MEMORIAL FUNDS, N-30D/A, 1999-05-25

MEMORIAL FUNDS
N-30D/A, 1999-05-25

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<PAGE>
MEMORIAL FUNDS

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

December 31, 1998 ANNUAL REPORT
- -------------------------------------------------------------------------

Dear Memorial Funds Shareholder:

It is with a great deal of pride and satisfaction that I am able to communicate
to you the remarkable success of the Memorial Funds since their inception in
March, 1998. As of December 31, 1998, over $250 million has been invested by
shareholders across our four Funds. This investment commitment by you, our
shareholders, far exceeded our initial expectations for the first fiscal year of
the Funds' existence. We thank you for your support through the development
process.

In spite of the advancement and development of investment products and services
for various retail and institutional clients, there are many industries that
continue to be under-served by the investment community. Prompted by investor
awareness of the quality portfolio managers we have assembled to manage our
Funds, and the conservative investment philosophy that those managers follow,
prospective shareholders have contacted us to inquire about our mutual fund
product line. In response to such inquiries, we have made presentations that are
designed to educate these potential investors on how the Memorial Funds can meet
their investment needs. These presentations have been extremely well received,
and we will continue to focus on educating these and other industry groups. We
expect that marketing efforts aimed at these new distribution channels will
continue to prove successful and will provide additional critical mass to our
fund family in the coming years. Such mass would have the effect of lowering the
overall cost to all shareholders.

If you have any questions or would like additional information about our Funds,
please call Forum Financial Services, Inc., the Funds' distributor, at (888)
263-5593. On behalf of the Board of Trustees of the Memorial Funds, I would like
to thank all of you who have supported us thus far. We remain committed to
meeting the needs of our shareholders for many years to come.

Sincerely,

/s/ Christopher W. Hamm
Christopher W. Hamm
President-Memorial Funds
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
INVESTMENT ADVISER'S REPORT AND PERFORMANCE DATA 1
Portfolio Performance....................................... 1
Sub-Adviser Interviews...................................... 3
Government Bond Fund...................................... 3
Corporate Bond Fund....................................... 6
Growth Equity Fund........................................ 8
Value Equity Fund......................................... 10
Performance Data............................................ 12
FINANCIAL STATEMENTS OF THE MEMORIAL FUNDS
Schedules of Investments:
Government Bond Fund...................................... 14
Corporate Bond Fund....................................... 15
Growth Equity Fund........................................ 18
Value Equity Fund......................................... 20
Notes to Schedules of Investments........................... 21
Statements of Assets and Liabilities........................ 22
Statements of Operations.................................... 23
Statements of Changes in Net Assets......................... 24
Financial Highlights........................................ 25
Notes to Financial Statements............................... 27
Independent Auditors' Report................................ 31
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
MEMORIAL FUNDS
INVESTMENT ADVISER'S REPORT AND PERFORMANCE DATA
DECEMBER 31, 1998
- --------------------------------------------------------------------------------

PORTFOLIO PERFORMANCE

MEMORIAL FUNDS PERFORMANCE-INCEPTION TO DATE

GOVERNMENT BOND FUND

The Government Bond Fund generated a total return since inception of 7.96%.
For the calendar quarter ended December 31, 1998, the Fund had a total return of
(0.17%), slightly underperforming the (0.08%) total return of the Lehman
Brothers U.S. Government Bond Index, its benchmark. The sector decisions made by
The Northern Trust Company ("Northern Trust") were slightly negative relative to
the benchmark. Although Northern Trust correctly anticipated and had positioned
the portfolio for slightly higher interest rates, this did not provide
contribution enough to offset the sector exposure. The portfolio is now
positioned with an interest rate sensitivity similar to the benchmark, since
Northern Trust believes their positive secular view regarding the economy has
become the consensus. The manager has made modest reductions in corporate and
agency sectors, and adjusted mortgage sector composition to take advantage of
relative value opportunities they see in the market.

CORPORATE BOND FUND

From inception through year end 1998, the total return of the Corporate Bond
Fund, managed by Conseco Capital Management, Inc. ("Conseco"), was 7.50%. During
the fourth quarter of the year the Fund performed in line with its benchmark,
the Lehman Brothers Corporate Bond Index; the Fund's total return was 0.53% and
the index's total return was 0.60%. The research driven discipline of Conseco is
oriented toward overweighting in the corporate sector and underweighting in
Treasuries, which made 1998 a challenge for the manager. There were significant
shifts in the financial markets through the year marked by ongoing changes in
risk premiums related to quality, maturity, and sector. Spreads widened
dramatically in the third quarter to levels not seen in many years, followed by
some contraction in the fourth quarter as the Federal Reserve Board provided
support to the markets by cutting short term rates. Conseco believes the market
overreacted in its revaluation of risk, and that it has yet to return to a more
normal level. The portfolio is positioned for this with an emphasis on corporate
issuers with BBB ratings, and mortgage backed and asset backed securities.

GROWTH EQUITY FUND

In the final quarter of 1998, the Growth Equity Fund underperformed the
Russell 1000 Growth Stock Index, producing a total return of 21.66% versus
26.51% for the index. Since inception, the Fund, under the management of Davis
Hamilton Jackson & Associates, Inc. ("Davis Hamilton"), has had a total return
on Institutional Shares of 20.97%. During the quarter the Fund was overweighted
relative to the index in health care, technology, capital goods and consumer
non-staple industries. It was underweighted in consumer staples, financials, and
basic materials. The manager's underperformance relative to the benchmark was
primarily a result of stock selection within the technology industry. Looking
forward, Davis Hamilton expects to maintain its portfolio posture by investing
in companies with steady and increasing quarterly earnings.

1 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------
MEMORIAL FUNDS
INVESTMENT ADVISER'S REPORT AND PERFORMANCE DATA (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------

VALUE EQUITY FUND

The Value Equity Fund, under the direction of Beutel, Goodman Capital
Management ("Beutel Goodman"), continued to struggle somewhat in a market which
did not reward value investors. The Fund produced a total return for the quarter
of 13.76%, versus the Russell 1000 Value Index total return of 15.92%, and the
S&P 500 total return of 21.28%. Since inception, the Fund has had a total return
on Institutional Shares of (7.76%). The Fund was well positioned by Beutel
Goodman with a significant overweighting in technology relative to the index,
resulting in a positive portfolio effect. However, an overweighting in capital
goods had a negative influence due to stock selection in that industry. While
the Fund was underweighted in financials, successful stock selection by Beutel
Goodman provided a positive impact on performance. Looking forward, Beutel
Goodman has positioned the portfolio with a greater emphasis on
mid-capitalization stocks to take advantage of the extreme return divergence
that has occurred between large and mid-cap equities.

2 Memorial Funds
<PAGE>
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MEMORIAL FUNDS
INVESTMENT ADVISER'S REPORT AND PERFORMANCE DATA (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------

Forum Investment Advisors, LLC, the investment adviser to the Memorial Funds,
posed various questions to the sub-advisers of the four portfolios subsequent to
the end of the reporting period. Those questions, and the responses received
from the investment managers, provide interesting insight into the investment
style, portfolio positioning and expectations of the managers for 1999.

AN INTERVIEW WITH MR. MONTY MEMLER OF THE NORTHERN TRUST COMPANY
SUB-ADVISER TO GOVERNMENT BOND FUND ("FUND")

Q: HOW WAS YOUR PERFORMANCE SINCE THE INCEPTION OF THE FUND?

A: The Fund's total return was essentially flat during the fourth quarter of
1998 as coupon income was offset by slightly greater loss of principal value.
Treasury rates moved higher and the yield curve flattened during the period as
bond market participants deemed it less likely that the Federal Open Market
Committee would ease soon again after its November meeting.

As of December 31, 1998, the Fund has generated a positive total return of 7.96%
since its inception date. For the latest calendar quarter, the Fund generated a
negative total return of (0.17%) versus a (0.08%) return for the Lehman Brothers
U.S. Government Bond Index.

Q: WHAT ATTRIBUTES OF YOUR PORTFOLIO HAD THE MOST SIGNIFICANT IMPACT ON THE
PERFORMANCE OF YOUR PORTFOLIO? WHY?

A: The portfolio has been positioned with similar interest rate sensitivity and
greater non-treasury exposure versus the benchmark. Prior to the fourth quarter,
the interest rate sensitivity was greater than the index. However, as we now
believe our positive secular view regarding the economy's non-inflationary
growth potential dynamic has become the consensus, we have reduced the Fund's
interest rate exposure to a level much closer to that of the index. This was a
beneficial decision during the quarter, but it had little impact on the relative
performance. Our sector decisions were a slightly negative contribution during
the quarter, despite the fact that the tone in the market for spread sensitive
paper was much improved at the end of the calendar year.

Q: HOW DID YOUR PERFORMANCE OVER THE PERIOD COMPARE TO YOUR ORIGINAL
EXPECTATIONS?

A: From an interest rate perspective, the directional movement toward slightly
higher interest rates was as we anticipated. The magnitude of the market's
upward drift in rates was also similar in magnitude given our expectations for a
range bound environment. Consequently, we were successful with the management of
the interest rate factors.

The contribution of spread sensitive securities was slightly less than
anticipated. We continue to anticipate that market volatility will decrease
somewhat as the Treasury market settles in a fairly narrow range. As a
consequence, it is our expectation that the Fund's spread sensitive securities
will move to relatively higher valuations over time. The present posture of the
Fund is constructed to perform better in a steady interest rate environment, as
well as an environment in which risk premiums remain steady-to-lower.

3 Memorial Funds

AN INTERVIEW WITH MR. MONTY MEMLER OF THE NORTHERN TRUST COMPANY
SUB-ADVISER TO GOVERNMENT BOND FUND ("FUND") (CONTINUED)

Q: WHAT WERE THE LARGEST POSITIONS YOU ADDED TO AND SUBTRACTED FROM YOUR
PORTFOLIO? DO YOU EXPECT ANY MAJOR PORTFOLIO SHIFTS DURING THE REMAINDER OF
1999?

A: During the quarter, we used the continuance in spread volatility to make
some timely and modest reductions in the Corporate and Agency sectors. At the
same time, we added to and adjusted the composition of the mortgage exposure.

Further participation in these areas will be dictated by relative value
opportunities as they arise. These sector and issue decisions are where we
anticipate generating the majority of relative performance over the longer term.

Q: WHAT IS THE CURRENT DURATION OF YOUR PORTFOLIO? HOW DOES THIS COMPARE TO THE
LEHMAN BROTHERS U.S. GOVERNMENT BOND INDEX?

A: As stated above, the duration of the portfolio is now similar to that of the
index. As of December 31, 1998, the duration of the Fund was 5.46 years versus
5.38 years for the Lehman Brothers U.S. Government Bond Index.

