MEMORIAL FUNDS, N-30D, 1999-09-03

MEMORIAL FUNDS
N-30D, 1999-09-03

Previous: EVERGREEN SELECT EQUITY TRUST, N-30D, 1999-09-03

Next: WESTPORT FUNDS, N-30D, 1999-09-03

<PAGE>
MEMORIAL FUNDS

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

June 30, 1999 (unaudited) SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------

Dear Fellow Shareholder:

On behalf of the Board of Directors, I am pleased to present the Semi-Annual
Report for the Memorial Funds for the period ended June 30, 1999.

MANAGEMENT COMMENTARY

It has been a very successful year -- both in terms of asset growth and fund
performance. As of June 30, 1999, shareholders had invested nearly $300 million
in the four existing Memorial Funds -- Corporate Bond Fund, Government Bond
Fund, Growth Equity Fund, and Value Equity Fund. Three of the four funds,
Corporate Bond Fund, Government Bond Fund, and Growth Equity Fund, placed in the
top quartile of their respective Lipper categories based on total return for the
one year period ended June 30, 1999.(1)

MARKET COMMENTARY

The past six months were a difficult time for fixed income securities,
particularly corporate bonds. In domestic equity markets, growth stocks
performed well, while value stocks showed little positive movement. However,
recent events in the U.S. economy may signal a turning point for both domestic
and international markets. In June 1999, the Federal Reserve Board ("the Fed"),
concerned that strong domestic growth and low unemployment could spark higher
inflation, raised the federal funds rate by 0.25% to 5%. Fear of such a rate
increase had put the Dow Jones Industrial Average (DJIA) into a tailspin during
May. When the Fed actually raised rates in June, and simultaneously announced a
return to a neutral position regarding the future direction of interest rates,
the stock and bond markets responded positively.

NEW DEVELOPMENTS

I also want to take this opportunity to inform you of several recent
developments affecting the Memorial Funds. First, as this Semi-Annual Report
goes to print, we are in the process of starting up two new Memorial Funds --
International Equity Fund and Equity Income Fund (a multi-manager fund investing
in value equity stocks and convertible bonds). The addition of these new funds
significantly broadens the investment options available to present and
prospective shareholders. The Board decided to start the new funds as a single
class, and is eliminating the Trust Share Class of the four existing funds as a
cost saving measure. Trust Class shareholders of the existing Memorial Funds
will be given the option of exchanging into the lower cost single class. The
investment minimum for each of the funds has been lowered to $2,000.

- ------------------------
(1)Source: Lipper Analytical Services, Inc. Rankings for Institutional Shares
based on total return for one year ended June 30, 1999. Corporate Bond Fund
ranked 17 out of 158 Corporate Debt A -- Rated Funds; Government Bond Fund
ranked 25 out of 184 General U.S. Government Bond Funds; Growth Equity Fund
ranked 150 out of 1,063 Growth Funds. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS. During this period, some of the Funds' fees were waived or expenses
reimbursed; otherwise total return would have been lower.
<PAGE>
- --------------------------------------------------------------------------------
MEMORIAL FUNDS
JUNE 30, 1999 (unaudited)(continued) SEMI-ANNUAL REPORT
- --------------------------------------------------------------------------------

Memorial Investment Advisors, Inc., an SEC registered investment adviser of
which I am the President, will provide advisory responsibilities for the new
funds, focusing on sub-adviser selection and oversight and asset allocation
services. Forum Financial Group and its affiliates will continue to serve the
Memorial Funds in the capacity of administrator, distributor, transfer agent and
fund accountant.

Finally, on behalf of the Board of Trustees of the Memorial Funds, I want to
personally thank all of you who have supported us through your investments. If
you have any questions or would like additional information about our funds,
please call Forum Fund Services, LLC, the funds' distributor, at 1-888-263-5593.

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
Sub-Adviser Interviews:..................................... 1
Government Bond Fund...................................... 1
Corporate Bond Fund....................................... 6
Growth Equity Fund........................................ 9
Value Equity Fund......................................... 12
FINANCIAL STATEMENTS OF THE MEMORIAL FUNDS
Schedules of Investments:
Government Bond Fund...................................... 15
Corporate Bond Fund....................................... 16
Growth Equity Fund........................................ 19
Value Equity Fund......................................... 21
Notes to Schedules of Investments........................... 22
Statements of Assets and Liabilities........................ 23
Statements of Operations.................................... 24
Statements of Changes in Net Assets......................... 25
Financial Highlights........................................ 27
Notes to Financial Statements............................... 30
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
MEMORIAL FUNDS
INVESTMENT ADVISER'S REPORT AND PERFORMANCE DATA
JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------

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 THE PERFORMANCE FOR THE FIRST SIX MONTHS OF THE FUND'S FISCAL YEAR
(JANUARY 1-JUNE 30, 1999), FOR THE ONE-YEAR PERIOD ENDING JUNE 30, 1999, AND
SINCE THE FUND'S INCEPTION (MARCH 29, 1998)?

A: Similar to the prior quarter, Treasury rates increased nearly one-half of a
percentage point across the yield curve during the second quarter of 1999.
Continued economic growth and mixed inflation data led to a 25 basis point
increase in the Fed Funds target rate at the end of June. The highly anticipated
increase was priced into the prevailing interest rate structure well in advance
of the actual decision.

For the latest calendar quarter, the Fund generated a negative total return of
- -1.02% versus a -0.85% return for the Lehman US Government Bond Index. Calendar
year-to-date, the Fund has generated a total return of -2.32% versus -2.27% for
the index. For the one-year period ending June 30, 1999, the Fund has generated
a total return of 2.77% versus 3.05% for the index. As of 06-30-99, the Fund has
generated a positive total return of 4.33% since its inception date.

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. We have maintained this
posture over the course of the past several quarters. Therefore, our interest
rate decision had little impact on the relative performance during the period.
Our sector decisions, however, did have a negative impact on relative
performance. Spread sensitive product had a difficult second quarter as
burgeoning supply, wider swap spreads, renewed liquidity concerns and Fed
activity all weighed on the market.

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

A: From an interest rate perspective, the directional movement towards higher
interest rates was at the higher end of the range we anticipated. In fact, over
the first six months of 1999, Treasury interest rates have risen approximately
one percentage point across the maturity spectrum. However, given our neutral
interest rate posture, we were successful with the management of the interest
rate factors.

The contribution of spread sensitive securities was much more volatile than we
anticipated. More recently, investors are demanding greater yield compensation
for participation in non-Treasury security types. The present posture of the
Fund is constructed to perform better in an environment in which risk premiums
remain steady-to-lower, as well as a steady interest rate environment.

1 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------
MEMORIAL FUNDS
INVESTMENT ADVISER'S REPORT AND PERFORMANCE DATA (CONTINUED)
JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------

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 past six months, we maintained the Fund's overall mortgage-backed
securities position. At the same time, we made modest increases in the
portfolio's agency exposure. All corporate issues were sold during the first
quarter of the year.

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.
At this time, we expect to increase the non-Treasury exposure, given the
historically generous yield advantage currently provided by these security
types.

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

A: As stated above, the duration of the portfolio is similar to that of the
index. As of 06-30-99, the duration of the Fund was 5.21 versus 5.14 for the
Lehman US 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 June, reflects
the following:

What Has Changed

-The Federal Reserve raised the federal funds rate by 25 basis points and
returned its bias for future interest rate actions to neutral.

-Chairman Greenspan indicated that the monetary authority's "speed limit"
for the U.S. economy has been increased to 3% from 2.5%.

-May's consumer price index (CPI) was reported below expectations with
1999's "core" CPI slowing from year-ago levels.

-Expectations of a global recovery strengthened amid continued mixed
economic data.

World Economic Growth is Picking Up

-U.S. domestic demand is expected to moderate as foreign demand recovers.

-Stronger-than-expected economic growth and higher industrial commodity
prices have caused inflationary expectations to rise.

2 Memorial Funds

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

Bond Investors' Concerns Appear Overdone

-The Federal Reserve's focus on moderating domestic growth is likely to
cause near-term market volatility to increase.

-Despite cyclical concerns, the secular inflation outlook remains
constructive.

-Neutral portfolio durations are still recommended.

While the Federal Open Market Committee (FOMC), as expected, raised the federal
funds rate by 25 basis points, its shift to a neutral bias regarding future
policy actions surprised financial markets, providing solace to the beleaguered
U.S. bond market and pushing domestic stock indices to new highs. On a less
pleasant note, the central bank's tightening in the absence of inflationary
pressures and the declaration of a 3% "speed limit" for the U.S. economy
combined to increase uncertainty for market participants. Meanwhile, despite
somewhat spotty evidence, expectations of global recovery strengthened.

