MEMORIAL FUNDS, 497, 1998-03-23

MEMORIAL FUNDS
497, 1998-03-23

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MEMORIAL FUNDS TRUST SHARES

GOVERNMENT BOND FUND
CORPORATE BOND FUND
GROWTH EQUITY FUND
VALUE EQUITY FUND

PROSPECTUS
March 15, 1998
- --------------------------------------------------------------------------------
This Prospectus offers Trust class shares of the Government Bond Fund, Corporate
Bond Fund, Growth Equity Fund and Value Equity Fund (each a "Fund" and
collectively the "Funds"). The Funds are separate, diversified portfolios of the
Memorial Funds (the "Trust"), a registered, open-end, management investment
company.

THIS PROSPECTUS SETS FORTH CONCISELY IMPORTANT INFORMATION THAT YOU SHOULD KNOW
BEFORE INVESTING.
PLEASE READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.

The Trust has filed with the Securities and Exchange Commission (the "SEC") a
Statement of Additional Information ("SAI") dated March 15, 1998, as may be
amended from time to time, which is available for reference on the SEC's Web
Site (http://www.sec.gov). The SAI contains more detailed information about the
Trust and each of the Funds and is incorporated into this Prospectus by
reference. An investor may obtain a copy of the SAI without charge by contacting
the Trust's distributor, Forum Financial Services, Inc., at Two Portland Square,
Portland, Maine 04101 or by calling (888) 263-5593.
<TABLE>
<S> <C> <C> <C> <C>
TABLE OF CONTENTS

Page Page
1. PROSPECTUS SUMMARY............................. 2 4. HOW TO BUY SHARES........................ 17
2. INVESTMENT OBJECTIVE AND POLICIES.............. 5 5. HOW TO SELL SHARES....................... 19
GOVERNMENT BOND FUND........................... 5 6. OTHER SHAREHOLDER SERVICES............... 21
CORPORATE BOND FUND............................ 6 7. DIVIDENDS AND TAX MATTERS................ 22
GROWTH EQUITY FUND............................. 7 8. DETAILED DESCRIPTION OF FUNDS'
VALUE EQUITY FUND.............................. 8 INVESTMENTS, STRATEGIES AND RISKS....... 23
3. MANAGEMENT..................................... 8 9. OTHER INFORMATION........................ 36
ACCOUNT APPLICATION
</TABLE>

THE MEMORIAL FUNDS ARE A FAMILY OF MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS ARE
NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE
SYSTEM OR ANY OTHER GOVERNMENT AGENCY.

AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

1. PROSPECTUS SUMMARY

HIGHLIGHTS OF THE FUNDS

The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.

INVESTMENT OBJECTIVES AND POLICIES

FIXED INCOME FUNDS. The Memorial Funds includes two "Fixed Income" Funds,
the Government Bond Fund and the Corporate Bond Fund. These mutual funds invest
primarily in bonds and other fixed income securities. The Fixed Income Funds are
designed principally for investors that seek current income.

Government Bond Fund seeks to provide a high level of income consistent
with maximum credit protection and moderate fluctuation in principal value. The
Fund will seek to achieve this objective by investing at least 90% of its assets
in obligations issued or guaranteed as to principal and interest by the United
States Government, or by its agencies or instrumentalities, including zero
coupon bonds issued or guaranteed by the U.S. Treasury and mortgage-backed
securities ("U.S. Government Securities"). The Fund may also invest in
asset-backed securities. The Fund seeks to moderate fluctuations its volatility
by structuring maturities of its investment portfolio in order to maintain a
duration between 75% and 125% of the duration of the Lehman Brothers Government
Bond Index.

Corporate Bond Fund seeks to provide as high a level of current income as
is consistent with capital preservation and prudent investment risk. Under
normal circumstances, the Fund will seek to attain this objective by investing
at least 65% of the value of the total assets in corporate bonds. The Fund may
also invest in U.S. Government Securities, mortgage-backed and asset-backed
securities. The Fund intends to maintain a duration between 75% and 125% of the
Lehman Brothers Corporate Bond Index.

EQUITY FUNDS. The Memorial Funds also includes two "Equity Funds" that
invest primarily in the common stock of domestic companies, the Growth Equity
Fund and the Value Equity Fund. The Equity Funds will invest only in companies
with a minimum market capitalization of $250 million at the time of purchase,
and will seek to maintain a minimum average weighted capitalization of $5
billion. A company's market capitalization is the total market value of its
outstanding common stock. Although the investment disciplines of the Equity
Funds differ, they are each designed for investors who are seeking long term
capital appreciation and can tolerate possibly significant fluctuation in the
value of their investment.

Growth Equity Fund seeks long-term capital appreciation. It will seek to
achieve this objective by investing at least 65% of its assets in the common
stock of domestic companies that the Fund's sub-adviser believes have superior
growth potential and fundamental characteristics that are significantly better
than the market average and that support internal earnings growth capability.

Value Equity Fund also seeks long-term capital appreciation. It will seek
to attain this objective by investing at least 65% of its total assets in the
common stock of domestic companies. Using a value approach, the Fund will seek
to invest in stocks that are underpriced when measured against comparable
securities, determined by price/earnings ratios, cash flows or other measures.

INVESTMENT CONSIDERATIONS AND RISK FACTORS

There is no assurance that any Fund will achieve its investment objective,
and a Fund's net asset value and total return will fluctuate based upon changes
in the value of its portfolio securities. Upon redemption, an investment in a
Fund may be worth more or less than its original value. No Fund, by itself,
provides a complete investment program.

All investments made by the Funds entail some risk. Among other things, the
market value of any security in which the Funds may invest is based

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<PAGE>

upon the market's perception of value and not necessarily the book value of an
issuer or other objective measure of the issuer's worth. Certain investments and
investment techniques, however, entail additional risks, such as the potential
use of leverage by certain Funds through borrowings, securities lending, and
other investment techniques. (See "Detailed Description of the Funds'
Investments, Strategies and Risks.") Similarly, a Fund's use of mortgage- and
asset-backed securities entails certain risks. (See "Detailed Description of the
Funds' Investments, Strategies and Risks - Mortgage-Backed Securities" and "
Asset-Backed Securities.")

FIXED INCOME FUNDS. The value of your investment in one or both of the
Fixed Income Funds may change in response to changes in interest rates. An
increase in interest rates typically causes a fall in the value of the fixed
income securities in which the Funds invest. Your investment in the Corporate
Bond Fund is also subject to the risk that the financial condition of an issuer
of a security held by the Fund may cause it to default or become unable to pay
interest or principal due on the security. To limit this risk, at least 80% of
the Corporate Bond Fund's investments in corporate debt securities will be in
securities rated A or better and the Fund will maintain a minimum average rating
of A.

EQUITY FUNDS. The Equity Funds may be appropriate investments for investors
who seek long term growth in their investment, but who are willing to tolerate
significant fluctuations in the value of their investment in response to changes
in the market value of the stocks the Funds hold. This type of market movement
may affect the price of the securities of a single issuer, a segment of the
domestic stock market, or the entire market.

PORTFOLIO MANAGEMENT

INVESTMENT ADVISER. Forum Investment Advisors, LLC (the "Adviser"), serves
as the investment adviser for each Fund. The Adviser's responsibilities include
developing and reviewing the investment strategies and policies of each Fund,
and overseeing the performance of the investment sub-advisers ("Sub-advisers")
responsible for the day-to-day management of each Fund's investment portfolio.
(See "Management - Investment Advisory Services.")

INVESTMENT CONSULTANT. To assist it in carrying out its responsibilities,
the Adviser has retained Wellesley Group, Inc. ("Wellesley"). Wellesley provides
data with which the Adviser and the Board of Trustees of the Trust ("Board") can
monitor and evaluate the performance of the Funds and the Sub-advisers. If the
Board determines in the future to replace one of the current Sub-advisers, or
retain additional Sub-advisers to manage one or more of the Funds, Wellesley
will assist the Adviser and the Board in the selection of those Sub-advisers.

INVESTMENT SUB-ADVISERS. The Adviser has retained the following
Sub-advisers to render advisory services and make daily investment decisions for
each Fund:

o The portfolio of the Government Bond Fund is managed by The
Northern Trust Company.

o The portfolio of the Corporate Bond Fund is managed by Conseco
Capital Management, Inc.

o The portfolio of the Growth Equity Fund is managed by Davis
Hamilton, Inc., d/b/a Davis Hamilton Jackson & Associates.

o The portfolio of the Value Equity Fund is managed by Beutel,
Goodman Capital Management.

The Adviser is also responsible for monitoring the investments and the
performance of the Sub-advisers on behalf of each of the Funds. The Adviser and
the Sub-advisers collectively may be referred to herein as the "Advisers." (See
"Management - Investment Advisory Services.")

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SHARES OF THE FUNDS

Each Fund currently offers two separate classes of shares:

TRUST SHARES. Trust Shares are sold through this Prospectus and are
offered primarily to individual investors and smaller fiduciary, agency and
custodial clients whose investments are pooled in common or collective trusts
managed by bank trust departments, trust companies or their affiliates. Trust
Shares are referred to as "Shares" in this prospectus.

INSTITUTIONAL SHARES. Institutional Shares are offered by a separate
prospectus. Institutional Shares are designed for large institutional investors
able to make an minimum initial investment of $10 million, and are expected to
incur lower expenses than Trust Shares.

Shares of each class of a Fund have identical interests in the investment
portfolio of the Fund and, with certain exceptions, the same rights. (See "Other
Information - The Trust and Its Shares.")

HOW TO BUY AND SELL SHARES

Shares of the Funds may be purchased or sold ("redeemed") on any
weekday except days that the New York Stock Exchange is closed, normally New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas ("Fund Business
Day"). The Trust's transfer agent accepts orders to buy or sell Shares between
9:00 a.m. and 6:00 p.m. (Eastern) on all Fund Business Days. Orders are executed
at the net asset value of the Fund's Shares next determined after an order in
proper form is received.

You may buy or sell Shares by mail, by bank wire or through various
financial institutions. The minimum initial investment in Shares is $5,000, or
$2,000 for retirement accounts and automatic investment plans. The minimum
subsequent investment is $100. (See "How to Buy Shares" and "How to Sell
Shares.")

EXCHANGES

Shareholders may exchange Trust Shares for Trust Shares of the other Funds
or for Institutional Service class shares of the Forum Daily Assets Government
Fund, a money market fund that is a separate series of Forum Funds. (See "Other
Shareholder Services - Exchanges.")

SHAREHOLDER FEATURES

Each Fund offers an Automatic Investment Plan, Automatic Withdrawal Plan
and Directed Dividend Option. (See "Other Shareholder Services" and "Choosing a
Share Class.")

DIVIDENDS AND DISTRIBUTIONS

The Fixed Income Funds declare dividends daily and pay dividends of net
investment income monthly. The Equity Funds declare and pay dividends of net
investment income, if any, quarterly. Each Fund's net capital gain, if any, is
distributed annually. All dividends and distributions are reinvested in
additional Fund Shares unless the shareholder elects to have them paid in cash.
(See "Dividends and Tax Matters.")

EXPENSE INFORMATION

The following tables should help you understand the expenses that you
will bear if you invest in Shares of a Fund.

SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C> <C> <C>
Government Corporate Growth Equity Value Equity
Bond Fund Bond Fund Fund Fund
--------- --------- ---- ----
Sales charge on
purchases................. None None None None
Sales charge on
dividends................. None None None None
Maximum deferred
sales charge.............. None None None None
Exchange Fee.............. None None None None
</TABLE>

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ANNUAL FUND OPERATING EXPENSES (1)
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<S> <C> <C> <C> <C>
Government Corporate Growth Equity Value Equity
Bond Fund Bond Fund Fund Fund
--------- --------- ---- ----

Investment Advisory
Fees................................ 0.35% 0.35% 0.45% 0.45%
Rule 12b-1 Fees.................... 0.25% 0.25% 0.25% 0.25%
Other Expenses...................... 0.65% 0.65% 0.85% 0.85%
----- ----- ----- -----
Total Operating
Expenses............................ 1.25% 1.25% 1.55% 1.55%
</TABLE>

(1) Annual Fund Operating Expenses are calculated as a percentage of each Fund's
average net assets assuming average net assets of at least $7.5 million. If the
average net assets of a Fund are lower in any given year, the expenses will be a
higher percentage of the Fund's assets. (See "Management.")

EXAMPLE

The following hypothetical example indicates the dollar amount of
expenses that you would pay if you invested $1,000 in a Fund's Shares, assuming
that (1) the Fund's expenses are as listed above, (2) the Fund has a 5% annual
return and (3) you reinvest all dividends and distributions paid by the Fund.
The example does not represent past or future expenses or return; actual
expenses and return may be more or less than indicated.
<TABLE>
<S> <C> <C>
1 Year 3 Years
------ -------

Government Bond Fund....................................... $13 $40
Corporate Bond Fund........................................ $13 $40
Growth Equity Fund......................................... $16 $49
Value Equity Fund.......................................... $16 $49
</TABLE>

2. INVESTMENT OBJECTIVES AND POLICIES

GOVERNMENT BOND FUND

INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide a high level of
income consistent with maximum credit protection and moderate fluctuation in
principal value. There is no assurance that the Fund will achieve this
objective.

INVESTMENT POLICIES
The Fund will invest at least 90% of its net assets in a portfolio of
fixed and variable rate U.S. Government Securities, including zero coupon bonds
issued or guaranteed by the U.S. Treasury and mortgage-backed securities. The
Fund may invest up to 10% of its net assets in corporate debt securities.

The Fund may not invest more than 25% of its total assets in the
securities issued or guaranteed by any single agency or instrumentality of the
U.S. Government, except the U.S. Treasury, and may not invest more than 10% of
its total assets in the securities of any other issuer.

The Fund invests in debt obligations with maturities (or average life
in the case of mortgage-backed and similar securities) ranging from overnight to
30 years. The Fund seeks to moderate fluctuations in the price of its Shares by
structuring maturities of its investment portfolio in order to maintain a
duration between 75% and 125% of the duration of the Lehman Brothers Government
Bond Index, which was 5.20 years as of March 11, 1998. Duration measures the
sensitivity of a debt security's price to changes in interest rates -- the
longer the security's duration, the more its price will fluctuate in response to
changes in interest rates. The calculation of duration is based on the present
value of payments over the life of the debt obligation and takes into account
call rights and other features that may shorten the debt obligation's life.
Because earlier payments on a debt security have a higher present value,
duration of a security, except a zero-coupon security, generally will be less
than its stated maturity.

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and foreign currency futures contracts and buy options and write covered options
on those futures contracts. An option is covered if, so long as the Fund is
obligated under the option, it owns an offsetting position in the underlying
security or futures contract or maintains a segregated account of liquid debt
instruments with a value at all times sufficient to cover the Fund's obligations
under the option. Although the Fund will not engage in these transactions for
speculative purposes, there is a risk that changes in the value of a hedging
instrument will not match those of the investment being hedged. (See "Detailed
Description of the Funds' Investments, Strategies and Risks.")

CORPORATE BOND FUND

INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide as high a level of
current income as is consistent with capital preservation and prudent investment
risk. There is no assurance that the Fund will achieve this objective.

INVESTMENT POLICIES
Under normal circumstances, the Fund will seek to attain its investment
objective by investing at least 65% of the value of the total assets in
corporate bonds. The Fund may also invest in U.S. Government securities and
mortgage-backed and asset-backed securities of private issuers ("U.S. Government
Securities").

At least 80% of the Fund's investments in corporate debt will be in
securities that are rated, at the time of purchase, in one of the three highest
rating categories by a nationally recognized statistical rating organization
("NRSRO") such as Standard & Poor's, or which are unrated and determined by the
Sub-adviser to be of comparable quality. (See "Detailed Description of the
Funds' Investments, Strategies and Risks - Fixed Income Securities and Their
Characteristics.") No more than 5% of the Fund's investments will be in
securities rated below investment grade, that is, below the fourth highest
rating category. The Fund's portfolio of corporate debt instruments will have a
minimum weighted average rating of A.

The Fund will invest primarily in debt obligations with maturities (or
average life in the case of mortgage-backed and similar securities) ranging from
short-term (including overnight) to 30 years. The Fund seeks to structure the
maturities of its investment portfolio in order to maintain a duration between
75% and 125% of the duration of the Lehman Brothers Corporate Bond Index, which
was 6.02 years as of March 11, 1998. Duration measures the sensitivity of a debt
security's price to changes in interest rates -- the longer the security's
duration, the more its price will fluctuate in response to changes in interest
rates. The calculation of duration is based on the present value of payments
over the life of the debt obligation and takes into account call rights and
other features that may shorten the debt obligation's life. Because earlier
payments on a debt security have a higher present value, duration of a security,
except a zero-coupon security, generally will be less than its stated maturity.

The Fund may invest up to 25% of its assets in mortgage- and
asset-backed securities. The Fund may enter into "dollar roll" transactions in
connection with its investments in mortgage-backed securities. The Fund may also
invest in zero-coupon securities, but will limit its investment in these
securities, except those issued through the U.S. Treasury's STRIPS program, to
not more than 10% of the Fund's total assets. The Fund may also invest in
securities that are restricted as to disposition under the federal securities
laws (sometimes referred to as "private placements" or "restricted securities").
In addition, the Fund may not invest more than 25% of its total assets in
securities issued or guaranteed by any single agency or instrumentality of the
U.S. Government, except the U.S. Treasury. (See "Detailed Description of the
Funds' Investments, Strategies and Risks.")

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The Fund may also use futures contracts and options (both
exchange-traded and over-the-counter) to attempt to reduce the overall risk of
its investments ("hedge"). The Fund's ability to use hedging strategies may be
limited by market considerations, regulatory limits and tax considerations. The
Fund may write covered call and put options, buy put and call options, buy and
sell interest rate futures contracts, and buy options and write covered options
on those futures contracts. An option is covered if, so long as the Fund is
obligated under the option, it owns an offsetting position in the underlying
security or futures contract or maintains a segregated account of liquid debt
instruments with a value at all times sufficient to cover the Fund's obligations
under the option. Although the Fund will not engage in these transaction for
speculative purposes, there is a risk that changes in the value of a hedging
instrument will not match those of the investment being hedged. (See "Detailed
Description of the Funds' Investments, Strategies and Risks.")

GROWTH EQUITY FUND

INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation.
There is no assurance that the Fund will achieve this objective.

INVESTMENT POLICIES
The Fund will seek to achieve its objective by investing at least 65%
of its assets in the common stock of domestic companies. The Fund will only
invest in companies having a minimum market capitalization of $250 million at
the time of purchase, and will seek to maintain a minimum average weighted
capitalization of $5 billion. A company's market capitalization is the total
market value of its outstanding common stock.

The Fund may also invest in preferred stocks and securities convertible
into common stock. The Fund will only purchase convertible securities that are
rated, at the time of purchase, within the four highest rating categories
assigned by an NRSRO or which are unrated and determined by the Sub-adviser to
be of comparable quality. Securities rated in these categories are generally
considered to be investment grade securities, although Moody's indicates that
securities rated Baa (the fourth highest category) have speculative
characteristics. A description of the rating categories of various NRSROs is
contained in the SAI.

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VALUE EQUITY FUND

INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation.
There is no assurance that the Fund will achieve this objective.

INVESTMENT POLICIES
The Fund will seek to attain this objective by investing at least 65%
of its total assets in common stocks of domestic companies. The Fund will only
invest in companies having a minimum market capitalization of $250 million at
the time of purchase, and will seek to maintain a minimum average weighted
capitalization of $5 billion. A company's market capitalization is the total
market value of its outstanding common stock.

Using a value approach, the Fund will seek to invest in stocks that are
underpriced relative to comparable stocks, determined by price/earnings ratios,
cash flows or other measures. It is expected that the Sub-adviser will rely on
stock selection to achieve its results, rather than trying to time market
fluctuations. In selecting stocks, the Sub-adviser will establish valuation
parameters by using relative ratios or target prices to evaluate companies on
several levels.

3. MANAGEMENT

The business of the Trust is managed under the direction of the Board.
The Board formulates the general policies of the Funds and meets periodically to
review the performance of the Funds, monitor their investment activities and
practices, and discuss other matters affecting the Funds and the Trust.

ADVISER

Forum Investment Advisors, LLC (the "Adviser"), Two Portland Square,
Portland, Maine 04101, serves as investment adviser to the Funds pursuant to an
investment advisory agreement with the Trust. Subject to the general control of
the Board, the Adviser is responsible for among other things, developing a
continuing investment program for each Fund in accordance with its investment
objective, reviewing the investment strategies and policies of each Fund, and
advising the Board on the selection of additional Sub-advisers.

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<PAGE>

The Adviser has entered into investment sub-advisory agreements with
the Sub-advisers to exercise investment discretion over the assets (or a portion
of assets) of each Fund.

For its services under the Investment Advisory Agreement, the Adviser
receives the following fees with respect to the following funds:

Advisory Fee
(as a percentage of
average daily net assets)

Government Bond Fund................................. 0.35
Corporate Bond Fund.................................. 0.35
Growth Equity Fund................................... 0.45
Value Equity Fund.................................... 0.45

YEAR 2000 COMPLIANCE
Like other mutual funds, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by the Adviser and other service providers to the Funds do
not properly process and calculate date-related information and data from and
after January 2000. The Adviser has taken steps to address the Year 2000 issue
with respect to the computer systems that it uses and to obtain reasonable
assurances that comparable steps are being taken by the Funds' other major
service providers. The Adviser does not anticipate that the move to the Year
2000 will have a material impact on its ability to continue to provide the Funds
with service at current levels.

The Adviser was incorporated under the laws of Delaware in 1987 and is
registered under the Investment Advisers Act of 1940.

INVESTMENT CONSULTANT

To assist it in carrying out its responsibilities under the Investment
Advisory Agreement, the Adviser has retained Wellesley Group, Inc.
("Wellesley"), 800 South Street, Waltham, Massachusetts 02154, to provide data
with which the Adviser and the Board can monitor and evaluate the performance of
the Funds and the Sub-advisers.

If the Board decides to add or change Sub-advisers, Wellesley will
assist the Adviser and the Board in the selection of new Sub-advisers with
proven long-term investment performance and philosophy best suited to the goals
and objectives of the Fund for which the adviser is being considered. As a part
of this selection process, Wellesley will analyze statistical information
relating to investments and performance, and evaluate the risk and return
profiles of the investment advisers under consideration. Wellesley will also
review such qualitative factors as the advisory firm's ownership, organizational
structure, business plan, client base, staff resources, investment philosophy,
research capabilities, investment decision-making process, and risk management
disciplines.

SUB-ADVISERS

The Adviser has retained the Sub-advisers to render advisory services
and make daily investment decisions for each Fund. The Adviser makes
recommendations to the Board regarding the selection and retention of these
Sub-advisers. On an ongoing basis, the Adviser evaluates the Sub-advisers and
reports to the Board concerning their investment results. The Adviser also
reviews the investments made for the Funds by the Sub-advisers to see that they
comply with the Funds' investment objectives, policies and restrictions.

The following Sub-advisers and individuals are primarily responsible
for the day-to-day management of the Funds:

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years of experience managing fixed income asset and holds a Masters in Business
Administration in Finance from DePaul University in Chicago, Illinois. Mr.
Stephen Timbers, is President of Northern Trust Global Investments and a Member
of the Management Committee of NTC. Prior to joining NTC, Mr. Timbers was
President, Chief Executive Officer and Chief Investment Officer of Zurich Kemper
Investments, the investment adviser to the Kemper Funds and the parent
organization of Zurich Investment Management, Inc. Prior to joining Kemper in
1987, Mr. Timbers was Executive Vice President and Chief Investment Officer of
the Portfolio Group, Inc. Mr. Timbers holds a Masters in Business Administration
from Harvard University in Cambridge, Massachusetts. Mr. Mark J. Wirth, CFA, is
Co-Director of Fixed Income and Senior Vice President for NTC. Mr. Wirth
co-manages NTC's fixed income management division and leads NTC's fixed income
effort as a senior strategist. Mr. Wirth holds a Masters in Business
Administration from the University of Wisconsin in Madison, Wisconsin and has
been in the industry since 1986. Mr. Monty Memler, CFA, is a Vice President and
Senior Portfolio Manager for NTC. Mr. Memler has been a member of the fixed
income team at NTC for seven years and holds a Masters in Business
Administration from the University of Chicago in Chicago, Illinois and has been
in the industry since 1986. Mr. Steven Schafer, CFA, is a Second Vice President
and Portfolio Manager for NTC. Mr. Schafer is responsible for managing active
and passive fixed income portfolios and holds a Masters in Business
Administration from the University of Chicago in Chicago, Illinois. Mr. Schafer
has been in the industry since 1990. Mr. Michael J. Lannan, CFA, is a Vice
President and Portfolio Manager for NTC. Mr. Lannan holds a Masters in Business
Administration from Depaul University in Chicago, Illinois and has been in the
industry since 1988. Mr. Peter T. Marchese, CFA, is a Second Vice President and
Portfolio Manager for NTC. Mr. Marchese holds a Masters in Business
Administration from the University of Wisconsin in Madison, Wisconsin and has
been in the industry since 1987.

CONSECO CAPITAL MANAGEMENT, INC. ("CCM"), 11825 N. Pennsylvania Street,
Carmel, Indiana 46032, manages the portfolio of the CORPORATE BOND FUND. CCM is
a Delaware corporation that was organized in 1981 and is registered as an
investment adviser under the Advisers Act. CCM is a wholly-owned subsidiary of
Conseco, Inc., a financial services holding company that owns or controls
several life insurance companies. CCM presently manages approximately $31
billion for individuals, corporations, insurance companies, investment
companies, pension plans, trusts, estates, as well as charitable organizations
including foundations and endowments. Mr. Maxwell Bublitz, CFA, is President of
CCM and holds a Masters in Business Administration from the University of
Southern California in Los Angeles, California. Prior to joining CCM in 1987,
Mr. Bublitz was a Portfolio Manager for Transamerica Investment Services in Los
Angeles, California. Mr. Thomas A. Meyers, CFA, is the Fund's Portfolio Manager
and is a Senior Vice President and Director of Marketing for CCM. Mr. Meyers
received his BA from Brown University in Providence, Rhode Island. Prior to
joining CCM in 1988, Mr. Meyers was a Securities Analyst for Capital Research &
Management in Los Angeles, California. Mr. Andrew S. Chow, CFA, is a Vice
President for CCM and holds a Masters in Business Administration from Carnegie
Mellon University in Pittsburgh, Pennsylvania. Prior to joining CCM in 1991, Mr.
Chow was a Manager of Quantitative Analysis at Washington Square Capital in
Minneapolis, Minnesota. Mr. Joseph F. DeMichele is a Vice President for CCM and
holds a Bachelor of Arts in Economics from the University of Pennsylvania in
Philadelphia, Pennsylvania. Prior to joining CCM in 1990, Mr. DeMichele was an
Assistant Trader for Salomon, Inc. in New York. Mr. Gregory Hahn, CFA, is a
Senior Vice President and Portfolio Manager for

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<PAGE>

CCM and holds a Masters in Business Administration from Indiana University in
Indianapolis, Indiana. Prior to joining CCM in 1989, Mr. Hahn was a Fixed Income
Portfolio Manager for Unified Management in Indianapolis, Indiana. Mr. Gordon N.
Smith, is a Vice President and Portfolio Manager for CCM and holds a Masters in
Finance from the University of Wisconsin in Madison, Wisconsin. Prior to joining
CCM in 1995, Mr. Smith was a Portfolio Manager for Strong Capital Management in
Menomonee Falls, Wisconsin from 1989 to 1995.

The following table sets forth the performance data relating to the
historical performance of the separate accounts managed by CCM that have an
investment objective and investment policies, strategies and risks substantially
similar to those of Corporate Bond Fund. The data is provided to illustrate the
past performance of CCM in managing substantially similar accounts as measured
against a specified market index and does not represent the performance of
Corporate Bond Fund. Investors should not consider this performance data as an
indication of future performance of the Corporate Bond Fund or of CCM.

These investment results have been calculated and presented in
compliance with the Performance Presentation Standards of the Association of
Investment Management and Research ("AIMR"), retroactively applied to all time
periods. AIMR has not been involved with the preparation or review of this
report. All returns presented were calculated on a total return basis and
include all dividends and interest, accrued income and realized and unrealized
gains and losses. All returns reflect the deduction of the actual investment
advisory fees, brokerage commissions and execution costs paid by the investment
adviser's private accounts, without provision for federal or state income taxes.
Custodial fees, if any, were not included in the calculation.

The presentation below describes and consists of the fully
discretionary taxable or tax-exempt accounts managed by CCM that have an
investment objective, and investment policies, strategies and risks
substantially similar to those of the Corporate Bond Fund. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. Cash and equivalents are included in performance returns. Results for
the full period are time-weighted and dollar weighted in accordance with AIMR
standards.

The private accounts are not subject to the same types of expenses to
which the Corporate Bond Fund is subject nor to the diversification
requirements, specific tax restrictions and investment limitations imposed by
the 1940 Act or Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). The Fund's returns would be reduced to the extent its fees and
expenses are higher than the fees and expenses incurred by the separate
accounts. Also, the performance results for the private accounts could have been
adversely affected if the private accounts included in the composite had been
regulated as an investment company under the federal securities laws. The
presentation below describes and contains six (6) accounts valued, as of
December 31, 1997, at $71.7 million.

The investment results of CCM's private accounts presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the Fund or an individual investor investing in the Corporate
Bond Fund. Investors should also be aware that the use of a methodology
different from that used below to calculate performance could result in
different performance data. The Fund's performance will be calculated using the
method required by the SEC, which differs from the method used to calculate the
performance of the separate accounts.

11
<PAGE>
<TABLE>
<S> <C> <C>
CCM's Composite
for the Lehman Brothers
Corporate Bond Corporate
Years(s) Style Bond Index(2)
- ------- --------------- ---------------
Since Inception (7/1/1990)(1)............. 10.53% 9.74%
5 Years (1993-1997)(1)..................... 8.83% 8.45%
3 Years (1995-1997)(1)..................... 11.38% 11.65%
1 Year (1997) (1).......................... 10.05% 10.24%
1993....................................... 13.57% 12.17%
1994....................................... (2.74%) (3.92%)
1995....................................... 19.59% 22.24%
1996....................................... 4.97% 3.29%
1997....................................... 10.05% 10.24%
</TABLE>

(1) Average annual returns through December 31, 1997.

(2) The Lehman Brothers Corporate Bond Index represents taxable, U.S.
dollar denominated debt securities. The index is composed of all publicly
issued, fixed rate, nonconvertible investment grade debt registered under the
Securities Act of 1933. The index includes the industrial, finance, and utility
sectors. The index also includes "Yankee bonds," that is, debt registered and
sold in the United States by foreign issuers, including debt issued or
guaranteed by foreign sovereign governments, municipalities, or governmental or
international agencies. Performance figures for the Index do not reflect
deduction of brokerage commissions, or other transaction costs, nor is the Index
subject to management and other fees charged to the private accounts.

