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Furthermore, the amount of the foreign tax credit that is available may be      
limited to the extent that dividends from a foreign corporation qualify for the 
lower tax rate on qualifying dividends.                                         

The foregoing is only a general description of the foreign tax credit. Because  
application of the credit depends on the particular circumstances of each       
shareholder, shareholders are advised to consult their own tax advisers.        

Dispositions                                                                    

Upon a redemption, sale or exchange of shares of the Fund, a shareholder will   
realize a taxable gain or loss depending upon his or her basis in the shares. A 
gain or loss will be treated as capital gain or loss if the shares are capital  
assets in the shareholder's hands, and will be long-term capital gain or loss if
the shares are held for more than one year and short-term capital gain or loss  
if the shares are held for not more than one year. Any loss realized on a       
redemption, sale or exchange will be disallowed to the extent the shares        
disposed of are replaced (including through reinvestment of dividends) within a 
period of 61 days, beginning 30 days before and ending 30 days after the shares 
are disposed of. In such a case, the basis of the shares acquired will be       
adjusted to reflect the disallowed loss. If a shareholder holds Fund shares for 
six months or less and during that period receives a distribution taxable to the
shareholder as long-term capital gain, any loss realized on the sale of such    
shares during such six-month period would be a long-term capital loss to the    
extent of such distribution.                                                    

Backup Withholding                                                              

The Fund generally will be required to withhold federal income tax at a rate    
equal to the fourth lowest tax rate applicable to unmarried individuals (28% for
2007) ("backup withholding") from dividends paid, capital gain distributions,   
and redemption proceeds to shareholders if (1) the shareholder fails to furnish 
the Fund with the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the shareholder or the Fund that the      
shareholder has failed to report properly certain interest and dividend income  
to the IRS and to respond to notices to that effect, or (3) when required to do 
so, the shareholder fails to certify that he or she is not subject to backup    
withholding. Any amounts withheld may be credited against the shareholder's     
federal income tax liability.                                                   

Foreign Shareholders                                                            

Taxation of a shareholder who, as to the United States, is a nonresident alien  
individual, foreign trust or estate, foreign corporation, or foreign partnership
("foreign shareholder"), depends on whether the income from the Fund is         
"effectively connected" with a U.S. trade or business carried on by such        
shareholder. If the income from the Fund is not effectively connected with a    
U.S. trade or business carried on by a foreign shareholder, ordinary income     
dividends (including distributions of any net short-term capital gains) will be 
subject to U.S. withholding tax at the rate of 30% (or lower treaty rate) upon  
the gross amount of the dividend. Note that the 15% rate of tax applicable to   
certain dividends (discussed above) does not apply to dividends paid to foreign 
shareholders. Such a foreign shareholder would generally be exempt from U.S.    
federal income tax on gains realized on the sale of shares of the Fund, and     
distributions of net long-term capital gains that are designated as capital gain
dividends. If the income from the Fund is effectively connected with a U.S.     
trade or business carried on by a foreign shareholder, then ordinary income     
dividends, capital gain dividends and any gains realized upon the sale of shares

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of the Fund will be subject to U.S. federal income tax at the rates applicable  
to U.S. citizens or domestic corporations.                                      

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

Other Taxes                                                                     

Distributions also may be subject to state, local and foreign taxes. U.S. tax   
rules applicable to foreign investors may differ significantly from those       
outlined above. This discussion does not purport to deal with all of the tax    
consequences applicable to shareholders. Shareholders are advised to consult    
their own tax advisers for details with respect to the particular tax           
consequences to them of an investment in the Fund.                              

Market Discount                                                                 

If the Fund purchases a debt security at a price lower than the stated          
redemption price of such debt security, the excess of the stated redemption     
price over the purchase price is "market discount." If the amount of market     
discount is more than a de minimis amount, a portion of such market discount    
must be included as ordinary income (not capital gain ) by the Fund in each     
taxable year in which the Fund owns an interest in such debt security and       
receives a principal payment on it. In particular, the Fund will be required to 
allocate that principal payment first to the portion of the market discount on  
the debt security that has accrued but has not previously been includable in    
income. In general, the amount of market discount that must be included for each
period is equal to the lesser of (i) the amount of market discount accruing     
during such period (plus any accrued market discount for prior periods not      
previously taken into account) or (ii) the amount of the principal payment with 
respect to such period. Generally, market discount accrues on a daily basis for 
each day the debt security is held by the Fund at a constant rate over the time 
remaining to the debt security's maturity or, at the election of the Fund, at a 
constant yield to maturity which takes into account the semi-annual compounding 
of interest. Gain realized on the disposition of a market discount obligation   
must be recognized as ordinary interest income (not capital gain) to the extent 
of the "accrued market discount."                                               