ECONOMIC OUTLOOK

WORLD ECONOMIC GROWTH IS PICKING UP

Continued increases in real income and capital gains in both the stock and
housing markets have combined to support strong household spending. Strength in
household demand and improved corporate profits has kept business investment
spending robust. In addition, some capital goods expenditures may have been
brought forward in the year because of year 2000 compliance issues. The rise in
mortgage rates in recent months is expected to slow down the residential real
estate sector. Mortgage rate increases also would be expected to deter existing
homeowners from tapping the equity that they have built up in their houses.
Home-equity withdrawal appears to have been important in fueling consumer
spending. While these elements of domestic demand moderate, foreign demand
appears to be strengthening. A number of East Asian economies have entered a
recovery phase, including the Japanese economy. European Union economies are
either exhibiting a reacceleration in growth or continue to grow at a relatively
high rate. One region, however, that remains very weak is South America.

Prices of industrial commodities have started to move higher. To a large degree,
the sharp increase in the prices of petroleum products is the result of
production cuts by the Organization of Petroleum Exporting Countries (OPEC).
Recovery in the global economy, however, also has contributed to oil price
increases, as well as to the continued rise in the prices of wood products and
the rebound in the prices of industrial metals. Higher commodity prices have
resulted in the firming of intermediate goods prices. This rise in commodity
prices in combination with stronger-than-expected global economic growth has
raised inflationary expectations. To date, however, there has been no
acceleration in the prices of final goods and services when the effects of
higher energy prices are excluded.

With the continued strength in domestic demand and the nascent recovery in
foreign demand, the Federal Reserve has increased its target federal funds rate
by 25 basis points to 5% in an effort to preempt any rise in underlying
inflation. The FOMC has moved back to a neutral policy stance and has indicated
that strong

3 Memorial Funds

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

aggregate demand for goods and services and "tight" labor markets alone would
not necessarily trigger further near-term Federal Reserve actions to raise
interest rates. Rather, the central bank's comments imply that the decision
whether or not to push interest rates higher would depend more on the behavior
of factors with a closer link to inflation than economic growth or the rate of
unemployment. Of course, investors may have some difficulty taking the Federal
Reserve's "neutral" bias at face value, given that the monetary authority just
raised interest rates by 25 basis points without any real inflationary
justification.

FIXED INCOME OUTLOOK

BOND INVESTORS' CONCERNS APPEAR OVERDONE

U.S. government bond yields rose further in the second quarter, eventually
breaching the top end of the 5.25% to 5.75% range which we had viewed as a
reasonable estimate of the near-term trend of interest rates. The yield curve
flattened by 20 basis points between the 2-year Treasury note and the 30-year
Treasury bond as the market correctly anticipated the Federal Reserve's move to
reverse a portion of the monetary easing initiated last fall. The central bank's
move to tighten credit, clearly telegraphed in Chairman Greenspan's forthright
testimony to Congress, indicated that the primary barometer guiding its policy
actions had shifted away from measured inflation, which remains subdued, and
toward the pace of U.S. economic growth, which continues to be brisk. In fact,
we believe that bond yields moved above the high end of our trading range
because domestic growth has not slowed to the degree we had expected. More
precisely, we did not foresee the importance the Federal Reserve would place on
moderating domestic growth despite an absence of building inflationary
pressures. The central bank's shift in focus clearly had a negative impact on
investor psychology as this new information brought significant uncertainty to a
bond market that thought it had a pretty good handle on Greenspan & Co.'s
concerns. Nevertheless, over the long run, we believe it is inflation, not
growth, which is the more important driver of interest rates, and we remain
constructive on the inflation front.

During the second quarter, most of the favorable fundamentals which have fueled
the highly desirable three-year trend of low-inflationary growth remained firmly
in place: cost pressures were subdued, employment expanded, productivity
remained high, and corporate earnings showed signs of strengthening. The ongoing
benefits from this constructive growth dynamic cannot be overemphasized. For
example, updated White House budget projections now show an additional $20
billion improvement in the U.S. government's fiscal surplus in the coming year
and $180 billion extra over five years. While the accuracy of longer-term
revenue projections is always suspect, the fact is that robust, non-inflationary
growth has paid big dividends on the fiscal front, and, should this trend
continue, it would bring us significant benefits in the future. Real growth, of
course, delivers a host of favorable financial, social, and political outcomes,
the likes of which all segments of society would like to see continue.

The "new-era" economic view sees strong growth as being compatible with low
inflation in part due to technological advances, global competition, and stable
monetary policy. In the past, Alan Greenspan has indicated his support for many
of these "new-era" beliefs. However, in his recent testimony, he articulated a
new policy predicated upon slowing the growth of the U.S. economy down to a
"speed limit" of around 3% in

4 Memorial Funds

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

order to prevent "inevitable" wage increases brought on by tightness in the
labor market. Unfortunately, we think that this shift in focus is likely to add
an element of uncertainty to the central bank's policymaking which will result
in a more volatile bond market. Because investors cannot know the degree of
policy tightening necessary to produce the pace of economic growth acceptable to
the Federal Reserve, we expect they will overscrutinize each and every data
release pertaining to the economy. These individual economic reports, of course,
always contain a fair degree of noise, hence our expectation that near term
market volatility is likely to remain high. So, while we do not share the
chairman's concerns that the U.S. economy is nearing a breaking point and
continue to believe that longer-term inflation will remain benign, we fully
respect the new uncertainty the Federal Reserve's shift in focus has brought to
the bond market and, in turn, have embraced a wait-and-see outlook for interest
rates over the near horizon. An attempt to "fine-tune" the U.S. economy down to
a 3% rate of growth, particularly when inflationary pressures remain
non-threatening, may provide very little benefit and could ultimately lead to
renewed global economic and financial problems. Consequently, we recommend
maintaining neutral portfolio durations while awaiting further evidence that the
fundamental factors underpinning the economy's favorable growth/inflation
dynamic remain in place.

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 period. Our current allocation among sectors includes 30%
exposure to agency issues and no exposure to corporate obligations at this time.
Agency issues continue to represent a growing percentage of the index.
Currently, agencies represent just over 20% of the Lehman US Government Bond
Index. The index does not contain any corporate issues. The Fund's
mortgage-backed exposure represents 19% of the portfolio. The Lehman US
Government Bond Index does not contain any mortgage-backed issues.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT THE SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PERFORMANCE
ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. DURING THE
PERIOD, SOME OF THE FUND'S FEES WERE WAIVED OR EXPENSES REIMBURSED; OTHERWISE
TOTAL RETURN WOULD HAVE BEEN LOWER.

THE LEHMAN BROTHERS U.S. GOVERNMENT BOND INDEX IS COMPOSED OF ALL PUBLICLY
ISSUED, NON-CONVERTIBLE, DOMESTIC DEBT OF THE U.S. GOVERNMENT OR ANY AGENCY
THEREOF. INDIVIDUALS CANNOT INVEST DIRECTLY IN THE INDEX.

THE OPINIONS EXPRESSED IN THIS INTERVIEW REFLECT THOSE OF THE PORTFOLIO MANAGER
ONLY THROUGH JUNE 30, 1999. 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 FOR THE FIRST SIX MONTHS OF THE FUND'S FISCAL YEAR
(JANUARY 1-JUNE 30, 1999), FOR THE ONE-YEAR PERIOD ENDING JUNE 30, 1999, AND
SINCE THE FUND'S INCEPTION (MARCH 25, 1998)?

<TABLE>
<S> <C> <C>
First six months
A: 1999 -1.98%
One year 2.52%
Since inception 4.23%
</TABLE>

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

A: The past year has proved difficult for fixed income securities, particularly
corporate bonds. The market is forced to digest record new issue supply, a less
accommodative Federal Reserve policy and the looming Year 2000 uncertainties. As
a result, investors have been apathetic most of the year. The Memorial Corporate
Bond Fund has performed well within its peer group because of its underweight to
corporate securities. Consistent with the prospectus, the Fund must maintain a
minimum of 65% in the corporate sector in normal markets. We were just at the
minimum with the balance of the Fund invested in U.S. Treasury securities, ABS,
MBS and taxable municipals. In addition, certain sectors which the Fund had
invested in, such as oil, REIT's and utilities, performed well despite the
general market malaise.

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

A: The performance has met all of our expectations.

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: Major additions included: East Coast Power (Baa3/BBB-), Lasmo (Baa2/BBB),
News America (Baa3/BBB-), Mutual Life Insurance (Baa2/A-), and Orion Capital
(Baa3/BB+). Securities that were sold included: AT&T Corp (A1/AA-), National
City Bank (A1/A), and St. Paul MN Sales Tax Revenue Bonds (Aaa/ AAA).

I would expect that, given how cheap the corporate bond market is, we would add
to our corporate exposure depending on liquidity and market technical factors.