DAVIS HAMILTON, INC., D/B/A DAVIS HAMILTON JACKSON & ASSOCIATES ("DHJA"),
Two Houston Center, 909 Fannin, Suite 550, Houston, Texas 77010, manages the
portfolio of the GROWTH EQUITY FUND. DHJA is a corporation that was organized in
1988 under the laws of the State of Texas and is registered as an investment
adviser under the Advisers Act. DHJA currently manages approximately $2.2
billion for institutions and high net worth individuals and invests primarily in
domestic equity securities. Mr. Jack R. Hamilton, CFA, is the President and a
shareholder of DHJA, and received his Bachelor of Arts in Finance from Texas
Tech University in Lubbock, Texas. Prior to co-founding DHJA in 1988, Mr.
Hamilton was a Vice President at Citicorp Investment Management in Houston,
Texas. Mr. Robert C. Davis, CFA, is the Secretary, Treasurer and a shareholder
of DHJA, and received his M.A. in Economics from the University of Texas at
Arlington in Arlington, Texas. Prior to co-founding DHJA in 1988, Mr. Davis was
a Senior Vice President at Lovett, Mitchell, Webb & Garrison in Houston, Texas.
Mr. J. Patrick Clegg, CFA, is the Fund's Portfolio Manager and received his
M.B.A. from the University of Texas in Austin, Texas. Prior to joining DHJA in
1996, Mr. Clegg was a Principal and Director of Research at Luther King Capital
Management in Fort Worth, Texas.

The following table sets forth the performance data relating to the
historical performance of the separate accounts managed by DHJA that have an
investment objective and investment policies, strategies and risks substantially
similar to those of Growth Equity Fund. The data is provided to illustrate the
past performance of DHJA in managing substantially similar accounts as measured
against a specified market index and does not represent the performance of
Growth Equity Fund. Investors should not consider this performance data as an
indication of future performance of the Growth Equity Fund or of DHJA.

These investment results have been calculated and presented in
compliance with the Performance Presentation Standards of AIMR only for the
period January 1, 1993 through December 31, 1997. Prior to January 1, 1993, not
all fully discretionary portfolios were represented in appropriate composites.
Composite results for the period of July 1, 1988 through December 31, 1992,
include fully discretionary accounts over $1.0 million that were managed in
accordance with the quality growth equity strategy. AIMR has not been involved
with the preparation or review of this report. All returns presented were
calculated on a total return basis and include all dividends and interest,
accrued income and realized and unrealized gains and losses. All returns reflect
the deduction of the highest investment advisory fee charged to any account,
brokerage commissions and execution costs paid by the investment adviser's
private accounts, without

12
<PAGE>

provision for federal or state income taxes. Custodial fees, if any, were not
included in the calculation.

The presentation below describes and consists of the fully
discretionary taxable or tax-exempt accounts managed by DHJA that have an
investment objective, and investment policies, strategies and risks
substantially similar to those of the Growth Equity Fund. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. Cash and equivalents are included in performance returns. Results for
the period of July 1, 1988 through December 31, 1992 were valued monthly and the
composites were equal weighted. Results for the period from January 1, 1993
through December 31, 1997 are valued monthly and portfolio returns have been
weighted by using beginning-of-month market values plus weighted cash flows in
accordance with AIMR standards.

The private accounts are not subject to the same types of expenses to
which the Growth Equity Fund is subject nor to the diversification requirements,
specific tax restrictions and investment limitations imposed by the 1940 Act or
Subchapter M of the Code. The Fund's returns would be reduced to the extent its
fees and expenses are higher than the fees and expenses incurred by the separate
accounts. Also, the performance results for the private accounts could have been
adversely affected if the private accounts included in the composite had been
regulated as an investment company under the federal securities laws. The
presentation below describes and contains forty-five (45) accounts valued, as of
December 31, 1997, at $1.032 billion.

The investment results of DHJA's private accounts presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the Fund or an individual investor investing in the Growth Equity
Fund. Investors should also be aware that the use of a methodology different
from that used below to calculate performance could result in different
performance data. The Fund's performance will be calculated using the method
required by the SEC, which differs from the method used to calculate the
performance of the separate accounts.

<TABLE>
<S> <C> <C>
DHJA's Composite Russell 1000
for the Growth
Year(s) Growth Equity Style Index(2)
- ------ ------------------- -------------
Since Inception (7/1/1988)(1)......................... 17.6% 17.95%
5 Years (1993-1997)(1)................................ 18.8% 18.44%
3 Years (1995-1997)(1) ............................... 28.4% 30.18%
1 Year (1997)(1) ..................................... 34.9% 30.48%
1993.................................................. 20.2% 2.90%
1994.................................................. (6.9%) 2.66%
1995.................................................. 35.4% 37.19%
1996.................................................. 15.9% 23.23%
1997.................................................. 34.9% 30.48%
</TABLE>

(1) Average annual returns through December 31, 1997.

(2) The Russell 1000 Index measures the performance of the 1,000
largest companies in the Russell 3000 Index, which represents the approximately
90% of the total market capitalization of the Russell 3000 Index. (The Russell
3000 consists of the 3,000 largest U.S. companies based on total market
capitalization; it represents approximately 98% of the investable U.S. equity
market.) When the Russell 1000 was last reconstituted, its average market
capitalization was approximately $7.6 billion, and its median market
capitalization was approximately $3.0 billion. The smallest company in the Index
had an approximate market capitalization of $1.1 billion. The Growth Index
measures the performance of those Russell 1000 companies with higher
price-to-book ratios and higher forecasted growth values. Performance figures
for the Index do not reflect deduction of brokerage commissions, or other
transaction costs, nor is the Index subject to management and other fees charged
to the private accounts.

BEUTEL, GOODMAN CAPITAL MANAGEMENT ("BGCM"), 5847 San Felipe, Suite 4500,
Houston, Texas 77057-3011, manages the portfolio of the VALUE EQUITY FUND. BGCM
is a partnership that was organized in 1988 and is registered as an investment
adviser under the Advisers Act. BGCM has two general partners, Value Corp. and
Beutel, Goodman America Inc. Beutel, Goodman America Inc. is owned by BG Canada:
51% of BG Canada is owned by its employees, 49% is owned by Duff & Phelps, a
U.S. public company listed on

13
<PAGE>

the New York Stock Exchange. BG Canada is registered as an investment adviser
with the Ontario and Quebec Securities Commissions. BGCM currently manages
approximately $1.9 billion in assets. Mr. Richard J. Andrews, CFA, has served as
President and a member of the Investment Committee of BGCM since 1995. Mr.
Andrews served as a Vice President and member of the Investment Committee of
BGCM from 1988 to 1995. Mr. Andrews received his Masters in Business
Administration from Amos Tuck, Dartmouth College in Hanover, New Hampshire. Mr.
John Philip Ferguson is the Fund's Portfolio Manager and has served as Vice
President and a member of the Investment Committee of BGCM since 1988. Mr.
Ferguson received his Juris Doctor from the University of Texas Law School in
Austin, Texas. Mr. Forrest B. Bruch, Jr., CFA, has served as a Portfolio Manager
of BGCM since 1995. Mr. Bruch received his Masters in Business Administration
from the University of Houston in Houston, Texas. Prior to joining BGCM, Mr.
Bruch was a Managing Director of Investments for Savoy Capital in Houston, Texas
from 1991 to 1994 and a First Vice President for Paine Webber, Inc. in Houston,
Texas in 1990. Mr. Carl Dinger, CFA, has served as a Vice President and
Portfolio Manager for BGCM since 1991. Mr. Dinger received his Masters in
Business Administration from Lehigh University. Prior to joining BGCM in 1991,
Mr. Dinger was an Analyst and Portfolio Manager for Bering Corporation in
Houston, Texas from 1988 to 1990. Mr. Frank McReynolds Wozencraft, Jr., CFA, has
served as a Vice President for BGCM since 1996 and a Portfolio Manager since
1993. Mr. Wozencraft received his Masters of Management from the J.L. Kellogg
Graduate School of Management, Northwestern University, in Evanston, Illinois.
Prior to joining BGCM in 1993, Mr. Wozencraft was a Financial Analyst for
Hendricks Management Co., in Houston, Texas from 1992 to 1993, and a Financial
Analyst for Criterion Investment Management Company in Houston, Texas from 1985
to 1990.

The following table sets forth the performance data relating to the
historical performance of the separate accounts managed by BGCM that have an
investment objective and investment policies, strategies and risks substantially
similar to those of Value Equity Fund. The data is provided to illustrate the
past performance of BGCM in managing substantially similar accounts as measured
against a specified market index and does not represent the performance of Value
Equity Fund. Investors should not consider this performance data as an
indication of future performance of the Value Equity Fund or of BGCM.

As of January 1, 1993, these investment results have been calculated
and presented in compliance with the Performance Presentation Standards of AIMR.
AIMR has not been involved with the preparation or review of this report. All
returns presented were calculated on a total return basis and include all
dividends and interest, accrued income and realized and unrealized gains and
losses. All returns reflect the deduction of a combination of the highest
investment advisory fees from 1988 to 1989 and the actual investment advisory
fees charged to each account from 1990 through 1997, brokerage commissions and
execution costs paid by the investment adviser's private accounts, without
provision for federal or state income taxes. Custodial fees, if any, were not
included in the calculation.

The presentation below describes and consists of the fully
discretionary taxable or tax-exempt accounts managed by BGCM that have an
investment objective, and investment policies, strategies and risks
substantially similar to those of the Value Equity Fund. The performance figures
currently represent a size-weighted average of the total return performance of
all fully discretionary, non-wrap, tax-exempt, fee paying U.S. equity portfolios
over $100,000 in size that have been managed for a full quarter. Prior to
January 1, 1993, the composite was equally-weighted. Prior to January 1, 1990,

14
<PAGE>

U.S. equity accounts managed by an affiliate company are included; from January
1, 1990, only those portfolios managed in the U.S. are included. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. Cash and equivalents are included in performance returns. Results for
the period from January 1, 1993 through December 31, 1997 are time-weighted and
dollar weighted in accordance with AIMR standards.

The private accounts are not subject to the same types of expenses to
which the Value Equity Fund is subject nor to the diversification requirements,
specific tax restrictions and investment limitations imposed by the 1940 Act or
Subchapter M of the Code. The Fund's returns would be reduced to the extent its
fees and expenses are higher than the fees and expenses incurred by the separate
accounts. Also, the performance results for the private accounts could have been
adversely affected if the private accounts included in the composite had been
regulated as an investment company under the federal securities laws. The
composite below contains seventy-nine (79) accounts, valued as of December 31,
1997 at $611.9 million.

The investment results of BGCM's private accounts presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the Fund or an individual investor investing in the Value Equity
Fund. Investors should also be aware that the use of a methodology different
from that used below to calculate performance could result in different
performance data. The Fund's performance will be calculated using the method
required by the SEC, which differs from the method used to calculate the
performance of the separate accounts.
<TABLE>
<S> <C> <C>
BGCM's Composite Russell 1000
for the Value
Year(s) Value Equity Style Index(2)
- ------- ------------------ -------------
10 Years (1988-1997)(1)............................... 17.5% 18.16%
5 Years (1993-1997(1)................................. 20.1% 21.36%
3 Years (1995-1997)(1)................................ 28.3% 31.52%
1 Year (1997)(1)...................................... 29.6% 35.18%
1993.................................................. 23.0% 18.12%
1994.................................................. (4.0%) (2.01%)
1995.................................................. 32.6% 38.34%
1996.................................................. 22.9% 21.63%
1997.................................................. 29.6% 35.18%
</TABLE>

(1) Average annual returns through December 31, 1997.

(2) The Russell 1000 Index measures the performance of the 1,000
largest companies in the Russell 3000 Index, which represents the approximately
90% of the total market capitalization of the Russell 3000 Index. (The Russell
3000 consists of the 3,000 largest U.S. companies based on total market
capitalization; it represents approximately 98% of the investable U.S. equity
market.) When the Russell 1000 was last reconstituted, its average market
capitalization was approximately $7.6 billion, and its median market
capitalization was approximately $3.0 billion. The smallest company in the Index
had an approximate market capitalization of $1.1 billion. The Value Index
measures the performance of those Russell 1000 companies with lower
price-to-book ratios and lower forecasted growth values. Performance figures for
the Index do not reflect deduction of brokerage commissions, or other
transaction costs, nor is the Index subject to management and other fees charged
to the private accounts.

The Adviser performs internal due diligence on each Sub-adviser and
monitors each Sub-adviser's performance. The Adviser will be responsible for
communicating performance targets and evaluations to the Sub-advisers,
supervising each Sub-adviser's compliance with its Fund's fundamental investment
objectives and policies, authorizing Sub-advisers to engage in certain
investment techniques for the Funds, and recommending to the Board whether
sub-advisory agreements should be renewed, modified or terminated. The Adviser
pays a fee to each of the Sub-advisers. These fees are borne solely by the
Adviser and do not increase the fees paid by shareholders of the Funds. As of
the date of this Prospectus, the Adviser will pay NTC, CCM, DHJA, BGCM fees of
0.20%, 0.20%,

15
<PAGE>

0.30%, and 0.30%, respectively, of the average daily net assets of the Fund for
which the Sub-adviser provides investment advisory services. The amount of these
fees may vary from time to time as a result of periodic negotiations with the
Sub-advisers and pursuant to certain factors described in the SAI. The amount of
advisory fees paid by each Fund will not vary as a result of changes in the
Sub-advisory fees, however.

The Adviser also may from time to time recommend that the Board replace
one or more Sub-advisers or appoint additional Sub-advisers, depending on the
Adviser's assessment of what combination of Sub-advisers it believes will
optimize each Fund's chances of achieving its investment objective. In the event
that a Sub-adviser ceased to provide investment advisory services for a Fund,
the Adviser would recommend to the Board a similarly qualified investment
adviser to replace the Sub-adviser but would not manage the Fund's portfolio.

Section 15(a) of the 1940 Act requires that a Fund's shareholders
approve its investment advisory contracts. As interpreted, this requirement
applies to the Sub-advisory contracts of the Funds. The Trust is applying to the
SEC for a conditional exemption from this shareholder approval requirement. The
SEC has granted such applications in the past, and the Trust expects it will
receive the requested exemption. Such relief is not certain, however. If the
exemption is granted, the Board would be able to appoint additional or
replacement Sub-advisers without Shareholder approval. The Board would not,
however, be able to replace the Adviser as investment adviser to any Fund
without the approval of that Fund's shareholders.

ADMINISTRATOR

On behalf of the Fund, the Trust has entered into an Administration
Agreement with Forum Administrative Services, LLC ("FAdS"). Under this
agreement, FAdS is responsible for the supervision of the overall management of
the Trust (including the Trust's receipt of services for which it must pay),
providing the Trust with general office facilities and providing persons
satisfactory to the Board to serve as officers of the Trust. For these services,
FAdS receives a fee computed and paid monthly at an annual rate of 0.15% of the
average daily net assets under $150 million, and 0.10% of the average daily
assets over $150 million of each Fund, subject to an annual minimum of $30,000
per Fund.

As of February 28, 1998, FAdS administers investment companies and
collective investment funds with assets of approximately $45 billion.

DISTRIBUTOR

Pursuant to a Distribution Agreement with the Trust, Forum Financial
Services, Inc. ("FFSI") acts as distributor of the Fund's Shares. FFSI acts as
the agent of the Trust in connection with the offering of Shares of the Fund.
FFSI receives no compensation for its services under the Distribution Agreement.
FFSI may enter into arrangements with banks, broker-dealers or other financial
institutions ("Selected Dealers") through which investors may purchase or redeem
Shares. FFSI may, at its own expense and from its own resources, compensate
certain persons who provide services in connection with the sale or expected
sale of Shares of the Fund. Investors purchasing Shares of the Fund through
another financial institution should read any materials and information provided
by the financial institution to acquaint themselves with its procedures and any
fees that it may charge. FFSI is a registered broker-dealer and is a member of
the National Association of Securities Dealers, Inc.

DISTRIBUTION EXPENSES

Under a distribution plan (the "Plan") adopted by the Board, the Fund
may reimburse FFSI for the distribution expenses incurred by FFSI on behalf of a
Fund. These expenses may include the cost of advertising and promotional
materials, providing prospective shareholders with a Fund's prospectus,
statement of additional information and shareholder reports, reimbursing the

16
<PAGE>

Adviser for its distribution expenses and compensating others who may provide
assistance in distributing Shares of a Fund. These expenses may include costs of
FFSI's offices such as rent, communications equipment, employee salaries and
overhead costs. The Trust will not reimburse FFSI for any distribution expenses
in any fiscal year of a Fund in excess of 0.25% of the Fund's average daily net
assets. During the period in which the Plan and the related Distribution
Agreement are in effect, the Board will from time to time determine the amount
of distribution expense reimbursement to be paid. Unreimbursed expenses of the
Distributor incurred during a fiscal year of the Trust may not be reimbursed by
the Trust in future years or after the termination of the Plan or the
Distribution Agreement. To the extent that the Funds engage in joint
distribution activities, distribution costs will be allocated among the
participating Funds pro rata according to their net assets.

TRANSFER AGENT

The Trust has entered into a Transfer Agency Agreement with Forum
Shareholder Services, LLC ("FSS") pursuant to which FSS acts as the Fund's
transfer agent and dividend disbursing agent. FSS maintains an account for each
shareholder of the Trust (unless such accounts are maintained by sub-transfer
agents), performs other transfer agency functions and acts as dividend
disbursing agent for the Trust.

Pursuant to a separate agreement, Forum Accounting Services, LLC
("FAcS") provides portfolio accounting services to each Fund. The Adviser, FAdS,
FFSI, FSS and FAcS are members of the Forum Financial Group of companies which
together provide a full range of services to the investment company and
financial services industry. As of October 1, 1997, the Adviser, FAdS, FSS,
FFSI, and FAcS were controlled by John Y. Keffer, and were located at Two
Portland Square, Portland, Maine, 04101.

EXPENSES OF THE TRUST

Each Fund's expenses comprise Trust expenses attributable to the Fund,
and a pro rata share of the Trust's expenses that are not attributable to a
particular Fund. The Adviser, FAdS, FSS, FAcS or any other entity that provides
services for the Funds pursuant to a contract with the Trust, may waive all or a
portion of its fees, which are accrued daily, and paid monthly. Any such waiver,
which could be discontinued at any time, would have the effect of increasing the
Fund's performance for the period during which the waiver was in effect and
would not be recouped at a later date.

CUSTODY

BankBoston serves as each Fund's custodian and may appoint
subcustodians for the foreign securities and other assets held in foreign
countries.

4. HOW TO BUY SHARES

MINIMUM INVESTMENT

There is a $5,000 minimum for initial purchases ($2,000 for retirement
accounts and automatic investment plans) and a $100 minimum for subsequent
purchases, of Shares of each Fund. Either management of the Trust or FSS may in
its discretion waive the investment minimums. (See "Other Shareholder Services -
Automatic Investment Plan" and "Dividends and Tax Matters.")

The Funds reserve the right to reject any subscription for the purchase
of their Shares. Share certificates are issued only to shareholders of record
upon their written request and no certificates are issued for fractional Shares.

PURCHASE PROCEDURES

THERE ARE THREE WAYS TO PURCHASE SHARES INITIALLY.

BY MAIL

You may send a check or money order (cash cannot be accepted) along
with a completed account application form to the Trust at the address listed
under "Account Application." Checks or

17
<PAGE>

money orders are accepted at full value subject to collection. If a check or
money order does not clear, the purchase order will be canceled and the investor
will be liable for any losses or fees incurred by the Trust, FSS or FAdS.

For individual or Uniform Gift to Minors Act accounts, the check or
money order used to purchase Shares of a Fund must be made payable to "Memorial
Funds" or to one or more owners of that account and endorsed to "Memorial
Funds." No other method of payment by check will be accepted. For corporation,
partnership, trust, 401(k) plan or other non-individual type accounts, the check
used to purchase Shares of a Fund must be made payable on its face to "Memorial
Funds." No other method of payment by check will be accepted. All purchases must
be paid in U.S. dollars; checks drawn on U.S. Banks. Payment by traveler's
checks is prohibited.

BY BANK WIRE

You make an initial investment in a Fund using the wire system for
transmittal of money among banks. You should first telephone FSS at (888)
263-5593 to obtain an account number. You should then instruct a bank to wire
your money immediately to:

BankBoston
Boston, Massachusetts
ABA # 011000390
For Credit To: Forum Financial Corp.
Account No.: 541-54171
Re: Memorial Funds
[Name of Fund] - Trust Shares
[Investor's Name]
[Investor's Account Number]

You should then promptly complete and mail the account application
form. Your bank may charge for transmitting the money by bank wire. The Trust
does not charge you for the receipt of wire transfers. Payment by bank wire is
treated as a federal funds payment when received.

THROUGH FINANCIAL INSTITUTIONS

You may also purchase Shares through certain broker-dealers, banks and
other financial institutions ("Processing Organizations"). FSS and its
affiliates may be Processing Organizations. Processing Organizations may receive
payments from FFSI with respect to sales of Trust Shares and may receive
payments as a processing agent from FSS. Financial institutions, including
Processing Organizations, may charge their customers a fee for their services
and are responsible for promptly transmitting purchase, redemption and other
requests to the Funds.

If you purchase Shares through a Processing Organization, you will be
subject to its procedures which may include charges, limitations, investment
minimums, cutoff times and restrictions in addition to, or different from, those
applicable to shareholders who invest in a Fund directly. You should acquaint
yourself with your institution's procedures and should read this Prospectus in
conjunction with any materials and information provided by their institution. If
you purchase a Fund's Shares through a Processing Organization, you may or may
not be the shareholder of record and, subject to your institution's and the
Fund's procedures, may have Fund Shares transferred into your name. There is
typically a three-day settlement period for purchases and redemptions through
broker-dealers. Certain Processing Organizations also may enter purchase orders
with payment to follow.

Certain shareholder services may not be available to you if you
purchase Shares through a Processing Organization. You should contact your
Processing Organization for further information. The Trust may confirm purchases
and redemptions of a Processing Organization's customers directly to the
Processing Organization, which in turn will provide its customers with
confirmations and periodic statements. The Trust is not responsible for the
failure of any Processing Organization to carry out its obligations to its
customer.

18
<PAGE>

SUBSEQUENT PURCHASES

You may make subsequent purchases by mailing a check, by sending a bank
wire or through your Processing Organization as indicated above. All payments
should clearly indicate your name and account number.

ACCOUNT APPLICATION

An account application is included in this Prospectus. You may also
obtain an account application that is necessary to open an account by writing
the Trust at the following address:

MEMORIAL FUNDS
P.O. BOX 446
PORTLAND, ME 04112

To participate in shareholder services not referenced on the account
application form and to change information on your account (such as addresses),
you should contact the Trust. The Trust reserves the right in the future to
modify, limit or terminate any shareholder privilege upon appropriate notice to
shareholders and to charge a fee for certain shareholder services, although no
such fees are currently contemplated. You may terminate your exercise of any
privilege or participation in any program at any time by writing to the Trust.

GENERAL INFORMATION

Fund Shares are continuously sold on any weekday except days when the
New York Stock Exchange is closed, normally New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas ("Fund Business Day"). The purchase price
for a share of a Fund equals its net asset value next-determined after
acceptance of an order in proper form.

Fund Shares become entitled to receive dividends and distributions on
the next Fund Business Day after a purchase order is accepted.

All payments for Shares must be in U.S. dollars. All transactions in
Fund Shares are effected through FSS, which accepts orders for redemptions and
for subsequent purchases only from shareholders of record. Shareholders of
record will receive from the Trust periodic statements listing all account
activity during the statement period.

For information regarding purchase and redemption of shareholder
accounts, please call Forum Shareholder Services at (888)-263-5593.

5. HOW TO SELL SHARES

GENERAL INFORMATION

Fund Shares may be sold ("redeemed") at their net asset value on any
Fund Business Day. There is no minimum period of investment and no restriction
on the frequency of redemptions.

Fund Shares are redeemed at the Fund's net asset value next determined
after FSS receives the redemption order in proper form (and any supporting
documentation that FSS may require). Redeemed Shares are not entitled to receive
dividends declared after the day the redemption becomes effective.

Normally, redemption proceeds are paid immediately, but in no event
later than seven days, following receipt of a redemption order. Proceeds of
redemption requests (and exchanges), however, will not be paid unless any check
used to purchase the Shares being redeemed has been cleared by the shareholder's
bank, which may take up to 15 days. This delay may be avoided by paying for
Shares through wire transfers. Unless otherwise indicated, redemption proceeds
normally are paid by check mailed to the shareholder's record address. The right
of redemption may not be suspended nor the payment dates postponed for more than
seven days after the tender of the Shares to a Fund, except when the New York
Stock Exchange is closed (or when trading on the Exchange is restricted) for any
reason other than its customary weekend or holiday closings, for any period
during which an emergency exists as a result of which disposal by the Fund of
its portfolio securities or determination by

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the Fund of the value of its net assets is not reasonably practicable and for
such other periods as the SEC may permit.

REDEMPTION PROCEDURES

If you invested through a Processing Organization you may redeem your
Shares through the Processing Organization as described above. If you invested
directly in a Fund, you may redeem your Shares as described below. If you wish
to redeem Shares by telephone or receive redemption proceeds by bank wire, you
must elect these options by properly completing the appropriate sections of your
account application form. These privileges may not be available until several
weeks after your application is received. Shares for which certificates have
been issued may not be redeemed by telephone.

BY MAIL

You may redeem Shares by sending a written request to FSS accompanied
by any share certificate that may have been issued to the shareholder to
evidence the Shares being redeemed. All written requests for redemption must be
signed by the shareholder with signature guaranteed, and all certificates
submitted for redemption must be endorsed by the shareholder with signature
guaranteed. (See "How to Sell Shares -- Other Redemption Matters.")

BY TELEPHONE

If you have elected telephone redemption privileges, you may request a
redemption by calling FSS at (888) 263-5593 and providing your account number,
the exact name in which your Shares are registered and your social security or
taxpayer identification number. In response to the telephone redemption
instruction, the Trust will mail a check to your record address or, if you have
elected wire redemption privileges, wire the proceeds.
(See "How to Sell Shares -- Other Redemption Matters.")

BY BANK WIRE

For redemptions of more than $5,000, if you have elected wire
redemption privileges, you may request a Fund to transmit proceeds of any
redemption over $5,000 by federal funds wire to a bank account that you
previously designated in writing. To request bank wire redemptions by telephone,
you also must have elected the telephone redemption privilege. Redemption
proceeds are transmitted by wire on the day after FSS receives a redemption
request in proper form.

OTHER REDEMPTION MATTERS

To protect shareholders and the Funds against fraud, signatures on
certain requests must have a signature guarantee. Requests must be made in
writing and include a signature guarantee for any of the following transactions:
(1) any endorsement on a share certificate; (2) instruction to change a
shareholder's record name; (3) modification of a designated bank account for
wire redemptions; (4) instruction regarding an Automatic Investment Plan or
Automatic Withdrawal Plan; (5) dividend and distribution election; (6) telephone
redemption; (7) exchange option election or any other option election in
connection with the shareholder's account; (8) written instruction to redeem
Shares whose value exceeds $50,000; (9) redemption in an account in which the
account address has changed within the last 30 days; (10) redemption when the
proceeds are deposited in a Memorial Funds account under a different account
registration; and (11) the remitting of redemption proceeds to any address,
person or account for which there are not established standing instructions on
the account.

Signature guarantees may be provided by any bank, broker-dealer,
national securities exchange, credit union, savings association or other
eligible institution that is authorized to guarantee signatures and is
acceptable to FSS. Whenever a signature guarantee is required, the signature of
each person required to sign for the account must be guaranteed.

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Shareholders who want to telephone redemption or exchange privileges
must elect those privileges. The Trust and FSS will employ reasonable procedures
in order to verify that telephone requests are genuine, including recording
telephone instructions and causing written confirmations of the resulting
transactions to be sent to shareholders. If the Trust and FSS did not employ
such procedures, they could be liable for losses due to unauthorized or
fraudulent telephone instructions. Shareholders should verify the accuracy of
telephone instructions immediately upon receipt of confirmation statements.
During times of drastic economic or market changes, telephone redemption and
exchange privileges may be difficult to implement. In the event that a
shareholder is unable to reach FSS by telephone, requests may be mailed or
hand-delivered to FSS.

Due to the cost of maintaining smaller accounts, the Trust reserves the
right to redeem, upon not less than 60 days' written notice, all Shares in any
Fund account whose aggregate net asset value is less than $2,000 immediately
following any redemption.

FSS will deem a shareholder's account "lost" if correspondence to the
shareholder's address of record is returned as undeliverable, unless FSS
determines the shareholder's new address. When an account is deemed lost all
distributions on the account will be reinvested in additional Shares of the
Fund. In addition, the amount of any outstanding (unpaid for six months or more)
checks for distributions that have been returned to FSS will be reinvested and
the checks will be canceled.

6. OTHER SHAREHOLDER SERVICES

EXCHANGES

Shareholders of one Fund may exchange their Shares for Trust Shares of
any of the other Memorial Funds, as well as for Institutional Service class
shares of Forum Daily Assets Government Fund. A prospectus for Daily Assets
Government Fund can be obtained by contacting FSS.

The Funds do not charge for exchanges, and there is currently no limit
on the number of exchanges you may make. The Funds reserve the right, however,
to limit excessive exchanges by any shareholder. Exchanges are subject to the
fees charged by, and the limitations (including minimum investment restrictions)
of, the Fund into which a shareholder is exchanging.

Exchanges may only be made between identically registered accounts or
by opening a new account. A new account application is required to open a new
account through an exchange if the new account will not have an identical
registration and the same shareholder privileges as the account from which the
exchange is being made. You may exchange into a Fund only if that Fund's Shares
may legally be sold in your state of residence.

Under federal tax law, an exchange is treated as a redemption and a
purchase. Accordingly, you may realize a capital gain or loss depending on
whether the value of the Shares redeemed is more or less than your basis in the
Shares at the time of the exchange transaction. Exchange procedures may be
amended materially or terminated by the Trust at any time upon 60 days' notice
to shareholders. (See "Additional Purchase and Redemption Information" in the
SAI.)

EXCHANGES BY MAIL

You may make an exchange by sending a written request to FSS accompanied by
any share certificates for the Shares to be exchanged. You must sign all written
requests for exchanges and endorse all certificates submitted for exchange with
your signature guaranteed. (See "How to Sell Shares -- Other Redemption
Matters.")

EXCHANGES BY TELEPHONE

If you have elected telephone exchange privileges, you may make a
telephone exchange request by calling FSS at (888) 263-5593 and providing the

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account number, the exact name in which the shareholder's Shares are registered
and your social security or taxpayer identification number. (See "How to Sell
Shares -- Other Redemption Matters.")

AUTOMATIC INVESTMENT PLAN

Under the Funds' Automatic Investment Plan, you may authorize monthly
amounts of $100 or more to be withdrawn automatically from a designated bank
account (other than passbook savings) and sent to FSS for investment in Shares
of a Fund. If you wish to use this plan, you must complete an application which
may be obtained by writing or calling FSS. The Trust may modify or terminate the
automatic investment plan with respect to any shareholder if the Trust is unable
to settle any transaction with the shareholder's bank. If the Automatic
Investment Plan is terminated before the shareholder's account totals $2,000,
the Trust reserves the right to close the account in accordance with the
procedures described under "How to Sell Shares -- Other Redemption Matters."