Q: WHAT IS YOUR OUTLOOK FOR INTEREST RATES IN THE NEAR TERM? HOW DOES YOUR
OUTLOOK AFFECT THE COMPOSITION OF YOUR PORTFOLIO?

A: Given a similar duration as that of the index, the Fund is positioned to
reflect a neutral outlook. Our latest policy, as of the end of December,
reflects the following:

Moderate Economic Growth Expected

-Federal Reserve rate cuts in 1998 should limit expected slowing in domestic
demand.

-Inflation is likely to remain low.

Treasury Market is Fairly Valued

-Credit spreads continue to look attractive over a longer-term investment
horizon.

-A rash of uncertainties warrants emphasizing liquidity in bond selection.

Q: WHAT IS YOUR CURRENT ALLOCATION AMONG SECTORS OF YOUR STRATEGY? HOW DOES
THIS COMPARE TO YOUR BENCHMARK?

A: As noted above, we did make some modest changes to the sector exposure
during the past quarter. Our current allocation among sectors includes 25.2%
exposure to Agency issues and a 7.1% position in assorted Corporate obligations.
Agency issues represent just over 18% of the Lehman Brothers U.S. Government
Bond Index. The index does not contain any Corporate issues. In addition, we
have added several mortgage-backed securities to the portfolio. At quarter end,
mortgage-backed exposure represented 17.3% of the portfolio. The Lehman Brothers
U.S. Government Bond Index does not contain any mortgage-backed issues.

4 Memorial Funds

AN INTERVIEW WITH MR. MONTY MEMLER OF THE NORTHERN TRUST COMPANY
SUB-ADVISER TO GOVERNMENT BOND FUND ("FUND") (CONCLUDED)

THE OPINIONS EXPRESSED IN THIS INTERVIEW REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH DECEMBER 31, 1998. THE MANAGER'S OPINIONS ARE SUBJECT TO CHANGE AT
ANY TIME BASED ON THE MARKET AND OTHER CONDITIONS. THE COMPOSITION, INDUSTRIES
AND HOLDINGS OF THE PORTFOLIO ARE SUBJECT TO CHANGE.

5 Memorial Funds

AN INTERVIEW WITH MR. GREG HAHN OF CONSECO CAPITAL MANAGEMENT, INC.
SUB-ADVISER TO CORPORATE BOND FUND ("FUND")

Q: HOW WAS THE PERFORMANCE SINCE THE INCEPTION OF THE FUND?

A: Since inception of the Fund through December 31, 1998, the Fund returned
7.50% while the Lehman Brothers Corporate Bond Index returned 6.86% over the
same period.

Q: WHAT ATTRIBUTES OF THE PORTFOLIO HAD THE MOST SIGNIFICANT IMPACT ON THE
PERFORMANCE OF THE PORTFOLIO? WHY?

A: The single best performing fixed income security during 1998 was the 30-year
U.S. Treasury Bond. While the portfolio held long maturity corporate bonds, they
did not perform as well due to the significant spread widening.

Q: HOW DID THE PERFORMANCE OVER THE PERIOD COMPARE TO YOUR ORIGINAL
EXPECTATIONS?

A: While we expected to see a gradual decline in interest rates, we did not
expect to see the dramatic repricing of risk and the subsequent spread widening
in the Corporate sector during August, September and October.

Q: WHAT WERE THE LARGEST POSITIONS ADDED TO AND SUBTRACTED FROM THE PORTFOLIO?
DO YOU EXPECT ANY MAJOR PORTFOLIO SHIFTS DURING 1999?

A: The largest holdings included: U.S. Treasury Bonds, Public Service Electric
& Gas, and Farmers Insurance Exchange. Since we are in the late stages of an
eight-year expansion, every credit in which we invest is scrutinized for its
ability to hold up through a recession. While we don't expect to see a recession
in the U.S. economy, the financial market impact of an economic slowdown may
have the same result on credit spreads. Thus, we expect to emphasize those
sectors which will hold up well in a slowing economy such as cable, media,
grocery stores and telecommunications. In contrast, I would expect that we will
avoid many of the deep cyclicals such as paper, forest products, chemicals and
steel.

Q: WHAT IS THE CURRENT DURATION OF THE PORTFOLIO? HOW DOES THIS COMPARE TO THE
LEHMAN BROTHERS CORPORATE BOND INDEX?

A: The portfolio duration at December 31, 1998, was 5.83 years while the
duration of the Lehman Brothers Corporate Bond Index was 6.03 years.

Q: WHAT IS YOUR OUTLOOK FOR INTEREST RATES IN THE NEAR TERM? HOW DOES THIS
OUTLOOK AFFECT THE COMPOSITION OF THE PORTFOLIO?

A: Given the tremendous slowdown in the global economies and the late stage of
the U.S. economic expansion, we are of the belief that the U.S. economy will be
impacted and slow from its existing robust growth. This in turn should have a
dampening effect on interest rates which should trade lower. Low

6 Memorial Funds

AN INTERVIEW WITH MR. GREG HAHN OF CONSECO CAPITAL MANAGEMENT, INC.
SUB-ADVISER TO CORPORATE BOND FUND ("FUND") (CONCLUDED)

commodity prices, particularly oil, and virtually no sign of inflation should
help to sustain low levels of interest rates. Regardless of this
prognostication, we expect to manage the portfolio to duration that approximates
the Lehman Brothers Corporate Bond Index duration.

Q: WHAT IS YOUR OUTLOOK REGARDING THE CREDIT SPREADS BETWEEN GOVERNMENT AND
CORPORATE BONDS? HOW DOES THIS AFFECT THE COMPOSITION OF THE PORTFOLIO?

A: An analysis of corporate spread as a percent of the comparable U.S. Treasury
yield shows that that relationship is at its historic widest levels. We believe
that means corporate bonds, in general, are under valued. We expect to increase
our investment in corporate bonds given the opportunities that are presented in
the capital markets.

7 Memorial Funds

AN INTERVIEW WITH MR. JACK HAMILTON OF DAVIS HAMILTON JACKSON & ASSOCIATES, INC.
SUB-ADVISER TO GROWTH EQUITY FUND ("FUND")

Q: HOW WAS YOUR PERFORMANCE SINCE THE INCEPTION OF THE FUND?

A: The performance of the Fund since inception has been very good. Including
reinvested dividends and distributions, the Institutional Shares of the Fund
returned 20.97% during the nine months. The S&P 500 advanced 12.85% in the
corresponding period.

Q: WHAT ATTRIBUTES OF YOUR PORTFOLIO HAD THE MOST SIGNIFICANT IMPACT ON THE
PERFORMANCE OF YOUR PORTFOLIO? WHY?

A: Adherence to our growth style objective, and a discipline emphasizing
companies with stable or rising earnings estimates helped relative returns. Our
research kept us overweighted in technology, retail, and health care due to
positive secular trends and consistent earnings outperformance from the leading
companies in these industries. We also minimized holdings in industries where
profit expectations declined. Basic materials, energy, and utilities were kept
at below average exposure while maintaining a diversified portfolio. The stock
market rewarded companies with strong franchises and stable earnings outlooks
due to the uncertainty in global markets and the slowdown in corporate profits
that has been underway for several quarters. Larger companies substantially
outdistanced smaller companies due to their superior earnings performance,
liquidity, and growth outlook.

Q: HOW DID YOUR PERFORMANCE OVER THE PERIOD COMPARE TO YOUR ORIGINAL
EXPECTATIONS?

A: Performance exceeded our expectations. We keep midcap companies as a core
25-35% of the portfolio. The divergence in performance of midcap and smaller cap
indices relative to the S&P 500 made beating the market with a large exposure to
this segment even more difficult. Most small cap managers had terrible relative
performance in 1998, with a large portion producing negative full year returns.
Midcap indices also lagged the S&P 500 by 1000-2000 basis points during the
year. Our stockpicking overall, and specifically in the medium sized companies,
was significantly above average.

Q: WHAT WERE THE LARGEST POSITIONS YOU ADDED TO AND SUBTRACTED FROM YOUR
PORTFOLIO?

A: Our largest portfolio holdings during 1998 included Microsoft, Time Warner,
Wal-Mart, General Electric, Symbol Technologies, AIG, Cisco Systems, IBM, and
SBC Communications. We added positions in Oracle, Intel, Ascend, Albertsons,
Medtronic, Enron, Providian, and Lexmark in the second half of 1998. Holdings of
Robert Half, PepsiCo, Southwest Airlines, Henry Schein, Meredith, Parametric,
Crescent Real Estate, Omnicare, and Nabors Industries were eliminated.

Q: HOW DO YOUR CURRENT INDUSTRY ALLOCATIONS COMPARE TO THE RUSSELL 1000 GROWTH
INDEX SECTOR WEIGHTS?

A: The portfolio is diversified relative to the S&P 500 and Russell 1000 Growth
Index industry weightings. The Russell 1000 Growth Index is much more
concentrated in three industries due to its construction. Technology, Health
Care and Consumer Staples represented nearly 70% of the index at year-end versus
a

8 Memorial Funds

AN INTERVIEW WITH MR. JACK HAMILTON OF DAVIS HAMILTON JACKSON & ASSOCIATES, INC.
SUB-ADVISER TO GROWTH EQUITY FUND ("FUND") (CONCLUDED)

comparable 50% in the S&P 500. The Fund carried above average holdings in all
three sectors compared to the S&P 500. However, weightings against the Russell
1000 Growth Index in these three sectors were all below average. We view the
Russell weightings in these industries as an upper limit in building a
diversified portfolio. Conversely, the Russell Index has minimal exposure to
Communication Services, Financials, Basic Materials, and Energy relative to
their share of the economy. We were overweighted in these areas versus the
Russell 1000 Growth Index but well below the S&P 500 in each. We intend to
manage the portfolio in a much more diversified manner than the Russell 1000
Growth Index while emphasizing industries and companies with the best growth
outlooks.

Q: WHAT IS YOUR OUTLOOK FOR YOUR STYLE OF GROWTH INVESTING OVER THE NEXT SIX
MONTHS? HOW DOES THIS COMPARE TO YOUR OUTLOOK FOR THE S&P 500 INDEX?

A: We are optimistic about our growth style for several reasons. First, rapid
organic growth in medium-sized to large companies remains difficult to achieve
in the current economic environment. We do not expect an acceleration in
corporate profits in 1999 and this should continue to result in growth stocks
holding a large relative premium to the average company. Second, positive
earnings estimate revisions will likely remain concentrated in the sectors of
the market with the best secular growth rates. We anticipate that industrial,
commodity cyclical, and manufacturing businesses will continue to struggle to
keep margins up with a slow world economy and an inability to increase product
prices. Third, the S&P 500 is a much more growth-centered index based on the
changes that have occurred in the last 5 years. We expect the large, high
quality companies that dominate index returns to be tough competition for the
average company until the next economic expansion gains more visibility.