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

<TABLE>
<S> <C> <C>
A: Memorial Corporate Bond Fund 5.95 years
Lehman Corporate Index 5.92 years
</TABLE>

6 Memorial Funds

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

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

A: Given the strength in the U.S. economy and the apparent recovery in the
global economy, we expect that interest rates will continue to increase until it
is clear that an increase in the rate of inflation is not a problem. The Fed's
intentions to raise short rates ahead of any serious threat of inflation have
been made clear to the financial markets. The only twist that we see is any Year
2000 issue, such as a large withdrawal of money from the banking system, that
may temporarily force the Fed to pump liquidity into the markets.

That being said, at this time, we don't anticipate a significant run-up in
rates. We would expect to maintain a duration similar to the Lehman Brothers
Corporate Index.

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

<TABLE>
<CAPTION>
FUND INDEX
--------- ---------
<S> <C> <C> <C>
A: U.S. Treasury 11.33% 0.00%
U.S. Agency 0.00 0.00
MBS/CMO 9.90 0.00
Industrials 29.29 43.13
Finance 25.28 27.91
Utility 11.10 6.85
Yankee 1.00 22.11
ABS 2.52 0.00
Municipals 6.53 0.00
Preferred Stocks 0.79 0.00
Cash 2.33 0.00
</TABLE>

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

A: Credit spreads have been under tremendous pressure this past quarter. The
huge, record level of supply hitting the market, swap spreads at record wide
levels, and overall investor apathy have forced credit spreads wider. Until the
supply starts to subside and overall market fundamentals improve, spreads of all
sectors are likely to remain volatile.

Given the latitude in the prospectus to invest in various sectors, we will
continue to diversify across asset classes while still maintaining an emphasis
on the corporate sector. Taxable municipal bonds have performed better than
corporates (in general) and we will look for opportunities to swap out of munis
into corporates.

7 Memorial Funds

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

THE LEHMAN BROTHERS CORPORATE BOND INDEX IS COMPOSED OF PUBLICLY ISSUED U.S.
CORPORATE DEBENTURES AND SECURED NOTES. INDIVIDUALS CANNOT INVEST DIRECTLY IN
THE INDEX.

8 Memorial Funds

AN INTERVIEW WITH MR. PATRICK CLEGG OF DAVIS HAMILTON JACKSON & ASSOCIATES, L.P.
SUB-ADVISER TO GROWTH EQUITY FUND ("FUND")

Q: HOW WAS YOUR PERFORMANCE FOR THE FIRST SIX MONTHS OF THE FUND'S FISCAL YEAR
(JANUARY 1-JUNE 30, 1999), FOR THE ONE-YEAR PERIOD ENDING JUNE 30, 1999, AND
SINCE THE FUND'S INCEPTION (MARCH 29, 1998)? (INSTITUTIONAL SHARES)

A: Including dividend distributions, the NAV of the fund advanced 12.92% during
the first six months of 1999. The fund rose 29.09% during the twelve months
ended June 30, 1999, and has returned 28.28% since inception. The S&P 500
advanced 12.38% in the six months ending June 30, 1999; 22.77% over the past
twelve months; and 20.95% since inception of the fund.

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

A: Strict adherence to our sell disciplines had a significant positive impact
on performance during the first half of 1999. Many growth stocks materially
underperformed the Standard and Poor's 500 Index ("S&P 500") as a result of
slower than expected earnings growth versus very high expectations. The fund
liquidated positions in Waste Management, McKesson HBOC, UnumProvident, Eli
Lilly, Washington Mutual, Medtronic, and Watson Pharmaceuticals before the fund
suffered materially from subsequent declines in those stock prices. Our research
kept us overweighted in technology and retail due to positive secular trends and
consistent earnings from the leading companies in these industries. We also
minimized holdings in industries where profit expectations declined. Basic
materials and utilities were kept at below average exposure while maintaining a
diversified portfolio. Our midcap growth holdings in health care and financial
services also aided performance, despite weak relative returns from those
industry groups in the marketplace.

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

A: Performance exceeded our expectations. The market has endured several short
but dramatic rotations in the first half of 1999. Value strategies and smaller
capitalization companies have had the best performance. Lower quality companies
(those rated C &D by S&P) have dramatically outdistanced high quality firms (A+
rank by S&P). The gap in performance is over 3000 basis points with the highly
ranked stocks barely moving and the low quality companies advancing over 30%
year-to-date according to statistics compiled by Merrill Lynch. As a growth
manager, we concentrate on the highest quality companies with the best growth
outlooks and typically refrain from holding large weightings in cyclical and
lower quality companies.

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: Our largest portfolio changes were the elimination of the positions with
deteriorating fundamentals listed above. In addition, positions in Clorox, DST
Systems, Halliburton, and Oracle were sold. We added positions in Apache,
Comverse Technology, Biogen, Exxon, Intimate Brands, Texas Instruments, Waters
Corp., Tyco International, Procter & Gamble, and McDonald's. We have
consistently been cutting back positions in the

9 Memorial Funds

AN INTERVIEW WITH MR. PATRICK CLEGG OF DAVIS HAMILTON JACKSON & ASSOCIATES, L.P.
SUB-ADVISER TO GROWTH EQUITY FUND ("FUND") (CONTINUED)

retail sector and anticipate reducing our exposure further towards a neutral
stance. Financials have also been a source of funds due to the large increase in
interest rates. Without a decline in long term interest rates we will likely
stay at below market weightings in the financials.

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

A: The portfolio is more diversified than the Russell 1000 Growth Index
industry weightings. The Russell index is concentrated in three industries due
to its construction. Technology, Health Care, and Consumer Staples represented
nearly 70% of the index on June 30 versus less than 50% in the S&P 500. The fund
carried above average holdings in technology 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, and Energy relative to
their share of the economy. We were overweighted in these areas versus the
Russell 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 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 have tempered our positive outlook for our growth style for several
reasons. First, corporate profit expectations began to increase during the first
half for the first time in several quarters. More companies are achieving their
earnings estimates which has resulted in broader market participation and a
smaller P/E premium for growth stocks. Second, interest rates are up more than
100 basis points in longer maturity U.S. Treasuries since the end of 1998. This
hurts longer duration growth stocks trading at higher P/E multiples more than
the average company. Third, the valuation disparities that exist within the
market can continue to create violent sector rotation towards the more cyclical
components of the stock market whenever the economic data support a continuation
of the current expansion. Positive factors for growth stocks remain low
inflation, strong earnings trends, and more visible organic growth versus mature
industries and companies. We believe that the large, high quality growth
companies that dominate S&P 500 Index returns and smaller companies with above
average growth rates will be the long-term stock market winners even with more
crosscurrents evident at this stage of the economic cycle.

10 Memorial Funds

AN INTERVIEW WITH MR. PATRICK CLEGG OF DAVIS HAMILTON JACKSON & ASSOCIATES, L.P.
SUB-ADVISER TO GROWTH EQUITY FUND ("FUND") (CONCLUDED)

THE RUSSELL 1000 GROWTH INDEX TRACKS STOCKS IN THE RUSSELL 1000 INDEX WITH
HIGHER PRICE-TO-BOOK RATIOS AND HIGHER FORECASTED GROWTH VALUES. THE STANDARD
AND POOR'S 500 INDEX IS A GROUP OF UNMANAGED SECURITIES WIDELY REGARDED TO BE
REPRESENTATIVE OF THE STOCK MARKET IN GENERAL. INDIVIDUALS CANNOT INVEST
DIRECTLY IN EITHER INDEX.

11 Memorial Funds

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

A: For the first six months of this fiscal year, our portfolio was up roughly
6.19%. The first fiscal quarter was down about 4.65% followed by a strong 10.84%
resurgence in the second quarter.

For the one-year period ended June 30, 1999, we were up 3.27%. Since the March
27, 1998, inception date, our portfolio is down 1.65%. These longer time periods
were characterized by market strength for the large capitalization companies in
America and profound market weakness for the medium sized companies. The stock
of the average U.S. company, as measured by the equal weighted Russell 3000,
rose less than 3% since the inception of the fund.

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

A: For the first half of this fiscal year, our positions in the energy sector
were excellent contributors to performance; four of our top ten gainers for the
period were from this sector-Weatherford International (+83%), Cooper Cameron
(+45%), Royal Dutch (+30%), and Burlington Resources (+19%). The largest
detractors from performance were positions in Service Corp. International, Tenet
Healthcare, and Lockheed Martin. In each of these cases, the companies were
faced with difficult industry situations and reported disappointing operating
results.