INDIVIDUAL RETIREMENT ACCOUNTS

The Funds may be a suitable investment vehicle for part or all of the
assets held in individual retirement accounts ("IRAs"). An IRA account
application form may be obtained by contacting the Trust at (888) 263-5593.
Generally, all contributions and investment earnings in an IRA will be
tax-deferred until withdrawn. Individuals may make tax-deductible IRA
contributions of up to a maximum of $2,000 annually. However, the deduction will
be reduced if the individual or, in the case of a married individual, either the
individual or the individual's spouse, is an active participant in an
employer-sponsored retirement plan and has adjusted gross income above certain
levels.

The foregoing discussion regarding IRAs is based on regulations in
effect as of June 1, 1997 and summarizes only some of the important federal tax
considerations generally affecting IRA contributions made by individuals or
their employers. It is not intended as a substitute for tax planning. Investors
should consult their tax advisors with respect to their specific tax situations
as well as with respect to state and local taxes.

AUTOMATIC WITHDRAWAL PLAN

If your Shares in a single account total $1,000 or more, you may
establish a withdrawal plan to provide for the pre-authorized payment from your
account of $250 or more on a monthly, quarterly, semi-annual or annual basis.
Under the withdrawal plan, sufficient Shares in your account are redeemed to
provide the amount of the periodic payment and you will recognize any taxable
gain or loss upon redemption of the Shares. If you wish to utilize the
withdrawal plan, you may do so by completing an application which may be
obtained by writing or calling FSS. The Trust may suspend a shareholder's
withdrawal plan without notice if the account contains insufficient funds to
effect a withdrawal or if the account balance is less than $1,000 at any time.

REOPENING ACCOUNTS

You may reopen an account, without filing a new account application
form, at any time within one year after your account is closed, if the
information on the account application form on file with the Trust is still
applicable.

7. DIVIDENDS AND TAX MATTERS

DIVIDENDS

PAYMENT OPTIONS

You may choose to have dividends and distributions of a Fund reinvested
in Shares of that Fund

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(the "Reinvestment Option"), to receive dividends and distributions in cash (the
"Cash Option") or to direct dividends and distributions to be reinvested in
Shares of another Fund (the "Directed Dividend Option"). All dividends and
distributions are treated in the same manner for federal income tax purposes
whether received in cash or reinvested in Shares of a Fund.

Under the Reinvestment Option, all dividends and distributions of a
Fund are automatically invested in additional Shares of that Fund. All dividends
and distributions are reinvested at a Fund's net asset value as of the payment
date of the dividend or distribution. You will be assigned this option unless
you select one of the other two options. Under the Cash Option, all dividends
and distributions are paid to the shareholder in cash. Under the Directed
Dividend Option, shareholders of a Fund whose Shares in a single account of that
Fund total $10,000 or more may elect to have all dividends and distributions
reinvested in Shares of another Fund, provided that those Shares are eligible
for sale in the shareholder's state of residence. For further information
concerning the Directed Dividend Option, shareholders should contact FSS.

TAX MATTERS

Each Fund intends to qualify for each fiscal year to be taxed as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"). As such, each Fund will not be liable for federal income
and excise taxes on the net investment income and net capital gain distributed
to its shareholders. Because each Fund intends to distribute all of its net
investment income and net capital gain each year, each Fund should thereby avoid
all federal income and excise taxes.

Dividends paid by a Fund out of its net investment income (including
net short- term capital gain) are taxable to shareholders of the Fund as
ordinary income. Pursuant to the Taxpayer Relief Act of 1997, two different tax
rates apply to net capital gains--that is, the excess of net gains from capital
assets held for more than one year over net losses from capital assets held for
not more than one year. One rate (generally 28%) applies to net gains on capital
assets held for more than one year but not more than 18 months ("mid-term
gains"), and a second rate (generally 20%) applies to the balance of such net
capital gains ("adjusted net capital gains"). Distributions of mid-term gains
and adjusted net capital gains will be taxable to shareholders as such,
regardless of how long a shareholder has held Shares in the Fund. If a
shareholder holds Shares for six months or less and during that period receives
a long-term capital gain distribution, any loss realized on the sale of the
Shares during that six-month period will be a long-term capital loss to the
extent of the distribution. Dividends and distributions reduce the net asset
value of the Fund paying the dividend or distribution by the amount of the
dividend or distribution. Furthermore, a dividend or distribution made shortly
after the purchase of Shares, although in effect a return of capital to you,
will be taxable as described above.

Each Fund is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to a shareholder who fails to provide the Fund with a correct
taxpayer identification number or to make required certifications, or who is
subject to backup withholding.

Reports containing appropriate information with respect to the federal
income tax status of dividends and distributions paid during the year by each
Fund will be mailed to shareholders shortly after the close of each calendar
year.

8. DETAILED DESCRIPTION OF FUNDS' INVESTMENTS, STRATEGIES AND RISKS

IN GENERAL

This section describes in more detail the Funds' investments, the
investment practices and

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strategies that the Sub-advisers may employ for a Fund, and the risks associated
with these investments and practices.

A FURTHER DESCRIPTION OF THE FUNDS' INVESTMENT POLICIES, INCLUDING
ADDITIONAL FUNDAMENTAL POLICIES, IS CONTAINED IN THE SAI.

A Fund must invest in accordance with its investment objective and
stated investment policies. The holders of a majority of the outstanding voting
securities of the Fund must approve any change to a Fund's investment objective
or to an investment policy designated as fundamental. A majority of outstanding
voting securities means the lesser of 67% of the Shares present or represented
at a shareholders' meeting at which the holders of more than 50% of the
outstanding Shares are present or represented, or more than 50% of the
outstanding Shares. Unless otherwise indicated, the investment policies of the
Funds are not fundamental and may be changed by the Board without shareholder
approval. A Fund will apply the percentage restrictions on its investments set
forth in its investment policies when the investment is made. If the percentage
of a Fund's assets committed to a particular investment or practice later
increases because of a change in the market values of a Fund's assets or
redemptions of Fund Shares, it will not constitute a violation of the
limitation.

CORE AND GATEWAY(R)

Notwithstanding the Funds' other investment policies, each Fund may
seek to achieve its investment objective by converting to a Core and
Gatewaystructure, upon future action by the Board and notice to shareholders. If
a Fund converts to a Core and Gateway structure, it would seek to achieve its
investment objective by investing all or a portion of its assets in shares of
another diversified, open-end management investment company that has an
investment objective and investment policies substantially similar to that of
the Fund.

FIXED INCOME SECURITIES AND THEIR CHARACTERISTICS

INTEREST RATE RISK
All fixed income securities, including U.S. Government Securities, can
change in value when there is a change in interest rates or the issuer's actual
or perceived creditworthiness or ability to meet its obligations. There is
normally an inverse relationship between the market value of securities
sensitive to prevailing interest rates and actual changes in interest rates. In
other words, an increase in interest rates produces a decrease in market value.
Moreover, the longer the remaining maturity (and duration) of a security, the
greater will be the effect of interest rate changes on the market value of that
security. Changes in the ability of an issuer to make payments of interest and
principal and in the market's perception of an issuer's creditworthiness will
also affect the market value of the debt securities of that issuer. The
possibility exists that, the ability of any issuer to pay, when due, the
principal of and interest on its debt securities may become impaired.

CREDIT RISK AND RATINGS

The Fixed Income Funds' investments are subject to "credit risk"
relating to the financial condition of the issuers of the securities that each
Fund holds. Each Fund attempts to limit its credit risk by limiting its
investment in securities rated in lower categories by a Nationally Recognized
Statistical Rating Organization ("NRSRO").

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<PAGE>

("Fitch"); the lowest permissible long-term investment grades for preferred
stock are "Baa" in the case of Moody's and "BBB" in the case of S&P and Fitch;
and the lowest permissible short-term investment grades for short-term debt,
including commercial paper, are Prime-2 (P-2) in the case of Moody's, A-2 in the
case of S&P and F-2 in the case of Fitch. Although considered investment grade,
Moody's indicates that securities rated Baa have speculative characteristics.

The Corporate Bond Fund also attempts to limit its credit risk by
limiting its investment in securities rated in lower categories by a Nationally
Recognized Statistical Rating Organization ("NRSRO"). At least 80% of the
corporate debt securities that the Fund purchases must be investment grade. No
more than 5% of the Fund's net assets may be lower than investment grade. The
Fund will attempt to maintain a minimum average portfolio rating, on a dollar
weighted basis, of A by Moody's, S&P or Fitch.

The Fixed Income Funds also may purchase unrated securities if the
portfolio manager determines the security to be of comparable quality to a rated
security that the Fund may purchase. Unrated securities may not be as actively
traded as rated securities. Each Fund may retain a security whose rating has
been lowered below the Fund's lowest permissible rating category (or that are
unrated and determined by the Sub-adviser to be of comparable quality to
securities whose rating has been lowered below the Fund's lowest permissible
rating category) if the portfolio manager determines that retaining the security
is in the best interests of the Fund. Because a ratings downgrade often results
in a reduction in the market price of the security, sale of a downgraded
security may result in a loss.

U.S. GOVERNMENT SECURITIES

The Fixed Income Funds may invest in U.S. Government Securities
including U.S. Treasury Securities and obligations issued or guaranteed by U.S.
Government agencies and instrumentalities and backed by the full faith and
credit of the U.S. Government, such as those guaranteed by the Small Business
Administration or issued by the Government National Mortgage Association
("Ginnie Mae").

The Corporate Bond Fund also may invest in securities supported
primarily or solely by the creditworthiness of the issuer, such as securities of
the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan
Mortgage Corporation ("Freddie Mac") and the Tennessee Valley Authority. There
is no guarantee that the U.S. Government will support securities not backed by
its full faith and credit. Accordingly, although these securities have
historically involved little risk of loss of principal if held to maturity, they
may involve more risk than securities backed by the U.S. Government's full faith
and credit.

VARIABLE AND FLOATING RATE SECURITIES

The Fixed Income Funds may invest in securities that pay interest at
rates that are adjusted periodically according to a specified formula, usually
with reference to some interest rate index or market interest rate (the
"underlying index"). Such adjustments minimize changes in the market value of
the obligation and, accordingly, enhance the ability of the Fund to reduce
fluctuations in its net asset value. Variable and floating rate instruments are
subject to changes in value based on changes in market interest rates or changes
in the issuer's creditworthiness.

There may not be an active secondary market for certain floating or
variable rate instruments which could make it difficult for a Fund to dispose of
the instrument during periods that the Fund is not entitled to exercise any
demand rights it may have. A Fund could, for this or other reasons, suffer a
loss with respect to an instrument. A Fund's Sub-adviser monitors the liquidity
of the Fund's investment in variable and floating rate instruments, but there
can be no guarantee that an active secondary market will exist.

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<PAGE>

DEMAND NOTES

The Fixed Income Funds may purchase variable and floating rate demand
notes of corporations, which are unsecured obligations redeemable upon not more
than 30 days' notice. These obligations include master demand notes that permit
investment of fluctuating amounts at varying rates of interest pursuant to
direct arrangement with the issuer of the instrument. The issuers of these
obligations often have the right, after a given period, to prepay their
outstanding principal amount of the obligations upon a specified number of days'
notice. These obligations generally are not traded, nor generally is there an
established secondary market for these obligations. To the extent a demand note
does not have a seven day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid security.
Although a Fund would generally not be able to resell a master demand note to a
third party, the Fund is entitled to demand payment from the issuer at any time.
The Sub-advisers continuously monitor the financial condition of the issuer to
determine the issuer's likely ability to make payment on demand.

GUARANTEED INVESTMENT CONTRACTS

The Corporate Bond Fund may invest in guaranteed investment contracts
("GICs"). A GIC is an arrangement with an insurance company under which the Fund
contributes cash to the insurance company's general account and the insurance
company credits the contribution with interest on a monthly basis. The interest
rate is tied to a specified market index and is guaranteed by the insurance
company not to be less than a certain minimum rate. The Fund will purchase a GIC
only when the Sub-adviser has determined that the GIC presents minimal credit
risks to the Fund and is of comparable quality to other instruments that the
Fund may purchase.

ZERO-COUPON SECURITIES

The Fixed Income Funds may invest in separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury.
These components are traded independently under the Treasury's Separate Trading
of Registered Interest and Principal of Securities ("STRIPS") program or as
Coupons Under Book Entry Safekeeping ("CUBES").

The Corporate Bond Fund may also invest in other types of related
zero-coupon securities. For instance, a number of banks and brokerage firms
separate the principal and interest portions of U.S. Treasury Securities and
sell them separately in the form of receipts or certificates representing
undivided interests in these instruments. These instruments are generally held
by a bank in a custodial or trust account on behalf of the owners of the
securities and are known by various names, including Treasury Receipts ("TRs"),
Treasury Investment Growth Receipts ("TIGRs") and Certificates of Accrual on
Treasury Securities ("CATS"). Zero-coupon securities also may be issued by
corporations and municipalities.

Zero-coupon securities are sold at original issue discount and pay no
interest to holders prior to maturity, but the Fund must include a portion of
the original issue discount of the security as income. Because of this,
zero-coupon securities may be subject to greater fluctuation of market value
than the other securities in which the Fund may invest. The Fund distributes all
of its net investment income, and may have to sell portfolio securities to
distribute imputed income, which may occur at a time when the Sub-adviser would
not have chosen to sell such securities and which may result in a taxable gain
or loss.

MORTGAGE-BACKED SECURITIES

The Fixed Income Funds may invest in mortgage-backed securities. The
Government Bond Fund may only invest in mortgage-backed securities issued by the
government or government-related issuers described below. The CORPORATE BOND
FUND may also invest in mortgage-backed securities of private issuers.

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<PAGE>

Mortgage-backed securities represent an interest in a pool of mortgages
originated by lenders such as commercial banks, savings associations and
mortgage bankers and brokers. Mortgage-backed securities may be issued by
governmental or government-related entities or by non-governmental entities such
as special purpose trusts created by banks, savings associations, private
mortgage insurance companies or mortgage bankers.

Interests in mortgage-backed securities differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or on specified call dates. In
contrast, mortgage-backed securities provide monthly payments which consist of
interest and, in most cases, principal. In effect, these payments are a "pass-
through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of the
securities or a mortgage loan servicer. Additional payments to holders of these
securities are caused by prepayments resulting from the sale or foreclosure of
the underlying property or refinancing of the underlying loans.

GOVERNMENT AND GOVERNMENT-RELATED GUARANTORS. The principal government
guarantor of mortgage-backed securities is Ginnie Mae, a wholly-owned United
States Government corporation within the Department of Housing and Urban
Development. Mortgage-backed securities are also issued by Fannie Mae, a
government-sponsored corporation owned entirely by private stockholders that is
subject to general regulation by the Secretary of Housing and Urban Development,
and Freddie Mac, a corporate instrumentality of the United States Government.
While Fannie Mae and Freddie Mac each guarantee the payment of principal and
interest on the securities they issue, unlike Ginnie Mae securities, their
securities are not backed by the full faith and credit of the United States
Government.

PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. The Corporate Bond Fund
may also invest in mortgage-backed securities offered by private issuers. These
include pass-through securities comprised of pools of conventional mortgage
loans; mortgage-backed bonds (which are considered to be debt obligations of the
institution issuing the bonds and which are collateralized by mortgage loans);
and collateralized mortgage obligations ("CMOs"), which are described below.
Mortgage-backed securities issued by non-governmental issuers may offer a higher
rate of interest than securities issued by government issuers because of the
absence of direct or indirect government guarantees of payment. Many
non-governmental issuers or servicers of mortgage-backed securities, however,
guarantee timely payment of interest and principal on these securities. Timely
payment of interest and principal also may be supported by various forms of
insurance, including individual loan, title, pool and hazard policies.

UNDERLYING MORTGAGES. Pools of mortgages consist of whole mortgage
loans or participations in mortgage loans. The majority of these loans are made
to purchasers of 1-4 family homes, but may be made to purchasers of mobile homes
or other real estate interests. The terms and characteristics of the mortgage
instruments are generally uniform within a pool but may vary among pools. For
example, in addition to fixed-rate, fixed-term mortgages, the Funds may purchase
pools of variable rate mortgages, growing equity mortgages, graduated payment
mortgages and other types. Mortgage servicers impose qualification standards for
local lending institutions which originate mortgages for the pools as well as
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, many mortgages included in pools are insured through
private mortgage insurance companies.

LIQUIDITY AND MARKETABILITY. Generally, government and
government-related pass-through pools are highly liquid. While private
conventional pools of mortgages (pooled by non-government-

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<PAGE>

related entities) have also achieved broad market acceptance and an active
secondary market has emerged, the market for conventional pools is smaller and
less liquid than the market for government and government-related mortgage
pools.

AVERAGE LIFE AND PREPAYMENTS. The average life of a pass-through pool
varies with the maturities of the underlying mortgage instruments. In addition,
a pool's terms may be shortened by unscheduled or early payments of principal
and interest on the underlying mortgages. Prepayments with respect to securities
during times of declining interest rates will tend to lower the return of a Fund
and may even result in losses to the Fund if the securities were acquired at a
premium. The occurrence of mortgage prepayments is affected by various factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions. As
prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. The assumed average
life of pools of mortgages having terms of 30 years or less is typically between
5 and 12 years.

YIELD CALCULATIONS. Yields on pass-through securities are typically
quoted based on the maturity of the underlying instruments and the associated
average life assumption. In periods of falling interest rates the rate of
prepayment tends to increase, thereby shortening the actual average life of a
pool of mortgages. Conversely, in periods of rising rates the rate of prepayment
tends to decrease, thereby lengthening the actual average life of the pool.
Actual prepayment experience may cause the yield to differ from the assumed
average life yield. Reinvestment of prepayments may occur at higher or lower
interest rates than the original investment, thus affecting the yield of a Fund.

ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES. Adjustable rate
mortgage-backed securities ("ARMs") are securities that have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Although the rate adjustment feature may act as a
buffer to reduce sharp changes in the value of adjustable rate securities, these
securities are still subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness. Because of the
resetting of interest rates, adjustable rate securities are less likely than
non-adjustable rate securities of comparable quality and maturity to increase
significantly in value when market interest rates fall. Also, most adjustable
rate securities (or the underlying mortgages) are subject to caps or floors.
"Caps" limit the maximum amount by which the interest rate paid by the borrower
may change at each reset date or over the life of the loan and, accordingly,
fluctuation in interest rates above these levels could cause such mortgage
securities to "cap out" and to behave more like long-term, fixed-rate debt
securities. ARMs may have less risk of a decline in value during periods of
rapidly rising rates, but they also may have less potential for capital
appreciation than other debt securities of comparable maturities due to the
periodic adjustment of the interest rate on the underlying mortgages and due to
the likelihood of increased prepayments of mortgages as interest rates decline.
Furthermore, during periods of declining interest rates, income to a Fund will
decrease as the coupon rate resets along with the decline in interest rates.
During periods of rising interest rates, changes in the coupon rates of the
mortgages underlying the Fund's ARMs may lag behind changes in market interest
rates. This may result in a lower value until the interest rate resets to market
rates.

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<PAGE>

(often referred to as tranches) of CMOs have priority over other classes with
respect to the receipt of payments. Multi-class mortgage pass-through securities
are interests in trusts that hold Mortgage Assets and that have multiple classes
similar to those of CMOs. Unless the context indicates otherwise, references to
CMOs include multi-class mortgage pass-through securities. Payments of principal
of and interest on the underlying Mortgage Assets (and in the case of CMOs, any
reinvestment income thereon) provide funds to pay debt service on the CMOs or to
make scheduled distributions on the multi-class mortgage pass-through
securities. Parallel pay CMOs are structured to provide payments of principal on
each payment date to more than one class. These simultaneous payments are taken
into account in calculating the stated maturity date or final distribution date
of each class, which, as with other CMO structures, must be retired by its
stated maturity date or final distribution date but may be retired earlier.
Planned amortization class mortgage-based securities ("PAC Bonds") are a form of
parallel pay CMO. PAC Bonds are designed to provide relatively predictable
payments of principal provided that, among other things, the actual prepayment
experience on the underlying mortgage loans falls within a contemplated range.
If the actual prepayment experience on the underlying mortgage loans is at a
rate faster or slower than the contemplated range, or if deviations from other
assumptions occur, principal payments on a PAC Bond may be greater or smaller
than predicted. The magnitude of the contemplated range varies from one PAC Bond
to another; a narrower range increases the risk that prepayments will be greater
or smaller than contemplated. CMOs may have complicated structures and generally
involve more risks than simpler forms of mortgage-related securities.

ASSET-BACKED SECURITIES
The Corporate Bond Fund may invest in asset-backed securities. These
securities represent direct or indirect participations in, or are secured by and
payable from, assets other than mortgage-related assets such as motor vehicle
installment sales contracts, installment loan contracts, leases of various types
of real and personal property and receivables from revolving credit (credit
card) agreements. The Fund may not invest more than 15% of its net assets in
asset-backed securities that are backed by a particular type of credit, for
instance, credit card receivables. Asset-backed securities, including adjustable
rate asset-backed securities, have yield characteristics similar to those of
mortgage-related securities and, accordingly, are subject to many of the same
risks.

Assets are securitized through the use of trusts and special purpose
corporations that issue securities that are often backed by a pool of assets
representing the obligations of a number of different parties. Payments of
principal and interest may be guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution.
Asset-backed securities do not always have the benefit of a security interest in
collateral comparable to the security interests associated with mortgage-related
securities. As a result, the risk that recovery on repossessed collateral might
be unavailable or inadequate to support payments on asset-backed securities is
greater for asset-backed securities than for mortgage-related securities. In
addition, because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of an interest rate or economic cycle has not been
tested.

COMMON STOCK

The Equity Funds invest primarily in common stocks of domestic issuers.
Common stock represents an equity or ownership interest in a company. Although
an equity interest often gives a Fund the right to vote on measures affecting
the company's organization and operations, the Funds do not intend to exercise
control over the management of companies in which they invest. Common stocks
have a history of long-term growth in value, but their prices tend to fluctuate
in the shorter term.

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PREFERRED STOCK

The Equity Funds may invest in preferred stock. Preferred stock
generally does not exhibit as great a potential for appreciation or depreciation
as common stock, although it ranks above common stock in its claim on income
from dividend payments or the recovery of investment or both. The owner of
preferred stock is a shareholder in a business and not, like a bondholder, a
creditor. Dividends paid to preferred stockholders are distributions of earnings
of a business in contrast to interest payments to bondholders which are expenses
of a business.

WARRANTS

The Equity Funds may invest in warrants. These are options to purchase
an equity security at a specified price at any time during the life of the
warrant. Unlike preferred stocks, warrants do not pay a dividend. Investments in
warrants involve certain risks, including the possible lack of a liquid market
for the resale of the warrants, potential price fluctuations as a result of
speculation or other factors and failure of the price of the underlying security
to reach a level at which the warrant can be prudently exercised (in which case
the warrant may expire without being exercised, resulting in the loss of a
Fund's entire investment therein).

CONVERTIBLE SECURITIES

All of the Funds may invest in securities that may be converted into a
pre-determined number of shares of the issuer's common stock at stated price or
formula within a specified time period. The holder of convertible securities is
entitled to receive interest paid or accrued on convertible debt, or the
dividend paid on convertible preferred stock, until the convertible security
matures or is redeemed, converted or exchanged. Traditionally, convertible
securities have paid dividends or interest greater than common stocks, but less
than fixed income or non-convertible debt securities. Convertible securities
typically rank before common stock, but after non-convertible debt securities,
in their claim on dividends paid by the issuer. In general, the value of a
convertible security is the higher of its investment value (its value as a fixed
income security) and its conversion value (the value of the underlying shares of
common stock if the security is converted). As a fixed income security, the
value of a convertible security generally increases when interest rates decline
and generally decreases when interest rates rise. The value of a convertible
security is, however, also influenced by the value of the underlying common
stock. By investing in a convertible security, a Fund may participate in any
capital appreciation or depreciation of a company's stock, but to a lesser
degree than its common stock.

A Fund may invest in preferred stock and convertible securities rated
BBB or higher by Standard & Poor's Corporation, Baa by Moody's Investors
Service, Inc., or the equivalent in the case of unrated instruments. (See
"Description of Securities Ratings" in Appendix A to the SAI.)

FUTURES CONTRACTS AND OPTIONS

Each Fund may attempt to hedge against a decline in the value of
securities it owns or an increase in the price of securities it plans to
purchase through the use of options and the purchase and sale of interest rate
futures contracts and options on those futures contracts. These instruments are
often referred to as "derivatives," because their performance is derived, at
least in part, from the performance of another asset (such as a security,
currency or an index of securities). The Funds only may write (sell) "covered"
options. An option is covered if, so long as the Fund is obligated under the
option, it owns an offsetting position in the underlying security or futures
contract or maintains cash, U.S. Government Securities or other liquid debt
securities in a segregated account with a value at all times sufficient to cover
the Fund's obligation under the option. A Fund may enter into futures contracts
only if the aggregate of initial deposits for open futures contract positions
does not exceed 5% of the Fund's total assets.

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RISK CONSIDERATIONS. A Fund's use of options and futures contracts
subjects the Fund to certain investment risks and transaction costs to which it
might not otherwise be subject. These risks include: (1) dependence on the
Sub-adviser's ability to predict movements in the prices of individual
securities and fluctuations in the general securities markets; (2) imperfect
correlations between movements in the prices of options or futures contracts and
movements in the price of the securities hedged or used for cover which may
cause a given hedge not to achieve its objective; (3) the fact that the skills
and techniques needed to trade these instruments are different from those needed
to select the other securities in which the Fund invests; (4) lack of assurance
that a liquid secondary market will exist for any particular instrument at any
particular time, which, among other things, may limit a Fund's ability to limit
exposures by closing its positions; (5) the possible need to defer closing out
of certain options, futures contracts and related options to avoid adverse tax
consequences; and (6) the potential for unlimited loss when investing in futures
contracts or writing options for which an offsetting position is not held.

Other risks include the inability of a Fund, as the writer of covered
call options, to benefit from any appreciation of the underlying securities
above the exercise price and the possible loss of the entire premium paid for
options purchased by the Fund. In addition, the futures exchanges may limit the
amount of fluctuation permitted in certain futures contract prices during a
single trading day. A Fund may be forced, therefore, to liquidate or close out a
futures contract position at a disadvantageous price.

There can be no assurance that a liquid market will exist at a time
when a Fund seeks to close out a futures position or that a counterparty in an
over-the-counter option transaction will be able to perform its obligations.
There are a limited number of options on interest rate futures contracts and
exchange traded options contracts on fixed income securities. Accordingly,
hedging transactions involving these instruments may entail "cross-hedging." As
an example, a Fund may wish to hedge existing holdings of mortgage-backed
securities, but no listed options may exist on those securities. In that event,
the Fund's Sub-adviser may attempt to hedge the Fund's securities by the use of
options with respect to similar securities. The Fund may use various futures
contracts that are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
in those contracts will develop or continue to exist.

LIMITATIONS. The Funds have no current intention of investing in
futures contracts and options thereon for purposes other than hedging. No Fund
may purchase any call or put option on a futures contract if the premiums
associated with all such options held by the Fund would exceed 5% of the Fund's
total assets as of the date the option is purchased. No Fund may sell a put
option if the exercise value of all put options written by the Fund would exceed
50% of the Fund's total assets or sell a call option if the exercise value of
all call options written by the Fund would exceed the value of the Fund's
assets. In addition, the current market value of all open futures positions held
by a Fund will not exceed 50% of its total assets.

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the option period. The amount of premium received or paid is based upon certain
factors, including the market price of the underlying security or index, the
relationship of the exercise price to the market price, the historical price
volatility of the underlying security or index, the option period, supply and
demand and interest rates.

OPTIONS ON STOCK INDICES. A stock index assigns relative values to the
stock included in the index, and the index fluctuates with changes in the market
values of the stocks included in the index. Stock index options operate in the
same way as the more traditional stock options except that exercises of stock
index options are effected with cash payments and do not involve delivery of
securities. Thus, upon exercise of a stock index option, the purchaser will
realize and the writer will pay an amount based on the differences between the
exercise price and the closing price of the stock index.

INDEX FUTURES CONTRACTS. Bond and stock index futures contracts are
bilateral agreements pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the bond or stock index value at the close of trading of the
contract and the price at which the futures contract is originally struck. No
physical delivery of the fixed income or equity securities comprising the index
is made. Generally, futures contracts are closed out prior to the expiration
date of the contract.

OPTIONS ON FUTURES CONTRACTS. Options on futures contracts are similar
to stock options except that an option on a futures contract gives the purchaser
the right, in return for the premium paid, to assume a position in a futures
contract rather than to purchase or sell stock, at a specified exercise price at
any time during the period of the option. Upon exercise of the option, the
delivery of the futures position to the holder of the option will be accompanied
by transfer to the holder of an accumulated balance representing the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
future.

TECHNIQUES INVOLVING LEVERAGE

Leveraging involves special risks. The Funds may borrow for other than
temporary or emergency purposes, lend their securities, and purchase securities
on a when-issued or forward commitment basis, and engage in dollar roll
transactions. Each of these transactions involves the use of "leverage" when
cash made available to the Fund through the investment technique is used to make
additional portfolio investments. In addition, the use of swap and related
agreements may involve leverage. A Fund uses these investment techniques only
when the Sub-adviser to the Fund believes that the leveraging and the returns
available from investing the cash will provide the Fund's shareholders with a
potentially higher return.

Leverage exists when a Fund achieves the right to a return on a capital
base that exceeds the Fund's investment. Leverage creates the risk of magnified
capital losses which occur when losses affect an asset base, enlarged by
borrowings or the creation of liabilities, that exceeds the equity base of the
Fund.

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involved in the leveraging arrangement may substantially increase relative to
the yield on the obligations in which the proceeds of the leveraging have been
invested. To the extent that the interest expense involved in leveraging
approaches the net return on a Fund's investment portfolio, the benefit of
leveraging will be reduced, and, if the interest expense on borrowings were to
exceed the net return to shareholders, the Fund's use of leverage would result
in a lower rate of return than if the Fund were not leveraged. Similarly, the
effect of leverage in a declining market could be a greater decrease in net
asset value per share than if the Fund were not leveraged. In an extreme case,
if a Fund's current investment income were not sufficient to meet the interest
expense of leveraging, it could be necessary for the Fund to liquidate certain
of its investments at an inappropriate time. The use of leverage may be
considered speculative.

SEGREGATED ACCOUNT. To limit the risks involved in various transactions
involving leverage, the Trust's custodian will set aside and maintain in a
segregated account for each Fund, cash, U.S. Government Securities and other
liquid, debt securities in accordance with SEC guidelines. The account's value,
which is marked to market daily, will be at least equal to the Fund's
commitments under these transactions. The Fund's commitments may include: (1)
the Fund's obligations to repurchase securities under a reverse repurchase
agreement, or settle when-issued and forward commitment transactions; (2) the
greater of the market value of securities sold short or the value of the
securities at the time of the short sale (reduced by any margin deposit). The
use of a segregated account in connection with leveraged transactions may result
in a Fund's portfolio being 100% leveraged.

BORROWING. As a fundamental investment policy, a Fund may borrow money
for temporary or emergency purposes, including the meeting of redemption
requests, in amounts up to 331/3% of a Fund's total assets. As a nonfundamental
investment policy, a Fund may not purchase portfolio securities if its
outstanding borrowings exceed 5% of its total assets or borrow for purposes
other than meeting redemptions in an amount exceeding 5% of the value of its
total assets at the time the borrowing is made.