9 Memorial Funds

AN INTERVIEW WITH MR. PHILIP FERGUSON OF BEUTEL, GOODMAN CAPITAL MANAGEMENT
SUB-ADVISER TO VALUE EQUITY FUND ("FUND")

Q: HOW WAS YOUR PERFORMANCE SINCE THE INCEPTION OF THE FUND?

A: While our portfolio outperformed the broad, equally weighted market
averages, our performance was clearly disappointing when compared with the
market-capitalization weighted Russell 1000 Value Index. The period from the
inception of the Fund until the end of 1998 was a very weak period for the
average U.S. common stock (the Russell 3000 equal-weighted Index and the Value
Line Index were down roughly 9% and 12%, respectively, during this period). The
Russell 1000 Value Index rose by over 4% during this period compared to our
performance of (7.76%) on the Institutional Shares of the Fund.

Q: WHAT ATTRIBUTES OF YOUR PORTFOLIO HAD THE MOST SIGNIFICANT IMPACT ON THE
PERFORMANCE OF YOUR PORTFOLIO? WHY?

A: The most significant impact was the average market capitalization of the
stocks in the portfolio. Throughout 1998, the best performers within the Russell
1000 Value Index were the very largest companies (see table). Our portfolio was
more heavily represented in the smaller companies within the Index, due to their
compelling relative value characteristics.

<TABLE>
<CAPTION>
RUSSELL 1000 VALUE CAPITALIZATION SECTORS 1998 RETURN
- -------------------------------------------------- ---------------
<S> <C>
Above $76 billion 32.5%
$34-76 billion 26.6%
$13-34 billion 19.7%
$4-13 billion 4.9%
Less than $4 billion 4.6%
</TABLE>

Within sectors, our most positive contribution came from the technology and
financial areas, while the most negative contributor was an overweight in oil
service stocks.

Q: HOW DID YOUR PERFORMANCE OVER THE PERIOD COMPARE TO YOUR ORIGINAL
EXPECTATIONS?

A: The results were well below our expectations. A consistently applied value
approach generally performs well over a complete market cycle. We consider
1998's results to be an aberration.

Q: WHAT WERE THE LARGEST POSITIONS YOU ADDED TO AND SUBTRACTED FROM YOUR
PORTFOLIO?

A: Subsequent to the initial round of investment, our most significant
additions to the portfolio were in the following sectors:

<TABLE>
<S> <C>
Financial Services SLM Holdings, A.G. Edwards, First
Union, First Data
Industrial Cyclicals Bowater, Champion Intl, Dana Corp.
Defense B. F. Goodrich, Lockheed Martin
Technology Texas Instruments
</TABLE>

10 Memorial Funds

AN INTERVIEW WITH MR. PHILIP FERGUSON OF BEUTEL, GOODMAN CAPITAL MANAGEMENT
SUB-ADVISER TO VALUE EQUITY FUND ("FUND") (CONCLUDED)

Three positions were liquidated as the result of takeovers or favorable
corporate restructurings: Cognizant restructured into two discreet companies.
R.P. Scherer was acquired by Cardinal Health. AMP was the subject of an
unfriendly takeover bid from Allied Signal. Several stocks were deemed to have
an uncomfortable level of exposure to problems in weak foreign economies;
liquidations in this area included Nucor, Brunswick, Cummins Engine, Fluor, and
Boeing.

Q: HOW DO YOUR CURRENT INDUSTRY ALLOCATIONS COMPARE TO THE RUSSELL 1000 VALUE
INDEX SECTOR WEIGHTS?

A: Our industry allocations differ markedly from the Russell 1000 Value Index.
Our most significant overweight is in the technology sector, where we closed the
year with a 22% weight vs. 7% for the Index. Our holdings in this area are all
industry leaders selling at unreasonably low valuation levels. Our technology
positions were our top five gainers for the year. We are roughly double-weighted
in Consumer Discretionary (15% vs. 7%). Our largest underweight was in the
Utilities sector (8% vs. 23%). While our three holdings in this sector were good
absolute contributors to performance, our underweight in a strong group
detracted from overall performance.

Q: WHAT IS YOUR OUTLOOK FOR YOUR STYLE OF VALUE INVESTING OVER THE NEXT SIX
MONTHS? HOW DOES THIS COMPARE TO YOUR OUTLOOK FOR THE S&P 500 INDEX?

A: As this is being written in early 1999, large-capitalization growth stocks
continue to dominate the market. Valuations for these companies are high by any
historic measure, while value stocks continue to sell at deep discounts to the
market averages. Over time, there is an ebb and flow to market leadership, and
history tells us that value stocks are overdue for their time in the sun. While
it is impossible to accurately predict market action over short time frames, we
remain convinced that our style of value investing will produce excellent
results over a normal market cycle. We expect the S&P 500 to trade in a volatile
manner for the remainder of the year, and our best guess is for a single-digit
return for the year.

11 Memorial Funds
<PAGE>
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MEMORIAL FUNDS
INVESTMENT ADVISER'S REPORT AND PERFORMANCE DATA (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------

These charts reflect a comparison in the change in value of a $10,000 investment
in Government Bond Fund and Corporate Bond Fund, including reinvested dividends
and distributions, since inception of each Fund. The result is compared with a
broad-based securities market index. Each Fund's total return includes operating
expenses that reduces returns, while the total return of the Fund's respective
Index does not. Investment return and principal value of an investment in the
Funds will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost. PAST PERFORMANCE IS NOT PREDICTIVE NOR A
GUARANTEE OF FUTURE RESULTS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
GOVERNMENT BOND FUND VS. LEHMAN BROTHERS U.S. GOVERNMENT BOND INDEX
GOVERNMENT BOND FUND
<S> <C>
3/29/98 10,000.00
4/30/98 10,041.85
5/31/98 10,136.86
6/30/98 10,261.36
7/31/98 10,266.59
8/31/98 10,525.42
9/30/98 10,814.20
10/31/98 10,725.91
11/30/98 10,769.78
12/31/98 10,796.01
Cumulative Total Return as of 12/31/98
Institutional
Shares
Since Inception on 3/29/98: 7.96%
Value on 12/31/98
Government Bond Fund: $10,796
Lehman Brothers U.S. Government Bond Index: $10,686

<CAPTION>
LEHMAN BROTHERS U.S. GOVERNMENT BOND INDEX
<S> <C>
3/29/98 10,000.00
4/30/98 10,048.00
5/31/98 10,117.33
6/30/98 10,185.12
7/31/98 10,223.82
8/31/98 10,417.05
9/30/98 10,659.77
10/31/98 10,677.89
11/30/98 10,644.79
12/31/98 10,686.30
Cumulative Total Return as of 12/31/98
Since Inception on 3/29/98:
Value on 12/31/98
Government Bond Fund:
Lehman Brothers U.S. Government Bond Index:
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CORPORATE BOND FUND VS. LEHMAN BROTHERS CORPORATE BOND INDEX
CORPORATE BOND FUND
<S> <C>
3/25/98 10,000.00
4/30/98 10,048.71
5/31/98 10,162.57
6/30/98 10,280.05
7/31/98 10,288.77
8/31/98 10,480.95
9/30/98 10,693.73
10/31/98 10,590.11
11/30/98 10,692.93
12/31/98 10,750.46
Cumulative Total Return as of 12/31/98
Institutional
Shares
Since Inception on 3/25/98: 7.50%
Value on 12/31/98
Corporate Bond Fund: $10,750
Lehman Brothers Corporate Bond Index: $10,695

<CAPTION>
LEHMAN BROTHERS CORPORATE BOND INDEX
<S> <C>
3/25/98 10,000.00
4/30/98 10,063.00
5/31/98 10,182.75
6/30/98 10,258.10
7/31/98 10,248.87
8/31/98 10,297.04
9/30/98 10,630.66
10/31/98 10,466.95
11/30/98 10,663.73
12/31/98 10,694.65
Cumulative Total Return as of 12/31/98
Since Inception on 3/25/98:
Value on 12/31/98
Corporate Bond Fund:
Lehman Brothers Corporate Bond Index:
</TABLE>

EACH FUND IS PROFESSIONALLY MANAGED WHILE THE INDEX IS UNMANAGED AND IS NOT
AVAILABLE FOR INVESTMENT. CHANGES IN VALUE OF LEHMAN BROTHERS U.S. GOVERNMENT
BOND INDEX AND LEHMAN BROTHERS CORPORATE BOND INDEX ARE BASED ON AN INCEPTION
DATE OF 3/31/98.
TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN FEES AND EXPENSES NOT BEEN
VOLUNTARILY WAIVED AND/OR REIMBURSED. RETURNS FOR LESS THAN ONE YEAR HAVE NOT
BEEN ANNUALIZED.

12 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------
MEMORIAL FUNDS
INVESTMENT ADVISER'S REPORT AND PERFORMANCE DATA (CONCLUDED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------

These charts reflect a comparison in the change in value of a $10,000 investment
in Growth Equity Fund and Value Equity Fund, including reinvested dividends and
distributions, since inception of each Fund. The result is compared with a
broad-based securities market index. Each Fund's total return includes operating
expenses that reduces returns, while the total return of the Fund's respective
Index does not. Investment return and principal value of an investment in the
Funds will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost. PAST PERFORMANCE IS NOT PREDICTIVE NOR A
GUARANTEE OF FUTURE RESULTS.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
GROWTH EQUITY FUND VS. RUSSELL 1000 GROWTH INDEX
GROWTH EQUITY GROWTH EQUITY RUSSELL 1000
<S> <C> <C> <C>

FUND (TRUST) FUND (INST) GROWTH INDEX
3/29/98 10,000.00 10,000.00 10,000.00
4/30/98 10,060.00 10,070.00 10,132.02
5/31/98 9,880.00 9,880.00 9,839.81
6/30/98 10,560.67 10,580.67 10,432.66
7/31/98 10,430.66 10,450.66 10,354.47
8/31/98 9,080.57 9,110.58 8,793.01
9/30/98 9,912.72 9,942.72 9,449.67
10/31/98 10,422.86 10,462.86 10,207.93
11/30/98 10,963.00 11,003.01 10,973.75
12/31/98 12,056.63 12,096.63 11,954.48
GROWTH EQUITY FUND VS. RUSSELL 1000 GROWTH INDEX
Cumulative Total Return as of 12/31/98
Trust Institutional
Shares Shares
Since Inception on 3/29/98: 20.57% 20.97%
Value on 12/31/98
Growth Equity Fund (Trust): $12,057
Growth Equity Fund (Inst): $12,097
Russell 1000 Growth Index: $11,954
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
VALUE EQUITY FUND VS. RUSSELL 1000 VALUE INDEX
VALUE EQUITY VALUE EQUITY RUSSELL 1000
<S> <C> <C> <C>

FUND (TRUST) FUND (INST) VALUE INDEX
3/29/98 $10,000.00 $10,000.00 $10,000.00
4/30/98 $10,040.00 $10,040.00 $10,045.43
5/31/98 $9,640.00 $9,640.00 $9,878.98
6/30/98 $9,474.53 $9,484.53 $9,989.63
7/31/98 $8,854.23 $8,874.24 $9,803.23
8/31/98 $7,503.59 $7,523.59 $8,320.98
9/30/98 $8,078.08 $8,108.09 $8,783.20
10/31/98 $8,769.63 $8,789.61 $9,445.81
11/30/98 $8,799.70 $8,829.70 $9,870.34
12/31/98 $9,193.71 $9,223.71 $10,181.19
VALUE EQUITY FUND VS. RUSSELL 1000 VALUE INDEX
Cumulative Total Return as of 12/31/98
Trust Institutional
Shares Shares
Since Inception on 3/29/98: (8.06%) (7.76%)
Value on 12/31/98
Value Equity Fund (Trust): $9,194
Value Equity Fund (Inst): $9,224
Russell 1000 Value Index: $10,181
</TABLE>

EACH FUND IS PROFESSIONALLY MANAGED WHILE THE INDEX IS UNMANAGED AND IS NOT
AVAILABLE FOR INVESTMENT. CHANGES IN VALUE OF RUSSELL 1000 GROWTH INDEX AND
RUSSELL 1000 VALUE INDEX ARE BASED ON AN INCEPTION DATE OF 3/31/98.
TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN FEES AND EXPENSES NOT BEEN
VOLUNTARILY WAIVED AND/OR REIMBURSED. RETURNS FOR LESS THAN ONE YEAR HAVE NOT
BEEN ANNUALIZED.