Another factor affecting performance was the size of the companies within the
portfolio. Our portfolio companies continue to be smaller on average than those
companies comprising the Russell 1000 Value Index. The valuation characteristics
of these "midcap" stocks have been compelling when compared to the larger
companies yet their relative performance has lagged for several years. This
midcap tilt continued to hurt our performance during the first quarter of this
year, but has acted in our favor since then. The valuation disparity still
exists and we will likely remain overweight in this sector of the market.

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

A: While the period since inception is still well below our original
expectation, we are pleased with recent results. In April of this year, market
leadership broadened to include stocks other than large capitalization growth
companies. For the second quarter of 1999, our equity portfolio gained 10.84%
versus gains of 10.84% and 7.05% for the Russell 1000 Value and Standard and
Poor's Index ("S&P 500"), respectively.

12 Memorial Funds

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?

We increased our weighting in the utility sector this year with the addition of
Southern Companies, Ameritech, and Edison International. Large additions to the
economy-sensitive sector included Federal Mogul, Hercules, and Ingersoll-Rand.
Allstate was added in the financial area, and the addition of Royal Dutch
augmented our energy exposure.

Two of our largest sales were in the technology sector; both IBM and Texas
Instruments were sold as they attained our sell targets. Lockheed Martin was
sold due to a deteriorating outlook, and King World Productions was acquired by
CBS. The weighting in the financial sector was reduced by the sale of A. G.
Edwards and the trimming of positions in First Data and Marsh McLennan.

We are not currently contemplating any major shifts during the balance of 1999.

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

A: Our largest overweight is in the consumer sector with an 18.3% weight versus
12.5% for the Russell 1000 Value. Recent additions in this area include Newell
Rubbermaid, Whirlpool, and R. R. Donnelley. Though we have been net sellers in
the technology sector this year, we remain overweight there as well, with an
11.3% weighting versus 7.7% for the Index. Our largest underweight continues to
be in the financial services sector, where we have a 21.3% weight versus 30.4%
for the Index. Recent purchases in the financial sector include Allstate and
Household International.

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: Over long market cycles, "value" investing has competed very successfully
with the "growth" style of investing. There is an ebb and flow of market
leadership, however, and large capitalization growth stocks have dominated the
market for the last several years. In the first quarter of 1999, for instance,
all of the gain in the S&P 500 was accounted for by just 18 large cap growth
stocks; the other 482 stocks merely canceled each other out.

There was a significant change of leadership early in the second quarter as the
market advance broadened to include value stocks and medium sized companies of
all types. The catalyst was an upturn in global economic activity that should
result in renewed earning power for value stocks at a time when their valuation
characteristics are near historic lows. Our sense is that a new trend has been
established, and that value stocks as a group can outperform the S&P 500 over
the foreseeable future.

13 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------
MEMORIAL FUNDS
INVESTMENT ADVISER'S REPORT AND PERFORMANCE DATA (CONCLUDED)
JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
AN INTERVIEW WITH MR. STEPHEN POUNS OF BEUTEL, GOODMAN CAPITAL MANAGEMENT
SUB-ADVISER TO VALUE EQUITY FUND ("FUND") (CONCLUDED)

THE RUSSELL 1000 VALUE INDEX TRACKS STOCKS IN THE RUSSELL 1000 INDEX WITH LOWER
PRICE-TO-BOOK RATIOS, AND LOWER FORECASTED GROWTH VALUES. THE STANDARD AND
POOR'S 500 INDEX IS A GROUP OF UNMANAGED SECURITIES WIDELY REGARDED TO BE
REPRESENTATIVE OF THE STOCK MARKET IN GENERAL. INDIVIDUALS CANNOT INVEST
DIRECTLY IN EITHER INDEX.

14 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------
GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (3.7%)
2,500,000 FHLMC, 6.00%, 11/15/21
(cost $2,471,094)................... $ 2,432,338
-----------
GOVERNMENT AND AGENCY BONDS (30.3%)
5,500,000 FHLB, 5.50%, 7/14/00.................... 5,493,125
2,500,000 FHLMC, 5.75%, 7/15/03................... 2,482,353
2,500,000 FHLMC, 5.75%, 4/15/08................... 2,380,303
2,500,000 FNMA, 5.63%, 3/15/01.................... 2,495,320
2,000,000 FNMA, 5.38%, 3/15/02.................... 1,972,566
5,000,000 FNMA, 5.75%, 6/15/05.................... 4,912,506
-----------
Total Government and Agency Bonds
(cost $19,926,664) 19,736,173
-----------
MORTGAGE BACKED SECURITIES (15.3%)
2,528,295 FHLMC, Gold Pool C18118, 6.00%,
11/1/28............................... 2,387,090
2,023,855 FHLMC, Gold Pool G00767, 7.50%,
8/1/27................................ 2,052,554
2,933,175 FNMA, Pool 440700, 6.00%, 11/1/28....... 2,765,632
2,918,865 FNMA, Pool 440737, 6.00%, 12/1/28....... 2,752,139
-----------
Total Mortgage Backed Securities
(cost $10,354,686) 9,957,415
-----------

SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS (47.8%)
13,150,000 U.S. Treasury Bond, 6.00%, 2/15/26...... $12,792,490
3,073,620 U.S. Treasury Inflation Index Note,
3.63%, 1/15/08........................ 2,988,136
2,575,000 U.S. Treasury Note, 6.88%, 7/31/99...... 2,579,828
5,500,000 U.S. Treasury Note, 6.63%, 7/31/01...... 5,616,875
6,850,000 U.S. Treasury Note, 6.50%, 10/15/06..... 7,070,487
-----------
Total U.S. Treasury Obligations
(cost $32,546,156) 31,047,816
-----------
SHORT TERM HOLDINGS (2.9%)
1,871,107 Dreyfus Government Cash Management Fund,
4.28%
(at cost)........................... 1,871,107
-----------
Total Investments (100.0%)
(cost $67,169,707) $65,044,849
-----------
-----------
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements. 15 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------
CORPORATE BOND FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ ------------
<C> <S> <C>
ASSET BACKED SECURITIES (1.1%)
1,600,000 EQCC Home Equity Loan Trust, Series
1996-4 A6, 6.88%, 7/15/14
(cost $1,630,000)................... $ 1,615,240
------------
COLLATERALIZED MORTGAGE OBLIGATIONS (5.9%)
300,000 Commonwealth Edison Transitional Funding
Trust, Series 1998-1 A7, 5.74%,
12/25/10.............................. 279,983
1,300,000 FHLMC, 6.50%, 1/15/22................... 1,289,880
1,000,000 FHLMC, 7.50% V/R, 12/15/24.............. 1,010,858
1,000,000 First Plus Home Loan Trust, Series
1998-3 A5, 6.49%, 7/10/17............. 996,985
523,008 FNMA, 6.50%, 4/1/28..................... 506,879
500,000 Money Store Home Equity Trust, Series
1996-D A13, 6.38%, 9/15/14............ 501,777
300,000 Mortgage Index Amortizing Trust, Series
1997-1 A1, 6.68%, 8/25/04 (#)......... 299,906
1,710,000 Nationslink Funding Corp., Series 1998-2
A2, 6.48%, 7/20/08.................... 1,663,051
2,000,000 Nationslink Funding Corp., Series 1999-1
A2, 6.32%, 11/20/08................... 1,916,430
------------
Total Collateralized Mortgage Obligations
(cost $8,630,732) 8,465,749
------------
CORPORATE BONDS & NOTES (63.3%)
2,600,000 AES Eastern Energy, 9.00%, 1/2/17....... 2,551,679
2,600,000 Armstrong World Industries, 6.35%,
8/15/03............................... 2,551,733
565,000 Associates Corp. of North America,
5.60%, 1/15/01........................ 560,682
2,000,000 Avco Financial Services, 6.00%,
8/15/02............................... 1,971,832
1,500,000 BellSouth Telecommunications, 6.00% V/R,
06/15/02.............................. 1,495,150
500,000 Carramerica Realty, 6.63%, 3/1/05....... 469,802
1,000,000 Case Credit Corp., 5.95%, 8/01/00....... 994,769
1,000,000 Centura Banks, Inc., 6.50%, 3/15/09..... 935,130

SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ ------------
<C> <S> <C>
CORPORATE BONDS & NOTES, CONTINUED
1,000,000 Choice Hotels International Corp.,
7.13%, 5/1/08......................... $ 941,447
500,000 Chrysler Financial Co. LLC, 9.50%,
12/15/99.............................. 507,938
450,000 Colonial Realty LP, 7.50%, 7/15/01...... 450,683
1,000,000 Continental Airlines, Inc., 6.9%,
1/2/18................................ 980,485
1,583,594 Continental Airlines Inc., 6.65%,
3/15/19............................... 1,535,270
1,000,000 Continental Cablevision Corp., 8.50%,
9/15/01............................... 1,043,760
1,000,000 CPI Corp., 9.00%, 3/15/02 (+)........... 1,046,523
2,500,000 East Coast Power LLC, 7.54%, 6/30/17.... 2,329,670
1,000,000 ENSCO International, Inc., 7.20%,
11/15/27.............................. 923,734
300,000 ERP Operating LP, 6.63% V/R, 4/13/15.... 289,478
2,450,000 Fidelity Investments, 7.57%, 6/15/29
(+)................................... 2,436,076
650,000 First Interstate Bancorp, 9.13%,
2/1/04................................ 715,362
1,000,000 Florida Windstorm Underwriting, 7.13%,
2/25/19............................... 961,871
3,500,000 General Motors Acceptance Corp., 7.13%,
5/1/01................................ 3,553,393
1,000,000 General Motors Acceptance Corp., 6.85%,
6/17/04............................... 1,008,374
2,000,000 GTE Corp., 6.84%, 4/15/18............... 1,913,176
2,000,000 Household Finance Corp., 6.13% V/R,
7/15/02............................... 1,978,556
1,800,000 Key Bank NA, 6.50%, 4/15/08............. 1,740,989
1,000,000 LASMO (USA), Inc., 7.30%, 11/15/27...... 923,383
3,000,000 Lehman Brothers Holdings, 6.63%,
12/27/02.............................. 2,951,697
1,500,000 Lehman Brothers Holdings, 7.00%,
5/15/03............................... 1,489,541
400,000 Marriott International, Inc., 6.63%,
11/15/03.............................. 392,148
3,100,000 Mattel, Inc., 6.00%, 7/15/03............ 3,024,583
750,000 MCN Investment Corp., 6.35%, 4/2/02..... 739,387
1,000,000 Mellon Financial Co., 7.63%, 11/15/99... 1,006,282
</TABLE>

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

<PAGE>
- --------------------------------------------------------------------------------
CORPORATE BOND FUND
SCHEDULE OF INVESTMENTS (continued)
JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ ------------
CORPORATE BONDS & NOTES, CONTINUED
<C> <S> <C>
500,000 Merrill Lynch & Co., Inc., 6.07%,
4/06/04............................... $ 487,572
2,900,000 Morgan Stanley Dean Witter, 5.88%,
2/28/01............................... 2,880,573
2,600,000 Mutual Life Insurance Co. of NY, 11.25%
V/R, 8/15/24 (+)...................... 3,619,332
1,000,000 National-Oilwell, Inc., 6.88%, 07/01/05
(+)................................... 968,161
1,500,000 National Rural Utilities Corp., 5.50%,
1/15/05............................... 1,418,159
2,500,000 NationsBank Corp., 6.38%, 2/15/08....... 2,402,420
2,500,000 News America, Inc., 7.25%, 5/18/18...... 2,336,758
1,000,000 NGC Corp., 7.13%, 5/15/18............... 918,716
1,500,000 Noble Drilling Corp., 7.50%, 3/15/19.... 1,467,579
600,000 Northwest Airlines Corp., 6.81%,
2/1/20................................ 578,871
1,500,000 Orion Capital Trust II, 7.70%,
4/15/28............................... 1,221,086
500,000 Owens Corning, 7.50%, 5/1/05............ 495,429
900,000 Paine Webber Group, Inc., 6.38%,
5/17/04............................... 875,741
3,600,000 Public Service Electric & Gas Co.,
6.13%, 8/1/02......................... 3,576,899
1,000,000 Puget Sound Energy, Inc., 7.00%,
3/9/29................................ 945,555
700,000 Reckson Operating Partnership, 7.40%,
3/15/04............................... 688,032
1,000,000 Reynolds (R.J.) Tobacco Holding, 7.38%,
5/15/03............................... 985,496
250,000 Rollins Truck Leasing Corp., 6.88%,
8/1/01................................ 250,726
2,899,933 Scotia Pacific Co. LLC, 6.55%,
1/20/07............................... 2,736,420
862,166 Seabrook Station-Unit 1, 7.83%,
1/2/19................................ 840,997
3,000,000 Sears Roebuck Acceptance Corp., 6.12%,
12/13/01.............................. 2,968,605
200,000 Shopko Stores, 6.50%, 8/15/03........... 193,935
1,500,000 Sprint Capital Corp., 6.88%, 11/15/28... 1,369,851
300,000 Standard Federal Bancorporation, 7.75%,
7/17/06............................... 304,942

SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ ------------
<C> <S> <C>
CORPORATE BONDS & NOTES, CONTINUED
500,000 Tele-Communications, Inc., 9.80%,
2/1/12................................ $ 611,883
1,500,000 Texas Utilities Electric Co., 6.75%,
4/1/03................................ 1,516,469
1,500,000 Tyco International Group SA, 5.88%,
11/1/04 (+)........................... 1,449,477
1,500,000 Union Planters Bank NA, 6.50%,
3/15/08............................... 1,416,914
1,200,000 United Dominion Realty Trust, 8.13%,
11/15/00.............................. 1,217,068
1,000,000 Waste Management, Inc., 7.65%,
3/15/11............................... 1,045,869
250,000 WMX Technologies, Inc., 7.00%,
10/15/06.............................. 249,494
3,000,000 360 Communications Co., 7.60%, 4/1/09... 3,121,347
------------
Total Corporate Bonds & Notes
(cost $94,241,546) 91,574,959
------------
MORTGAGE BACKED SECURITIES (5.6%)
566,317 FHLMC, Pool E69646, 6.00%, 3/1/13....... 548,358
404,202 FHLMC, Pool E70688, 6.00%, 6/1/13....... 391,385
933,038 FHLMC, Pool E75926, 6.00%, 4/1/14....... 903,218
1,406,609 FHLMC, Pool E76404, 6.00%, 4/1/14....... 1,362,005
936,566 FNMA, Pool 251818, 6.00%, 6/1/18........ 892,379
297,755 FNMA, Pool 313873, 7.00%, 12/1/27....... 295,751
260,914 FNMA, Pool 399774, 7.00%, 5/1/28........ 258,905
885,811 FNMA, Pool 422848, 6.00%, 4/1/18........ 844,018
298,073 FNMA, Pool 428152, 7.00%, 5/1/28........ 295,778
955,587 FNMA, Pool 428968, 6.00%, 6/1/28........ 901,004
1,465,158 General Motors Acceptance Corp., 5.83%,
5/15/33............................... 1,413,796
------------
Total Mortgage Backed Securities
(cost $8,314,978) 8,106,597
------------
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements. 17 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------
CORPORATE BOND FUND
SCHEDULE OF INVESTMENTS (concluded)
JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ ------------
<C> <S> <C>
MUNICIPAL BONDS & NOTES (6.5%)
2,000,000 Alameda, CA, Corridor Transportation
Auth., California RV, "C", 6.60%,
10/1/29............................... $ 1,834,366
150,000 Denver, CO, Urban Renewal Authority, Tax
Increment RV, Adams Mark Hotel, Series
A, 6.37%, 9/1/02...................... 148,926
1,000,000 Madison, WI, Community Development
Authority RV, U.S. Bank insured,
6.20%, 7/2/18......................... 1,007,564
905,000 Oklahoma County, OK, Finance Authority
MFHR, Oakridge Village Apartments,
Series A, HUD Section 8 insured,
8.05%, 10/1/09........................ 939,963
1,250,000 Philadelphia, PA, IDR Bonds, Pension
Funding, Retirement System, Series A,
FSA insured, 6.35%, 4/15/28........... 1,079,860
260,000 Reeves County, TX, Tax COP, 6.70%,
3/31/05............................... 261,132
2,000,000 Reeves County, TX, Tax COP, 7.25%,
6/01/11............................... 1,948,618
200,000 Show Low, AZ, IDA Hospital RV, Navapache
Regional Medical Center, Series B, ACA
insured, 6.13%, 12/1/99............... 200,917
200,000 Show Low, AZ, IDA Hospital RV, Navapache
Regional Medical Center, Series B, ACA
insured, 6.25%, 12/1/00............... 201,793
250,000 Show Low, AZ, IDA Hospital RV, Navapache
Regional Medical Center, Series B, ACA
insured, 6.50%, 12/1/02............... 253,566
290,000 Show Low, AZ, IDA Hospital RV, Navapache
Regional Medical Center, Series B, ACA
insured, 6.60%, 12/1/03............... 294,070
250,000 St. Charles County, MO, Public Arena
Authority, Leasehold Taxable RV,
Family Area Project, 6.54%, 9/15/05... 237,986