Borrowing involves special risk considerations. Interest costs on
borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on borrowed funds (or on the assets
that were retained rather than sold to meet the needs for which funds were
borrowed). Under adverse market conditions, a Fund might need to sell portfolio
securities to meet interest or principal payments at a time when investment
considerations would not favor such sales.

REPURCHASE AGREEMENTS AND LENDING OF PORTFOLIO SECURITIES. Each Fund
may seek additional income by entering into repurchase agreements or by lending
securities from its portfolio to brokers, dealers and other financial
institutions. These investments may entail certain risks not associated with
direct investments in securities. For instance, in the event that bankruptcy or
similar proceedings were commenced against a counterparty in these transactions
or a counterparty defaulted on its obligations, a Fund might suffer a loss.

Repurchase agreements are transactions in which a Fund purchases a
security and simultaneously commits to resell that security to the seller at an
agreed-upon price on an agreed-upon future date, normally one to seven days
later. The resale price reflects a market rate of interest that is not related
to the coupon rate or maturity of the purchased security. When a Fund lends a
security it receives interest from the borrower or from investing cash
collateral. The Trust maintains possession of the purchased securities and any
underlying collateral in these transactions, the total market value of which on
a continuous basis is at least equal to the repurchase price or value of
securities loaned, plus accrued interest. The Funds may pay fees to

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arrange securities loans and each Fund will, as a fundamental policy, limit
securities lending to not more than 331/3% of the value of its total assets.

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. The FIXED INCOME FUNDS
may purchase securities on a "when-issued" or "forward commitment" basis. When a
Fund purchases a security on a when-issued or forward commitment basis, the
price of the security is fixed when the commitment is made, but delivery and
payment for the securities take place at a later date. Normally, the settlement
occurs within three months after the transaction, but delayed settlements beyond
three months may be negotiated.

During the period between a commitment and settlement, no interest
accrues to the Fund. When a Fund commits to purchase securities in this manner,
however, the Fund immediately assumes the risk of ownership, including price
fluctuation. If the other party does not deliver or pay for a security purchased
or sold by the Fund, the Fund may incur a loss or miss an opportunity to make an
alternative investment. Any significant commitment of a Fund's assets committed
to the purchase of securities on a when-issued or forward commitment basis may
increase the volatility of its net asset value. Except for dollar roll
transactions, which are described below, each of the Fixed Income Funds limits
its investments in when-issued and forward commitment securities to 15% of the
value of the Fund's total assets.

A Fund may use when-issued transactions and forward commitments to
hedge against anticipated changes in interest rates and prices. If the Fund's
Sub-adviser forecasts incorrectly the direction of interest rate movements,
however, the Fund might be required to complete when-issued or forward
transactions at prices inferior to the current market values. The Funds enter
into when-issued and forward commitments only with the intention of actually
receiving the securities, but a Fund may sell the securities before the
settlement date if deemed advisable. If a Fund disposes of the right to acquire
a when-issued security prior to its acquisition or to dispose of its right to
deliver or receive against a forward commitment, it can incur a gain or loss.

DOLLAR ROLL TRANSACTIONS. Each Fixed Income Fund may enter into dollar
roll transactions in which the Fund sells fixed income securities, typically
mortgage-backed securities, and makes a commitment to purchase similar, but not
identical, securities at a later date from the same party. During the roll
period no payment is made for the securities purchased and no interest or
principal payments on the security accrue to the Fund, but the Fund assumes the
risk of ownership. A Fund is compensated for entering into dollar roll
transactions by the difference between the current sales price and the forward
price for the future purchase, as well as by the interest earned on the cash
proceeds of the initial sale. Dollar roll transactions involve the risk that the
market value of the securities sold by a Fund may decline below the price at
which the Fund is committed to purchase similar securities. If the buyer of
securities under a dollar roll transaction becomes insolvent, the Fund's use of
the proceeds of the transaction may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. The Funds will engage in roll
transactions for the purpose of acquiring securities for their portfolios and
not for investment leverage. Each Fixed Income Fund will limit its obligations
on dollar roll transactions to 35% of the Fund's net assets.

CONCENTRATION

As a fundamental investment policy, a Fund may not purchase a security
(other than U.S. Government Securities) if as a result more than 25% of its net
assets would be invested in a particular industry.

DIVERSIFICATION

As a fundamental investment policy, a Fund may not purchase a security
if, as a result (1) more than 5% of a Fund's total assets would be invested in
the securities of a single issuer, or (2) a Fund

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would own more than 10% of the outstanding voting securities of a single issuer.
This limitation applies only with respect to 75% of a Fund's total assets and
does not apply to U.S. Government Securities.

CASH AND TEMPORARY DEFENSIVE POSITIONS

A Fund will hold a certain portion of its assets in cash or cash
equivalents to retain flexibility in meeting redemptions, paying expenses, and
timing of new investments. Cash equivalents may include (1) short-term
obligations issued or guaranteed by the United States Government, its agencies
or instrumentalities ("U.S. Government Securities"), (2) certificates of
deposit, bankers' acceptances and interest-bearing savings deposits of
commercial banks doing business in the United States that have an A+ rating from
Standard & Poor's Corporation or an A-1+ rating from Moody's Investors Service,
Inc., (3) commercial paper rated P-1 by Moody's Investors Service, Inc. or A-1
by Standard & Poor's Corporation, (4) repurchase agreements covering any of the
securities in which a Fund may invest directly, and (5) money market mutual
funds.

In addition, when a Sub-adviser believes that business or financial
conditions warrant, the Sub-adviser's Fund may assume a temporary defensive
position. During such periods, a Fund may invest without limit in cash or cash
equivalents. When and to the extent a Fund assumes a temporary defensive
position, it will not pursue its investment objective.

SHORT SALES

A Fund may not enter into short sales, except short sales "against the
box." In a short sale against the box, a Fund sells securities it owns, or has
the right to acquire at no additional cost. A Fund does not immediately deliver
the securities sold, however, and does not receive proceeds from the sale until
it does deliver the securities. A Fund may enter into a short sale against the
box to lock-in a gain or loss in one year, while deferring recognition of the
gain or loss until the next year. A Fund may also sell short against the box to
hedge against the risk that the price of a security may decline. In such a case,
to the extent a Fund limits its future losses in the security, it limits its
opportunity to achieve future gain in the security as well. Pursuant to the
Taxpayer Relief Act of 1997, if a Fund has unrealized gain with respect to a
security and enters into a short sale with respect to such security, the Fund
generally will be deemed to have sold the appreciated security and this will
recognize gain for tax purposes.

SECURITIES OF OTHER INVESTMENT COMPANIES

A Fund may invest in shares of other investment companies to the extent
permitted by the Investment Company Act of 1940 ("Investment Company Act"). To
the extent a Fund invests in shares of an investment company, it will bear its
pro rata share of the other investment company's expenses, such as investment
advisory and distribution fees, and operating expenses.

Each Fund reserves the right upon notification to shareholders to
invest up to 100% of its investable assets in one or more other investment
companies. If a Fund elected to pursue its investment objective in this manner,
its policies on concentration and diversification would apply to the assets of
the investment companies in which the Fund invests.

ILLIQUID AND RESTRICTED SECURITIES

A Fund may not purchase a security if, as a result, more than 15% of
its net assets would be invested in illiquid securities. A security is
considered "illiquid" if it may not be sold or disposed of in the ordinary
course of business within seven days at approximately the value at which a Fund
has valued the security. Over-the-counter options, repurchase agreements not
entitling the holder to payment of principal in 7 days, and certain "restricted
securities" may be illiquid.

A security is restricted if it is subject to contractual or legal
restrictions on resale to the general public. A liquid institutional market has

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developed, however, for certain restricted securities such as repurchase
agreements, commercial paper, foreign securities and corporate bonds and notes.
Thus, restrictions on resale do not necessarily indicate the liquidity of the
security. For example, if a restricted security may be sold to certain
institutional buyers in accordance with Rule 144A under the Securities Act of
1933 or another exemption from registration under the Securities Act, the
Sub-adviser may determine that the security is liquid under guidelines adopted
by the Board. These guidelines take into account trading activity in the
securities and the availability of reliable pricing information, among other
factors. With other restricted securities, however, there can be no assurance
that a liquid market will exist for the security at any particular time. A Fund
might not be able to dispose of such securities promptly or at reasonable prices
and might thereby experience difficulty satisfying redemptions. A Fund treats
such holdings as illiquid.

PORTFOLIO TRANSACTIONS

Each Sub-adviser places orders for the purchase and sale of assets it
manages with brokers and dealers selected by, and in the discretion of, the
Sub-adviser. The Sub-advisers seek "best execution" for all portfolio
transactions, but a Fund may pay higher than the lowest available commission
rates when the Fund's Sub-adviser believes it is reasonable to do so in light of
the value of the brokerage and research services provided by the broker
effecting the transaction.

Subject to the policy of obtaining "best execution", each Sub-adviser
may employ broker-dealer affiliates (collectively "Affiliated Brokers") to
effect brokerage transactions. Payment of commissions to Affiliated Brokers is
subject to procedures adopted by the Board to provide that the commissions will
not exceed the usual and customary broker's commissions charged by unaffiliated
brokers. No specific portion of brokerage transactions will be directed to
Affiliated Brokers and in no event will a broker affiliated with the Sub-adviser
directing the transaction receive brokerage transactions in recognition of
research services provided to the Sub-adviser.

The frequency of portfolio transactions of a Fund (portfolio turnover
rate) will vary from year to year depending on many factors. From time to time a
Fund may engage in active short-term trading to take advantage of price
movements affecting individual issues, groups of issues or markets. An annual
portfolio turnover rate of 100% would occur if all of the securities in a fund
were replaced once in a period of one year. Higher portfolio turnover rates may
result in increased brokerage costs and a possible increase in short-term
capital gains or losses. Tax rules applicable to short-term trading may affect
the timing of a portfolio transactions or the ability to realize short-term
trading profits or establish short-term positions. It is estimated that each
Fund's portfolio turnover will be less than 100%.

9. OTHER INFORMATION

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each class of each Fund is determined
as of the close of trading on the New York Stock Exchange (normally 4:00 p.m.,
Eastern Time), on each Fund Business Day by dividing the value of the Fund's net
assets (I.E., the value of its securities and other assets less its liabilities)
by the number of shares outstanding at the time the determination is made.
Securities owned by a Fund for which market quotations are readily available are
valued at current market value or, in their absence, at fair value as determined
by the Board or pursuant to procedures approved by the Board.

PERFORMANCE INFORMATION

A Fund's performance may be quoted in terms of yield or total return.
All performance information is based on historical results and is not intended
to indicate future performance. A Fund's

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yield is a way of showing the rate of income the Fund earns on its investments
as a percentage of the Fund's share price. To calculate standardized yield, a
Fund takes the income it earned from its investments for a 30-day period (net of
expenses), divides it by the average number of Shares entitled to receive
dividends, and expresses the result as an annualized percentage rate based on
the Fund's share price at the end of the 30-day period. A Fund's total return
shows its overall change in value, including changes in share price and assuming
all the Fund's dividends and distributions are reinvested. A cumulative total
return reflects a Fund's performance over a stated period of time. An average
annual total return reflects the hypothetical annually compounded return that
would have produced the same cumulative total return if the Fund's performance
had been constant over the entire period. Because average annual returns tend to
smooth out variations in the Funds' returns, shareholders should recognize that
they are not the same as actual year-by-year results.

The Funds' advertisements may refer to ratings and rankings among
similar mutual funds by independent evaluators such as Morningstar, Inc., Lipper
Analytical Services, Inc. and IBC/Donoghue, Inc. In addition, the performance of
a Fund may be compared to securities indices. Indices are not used in the
management of the Funds but rather are standards by which the Advisers and
shareholders may compare the performance of a Fund to an unmanaged composite of
securities with similar, but not identical, characteristics. The Funds may also
advertise the historical performance of private accounts managed by the
Sub-advisers to the extent permitted by the National Association of Securities
Dealers. Performance information is not to be considered representative or
indicative of a Fund's future performance. All performance information for a
Fund is calculated on a class basis.

Federal banking rules generally permit a bank or bank affiliate to act
as investment adviser, transfer agent, or custodian to an investment company and
to purchase shares of the investment company as agent for and upon the order of
a customer and, in connection therewith, to retain a sales charge or similar
payment. The Adviser believes that the Trust and any bank or other bank
affiliate also may perform Processing Organization or similar services for the
Trust and its shareholders without violating applicable federal banking rules.
If a bank or bank affiliate were prohibited in the future from so acting,
changes in the operation of the Trust could occur and a shareholder serviced by
the bank or bank affiliate may no longer be able to avail itself of those
services. It is not expected that shareholders would suffer any adverse
financial consequences as a result of any of these occurrences.

THE TRUST AND ITS SHARES

The Trust has an unlimited number of authorized Shares of beneficial
interest. The Board may, without shareholder approval, divide the authorized
Shares into an unlimited number of separate portfolios or series (such as a
Fund) and may divide portfolios or series into classes of shares (such as Trust
Shares); the costs of doing so will be borne by the Trust. Currently the
authorized Shares of the Trust are divided into four separate series.

OTHER CLASSES OF SHARES

The Funds currently issue two classes of shares, Trust Shares and
Institutional Shares. Institutional Shares are offered to large institutional
investors able to make a minimum investment of $10 million. Each class of a Fund
will have a different expense ratio and may have different distribution fees.
Each class' performance is affected by its expenses. For more information on
Institutional Shares of the Funds, investors may contact FSS at (888) 263-5593
or the Funds' distributor. Investors may also contact their sales representative
to obtain information about the other classes.

SHAREHOLDER VOTING AND OTHER RIGHTS

Each share of each series of the Trust and each class of shares has
equal dividend, distribution, liquidation and voting rights, and fractional
shares

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have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency and administration expenses) are borne solely by those shares
and each class votes separately with respect to the provisions of any Rule 12b-1
plan which pertains to the class and other matters for which separate class
voting is appropriate under applicable law. Generally, shares will be voted in
the aggregate without reference to a particular series or class, except if the
matter affects only one series or class or voting by series or class is required
by law, in which case shares will be voted separately by series or class, as
appropriate. Delaware law does not require the Trust to hold annual meetings of
shareholders, and it is anticipated that shareholder meetings will be held only
when specifically required by federal or state law. Shareholders (and Trustees)
have available certain procedures for the removal of Trustees. There are no
conversion or preemptive rights in connection with shares of the Trust. All
shares when issued in accordance with the terms of the offering will be fully
paid and nonassessable. Shares are redeemable at net asset value, at the option
of the shareholders, subject to any contingent deferred sales charge that may
apply. A shareholder in a series is entitled to the shareholder's pro rata share
of all dividends and distributions arising from that series' assets and, upon
redeeming shares, will receive the portion of the series' net assets represented
by the redeemed shares.

As of the date of this Prospectus, Memorial Group, Inc. owns 100% of the
Shares of each of the Funds. Trustee and President Christopher W. Hamm owns 100%
of the Shares of Memorial Group, Inc.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUNDS' SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO
ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.

38
<PAGE>

[Account Application]

<PAGE>

[Account Application (Continued)]

<PAGE>

[LOGO] MEMORIAL
FUNDS

FOR MORE COMPLETE INFORMAITON PLEASE CONTACT:

THE MEMORIAL GROUP
1600 SMITH STREET SUITE 3100
HOUSTON, TEXAS 77002

(713)650-2535 OR (888)206-4134

READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.

<PAGE>

MEMORIAL FUNDS INSTITUTIONAL SHARES

GOVERNMENT BOND FUND
CORPORATE BOND FUND
GROWTH EQUITY FUND
VALUE EQUITY FUND

PROSPECTUS
March 15, 1998
- --------------------------------------------------------------------------------
This Prospectus offers Institutional class shares of the Government Bond Fund,
Corporate Bond Fund, Growth Equity Fund and Value Equity Fund (each a "Fund" and
collectively the "Funds"). The Funds are separate, diversified portfolios of the
Memorial Funds (the "Trust"), a registered, open-end, management investment
company.

THIS PROSPECTUS SETS FORTH CONCISELY IMPORTANT INFORMATION
THAT YOU SHOULD KNOW BEFORE INVESTING. PLEASE READ
THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.

1. PROSPECTUS SUMMARY................................. 2 4. HOW TO BUY SHARES....................... 17
2. INVESTMENT OBJECTIVES AND POLICIES................. 5 5. HOW TO SELL Shares...................... 19
GOVERNMENT BOND FUND.............................. 5 6. OTHER SHAREHOLDER Services.............. 21
CORPORATE BOND FUND............................... 6 7. DIVIDENDS AND TAX MATTERS............... 22
GROWTH EQUITY FUND................................ 7 8. DETAILED DESCRIPTION OF FUNDS'
VALUE EQUITY FUND................................. 8 INVESTMENTS, STRATEGIES, AND RISKS.... 23
3. MANAGEMENT......................................... 8 9. OTHER Information....................... 36
ACCOUNT APPLICATION
</TABLE>

THE MEMORIAL FUNDS ARE A FAMILY OF MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS ARE
NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE
SYSTEM OR ANY OTHER GOVERNMENT AGENCY.

AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

<PAGE>

1. PROSPECTUS SUMMARY

HIGHLIGHTS OF THE FUNDS

The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.

INVESTMENT OBJECTIVES AND POLICIES

FIXED INCOME FUNDS. The Memorial Funds includes two "Fixed Income"
Funds, the Government Bond Fund and the Corporate Bond Fund. These mutual funds
invest primarily in bonds and other fixed income securities. The Fixed Income
Funds are designed principally for investors that seek current income.

Corporate Bond Fund seeks to provide as high a level of current income
as is consistent with capital preservation and prudent investment risk. Under
normal circumstances, the Fund will seek to attain this objective by investing
at least 65% of the value of the total assets in corporate bonds. The Fund may
also invest in U.S. Government Securities and mortgage-backed and asset-backed
securities. The Fund intends to maintain a duration between 75% and 125% of the
Lehman Brothers Corporate Bond Index.

EQUITY FUNDS. The Memorial Funds also includes two "Equity Funds" that
invest primarily in the common stock of domestic companies, the Growth Equity
Fund and the Value Equity Fund (the "Equity Funds"). The Equity Funds will
invest only in companies with a minimum market capitalization of $250 million at
the time of purchase, and will seek to maintain a minimum average weighted
capitalization of $5 billion. A company's market capitalization is the total
market value of its outstanding common stock. Although the investment
disciplines of the Equity Funds differ, they are each designed for investors
seeking long term capital appreciation and possible significant fluctuation in
the value of their investment.

Growth Equity Fund seeks long-term capital appreciation. It will seek
to achieve this objective by investing at least 65% of its assets in the common
stock of domestic companies that the Fund's sub-adviser believes have superior
growth potential and fundamental characteristics that are significantly better
than the market average and that support internal earnings growth capability.

Value Equity Fund also seeks long-term capital appreciation. It will
seek to attain this objective by investing at least 65% of its total assets in
the common stock of domestic companies. Using a value approach, the Fund will
seek to invest in stocks that are underpriced when measured against comparable
securities, determined by price/earnings ratios, cash flows or other measures.

INVESTMENT CONSIDERATIONS AND RISK FACTORS

There is no assurance that any Fund will achieve its investment
objective, and a Fund's net asset value and total return will fluctuate based
upon changes in the value of its portfolio securities. Upon redemption, an
investment in a Fund may be worth more or less than its original value. No Fund,
by itself, provides a complete investment program.

All investments made by the Funds entail some risk. Among other things,
the market value of any security in which the Funds may invest is based

2
<PAGE>

upon the market's perception of value and not necessarily the book value of an
issuer or other objective measure of the issuer's worth. Certain investments and
investment techniques, however, entail additional risks, such as the potential
use of leverage by certain Funds through borrowings, securities lending, and
other investment techniques. (See "A Detailed Description of the Funds'
Investments, Investment Strategies and Risks.") Similarly, a Fund's use of
mortgage- and asset-backed securities entails certain risks. (See "A Detailed
Description of the Funds' Investments, Investment Strategies and Risks
- --Mortgage-Backed Securities" and "-- Asset-Backed Securities.")

FIXED INCOME FUNDS. The value of your investment in one or both of the
Fixed Income Funds may change in response to changes in interest rates. An
increase in interest rates typically causes a fall in the value of the fixed
income securities in which the Funds invest. Your investment in the Corporate
Bond Fund is also subject to the risk that the financial condition of an issuer
of a security held by the Fund may cause it to default or become unable to pay
interest or principal due on the security. To limit this risk, at least 80
percent of the Corporate Bond Fund's investments in corporate debt securities
will be in securities rated A or better and the Fund will maintain a minimum
average rating of A.

EQUITY FUNDS. The Equity Funds may be appropriate investments for
investors who seek long term growth in their investment, but who are willing to
tolerate significant fluctuations in the value of their investment in response
to changes in the market value of the stocks the Funds hold. This type of market
movement may affect the price of the securities of a single issuer, a segment of
the domestic stock market, or the entire market.

PORTFOLIO MANAGEMENT

INVESTMENT CONSULTANT. To assist it in carrying out its
responsibilities, the Adviser has retained Wellesley Group, Inc. ("Wellesley").
Wellesley provides data with which the Adviser and the Board of Trustees of the
Trust ("Board") can monitor and evaluate the performance of the Funds and the
Sub-advisers. If the Board determines in the future to replace one of the
current Sub-advisers, or retain additional Sub-advisers to manage one or more of
the Funds, Wellesley will assist the Adviser and the Board in the selection of
those Sub-advisers.

INVESTMENT SUB-ADVISERS. The Adviser has retained the following
Sub-advisers to render advisory services and make daily investment decisions for
each Fund:

o The portfolio of the Government Bond Fund is managed by The
Northern Trust Company.

o The portfolio of the Corporate Bond Fund is managed by Conseco
Capital Management, Inc.

o The portfolio of the Growth Equity Fund is managed by Davis
Hamilton, Inc., d/b/a Davis Hamilton Jackson & Associates.

o The portfolio of the Value Equity Fund is managed by Beutel,
Goodman Capital Management.

3
<PAGE>

SHARES OF THE FUNDS

Each Fund currently offers two separate classes of shares:

INSTITUTIONAL SHARES. INSTITUTIONAL SHARES are sold through this
prospectus, and are offered to large institutional investors able to make an
minimum initial investment of $10 million, referred to as "Shares" in this
prospectus.

TRUST SHARES. TRUST SHARES are offered by separate prospectus. Trust
Shares are designed primarily for individual investors and smaller fiduciary,
agency and custodial clients whose investments are pooled in common or
collective trusts managed by bank trust departments, trust companies or their
affiliates. Trust Shares are expected to incur higher expenses than
Institutional Shares.

Shares of each class of a Fund have identical interests in the investment
portfolio of the Fund and, with certain exceptions, the same rights. (See "Other
Information -- The Trust and Its Shares.")

HOW TO BUY AND SELL SHARES

Shares of the Funds may be purchased or sold ("redeemed") on any
weekday except days that the New York Stock Exchange is closed, normally New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas ("Fund Business
Day"). The Trust's transfer agent accepts orders to buy or sell Shares between
9:00 a.m and 6:00 p.m. (Eastern) on all Fund Business Days. Orders are executed
at the net asset value of the Fund's Shares next determined after an order in
proper form is received.

You may buy or sell Shares by mail, by bank wire or through various
financial institutions. The minimum initial investment in Shares is $10 million.
There is no minimum for subsequent investments. (See "How to Buy Shares" and
"How to Sell Shares.")

EXCHANGES

Shareholders may exchange Institutional Shares for Trust Shares of the
other Funds or for Institutional class shares of the Forum Daily Assets
Government Fund, a money market fund that is a separate series of Forum Funds.
(See "Other Shareholder Services -- Exchanges.")

DIVIDENDS AND DISTRIBUTIONS

EXPENSE INFORMATION

The following tables should help you understand the expenses that you
will bear if you invest in Shares of a Fund.

SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C> <C> <C>

Government Bond Corporate Bond Growth Value
Fund Fund Equity Fund Equity Fund
---- ---- ----------- -----------
Sales charge on
purchases................................ None None None None
Sales charge on
dividends................................ None None None None
Maximum deferred
sales charge............................. None None None None
Exchange Fee............................. None None None None
</TABLE>

4
<PAGE>

ANNUAL FUND OPERATING EXPENSES (1)
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<S> <C> <C> <C> <C>
Government Corporate Growth Value
Bond Fund Bond Fund Equity Fund Equity Fund
--------- --------- ----------- -----------
Investment
Advisory Fees................................ 0.35% 0.35% 0.45% 0.45%
Rule 12b-1 Fees.............................. None None None None
Other Expenses
Shareholder
Service Fees........................... 0.05% 0.05% 0.05% 0.05%
Miscellaneous............................ 0.35% 0.35% 0.50% 0.50%
----- ----- ----- -----
Total Operating
Expenses..................................... 0.75% 0.75% 1.00% 1.00%
</TABLE>

(1) Annual Fund Operating Expenses are calculated as a percentage of each
Fund's average net assets assuming average net assets of at least $50 million.
If the average net assets of a Fund are lower in any given year, the expenses
will be a higher percentage of the Fund's assets. (See "Management.")

EXAMPLE

1 Year 3 Years
------ -------

Government Bond Fund.............................. $8 $24
Corporate Bond Fund............................... $8 $24
Growth Equity Fund................................ $10 $32
Value Equity Fund................................. $10 $32

2. INVESTMENT OBJECTIVES AND POLICIES

GOVERNMENT BOND FUND

INVESTMENT POLICIES
The Fund will invest at least 90 percent of its net assets in a
portfolio of fixed and variable rate U.S. Government Securities, including zero
coupon bonds issued or guaranteed by the U.S. Treasury and mortgage-backed
securities. The Fund may invest up to 10% of its net assets in corporate debt
securities.

5
<PAGE>

other features that may shorten the debt obligation's life. Because earlier
payments on a debt security have a higher present value, duration of a security,
except a zero-coupon security, generally will be less than its stated maturity.

The Fund may also use options and futures contracts (both
exchange-traded and over-the-counter) to attempt to reduce the overall risk of
its investments ("hedge"). The Fund's ability to use these strategies may be
limited by market considerations, regulatory limits and tax considerations. The
Fund may write covered call and put options, buy put and call options, buy and
sell interest rate and foreign currency futures contracts and buy options and
write covered options on those futures contracts. An option is covered if, so
long as the Fund is obligated under the option, it owns an offsetting position
in the underlying security or futures contract or maintains a segregated account
of liquid debt instruments with a value at all times sufficient to cover the
Fund's obligations under the option. Although the Fund will not engage in these
transaction for speculative purposes, there is a risk that changes in the value
of a hedging instrument will not match those of the investment being hedged.
(See "Detailed Description of the Funds' Investments, Strategies and Risks.")

CORPORATE BOND FUND

At least 80% of the Fund's investments in corporate debt will be in
securities that are rated, at the time of purchase, in one of the three highest
rating categories by a nationally recognized statistical rating organization
("NRSRO") such as Standard & Poor's, or which are unrated and determined by the
Sub-adviser to be of comparable quality. (See "Detailed Description of the
Funds' Investments, Strategies and Risks - Fixed Income Securities and Their
Characteristics.") No more than 5% of the Fund's investments will be in
securities rated below investment grade, that is below the fourth highest rating
category. The Fund's portfolio of corporate debt instruments will have a minimum
weighted average rating of A.

6
<PAGE>

the Fund's total assets. The Fund may also invest in securities that are
restricted as to disposition under the federal securities laws (sometimes
referred to as "private placements" or "restricted securities"). In addition,
the Fund may not invest more than 25% of its total assets in securities issued
or guaranteed by any single agency or instrumentality of the U.S. Government,
except the U.S. Treasury. (See "A Detailed Description of the Funds'
Investments, Strategies and Risks.")

GROWTH EQUITY FUND

INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation.
There is no assurance that the Fund will achieve this objective.

The Fund will invest in the securities of issuers that its Sub-adviser
believes have superior growth potential and fundamental characteristics that are
significantly better than the market average and support internal earnings
growth capability. The Fund may invest in the securities of companies whose
growth potential is, in the Sub-adviser's opinion, generally unrecognized or
misperceived by the market. The Sub-adviser may also look to changes in a
company that involve a sharp increase in earnings, the hiring of new management
or measures taken to close the gap between the company's share price and
takeover/asset value. The Fund may also invest in preferred stocks and
securities convertible into common stock. The Fund will only purchase
convertible securities that are rated, at the time of purchase, within the four
highest rating categories assigned by an NRSRO or which are unrated and
determined by the Sub-adviser to be of comparable quality. Securities rated in
these categories are generally considered to be investment grade securities,
although Moody's indicates that securities rated Baa (the fourth highest
category) have speculative characteristics. A description of the rating
categories of various NRSROs is contained in the SAI.

7
<PAGE>

position in the underlying security or futures contract or maintains a
segregated account of liquid debt instruments with a value at all times
sufficient to cover the Fund's obligations under the option. Although the Fund
will not engage in these transaction for speculative purposes, there is a risk
that changes in the value of a hedging instrument will not match those of the
investment being hedged. (See "Detailed Description of the Funds' Investments,
Strategies and Risks - Futures Contracts and Options.")

VALUE EQUITY FUND

INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation.
There is no assurance that the Fund will achieve this objective.

Using a value approach, the Fund will seek to invest in stocks that are
underpriced relative to comparable stocks, determined by price/earnings ratios,
cash flows or other measures. It is expected that the Sub-adviser will rely on
stock selection to achieve its results, rather than trying to time market
fluctuations. In selecting stocks, the Sub-adviser will establish valuation
parameters , by using relative ratios or target prices to evaluate companies on
several levels.

3. MANAGEMENT

8
<PAGE>

ADVISER

The Adviser has entered into investment sub-advisory agreements with
the Sub-advisers to exercise investment discretion over the assets (or a portion
of assets) of each Fund.

For its services under the Investment Advisory Agreement, the Adviser
receives the following fees with respect to the following funds:

Advisory Fee
(as a percentage of average daily net assets)

Government Bond Fund ............................ 0.35
Corporate Bond Fund.............................. 0.35
Growth Equity Fund............................... 0.45
Value Equity Fund................................ 0.45

The Adviser was incorporated under the laws of Delaware in 1987 and is
registered under the Investment Advisers Act of 1940.

INVESTMENT CONSULTANT

If the Board decides to add or change Sub-advisers, Wellesley will
assist the Adviser and the Board in the selection of these new Sub-advisers with
proven long-term investment performance and philosophy best suited to the goals
and objectives of the Fund for which the adviser is being considered. As a part
of this selection process, Wellesley will analyze statistical information
relating to investments and performance, and evaluate the risk and return
profiles of the investment advisers under consideration. Wellesley will also
review such qualitative factors as the advisory firm's ownership, organizational
structure, business plan, client base, staff resources, investment philosophy,
research capabilities, investment decision-making process, and risk management
disciplines.