13 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------
GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE SECURITY
AMOUNT/ SHARES DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATION (3.9%)
2,500,000 FHLMC, Series 2080, 6.00%, 11/15/21
(cost $2,471,094)................... $ 2,496,813
-----------
CORPORATE BONDS & NOTES (7.0%)
1,000,000 Associates Corp. of North America,
6.38%, 7/15/02........................ 1,026,339
1,250,000 Finova Capital Corp., 6.63%, 9/15/01.... 1,267,686
1,000,000 Lehman Brothers Holdings, 6.00%,
2/26/01............................... 993,195
1,250,000 MCI Worldcom, Inc., 6.13%, 8/15/01...... 1,271,708
-----------
Total Corporate Bonds & Notes
(cost $4,531,305) 4,558,928
-----------
GOVERNMENT BONDS & NOTES (25.2%)
5,500,000 FHLB, 5.50%, 7/14/00.................... 5,542,367
2,500,000 FHLMC, 5.75%, 7/15/03................... 2,572,045
2,500,000 FHLMC, 5.75%, 4/15/08................... 2,573,758
2,500,000 FNMA, 5.63%, 3/15/01.................... 2,536,510
3,000,000 FNMA, 5.75%, 6/15/05.................... 3,114,180
-----------
Total Government Bonds & Notes
(cost $15,978,540) 16,338,860
-----------
MORTGAGE BACKED SECURITIES (17.3%)
2,608,600 FHLMC, Gold Pool C18118, 6.00%,
11/1/28............................... 2,579,801
2,643,422 FHLMC, Gold Pool G00767, 7.50%,
8/1/27................................ 2,717,227
3,019,924 FNMA, Pool 440700, 6.00%, 11/1/28....... 2,984,710

FACE SECURITY
AMOUNT/ SHARES DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>
MORTGAGE BACKED SECURITIES, CONTINUED
2,970,000 FNMA, Pool 440737, 6.00%, 12/1/28....... $ 2,935,370
-----------
Total Mortgage Backed Securities
(cost $11,204,863) 11,217,108
-----------
U.S. TREASURY OBLIGATIONS (43.9%)
U.S. INFLATION INDEX NOTE (4.6%)
3,045,180 3.63%, 1/15/08
(cost $3,026,070)................... 2,986,180
-----------
U.S. TREASURY NOTES (18.9%)
2,575,000 6.88%, 7/31/99.......................... 2,607,993
2,500,000 6.63%, 7/31/01.......................... 2,619,533
6,350,000 6.50%, 10/15/06......................... 7,050,488
-----------
Total U.S. Treasury Notes
(cost $12,255,585) 12,278,014
-----------
U.S. TREASURY BONDS (20.4%)
12,150,000 6.00%, 2/15/26
(cost $12,591,492).................... 13,262,490
-----------
Total U.S. Treasury Obligations
(cost $27,873,147) 28,526,684
-----------
SHORT-TERM HOLDINGS (2.7%)
1,745,805 Dreyfus Government Cash Management Fund,
4.79%
(cost $1,745,805)..................... 1,745,805
-----------
Total Investments (100.0%)
(cost $63,804,754) $64,884,198
-----------
-----------
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements 14 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------
CORPORATE BOND FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ ------------
<C> <S> <C>
ASSET BACKED SECURITIES (0.7%)
994,780 Nationslink Funding Corp., Series
1998-2, A1, 6.00%, 11/20/07
(cost $999,754)....................... $ 1,005,867
------------
COLLATERALIZED MORTGAGE OBLIGATIONS (4.0%)
FHLMC (0.8%)
1,000,000 Series 1928 C, 7.50%, 12/15/24 (cost
$1,017,188)........................... 1,019,800
------------
OTHER (3.2%)
600,000 Commonwealth Edison Transitional Funding
Trust, Series 1998-1 A7, 5.74%,
12/25/10.............................. 598,500
1,000,000 First Plus Home Loan Trust, Series
1998-3 A5, 6.49%, 7/10/17............. 1,015,935
2,000,000 First Union-Lehman Brothers-Bank of
America, Series 1998-C2 C, 6.73%,
9/18/12 (d)........................... 2,014,850
500,000 Money Store Home Equity Trust, Series
1996-D A13, 6.64%, 9/15/14............ 508,573
300,000 Mortgage Index Amortizing Trust, Series
1997-1 A1, 6.68%, 8/25/04 (d)......... 303,931
------------
Total Other
(cost $4,402,532) 4,441,789
------------
Total Collateralized Mortgage Obligations
(cost $5,419,720) 5,461,589
------------
CORPORATE BONDS & NOTES (69.1%)
2,600,000 Armstrong World, 6.35%, 8/15/03......... 2,640,914
565,000 Associates Corp. of North America,
5.60%, 1/15/01........................ 566,664
2,000,000 Associates Corp. of North America,
7.88%, 9/30/01........................ 2,120,854
500,000 Associates Corp. of North America,
5.75%, 11/3/03........................ 504,096
1,500,000 Bellsouth Telecommunications, 6.00%,
6/15/02............................... 1,535,418
1,000,000 Case Credit Corp., 5.95%, 8/1/00........ 1,001,207
1,000,000 Choice Hotels Corporation, Inc., 7.13%,
5/1/08................................ 1,035,827
500,000 Chrysler Financial Co. LLC, 9.50%,
12/15/99.............................. 519,145

SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ ------------
<C> <S> <C>
CORPORATE BONDS & NOTES, CONTINUED
500,000 Colonial Realty LP, 7.00%, 7/14/07...... $ 479,296
1,000,000 Continental Cablevision Corp., 8.50%,
9/15/01............................... 1,062,676
1,000,000 CPI Corp., 9.00%, 3/15/02 (b)........... 1,085,071
2,000,000 Duke Realty, 6.75%, 5/30/08............. 1,956,604
1,000,000 ENSCO International, Inc., 7.20%,
11/15/27.............................. 1,015,785
1,000,000 EOP Operating LP, 6.76%, 6/15/07........ 987,192
1,000,000 Equitable Companies, Inc., 7.00%,
4/1/28................................ 1,031,398
300,000 ERP Operating LP, 6.63%, 4/13/05........ 296,190
4,050,000 Farmers Exchange Capital, 7.05%, 7/15/28
(b)................................... 4,087,479
3,500,000 General Motors Acceptance Corp., 7.13%,
5/1/01................................ 3,618,304
1,000,000 General Motors Acceptance Corp., 5.75%,
11/10/03.............................. 1,005,236
1,000,000 Global Marine, Inc., 7.00%, 6/1/28...... 924,585
1,000,000 Healthsouth Corp., 7.00%, 6/15/08....... 993,434
1,000,000 Hertz Corp., 6.63%, 5/15/08............. 1,040,114
2,000,000 Household Finance Corp., 6.13%, V/R,
7/15/02 (a)........................... 2,013,462
1,000,000 Illinova Corp., 7.13%, 2/1/04........... 1,032,068
1,800,000 Key Bank NA, 6.50%, 4/15/08............. 1,823,135
1,500,000 Lehman Brothers Holdings, 6.33%,
8/1/00................................ 1,501,023
3,000,000 Lehman Brothers Holdings, 6.63%,
12/27/02.............................. 3,004,218
300,000 Lehman Brothers Holdings 7.25%,
4/15/03............................... 309,300
400,000 Marriott International, Inc., 6.63%,
11/15/03 (b).......................... 399,922
3,100,000 Mattel, Inc., 6.00%, 7/15/03............ 3,133,170
750,000 MCN Investment Corp., 6.35%, V/R, 4/2/02
(a)................................... 756,659
1,000,000 Mellon Financial Co., 7.63%, 11/15/99... 1,019,138
300,000 Mellon Financial Co., 5.75%, 11/15/03... 302,074
2,000,000 Merrill Lynch & Co., Inc., 6.38%,
10/15/08.............................. 2,078,040
3,000,000 Merrill Lynch & Co., Inc., 6.75%,
6/1/28................................ 2,997,762
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements 15 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------
CORPORATE BOND FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ ------------
CORPORATE BONDS & NOTES, CONTINUED
<C> <S> <C>
900,000 Morgan Stanley Dean Witter, 5.88%,
4/24/00............................... $ 903,822
2,900,000 Morgan Stanley Dean Witter, 5.88%,
2/28/01............................... 2,918,638
1,000,000 NGC Corporation, 7.13%, 5/15/18......... 978,835
1,000,000 NGC Corporation, 8.32%, 6/1/27.......... 1,023,742
1,000,000 National-Oilwell, Inc., 6.88%, 7/1/05
(b)................................... 1,027,748
2,500,000 NationsBank Corp., 6.38%, 2/15/08....... 2,604,093
500,000 News America Holdings, 7.25%, 5/18/18... 514,201
500,000 Owens Corning, 7.50%, 5/1/05............ 514,717
3,050,000 PNC Funding Corp., 6.50%, 5/1/08........ 3,197,321
3,600,000 Public Service Electric & Gas Co.,
6.13%, 8/1/02......................... 3,705,883
250,000 Rollins Truck Leasing Corp., 6.88%,
8/1/01................................ 256,734
3,000,000 Scotia Pacific Co. LLC, 6.55%,
1/20/07............................... 2,901,558
915,890 Seabrook Station-Unit 1, 7.83%,
1/2/19................................ 984,531
3,000,000 Sears Roebuck Acceptance Corp., 6.12%,
12/13/01.............................. 3,035,307
550,000 Shopko Stores, 8.50%, 3/15/02........... 591,482
200,000 Shopko Stores, 6.50%, 8/15/03........... 204,653
500,000 Simon Debartolo Group, Inc., 6.75%,
6/15/05............................... 492,026
2,000,000 Sprint Capital Corp., 6.88%, 11/15/28... 2,083,480
300,000 Standard Federal Bancorporation, 7.75%,
7/17/06............................... 331,040
500,000 Tele-Communications, Inc., 9.80%,
2/1/12................................ 668,764
1,500,000 Texas Utilities Electric Co., 8.25%,
4/1/04................................ 1,682,478
500,000 Tommy Hilfiger, 6.50%, 6/1/03........... 493,424
1,500,000 Tyco International Group SA, 5.88,
11/1/04 (b)........................... 1,492,930
1,200,000 United Dominion Realty Trust, 8.13%,
11/15/00.............................. 1,205,490
2,000,000 US Bancorp, 6.50%, 2/1/08............... 2,097,734
2,700,000 US Bancorp, 5.70%, 12/15/08............. 2,685,909
325,000 Viacom, Inc., 7.75%, 6/1/05............. 355,325
1,500,000 Waste Management, Inc., 6.13%,
7/15/01............................... 1,518,275

SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ ------------
<C> <S> <C>
CORPORATE BONDS & NOTES, CONTINUED
1,000,000 Waste Management, Inc., 7.65%,
3/15/11............................... $ 1,123,915
250,000 WMX Technologies, Inc., 7.00%,
10/15/06.............................. 264,264
3,000,000 360 Communications Co., 7.60%, 4/1/09... 3,401,730
------------
Total Corporate Bonds & Notes
(cost $94,382,821) 95,137,509
------------
MORTGAGE BACKED SECURITIES (7.3%)
1,909,655 FHLMC, Pool E00566, 6.50%, 8/1/13....... 1,941,298
587,834 FHLMC, Pool E69646, 6.0%, 3/1/13........ 590,961
1,932,967 FHLMC, Pool E70688, 6.00%, 6/1/13....... 1,943,250
968,058 FNMA, Pool 251818, 6.00%, 6/1/18........ 962,821
262,416 FNMA, Pool 399774, 7.00%, 5/1/28........ 268,090
559,728 FNMA, Pool 417599, 6.50%, 4/1/28........ 564,278
900,126 FNMA, Pool 422848, 6.00%, 4/1/18........ 895,256
1,264,043 FNMA, Pool 425701, 6.50%, 5/1/13........ 1,283,800
342,704 FNMA, Pool 425797, 7.00%, 6/1/24........ 350,483
299,703 FNMA, Pool 428152, 7.00%, 5/1/28........ 306,183
983,687 FNMA, Pool 428968, 6.00%, 6/1/28........ 972,217
------------
Total Mortgage Backed Securities
(cost $9,914,316) 10,078,637
------------
MUNICIPAL BONDS & NOTES (6.0%)
1,000,000 Birmingham, AL, Water & Sewer, Tax RV,
Series B, 5.87%, 1/1/09............... 998,500
150,000 Denver, CO, Urban Renewal Authority, Tax
Increment Revenue Bonds, Adams Mark
Hotel, Series A, 6.37%, 9/1/02........ 155,070
1,000,000 Madison WI, Community Development
Authority RV, U.S. Bank N.A. insured,
6.20%, 7/1/18......................... 1,009,201
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements 16 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------
CORPORATE BOND FUND
SCHEDULE OF INVESTMENTS (concluded)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ ------------
<C> <S> <C>
MUNICIPAL BONDS & NOTES, CONTINUED
930,000 Oklahoma County, OK, Finance Authority
MFH RV, Oakridge Village Apartments,
Series A, HUD Section 8 insured,
8.05%, 10/1/09........................ $ 996,280
270,000 Reeves County, TX, Tax Certificates of
Participation, 6.70%, 3/31/05......... 274,485
200,000 Show Low, AZ, IDA Hospital RV, Navapache
Regional Medical Center, Series B, ACA
insured, 6.13%, 12/1/99............... 201,616
200,000 Show Low, AZ, IDA Hospital RV, Navapache
Regional Medical Center, Series B, ACA
insured, 6.25%, 12/1/00............... 203,227
250,000 Show Low, AZ, IDA Hospital RV, Navapache
Regional Medical Center, Series B, ACA
insured, 6.50%, 12/1/02............... 258,687
290,000 Show Low, AZ, IDA Hospital RV, Navapache
Regional Medical Center, Series B, ACA
insured, 6.60%, 12/1/03............... 302,676
250,000 St Charles County, MO, Public Arena
Authority Leasehold Taxable RV, Family
Area Project, 6.54%, 9/15/05.......... 253,892
2,000,000 Tallulah, LA, Youth Correctional, RV,
AMBAC insured, 6.65%, 11/1/08......... 2,147,450
1,500,000 Worcester, MA, Pension Funding Loan, FSA
insured, 6.25%, 1/1/28................ 1,489,200
------------
Total Municipal Bonds & Notes
(cost $8,068,777) 8,290,284
------------

SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ ------------
PREFERRED STOCK (1.5%)
1,000,000 Centaur Funding Corp. (b)............... $ 1,048,125
4,000,000 Lincoln National Capital................ 1,037,500
------------
Total Preferred Stock
(cost $2,000,000) 2,085,625
------------
U.S. TREASURY OBLIGATIONS (7.8%)
U.S. TREASURY NOTES (1.8%)
500,000 5.25%, 8/15/03.......................... 512,657
150,000 7.50%, 2/15/05.......................... 171,750
1,340,000 7.00%, 7/15/06.......................... 1,526,344
300,000 4.75%, 11/15/08......................... 302,438
------------
Total U.S. Treasury Notes
(cost $2,507,050) 2,513,189
------------
U.S. TREASURY BONDS (6.0%)
5,195,000 6.13%, 11/15/27......................... 5,820,025
2,300,000 5.50%, 8/15/28.......................... 2,411,405
------------
Total U.S. Treasury Bonds
(cost $8,325,066) 8,231,430
------------
Total U.S. Treasury Obligations
(cost $10,832,116) 10,744,619
------------
SHORT-TERM HOLDINGS (3.6%)
4,904,880 Dreyfus Government Cash Management Fund,
4.79%
(cost $4,904,880)..................... 4,904,880
------------
Total Investments (100.0%)
(cost $136,522,384) $137,709,010
------------
------------
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements 17 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------
GROWTH EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>
COMMON STOCK (97.4%)
BUILDING MATERIALS, HARDWARE, & GARDEN
SUPPLY (2.3%)
10,000 Home Depot, Inc......................... $ 611,875
-----------
BUSINESS SERVICES (10.0%)
7,700 Concord EFS, Inc. (c)................... 326,288
7,000 DST Systems, Inc. (c)................... 399,438
10,300 HBO & Co................................ 295,481
7,500 Microsoft Corp. (c)..................... 1,040,156
13,800 Oracle Systems Corp. (c)................ 595,125
-----------
2,656,488
-----------
CHEMICALS & ALLIED PRODUCTS (7.0%)
4,900 Clorox Co............................... 572,381
3,700 Estee Lauder Companies, Inc............. 316,350
5,300 Procter & Gamble Co..................... 483,956
8,600 Schering-Plough Corp.................... 475,150
-----------
1,847,837
-----------
COMMUNICATIONS (11.5%)
8,200 AT&T Corp............................... 617,050
7,200 Ascend Communications, Inc. (c)......... 473,400
7,100 Bell Atlantic Corp...................... 403,369
6,000 Clear Channel Communications, Inc.
(c)................................... 327,000
4,300 Lucent Technologies, Inc................ 473,000
14,100 SBC Communications, Inc................. 756,113
-----------
3,049,932
-----------
DOMESTIC DEPOSITORY INSTITUTIONS (2.3%)
5,723 BankAmerica Corp........................ 344,095
6,850 Washington Mutual, Inc.................. 261,584
-----------
605,679
-----------
EDUCATIONAL SERVICES (2.7%)
11,050 Symbol Technologies, Inc................ 706,509
-----------
ELECTRIC, GAS & SANITARY SERVICES (3.1%)
10,500 Houston Industries, Inc................. 337,313
10,500 Waste Management, Inc................... 489,563
-----------
826,876
-----------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT &
COMPONENTS, EXCEPT COMPUTER EQUIPMENT
(4.8%)
8,400 American Power Conversion Corp. (c)..... 406,875
8,400 General Electric Co..................... 857,325
-----------
1,264,200
-----------

SECURITY
SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>

ENGINEERING, ACCOUNTING, RESEARCH,
MANAGEMENT & RELATED SERVICES (1.7%)
15,200 Halliburton Co.......................... $ 450,300
-----------
FEDERAL AGENCIES & INSTRUMENTALITIES (2.4%)
8,700 FNMA.................................... 643,800
-----------
FOOD & KINDRED PRODUCTS (0.7%)
2,900 Coca-Cola Co............................ 193,938
-----------
FOOD STORES (1.9%)
7,900 Albertson's, Inc........................ 503,131
-----------
GENERAL MERCHANDISE STORES (3.2%)
10,300 Wal-Mart Stores, Inc.................... 838,806
-----------
HEALTH CARE (0.8%)
3,000 IMS Health, Inc......................... 226,313
-----------
HOLDING & OTHER INVESTMENT OFFICES (1.0%)
5,000 Paychex, Inc............................ 257,188
-----------
INDUSTRIAL & COMMERCIAL MACHINERY &
COMPUTER EQUIPMENT (10.5%)
7,300 Cisco Systems, Inc. (c)................. 677,531
3,600 IBM Corp................................ 665,100
5,600 Intel Corp.............................. 663,950
3,500 Lexmark International
Group, Inc. (c)....................... 351,750
3,000 Linear Technology Corp.................. 268,688
3,900 Vitesse Semiconductor Corp. (c)......... 177,938
-----------
2,804,957
-----------
INSURANCE CARRIERS (2.6%)
7,200 American International Group, Inc....... 695,700
-----------
MEASURING, ANALYZING, & CONTROLLING
INSTRUMENTS; PHOTOGRAPHIC, MEDICAL &
OPTICAL GOODS (3.0%)
4,900 Allergan, Inc........................... 317,275
6,500 Medtronic, Inc.......................... 482,625
-----------
799,900
-----------
MISCELLANEOUS RETAIL (2.9%)
12,200 Bed Bath & Beyond, Inc. (c)............. 416,325
5,000 Costco Cos., Inc. (c)................... 360,938
-----------
777,263
-----------
MOTION PICTURE & VIDEO TAPE PRODUCTION (3.3%)
14,400 Time Warner, Inc........................ 893,700
-----------
NONDEPOSITORY CREDIT INSTITUTIONS (1.5%)
5,200 Providian Financial Corp................ 390,000
-----------
OIL & GAS EXTRACTION (4.2%)
7,400 Atlantic Richfield Co................... 482,850
8,100 Enron Corp.............................. 462,205
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements 18 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------
GROWTH EQUITY FUND
SCHEDULE OF INVESTMENTS (concluded)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>
OIL & GAS EXTRACTION, CONTINUED
7,000 Noble Affiliates, Inc................... $ 172,375
-----------
1,117,430
-----------
PHARMACEUTICAL PREPARATIONS (10.2%)
5,000 American Home Products Corp............. 281,563
4,900 Bristol-Myers Squibb Co................. 655,680
5,600 Eli Lilly & Co.......................... 497,700
3,200 Merck & Co., Inc........................ 472,600
3,500 Pfizer, Inc............................. 439,030
5,800 Watson Pharmaceuticals, Inc. (c)........ 364,675
-----------
2,711,248
-----------