Original Issue Discount                                                         

Certain debt securities acquired by the Fund may be treated as debt securities  
that were originally issued at a discount. Very generally, original issue       
discount is defined as the difference between the price at which a security was 
issued and its stated redemption price at maturity. Although no cash income on  
account of such discount is actually received by the Fund, original issue       
discount that accrues on a debt security in a given year generally is treated   
for federal income tax purposes as interest and, therefore, such income would be
subject to the distribution requirements applicable to regulated investment     
companies. Some debt securities may be purchased by the Fund at a discount that 
exceeds the original issue discount on such debt securities, if any. This       
additional discount represents market discount for federal income tax purposes  
(see above).                                                                    

Options, Futures and Forward Contracts                                          

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Any regulated futures contracts and certain options (namely, nonequity options  
and dealer equity options) in which the Fund may invest may be "section 1256    
contracts." Gains (or losses) on these contracts generally are considered to be 
60% long-term and 40% short-term capital gains or losses. Also, section 1256    
contacts held by the Fund at the end of each taxable year (and on certain other 
dates prescribed in the Code) are "marked to market" with the result that       
unrealized gains or losses are treated as though they were realized.            

Transactions in options, futures and forward contracts undertaken by the Fund   
may result in "straddles" for federal income tax purposes. The straddle rules   
may affect the character of gains (or losses) realized by the Fund and losses   
under the straddle rules, rather than being taken into account in calculating   
the taxable income for the taxable year in which the losses are realized. In    
addition, certain carrying charges (including interest expense) associated with 
positions in a straddle may be required to be capitalized rather than deducted  
currently. Certain elections that the Fund may make with respect to its straddle
positions may also affect the amount, character and timing of the recognition of
gains or losses from the affected positions.                                    

Because only a few regulations implementing the straddle rules have been        
promulgated, the consequences of such transactions to the Fund are not entirely 
clear. The straddle rules may increase the amount of short-term capital gain    
realized by the Fund, which is taxed as ordinary income when distributed to the 
Fund. Because application of the straddle rules may affect the character of     
gains or losses, defer losses and/or accelerate the recognition of gains or     
losses from the affected straddle positions, the amount which must be increased 
or decreased substantially as compared to a fund that did not engage in such    
transactions.                                                                   

Under current tax law, certain hedging activities may cause a dividend that     
would otherwise be eligible for the lower tax rate applicable to a "qualifying  
dividend," to instead be taxed at the rate of tax applicable to ordinary income.

Constructive Sales                                                              

Under certain circumstances, the Fund may recognize gain from a constructive    
sale of an "appreciated financial position" it holds if it enters into a short  
sale, forward contract or other transaction that substantially reduces the risk 
of loss with respect to the appreciated position. In that event, the Fund would 
be treated as if it had sold and immediately repurchased the property and would 
be taxed on any gain (but not loss) from the constructive sale. The character of
gain from a constructive sale would depend upon the Fund's holding period in the
property. Loss from a constructive sale would be recognized when the property   
was subsequently disposed of, and its character would depend on the Fund's      
holding period and the application of various loss deferral provisions of the   
Code. Constructive sale treatment generally does not apply to transaction that  
closed before the end of the 30th day after the close of the Fund's taxable year
and the Fund holds the appreciated financial position throughout the 60-day     
period beginning with the day such transaction was closed.                      

Section 988 Gains or Losses                                                     

Gains or losses attributable to fluctuations in exchange rates which occur      
between the time the Fund accrues income or other receivable or accrues expenses
or other liabilities denominated in a foreign currency and the time the Fund    
actually collects such receivables or pays such liabilities generally are       
treated as ordinary income or ordinary loss. Similarly, on disposition of some  
investments, including debt securities and certain forward contracts denominated
in a foreign                                                                    

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currency, gains or losses attributable to fluctuations in the value of the      
foreign currency between the acquisition and disposition of the position also   
are treated as ordinary gain or loss. These gains or losses, referred to under  
the Code as "section 988" gains or losses, increase or decrease the amount of   
the Fund's investment company taxable income available to be distributed to its 
shareholders as ordinary income. For example, fluctuations in exchange rates may
increase the amount of income that the Fund must distribute in order to qualify 
for treatment as a RIC and to prevent application of an excise tax on           
distributed income. Alternatively, fluctuations in exchange rates may decrease  
or eliminate income available for distribution. If section 988 losses exceed    
other investment company taxable income during a taxable year, the Fund would   
not be able to make any ordinary dividend distribution, or distributions made   
before the losses were realized would be recharacterized as a return of capital 
to a shareholder.                                                               

Passive Foreign Investment Companies                                            

The Fund may invest in shares of foreign corporations that may be classified    
under the Code as passive foreign investment companies ("PFICs"). In general, a 
foreign corporation is classified as a PFIC if at least one-half of its assets  
are assets that product passive (i.e., investment type income or are held for   
one production of passive income, or 75% or more of its gross income is passive 
income). Under certain circumstances, the Fund will be subject to federal income
tax on a portion of any "excess distribution" received on the stock of a PFIC or
of any gain on dispositions of that stock, plus interest, even if the Fund      
distributes this income as a dividend to its shareholders. If this tax is       
imposed on a Fund, the balance of the income will be included in the Fund's     
investment company taxable income and, accordingly, will not be taxable to the  
Fund to the extent that the income is distributed to its shareholders.          