SUB-ADVISERS

9
<PAGE>

The following Sub-advisers and individuals are primarily responsible
for the day-to-day management of the Funds:

THE NORTHERN TRUST COMPANY ("NTC"), 50 South LaSalle Street, Chicago,
Illinois 60675, manages the portfolio of the GOVERNMENT BOND FUND. NTC is a
wholly-owned subsidiary of Northern Trust Corporation, a Delaware corporation
that was incorporated in 1889. NTC presently manages approximately $196 billion
in assets for endowments and foundations, corporations, public funds and
insurance companies. Mr. James Snyder, CFA, is Chief Investment Officer and
Executive Vice President for NTC. Mr. Snyder brings more than 25 years of
experience managing fixed income asset and holds a Masters in Business
Administration in Finance from DePaul University in Chicago, Illinois. Mr.
Stephen Timbers, is President of Northern Trust Global Investments and a Member
of the Management Committee of NTC. Prior to joining NTC, Mr. Timbers was
President, Chief Executive Officer and Chief Investment Officer of Zurich Kemper
Investments, the investment adviser to the Kemper Funds and the parent
organization of Zurich Investment Management, Inc. Prior to joining Kemper in
1987, Mr. Timbers was Executive Vice President and Chief Investment Officer of
the Portfolio Group, Inc. Mr. Timbers holds a Masters in Business Administration
from Harvard University in Cambridge, Massachusetts. Mr. Mark J. Wirth, CFA, is
Co-Director of Fixed Income and Senior Vice President for NTC. Mr. Wirth
co-manages NTC's fixed income management division and leads NTC's fixed income
effort as a senior strategist. Mr. Wirth holds a Masters in Business
Administration from the University of Wisconsin in Madison, Wisconsin and has
been in the industry since 1986. Mr. Monty Memler, CFA, is a Vice President and
Senior Portfolio Manager for NTC. Mr. Memler has been a member of the fixed
income team at NTC for seven years and holds a Masters in Business
Administration from the University of Chicago in Chicago, Illinois and has been
in the industry since 1986. Mr. Steven Schafer, CFA, is a Second Vice President
and Portfolio Manager for NTC. Mr. Schafer is responsible for managing active
and passive fixed income portfolios and holds a Masters in Business
Administration from the University of Chicago in Chicago, Illinois. Mr. Schafer
has been in the industry since 1990. Mr. Michael J. Lannan, CFA, is a Vice
President and Portfolio Manager for NTC. Mr. Lannan holds a Masters in Business
Administration from Depaul University in Chicago, Illinois and has been in the
industry since 1988. Mr. Peter T. Marchese, CFA, is a Second Vice President and
Portfolio Manager for NTC. Mr. Marchese holds a Masters in Business
Administration from the University of Wisconsin in Madison, Wisconsin and has
been in the industry since 1987.

10
<PAGE>

Business Administration from Carnegie Mellon University in Pittsburgh,
Pennsylvania. Prior to joining CCM in 1991, Mr. Chow was a Manager of
Quantitative Analysis at Washington Square Capital in Minneapolis, Minnesota.
Mr. Joseph F. DeMichele is a Vice President for CCM and holds a Bachelor of Arts
in Economics from the University of Pennsylvania in Philadelphia, Pennsylvania.
Prior to joining CCM in 1990, Mr. DeMichele was an Assistant Trader for Salomon,
Inc. in New York. Mr. Gregory Hahn, CFA, is a Senior Vice President and
Portfolio Manager for CCM and holds a Masters in Business Administration from
Indiana University in Indianapolis, Indiana. Prior to joining CCM in 1989, Mr.
Hahn was a Fixed Income Portfolio Manager for Unified Management in
Indianapolis, Indiana. Mr. Gordon N. Smith, is a Vice President and Portfolio
Manager for CCM and holds a Masters in Finance from the University of Wisconsin
in Madison, Wisconsin. Prior to joining CCM in 1995, Mr. Smith was a Portfolio
Manager for Strong Capital Management in Menomonee Falls, Wisconsin from 1989 to
1995.

11
<PAGE>

methodology different from that used below to calculate performance could result
in different performance data. The Fund's performance will be calculated using
the method required by the SEC, which differs from the method used to calculate
the performance of the separate accounts.

<TABLE>
<S> <C> <C>
CCM's Composite Lehman Brothers
for the Corporate
Year(s) Corporate Bond Style Bond Index(2)
- ------- -------------------- ---------------
Since Inception (7/1/1990)(1)......................... 10.53% 9.74%
5 Years (1993-1997)(1)................................ 8.83% 8.45%
3 Years (1995-1997)(1)................................ 11.38% 11.65%
1 Year (1997)(1)...................................... 10.05% 10.24%
1993.................................................. 13.57% 12.17%
1994.................................................. (2.74%) (3.92%)
1995.................................................. 19.59% 22.24%
1996.................................................. 4.97% 3.29%
1997.................................................. 10.05% 10.24%
</TABLE>

(1) Average annual returns through December 31, 1997.

12
<PAGE>

and include all dividends and interest, accrued income and realized and
unrealized gains and losses. All returns reflect the deduction of the highest
investment advisory fee charged to any account, brokerage commissions and
execution costs paid by the investment adviser's private accounts, without
provision for federal or state income taxes. Custodial fees, if any, were not
included in the calculation.

<TABLE>
<S> <C> <C>
DHJA's Composite Russell 1000
for the Growth
Year(s) Growth Equity Style Index(2)
- ------- ------------------- -------------
Since Inception (7/1/1988)(1)......................... 17.6% 17.95%
5 Years (1993-1997)(1)................................ 18.8% 18.44%
3 Years (1995-1997)(1)................................ 28.4% 30.18%
1 Year (1997)(1)...................................... 34.9% 30.48%
1993.................................................. 20.2% 2.90%
1994.................................................. (6.9%) 2.66%
1995.................................................. 35.4% 37.19%
1996.................................................. 15.9% 23.23%
1997.................................................. 34.9% 30.48%
</TABLE>

(1) Average annual returns through December 31, 1997.

13
<PAGE>

Goodman America Inc. Beutel, Goodman America Inc. is owned by BG Canada: 51% of
BG Canada is owned by its employees, 49% is owned by Duff & Phelps, a U.S.
public company listed on the New York Stock Exchange. BG Canada is registered as
an investment adviser with the Ontario and Quebec Securities Commissions. BGCM
currently manages approximately $1.9 billion in assets. Mr. Richard J. Andrews,
CFA, has served as President and a member of the Investment Committee of BGCM
since 1995. Mr. Andrews served as a Vice President and member of the Investment
Committee of BGCM from 1988 to 1995. Mr. Andrews received his Masters in
Business Administration from Amos Tuck, Dartmouth College in Hanover, New
Hampshire. Mr. John Philip Ferguson, is the Fund's Portfolio Manager and has
served as Vice President and a member of the Investment Committee of BGCM since
1988. Mr. Ferguson received his Juris Doctor from the University of Texas Law
School, in Austin, Texas. Mr. Forrest B. Bruch, Jr., CFA, has served as a
Portfolio Manager of BGCM since 1995. Mr. Bruch received his Masters in Business
Administration from the University of Houston in Houston, Texas. Prior to
joining BGCM, Mr. Bruch was a Managing Director of Investments for Savoy Capital
in Houston, Texas from 1991 to 1994 and a First Vice President for Paine Webber,
Inc. in Houston, Texas in 1990. Mr. Carl Dinger, CFA, has served as a Vice
President and Portfolio Manager for BGCM since 1991. Mr. Dinger received his
Masters in Business Administration from Lehigh University. Prior to joining BGCM
in 1991, Mr. Dinger was an Analyst and Portfolio Manager for Bering Corporation
in Houston, Texas from 1988 to 1990. Mr. Frank McReynolds Wozencraft, Jr., CFA,
has served as a Vice President for BGCM since 1996 and a Portfolio Manager since
1993. Mr. Wozencraft received his Masters of Management from the J.L. Kellogg
Graduate School of Management, Northwestern University, in Evanston, Illinois.
Prior to joining BGCM in 1993, Mr. Wozencraft was a Financial Analyst for
Hendricks Management Co., in Houston, Texas from 1992 to 1993, and a Financial
Analyst for Criterion Investment Management Company in Houston, Texas from 1985
to 1990.

14
<PAGE>

quarter. Prior to January 1, 1993, the composite was equally-weighted. Prior to
January 1, 1990, U.S. equity accounts managed by an affiliate company are
included; from January 1, 1990, only those portfolios managed in the U.S. are
included. Securities transactions are accounted for on the trade date and
accrual accounting is utilized. Cash and equivalents are included in performance
returns. Results for the period from January 1, 1993 through December 31, 1997
are time-weighted and dollar weighted in accordance with AIMR standards.

The investment results of BGCM's private accounts presented below are
unaudited and are not intended to predict or suggest the returns that might be
experienced by the Fund or an individual investor investing in the Value Equity
Fund. Investors should also be aware that the use of a methodology different
from that used below to calculate performance could result in different
performance data. The Fund's performance will be calculated using the method
required by the SEC, which differs from the method used to calculate the
performance of the separate accounts.
<TABLE>
<S> <C> <C>
BGCM's Composite Russell 1000
for the Value
Years(s) Value Equity Style Index (2)
- -------- ------------------ -------------
10 Years (1988-1997)(1)............................... 17.5% 18.16%
5 Years (1993-1997)(1)................................ 20.1% 21.36%
3 Years (1995-1997)(1)................................ 28.3% 31.52%
1 Year (1997)(1)...................................... 29.6% 35.18%
1993.................................................. 23.0% 18.12%
1994.................................................. (4.0%) (2.01%)
1995.................................................. 32.6% 38.34%
1996.................................................. 22.9% 21.63%
1997.................................................. 29.6% 35.18%
</TABLE>

(1) Average annual returns through December 31, 1997.

(2) The Russell 1000 Index measures the performance of the 1,000
largest companies in the Russell 3000 Index, which represents the approximately
90% of the total market capitalization of the Russell 3000 Index. (The Russell
3000 consists of the 3,000 largest U.S. companies based on total market
capitalization; it represents approximately 98% of the investable U.S. equity
market.) When the Russell 1000 was last reconstituted, its average market
capitalization was approximately $7.6 billion, and its median market
capitalization was approximately $3.0 billion. The smallest company in the Index
had an approximate market capitalization of $1.1 billion. The Value Index
measures the performance of those Russell 1000 companies with lower
price-to-book ratios and lower forecasted growth values. Performance figures for
the Index do not reflect deduction of brokerage commissions, or other
transaction costs, nor is the Index subject to management and other fees charged
to the private accounts.

15
<PAGE>

the fees paid by shareholders of the Funds. As of the date of this Prospectus,
the Adviser will pay NTC, CCM, DHJA, BGCM fees of 0.20%, 0.20%, 0.30%, and
0.30%, respectively, of the average daily net assets of the Fund for which the
Sub-adviser provides investment advisory services. The amount of these fees may
vary from time to time as a result of periodic negotiations with the
Sub-advisers and pursuant to certain factors described in the SAI. The amount of
advisory fees paid by each Fund will not vary as a result of changes in the
Sub-advisory fees, however.

ADMINISTRATOR

On behalf of the Fund, the Trust has entered into an Administration
Agreement with Forum Administrative Services, LLC ("FAdS"). Under this
agreement, Forum is responsible for the supervision of the overall management of
the Trust (including the Trust's receipt of services for which it must pay),
providing the Trust with general office facilities and providing persons
satisfactory to the Board to serve as officers of the Trust. For these services,
FAdS receives a fee computed and paid monthly at an annual rate of 0.15% of the
average daily net assets under $150 million, and 0.10% of the average daily
assets over $150 million of each Fund, subject to an annual minimum of $30,000
per Fund.

As of February 28, 1998, FAdS administers investment companies and
collective investment funds with assets of approximately $45 billion.

DISTRIBUTOR

SHAREHOLDER SERVICES
The Trust has adopted a shareholder services plan providing that the
Trust may obtain the services of the Adviser and other qualified financial
institutions to act as shareholder servicing agents for their customers. Under
this plan, the Trust has

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<PAGE>

authorized FAS to enter into agreements pursuant to which the shareholder
servicing agent performs certain shareholder services not otherwise provided by
the Funds' transfer agent. For these services, the Trust pays the shareholder
servicing agent a fee of up to 0.05% of the average daily net assets of the
Institutional Shares owned by investors for which the shareholder servicing
agent maintains a servicing relationship. Among the services provided by
shareholder servicing agents are: answering customer inquiries regarding account
matters; assisting shareholders in designating and changing various account
options; aggregating and processing purchase and redemption orders and
transmitting and receiving funds for shareholder orders; transmitting, on behalf
of the Trust, proxy statements, prospectuses and shareholder reports to
shareholders and tabulating proxies; processing dividend payments and providing
subaccounting services for Institutional Shares held beneficially; and providing
such other services as the Trust or a shareholder may request.

TRANSFER AGENT

Pursuant to a separate agreement, Forum Accounting Services, LLC
("FAcS") provides portfolio accounting services to each Fund. The Adviser, FAdS,
FFSI, FSS and FAcS are members of the Forum Financial Group of companies which
together provide a full range of services to the investment company and
financial services industry. As of October 1, 1997, the Adviser, FAdS, FSS,
FFSI, and FAcS were controlled by John Y. Keffer and were located at Two
Portland Square, Portland, Maine, 04101.

EXPENSES OF THE TRUST

CUSTODY

BankBoston serves as each Fund's custodian and may appoint
subcustodians for the foreign securities and other assets held in foreign
countries.

4. HOW TO BUY SHARES

MINIMUM INVESTMENT

There is a $10 million minimum for initial purchases of Shares of each
Fund. Either management of the Trust or FSS may in its discretion waive the
investment minimums. There is no minimum for subsequent purchases.

The Funds reserve the right to reject any subscription for the purchase
of their shares. Share certificates are issued only to shareholders of record
upon their written request and no certificates are issued for fractional Shares.

PURCHASE PROCEDURES

THERE ARE THREE WAYS TO PURCHASE SHARES INITIALLY.

BY MAIL
You may send a check or money order (cash cannot be accepted) along
with a completed account application form to the Trust at the address listed
under "Account Application." Checks or money orders are accepted at full value
subject to collection. If a check or money order does not

17
<PAGE>

clear, the purchase order will be canceled and the investor will be liable for
any losses or fees incurred by the Trust, FSS or FAdS.

For individual or Uniform Gift to Minors Act accounts, the check or
money order used to purchase Shares of a Fund must be made payable to "Memorial
Funds" or to one or more owners of that account and endorsed to "Memorial
Funds." No other method of payment by check will be accepted. For corporation,
partnership, trust, 401(k) plan or other non-individual type accounts, the check
used to purchase Shares of a Fund must be made payable on its face to "Memorial
Funds." No other method of payment by check will be accepted. All purchases must
be paid in U.S. dollars; checks must be drawn on U.S. banks. Payment by
traveler's checks is prohibited.

BY BANK WIRE
You make an initial investment in a Fund using the wire system for
transmittal of money among banks. You should first telephone FSS at (888)
263-5593 to obtain an account number. You should then instruct a bank to wire
your money immediately to:

BankBoston
Boston, Massachusetts
ABA # 011000390
For Credit To: Forum Financial Corp.
Account No.: 541-54171
RE: Memorial Funds
[Name of Fund] - Institutional Shares
[Investor's Name]
[Investor's Account No.]

THROUGH FINANCIAL INSTITUTIONS
You may also purchase Shares through certain broker-dealers, banks and
other financial institutions ("Processing Organizations"). FSS and its
affiliates may be Processing Organizations. Processing Organizations may receive
payments from Forum with respect to sales of Trust Shares and may receive
payments as a processing agent from FSS. Financial institutions, including
Processing Organizations, may charge their customers a fee for their services
and are responsible for promptly transmitting purchase, redemption and other
requests to the Funds.

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<PAGE>

SUBSEQUENT PURCHASES

ACCOUNT APPLICATION

An account application is included in this Prospectus. You may also
obtain an account application that is necessary to open an account by writing
the Trust at the following address:

Memorial Funds
P.O. BOX 446
PORTLAND, ME 04112

GENERAL INFORMATION

Fund Shares are continuously sold on any weekday except days when the
New York Stock Exchange is closed, normally New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas ("Fund Business Day"). The purchase price
for a share of a Fund equals its net asset value next-determined after
acceptance of an order in proper form.

Fund shares become entitled to receive dividends and distributions on
the next Fund Business Day after a purchase order is accepted.

For information regarding purchase and redemption of shareholder
accounts, please call Forum Shareholder Services at 1-888-263-5593.

5. HOW TO SELL SHARES

GENERAL INFORMATION

Fund Shares may be sold ("redeemed") at their net asset value on any
Fund Business Day. There is no minimum period of investment and no restriction
on the frequency of redemptions.

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<PAGE>

the Fund of the value of its net assets is not reasonably practicable and for
such other periods as the SEC may permit.

REDEMPTION PROCEDURES

If you invested through a Processing Organization you may redeem your
Shares through the Processing Organization as described above. If you invested
directly in a Fund, you may redeem your Shares as described below. If you wish
to redeem shares by telephone or receive redemption proceeds by bank wire, you
must elect these options by properly completing the appropriate sections of your
account application form. These privileges may not be available until several
weeks after your application is received. Shares for which certificates have
been issued may not be redeemed by telephone.

BY MAIL
You may redeem Shares by sending a written request to FSS accompanied
by any share certificate that may have been issued to the shareholder to
evidence the Shares being redeemed. All written requests for redemption must be
signed by the shareholder with signature guaranteed, and all certificates
submitted for redemption must be endorsed by the shareholder with signature
guaranteed. (See "How to Sell Shares -- Other Redemption Matters.")

BY TELEPHONE
If you have elected telephone redemption privileges, you may request a
redemption by calling FSS at (888) 263-5593 and providing your account number,
the exact name in which your Shares are registered and your social security or
taxpayer identification number. In response to the telephone redemption
instruction, the Trust will mail a check to your record address or, if you have
elected wire redemption privileges, wire the proceeds.
(See "How to Sell Shares -- Other Redemption Matters.")

BY BANK WIRE
For redemptions of more than $5,000, if you have elected wire
redemption privileges, you may request a Fund to transmit proceeds of any
redemption over $5,000 by federal funds wire to a bank account that you
previously designated in writing. To request bank wire redemptions by telephone,
you also must have elected the telephone redemption privilege. Redemption
proceeds are transmitted by wire on the day after FSS receives a redemption
request in proper form.

OTHER REDEMPTION MATTERS

To protect shareholders and the Funds against fraud, signatures on
certain requests must have a signature guarantee. Requests must be made in
writing and include a signature guarantee for any of the following transactions:
(1) any endorsement on a share certificate; (2) instruction to change a
shareholder's record name; (3) modification of a designated bank account for
wire redemptions; (4) dividend and distribution election; (5) telephone
redemption; (6) exchange option election or any other option election in
connection with the shareholder's account; (7) written instruction to redeem
Shares whose value exceeds $50,000; (8) redemption in an account in which the
account address has changed within the last 30 days; (9) redemption when the
proceeds are deposited in a Memorial Funds account under a different account
registration; and (10) the remitting of redemption proceeds to any address,
person or account for which there are not established standing instructions on
the account.

Signature guarantees may be provided by any bank, broker-dealer,
national securities exchange, credit union, savings association or other
eligible

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<PAGE>

institution that is authorized to guarantee signatures and is acceptable to FSS.
Whenever a signature guarantee is required, the signature of each person
required to sign for the account must be guaranteed.

Due to the cost of maintaining smaller accounts, the Trust reserves the
right to exchange, upon not less than 60 days' written notice, all Institutional
Shares in any Fund account whose aggregate net asset value is less than $5
million immediately following any redemption with Trust Shares.

6. OTHER SHAREHOLDER SERVICES

EXCHANGES

Shareholders of one Fund may exchange their shares for Institutional
shares of any of the other Memorial Funds, as well as for Institutional class
shares of Forum Daily Assets Treasury Fund. A prospectus for Daily Assets
Government Fund can be obtained by contacting FSS.

Exchanges may only be made between identically registered accounts or
by opening a new account. A new account application is required to open a new
account through an exchange if the new account will not have an identical
registration and the same shareholder privileges as the account from which the
exchange is being made. A shareholder may exchange into a Fund only if that
Fund's Shares may legally be sold in the shareholder's state of residence.

EXCHANGES BY MAIL

You may make an exchange by sending a written request to FSS accompanied by
any share certificates for the Shares to be exchanged. You must sign all written
requests for exchanges and endorse

21
<PAGE>

all certificates submitted for exchange with your signature guaranteed. (See
"How to Sell Shares -- Other Redemption Matters.")

EXCHANGES BY TELEPHONE
If you have elected telephone exchange privileges, you may make a
telephone exchange request by calling FSS at (888) 263-5593 and providing the
account number, the exact name in which the shareholder's shares are registered
and your social security or taxpayer identification number. (See "How to Sell
Shares -- Other Redemption Matters.")

REOPENING ACCOUNTS

7. DIVIDENDS AND TAX MATTERS

DIVIDENDS

PAYMENT OPTIONS

You may choose to have dividends and distributions of a Fund reinvested
in shares of that Fund (the "Reinvestment Option"), to receive dividends and
distributions in cash (the "Cash Option") or to direct dividends and
distributions to be reinvested in Shares of another Fund of the Trust (the
"Directed Dividend Option"). All dividends and distributions are treated in the
same manner for federal income tax purposes whether received in cash or
reinvested in Shares of a Fund.

Under the Reinvestment Option, all dividends and distributions of a
Fund are automatically invested in additional Shares of that Fund. All dividends
and distributions are reinvested at a Fund's net asset value as of the payment
date of the dividend or distribution. You will be assigned this option unless
you select one of the other two options. Under the Cash Option, all dividends
and distributions are paid to the shareholder in cash. Under the Directed
Dividend Option, any shareholders of a Fund may elect to have all dividends and
distributions reinvested in Shares of another Fund, provided that those Shares
are eligible for sale in the shareholder's state of residence. For further
information concerning the Directed Dividend Option, shareholders should contact
FSS.

TAX MATTERS

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<PAGE>

shareholders as such, regardless of how long a shareholder has held Shares in
the Fund. If a shareholder holds Shares for six months or less and during that
period receives a long-term capital gain distribution, any loss realized on the
sale of the Shares during that six-month period will be a long-term capital loss
to the extent of the distribution. Dividends and distributions reduce the net
asset value of the Fund paying the dividend or distribution by the amount of the
dividend or distribution. Furthermore, a dividend or distribution made shortly
after the purchase of Shares, although in effect a return of capital to you,
will be taxable as described above.

Reports containing appropriate information with respect to the federal income
tax status of dividends and distributions paid during the year by each Fund will
be mailed to shareholders shortly after the close of each calendar year.

8. DETAILED DESCRIPTION OF THE FUNDS' INVESTMENTS, STRATEGIES AND RISKS

IN GENERAL

This section describes in more detail the Funds' investments, the
investment practices and strategies that the Sub-advisers may employ for a Fund,
and the risks associated with these investments and practices.

A FURTHER DESCRIPTION OF THE FUNDS' INVESTMENT POLICIES, INCLUDING
ADDITIONAL FUNDAMENTAL POLICIES, IS CONTAINED IN THE SAI.

CORE AND GATEWAY(R)

Notwithstanding the Funds' other investment policies, each Fund may
seek to achieve its investment objective by converting to a Core and Gateway
structure, upon future action by the Board and notice to shareholders. If a Fund
converts to a Core and Gateway structure, it would seek to achieve its
investment objective by investing all or a portion of its assets in shares of
another diversified, open-end management investment company that has an
investment objective and investment policies substantially similar to that of
the Fund.

FIXED INCOME SECURITIES AND THEIR CHARACTERISTICS

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<PAGE>

changes in interest rates. In other words, an increase in interest rates
produces a decrease in market value. Moreover, the longer the remaining maturity
(and duration) of a security, the greater will be the effect of interest rate
changes on the market value of that security. Changes in the ability of an
issuer to make payments of interest and principal and in the market's perception
of an issuer's creditworthiness will also affect the market value of the debt
securities of that issuer. The possibility exists that, the ability of any
issuer to pay, when due, the principal of and interest on its debt securities
may become impaired.

CREDIT RISK AND RATINGS
The Fixed Income Funds' investments are subject to "credit risk"
relating to the financial condition of the issuers of the securities that each
Fund holds. Each Fund attempts to limit its credit risk by limiting its
investment in securities rated in lower categories by a Nationally Recognized
Statistical Rating Organization ("NRSRO").

The Government Bond Fund invests at least 90% of its net assets in U.S.
Government Securities. For this reason its exposure to credit risk is limited.
It may, however, invest up to 10% of its net assets in "investment grade"
corporate debt instruments. Accordingly, the Government Bond Fund may not
purchase any corporate debt instrument having a long-term rating for corporate
bonds, including convertible bonds, lower than are "Baa" in the case of Moody's
Investors Service ("Moody's") and "BBB" in the case of Standard & Poor's ("S&P")
and Fitch Investors Service, L.P. ("Fitch"); the lowest permissible long-term
investment grades for preferred stock are "Baa" in the case of Moody's and "BBB"
in the case of S&P and Fitch; and the lowest permissible short-term investment
grades for short-term debt, including commercial paper, are Prime-2 (P-2) in the
case of Moody's, A-2 in the case of S&P and F-2 in the case of Fitch. Although
considered investment grade, Moody's indicates that securities rated Baa have
speculative characteristics.

U.S. GOVERNMENT SECURITIES
The Fixed Income Funds may invest in U.S. Government Securities
including U.S. Treasury Securities and obligations issued or guaranteed by U.S.
Government agencies and instrumentalities and backed by the full faith and
credit of the U.S. Government, such as those guaranteed by the Small Business
Administration or issued by the Government National Mortgage Association
("Ginnie Mae").

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<PAGE>

Valley Authority. There is no guarantee that the U.S. Government will support
securities not backed by its full faith and credit. Accordingly, although these
securities have historically involved little risk of loss of principal if held
to maturity, they may involve more risk than securities backed by the U.S.
Government's full faith and credit.

VARIABLE AND FLOATING RATE SECURITIES
The Fixed Income Funds may invest in securities that pay interest at
rates that are adjusted periodically according to a specified formula, usually
with reference to some interest rate index or market interest rate (the
"underlying index"). Such adjustments minimize changes in the market value of
the obligation and, accordingly, enhance the ability of the Fund to reduce
fluctuations in its net asset value. Variable and floating rate instruments are
subject to changes in value based on changes in market interest rates or changes
in the issuer's creditworthiness.

DEMAND NOTES
The Fixed Income Funds may purchase variable and floating rate demand
notes of corporations, which are unsecured obligations redeemable upon not more
than 30 days' notice. These obligations include master demand notes that permit
investment of fluctuating amounts at varying rates of interest pursuant to
direct arrangement with the issuer of the instrument. The issuers of these
obligations often have the right, after a given period, to prepay their
outstanding principal amount of the obligations upon a specified number of days'
notice. These obligations generally are not traded, nor generally is there an
established secondary market for these obligations. To the extent a demand note
does not have a seven day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid security.
Although a Fund would generally not be able to resell a master demand note to a
third party, the Fund is entitled to demand payment from the issuer at any time.
The Sub-advisers continuously monitor the financial condition of the issuer to
determine the issuer's likely ability to make payment on demand.

GUARANTEED INVESTMENT CONTRACTS
The Corporate Bond Fund may invest in guaranteed investment contracts
("GICs"). A GIC is an arrangement with an insurance company under which the Fund
contributes cash to the insurance company's general account and the insurance
company credits the contribution with interest on a monthly basis. The interest
rate is tied to a specified market index and is guaranteed by the insurance
company not to be less than a certain minimum rate. The Fund will purchase a GIC
only when the Sub-adviser has determined that the GIC presents minimal credit
risks to the Fund and is of comparable quality to other instruments that the
Fund may purchase.

ZERO-COUPON SECURITIES
The Fixed Income Funds may invest in separately traded principal and
interest components of securities issued or guaranteed by the U.S. Treasury.
These components are traded independently under the Treasury's Separate Trading
of Registered Interest and Principal of Securities ("STRIPS") program or as
Coupons Under Book Entry Safekeeping ("CUBES").

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<PAGE>

form of receipts or certificates representing undivided interests in these
instruments. These instruments are generally held by a bank in a custodial or
trust account on behalf of the owners of the securities and are known by various
names, including Treasury Receipts ("TRs"), Treasury Investment Growth Receipts
("TIGRs") and Certificates of Accrual on Treasury Securities ("CATS").
Zero-coupon securities also may be issued by corporations and municipalities.

MORTGAGE-BACKED SECURITIES
The Fixed Income Funds may invest in mortgage-backed securities. The
Government Bond Fund may only invest in mortgage-backed securities issued by the
government or government-related issuers described below. The Corporate Bond
Fund may also invest in mortgage-backed securities of private issuers.

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<PAGE>

government issuers because of the absence of direct or indirect government
guarantees of payment. Many non-governmental issuers or servicers of
mortgage-backed securities, however, guarantee timely payment of interest and
principal on these securities. Timely payment of interest and principal also may
be supported by various forms of insurance, including individual loan, title,
pool and hazard policies.

LIQUIDITY AND MARKETABILITY. Generally, government and
government-related pass-through pools are highly liquid. While private
conventional pools of mortgages (pooled by non-government-related entities) have
also achieved broad market acceptance and an active secondary market has
emerged, the market for conventional pools is smaller and less liquid than the
market for government and government-related mortgage pools.

27
<PAGE>

the maximum amount by which the interest rate paid by the borrower may change at
each reset date or over the life of the loan and, accordingly, fluctuation in
interest rates above these levels could cause such mortgage securities to "cap
out" and to behave more like long-term, fixed-rate debt securities. ARMs may
have less risk of a decline in value during periods of rapidly rising rates, but
they also may have less potential for capital appreciation than other debt
securities of comparable maturities due to the periodic adjustment of the
interest rate on the underlying mortgages and due to the likelihood of increased
prepayments of mortgages as interest rates decline. Furthermore, during periods
of declining interest rates, income to a Fund will decrease as the coupon rate
resets along with the decline in interest rates. During periods of rising
interest rates, changes in the coupon rates of the mortgages underlying the
Fund's ARMs may lag behind changes in market interest rates. This may result in
a lower value until the interest rate resets to market rates.

COLLATERALIZED MORTGAGE OBLIGATIONS. CMOs are debt obligations
collateralized by mortgages or mortgage pass-through securities issued by Ginnie
Mae, Freddie Mac or Fannie Mae or by pools of conventional mortgages ("Mortgage
Assets"). CMOs may be privately issued or U.S. Government Securities. Payments
of principal and interest on the Mortgage Assets are passed through to the
holders of the CMOs on the same schedule as they are received, although, certain
classes (often referred to as tranches) of CMOs have priority over other classes
with respect to the receipt of payments. Multi-class mortgage pass-through
securities are interests in trusts that hold Mortgage Assets and that have
multiple classes similar to those of CMOs. Unless the context indicates
otherwise, references to CMOs include multi-class mortgage pass-through
securities. Payments of principal of and interest on the underlying Mortgage
Assets (and in the case of CMOs, any reinvestment income thereon) provide funds
to pay debt service on the CMOs or to make scheduled distributions on the
multi-class mortgage pass-through securities. Parallel pay CMOs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. Planned amortization class mortgage-based
securities ("PAC Bonds") are a form of parallel pay CMO. PAC Bonds are designed
to provide relatively predictable payments of principal provided that, among
other things, the actual prepayment experience on the underlying mortgage loans
falls within a contemplated range. If the actual prepayment experience on the
underlying mortgage loans is at a rate faster or slower than the contemplated
range, or if deviations from other assumptions occur, principal payments on a
PAC Bond may be greater or smaller than predicted. The magnitude of the
contemplated range varies from one PAC Bond to another; a narrower range
increases the risk that prepayments will be greater or smaller than
contemplated. CMOs may have complicated structures and generally involve more
risks than simpler forms of mortgage-related securities.