<CAPTION>
SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ ------------
<C> <S> <C>
MUNICIPAL BONDS & NOTES, CONTINUED
1,000,000 Wickliffe, KY, Solid Waste Disposal
Facilities RV, Westvaco Corp. Project,
7.67%, 1/15/27(+)..................... $ 1,021,986
------------
Total Municipal Bonds & Notes
(cost $9,707,604) 9,430,747
------------
PREFERRED STOCK (1.5%)
1,000,000 Centaur Funding Corp., 9.08%, 4/21/20
(+)................................... 1,075,625
4,000,000 Lincoln National Capital, 6.40%,
8/13/01............................... 1,005,000
------------
Total Preferred Stock
(cost $2,000,000) 2,080,625
------------
U.S. TREASURY OBLIGATIONS (13.0%)
1,500,000 U.S. Treasury Note, 6.63%, 7/31/01...... 1,531,875
1,000,000 U.S. Treasury Note, 6.25%, 2/28/02...... 1,015,313
500,000 U.S. Treasury Note, 4.25%, 11/15/03..... 471,875
100,000 U.S. Treasury Note, 4.75%, 11/15/08..... 91,813
7,460,000 U.S. Treasury Note, 5.50%, 5/15/09...... 7,287,488
9,510,000 U.S. Treasury Bond, 5.25%, 11/15/28..... 8,419,327
------------
Total U.S. Treasury Obligations
(cost $19,139,515) 18,817,691
------------
SHORT TERM HOLDINGS (3.1%)
CASH MANAGEMENT ACCOUNTS (0.0%)
84,230 Dreyfus Government Cash Management Fund,
4.28%................................. 84,230
------------
COMMERCIAL PAPER (3.1%)
2,000,000 Citibank Capital Markets Assets LLC,
5.80%, 7/1/99......................... 2,000,000
2,500,000 Ford Motor Credit Co., 5.75%, 7/1/99.... 2,500,000
------------
4,500,000
------------
Total Short Term Holdings (at cost) 4,584,230
------------
Total Investments (100.0%)
(cost $148,356,148) $144,675,838
------------
------------
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements. 18 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------
GROWTH EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>
COMMON STOCK (95.8%)
APPAREL & ACCESSORY STORES (1.3%)
11,970 Intimate Brands, Inc.................... $ 567,078
-----------
BUILDING MATERIALS, HARDWARE, GARDEN SUPPLY & MOBILE HOME
DEALERS (1.7%)
11,800 Home Depot, Inc......................... 760,362
-----------
BUSINESS SERVICES (13.1%)
3,100 America Online, Inc.*................... 342,550
13,600 Concord EFS, Inc.*...................... 575,450
14,300 First Data Corp......................... 699,806
16,500 Fiserv, Inc.*........................... 516,656
14,300 IMS Health, Inc......................... 446,875
20,400 Microsoft Corp.*........................ 1,839,826
26,500 Novell, Inc.*........................... 702,250
8,700 Omnicom Group, Inc...................... 696,000
-----------
5,819,413
-----------
CHEMICALS & ALLIED PRODUCTS (9.0%)
9,100 American Home Products Corp............. 523,250
8,800 Biogen, Inc.*........................... 565,951
18,400 Estee Lauder Cos., Inc.................. 922,300
6,400 Gillette Co............................. 262,400
10,400 Procter & Gamble Co..................... 928,200
14,400 Schering-Plough Corp.................... 763,200
-----------
3,965,301
-----------
COMMUNICATIONS (5.9%)
15,300 AT&T Corp............................... 853,931
9,000 Clear Channel Communications, Inc.*..... 620,437
19,600 SBC Communications, Inc................. 1,136,800
-----------
2,611,168
-----------
DOMESTIC DEPOSITORY INSTITUTIONS (1.4%)
8,523 Bank of America Corp.................... 624,842
-----------
EATING & DRINKING PLACES (1.3%)
14,100 McDonald's Corp......................... 582,506
-----------
EDUCATIONAL SERVICES (1.8%)
22,125 Symbol Technologies, Inc................ 815,859
-----------

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

ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT
COMPUTER EQUIPMENT (8.1%)
30,600 American Power Conversion Corp.*........ $ 615,825
10,900 General Electric Co..................... 1,231,700
15,840 Lucent Technologies, Inc................ 1,068,210
4,500 Texas Instruments, Inc.................. 652,500
-----------
3,568,235
-----------
FEDERAL AGENCIES & INSTRUMENTALITIES (1.9%)
12,300 Federal National Mortgage Assn.......... 841,014
-----------
FOOD STORES (1.2%)
10,600 Albertson's, Inc........................ 546,562
-----------
GENERAL MERCHANDISE STORES (2.1%)
19,100 Wal-Mart Stores, Inc.................... 921,575
-----------
HOLDING & OTHER INVESTMENT OFFICES (1.3%)
18,000 Paychex, Inc............................ 573,750
-----------
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT
(12.6%)
14,400 Cisco Systems, Inc.*.................... 928,800
5,600 Comverse Technology, Inc.*.............. 422,800
11,800 EMC Corp.*.............................. 649,000
8,400 IBM Corp................................ 1,085,700
12,000 Intel Corp.............................. 714,000
10,800 Lexmark International Group, Inc.*...... 713,476
9,500 Linear Technology Corp.................. 638,875
6,500 Vitesse Semiconductor Corp.*............ 438,344
-----------
5,590,995
-----------
INSURANCE CARRIERS (5.0%)
8,300 AFLAC, Inc.............................. 397,362
10,600 American International Group, Inc....... 1,240,862
12,150 Citigroup, Inc.......................... 577,125
-----------
2,215,349
-----------
MEASURING, ANALYZING & CONTROLLING INSTRUMENTS;
PHOTOGRAPHIC, MEDICAL & OPTICAL GOODS (2.3%)
3,900 Allergan, Inc........................... 432,900
10,800 Waters Corp.*........................... 573,750
-----------
1,006,650
-----------
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements. 19 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------
GROWTH EQUITY FUND
SCHEDULE OF INVESTMENTS (concluded)
JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>
MISCELLANEOUS MANUFACTURING INDUSTRIES (1.5%)
6,800 Tyco International Ltd.................. $ 644,300
-----------
MISCELLANEOUS RETAIL (3.9%)
20,400 Bed Bath & Beyond, Inc.*................ 785,400
6,200 Costco Cos., Inc.*...................... 496,387
20,700 Office Depot, Inc.*..................... 456,693
-----------
1,738,480
-----------
MOTION PICTURE AND VIDEO TAPE PRODUCTION (2.5%)
14,800 Time Warner, Inc........................ 1,087,800
-----------
NONDEPOSITORY CREDIT INSTITUTIONS (1.3%)
5,900 Providian Financial Corp................ 551,650
-----------
OIL & GAS EXTRACTION (4.9%)
13,500 Apache Corp............................. 526,500
7,000 Atlantic Richfield Co................... 584,937
13,200 Enron Corp.............................. 1,079,100
-----------
2,190,537
-----------
PERSONAL SERVICES (1.4%)
9,500 Cintas Corp............................. 638,281
-----------

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

PETROLEUM REFINING & RELATED INDUSTRIES (2.0%)
14,100 Conoco Inc., Class A.................... $ 393,037
6,400 Exxon Corp.............................. 493,600
-----------
886,637
-----------
PHARMACEUTICAL PREPARATIONS (5.6%)
13,400 Bristol-Myers Squibb Co................. 943,865
10,900 Merck & Co., Inc........................ 806,600
6,600 Pfizer, Inc............................. 724,350
-----------
2,474,815
-----------
SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES
(2.7%)
11,600 Morgan Stanley Dean Witter.............. 1,189,000
-----------
Total Common Stock
(cost $37,335,247) 42,412,159
-----------
SHORT TERM HOLDINGS (4.2%)
1,869,589 Dreyfus Government Cash Management Fund,
4.28% (at cost)....................... 1,869,589
-----------
Total Investments (100.0%)
(cost $39,204,836) $44,281,748
-----------
-----------
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements. 20 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>
COMMON STOCK (99.5%)
APPAREL & OTHER FINISHED PRODUCTS MADE FROM FABRICS &
SIMILAR MATERIALS (2.6%)
41,900 Warnaco Group, Inc., Class A............ $ 1,120,825
-----------
BUSINESS SERVICES (8.7%)
22,400 Electronic Data Systems Corp............ 1,267,001
28,700 First Data Corp......................... 1,404,506
35,600 Newbridge Networks Corp.*............... 1,023,500
-----------
3,695,007
-----------
COMMUNICATIONS (6.3%)
13,300 Ameritech Corp.......................... 977,550
22,500 GTE Corp................................ 1,704,375
-----------
2,681,925
-----------
DOMESTIC DEPOSITORY INSTITUTIONS (3.6%)
32,800 First Union Corp........................ 1,541,600
-----------
ELECTRIC, GAS & SANITARY SERVICES (12.4%)
14,800 Duke Energy Corp........................ 804,751
29,900 Edison International.................... 799,825
34,300 El Paso Energy Corp..................... 1,206,932
44,500 Southern Co............................. 1,179,250
24,000 Waste Management, Inc................... 1,290,000
-----------
5,280,758
-----------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT
COMPUTER EQUIPMENT (7.1%)
73,200 American Power Conversion Corp.*........ 1,473,150
20,700 Whirlpool Corp.......................... 1,531,800
-----------
3,004,950
-----------
FOOD & KINDRED PRODUCTS (3.4%)
36,700 Hercules, Inc........................... 1,442,768
-----------
GENERAL MERCHANDISE STORES (2.9%)
23,400 Federated Department Stores, Inc.*...... 1,238,738
-----------
HEALTH SERVICES (3.1%)
26,500 Columbia HCA Healthcare Corp............ 604,531
1,394 LifePoint Hospitals, Inc.*.............. 18,731
35,900 Tenet Healthcare Corp.*................. 666,393
1,394 Triad Hospitals, Inc.*.................. 18,821
-----------
1,308,476
-----------