If the Fund receives a so-called "excess distribution" with respect to PFIC     
stock, the Fund itself may be subject tot a tax on a portion of the excess      
distribution is treated as having been realized ratable over the period during  
which the Fund held the PFIC shares. The Fund will itself be subject to tax on  
the portion, if any, of an excess distribution that is so allocated to prior    
taxable years of the Fund and an interest factor will be added to the tax, as if
the tax had been payable in such prior taxable years. Certain distribution from 
a PFIC as well as gain from the sale of PFIC shares are treated as excess       
distributions. Excess distributions are characterized as ordinary income even   
though, absent application of the PFIC rules, certain excess distributions might
have been classified as capital gain.                                           

The Fund may be eligible to elect alternative tax treatment with respect to PFIC
shares. Under an election that currently is available in some circumstances, the
Fund would be required to include in its gross income its share of the earnings 
of a PFIC on a current basis, regardless of whether distributions were received 
from the PFIC in a given year. If this election were made, the special rules,   
discussed above, relating to the taxation of excess distributions and the sale  
of shares of a PFIC will not apply. In addition, another election may be        
available that would involve the marking to market of the Fund's PFIC shares at 
the end of each taxable year, with the result that unrealized gains would be    
treated at though they were realized and reported as ordinary income. Any       
mark-to-market losses and any loss from an actual disposition of PFIC shares    
would be deductible as ordinary losses to the extent of any net mark-to-market  
gains included in income in prior years.                                        

Note that distributions from a PFIC are not eligible for the reduced rate of tax
on "qualifying dividends."                                                      

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PERFORMANCE INFORMATION                                                         

The Fund may, from time to time, include its yield or total return in           
advertisements or reports to Shareholders or prospective investors.             

Yields of the Fund are computed by analyzing net investment income per Share for
a recent 30-day period and dividing that amount by a Share's maximum offering   
price (reduced by any undeclared earned income expected to be paid shortly as a 
dividend) on the last trading day of that period. Net investment income will    
reflect amortization of any market value premium or discount of fixed income    
securities (except for obligations backed by mortgages or other assets) and may 
include recognition of a pro rata portion of the stated dividend rate of        
dividend paying portfolio securities. The yield of the Fund will vary from time 
to time depending upon market conditions, the composition of the Fund's         
portfolio and operating expenses of the Trust allocated to the Fund. Yield      
should also be considered relative to changes in the value of the Fund's Shares 
and to the relative risks associated with the investment objective and policies 
of the Fund.                                                                    

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

Standardized quotations of average annual total return for Fund Shares will be  
expressed in terms of the average annual compounded rate of return for a        
hypothetical investment in Shares over periods of 1, 5 and 10 years or up to the
life of the Fund), calculated pursuant to the following formula: P(1 + T)(n) =  
ERV (where P = a hypothetical initial payment of $1,000, T = the average annual 
total return, n = the number of years, and ERV = the ending redeemable value of 
a hypothetical $1,000 payment made at the beginning of the period). All total   
return figures reflect the deduction of expenses (on an annual basis), and      
assume that all dividends and distributions on Shares are reinvested when paid. 
In addition, after-tax total return information will be included in the Fund's  
disclosure documents, and may be included in Fund promotional materials.        

Performance information for the Fund may be compared in reports and promotional 
literature to the performance of other mutual funds with comparable investment  
objectives and policies through various mutual fund or market indices such as   
those prepared by Dow Jones & Co., Inc., S&P, Lehman Brothers, Inc., the Russell
2000 Index, the Consumer Price Index, and to data prepared by Lipper Analytical 
Services, Inc., a widely recognized independent service which monitors the      
performance of mutual funds, or Morningstar, Inc. Comparisons may also be made  
to indices or data published in Money Magazine, Forbes, Barron's, The Wall      
Street Journal, The Bond Buyer's Weekly 20-Bond Index, The Bond Buyer's Index,  
The Bond Buyer, The New York Times, Business Week, Pensions and Investments, and
U.S.A. Today.                                                                   

The Fund may also compute aggregate total return for specified periods. The     
aggregate total return is determined by dividing the net asset value of this    
account at the end of the specified period by the value of the initial          
investment and is expressed as a percentage. Calculation of aggregate total     
return assumes reinvestment of all income dividends and capital gain            
distributions during the period.                                                

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The Fund also may quote annual, average annual and annualized total return and  
aggregate total return performance data for various periods other than those    
noted above. Such data will be computed as described above, except that the     
rates of return calculated will not be average annual rates, but rather, actual 
annual, annualized or aggregate rates of return.                                