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<PAGE>

COMMON STOCK
The EQUITY FUNDS invest primarily in common stocks of domestic issuers.
Common stock represents an equity or ownership interest in a company. Although
an equity interest often gives a Fund the right to vote on measures affecting
the company's organization and operations, the Funds do not intend to exercise
control over the management of companies in which they invest. Common stocks
have a history of long-term growth in value, but their prices tend to fluctuate
in the shorter term.

PREFERRED STOCK
The EQUITY FUNDS may invest in preferred stock. Preferred stock
generally does not exhibit as great a potential for appreciation or depreciation
as common stock, although it ranks above common stock in its claim on income
from dividend payments or the recovery of investment or both. The owner of
preferred stock is a shareholder in a business and not, like a bondholder, a
creditor. Dividends paid to preferred stockholders are distributions of earnings
of a business in contrast to interest payments to bondholders which are expenses
of a business.

WARRANTS
The EQUITY FUNDS may invest in warrants. These are options to purchase
an equity security at a specified price at any time during the life of the
warrant. Unlike preferred stocks, warrants do not pay a dividend. Investments in
warrants involve certain risks, including the possible lack of a liquid market
for the resale of the warrants, potential price fluctuations as a result of
speculation or other factors and failure of the price of the underlying security
to reach a level at which the warrant can be prudently exercised (in which case
the warrant may expire without being exercised, resulting in the loss of a
Fund's entire investment therein).

CONVERTIBLE SECURITIES
All of the Funds may invest in securities that may be converted into a
pre-determined number of shares of the issuer's common stock at stated price or
formula within a specified time period. The holder of convertible securities is
entitled to receive interest paid or accrued on convertible debt, or the
dividend paid on convertible preferred stock, until the convertible security
matures or is redeemed, converted or exchanged. Traditionally, convertible
securities have paid dividends or interest greater than common stocks, but less
than fixed income or non-convertible debt securities. Convertible securities
typically rank before common stock, but after non-convertible debt securities,
in their claim on dividends paid by the issuer. In general, the value of a
convertible security is the higher of its investment value (its value as a fixed
income security) and its conversion value (the value of the underlying shares of
common stock if the security is converted). As a fixed income security, the
value of a convertible security generally increases when interest rates decline
and generally decreases when interest rates rise. The value of a convertible
security is, however, also influenced by the value of the

29
<PAGE>

underlying common stock. By investing in a convertible security, a Fund may
participate in any capital appreciation or depreciation of a company's stock,
but to a lesser degree than its common stock.

FUTURES CONTRACTS AND OPTIONS
Each Fund may attempt to hedge against a decline in the value of
securities it owns or an increase in the price of securities it plans to
purchase through the use of options and the purchase and sale of interest rate
futures contracts and options on those futures contracts. These instruments are
often referred to as "derivatives," because their performance is derived, at
least in part, from the performance of another asset (such as a security,
currency or an index of securities). The Funds only may write (sell) "covered"
options. An option is covered if, so long as the Fund is obligated under the
option, it owns an offsetting position in the underlying security or futures
contract or maintains cash, U.S. Government Securities or other liquid debt
securities in a segregated account with a value at all times sufficient to cover
the Fund's obligation under the option. A Fund may enter into futures contracts
only if the aggregate of initial deposits for open futures contract positions
does not exceed 5% of the Fund's total assets.

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<PAGE>

As a result, there can be no assurance that an active secondary market in those
contracts will develop or continue to exist.

OPTIONS ON SECURITIES. A call option is a contract pursuant to which
the purchaser of the call option, in return for a premium paid, has the right to
buy the security underlying the option at a specified exercise price at any time
during the term of the option. The writer of the call option, who receives the
premium, has the obligation upon exercise of the option to deliver the
underlying security against payment of the exercise price during the option
period. A put option gives its purchaser, in return for a premium, the right to
sell the underlying security at a specified price during the term of the option.
The writer of the put, who receives the premium, has the obligation to buy the
underlying security, upon exercise at the exercise price during the option
period. The amount of premium received or paid is based upon certain factors,
including the market price of the underlying security or index, the relationship
of the exercise price to the market price, the historical price volatility of
the underlying security or index, the option period, supply and demand and
interest rates.

TECHNIQUES INVOLVING LEVERAGE
Leveraging involves special risks. The Funds may borrow for other than
temporary or emergency purposes, lend their securities, and purchase securities
on a when-issued or forward commitment basis, and engage in dollar roll
transactions. Each of these transactions involves the use of "leverage" when
cash made available to the Fund

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<PAGE>

through the investment technique is used to make additional portfolio
investments. In addition, the use of swap and related agreements may involve
leverage. A Fund uses these investment techniques only when the Sub-adviser to
the Fund believes that the leveraging and the returns available from investing
the cash will provide the Fund's shareholders with a potentially higher return.

The risks of leverage include a higher volatility of the net asset
value of a Fund's Shares and the relatively greater effect on the net asset
value of the Shares caused by favorable or adverse market movements or changes
in the cost of cash obtained by leveraging and the yield obtained from investing
the cash. So long as a Fund is able to realize a net return on its investment
portfolio that is higher than interest expense incurred, if any, leverage will
result in higher current net investment income being realized by the Fund than
if the Fund were not leveraged. On the other hand, interest rates change from
time to time depending upon such factors as supply and demand, monetary and tax
policies and investor expectations. Changes in such factors could cause the
relationship between the cost of leveraging and the yield to change so that
rates involved in the leveraging arrangement may substantially increase relative
to the yield on the obligations in which the proceeds of the leveraging have
been invested. To the extent that the interest expense involved in leveraging
approaches the net return on a Fund's investment portfolio, the benefit of
leveraging will be reduced, and, if the interest expense on borrowings were to
exceed the net return to shareholders, the Fund's use of leverage would result
in a lower rate of return than if the Fund were not leveraged. Similarly, the
effect of leverage in a declining market could be a greater decrease in net
asset value per share than if the Fund were not leveraged. In an extreme case,
if a Fund's current investment income were not sufficient to meet the interest
expense of leveraging, it could be necessary for the Fund to liquidate certain
of its investments at an inappropriate time. The use of leverage may be
considered speculative.

SEGREGATED ACCOUNT. To limit the risks involved in various transactions
involving leverage, the Trust's custodian will set aside and maintain in a
segregated account for each Fund, cash, U.S. Government Securities and other
liquid, debt securities in accordance with SEC guidelines. The account's value,
which is marked to market daily, will be at least equal to the Fund's
commitments under these transactions. The Fund's commitments may include: (i)
the Fund's obligations to repurchase securities under a reverse repurchase
agreement, or settle when-issued and forward commitment transactions; (ii) the
greater of the market value of securities sold short or the value of the
securities at the time of the short sale (reduced by any margin deposit). The
use of a segregated account in connection with leveraged transactions may result
in a Fund's portfolio being 100% leveraged.

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a Fund might need to sell portfolio securities to meet interest or principal
payments at a time when investment considerations would not favor such sales.

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. The Fixed Income Funds
may purchase securities on a "when-issued" or "forward commitment" basis. When a
Fund purchases a security on a when-issued or forward commitment basis, the
price of the security is fixed when the commitment is made, but delivery and
payment for the securities take place at a later date. Normally, the settlement
occurs within three months after the transaction, but delayed settlements beyond
three months may be negotiated.

During the period between a commitment and settlement, no interest
accrues to the Fund. When a Fund commits to purchase securities in this manner,
however, the Fund immediately assumes the risk of ownership, including price
fluctuation. If the other party does not deliver or pay for a security purchased
or sold by the Fund, the Fund may incur a loss or miss and opportunity to make
an alternative investment. Any significant commitment of a Fund's assets
committed to the purchase of securities on a when-issued or forward commitment
basis may increase the volatility of its net asset value. Except for dollar roll
transactions, which are described below, each of the Fixed Income Funds limits
its investments in when-issued and forward commitment securities to 15% of the
value of the Fund's total assets.

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<PAGE>

payments on the security accrue to the Fund, but the Fund assumes the risk of
ownership. A Fund is compensated for entering into dollar roll transactions by
the difference between the current sales price and the forward price for the
future purchase, as well as by the interest earned on the cash proceeds of the
initial sale. Dollar roll transactions involve the risk that the market value of
the securities sold by a Fund may decline below the price at which the Fund is
committed to purchase similar securities. If the buyer of securities under a
dollar roll transaction becomes insolvent, the Fund's use of the proceeds of the
transaction may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the Fund's obligation to repurchase the
securities. The Funds will engage in roll transactions for the purpose of
acquiring securities for their portfolios and not for investment leverage. Each
FIXED INCOME FUND will limit its obligations on dollar roll transactions to 35%
of the Fund's net assets.

CONCENTRATION
As a fundamental investment policy, a Fund may not purchase a security
(other than U.S. Government Securities) if as a result more than 25% of its net
assets would be invested in a particular industry.

DIVERSIFICATION
As a fundamental investment policy, a Fund may not purchase a security
if, as a result (1) more than 5% of a Fund's total assets would be invested in
the securities of a single issuer, or (2) a Fund would own more than 10% of the
outstanding voting securities of a single issuer. This limitation applies only
with respect to 75% of a Fund's total assets and does not apply to U.S.
Government Securities.

CASH AND TEMPORARY DEFENSIVE POSITIONS
A Fund will hold a certain portion of its assets in cash or cash
equivalents to retain flexibility in meeting redemptions, paying expenses, and
timing of new investments. Cash equivalents may include (1) short-term
obligations issued or guaranteed by the United States Government, its agencies
or instrumentalities ("U.S. Government Securities"), (2) certificates of
deposit, bankers' acceptances and interest-bearing savings deposits of
commercial banks doing business in the United States that have an A+ rating from
Standard & Poor's Corporation or an A-1+ rating from Moody's Investors Service,
Inc., (3) commercial paper rated P-1 by Moody's Investors Service, Inc. or A-1
by Standard & Poor's Corporation, (4) repurchase agreements covering any of the
securities in which a Fund may invest directly, and (5) money market mutual
funds.

In addition, when a Fund's Sub-adviser believes that business or
financial conditions warrant, the Sub-Adviser's Fund may assume a temporary
defensive position. During such periods, a Fund may invest without limit in cash
or cash equivalents. When and to the extent a Fund assumes a temporary defensive
position, it will not pursue its investment objective.

SHORT SALES
A Fund may not enter into short sales, except short sales "against the
box." In a short sale against the box, a Fund sells securities it owns, or has
the right to acquire at no additional cost. A Fund does not immediately deliver
the securities sold, however, and does not receive proceeds from the sale until
it does deliver the securities. A Fund may enter into a short sale against the
box to lock-in a gain or loss in one year, while deferring recognition of the
gain or loss until the next year. A Fund may also sell short against the box to
hedge against the risk that the price of a security may decline. In such a case,
to the extent a Fund limits its future losses in the security, it limits its
opportunity to achieve future gain in the security as well. Pursuant to the
Taxpayer Relief Act of 1997, if a Fund has unrealized gain with respect to a
security and enters into a short sale with respect to such security, the Fund
generally will be deemed to have sold the appreciated security and this will
recognize gain for tax purposes.

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SECURITIES OF OTHER INVESTMENT COMPANIES
A Fund may invest in shares of other investment companies to the extent
permitted by the Investment Company Act of 1940 ("Investment Company Act"). To
the extent a Fund invests in shares of an investment company, it will bear its
pro rata share of the other investment company's expenses, such as investment
advisory and distribution fees, and operating expenses.

Each Fund reserves the right upon notification to shareholders, to
invest up to 100% of its investable assets in one or more other investment
companies. If a Fund elected to pursue its investment objective in this manner,
its policies on concentration and diversification would apply to the assets of
the investment companies in which the Fund invests.

ILLIQUID AND RESTRICTED SECURITIES
A Fund may not purchase a security if, as a result, more than 15
percent of its net assets would be invested in illiquid securities. A security
is considered "illiquid" if it may not be sold or disposed of in the ordinary
course of business within seven days at approximately the value at which a Fund
has valued the security. Over-the-counter options, repurchase agreements not
entitling the holder to payment of principal in 7 days, and certain "restricted
securities" may be illiquid.

A security is restricted if it is subject to contractual or legal
restrictions on resale to the general public. A liquid institutional market has
developed, however, for certain restricted securities such as repurchase
agreements, commercial paper, foreign securities and corporate bonds and notes.
Thus, restrictions on resale do not necessarily indicate the liquidity of the
security. For example, if a restricted security may be sold to certain
institutional buyers in accordance with Rule 144A under the Securities Act of
1933 or another exemption from registration under the Securities Act, the
Sub-adviser may determine that the security is liquid under guidelines adopted
by the Board. These guidelines take into account trading activity in the
securities and the availability of reliable pricing information, among other
factors. With other restricted securities, however, there can be no assurance
that a liquid market will exist for the security at any particular time. A Fund
might not be able to dispose of such securities promptly or at reasonable prices
and might thereby experience difficulty satisfying redemptions. A Fund treats
such holdings as illiquid.

PORTFOLIO TRANSACTIONS
Each Sub-adviser places orders for the purchase and sale of assets it
manages with brokers and dealers selected by, and in the discretion of, the
Sub-adviser. The Sub-advisers seek "best execution" for all portfolio
transactions, but a Fund may pay higher than the lowest available commission
rates when the Fund's Sub-adviser believes it is reasonable to do so in light of
the value of the brokerage and research services provided by the broker
effecting the transaction.

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<PAGE>

once in a period of one year. Higher portfolio turnover rates may result in
increased brokerage costs and a possible increase in short-term capital gains or
losses. Tax rules applicable to short-term trading may affect the timing of a
portfolio transactions or the ability to realize short-term trading profits or
establish short-term positions. It is estimated that each Fund's portfolio
turnover will be less than 100%.

9. OTHER INFORMATION

DETERMINATION OF NET ASSET VALUE

PERFORMANCE INFORMATION

A Fund's performance may be quoted in terms of yield or total return.
All performance information is based on historical results and is not intended
to indicate future performance. A Fund's yield is a way of showing the rate of
income the Fund earns on its investments as a percentage of the Fund's share
price. To calculate standardized yield, a Fund takes the income it earned from
its investments for a 30-day period (net of expenses), divides it by the average
number of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on the Fund's share price at the end of the
30-day period. A Fund's total return shows its overall change in value,
including changes in share price and assuming all the Fund's dividends and
distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if the Fund's performance had been constant
over the entire period. Because average annual returns tend to smooth out
variations in the Funds' returns, shareholders should recognize that they are
not the same as actual year-by-year results.

THE TRUST AND ITS SHARES

The Trust has an unlimited number of authorized shares of beneficial
interest. The Board may, without shareholder approval, divide the authorized
shares into an unlimited number of separate portfolios or series (such as a
Fund) and may divide portfolios or series into classes of shares (such as Trust
Shares); the costs of doing so will be borne by the Trust. Currently the
authorized Shares of the Trust are divided into four separate series.

OTHER CLASSES OF SHARES
The Funds currently issue two classes of shares, Trust Shares and
Institutional Shares. Trust Shares are designed primarily for individual
investors and smaller fiduciary, agency and custodial

36
<PAGE>

clients whose investments are pooled in common or collective trusts managed by
bank trust departments, trust companies or their affiliates. Each class of a
Fund will have a different expense ratio and may have different distribution
fees. Each class' performance is affected by its expenses. For more information
on Trust Shares of the Funds, investors may contact FSS at (888) 263-5593 or the
Funds' distributor. Investors may also contact their sales representative to
obtain information about the other classes.

SHAREHOLDER VOTING AND OTHER RIGHTS
Each share of each series of the Trust and each class of shares has
equal dividend, distribution, liquidation and voting rights, and fractional
shares have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency and administration expenses) are borne solely by those shares
and each class votes separately with respect to the provisions of any Rule 12b-1
plan which pertains to the class and other matters for which separate class
voting is appropriate under applicable law. Generally, shares will be voted in
the aggregate without reference to a particular series or class, except if the
matter affects only one series or class or voting by series or class is required
by law, in which case shares will be voted separately by series or class, as
appropriate. Delaware law does not require the Trust to hold annual meetings of
shareholders, and it is anticipated that shareholder meetings will be held only
when specifically required by federal or state law. Shareholders (and Trustees)
have available certain procedures for the removal of Trustees. There are no
conversion or preemptive rights in connection with shares of the Trust. All
shares when issued in accordance with the terms of the offering will be fully
paid and nonassessable. Shares are redeemable at net asset value, at the option
of the shareholders, subject to any contingent deferred sales charge that may
apply. A shareholder in a series is entitled to the shareholder's pro rata share
of all dividends and distributions arising from that series' assets and, upon
redeeming shares, will receive the portion of the series' net assets represented
by the redeemed shares.

As of the date of this Prospectus, Memorial Group, Inc. owns 100% of the
Shares of each of the Funds. Trustee and President Christopher W. Hamm owns 100%
of the Shares of Memorial Group, Inc.

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<PAGE>

[Account Application]

<PAGE>

[Account Application (Continued)]

<PAGE>

[LOGO] MEMORIAL
FUNDS

FOR MORE COMPLETE INFORMATION PLEASE CONTACT:

THE MEMORIAL GROUP
1600 SMITH STREET SUITE 3100
HOUSTON, TEXAS 77002

(713)650-2535 OR (888)206-4134

READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION:

MEMORIAL FUNDS

GOVERNMENT BOND FUND
CORPORATE BOND FUND
GROWTH EQUITY FUND
VALUE EQUITY FUND
<TABLE>
<S> <C>
Fund Information:
Forum Shareholder Services, LLC
P.O. Box 446
Two Portland Square
Portland, Maine 04101 Account Information and
(888) 263-5593 Shareholder Services:
Forum Shareholder Services, LLC .
P.O. Box 446
Investment Adviser: Portland, Maine 04112
Forum Investment Advisors, LLC (888)263-5593
Two Portland Square
Portland, ME 04101
</TABLE>

STATEMENT OF ADDITIONAL INFORMATION

March 15, 1998

This Statement of Additional Information ("SAI") supplements the Prospectus
dated March 15, 1998, offering shares of the Government Bond Fund, Corporate
Bond Fund, Growth Equity Fund and Value Equity Fund (each a "Fund" and
collectively the "Funds"). The Funds are each diversified portfolios of Memorial
Funds (the "Trust"), a registered open-end, management investment company. This
SAI should be read only in conjunction with the Prospectus, which you may obtain
without charge by contacting the Trust's Distributor, Forum Financial Services,
Inc., Two Portland Square, Portland, Maine 04101.
<TABLE>

TABLE OF CONTENTS
<S> <C> <C> <C>
Page Page
1. Investment Policies..................... 6. Portfolio Transactions..........................
2. Investment Limitations.................. 7. Additional Purchase and Redemption Information..
3. Performance Data........................ 8. Taxation........................................
4. Management.............................. 9. Other Information...............................
5. Determination of Net Asset Value........ 10. Financial Statements............................
Appendix A - Description of Securities Ratings A-1
Statements of Assets and Liabilities
Notes to Statements of Assets and Liabilities
Independent Auditors Report
</TABLE>

<PAGE>

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.

THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ ONLY IN CONJUNCTION WITH
THE PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED BY AN INVESTOR WITHOUT CHARGE.

2
<PAGE>

As used in this SAI, the following terms shall have the following meanings:

"Adviser" shall mean Forum Investment Advisors, LLC. "Advisers" shall
mean the Adviser and each of the investment subadvisers that provide
investment advice and portfolio management for one or more of the Funds
pursuant to an investment subadvisory agreement with the Adviser.

"Board" shall mean the Board of Trustees of the Trust.

"CFTC" shall mean the U.S. Commodities Futures Trading Commission.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Custodian" shall mean BankBoston, or its successor, acting in its
capacity as custodian of a Fund.

"Equity Funds" shall mean the Growth Equity Fund and the Value Equity
Fund.

"FAdS" shall mean Forum Administrative Services, LLC, the Trust's
administrator.

"Fitch" shall mean Fitch Investors Service, L.P.

"Fixed Income Funds" shall mean the Government Bond Fund and the
Corporate Bond Fund.

"FSS" shall mean Forum Shareholder Services, LLC, the Trust's transfer
and dividend disbursing agent.

"FFSI" shall mean Forum Financial Services, Inc., the distributor of
the Trust's shares.

"Forum" shall mean the Adviser.

"Fund" shall mean each of the separate portfolios of the Trust
identified on the cover page of this Statement of Additional
Information.

"Moody's" shall mean Moody's Investors Service, Inc.

"NRSRO" shall mean a nationally recognized statistical rating
organization.

"Processing Organization" shall have the meaning set forth in the
prospectus of the Funds.

"SEC" shall mean the U.S. Securities and Exchange Commission.

"S&P" shall mean Standard & Poor's Rating Group.

"Sub-adviser" shall mean each of the investment advisers that provide
investment advice and portfolio management for the Funds pursuant to
investment subadvisory agreements with Adviser.

"Transfer Agent" shall mean FSS.

"Trust" shall mean Memorial Funds, an open-end management investment
company registered under the 1940 Act.

"U.S. Government Securities" shall mean obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.

"1933 Act" shall mean the Securities Act of 1933, as amended.

"1940 Act" shall mean the Investment Company Act of 1940, as amended.

3
<PAGE>

1. INVESTMENT POLICIES

The following discussion is intended to supplement the disclosure in the
Prospectus concerning each Fund's investments, investment techniques and
strategies and the risks associated therewith. No Fund may make any investment
or employ any investment technique or strategy unless otherwise permitted in a
Prospectus relating to that Fund or this SAI. For example, while the SAI
describes "when-issued" transactions below, only those Funds whose investment
policies, as described in the Prospectus or this SAI, allow the Fund to invest
in when-issued transactions may do so.

SECURITY RATINGS INFORMATION

Moody's, S&P and other NRSROs are private services that rate the credit quality
of debt obligations. A description of the range of ratings assigned to various
types of bonds and other securities by several NRSROs is included in Appendix A
to this SAI. The Funds may use these ratings to determine whether to purchase,
sell or hold a security. These ratings are general and are not absolute
standards of quality, however. Consequently, securities with the same maturity,
interest rate and rating may have different market prices. To the extent that
the ratings given by a NRSRO may change as a result of changes in such
organizations or their rating systems, the Sub-adviser will attempt to
substitute comparable ratings. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not evaluate the risks of fluctuations in
market value. Also, rating agencies may fail to make timely changes in credit
ratings. An issuer's current financial condition may be better or worse than a
rating indicates.

A Fund may purchase unrated securities if its Sub-adviser determines the
security to be of comparable quality to a rated security that the Fund may
purchase. Unrated securities may not trade as actively as rated securities. A
Fund may retain securities whose rating has been lowered below the lowest
permissible rating category (or that are unrated and determined by its
Sub-adviser to be of comparable quality to securities whose rating has been
lowered below the lowest permissible rating category) if the Sub-adviser
determines that retaining such security is in the best interests of the Fund.

To limit credit risks, the Funds generally may only invest in securities that
are investment grade (rated in the top four long-term investment grades by an
NRSRO or in the top two short-term investment grades by an NRSRO.) Accordingly,
the lowest permissible long-term investment grades for corporate bonds,
including convertible bonds, are Baa in the case of Moody's and BBB in the case
of S&P and Fitch; the lowest permissible long-term investment grades for
preferred stock are baa in the case of Moody's and BBB in the case of S&P and
Fitch; and the lowest permissible short-term investment grades for short-term
debt, including commercial paper, are Prime-2 (P-2) in the case of Moody's, A-2
in the case of S&P and F-2 in the case of Fitch. All these ratings are generally
considered to be investment grade ratings, although Moody's indicates that
securities with long-term ratings of Baa have speculative characteristics.
Corporate Bond Fund may invest up to 5% of its assets in securities rated below
investment grade. Non-investment grade securities (commonly known as "junk
bonds") are predominantly speculative with respect to the capacity to pay
interest and repay principal and generally involve a greater volatility of price
than securities in higher-rated categories.

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS

Each Fixed Income Fund may purchase securities offered on a "when-issued" basis
and may purchase or sell securities on a "forward commitment" basis. When such
transactions are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. Normally, the settlement date occurs
within two months after the transaction, but delayed settlements beyond two
months may be negotiated. During the period between a commitment and settlement,
no payment is made for the securities purchased by the purchaser and, thus, no
interest accrues to the purchaser from the transaction. At the time a Fund makes
the commitment to purchase securities on a when-issued or delayed

4
<PAGE>

delivery basis, the Fund will record the transaction as a purchase and
thereafter reflect the value each day of such securities in determining its net
asset value.

The use of when-issued transactions and forward commitments enables the Fixed
Income Funds to hedge against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling bond prices, a
Fund might sell securities which it owned on a forward commitment basis to limit
its exposure to falling prices. In periods of falling interest rates and rising
bond prices, a Fund might sell a security and purchase the same or a similar
security on a when-issued or forward commitment basis, thereby obtaining the
benefit of currently higher cash yields. However, if the Fund's Sub-adviser
forecasts incorrectly the direction of interest rate movements, the Fund might
be required to complete such when-issued or forward commitment transactions at
prices lower than the current market values.

The Funds enter into when-issued and forward commitment transactions only with
the intention of actually receiving or delivering the securities, as the case
may be. If a Fund subsequently chooses to dispose of its right to acquire a
when-issued security or its right to deliver or receive against a forward
commitment before the settlement date, it can incur a gain or loss. When-issued
securities may include bonds purchased on a "when, as and if issued" basis under
which the issuance of the securities depends upon the occurrence of a subsequent
event. Any significant commitment of a Fund's assets to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
its net asset value.

Each Fund will establish and maintain with its custodian a separate account with
cash, U.S. Government Securities and other liquid high-grade debt securities in
an amount at least equal to its commitments to purchase securities on a
when-issued or delayed delivery basis.

ILLIQUID SECURITIES

Each Fund may invest up to 15% of its net assets in illiquid securities. The
term "illiquid securities" for this purpose means securities that cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued the securities and
includes, among other things, purchased over-the-counter (OTC) options and
repurchase agreements maturing in more than seven days.

The Board is ultimately responsible for determining whether specific securities
are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Advisers, pursuant to guidelines
approved by the Board. The Advisers take into account a number of factors in
reaching liquidity decisions, including but not limited to: (1) the frequency of
trades and quotations for the security; (2) the number of dealers willing to
purchase or sell the security and the number of other potential buyers; (3) the
willingness of dealers to undertake to make a market in the security; and (4)
the nature of the marketplace trades, including the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the transfer.
The Adviser and the Sub-adviser for each Fund monitor the liquidity of the
securities in that Fund's portfolio and reports periodically on such decisions
to the Board.

CONVERTIBLE SECURITIES

The Funds may invest in convertible securities. A convertible security is a
bond, debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock of the same or a
different issuer within a particular period of time at a specified price or
formula. A convertible security entitles the holder to receive interest paid or
accrued on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before conversion,
convertible securities are similar to corresponding nonconvertible securities to
the extent that they ordinarily provide a stable stream of income with generally
higher yields than those of common stocks of the same or similar issuers.
Convertible securities rank senior to common stock in a corporation's capital
structure but are usually subordinated to comparable nonconvertible securities.
Although no securities investment is without some risk, investment in
convertible securities generally entails less risk than in the issuer's common
stock. However, the extent to which such risk is reduced depends in large
measure upon the degree to which the convertible security sells above its value
as a fixed

5
<PAGE>

income security. Convertible securities have unique investment characteristics
in that they generally (1) have higher yields than common stocks, but lower
yields than comparable non-convertible securities, (2) are less subject to
fluctuation in value than the underlying stocks since they have fixed income
characteristics and (3) provide the potential for capital appreciation if the
market price of the underlying common stock increases.

The value of a convertible security is a function of its "investment value"
(determined by its yield comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may affect the convertible
security's investment value. The conversion value of a convertible security is
determined by the market price of the underlying common stock. If the conversion
value is low relative to the investment value, the price of the convertible
security is governed principally by its investment value and generally the
conversion value decreases as the convertible security approaches maturity. To
the extent the market price of the underlying common stock approaches or exceeds
the conversion price, the price of the convertible security will be increasingly
influenced by its conversion value. In addition, a convertible security
generally will sell at a premium over its conversion value determined by the
extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed income security.

A convertible security may be subject to redemption at the option of the issuer
at a price established in the convertible security's governing instrument. If a
convertible security held by a Fund is called for redemption, the Fund will be
required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party.

TEMPORARY DEFENSIVE POSITION

When a Fund assumes a temporary defensive position it may invest without limit
in (1) short-term U.S. Government Securities, (2) certificates of deposit,
bankers' acceptances and interest-bearing savings deposits of commercial banks
doing business in the United States that have, at the time of investment, total
assets in excess of one billion dollars and that are insured by the Federal
Deposit Insurance Corporation, (3) commercial paper of prime quality rated
Prime-2 or higher by Moody's or A-2 or higher by S&P or, if not rated,
determined by the Fund's Subadviser to be of comparable quality, (4) repurchase
agreements covering any of the securities in which the Fund may invest directly
and (5) money market mutual funds.

OTHER INVESTMENT COMPANIES

The Funds may invest in the securities of other investment companies within the
limits proscribed by the 1940 Act. In addition to the Fund's expenses (including
the various fees), as a shareholder in another investment company, a Fund would
bear its pro rata portion of the other investment company's expenses (including
fees).

FUTURES CONTRACTS AND OPTIONS

Each Fund may seek to hedge against a decline in the value of securities it owns
or an increase in the price of securities that it plans to purchase through the
writing and purchase of exchange-traded and over-the-counter options and the
purchase and sale of futures contracts and options on those futures contracts.
The Equity Funds may buy or sell stock index futures contracts, such as
contracts on the S&P 500 stock index. The Fixed Income Funds may buy and sell
bond index futures contracts. In addition, all of the Funds may buy or sell
futures contracts on Treasury bills, Treasury bonds and other financial
instruments. The Funds may write covered options and buy options on the futures
contracts in which they may invest.

In addition, the Funds may write (sell) covered put and call options and may buy
put and call options on debt securities and bond indices. An option is covered
if, so long as the Fund is obligated under the option, it owns an offsetting
position in the underlying security, currency or futures contract or maintains
cash, U.S. Government

6
<PAGE>

Securities or other liquid, high-grade debt securities in a segregated account
with a value at all times sufficient to cover the Fund's obligation under the
option.

The Funds' use of options and futures contracts would subject the Funds to
certain investment risks and transaction costs to which they might not otherwise
be subject. These risks include: (1) dependence on the Sub-adviser's ability to
predict movements in the prices of individual securities and fluctuations in the
general securities markets; (2) imperfect correlation between movements in the
prices of options, futures contracts or related options and movements in the
price of the securities hedged or used for cover; (3) the fact that skills and
techniques needed to trade these instruments are different from those needed to
select the other securities in which the Funds invest; (4) lack of assurance
that a liquid secondary market will exist for any particular instrument at any
particular time; and (5) the possible need to defer closing out of certain
options, futures contracts and related options to avoid adverse tax
consequences. Other risks include the inability of the Fund, as the writer of
covered call options, to benefit from the appreciation of the underlying
securities above the exercise price and the possible loss of the entire premium
paid for options purchased by the Fund.