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

INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT
(7.3%)
19,300 Ingersoll-Rand Co....................... $ 1,247,262
17,800 Intel Corp.............................. 1,059,100
35,900 Pall Corp............................... 796,531
-----------
3,102,893
-----------
INSURANCE AGENTS, BROKERS & SERVICES (2.4%)
13,700 Marsh & McLennan Cos., Inc.............. 1,034,350
-----------
INSURANCE CARRIERS (5.7%)
32,900 Allstate Corp........................... 1,180,287
19,400 MBIA, Inc............................... 1,256,150
-----------
2,436,437
-----------
MEASURING, ANALYZING & CONTROLLING INSTRUMENTS;
PHOTOGRAPHIC, MEDICAL & OPTICAL GOODS (1.7%)
11,900 Baxter International, Inc............... 721,437
-----------
NONDEPOSITORY CREDIT INSTITUTIONS (6.2%)
19,100 Household International, Inc............ 904,862
38,300 SLM Holding Corp........................ 1,754,619
-----------
2,659,481
-----------
OIL & GAS EXTRACTION (2.7%)
26,500 Burlington Resources, Inc............... 1,146,125
-----------
PAPER & ALLIED PRODUCTS (3.3%)
14,000 Bowater, Inc............................ 661,500
15,400 Champion International Corp............. 737,275
-----------
1,398,775
-----------
PETROLEUM REFINING & RELATED INDUSTRIES (5.1%)
23,600 Cooper Cameron Corp.*................... 874,675
21,700 Royal Dutch Petroleum Co................ 1,307,425
-----------
2,182,100
-----------
PRINTING, PUBLISHING & ALLIED INDUSTRIES (1.9%)
22,300 Donnelley (R.R.) & Sons Co.............. 826,493
-----------
RUBBER & MISCELLANEOUS PLASTICS PRODUCTS (1.9%)
22,200 Weatherford International, Inc.*........ 813,075
-----------
TRANSPORTATION EQUIPMENT (4.7%)
20,800 Dana Corp............................... 958,100
24,900 Goodrich (B.F.) Co...................... 1,058,250
-----------
2,016,350
-----------
</TABLE>

See Notes to Schedules of Investments and
Notes to Financial Statements. 21 Memorial Funds

<PAGE>
- --------------------------------------------------------------------------------
VALUE EQUITY FUND
SCHEDULE OF INVESTMENTS (concluded)
JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
SECURITY
FACE/SHARE AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------ -----------
<C> <S> <C>
WHOLESALE TRADE-DURABLE GOODS (4.0%)
19,100 Federal-Mogul Corp...................... $ 993,200
15,600 Newell Rubbermaid, Inc.................. 725,400
-----------
1,718,600
-----------
WHOLESALE TRADE-NONDURABLE GOODS (2.5%)
35,100 Sysco Corp.............................. 1,046,419
-----------
Total Common Stock
(cost $40,003,623) 42,417,582
-----------
SHORT TERM HOLDINGS (0.5%)
227,340 Dreyfus Government Cash Management Fund,
4.28% (at cost)....................... 227,340
-----------
Total Investments (100.0%)
(cost $40,230,962) $42,644,922
-----------
-----------
</TABLE>

NOTES TO SCHEDULES OF INVESTMENTS
- --------------------------------------------------------------------------------

(*) Non-income producing securities.

(+) 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 June 30, 1999.

(#) 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 Access Corp.
COP Certificates of Participation
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Assoc.
FSA Financial Security Assurance, Inc.
HUD Department of Housing and Urban Development
IDA Industrial Development Authority
IDR Industrial Development Revenue
MFHR Multi Family Housing Revenue
RV Revenue Bonds
V/R Variable Rate--these securities are deemed to have a maturity remaining until the next adjustment of
the interest rate or the longer of the demand period or readjustment. The interest rates shown
reflect the rate in effect on June 30, 1999.
</TABLE>

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

STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------

<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............... $ 67,169,707 $ 148,356,148 $ 39,204,836 $ 40,230,962
Net unrealized appreciation
(depreciation)................... (2,124,858) (3,680,310) 5,076,912 2,413,960
------------- ------------- ------------- -------------
Total investments at value...... 65,044,849 144,675,838 44,281,748 42,644,922
Cash................................ -- -- 3,750 3,750
Interest, dividends and other
receivables........................ 1,095,405 2,085,186 19,241 64,203
Receivable for investments sold..... -- 7,306,444 -- --
Organization costs, net of
amortization (Note 2).............. 22,468 22,403 22,468 22,468
Other assets........................ 2,499 5,166 1,580 1,294
------------- ------------- ------------- -------------
Total Assets............................ 66,165,221 154,095,037 44,328,787 42,736,637
------------- ------------- ------------- -------------
LIABILITIES
Dividends payable................... 243,388 767,072 -- 73,873
Payable for investments purchased... -- 6,929,950 -- --
Payable to investment adviser (Note
3)................................. 1,613 3,563 1,702 1,725
Payable to investment sub-adviser
(Note 3)........................... 21,862 46,919 8,513 8,623
Payable to administrator (Note 3)... 8,063 17,817 5,108 5,174
Payable to shareholder servicing
agent (Note 3)..................... 9,139 20,193 5,044 5,122
Accrued fees, other liablilities and
other expenses..................... 25,161 44,587 23,506 24,732
------------- ------------- ------------- -------------
Total Liabilities....................... 309,226 7,830,101 43,873 119,249
------------- ------------- ------------- -------------
NET ASSETS.............................. $ 65,855,995 $ 146,264,936 $ 44,284,914 $ 42,617,388
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
COMPONENTS OF NET ASSETS
Paid in capital..................... $ 68,004,996 $ 151,979,814 $ 35,645,471 $ 41,519,963
Undistributed net investment income
(loss)............................. 423 423 (27,971) --
Net unrealized appreciation
(depreciation) of investments...... (2,124,858) (3,680,310) 5,076,912 2,413,960
Accumulated net realized gain (loss)
from investments................... (24,566) (2,034,991) 3,590,502 (1,316,535)
------------- ------------- ------------- -------------
NET ASSETS.............................. $ 65,855,995 $ 146,264,936 $ 44,284,914 $ 42,617,388
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
NET ASSETS BY SHARE CLASS
Trust Shares........................ $ -- $ -- $ 555,475 $ 425,877
Institutional Shares................ 65,855,995 146,264,936 43,729,439 42,191,511
------------- ------------- ------------- -------------
NET ASSETS.............................. $ 65,855,995 $ 146,264,936 $ 44,284,914 $ 42,617,388
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
SHARES OF BENEFICIAL INTEREST
Trust Shares........................ -- -- 43,027 43,976
Institutional Shares................ 6,745,635 15,227,333 3,372,045 4,339,873