Performance information for the Fund reflects only the performance of a         
hypothetical investment in the Fund during the particular time period in which  
the calculations are based. Performance information should be considered in     
light of the Fund's investment objectives and policies, characteristics and     
quality of the portfolios and the market conditions during the given time       
period, and should not be considered as a representation of what may be achieved
in the future.                                                                  

MISCELLANEOUS                                                                   

Individual Trustees are elected by the Shareholders and, subject to removal by  
the vote of two-thirds of the Board of Trustees, serve for a term lasting until 
the next meeting of Shareholders at which Trustees are elected. Such meetings   
are not required to be held at any specific intervals. Individual Trustees may  
be removed by vote of the Shareholders voting not less than a majority of the   
Shares then outstanding, cast in person or by proxy at any meeting called for   
that purpose, or by a written declaration signed by Shareholders voting not less
than two-thirds of the Shares then outstanding. In accordance with current laws,
it is anticipated that an insurance company issuing a Variable Contract that    
participates in the Fund will request voting instructions from variable contract
owners and will vote shares or other voting interests in the Separate Account in
proportion of the voting instructions received.                                 

The Trust is registered with the Securities and Exchange Commission as a        
management investment company. Such registration does not involve supervision by
the Securities and Exchange Commission of the management or policies of the     
Trust.                                                                          

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

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

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  FINANCIAL STATEMENTS

Financial statements for the Trust with respect to the Fund, since the          
commencement of its operations through December 31, 2006, including notes       
thereto and the report of Ernst & Young LLP thereon dated February 21, 2007, are
incorporated by reference from the Trust's 2006 Annual Reports filed on Form    
N-CSR. A copy of the report delivered with this SAI should be retained for      
future reference.                                                               

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APPENDIX

 DESCRIPTION OF BOND RATINGS

DESCRIPTION OF MOODY'S BOND RATINGS:                                            

     Excerpts from Moody's description of its bond ratings are listed as
follows: Aaa - judged to be the best quality and they carry the smallest degree 
of investment risk; Aa - judged to be of high quality by all standards -        
together with the Aaa group, they comprise what are generally known as          
high-grade bonds; A - possess many favorable investment attributes and are to be
considered as "upper medium grade obligations"; Baa - considered to be medium   
grade obligations, i.e., they are neither highly protected nor poorly secured   
-interest payments and principal security appear adequate for the present but   
certain protective elements may be lacking or may be characteristically         
unreliable over any great length of time; Ba - judged to have speculative       
elements, their future cannot be considered as well assured; B - generally lack 
characteristics of the desirable investment; Caa - are of poor standing - such  
issues may be in default or there may be present elements of danger with respect
to principal or interest; Ca - speculative in a high degree, often in default; C
- lowest rated class of bonds, regarded as having extremely poor prospects.     

 Moody's also supplies numerical indicators 1, 2 and 3 to rating
categories. The modifier 1 indicates that the security is in the higher end of  
its rating category; the modifier 2 indicates a mid-range ranking; and modifier 
3 indicates a ranking toward the lower end of the category.                     

DESCRIPTION OF S&P'S BOND RATINGS:                                              

   Excerpts from S&P's description of its bond ratings are listed as
follows: AAA - highest grade obligations, in which capacity to pay interest and 
repay principal is extremely strong; AA - has a very strong capacity to pay     
interest and repay principal, and differs from AAA issues only in a small       
degree; A - has a strong capacity to pay interest and repay principal, although 
they are somewhat more susceptible to the adverse effects of changes in         
circumstances and economic conditions than debt in higher rated categories; BBB 
- regarded as having an adequate capacity to pay interest and repay principal;  
whereas it normally exhibits adequate protection parameters, adverse economic   
conditions or changing circumstances are more likely to lead to a weakened      
capacity to pay interest and repay principal for debt in this category than in  
higher rated categories. This group is the lowest which qualifies for commercial
bank investment. BB, B, CCC, CC, C - predominantly speculative with respect to  
capacity to pay interest and repay principal in accordance with terms of the    
obligations; BB indicates the highest grade and C the lowest within the         
speculative rating categories. D - interest or principal payments are in        
default.                                                                        

 S&P applies indicators "+," no character, and "-" to its rating
categories. The indicators show relative standing within the major rating       
categories.                                                                     

DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:                                

       Excerpts from Moody's commercial paper ratings are listed as follows:
PRIME - 1 - issuers (or supporting institutions) have a superior ability for    
repayment of senior short-term promissory obligations; PRIME - 2 - issuers (or  
supporting institutions) have a strong ability for repayment of senior          
short-term promissory obligations; PRIME - 3 - issuers (or supporting           
institutions) have an                                                           

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acceptable ability for repayment of senior short-term promissory obligations;   
NOT PRIME - issuers do not fall within any of the Prime categories.             