<CAPTION>
SECURITY
SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>

SECURITY & COMMODITY BROKERS, DEALERS,
EXCHANGES & SERVICE (2.0%)
7,600 Morgan Stanley, Dean Witter, & Co....... $ 539,600
-----------
WHOLESALE TRADE-NONDURABLE GOODS (1.8%)
6,200 McKesson Corp........................... 490,188
-----------
Total Common Stock
(cost $22,899,080) 25,902,858
-----------
SHORT-TERM HOLDINGS (2.6%)
681,557 Dreyfus Government Cash Management Fund,
4.79%
(cost $681,557)....................... 681,557
-----------
Total Investments (100.0%)
(cost $23,580,637) $26,584,415
-----------
-----------
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements 19 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>
COMMON STOCK (95.6%)
APPAREL & OTHER FINISHED PRODUCTS MADE
FROM FABRICS & SIMILAR MATERIALS (3.1%)
38,300 Warnaco Group, Inc.-Class A............. $ 967,075
-----------
BUSINESS SERVICES (13.3%)
29,200 Electronic Data Systems Corp............ 1,467,300
42,900 First Data Corp......................... 1,359,394
33,600 Service Corp. International............. 1,278,900
-----------
4,105,594
-----------
COMMUNICATIONS (3.6%)
16,700 GTE Corp................................ 1,126,206
-----------
DOMESTIC DEPOSITORY INSTITUTIONS (2.9%)
14,600 First Union Corp........................ 887,863
-----------
ELECTRIC, GAS & SANITARY SERVICES (7.9%)
8,600 Duke Energy Corp........................ 550,938
27,300 El Paso Energy Corp..................... 950,381
20,500 Waste Management, Inc................... 955,813
-----------
2,457,132
-----------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT &
COMPONENTS, EXCEPT COMPUTER EQUIPMENT (4.9%)
31,500 American Power Conversion
Corp. (c)........................... 1,525,780
-----------
GENERAL MERCHANDISE STORES (2.7%)
19,400 Federated Department Stores (c)......... 845,113
-----------
HEALTH SERVICES (4.3%)
23,600 Columbia HCA Healthcare Corp............ 584,100
28,200 Tenet Healthcare Corp. (c).............. 740,250
-----------
1,324,350
-----------
INDUSTRIAL & COMMERCIAL MACHINERY &
COMPUTER EQUIPMENT (16.2%)
18,400 Cooper Cameron Corp. (c)................ 450,800
5,100 IBM Corp................................ 942,225
13,300 Intel Corp.............................. 1,576,880
28,400 Pall Corp............................... 718,875
15,300 Texas Instruments, Inc.................. 1,309,105
-----------
4,997,885
-----------
INSURANCE AGENTS, BROKERS & SERVICE (3.6%)
18,600 Marsh & McLennan Cos., Inc.............. 1,086,938
-----------
INSURANCE CARRIERS (3.5%)
16,700 MBIA, Inc............................... 1,094,894
-----------

<CAPTION>
SECURITY
SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>
MEASURING, ANALYZING, & CONTROLLING
INSTRUMENTS; PHOTOGRAPHIC, MEDICAL &
OPTICAL GOODS (2.0%)
9,400 Baxter International, Inc............... $ 604,538
-----------
METAL MINING (1.5%)
25,500 Newmont Mining Corp..................... 460,594
-----------
MOTION PICTURES & VIDEO TAPE PRODUCTION (2.0%)
21,400 King World Productions, Inc. (c)........ 629,963
-----------
NONDEPOSITORY CREDIT INSTITUTIONS (4.8%)
31,100 SLM Holding Corp........................ 1,492,800
-----------
OIL & GAS EXTRACTION (2.6%)
22,400 Burlington Resources, Inc............... 802,200
-----------
PAPER & ALLIED PRODUCTS (3.3%)
10,500 Bowater, Inc............................ 435,094
14,100 Champion International Corp............. 571,050
-----------
1,006,144
-----------
RUBBER & MISCELLANEOUS PLASTICS
PRODUCTS (1.2%)
19,200 Weatherford International, Inc. (c)..... 372,000
-----------
SECURITIES, BROKERS, DEALERS &
ADVISORS (2.0%)
16,800 A.G. Edwards, Inc....................... 625,800
-----------
TRANSPORTATION EQUIPMENT (7.7%)
19,500 B.F. Goodrich Co........................ 699,563
17,200 Dana Corp............................... 703,050
11,600 Lockheed Martin Corp.................... 983,100
-----------
2,385,713
-----------
WHOLESALE TRADE-NONDURABLE GOODS (2.5%)
28,300 Sysco Corp.............................. 776,481
-----------
Total Common Stock
(cost $29,079,077) 29,575,063
-----------
SHORT-TERM HOLDINGS (4.4%)
359,225 Dreyfus Government Cash Management Fund,
4.79%................................. 359,225
1,000,000 FHLMC Discount Note, 5.11%, 1/4/99...... 1,000,000
-----------
Total Short Term Holdings
(cost $1,359,225) 1,359,225
-----------
Total Investments (100.0%)
(cost $30,438,302) $30,934,288
-----------
-----------
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements 20 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------

NOTES TO SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------

(a) The interest rates shown reflect the variable rate in effect on December 31,
1998.

(b) Securities that may be resold to qualified institutional buyers under rule
144A or securities offered pursuant to 4(2) of the Securities Act of 1933,
as amended. The Board of Trustees has deemed these securities to be liquid
at December 31, 1998.

(d) Securities that are fair valued as determined by the Board of Trustees. (See
Note 2 to Notes to Financial Statements).

Definition of certain terms:

<TABLE>
<S> <C>
ACA American Capital Assets
AMBAC American Municipal Bond Assurance Corporation
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
FSA Financial Security Assurance, Inc.
IDA Industrial Development Authority
MFH Multi-Family Housing
RV Revenue Bonds
V/R Variable Rate
</TABLE>

See Notes to Financial Statements 21 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------

STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GOVERNMENT CORPORATE GROWTH VALUE
BOND FUND BOND FUND EQUITY FUND EQUITY FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2)
Investments at cost............... $ 63,804,754 $ 136,522,384 $ 23,580,637 $ 30,438,302
Net unrealized appreciation....... 1,079,444 1,186,626 3,003,778 495,986
------------- ------------- ------------- -------------
Total investments at value...... 64,884,198 137,709,010 26,584,415 30,934,288
Interest, dividends and other
receivables........................ 1,037,538 1,893,891 17,363 39,982
Receivable for investments sold..... -- -- 9,777,031 --
Organization costs, net of
amortization (Note 2).............. 25,468 25,403 25,468 25,468
------------- ------------- ------------- -------------
Total Assets............................ 65,947,204 139,628,304 36,404,277 30,999,738
------------- ------------- ------------- -------------
LIABILITIES:
Dividends payable................... 200,474 645,733 -- --
Payable for Fund shares redeemed.... -- -- 9,455,635 --
Payable for investments purchased... -- 1,496,929 112,090 --
Payable to investment adviser (Note
3)................................. 22,718 50,237 7,331 6,281
Payable to administrator (Note 3)... 8,219 17,460 4,399 3,768
Payable to shareholder servicing
agent (Note 3)..................... 9,315 19,788 4,355 3,732
Accrued fees, other liablilities and
other expenses..................... 30,913 60,167 21,248 11,460
------------- ------------- ------------- -------------
Total Liabilities....................... 271,639 2,290,314 9,605,058 25,241
------------- ------------- ------------- -------------
NET ASSETS.............................. $ 65,675,565 $ 137,337,990 $ 26,799,219 $ 30,974,497
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
COMPONENTS OF NET ASSETS:
Paid in capital..................... $ 64,596,309 $ 136,184,278 $ 22,187,895 $ 32,407,576
Undistributed net investment
income............................. 423 423 1,715 649
Net unrealized appreciation......... 1,079,444 1,186,626 3,003,778 495,986
Accumulated net realized gain
(loss)............................. (611) (33,337) 1,605,831 (1,929,714)
------------- ------------- ------------- -------------
NET ASSETS.............................. $ 65,675,565 $ 137,337,990 $ 26,799,219 $ 30,974,497
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
NET ASSETS BY SHARE CLASS
Trust Shares........................ $ -- $ -- $ 373,341 $ 304,271
Institutional Shares................ 65,675,565 137,337,990 26,425,878 30,670,226
------------- ------------- ------------- -------------
NET ASSETS.............................. $ 65,675,565 $ 137,337,990 $ 26,799,219 $ 30,974,497
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
SHARES OF BENEFICIAL INTEREST
Trust Shares........................ -- -- 32,603 33,204
Institutional Shares................ 6,405,517 13,615,356 2,300,377 3,338,042

NET ASSET VALUE (OFFERING AND REDEMPTION
PRICE) PER SHARE
Trust Shares........................ $ -- $ -- $ 11.45 $ 9.16
Institutional Shares................ $ 10.25 $ 10.09 $ 11.49 $ 9.19
</TABLE>

See Notes to Financial Statements 22 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------

STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1998(a)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GOVERNMENT CORPORATE GROWTH VALUE EQUITY
BOND FUND BOND FUND EQUITY FUND FUND
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividend income..................... $ -- $ 16,356 $ 172,100 $ 196,783
Interest income..................... 2,029,609 5,630,705 71,659 86,369
----------- ----------- ----------- ------------
Total Investment Income................. 2,029,609 5,647,061 243,759 283,152
----------- ----------- ----------- ------------
EXPENSES:
Investment advisory (Note 3)........ 99,932 266,091 83,606 71,058
Shareholder servicing (Note 3)...... 40,535 96,504 20,680 17,444
Administration (Note 3)............. 52,679 135,972 31,346 26,603
Transfer agent services (Note 3)
Trust Shares...................... -- -- 1,020 1,011
Institutional Shares.............. 20,372 19,851 27,453 27,432
Accounting (Note 3)................. 28,258 31,581 36,258 36,258
Distribution (Note 3)............... 54 -- 540 484
Legal............................... 14,034 35,414 8,037 6,738
Audit............................... 13,000 13,000 13,000 13,000
Custody............................. 1,960 17,905 11,227 5,886
Registration........................ 18,008 39,428 7,113 9,137
Trustees............................ 761 1,867 440 361
Amortization of organization costs
(Note 2)........................... 4,532 4,597 4,532 4,532
Miscellaneous....................... 7,199 28,247 5,888 4,542
----------- ----------- ----------- ------------
Total Expenses.......................... 301,324 690,457 251,140 224,486
Expenses reimbursed and fees waived
(Note 4)............................... (46,580) (118,031) (40,618) (45,806)
----------- ----------- ----------- ------------
Net Expenses............................ 254,744 572,426 210,522 178,680
----------- ----------- ----------- ------------
NET INVESTMENT INCOME................... 1,774,865 5,074,635 33,237 104,472
----------- ----------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on
investments sold................... 889,300 2,741,126 3,424,032 (1,929,714)
Net change in unrealized
appreciation....................... 1,079,444 1,186,626 3,003,778 495,986
----------- ----------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS......................... 1,968,744 3,927,752 6,427,810 (1,433,728)
----------- ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.............. $3,743,609 $9,002,387 $6,461,047 $(1,329,256)
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>

- ------------------------------
(a) See Note 1 of Notes to Financial Statements for date of commencement of
operations.

