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<PAGE> PAGE 11
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TITLE FINANCIAL OFFICER
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<ASSETS-OTHER> 611264
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9177077
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1496531
<TOTAL-LIABILITIES> 1496531
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8745588
<SHARES-COMMON-STOCK> 737536
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> (1237113)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 172071
<NET-ASSETS> 7680546
<DIVIDEND-INCOME> 15169
<INTEREST-INCOME> 18543
<OTHER-INCOME> 0
<EXPENSES-NET> 135527
<NET-INVESTMENT-INCOME> (101815)
<REALIZED-GAINS-CURRENT> 2282566
<APPREC-INCREASE-CURRENT> 172071
<NET-CHANGE-FROM-OPS> 2352822
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28545895
<NUMBER-OF-SHARES-REDEEMED> 27808359
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7680546
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 67763
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 290396
<AVERAGE-NET-ASSETS> 10469271
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.11)
<PER-SHARE-GAIN-APPREC> 0.52
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.41
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001040587
<NAME> POTOMAC FUNDS
<SERIES>
<NUMBER> 6
<NAME> POTOMAC OTC/SHORT FUND
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> OCT-16-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 11412524
<INVESTMENTS-AT-VALUE> 11413080
<RECEIVABLES> 5279033
<ASSETS-OTHER> 25670221
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42362334
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23193796
<TOTAL-LIABILITIES> 23193796
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21075426
<SHARES-COMMON-STOCK> 2286861
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 11388
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5468664)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3550388
<NET-ASSETS> 19168538
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 184794
<OTHER-INCOME> 0
<EXPENSES-NET> 106147
<NET-INVESTMENT-INCOME> 78647
<REALIZED-GAINS-CURRENT> (5381857)
<APPREC-INCREASE-CURRENT> 3550388
<NET-CHANGE-FROM-OPS> (1752822)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 35233130
<NUMBER-OF-SHARES-REDEEMED> 32946269
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 19168538
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 53805
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 221282
<AVERAGE-NET-ASSETS> 6840391
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> (1.71)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.38
<EXPENSE-RATIO> 1.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001040587
<NAME> POTOMAC FUNDS
<SERIES>
<NUMBER> 7
<NAME> POTOMAC U.S. GOVERNMENT MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> OCT-20-1997
<PERIOD-END> AUG-31-1998
<INVESTMENTS-AT-COST> 12380653
<INVESTMENTS-AT-VALUE> 12380653
<RECEIVABLES> 3132889
<ASSETS-OTHER> 30431
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15543973
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6173589
<TOTAL-LIABILITIES> 6173589
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9352613
<SHARES-COMMON-STOCK> 9370384
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 17771
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 9370384
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 184081
<OTHER-INCOME> 0
<EXPENSES-NET> 34335
<NET-INVESTMENT-INCOME> 149746
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 149746
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 149746
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 198593087
<NUMBER-OF-SHARES-REDEEMED> 189292611
<SHARES-REINVESTED> 69908
<NET-CHANGE-IN-ASSETS> 9370384
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17168
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 127133
<AVERAGE-NET-ASSETS> 3977292
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.04
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
In planning and performing our audits of the
financial statements of the Potomac U.S. Plus
Fund, the Potomac U.S./Short Fund, the Potomac OTC
Plus Fund, the Potomac OTC/Short Fund and the
Potomac U.S. Government Money Market Fund
(constituting The Potomac Funds, hereafter referred
to as the "Funds") for the periods ended
August 31, 1998, we considered its internal control,
including controls over safeguarding securities, in
order to determine our auditing procedures for the
purpose of expressing our opinion on the financial
statements and to comply with the requirements
of Form N-SAR, not to provide assurance on
internal control.
The management of the Funds is responsible
for establishing and maintaining
internal control. In fulfilling this
responsibility, estimates and judgments
by management are required to assess the
expected benefits and related costs of
controls. Generally, controls that are
relevant to an audit pertain to the entity's
objective of preparing financial statements
for external purposes that are fairly presented
in conformity with generally accepted
accounting principles. Those controls include
the safeguarding of assets against unauthorized
acquisition, use, or disposition.
Because of inherent limitations in any internal
control, errors or irregularities may occur and
may not be detected. Also, projection
of any evaluation of internal control to future
periods is subject to the risk that it may become
inadequate because of changes in conditions
or that the effectiveness of the design and
operation may deteriorate.
Our consideration of internal control would
not necessarily disclose all matters in
internal control that might be material
weaknesses under standards established by
the American Institute of Certified Public
Accountants. A material weakness is a condition
in which the design or operation of the specific
internal control component does not reduce
to a relatively low level the risk that errors
or irregularities in amounts that would be material
in relation to the financial statements being
audited may occur and not be detected within a
timely period by employees in the normal course
of performing their assigned functions.
However, we noted no matters involving internal
control, including controls over safeguarding
securities, that we consider to be material
weaknesses as defined above as of August 31, 1998.
This report is intended solely for the information
and use of management and the Securities and Exchange
Commission.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
October 28, 1998