DESCRIPTION OF S&P'S RATINGS FOR CORPORATE AND MUNICIPAL BONDS:                 

     INVESTMENT GRADE RATINGS: AAA - the highest rating assigned by S&P,
capacity to pay interest and repay principal is extremely strong; AA - has a    
very strong capacity to pay interest and repay principal and differs from the   
highest rated issues only in a small degree; A - has strong capacity to pay     
interest and repay principal although it is somewhat more susceptible to the    
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories; BBB - regarded as having an adequate capacity to pay   
interest and repay principal - whereas it normally exhibits adequate protection 
parameters, adverse economic conditions or changing circumstances are more      
likely to lead to a weakened capacity to pay interest and repay principal for   
debt in this category than in higher rated categories.                          

    SPECULATIVE GRADE RATINGS: BB, B, CCC, CC, C - debt rated in these
categories is regarded as having predominantly speculative characteristics with 
respect to capacity to pay interest and repay principal - while such debt will  
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; CI - reserved
for income bonds on which no interest is being paid; D -in default, and payment 
of interest and/or repayment of principal is in arrears. PLUS (+) OR MINUS (-) -
the ratings from "AA" to "CCC" may be modified by the addition of a plus or     
minus sign to show relative standing within the major rating categories.        

DESCRIPTION OF S&P'S RATINGS FOR SHORT-TERM CORPORATE DEMAND OBLIGATIONS AND    
COMMERCIAL PAPER:                                                               

An S&P commercial paper rating is a current assessment of the 
likelihood of timely repayment of debt having an original maturity of no more   
than 365 days. Excerpts from S&P's description of its commercial paper ratings  
are listed as follows: A-1 - the degree of safety regarding timely payment is   
strong - those issues determined to possess extremely strong safety             
characteristics will be denoted with a plus (+) designation; A-2 - capacity for 
timely payment is satisfactory - however, the relative degree of safety is not  
as high as for issues designated "A-1;" A-3 - has adequate capacity for timely  
payment - however, is more vulnerable to the adverse effects of changes in      
circumstances than obligations carrying the higher designations; B - regarded as
having only speculative capacity for timely payment; C - a doubtful capacity for
payment; D - in payment default - the "D" rating category is used when interest 
payments or principal payments are not made on the date due, even if the        
applicable grace period has not expired, unless S&P believes that such payments 
will be made during such grace period.                                          

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PART C

 OTHER INFORMATION

Item 23. Exhibits                                                               

(a)   (1)    Form of Amended and Restated Declaration of Trust dated July 20,   
         1994, as amended and restated February 5, 1997 and November 20,
2002 (15)                                             

     (2)    Establishment and Designation of Series effective February 5, 1997
(1)                                                   

(3)    Redesignation of Two Existing Series and Establishment and   
            Designation of Two Additional Series effective August 13, 1997 (3)

      (4)    Establishment and Designation of Series effective February 25, 1999
(4)                                                   

      (5)    Form of Establishment and Designation of Four Additional Series (5)

(6)    Form of Amended Designation of Series (5)                    

(7)    Form of Amended Designation of Series (6)                    

      (8)    Form of Establishment and Designation of Five Additional Series (7)

(9)    Form of Amended Designation of Series and Establishment and  
Designation of Two Additional Series (8)              

   (10)   Form of Establishment and Designation of Seven Additional Series
(9)                                                   

(11)   Form of Amended Designation of Series (10)                   

   (12)   Form of Establishment and Designation of Three Additional Series
(11)                                                  

      (13)   Form of Establishment and Designation of One Additional Series (12)

(14)   Form of Amended Designation of Series (13)                   

      (15)   Form of Establishment and Designation of Two Additional Series (14)

      (16)   Form of Establishment and Designation of Two Additional Series (16)

(17)   Form of Redesignation of Series (18)                         

      (18)   Form of Establishment and Designation of One Additional Series (17)

(19)   Certificate of Amendment of Declaration of Trust (20)        

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(b)          By Laws(1)                                                         

(c)          Articles V and VI of the Registrant's Amended and Restated         
  Declaration of Trust define rights of holders of Shares.