The Funds have no current intention of investing in futures contracts and
options thereon for purposes other than hedging. No Fund may purchase any call
or put option on a futures contract if the premiums associated with all such
options held by the Fund would exceed 5% of the Fund's total assets as of the
date the option is purchased. No Fund may sell a put option if the exercise
value of all put options written by the Fund would exceed 50% of the Fund's
total assets or sell a call option if the exercise value of all call options
written by the Fund would exceed the value of the Fund's assets. In addition,
the current market value of all open futures positions held by a Fund will not
exceed 50% of its total assets.

A Fund will only invest in futures and options contracts after providing notice
to its shareholders and filing a notice of eligibility (if required) and
otherwise complying with the requirements of the Commodity Futures Trading
Commission ("CFTC"). The CFTC's rules provide that the Funds are permitted to
purchase such futures or options contracts only (1) for bona fide hedging
purposes within the meaning of the rules of the CFTC; provided, however, that in
the alternative with respect to each long position in a futures or options
contract entered into by a Fund, the underlying commodity value of such contract
at all times does not exceed the sum of cash, short-term United States debt
obligations or other United States dollar denominated short-term money market
instruments set aside for this purpose by the Fund, accrued profit on the
contract held with a futures commission merchant and cash proceeds from existing
Fund investments due in 30 days; and (2) subject to certain limitations.

HEDGING AND OPTIONS STRATEGIES

Each Fund may purchase or sell (write) put and call options on securities to
seek to hedge against a decline in the value of securities owned by it or an
increase in the price of securities which it plans to purchase through the
writing and purchase of exchange-traded and over-the-counter options on
individual securities or securities or financial indices and through the
purchase and sale of financial futures contracts and related options. These
investment techniques involve risks that are different in certain respects from
the investment risks associated with the other investments of a Fund. Use of
these instruments is subject to regulation by the SEC, the several options and
futures exchanges upon which options and futures are traded or the CFTC.

No assurance can be given, however, that any hedging or option income strategy
will succeed in achieving its intended result.

Except as otherwise noted in the Prospectus or herein, the Funds will not use
leverage in their options and hedging strategies. In the case of transactions
entered into as a hedge, a Fund will hold securities, currencies or other
options or futures positions whose values are expected to offset ("cover") its
obligations thereunder. A Fund will not enter into a hedging strategy that
exposes it to an obligation to another party unless it owns either (1) an
offsetting ("covered") position or (2) cash, U.S. Government Securities or other
liquid securities (or other assets as may be permitted by the SEC) with a value
sufficient at all times to cover its potential obligations. When required by
applicable regulatory guidelines, the Funds will set aside cash, U.S. Government
Securities or other liquid securities (or other assets as may be permitted by
the SEC) in a segregated account with its custodian in the prescribed

7
<PAGE>

amount. Any assets used for cover or held in a segregated account cannot be sold
or closed out while the hedging or option income strategy is outstanding, unless
they are replaced with similar assets. As a result, there is a possibility that
the use of cover or segregation involving a large percentage of a Fund's assets
could impede portfolio management or the Fund's ability to meet redemption
requests or other current obligations.

OPTIONS STRATEGIES

A Fund may purchase put and call options written by others and sell put and call
options covering specified individual securities, securities or financial
indices or currencies. A put option (sometimes called a "standby commitment")
gives the buyer of the option, upon payment of a premium, the right to deliver a
specified amount of currency to the writer of the option on or before a fixed
date at a predetermined price. A call option (sometimes called a "reverse
standby commitment") gives the purchaser of the option, upon payment of a
premium, the right to call upon the writer to deliver a specified amount of
currency on or before a fixed date, at a predetermined price. The predetermined
prices may be higher or lower than the market value of the underlying currency.
A Fund may buy or sell both exchange-traded and over-the-counter ("OTC")
options. A Fund will purchase or write an option only if that option is traded
on a recognized U.S. options exchange or if the sub-adviser believes that a
liquid secondary market for the option exists. When a Fund purchases an OTC
option, it relies on the dealer from which it has purchased the OTC option to
make or take delivery of the currency underlying the option. Failure by the
dealer to do so would result in the loss of the premium paid by the Fund as well
as the loss of the expected benefit of the transaction. OTC options and the
securities underlying these options currently are treated as illiquid securities
by the Funds.

When a Fund sells an option, it receives a premium from the purchaser. When a
Fund purchases an option, it pays a premium to the seller. The amount of premium
received or paid by the Fund is based upon certain factors, including the market
price of the underlying securities, index or currency, the relationship of the
exercise price to the market price, the historical price volatility of the
underlying assets, the option period, supply and demand and interest rates.

The Funds may purchase options on securities that the Fund's Sub-adviser intends
to include in the Fund's portfolio in order to fix the cost of a future
purchase. Call options may also be purchased as a means of participating in an
anticipated price increase of a security on a more limited risk basis than would
be possible if the security itself were purchased. If the price of the
underlying security declines, use of this strategy limits the potential loss to
the Fund to the premium paid for the options; conversely, if the market price of
the underlying security increases above the exercise price and the Fund either
sells or exercises the option, any profit eventually realized will be reduced by
the premium paid. A Fund may similarly purchase put options in order to hedge
against a decline in market value of securities held in its portfolio. The put
enables the Fund to sell the underlying security at the predetermined exercise
price; thus the potential for loss to the Fund is limited to the option premium
paid. If the market price of the underlying security is lower than the exercise
price of the put, any profit the Fund realizes on the sale of the security would
be reduced by the premium paid for the put option less any amount for which the
put may be sold.

A Sub-adviser may write call options when it believes that the market value of
the underlying security will not rise to a value greater than the exercise price
plus the premium received. Call options may also be written to provide limited
protection against a decrease in the market price of a security, in an amount
equal to the call premium received less any transaction costs.

Certain Funds may purchase and write put and call options on fixed income or
equity security indexes in much the same manner as the options discussed above,
except that index options may serve as a hedge against overall fluctuations in
the fixed income or equity securities markets (or market sectors) or as a means
of participating in an anticipated price increase in those markets. The
effectiveness of hedging techniques using index options will depend on the
extent to which price movements in the index selected correlate with price
movements of the securities which are being hedged. Index options are settled
exclusively in cash.

8
<PAGE>

SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING

A Fund may effectively terminate its right or obligation under an option
contract by entering into a closing transaction. For instance, if the Fund
wished to terminate its potential obligation to sell securities or currencies
under a call option it had written, it would purchase a call option of the same
type. Closing transactions essentially permit the Fund to realize profits or
limit losses on its options positions prior to the exercise or expiration of the
option. In addition:

(1) The successful use of options depends upon the Sub-adviser's
ability to forecast the direction of price fluctuations in the
underlying securities or currency markets, or in the case of an index
option, fluctuations in the market sector represented by the index.

(2) Options normally have expiration dates of up to nine months.
Options that expire unexercised have no value. Unless an option
purchased by a Fund is exercised or unless a closing transaction is
effected with respect to that position, a loss will be realized in the
amount of the premium paid.

(3) A position in an exchange-listed option may be closed out only on
an exchange that provides a market for identical options. Most
exchange-listed options relate to equity securities. Closing
transactions may be effected with respect to options traded in the
over-the-counter markets only by negotiating directly with the other
party to the option contract or in a secondary market for the option if
such market exists. There is no assurance that a liquid secondary
market will exist for any particular option at any specific time. If it
is not possible to effect a closing transaction, a Fund would have to
exercise the option which it purchased in order to realize any profit.
The inability to effect a closing transaction on an option written by a
Fund may result in material losses to the Fund.

(4) A Fund's activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs.

(5) When a Fund enters into an over-the-counter contract with a
counterparty, the Fund will assume the risk that the counterparty will
fail to perform its obligations in which case the Fund could be worse
off than if the contract had not been entered into.

FUTURES STRATEGIES

A futures contract is a bilateral agreement wherein one party agrees to accept,
and the other party agrees to make, delivery of cash, an underlying debt
security or the currency as called for in the contract at a specified future
date and at a specified price. For futures contracts with respect to an index,
delivery is of an amount of cash equal to a specified dollar amount times the
difference between the index value at the time of the contract and the close of
trading of the contract.

A Fund may sell interest rate futures contracts in order to continue to receive
the income from a fixed income security, while endeavoring to avoid part of or
all of a decline in the market value of that security which would accompany an
increase in interest rates.

A Fund may purchase index futures contracts for several reasons: to simulate
full investment in the underlying index while retaining a cash balance for fund
management purposes, to facilitate trading, to reduce transactions costs, or to
seek higher investment returns when a futures contract is priced more
attractively than securities in the index.

A Fund may purchase call options on a futures contract as a means of obtaining
temporary exposure to market appreciation at limited risk. This strategy is
analogous to the purchase of a call option on an individual security, in that it
can be used as a temporary substitute for a position in the security itself.

9
<PAGE>

SPECIAL CHARACTERISTICS AND RISKS OF FUTURES AND RELATED OPTIONS TRADING

A Fund pays no price when it enters into a futures contract; rather, it deposits
(typically with its custodian in a segregated account in the name of the futures
broker) an amount of cash or U.S. Government Securities generally equal to 5% or
less of the contract value. This amount is known as initial margin. Subsequent
payments, called variation margin, to and from the broker, are made on a daily
basis as the value of the futures position varies. When writing a call on a
futures contract, variation margin must be deposited in accordance with
applicable exchange rules. The initial margin in futures transactions is in the
nature of a performance bond or good-faith deposit on the contract that is
returned to the Fund upon termination of the contract, assuming all contractual
obligations have been satisfied.

Holders and writers of futures and options on futures contracts can enter into
offsetting closing transactions, similar to closing transactions on options, by
selling or purchasing, respectively, a futures contract or related option with
the same terms as the position held or written. Positions in futures contracts
may be closed only on an exchange or board of trade providing a secondary market
for such futures contracts.

Under certain circumstances, futures exchanges may establish daily limits in the
amount that the price of a futures contract or related option may vary either up
or down from the previous day's settlement price. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit. Prices could move to the daily limit for several consecutive
trading days with little or no trading and thereby prevent prompt liquidation of
positions. In such event, it may not be possible for a Fund to close a position,
and in the event of adverse price movements, it would have to make daily cash
payments of variation margin. In addition:

(1) Successful use by a Fund of futures contracts and related options
will depend upon the Sub-adviser's ability to predict movements in the
direction of the overall securities and currency markets, which
requires different skills and techniques than predicting changes in the
prices of individual securities. Moreover, futures contracts relate not
to the current level of the underlying instrument but to the
anticipated levels at some point in the future; thus, for example,
trading of stock index futures may not reflect the trading of the
securities which are used to formulate an index or even actual
fluctuations in the relevant index itself.

(2) The price of futures contracts may not correlate perfectly with
movement in the price of the hedged currencies due to price distortions
in the futures market or otherwise. There may be several reasons
unrelated to the value of the underlying currencies which causes this
situation to occur. As a result, a correct forecast of general market
trends may still not result in successful hedging through the use of
futures contracts over the short term.

(3) There is no assurance that a liquid secondary market will exist for
any particular contract at any particular time. In such event, it may
not be possible to close a position, and in the event of adverse price
movements, the Fund would continue to be required to make daily cash
payments of variation margin.

(4) Like other options, options on futures contracts have a limited
life. A Fund will not trade options on futures contracts on any
exchange or board of trade unless and until, in the Adviser's opinion,
the market for such options has developed sufficiently that the risks
in connection with options on futures transactions are not greater than
the risks in connection with futures transactions.

(5) Purchasers of options on futures contracts pay a premium in cash at
the time of purchase. This amount and the transaction costs is all that
is at risk. Sellers of options on futures contracts, however, must post
an initial margin and are subject to additional margin calls which
could be substantial in the event of adverse price movements.

(6) A Fund's activities in the futures markets may result in a higher
portfolio turnover rate and additional transaction costs in the form of
added brokerage commissions.

10
<PAGE>

COMMODITY FUTURES CONTRACTS AND COMMODITY OPTIONS

A Fund may invest in certain financial futures contracts and options contracts
in accordance with the policies described in the Prospectus and above. A Fund
will only invest in futures contracts, options on futures contracts and other
options contracts that are subject to the jurisdiction of the CFTC after filing
a notice of eligibility and otherwise complying with the requirements of Section
4.5 of the rules of the CFTC. Under that section, a Fund will not enter into any
futures contract or option on a futures contract if, as a result, the aggregate
initial margins and premiums required to establish such positions would exceed
5% of the Fund's net assets.

2. INVESTMENT LIMITATIONS

For purposes of all investment policies of the Fund, (1) the term 1940 Act
includes the rules thereunder, SEC interpretations and any exemptive order upon
which the Fund may rely and (2) the term Code includes the rules thereunder, IRS
interpretations and any private letter ruling or similar authority upon which
the Fund may rely.

Except as required by the 1940 Act or the Code, if a Fund satisfies a percentage
restriction on an investment or investment technique when the investment is
made, a later change in percentage resulting from a change in the market values
of a Fund's assets or purchases and redemptions of shares will not be considered
a violation of the limitation.

FUNDAMENTAL INVESTMENT LIMITATIONS

Each Fund has adopted the following fundamental investment limitations that
cannot be changed without the affirmative vote of the lesser of (1) more than
50% of the outstanding shares of a Fund or (2) 67% of the shares of a Fund
present or represented at a shareholders meeting at which the holders of more
than 50% of the outstanding shares of a Fund are present or represented. No Fund
may:

(1) Purchase the securities of issuers (other than U.S. Government
Securities) conducting their business activity in the same industry
if, immediately after such purchase, the value of a Fund's
investments in such industry would comprise 25% or more of the value
of its total assets.

(2) Purchase a security if, as a result (a) more than 5% of a Fund's
total assets would be invested in the securities of a single issuer,
or (b) a Fund would own more than 10% of the outstanding voting
securities of a single issuer. This limitation applies only with
respect to 75% of a Fund's total assets and does not apply to U.S.
Government Securities.

(3) Act as an underwriter of securities of other issuers, except to
the extent that, in connection with the disposition of portfolio
securities, a Fund may be deemed to be an underwriter for purpose of
the Securities Act of 1933.

(4) Purchase or sell real estate or any interest therein, except that
a Fund may invest in securities issued or guaranteed by corporate or
governmental entities secured by real estate or interests therein,
such as mortgage pass-throughs and collateralized mortgage
obligations, or issued by companies that invest in real estate or
interests therein.

(5) Purchase or sell physical commodities or contracts, options or
options on contracts to purchase or sell physical commodities.

(6) Make loans to other persons except for the purchase of debt
securities that are otherwise permitted investments or loans of
portfolio securities through the use of repurchase agreements.

(7) Issue senior securities except pursuant to Section 18 of the
Investment Company Act and except that a Fund may borrow money
subject to its investment limitation on borrowing.

11
<PAGE>

OTHER INVESTMENT LIMITATIONS

Each Fund has adopted the following nonfundamental investment limitations that
may be changed by the Board without shareholder approval. No Fund may:

(1) Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted to be incurred by a Fund. The deposit in
escrow of securities in connection with the writing of put and call
options, collateralized loans of securities and collateral
arrangements with respect to margin for futures contracts are not
deemed to be pledges or hypothecations for this purpose.

(2) Make short sales of securities except short sales against the
box.

(3) Purchase securities on margin except for the use of short-term
credit necessary for the clearance of purchases and sales of
portfolio securities, but a Fund may make margin deposits in
connection with permitted transactions in options.

(4) Purchase a security if, as a result, more than 15% of its net
assets would be invested in illiquid securities.

(5) Purchase portfolio securities if its outstanding borrowings
exceed 5% of the value of its total assets or borrow for purposes
other than meeting redemptions in an amount exceeding 5% of the value
of its total assets at the time the borrowing is made.

(6) Invest more than 5% of its net assets in securities (other than
fully-collateralized debt obligations) issued by companies that have
conducted continuous operations for less than three years, including
the operations of predecessors, unless guaranteed as to principal and
interest by an issuer in whose securities a Fund could invest.

(7) Invest in or hold securities of any issuer if officers and
Trustees of the Trust or the Adviser, individually owning
beneficially more than 1/2 of 1% of the securities of the issuer, in
the aggregate own more than 5% of the issuer's securities.

(8) Invest in interests in oil or gas or interests in other mineral
exploration or development programs.

3. PERFORMANCE DATA

The Funds may quote performance in various ways. All performance information
supplied by the Funds in advertising is historical and is not intended to
predict future returns. A Fund's net asset value, yield and total return
fluctuate in response to market conditions and other factors, and the value of
Fund shares when redeemed may be more or less than their original cost.

In performance advertising the Funds may compare any of their performance
information with data published by independent evaluators such as Morningstar,
Lipper Analytical Services, Inc., IBC/Donoghue, Inc., CDC/Wiesenberger or other
companies which track the investment performance of investment companies ("Fund
Tracking Companies"). In addition, a Fund may compare any of its performance
information with the performance of recognized stock, bond and other indexes,
including but not limited to the Salomon Brothers Bond Index, the Shearson
Lehman Bond Index, the Standard & Poor's 500 Composite Stock Price Index, the
Dow Jones Industrial Average, and changes in the Consumer Price Index as
published by the U.S. Department of Commerce. A Fund may refer in such materials
to mutual fund performance rankings and other data published by Fund Tracking
Companies. Performance advertising may also refer to discussions of a Fund and
comparative mutual fund data and ratings reported in independent periodicals,
such as newspapers and financial magazines.

12
<PAGE>

YIELD CALCULATIONS

Yields for a Fund used in advertising are computed by dividing the Fund's
interest income for a given 30-day or one-month period, net of expenses, by the
average number of shares entitled to receive distributions during the period,
dividing this figure by the Fund's net asset value per share at the end of the
period and annualizing the result (assuming compounding of income) in order to
arrive at an annual percentage rate. In general, interest income is reduced with
respect to bonds purchased at a premium over their par value by subtracting a
portion of the premium from income on a daily basis, and is increased with
respect to bonds purchased at a discount by adding a portion of the discount to
daily income. Capital gain and loss generally are excluded from these
calculations.

Income calculated for the purpose of determining a Fund's yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for a Fund may differ from the rate of
distribution the Fund paid over the same period or the rate of income reported
in the Fund's financial statements.

Although published yield information is useful to investors in reviewing a
Fund's performance, investors should be aware that a Fund's yield for any given
period is not an indication or representation by the Fund of future yields or
rates of return on the Fund's shares. Also, Processing Organizations may charge
their customers direct fees in connection with an investment in a Fund, which
will have the effect of reducing the Fund's net yield to those shareholders. The
yields of each Fund are not fixed or guaranteed, and an investment in a Fund is
not insured or guaranteed. Accordingly, yield information may not necessarily be
used to compare shares of a Fund with investment alternatives which, like money
market instruments or bank accounts, may provide a fixed rate of interest. Also,
it may not be appropriate to compare a Fund's yield information directly to
similar information regarding investment alternatives which are insured or
guaranteed.

TOTAL RETURN CALCULATIONS

Each of the Funds may advertise total return. Total returns quoted in
advertising reflect all aspects of a Fund's return, including the effect of
reinvesting dividends and capital gain distributions, and any change in the
Fund's net asset value per share over the period. Average annual returns are
calculated by determining the growth or decline in value of a hypothetical
historical investment in a Fund over a stated period, and then calculating the
annually compounded percentage rate that would have produced the same result if
the rate of growth or decline in value had been constant over the period. While
average annual returns are a convenient means of comparing investment
alternatives, investors should realize that the performance is not constant over
time but changes from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year performance of the Funds.

Average annual total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment over a given period
according to the following formula:

n
P(1+T) = ERV

Where:

P = a hypothetical initial payment of $1,000; T =
average annual total return; n = number of years;
and ERV = ending redeemable value.

ERV is the value, at the end of the applicable period, of a hypothetical $1,000
payment made at the beginning of the applicable period.

In addition to average annual returns, each Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Total returns may be broken down into their components of
income and capital (including capital gain and changes in share price) in order
to illustrate the

13
<PAGE>

relationship of these factors and their contributions to total return. Total
returns, yields and other performance information may be quoted numerically or
in a table, graph or similar illustration.

Period total return is calculated according to the following formula:

PT = (ERV/P-1)

Where:

PT = period total return. The other
definitions are the same as in average
annual total return above.

4. MANAGEMENT

The trustees and officers of the Trust and their principal occupations during
the past five years are set forth below. Each Trustee who is an "interested
person" (as defined by the 1940 Act) of the Trust is indicated by an asterisk.

TRUSTEES:

John Y. Keffer*, Trustee, has been President and Director of Forum
Financial Services, Inc. for more than five years. His address is Two
Portland Square, Portland, Maine 04101.

Christopher W. Hamm*, Trustee, has been the Executive Director of CIBC
Oppenheimer, since 1996. His address is 1600 Smith Street, Ste. 3100,
Houston, Texas 77002. Mr. Hamm was Vice President of Paine Webber from
1993 to 1996.

Jay Brammer, Trustee, has been Executive Vice President of Gibraltar
Properties, Inc., a real estate holding company, since 1995. His
address is 9000 Keystone Crossing, Ste. 1000, Indianapolis, Indiana
46240. Mr. Brammer was Executive Vice President of Gibraltar Masoleum
Corp. from 1980 to 1995.

J.B. Goodwin, Trustee, has been President of JBGoodwin Company, a
comprehensive real estate and mortgage holding company, for more than
five years. His address is 3933 Steck Avenue, B-101, Austin, Texas
78759.

Robert Stillwell, Trustee, has been an attorney with the law firm of
Baker & Botts for more than five years. His address is 3000 One Shell
Plaza, Houston, Texas 77002.

OFFICERS:

CHRISTOPHER W. HAMM - President has been the Executive Director of
CIBC Oppenheimer since 1996. Prior to that Mr. Hamm was Vice President
of Paine Webber from 1993 to 1996. His address is 1600 Smith Street,
Ste. 3100, Houston, Texas 77002.

SARA M. MORRIS, Treasurer, is a Managing Director, Forum
Administrative Services, LLC (and its predecessors in interest) with
which she has been associated since 1994. Prior thereto, from 1991 to
1994, Ms. Morris was Controller of Wright Express Corporation (a
national credit card company) and for six years prior thereto was
employed at Deloitte & Touche LLP as an accountant. Ms. Morris is also
an officer of various registered investment companies for which Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. Her address is Two Portland Square, Portland, Maine
04101.

RICHARD C. BUTT, Vice President and Assistant Treasurer, is a Managing
Director of Forum Financial Corp. with which he has been associated
since May 1996. Prior thereto, from December 1994 to April 1996, Mr.
Butt was a Director of the Financial Services Consulting Practice,
KPMG Peat Marwick LLP. From November 1993 to August 1994, Mr. Butt was
President of 440 Financial Distributors, Inc. a mutual fund

14
<PAGE>

administrator and distributor, and prior thereto was Senior Vice
President of 440 Financial Group, Inc. Mr. Butt is also an officer of
various registered investment companies for which Forum Financial
Services, Inc. serves as manager, administrator and/or distributor.
His address is Two Portland Square, Portland, Maine 04101.

MAX BERUEFFY, Vice President and Secretary, is a Managing Director and
Senior Counsel, Forum Financial Services, Inc., with which he has been
associated since 1994. Prior thereto, Mr. Berueffy was on the staff of
the U.S. Securities and Exchange Commission for seven years, first in
the appellate branch of the Office of the General Counsel, then as a
counsel to Commissioner Grundfest and finally as a senior special
counsel in the Division of Investment Management. His address is Two
Portland Square, Portland, Maine 04101.

STEPHEN J. BARRETT, Assistant Secretary, is a Manager of Client
Services, Forum Financial Services, Inc., with which he has been
associated since September 1996. Prior to joining Forum, Mr. Barrett
spent two and a half years at Fidelity Investments where he served as
a Senior Product Manager. Prior to that, he was a Securities Analyst
for two and a half years with Bingham, Dana & Gould in Boston,
Massachusetts. Mr. Barrett also is an officer of various registered
investment companies for which Forum Financial Services, Inc. serves
as manager, administrator and/or distributor. His address is Two
Portland Square, Portland, Maine 04101.

D. BLAINE RIGGLE, Assistant Secretary, is an Assistant Counsel, Forum
Financial Services, Inc., with which he has been associated since
1998. Prior thereto, Mr. Riggle was Associate Counsel for Wright
Express Corporation from 1997 to 1998 and for three years thereto was
an associate with the law firm of Friedman, Babcock & Gaythwaite in
Portland, Maine. His address is Two Portland Square, Portland, Maine
04101.

Each Trustee of the Trust (other than John Y. Keffer and Christopher W. Hamm,
who are interested persons of the Trust) is paid $5,000 annually and $500 for
each Board meeting attended and is paid $500 for each committee meeting attended
on a date when a Board meeting is not held. Trustees are also reimbursed for
travel and related expenses incurred in attending meetings of the Board. No
officer of the Trust is compensated by the Trust. The Trust has not adopted any
form of retirement plan covering Trustees or officers.

The following table provides the estimated aggregate compensation paid to each
Trustee. Estimates are presented for the fiscal year ended December 31, 1998.
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------- ---------------------- ------------------------ ---------------------- ------------------
ACCRUED PENSION ANNUAL BENEFITS UPON
AGGREGATE BENEFITS RETIREMENT
TRUSTEE COMPENSATION TOTAL
- --------------------------- ---------------------- ------------------------ ---------------------- ------------------
John Y. Keffer* $0 $0 $0 $0
- --------------------------- ---------------------- ------------------------ ---------------------- ------------------
Christopher W. Hamm* $0 $0 $0 $0
- --------------------------- ---------------------- ------------------------ ---------------------- ------------------
Jay Brammer $7,000 $0 $0 $7,000
- --------------------------- ---------------------- ------------------------ ---------------------- ------------------
J.B. Goodwin $7,000 $0 $0 $7,000
- --------------------------- ---------------------- ------------------------ ---------------------- ------------------
Robert Stillwell $7,000 $0 $0 $7,000
- --------------------------- ---------------------- ------------------------ ---------------------- ------------------
</TABLE>

ADVISERS

Forum Investment Advisors, LLC ("Adviser"), Two Portland Square, Portland, Maine
04101, serves as investment adviser to the Funds pursuant to an investment
advisory agreement with the Trust (the "Advisory Agreement"). Subject to the
general control of the Board, the Adviser is responsible for among other things,
developing a continuing investment program for each Fund in accordance with its
investment objective and reviewing the investment strategies and policies of
each Fund and overseeing the performance of the investment subadvisers
responsible for the day-to-day management of each Fund's portfolio. The Adviser
was incorporated under the laws of Delaware in 1987 and is registered under the
Investment Advisers Act of 1940.

15
<PAGE>

For its services, the Adviser receives the following advisory fees with respect
to each Fund:

Advisory Fee
(as a percentage of average daily net assets)
Government Bond Fund ........................ 0.35
Corporate Bond Fund.......................... 0.35
Growth Equity Fund........................... 0.45
Value Equity Fund............................ 0.45

To assist it in carrying out its responsibility, the Adviser has retained the
following Subadvisers to render advisory services and make daily investment
decisions for each Fund pursuant to an investment subadvisory agreements with
the Adviser (the "Subadvisory Agreements").

Government Bond Fund -- The Northern Trust Company

Corporate Bond Fund -- Conseco Capital Management, Inc.

Growth Equity Fund -- Davis Hamilton, Inc., d/b/a Davis Hamilton
Jackson & Associates

Value Equity Fund -- Beutel, Goodman Capital Management

The amount of the fees paid by Forum to each Subadviser may vary from time to
time as a result of periodic negotiations with the Subadviser regarding such
matters as the nature and extent of the services (other than investment
selection and order placement activities) provided by the Subadviser to the
Fund, the increased cost and complexity of providing services to the Fund, the
investment record of the Subadviser in managing the Fund and the nature and
magnitude of the expenses incurred by the Subadviser in managing the Fund's
assets and by the Adviser in overseeing and administering management of the
Fund. However, the contractual fee payable to Forum by each Fund for investment
advisory services that is set forth in the Prospectus will not vary as a result
of those negotiations.

The Advisers furnish at their own expense all services, facilities and personnel
necessary to perform their duties under the Advisory or Subadvisory Agreements.
The Advisory and Subadvisory Agreements provide, with respect to each Fund, for
an initial term of two years from its effective date and for its continuance in
effect for successive twelve-month periods thereafter, provided the agreement is
specifically approved at least annually by the Board or, with respect to each
Fund, by vote of the shareholders of that Fund, and in either case by a majority
of the directors who are not parties to the Advisory Agreement or interested
persons of any such party.

The Advisory and Subadvisory Agreements are terminable without penalty by the
Trust and by the Adviser, respectively, with respect to a Fund on 30 days'
written notice when authorized either by vote of the Fund's shareholders or by a
vote of a majority of the Board, or by the Adviser and the Subadviser,
respectively, on not less than 90 days' written notice, and will automatically
terminate in the event of its assignment. The Agreements also provide that, with
respect to each Fund, the Adviser shall not be liable for any error of judgment
or mistake of law or for any act or omission in the performance of its duties to
the Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of the Adviser's duties or by reason of reckless disregard of its
obligations and duties under the Agreements. The Advisory and Subadvisory
Agreements provide that the Advisers may render services to others.

ADMINISTRATOR

Forum Administrative Services, LLC ("FAdS") acts as administrator to the Trust
pursuant to an Administration Agreement with the Trust. As administrator, FAdS
provides management and administrative services necessary to the operation of
the Trust (which include, among other responsibilities, negotiation of contracts
and fees with, and

16
<PAGE>

monitoring of performance and billing of, the transfer agent and custodian and
arranging for maintenance of books and records of the Trust), and provides the
Trust with general office facilities. The Administration Agreement will remain
in effect for a period of twelve months with respect to each Fund and thereafter
is automatically renewed each year for an additional term of one year, provided
that continuance is specifically approved at least annually (1) by the Board or,
with respect to a Fund, by a vote of a majority of the outstanding voting
securities of the Fund and (2) by a vote of a majority of Trustees of the Trust
who are not parties of the Administration Agreement or interested persons of any
such party.

The Administration Agreement terminates automatically if it is assigned and may
be terminated without penalty with respect to the Fund by vote of the Fund's
shareholders or by either party on not more than 60 days' written notice. The
Administration Agreement also provides that FAdS shall not be liable for any
error of judgment or mistake of law or for any act or omission in the
administration or management of the Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under the Administration
Agreement.

At the request of the Board, FAdS provides persons satisfactory to the Board to
serve as officers of the Trust. Those officers, as well as certain other
employees and Trustees of the Trust, may be directors, officers or employees of
FAdS, the Adviser, the Subadvisers or their affiliates.

DISTRIBUTOR

Forum Financial Services, Inc. ("FFSI"), an affiliate of FAdS, is the Trust's
distributor and acts as the agent of the Trust in connection with the offering
of shares of the Fund pursuant to a Distribution Agreement. The Distribution
Agreement will continue in effect for twelve months and will continue in effect
thereafter only if its continuance is specifically approved at least annually by
the Board or by vote of the shareholders entitled to vote thereon, and in either
case, by a majority of the Trustees who (1) are not parties to the Distribution
Agreement, (2) are not interested persons of any such party or of the Trust and
(3) with respect to any class for which the Trust has adopted a distribution
plan, have no direct or indirect financial interest in the operation of that
distribution plan or in the Distribution Agreement, at a meeting called for the
purpose of voting on the Distribution Agreement. All subscriptions for shares
obtained by FFSI are directed to the Trust for acceptance and are not binding on
the Trust until accepted by it. The Trust has adopted a distribution plan
pursuant to Rule 12b-1 under the 1940 Act (the "Plan") that authorizes the
payment to FFSI under the Distribution Services Agreement of a distribution
services fee, which may not exceed an annual rate of 0.25% of the average daily
net assets of each Fund attributable to Trust shares.