See Notes to Financial Statements 23 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------

STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998(a)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT CORPORATE GROWTH EQUITY VALUE EQUITY
BOND FUND BOND FUND FUND FUND
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
NET ASSETS--BEGINNING OF PERIOD......... $ -- $ -- $ -- $ --
OPERATIONS:
Net investment income................. 1,774,865 5,074,635 33,237 104,472
Net realized gain (loss) on
investments sold..................... 889,300 2,741,126 3,424,032 (1,929,714)
Net change in unrealized
appreciation......................... 1,079,444 1,186,626 3,003,778 495,986
------------- ------------- ------------- ------------
Net increase (decrease) in net
assets resulting from operations... 3,743,609 9,002,387 6,461,047 (1,329,256)
------------- ------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Trust Shares... -- -- (297) (905)
Net investment income--Institutional
Shares............................... (1,774,865) (5,074,635) (31,648) (103,341)
Net realized capital gain from
investments--Trust Shares............ -- -- (18,252) --
Net realized capital gain from
investments--Institutional Shares.... (889,917) (2,774,463) (1,799,949) --
------------- ------------- ------------- ------------
Total distributions to
shareholders....................... (2,664,782) (7,849,098) (1,850,146) (104,246)
------------- ------------- ------------- ------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares--Trust Shares.......... -- -- 1,620,834 1,519,346
Sale of shares--Institutional
Shares............................... 85,999,880 177,765,653 48,487,911 34,931,423
Reinvestment of distributions--Trust
Shares............................... -- -- 18,549 905
Reinvestment of
distributions--Institutional
Shares............................... 920,555 2,329,123 1,285,045 45,654
Redemption of shares--Trust Shares.... -- -- (1,302,403) (1,206,242)
Redemption of shares--Institutional
Shares............................... (22,323,697) (43,910,075) (27,921,618) (2,883,087)
------------- ------------- ------------- ------------
Net increase from capital
transactions....................... 64,596,738 136,184,701 22,188,318 32,407,999
------------- ------------- ------------- ------------
Net increase in net assets.......... 65,675,565 137,337,990 26,799,219 30,974,497
------------- ------------- ------------- ------------
NET ASSETS--END OF PERIOD(A)............ $ 65,675,565 $ 137,337,990 $ 26,799,219 $30,974,497
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
(A) Including accumulated
undistributed net investment
income.............................. $ 423 $ 423 $ 1,715 $ 649
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------

SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
------------- ------------- ------------- ------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares--Trust Shares.......... -- -- 161,489 153,755
Sale of shares--Institutional
Shares............................... 8,492,304 17,666,188 4,716,662 3,655,098
Reinvestment of distributions--Trust
Shares............................... -- -- 1,622 105
Reinvestment of
distributions--Institutional
Shares............................... 89,801 231,044 111,988 5,273
Redemption of shares--Trust Shares.... -- -- (130,508) (120,656)
Redemption of shares--Institutional
Shares............................... (2,176,588) (4,281,876) (2,528,273) (322,329)
------------- ------------- ------------- ------------
Net increase in shares................ 6,405,517 13,615,356 2,332,980 3,371,246
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
</TABLE>

- ------------------------------
(a) See Note 1 of Notes to Financial Statements for date of commencement of
operations.

See Notes to Financial Statements 24 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED PER SHARE DATA FOR A SHARE OF THE FUND OUTSTANDING THROUGHOUT EACH
PERIOD:

<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
DECEMBER 31, 1998(a)
----------------------------------
GOVERNMENT CORPORATE
BOND FUND BOND FUND
--------------- --------------
INSTITUTIONAL INSTITUTIONAL
SHARES SHARES
--------------- --------------
<S> <C> <C>
Net asset value, beginning of period............................. $ 10.00 $ 10.00
--------------- --------------
Investment Operations:
Net investment income........................................ 0.39 0.43
Net realized and unrealized gain on investments.............. 0.39 0.30
--------------- --------------
Total from Investment Operations................................. 0.78 0.73
--------------- --------------
Distributions from:
Net investment income.......................................... (0.39) (0.43)
Net realized gain on investments............................... (0.14) (0.21)
--------------- --------------
Total Distributions.............................................. (0.53) (0.64)
--------------- --------------
Net asset value, end of period................................... $ 10.25 $ 10.09
--------------- --------------
--------------- --------------
Total Return (b)................................................. 7.96% 7.50%
Ratio/Supplementary Data:
Ratios to average net assets:
Expenses, including reimbursement/waiver of fees (c)......... 0.73% 0.63%
Expenses, excluding reimbursement/waiver of fees (c)......... 0.85% 0.76%
Net investment income, including reimbursement/waiver of fees
(c)......................................................... 5.05% 5.60%
Portfolio turnover rate.......................................... 113.50% 377.36%
Net assets at end of period (000's omitted)...................... $ 65,676 $137,338
</TABLE>

- ------------------------------
(a) See Note 1 of Notes to Financial Statements for date of commencement of
operations.
(b) Total returns would have been lower had certain expenses not been reduced
during the period shown (Note 4).
(c) Annualized.

See Notes to Financial Statements 25 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS (CONCLUDED)
- --------------------------------------------------------------------------------
SELECTED PER SHARE DATA FOR A SHARE OF THE FUND OUTSTANDING THROUGHOUT EACH
PERIOD:

<TABLE>
<CAPTION>
FOR THE PERIOD ENDED DECEMBER 31, 1998(a)
---------------------------------------------------------------------------
GROWTH VALUE
EQUITY FUND EQUITY FUND
-------------------------------- -------------------------------------
INSTITUTIONAL INSTITUTIONAL
TRUST SHARES SHARES TRUST SHARES SHARES
------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 10.00 $ 10.00 $ 10.00 $ 10.00
------------- ------------- ------- --------
Investment Operations:
Net investment income......................... 0.01 0.01 0.02 0.03
Net realized and unrealized gain (loss) on
investments.................................. 2.05 2.09 (0.83) (0.81)
------------- ------------- ------- --------
Total from Investment Operations.................. 2.06 2.10 (0.81) (0.78)
------------- ------------- ------- --------
Distributions from:
Net investment income........................... (0.01) (0.01) (0.03) (0.03)
Net realized gain on investments................ (0.60) (0.60) -- --
------------- ------------- ------- --------
Total Distributions............................... (0.61) (0.61) (0.03) (0.03)
------------- ------------- ------- --------
Net asset value, end of period.................... $ 11.45 $ 11.49 $ 9.16 $ 9.19
------------- ------------- ------- --------
------------- ------------- ------- --------
Total Return (b).................................. 20.57% 20.97% (8.06)% (7.76)%
Ratio/Supplementary Data:
Ratios to average net assets:
Expenses, including reimbursement/waiver of
fees (c)..................................... 1.25% 1.00% 1.25% 1.00%
Expenses, excluding reimbursement/waiver of
fees (c)..................................... 2.29% 1.19% 2.40% 1.25%
Net investment income, including
reimbursement/waiver of fees (c)............. 0.14% 0.16% 0.34% 0.59%
Portfolio turnover rate........................... 135.38% 135.38% 36.95% 36.95%
Net assets at end of period (000's omitted)....... $ 373 $26,426 $ 304 $ 30,670
</TABLE>

See Notes to Financial Statements 26 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1998
- --------------------------------------------------------------------------------

NOTE 1. ORGANIZATION

The Memorial Funds (the "Trust") is an open-end management investment company
organized as a Delaware business trust. The Trust currently has four active
diversified investment portfolios (each a "Fund" and, collectively, the
"Funds"). The Trust Instrument authorizes each Fund to issue an unlimited number
of shares of beneficial interest. The classes of each Fund and their dates of
commencement of operations are as follows:

<TABLE>
<S> <C>
Government Bond Fund (Institutional Shares) March 29, 1998

Corporate Bond Fund (Institutional Shares) March 25, 1998

Growth Equity Fund (Trust and Institutional
Shares) March 29, 1998

Value Equity Fund (Trust and Institutional Shares) March 29, 1998
</TABLE>

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements are prepared in accordance with generally accepted
accounting principles, which require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual results could differ from those
estimates.

The following represent significant accounting policies of the Funds:

SECURITY VALUATION--Securities, other than short-term securities, held by the
Funds for which market quotations are readily available are valued using the
last reported sales price provided by independent pricing services as of the
close of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
time), on each Fund's business day. If no sales are reported, the mean of the
last bid and asked price is used. In the absence of readily available market
quotations, securities are valued at fair value as determined by the Board of
Trustees. At December 31, 1998, Corporate Bond Fund holds securities valued at
fair value as determined by the Board of Trustees amounting to $2,318,781, or
1.7% of the Fund's net assets. Securities with a maturity of 60 days or less are
valued at amortized cost.

REALIZED GAIN AND LOSS--Security transactions are accounted for on a trade date
basis and realized gain and loss on investments sold is determined on the basis
of identified cost.

INTEREST AND DIVIDEND INCOME--Interest income is accrued as earned. Dividends on
securities held by the Funds are recorded on the ex-dividend date.

DISTRIBUTIONS TO SHAREHOLDERS--Distributions of net investment income to
shareholders are declared daily and paid monthly by Government Bond Fund and
Corporate Bond Fund. Net investment income distributions for Growth Equity Fund
and Value Equity Fund are declared and paid quarterly. Net capital gains for the
Funds, if any, are distributed to shareholders at least annually. Distributions
are based on amounts calculated in accordance with applicable income tax
regulations.