(d)   (1)    Form of Investment Advisory Agreement between Registrant and Fifth 
Third Asset Management Inc. (10)                      

   (2)    Form of Investment Advisory Agreement between Variable Insurance
Funds and Action Fund Management, LLC (19)            

(e)   (1)    Form of Distribution Agreement between Registrant and BISYS Fund   
Services (3)                                          

   (2)    Form of Distribution Agreement between Registrant and BISYS Fund
        Services (with respect to the Free Enterprise Action Fund (19)

(f)          Not Applicable                                                     

(g)   (1)    Form of Custodian Agreement between Registrant and Fifth Third Bank
(2)                                                   

      (2)    Form of Custodian Agreement between Registrant and Fifth Third Bank
(10)                                                  

     (3)    Form of Custodian Agreement between Registrant and U.S. Bank, N.A.
(18)                                                  

  (4)    Form of Custody Agreement between Registrant and The Huntington
         National Bank (with respect to the Free Enterprise Action Funds
(19)                                                  

(h)   (1)    Form of Management and Administration Agreement between Registrant 
and BISYS Fund Services Ohio, Inc.(4)                 

      (2)    Form of Fund Accounting Agreement between Registrant and BISYS Fund
Services Ohio, Inc.(4)                                

      (3)    Form of Fund Accounting Agreement between Registrant and BISYS Fund
         Services Ohio, Inc. (with respect to the Free Enterprise Action
Fund) (19)                                            

      (4)    Form of Transfer Agency Agreement between Registrant and BISYS Fund
Services Ohio, Inc.(4)                                

      (5)    Form of Transfer Agency Agreement between Registrant and BISYS Fund
         Services Ohio, Inc. (with respect to the Free Enterprise Action
Fund) (19)                                            

  (6)    Form of Fund Participation Agreement with Jackson National Life
           Insurance Company (with respect to the Fifth Third VIP Funds (20)

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    (7)    Form of Fund Participation Agreement with Hartford Life Insurance
Company (with respect to the Fifth Third VIP Funds)(6)

(8)    Form of Variable Contract Owner Servicing Agreement(4)       

    (9)    Form of Expense Limitation Agreement (with respect to Fifth Third
Variable Insurance Funds) (20)                        

(10)   Form of Expense Limitation Agreement (with respect to Free   
Enterprise Action Fund) (20)                          

     (11)   Form of Administration Agreement between Registrant and BISYS Fund
         Services Ohio, Inc. (with respect to the Free Enterprise Action
Fund) (19)                                            

(i)          Opinion and Consent of Counsel is filed herewith                   

(j)   (1)    Consent of Independent Auditors is filed herewith                  

(2)    Consent of Independent Auditors is filed herewith            

(k)          Not Applicable                                                     

(1)    Purchase Agreement(2)                                        

(m)          Not Applicable                                                     

(n)          Not Applicable                                                     

(p)   (1)    Form of Code of Ethics of the Registrant (5)                       

   (2)    Form of Code of Ethics of Fifth Third Asset Management Inc. (10)

(3)    Form of Code of Ethics of Action Fund Management, LLC (19)   

----------                                                                      
1.   Filed with Pre Effective Amendment No. 1 to Registrant's Registration      
Statement on February 5, 1997.                                        

2.   Filed with Pre Effective Amendment No. 2 to Registrant's Registration      
Statement on May 29, 1997.                                            

3.   Filed with Post Effective Amendment No. 1 to Registrant's Registration     
Statement on July 3, 1997.                                            

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4.   Filed with Post Effective Amendment No. 6 to Registrant's Registration     
Statement on April 1, 1999.                                           

5.   Filed with Post Effective Amendment No. 9 to Registrant's Registration     
Statement on April 28, 2000.                                          

6.   Filed with Post Effective Amendment No. 10 to Registrant's Registration    
Statement on August 3, 2000.                                          

7.   Filed with Post Effective Amendment No. 11 to Registrant's Registration    
Statement on October 16, 2000.                                        

8.   Filed with Post Effective Amendment No. 12 to Registrant's Registration    
Statement on January 31, 2001.                                        

9.   Filed with Post Effective Amendment No. 13 to Registrant's Registration    
Statement on March 23, 2001.                                          

10.  Filed with Post Effective Amendment No. 15 to Registrant's Registration    
Statement on July 31, 2001.                                           

11.  Filed with Post Effective Amendment No. 16 to Registrant's Registration    
Statement on February 1, 2002                                         

12.  Filed with Post Effective Amendment No. 18 to Registrant's Registration    
Statement on June 14, 2002                                            

13.  Filed with Post Effective Amendment No. 19 to Registrant's Registration    
Statement on June 28, 2002                                            

14.  Filed with Post Effective Amendment No. 20 to Registrant's Registration    
Statement on February 14, 2003.                                       

15.  Filed with Post Effective Amendment No. 21 to Registrant's Registration    
Statement on April 28, 2003.                                          

16.  Filed with Post Effective Amendment No. 22 to Registrant's Registration    
Statement on February 13, 2004.                                       

17.  Filed with Post Effective Amendment No. 23 to Registrant's Registration    
Statement on April 14, 2004.                                          

18.  Filed with Post Effective Amendment No. 24 to Registrant's Registration    
Statement on April 29, 2004.                                          

19.  Filed with Post Effective Amendment No. 25 to Registrant's Registration    
Statement on June 29, 2004.                                           

20.  Filed with Post Effective Amendment No. 30 to Registrant's Registration    
Statement on April 28, 2006.                                          

Item 24. Persons Controlled by or Under Common Control with Registrant          

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Not applicable                                                        

Item 25. Indemnification                                                        

Reference is made to Article IV of the Registrant's Agreement and     
  Declaration of Trust (Exhibit (a)(1)) which is incorporated by reference
herein.                                                               