The Distribution Agreement provides that FFSI shall not be liable for any error
of judgment or mistake of law or in any event whatsoever, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under the
Distribution Agreement.

The Distribution Agreement is terminable with respect to the Fund without
penalty by the Trust on 60 days' written notice when authorized either by vote
of the Fund's shareholders or by a vote of a majority of the Board, or by FFSI
on 60 days' written notice. The Distribution Agreement will automatically
terminate in the event of its assignment.

FFSI may enter into agreements with selected broker-dealers, banks, or other
financial institutions for distribution of shares of the Fund. These financial
institutions may charge a fee for their services and may receive shareholders
service fees even though shares of the Fund are sold without sales charges or
distribution fees. These financial institutions may otherwise act as processing
agents, and will be responsible for promptly transmitting purchase, redemption
and other requests to the Fund.

Investors who purchase shares in this manner will be subject to the procedures
of the institution through whom they purchase shares, which may include charges,
investment minimums, cutoff times and other restrictions in addition to, or
different from, those listed herein. Information concerning any charges or
services will be provided to customers by the financial institution. Investors
purchasing shares of the Fund in this manner should acquaint themselves with
their institution's procedures and should read the Prospectus and this SAI in
conjunction with any

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<PAGE>

materials and information provided by their institution. The financial
institution and not its customers will be the shareholder of record, although
customers may have the right to vote shares depending upon their arrangement
with the institution.

TRANSFER AGENT

Forum Shareholder Services, LLC ("FSS") acts as transfer agent of the Trust
pursuant to a transfer agency agreement (the "Transfer Agency Agreement"). The
Transfer Agency Agreement provides, with respect to each Fund, for an initial
term of one year from its effective date and for its continuance in effect for
successive twelve-month periods thereafter, provided that the agreement is
specifically approved at least annually by the Board or, with respect to a Fund,
by a vote of the shareholders of that Fund, and in either case by a majority of
the directors who are not parties to the Transfer Agency Agreement or interested
persons of any such party at a meeting called for the purpose of voting on the
Transfer Agency Agreement.

Among the responsibilities of FSS as agent for the Trust are: (1) answering
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares of the Funds may be effected and certain
other matters pertaining to the Funds; (2) assisting shareholders in initiating
and changing account designations and addresses; (3) providing necessary
personnel and facilities to establish and maintain shareholder accounts and
records, assisting in processing purchase and redemption transactions and
receiving wired funds; (4) transmitting and receiving funds in connection with
customer orders to purchase or redeem shares; (5) verifying shareholder
signatures in connection with changes in the registration of shareholder
accounts; (6) furnishing periodic statements and confirmations of purchases and
redemptions; (7) arranging for the transmission of proxy statements, annual
reports, prospectuses and other communications from the Trust to its
shareholders; (8) arranging for the receipt, tabulation and transmission to the
Trust of proxies executed by shareholders with respect to meetings of
shareholders of the Trust; and (9) providing such other related services as the
Trust or a shareholder may reasonably request.

FSS or any sub-transfer agent or processing agent may also act and receive
compensation as custodian, investment manager, nominee, agent or fiduciary for
its customers or clients who are shareholders of the Funds with respect to
assets invested in the Funds. FSS or any sub-transfer agent or other processing
agent may elect to credit against the fees payable to it by its clients or
customers all or a portion of any fee received from the Trust or from FSS with
respect to assets of those customers or clients invested in the Funds. FSS, FFSI
or sub-transfer agents or processing agents retained by FSS may be Processing
Organizations (as defined in the Prospectus) and, in the case of sub- transfer
agents or processing agents, may also be affiliated persons of FSS or FFSI.

For its services under the Transfer Agency Agreement, FSS receives, with respect
to each Series: a fee of $24,000 per year; such amounts to be computed and paid
monthly in arrears by the Fund; and (iii) Annual Shareholder Account Fees of
$25.00 for a retail and $125.00 for an institutional shareholder account; such
fees to be computed as of the last business day of the prior month.

FUND ACCOUNTANT

Pursuant to a Fund Accounting Agreement, Forum Accounting Services, LLC,
("FAcS") prepares and maintains books and records of each Fund on behalf of the
Trust as required under the 1940 Act, calculates the net asset value per share
of each Fund and dividends and capital gain distributions and prepares periodic
reports to shareholders and the Securities and Exchange Commission. For its
services, FAcS receives from the Trust with respect to each Fund a fee of
$36,000 per year plus surcharges of $6,000 to $24,000 for specified asset
levels. FAcS is paid additional surcharges of $12,000 per year for each of the
following: a portfolio with more than a specified number of securities positions
and/or international positions; investments in derivative instruments;
percentages of assets invested in asset backed securities; and, a monthly
portfolio turnover rate of 10% or greater.

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<PAGE>

5. DETERMINATION OF NET ASSET VALUE

The Trust does not determine the Funds' net asset value on any day that the New
York Stock Exchange ("NYSE") is closed. The NYSE is normally closed on the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Veterans' Day,
Thanksgiving and Christmas. The Trust determines the net asset value per share
of each Fund as of the close of trading on the NYSE (normally 4:00 p.m., Eastern
time) on each Fund Business Day by dividing the value of the Fund's net assets
(in other words, the value of its portfolio securities and other assets less its
liabilities) by the number of that Fund's shares outstanding at the time the
determination is made. Securities owned by a Fund for which market quotations
are readily available are valued at current market value, or, in their absence,
at fair value as determined by the Board. Purchases and redemptions are effected
at the time of the next determination of net asset value following the receipt
in proper form of any purchase or redemption order.

6. PORTFOLIO TRANSACTIONS

Purchases and sales of debt securities for the Fixed Income Funds usually are
principal transactions. Portfolio securities for these Funds are normally
purchased directly from the issuer or from an underwriter or market maker for
the securities. There usually are no brokerage commissions paid for such
purchases. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market makers include the spread between the bid and
asked prices.

The Equity Funds will, and the Fixed Income Funds may, effect purchases and
sales through brokers who charge commissions. Allocations of transactions to
brokers and dealers and the frequency of transactions are determined by the
Fund's Sub-adviser in its best judgment and in a manner deemed to be in the best
interest of shareholders of the Fund rather than by any formula. The primary
consideration is prompt execution of orders in an effective manner and at the
most favorable price available to the Fund.

A Fund may not always pay the lowest commission or spread available. Rather, in
determining the amount of commission, including certain dealer spreads, paid in
connection with Fund transactions, the Sub-adviser takes into account such
factors as size of the order, difficulty of execution, efficiency of the
executing broker's facilities (including the services described below) and any
risk assumed by the executing broker. The Sub-advisor may also take into account
payments made by brokers effecting transactions for a Fund (1) to the Fund or
(2) to other persons on behalf of the Fund for services provided to it for which
it would be obligated to pay.

In addition, a Sub-adviser may give consideration to research and investment
analysis services furnished by brokers or dealers to the Sub-adviser for its use
and may cause the Fund to pay these brokers a higher amount of commission than
may be charged by other brokers. Such research and analysis is of the types
described in Section 28(e)(3) of the Securities Exchange Act of 1934, as
amended, and is designed to augment the Sub-adviser's own internal research and
investment strategy capabilities. The Sub-adviser may use the research and
analysis in connection with services to clients other than the Fund, and the
Sub-adviser's fee is not reduced by reason of the Sub-adviser's receipt of the
research services.

Investment decisions for the Funds will be made independently from those for any
other account or investment company that is or may in the future become managed
by the Sub-advisers or their affiliates. If, however, a Fund and other
investment companies or accounts managed by one of the Sub-advisers are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by a Fund or the size of the position obtainable for the Fund. In
addition, when purchases or sales of the same security for a Fund and for other
investment companies and accounts managed by one of the Sub-advisers occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.

In the future the Funds, consistent with the policy of obtaining best net
results, may conduct brokerage transactions through affiliates of those persons
or Forum. The Board has adopted procedures in conformity with applicable rules
under the 1940 Act to ensure that all brokerage commissions paid to these
persons are reasonable and fair.

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<PAGE>

7. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares of each Fund are sold on a continuous basis by the distributor on a best
efforts basis.

In addition to the situations described in the Prospectus under "Purchases and
Redemptions of Shares," the Trust may redeem shares involuntarily, from time to
time, to reimburse a Fund for any loss sustained by reason of the failure of a
shareholder to make full payment for shares purchased by the shareholder or to
collect any charge relating to transactions effected for the benefit of a
shareholder which is applicable to a Fund's shares as provided in the
Prospectus.

The Trust has filed a formal election with the Securities and Exchange
Commission pursuant to which a Fund will only effect a redemption in portfolio
securities if a shareholder is redeeming more than $250,000 or 1% of the Fund's
total net assets, whichever is less, during any 90-day period.

EXCHANGE PRIVILEGE

The exchange privilege permits shareholders of the Funds to exchange their
shares for shares of the same class of any other Fund of the Trust or a
designated class of shares of Daily Assets Cash Fund, a money market fund of
Forum Funds ("Participating Fund"). For Federal income tax purposes, exchange
transactions are treated as sales on which a purchaser will realize a capital
gain or loss depending on whether the value of the shares redeemed is more or
less than his basis in such shares at the time of the transaction.

By use of the exchange privilege, the shareholder authorizes FSS to act upon the
instruction of any person representing himself to either be, or to have the
authority to act on behalf of, the investor and believed by FSS to be genuine.
The records of FSS of such instructions are binding. Proceeds of an exchange
transaction may be invested in another Participating Fund in the name of the
shareholder.

Exchange transactions will be made on the basis of relative net asset values per
share at the time of the exchange transaction. Shares of any Participating Fund
may be redeemed and the proceeds used to purchase, without a sales charge,
shares of any other Participating Fund. The terms of the exchange privilege are
subject to change, and the privilege may be terminated by the Trust. However the
privilege will not be terminated, and no material change that restricts the
availability of the privilege to shareholders will be implemented, without
reasonable advance notice to shareholders.

INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT

The Trust offers an individual retirement plan ("IRA") for individuals who wish
to use Trust shares of the Funds as a medium for funding individual retirement
savings. Under the IRA, distributions of net investment income and capital gain
will be automatically reinvested in the IRA established for the investor. The
Funds' custodian furnishes custodial services to the IRAs for a service fee.
Shareholders wishing to use a Fund's IRA should contact FSS for further details
and information.

8. TAXATION

Each Fund intends, for each taxable year, to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code").
Qualification as a regulated investment company under the Internal Revenue Code
of 1986 does not involve governmental supervision of management or investment
practices or policies. Investors should consult their own counsel for a complete
understanding of the requirements the Funds must meet to qualify for such
treatment. The information set forth in the Prospectus and the following
discussion relate solely to Federal income taxes on dividends and distributions
by a Fund and assume that each Fund qualifies as a regulated investment company.
Investors should consult their own counsel for further details and for the
application of state and local tax laws to the investor's particular situation.

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<PAGE>

The Equity Funds expect to derive a substantial amount of their gross income
(exclusive of capital gain) from dividends. Accordingly, that portion of the
Equity Funds' dividends so derived will qualify for the dividends-received
deduction for corporations to the extent attributable to certain qualifying
dividends received by the Fund from domestic corporations. The Fixed Income
Funds expect to derive substantially all of their gross income (exclusive of
capital gain) from sources other than dividends. Accordingly, it is expected
that only a small portion, if any, of the Fixed Income Funds' dividends or
distributions will qualify for the dividends-received deduction for
corporations. Capital gain distributions are not eligible for the dividends
received deduction for corporations.

Under the Code, gains or losses from the disposition of (1) foreign currencies,
(2) debt securities denominated in a foreign currency, (3) certain options on
foreign currencies or (4) certain forward contracts denominated in a foreign
currency, that are attributed to fluctuations in the value of the foreign
currency between the date of acquisition of the asset and the date of its
disposition 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 a Fund's investment company taxable income available to
be distributed to shareholders as ordinary income, rather than affecting the
amount of the Fund's net capital gain. Because section 988 losses reduce the
amount of ordinary dividends a Fund will be allowed to distribute for a taxable
year, such losses may result in all or a portion of prior dividend distributions
for such year being recharacterized as non-taxable return of capital to
shareholders, rather than as an ordinary dividend, reducing each shareholder's
basis in his or her shares. To the extent that such distributions exceed such
shareholders' basis, each distribution will be treated as a gain from the sale
of shares. Under certain conditions, a Fund may elect to except from Section 988
any foreign currency gain or loss realized by a Fund on any regulated forward
contract, option or futures contract which would be "marked to market" under
Section 1256 of the Code if held on the last day of taxable year, as described
immediately below.

Certain listed options, regulated futures contracts and foreign exchange
contracts are considered "section 1256 contracts" for Federal income tax
purposes. Section 1256 contracts held by a Fund at the end of each taxable year
will be "marked to market" and treated for Federal income tax purposes as though
sold for fair market value on the last business day of such taxable year. Gain
or loss realized by a Fund on section 1256 contracts generally will be
considered 60% long-term and 40% short-term capital gain or loss. A Fund can
elect to exempt its section 1256 contracts which are part of a "mixed straddle"
from the application of section 1256.

With respect to equity or over-the-counter put and call options, gain or loss
realized by a Fund upon the lapse or sale of such options held by the Fund will
be either long-term or short-term capital gain or loss depending upon the
respective Fund's holding period with respect to such option. However, gain or
loss realized upon the lapse or closing out of such options that are written by
a Fund will be treated as short-term capital gain or loss. In general, if a Fund
exercises an option, or if an option that a Fund has written is exercised, gain
or loss on the option will not be separately recognized but the premium received
or paid will be included in the calculation of gain or loss upon disposition of
the property underlying the option.

Any option, futures contract, or other position entered into or held by a Fund
in conjunction with any other position held by such Fund may constitute a
"straddle" for Federal income tax purposes. A straddle of which at least one,
but not all, the positions are section 1256 contracts may constitute a "mixed
straddle". In general, straddles are subject to certain rules that may affect
the character and timing of a Fund's gains and losses with respect to straddle
positions by requiring, among other things, that (1) loss realized on
disposition of one position of a straddle not be recognized to the extent that a
Fund has unrealized gains with respect to the other position in such straddle;
(2) a Fund's holding period in straddle positions be suspended while the
straddle exists (possibly resulting in gain being treated as short-term capital
gain rather than long-term capital gain); (3) losses recognized with respect to
certain straddle positions which are part of a mixed straddle and which are
non-section 1256 positions be treated as 60% long-term and 40% short-term
capital loss; (4) losses recognized with respect to certain straddle positions
which would otherwise constitute short-term capital losses be treated as long-
term capital losses; and (5) the deduction of interest and carrying charges
attributable to certain straddle positions may be deferred. Various elections
are available to a Fund which may mitigate the effects of the straddle rules,
particularly with respect to mixed straddles. In general, the straddle rules
described above do not apply to any straddles held by a Fund all of the
offsetting positions of which consist of section 1256 contracts.

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<PAGE>

A Fund's investment in zero coupon securities will be subject to special
provisions of the Code which may cause the Fund to recognize income without
receiving cash necessary to pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements for avoiding federal income
and excise taxes. In order to satisfy those distribution requirements the Fund
may be forced to sell other portfolio securities.

9. OTHER INFORMATION

CUSTODIAN

Pursuant to a Custodian Agreement, BankBoston acts as the custodian of the
Funds' assets. The custodian's responsibilities include safeguarding and
controlling the Funds' cash and securities, determining income and collecting
interest on Fund investments.

COUNSEL

Legal matters in connection with the issuance of shares of beneficial interest
of the Trust are passed upon by the law firm of Seward & Kissel, One Battery
Park Plaza, New York, New York 10004

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP act as independent auditors for the Funds.

THE TRUST AND ITS SHARES

The Trust was organized on November 26, 1997, as a Delaware business trust. The
Trust has an unlimited number of authorized shares of beneficial interest. The
Board may, without shareholder approval, divide the authorized shares into an
unlimited number of separate portfolios or series (such as the Funds) and may
divide portfolios or series into two or more classes of shares (such as Trust
and Institutional Shares). Currently the authorized shares of the Trust are
divided into 4 separate series.

Each share of each Fund of the Trust and each class of shares has equal
dividend, distribution, liquidation and voting rights, and fractional shares
have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency and administration expenses) are borne solely by those shares
and each class votes separately with respect to the provisions of any Rule 12b-1
plan which pertain to the class and other matters for which separate class
voting is appropriate under applicable law. Generally, shares will be voted in
the aggregate without reference to a particular portfolio or class, except if
the matter affects only one portfolio or class or voting by portfolio or class
is required by law, in which case shares will be voted separately by portfolio
or class, as appropriate. Delaware law does not require the Trust to hold annual
meetings of shareholders, and it is anticipated that shareholder meetings will
be held only when specifically required by Federal or state law. Shareholders
and Trustees have available certain procedures for the removal of Trustees.
There are no conversion or preemptive rights in connection with shares of the
Trust. All shares when issued in accordance with the terms of the offering will
be fully paid and nonassessable. Shares are redeemable at net asset value, at
the option of the shareholders, subject to any contingent deferred sales charge
that may apply. A shareholder in a portfolio is entitled to the shareholder's
pro rata share of all dividends and distributions arising from that portfolio's
assets and, upon redeeming shares, will receive the portion of the portfolio's
net assets represented by the redeemed shares.

The Trust's shareholders are not personally liable for the obligations of the
Trust under Delaware law. The Delaware Business Trust Act (the "Delaware Act")
provides that a shareholder of a Delaware business trust shall be entitled to
the same limitation of liability extended to shareholders of private
corporations for profit. However, no similar statutory or other authority
limiting business trust shareholder liability exists in many other states. As a
result, to the extent that the Trust or a shareholder is subject to the
jurisdiction of courts in those states, the courts may not apply

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<PAGE>

Delaware law, and may thereby subject the Trust shareholders to liability. To
guard against this risk, the Trust Instrument of the Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation and instrument entered into by
the Trust or its Trustees, and provides for indemnification out of Trust
property of any shareholder held personally liable for the obligations of the
Trust. Thus, the risk of a shareholder incurring financial loss beyond his
investment because of shareholder liability is limited to circumstances in which
(1) a court refuses to apply Delaware law, (2) no contractual limitation of
liability is in effect, and (3) the Trust itself is unable to meet its
obligations. In light of Delaware law, the nature of the Trust's business, and
the nature of its assets, the Board believes that the risk of personal liability
to a Trust shareholder is extremely remote.

From time to time, certain shareholders may own a large percentage of the shares
of a Fund. Accordingly, those shareholders may be able to greatly affect (if not
determine) the outcome of a shareholder vote. As noted, certain of these
shareholders are known to the Trust to hold their shares of record only and have
no beneficial interest, including the right to vote, in the shares.

SHAREHOLDINGS

As of March 13, 1998, Memorial Group, Inc., a Delaware corporation, owns 100% of
the shares of each fund as listed below. Trustee and President Christopher W.
Hamm owns 100% of the shares of Memorial Group, Inc. As of the same date, no
other officers or Trustees of the Trust owned any of the outstanding shares of
the Funds. Shareholders owning 25% or more of the shares of a Fund or of the
Trust as a whole may be deemed to be controlling persons. By reason of their
substantial holdings of shares, these persons may be able to require the Trust
to hold a shareholder meeting to vote on certain issues and may be able to
determine the outcome of any shareholder vote. As noted, certain of these
shareholders are known to the Trust to hold their shares of record only and have
no beneficial interest, including the right to vote, in the shares.

FUND SHAREHOLDER INTEREST
- ---- ----------- --------
Government Bond Fund Memorial Group, Inc. 100%
Corporate Bond Fund Memorial Group, Inc. 100%
Growth Equity Fund Memorial Group, Inc. 100%
Value Equity Fund Memorial Group, Inc. 100%

10. FINANCIAL STATEMENTS

Because the Funds had not commenced operations as of the date of this SAI,
financial statements for these Funds are not yet available.

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MEMORIAL FUNDS

APPENDIX A - DESCRIPTION OF SECURITIES RATINGS

1. CORPORATE BONDS

MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")

Moody's rates corporate bond issues, including convertible debt issues, as
follows:

Bonds which are rated Aaa are judged by Moody's to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.

Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.

Bonds which are rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payment 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.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Bonds which are rated 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.

Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

Note: Those bonds in the Aa, A, Baa, Ba or B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1, Baa1, Ba1, and B1.

STANDARD AND POOR'S CORPORATION ("S&P")

S&P rates corporate bond issues, including convertible debt issues, as follows:

24
<PAGE>

Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

Bonds rated AA have a very strong capacity to pay interest and repay principal
and differ from the highest rated issues only in small degree.

Bonds rated A have 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 rated in higher rated
categories.

Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.

Bonds rated BB, B, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.

Bonds rated B have a greater vulnerability to default but currently have the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.

Bonds rated CCC have currently identifiable vulnerability to default, and are
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, they are not likely to have the
capacity to pay interest and repay principal.

Bonds rated CC typically are debt subordinated to senior debt which is assigned
an actual or implied CCC debt rating. This rating may also be used to indicate
imminent default.

The C rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued. The rating Cl is reserved
for income bonds on which no interest is being paid.

Bonds are rated D when the issue is in payment default, or the obligor has filed
for bankruptcy. Bonds rated D are in payment default or the obligor has filed
for bankruptcy. 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 made during
such grace period.

Note: The ratings from AA to CCC may be modified by the addition of a plus (+)
or minus (-) sign to show the relative standing within the rating category.

FITCH INVESTORS SERVICE, INC. ("FITCH")

Fitch rates corporate bond issues, including convertible debt issues, as
follows:

AAA Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.

25
<PAGE>

AA Bonds are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the AAA
and AA categories are not significantly vulnerable to foreseeable future
developments, shorter-term debt of these issuers is generally rate F-1+.

A Bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB Bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.

BB Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C Bonds are in imminent default in payment of interest or principal.

DDD, DD, and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.

Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA, DDD, DD, or D categories.

2. PREFERRED STOCK

MOODY'S INVESTORS SERVICE, INC.

Moody's rates preferred stock as follows:

An issue rated aaa is considered to be a top-quality preferred stock. This
rating indicates good asset protection and the least risk of dividend impairment
among preferred stock issues.

An issue rated aa is considered a high-grade preferred stock. This rating
indicates that there is a reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.

26
<PAGE>

An issue rated a is considered to be an upper-medium grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classification, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.

An issue rated baa is considered to be a medium-grade, neither highly protected
nor poorly secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.

An issue rated ba is considered to have speculative elements and its future
cannot be considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.

An issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small.

An issue which is rated caa is likely to be in arrears on dividend payments.
This rating designation does not purport to indicate the future status of
payments.

An issue which is rated ca is speculative in a high degree and is likely to be
in arrears on dividends with little likelihood of eventual payment.

An issue which is rated c can be regarded as having extremely poor prospects of
ever attaining any real investment standing. This is the lowest rated class of
preferred or preference stock.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification from aa through b in its preferred stock rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issuer ranks in the lower end of its generic rating
category.

STANDARD & POOR'S CORPORATION

S&P rates preferred stock as follows:

AAA is the highest rating that is assigned by S&P to a preferred stock issue and
indicates an extremely strong capacity to pay the preferred stock obligations.

A preferred stock issue rated AA also qualifies as a high-quality fixed income
security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated AAA.

An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.

An issue rated BBB is regarded as backed by an adequate capacity to pay the
preferred stock obligations. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the A category.

Preferred stock rated BB, B, and CCC are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay preferred stock
obligations. BB indicates the lowest degree of speculation and CCC the highest
degree of speculation. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.

The rating CC is reserved for a preferred stock issue in arrears on dividends or
sinking fund payments but that is currently paying.

27
<PAGE>

A preferred stock rated C is a non-paying issue.

A preferred stock rated D is a non-paying issue with the issuer in default on
debt instruments.

To provide more detailed indications of preferred stock quality, 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.

3. SHORT-TERM DEBT (COMMERCIAL PAPER)

MOODY'S INVESTORS SERVICE, INC.

Moody's two highest ratings for short-term debt, including commercial paper, are
Prime-1 and Prime-2, both are judged investment grade, to indicate the relative
repayment ability of rated issuers.

Issuers rated Prime-1 have a superior ability for repayment of senior short-term
debt obligations. Prime-1 repayment ability will often be evidenced by many of
the following characteristics:

--- Leading market positions in well-established industries.
--- High rates of return on funds employed.
--- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
--- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
--- Well-established access to a range of financial markets
and assured sources of alternate liquidity.

Issuers rated Prime-2 by Moody's have a strong ability for repayment of senior
short-term debt obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1 but to a lesser degree. Earnings trends
and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

STANDARD AND POOR'S CORPORATION

S&P's two highest commercial paper ratings are A and B. Issues assigned an A
rating are regarded as having the greatest capacity for timely payment. Issues
in this category are delineated with the numbers 1, 2 and 3 to indicate the
relative degree of safety. An A-1 designation indicates that the degree of
safety regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation. The capacity for timely payment on issues with
an A-2 designation is strong. However, the relative degree of safety is not as
high as for issues designated A-1. A-3 issues have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations. Issues rated B are regarded as having only an adequate capacity
for timely payment. However, such capacity may be damaged by changing conditions
or short-term adversities.

FITCH INVESTORS SERVICE, INC.

Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.

F-1+. Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.

28
<PAGE>

F-1. Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.

F-2. Issues assigned this rating have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues assigned
F-1+ or F-1 ratings.

F-3. Issues assigned this rating have characteristics suggesting that the degree
of assurance for timely payment is adequate, however, near-term adverse changes
could cause these securities to be rated below investment grade.

F-S. Issues assigned this rating have characteristics suggesting a minimal
degree of assurance for timely payment and are vulnerable to near-term adverse
changes in financial and economic conditions.

D. Issues assigned this rating are in actual or imminent payment default.

29
<PAGE>

THE MEMORIAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 11, 1998
<TABLE>
<S> <C> <C> <C>

GOVERNMENT CORPORATE GROWTH EQUITY
BOND FUND BOND FUND FUND
----------------- -------------- -------------

ASSETS

Cash $25,000 $25,000 $25,000
Deferred organization expense 30,000 30,000 30,000

----------------- -------------- -------------
Total assets $55,000 $55,000 $55,000

LIABILITIES

Accrued organization expenses 30,000 30,000 30,000
----------------- -------------- -------------

NET ASSETS $25,000 $25,000 $25,000
----------------- -------------- -------------

Shares Outstanding (no par value, shares authorized
is unlimited) 2,500 2,500 2,500
----------------- -------------- -------------

Net Asset Value, offering and redemption price
per share ($25,000/2,500 shares outstanding per fund) $10.00 $10.00 $10.00
----------------- -------------- -------------
</TABLE>

VALUE EQUITY
FUND
--------------

$25,000
30,000

--------------
$55,000

30,000
--------------

$25,000
--------------

2,500
--------------

$10.00
--------------

</TABLE>

The accompanying notes are an integral part of these statements.

30
<PAGE>

NOTES TO STATEMENTS OF ASSETS AND LIABILITIES
MARCH 11, 1998

Note 1 - Significant Accounting Policies:

(A) General: The Memorial Funds (the "Trust") is an open end management
investment company registered under the Investment Company Act of 1940, as
amended. The Company was established as a Delaware business trust organized
pursuant to a Declaration of Trust dated November 25, 1997. The Government Bond
Fund, Corporate Bond Fund, Growth Equity Fund and Value Equity Fund (each a
"Fund") are each separate, diversified series of the Trust. Each Fund presently
offers two classes of shares, Trust shares and Institutional shares. Shares of
each class have identical interests in the portfolio of the Fund and have the
same rights. As of March 11, 1998, the Funds had no operations other than
organizational matters and the issuance and sale of initial shares to Memorial
Group, Inc., on March 11, 1998.

(B) Organizational Expenses: Costs incurred by the Funds in connection with
their organization and the initial offering of their shares have been deferred
and will be amortized on a straight-line basis from the date upon which the
Funds will commence their investment activities, over a period of five years. If
any of the initial shares of a Fund are redeemed during the amortization period,
the redemption proceeds will be reduced by any unamortized organization expenses
in the same proportion as the number of shares being redeemed bears to the
number of initial shares outstanding at the time of such redemption.

(C) Federal Taxes: Each Fund intends to qualify for treatment as a regulated
investment company under the Internal Revenue Code and distribute all its
taxable income. In addition, by distributing in each calendar year substantially
all its net investment income, capital gains and certain other amounts, if any,
the Funds will not be subject to Federal excise tax. Therefore, no Federal
income or excise tax provision will be required.

Note 2 - Investment Adviser

Forum Investment Advisors, LLC (the "Adviser"), serves as the investment adviser
for each Fund. For their services, the Adviser is paid by the Government Bond
Fund and Corporate Bond Fund a fee at an annual rate of 0.35% of each Fund's
average daily net assets. The Growth Equity Fund and Value Equity Fund are
charged a fee at an annual rate of 0.45% of each Fund's average daily net
assets.

The Adviser has retained the following sub-advisers to render advisory services
and make daily investment decisions for each Fund:

The Government Bond Fund is managed by The Northern Trust Company.
The Corporate Bond Fund is managed by Conseco Capital Management, Inc.
The Growth Equity Fund is managed by Davis, Hamilton, Jackson & Associates
The Value Equity Fund is managed by Beutel, Goodman Capital Management

The sub-advisers are compensated by the Adviser.

Note 3 - Administrative, Accounting, Distribution and Shareholder Servicing Fees

Forum Administrative Services, LLC ("FAdS") is the administrator of the Funds,
and is responsible for the supervision of the overall management of the Funds.
For these services, FAdS receives a fee at an annual rate of 0.15% of each
Fund's average daily net assets under $150 million, and 0.10% of the average
daily net assets in excess of $150 million, subject to an annual minimum fee of
$30,000 for each Fund.

Forum Financial Services, Inc. ("FFSI") acts as distributor of each Fund's
shares. The Funds have adopted a distribution plan in accordance with Rule 12b-1
under the Investment Company Act of 1940, as amended (the "Plan"). Under the
provisions of the Plan, each Fund may reimburse FFSI up to an annual rate of
0.25% of each Fund's Trust shares average daily net assets.

Forum Accounting Services, LLC provides portfolio accounting services to each
Fund.

31
<PAGE>

Forum Shareholder Services, LLC acts as each Fund's transfer agent and dividend
disbursing agent.

32
<PAGE>

Independent Auditors' Report

The Board of Trustees and Shareholder
Memorial Funds:

We have audited the accompanying statements of assets and liabilities of
Government Bond Fund, Corporate Bond Fund, Growth Equity Fund, and Value Equity
Fund, portfolios of Memorial Funds (the Company) as of March 11, 1998. These
statements of assets and liabilities are the responsibility of the Company's
management. Our responsibility is to express an opinion on these statements of
assets and liabilities based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statements of assets and liabilities are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements of assets and
liabilities. Our procedures included confirmation of cash in bank by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of Government
Bond Fund, Corporate Bond Fund, Growth Equity Fund, and Value Equity Fund as of
March 11, 1998, in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Boston, Massachusetts
March 11, 1998