ORGANIZATION COSTS--The costs incurred by the Funds in connection with their
organization and registration of shares have been capitalized and are being
amortized using the straight-line method over a five-year period beginning with
the commencement of the Funds' operations.

FEDERAL TAXES--Each Fund intends to qualify, and continue to qualify, each year
as a regulated investment company 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, each Fund
will not be subject to a federal excise tax. As the Funds intend to meet these
minimum distribution requirements, no federal income tax provision is currently
required.

As of December 31, 1998, Value Equity Fund had a capital loss carryover in the
amount of $1,035,112, expiring December 31, 2006, available to offset future net
realized capital gains.

NOTE 3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES

The investment adviser of each Fund is Forum Investment Advisors, LLC (the
"Adviser"). The Adviser receives monthly, from each Fund, an advisory fee at an
annual rate of 0.23% of the average daily net assets of Government Bond Fund and
Corporate Bond Fund, and 0.35% of the average daily net assets of Growth Equity
Fund and Value Equity Fund. Prior to September 11, 1998, the Adviser received an

27 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998
- --------------------------------------------------------------------------------
advisory fee at an annual rate of 0.35% of the average daily net assets of
Government Bond Fund and Corporate Bond Fund and 0.45% of the average daily net
assets of Growth Equity Fund and Value Equity Fund. In addition, the Adviser has
retained the following investment sub-advisers (each a "Sub-adviser") for each
Fund pursuant to an investment sub-advisory agreement with the Adviser:

<TABLE>
<S> <C>
Government Bond Fund The Northern Trust Company

Corporate Bond Fund Conseco Capital Management, Inc.

Growth Equity Fund Davis Hamilton Jackson & Associates, Inc.

Value Equity Fund Beutel, Goodman Capital Management
</TABLE>

Currently, the Adviser pays the Sub-advisers of the Government Bond Fund and the
Corporate Bond Fund an annual fee of 0.20% of the average daily net assets of
each Fund. The Sub-advisers for Growth Equity Fund and Value Equity Fund are
currently paid an annual fee of 0.30% of the average daily net assets of each
Fund. The amount of the fees paid by the Adviser to each Sub-adviser may vary
from time to time as a result of periodic negotiations with each Sub-adviser
regarding such matters as the nature and extent of the services provided (other
than investment selection and order placement activities). The amount of the
advisory fees paid by each Fund will not vary as a result of changes in the
sub-advisory fees, however. For the period ended December 31, 1998, the Adviser
paid the respective Fund's sub-adviser $46,826, $120,866, $41,795, $35,471, net
of $23,413, $60,432, $20,896, $17,735 sub-advisory fee waivers for Government
Bond Fund, Corporate Bond Fund, Growth Equity Fund and Value Equity Fund,
respectively. To assist 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 can monitor and evaluate the
performance of the Funds and Sub-advisers. Wellesley receives a fee from the
Adviser of 0.02% of the average annual net assets of the Funds (decreasing to
0.015% as average annual net assets exceed $250 million but are less than $500
million, and 0.01% as average annual net assets exceed $500 million). At a
minimum, Wellesley shall receive an aggregate annual fee of $30,000.

On behalf of each Fund, the Trust has entered into an Administration Agreement
with Forum Administrative Services, LLC ("FAdS"). For its services, FAdS
receives a fee at an annual rate of 0.15% of the average daily net assets of
each Fund for the first $150 million in assets, and 0.10% of the average daily
net assets of each Fund over $150 million, subject to an annual minimum of
$30,000.

Forum Shareholder Services, LLC ("FSS"), an affiliate of FAdS, serves as each
Fund's transfer agent and dividend disbursing agent, for which it receives a fee
of $24,000 per year, plus certain account and additional class charges.

Forum Financial Services, Inc. ("FFSI"), a registered broker-dealer and a member
of the National Association of Securities Dealers, Inc., acts as each Fund's
distributor pursuant to a separate distribution agreement with the Trust. The
Trust has adopted a plan of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Act"), with respect to Trust
Shares under which the Trust pays FFSI a distribution fee at an annual rate of
0.25% of the average daily net assets of the Trust Shares of each Fund. FFSI may
pay any or all amounts of these payments to various institutions which provide
distribution or shareholder services for Trust Shares. The plan obligates the
Funds to pay FFSI as compensation for FFSI's distributions and shareholder
services and not as reimbursement for certain expenses incurred.

Forum Accounting Services, LLC ("FAcS") serves as the fund accountant for each
Fund. For its services, FAcS receives a fee of $36,000 per year, per Fund, plus
certain share class charges and certain amounts based upon the number and types
of portfolio transactions within each Fund.

The Trust has adopted a Shareholder Service Plan which allows it to 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
pays Memorial Group, Inc. a fee at an annual rate of 0.17% of the average daily
net assets of the Institutional Shares of Government Bond Fund and Corporate
Bond Fund and 0.15% of the average daily net assets of the Institutional Shares
of Growth Equity Fund and Value Equity Fund. Prior to September 11, 1998, FAdS
paid Memorial Group a fee at an annual rate of 0.05% of the average daily net
assets of the Institutional Shares of each Fund.

Each Trustee, who is not an "affiliated person" as defined in the Act, receives
from the Fund an annual fee of $5,000, plus out of pocket expenses. In addition,
each Trustee receives $500 per meeting attended. One Trustee has waived all fees
for the entire fiscal year.

28 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1998
- --------------------------------------------------------------------------------

NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES

The Adviser, Sub-advisers, FFSI, FSS and FAcS have voluntarily waived a portion
of their fees. In addition, FAdS may, under certain circumstances, assume
certain expenses of the Funds. For the period ended December 31, 1998, fees
waived and expenses reimbursed were as follows:

<TABLE>
<CAPTION>
INVESTMENT EXPENSES
ADVISORY REIMBURSED
FEE FFSI FSS FAcS BY FAdS TOTAL
--------- ---- ---- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Government Bond Fund............... $42,570 $ 54 $474 $3,065 $ 417 $ 46,580
Corporate Bond Fund................ 118,031 -- -- -- -- 118,031
Growth Equity Fund................. 31,363 540 765 3,065 4,885 40,618
Value Equity Fund.................. 26,719 484 760 3,065 14,778 45,806
</TABLE>

NOTE 5. SECURITIES TRANSACTIONS

The cost of securities purchased and the proceeds from sales of securities,
other than short-term securities, for the period ended December 31, 1998, were
as follows:

<TABLE>
<CAPTION>
COST OF
COST OF PROCEEDS FROM GOVERNMENT PROCEEDS FROM
PURCHASES SALES PURCHASES GOVERNMENT SALES
------------- -------------- ------------- ------------------
<S> <C> <C> <C> <C>
Government Bond Fund............... $115,429,345 $ 56,671,970 $ 113,100,859 $ 56,098,136
Corporate Bond Fund................ 558,268,785 428,786,241 302,701,283 279,248,410
Growth Equity Fund................. 56,775,541 37,302,470 -- --
Value Equity Fund.................. 39,623,982 8,618,038 -- --
</TABLE>

For federal income tax purposes, the tax cost basis of investment securities
owned, the aggregate gross unrealized appreciation, the aggregate gross
unrealized depreciation and net unrealized appreciation as of December 31, 1998,
were as follows:

<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
-------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Government Bond Fund............... $ 63,805,365 $1,168,167 $ 89,334 $1,078,833
Corporate Bond Fund................ 136,620,661 1,631,400 543,051 1,088,349
Growth Equity Fund................. 23,959,477 3,050,990 426,052 2,624,938
Value Equity Fund.................. 30,458,044 3,587,992 3,111,748 476,244
</TABLE>

NOTE 6. MEETING OF SPECIAL SHAREHOLDERS (UNAUDITED)

On December 21, 1998, a special meeting of shareholders of Growth Equity Fund
was held to consider a proposal to approve a new investment sub-advisory
agreement between the Trust, the Adviser and the Fund's Sub-adviser. The
proposal was brought to the shareholders of the Fund because Davis Hamilton
Jackson & Associates, Inc., the Fund's Sub-adviser, intended to enter into an
agreement with Affiliated Managers Group, Inc. ("AMG") and certain wholly owned
subsidiaries of AMG, to form a Delaware limited partnership called Davis
Hamilton Jackson & Associates, L.P. ("DHJA"). The Act requires a vote when there
is a change of ownership of a mutual fund's investment adviser of the type that
was proposed. As a result, this required the approval of the new investment
sub-advisory agreement by the shareholders of the Growth Equity Fund. The new
investment sub-advisory agreement was approved by 1,991,001.507 shares out of
2,804,716.235 (70.99%) shares of the Fund present at the meeting. The new
investment sub-advisory agreement was effective at the close of business on
December 31, 1998. AMG, a holding company that invests in investment management
firms, may be deemed to control DHJA due to an investment it has made in DHJA.
AMG does not participate in the day-to-day management or the investment process
of DHJA.

29 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

DECEMBER 31, 1998
- --------------------------------------------------------------------------------

NOTE 7. FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR
(UNAUDITED)

For federal income tax purposes, dividends from short term capital gains are
classified as ordinary income. The percentage of qualifying dividends eligible
for the corporate dividend received deduction for Corporate Bond Fund, Growth
Equity Fund and Value Equity Fund were 0.21%, 4.45% and 100.00%, respectively.

30 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------

INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------

The Board of Trustees and Shareholders of The 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 The Memorial Funds, (collectively the "Funds"), including
the schedules of investments as of December 31, 1998, and the related statements
of operations, statements of changes in net assets, and financial highlights for
the period from the commencement of operations on March 29, 1998 (March 25, 1998
for the Corporate Bond Fund) to December 31, 1998. These financial statements
and financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights 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 financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
financial highlights. Our procedures included confirmation of securities owned
as of December 31, 1998 by correspondence with the custodian and brokers. 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 financial statements and financial highlights 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 December 31, 1998, the results of their operations, changes in their
net assets and financial highlights for the periods referred to above in
conformity with generally accepted accounting principles.

[SIGNATURE]

Boston, Massachusetts
February 5, 1999

31 Memorial Funds
<PAGE>
THE MEMORIAL GROUP

INVESTMENT ADVISER
Forum Investment Advisors, LLC
Two Portland Square
Portland, Maine 04101

<TABLE>
<S> <C>
ADMINISTRATOR TRANSFER AGENT & DIVIDEND DISBURSING AGENT
Forum Administrative Services, LLC Forum Shareholder Services, LLC
Two Portland Square Two Portland Square
Portland, Maine 04101 Portland, Maine 04101
</TABLE>

This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective prospectus, which includes
information regarding the Funds' objectives and policies, experience of its
management, marketability of shares, and other information.