     Insofar as indemnification for liabilities arising under the Securities Act
   of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant by the Registrant pursuant to the Fund's Declaration of
Trust, its By Laws or otherwise, the Registrant is aware that in the  
    opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and, therefore, is      
   unenforceable. In the event that a claim for indemnification against such
    liabilities (other than the payment by the Registrant of expenses incurred
   or paid by trustees, officers or controlling persons of the Registrant in
   connection with the successful defense of any act, suit or proceeding) is
  asserted by such trustees, officers or controlling persons in connection
     with shares being registered, the Registrant will, unless in the opinion of
     its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such         
    indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issues.            

Item 26. Business and Other Connections of Investment Advisers and their        
Officers and Directors                                                

The business of each of the Investment Advisers is summarized under   
"Management of the Fund(s)" or "Fund Management" in the Prospectuses  
constituting Part A and "Management of the Trust" in the Statement of 
    Additional Information constituting Part B of this Registration Statement,
which summaries are incorporated herein by reference.                 

   Information relating to the business and other connections of Fifth Third
Asset Management, Inc. ("Fifth Third") and each director, officer or  
     partner of Fifth Third is hereby incorporated by reference to disclosure in
 Item 26 of the registration statement of Form N-1A of Fifth Third Funds
(File Nos. 33-24848 and 811-5669).                                    

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Action Fund Management, LLC ("AFM"), 12309 Briarbush Lane, Potomac,   
   Maryland 20854, serves as the adviser to the Free Enterprise Action Fund.
     Steven J. Milloy is General Manager and Chief Compliance Officer and Thomas
J. Borelli is Member-Manager.                                         

    Thinkorswim Advisors, Inc. ("TOS"), 600 W. Chicago Ave., Chicago, Illinois
     60610 had served as the sub-adviser to the Free Enterprise Action Fund. Tom
 Sosnoff is President, Scott D. Sheridan is Vice President and Robert J.
Stapleton is Chief Executive Officer.                                 

Item 27. Principal Underwriter                                                  

    (a)  BISYS Fund Services Limited Partnership ("BISYS") acts as distributor
for Registrant. BISYS also distributes the securities of:   

American Independence Funds Trust                                               
American Performance Funds                                                      
The Bjurman, Barry Funds                                                        
The Coventry Group                                                              
Excelsior Funds, Inc.                                                           
Excelsior Funds Trust                                                           
Excelsior Tax-Exempt Funds, Inc. The Eureka Funds                               
First Focus Funds, Inc.                                                         
The Hirtle Callaghan Trust                                                      
HSBC Advisor Funds Trust                                                        
HSBC Investor Funds                                                             
Legacy Funds Group                                                              

Pacific Capital Funds                                                           

STI Classic Funds                                                               

STI Classic Variable Trust                                                      

Allianz Variable Insurance Products Trust                                       

Vintage Mutual Funds, Inc.                                                      

Commonwealth International Series Trust                                         

The Blue Fund Group                                                             

Allianz Variable Insurance Products Fund of Funds Trust                         

        BISYS is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities Dealers.
BISYS' main address is 100 SUMMER ST. 15TH FLOOR, Boston, Massachusetts 02110.  
Office of Supervisory Jurisdiction (OSJ) Branch is at 3435 Stelzer Road,        
Columbus, Ohio 43219. BISYS is an indirect wholly-owned subsidiary of The BISYS 
Group, Inc., each of which is a management investment company.                  

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(b)  Information about Directors and Officers of BISYS is as follows: 

                                                                [Download Table]

Name and Address                   Position with Underwriter
----------------                   -------------------------
                                                            
Brian K. Bey       President and Director                   
Elliott Dobin      Secretary                                
Wayne A. Rose      Assistant Compliance Officer             
Andrew H. Byer     Chief Compliance Officer                 
James E. Pike      Financial and Operations Principal       

(c)  Not Applicable                                                   

Item 28. Location of Accounts and Records                                       

The accounts, books, and other documents required to be maintained by 
    Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and rules promulgated thereunder are in the possession of: Fifth Third
   Asset Management, Inc., 38 Fountain Square Plaza, Cincinnati, Ohio 45263;
    BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219-3035 (records
 relating to its functions as distributor); Action Fund Management, LLC,
  12309 Briarbush Lane, Potomac, MD 20854; Thinkorswim Advisors, Inc., 600
   West Chicago Ave., Chicago, IL 60610; and BISYS Fund Services Ohio, Inc.,
3435 Stelzer Road, Columbus, Ohio 43219-3035 (records relating to its 
functions as administrator, transfer agent, and fund accountant).     

Item 29. Management Services                                                    

Not Applicable                                                        

Item 30. Undertakings                                                           

   (a)  Registrant undertakes to furnish each person to whom a prospectus is
     delivered with a copy of the Registrant's latest Annual Report to
Shareholders, a on request and without charge.              

(b)  Registrant undertakes to call a meeting of Shareholders for the  
  purpose of voting a on the question of removal of a Trustee or
          Trustees when requested to do so by the holders of at least 10% of the
 Registrant's outstanding shares of beneficial interest and in
connection with such meeting to comply with the shareholders
        communications provisions of Section 16(c) of the Investment Company
Act of 1940.                                                

485BPOS
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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment   
Company Act of 1940, the Registrant certifies that it meets all requirements for
effectiveness of this Registration Statement under Rule 485(b) under the        
Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 32 
to its Registration Statement to be signed on its behalf by the undersigned,    
duly authorized, in the city of Columbus, Ohio on the 23rd day of April, 2007.  

                        The Coventry Funds Trust

                        By: /s/ R. Jeffrey Young
                                           -----------------------------------
                        R. Jeffrey Young
                 President

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, this Registration   
Statement on Form N-1A has been signed below by the following persons on behalf 
of Variable Insurance Funds in the capacity and on the date indicated:          

                                                                [Download Table]

Signatures                            Title                    Date          
----------                            -----                    ----          
                                                                             

/s/ Walter Grimm                  *   Trustee                  April 23, 2007
----------------------------------                                           
Walter Grimm                                                                 
President                                                                    

/s/ Michael Van Buskirk           *   Trustee and Chairman     April 23, 2007
----------------------------------    of the Board                           
Michael Van Buskirk                                                          

/s/ James H. Woodward             *   Trustee                  April 23, 2007
----------------------------------                                           
James H. Woodward                                                            

/s/ Maurice Stark                 *   Trustee                  April 23, 2007
----------------------------------                                           
Maurice Stark                                                                

/s/ Diane E. Armstrong            *   Trustee                  April 23, 2007
----------------------------------                                           
Diane E. Armstrong                                                           

/s/ Linda A. Durkin                   Treasurer                April 23, 2007
----------------------------------                                           
Linda A. Durkin                                                              

/s/ R. Jeffrey Young                                                         
----------------------------------    President                April 23, 2007
R. Jeffrey Young                                                             

* By: /s/ Michael V. Wible                                                      
----------------------------                                        
Michael V. Wible                                                    

----------                                                                      
*    Pursuant to Powers of Attorney filed with Post Effective Amendment No. 31  
on April 10, 2007                                                     

485BPOS
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EXHIBIT LIST

                                                                [Download Table]
                                         
(i)       Opinion and Consent of Counsel 

(j)(1)    Consent of Independent Auditors

(j)(2)    Consent of Independent Auditors

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘485BPOS’ Filing		Date		First		Last			Other Filings
		4/30/09		5		78
		12/31/08		40
		4/30/08		33		35			497
		6/30/07		15		35			N-CSRS,  N-PX,  NSAR-A
Effective on:		5/1/07		1		100
Filed on:		4/26/07		1
		4/23/07		159
		4/10/07		159					485BXT
		4/1/07		75		139
		2/22/07		97
		2/21/07		149
		2/15/07		129
		12/31/06		4		149			24F-2NT,  N-CSR,  N-CSR/A,  NSAR-B
		10/31/06		142
		5/1/06		129					485BPOS
		4/30/06		129
		4/28/06		155					485BPOS
		12/31/05		44		135			24F-2NT,  N-CSR,  NSAR-B
		3/1/05		32		136
		12/31/04		78		86			24F-2NT,  N-CSR,  NSAR-B
		6/29/04		155					485BPOS
		4/29/04		155					485BPOS
		4/14/04		155					485APOS
		2/13/04		155					485APOS
		4/28/03		155					485BPOS
		2/14/03		155					485APOS
		11/20/02		152
		7/15/02		6		21			497
		7/12/02		6		9
		6/28/02		155					485APOS,  497
		6/14/02		155					485APOS
		4/1/02		78
		2/1/02		155					485APOS
		7/31/01		155					40-17F2,  485APOS
		3/23/01		155					485APOS
		1/31/01		155					485APOS
		1/26/01		4
		10/16/00		155					485APOS
		8/3/00		155					485APOS
		4/28/00		155					485BPOS
		4/1/99		155					485BPOS
		3/1/99		86		136			NSAR-B
		2/25/99		152
		8/13/97		152
		7/3/97		154					485APOS
		6/1/97		87		136
		5/29/97		154					N-1A EL/A
		2/5/97		152		154			N-1A EL/A
		7/20/94		89		152
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