NET ASSET VALUE (OFFERING AND REDEMPTION
PRICE) PER SHARE

Trust Shares........................ $ -- $ -- $ 12.91 $ 9.68

Institutional Shares................ $ 9.76 $ 9.61 $ 12.97 $ 9.72
</TABLE>

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

STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
GOVERNMENT CORPORATE GROWTH VALUE EQUITY
BOND FUND BOND FUND EQUITY FUND FUND
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income..................... $ -- $ 73,617 $ 134,291 $ 266,777
Interest income..................... 1,897,506 4,345,017 42,126 69,476
----------- ----------- ----------- ------------
Total Investment Income................. 1,897,506 4,418,634 176,417 336,253
----------- ----------- ----------- ------------
EXPENSES
Investment advisory (Note 3)........ 74,917 157,933 68,392 63,008
Shareholder servicing (Note 3)
Institutional Shares.............. 55,373 116,733 28,963 26,740
Administration (Note 3)............. 48,859 103,000 29,311 27,004
Transfer agent (Note 3)
Trust Shares...................... -- -- 313 253
Institutional Shares.............. 12,413 12,751 18,119 18,120
Accounting (Note 3)................. 18,000 27,000 24,000 24,000
Distribution (Note 3)
Trust Shares...................... -- -- 580 440
Legal............................... 2,358 5,937 1,515 1,702
Audit............................... 8,250 8,250 8,250 8,250
Custody............................. 5,236 17,296 13,624 5,335
Trustees............................ 2,655 5,628 1,441 1,224
Registration........................ 4,888 5,040 5,749 4,784
Amortization of organization costs
(Note 2)........................... 3,000 3,000 3,000 3,000
Miscellaneous....................... 6,960 20,827 6,179 8,071
----------- ----------- ----------- ------------
Total Expenses.......................... 242,909 483,395 209,436 191,931
Expenses reimbursed and fees waived
(Note 4)........................... (21,715) (45,778) (15,027) (13,320)
----------- ----------- ----------- ------------
Net Expenses............................ 221,194 437,617 194,409 178,611
----------- ----------- ----------- ------------
NET INVESTMENT INCOME (LOSS)............ 1,676,312 3,981,017 (17,992) 157,642
----------- ----------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) from
investments........................ (23,955) (2,001,654) 1,984,671 613,179
Net change in unrealized
appreciation (depreciation) of
investments........................ (3,204,302) (4,866,936) 2,073,134 1,917,974
----------- ----------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS......................... (3,228,257) (6,868,590) 4,057,805 2,531,153
----------- ----------- ----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.............. $(1,551,945) $(2,887,573) $4,039,813 $ 2,688,795
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>

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

STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT BOND FUND CORPORATE BOND FUND
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
SIX MONTHS PERIOD SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED
JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998(a) (UNAUDITED) 1998(b)
----------------------------------------------------------------
NET ASSETS--BEGINNING OF PERIOD......... $ 65,675,565 $ -- $137,337,990 $ --
OPERATIONS:
Net investment income................. 1,676,312 1,774,865 3,981,017 5,074,635
Net realized gain (loss) from
investments.......................... (23,955) 889,300 (2,001,654) 2,741,126
Net change in unrealized appreciation
(depreciation) of investments........ (3,204,302) 1,079,444 (4,866,936) 1,186,626
------------- ------------- ------------- -------------
Net increase (decrease) in net
assets resulting from operations... (1,551,945) 3,743,609 (2,887,573) 9,002,387
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Institutional
Shares............................... (1,676,312) (1,774,865) (3,981,017) (5,074,635)
Net realized capital gain from
investments--Institutional Shares.... -- (889,917) -- (2,774,463)
------------- ------------- ------------- -------------
Total distributions to
shareholders....................... (1,676,312) (2,664,782) (3,981,017) (7,849,098)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares--Institutional
Shares............................... 4,624,896 85,999,880 25,860,309 177,765,653
Reinvestment of
distributions--Institutional
Shares............................... 448,231 920,555 158,806 2,329,123
Redemption of shares--Institutional
Shares............................... (1,664,440) (22,323,697) (10,223,579) (43,910,075)
------------- ------------- ------------- -------------
Net increase from capital
transactions....................... 3,408,687 64,596,738 15,795,536 136,184,701
------------- ------------- ------------- -------------
Net increase in net assets.......... 180,430 65,675,565 8,926,946 137,337,990
------------- ------------- ------------- -------------
NET ASSETS--END OF PERIOD (A)........... $ 65,855,995 $ 65,675,565 $146,264,936 $137,337,990
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(A) Including accumulated
undistributed net investment
income.............................. $ 423 $ 423 $ 423 $ 423
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------

SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares--Institutional
Shares............................... 460,272 8,492,304 2,624,929 17,666,188
Reinvestment of
distributions--Institutional
Shares............................... 44,949 89,801 16,129 231,044
Redemption of shares--Institutional
Shares............................... (165,103) (2,176,588) (1,029,081) (4,281,876)
------------- ------------- ------------- -------------
Net increase in shares................ 340,118 6,405,517 1,611,977 13,615,356
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

See Notes to Financial Statements. 25 Memorial Funds

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

STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH EQUITY FUND VALUE EQUITY FUND
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
SIX MONTHS PERIOD SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED
JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998(a) (UNAUDITED) 1998(a)
----------------------------------------------------------------
NET ASSETS--BEGINNING OF PERIOD......... $ 26,799,219 $ -- $ 30,974,497 $ --
OPERATIONS:
Net investment income (loss).......... (17,992) 33,237 157,642 104,472
Net realized gain (loss) from
investments.......................... 1,984,671 3,424,032 613,179 (1,929,714)
Net change in unrealized appreciation
of investments....................... 2,073,134 3,003,778 1,917,974 495,986
------------- ------------- ------------- -------------
Net increase (decrease) in net
assets resulting from operations... 4,039,813 6,461,047 2,688,795 (1,329,256)
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income--Trust Shares... -- (297) (1,544) (905)
Net investment income--Institutional
Shares............................... (11,694) (31,648) (156,747) (103,341)
Net realized capital gain from
investments--Trust Shares............ -- (18,252) -- --
Net realized capital gain from
investments--Institutional Shares.... -- (1,799,949) -- --
------------- ------------- ------------- -------------
Total distributions to
shareholders....................... (11,694) (1,850,146) (158,291) (104,246)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares--Trust Shares.......... 174,856 1,620,834 97,500 1,519,346
Sale of shares--Institutional
Shares............................... 42,230,436 48,487,911 20,540,548 34,931,423
Reinvestment of distributions--Trust
Shares............................... 144 18,549 1,544 905
Reinvestment of
distributions--Institutional
Shares............................... 5,163 1,285,045 48,681 45,654
Redemption of shares--Trust Shares.... (51,379) (1,302,403) -- (1,206,242)
Redemption of shares--Institutional
Shares............................... (28,901,644) (27,921,618) (11,575,886) (2,883,087)
------------- ------------- ------------- -------------
Net increase from capital
transactions....................... 13,457,576 22,188,318 9,112,387 32,407,999
------------- ------------- ------------- -------------
Net increase in net assets.......... 17,485,695 26,799,219 11,642,891 30,974,497
------------- ------------- ------------- -------------
NET ASSETS--END OF PERIOD (A)........... $ 44,284,914 $ 26,799,219 $ 42,617,388 $ 30,974,497
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(A) Including accumulated
undistributed net investment income
(loss).............................. $ (27,971) $ 1,715 $ -- $ 649
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------

SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares--Trust Shares.......... 14,593 161,489 10,605 153,755
Sale of shares--Institutional
Shares............................... 3,466,909 4,716,662 2,196,984 3,655,098
Reinvestment of distributions--Trust
Shares............................... 12 1,622 166 105
Reinvestment of
distributions--Institutional
Shares............................... 421 111,988 5,272 5,273
Redemption of shares--Trust Shares.... (4,181) (130,508) -- (120,656)
Redemption of shares--Institutional
Shares............................... (2,395,662) (2,528,273) (1,200,425) (322,329)
------------- ------------- ------------- -------------
Net increase in shares................ 1,082,092 2,332,980 1,012,602 3,371,246
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

- ------------------------------
(a) For the period March 29, 1998 (commencement of operations) through December
31, 1998 (Note 1).

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

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED PER SHARE DATA FOR AN AVERAGE SHARE OF EACH FUND OUTSTANDING THROUGHOUT
EACH PERIOD:

<TABLE>
<CAPTION>
GOVERNMENT CORPORATE
BOND FUND BOND FUND
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
SHARES SHARES SHARES SHARES
--------------- -------------- --------------- --------------
SIX MONTHS PERIOD SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED
JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998(a) (UNAUDITED) 1998(b)
--------------- -------------- --------------- --------------

Net asset value, beginning of period......... $ 10.25 $ 10.00 $ 10.09 $ 10.00
--------------- -------------- --------------- --------------
Investment Operations:
Net investment income.................... 0.25 0.39 0.28 0.43
Net realized and unrealized gain (loss)
on investments.......................... (0.49) 0.39 (0.48) 0.30
--------------- -------------- --------------- --------------
Total from Investment Operations............. (0.24) 0.78 (0.20) 0.73
--------------- -------------- --------------- --------------
Distributions from:
Net investment income...................... (0.25) (0.39) (0.28) (0.43)
Net realized gain on investments........... -- (0.14) -- (0.21)
--------------- -------------- --------------- --------------
Total Distributions.......................... (0.25) (0.53) (0.28) (0.64)
--------------- -------------- --------------- --------------
Net asset value, end of period............... $ 9.76 $ 10.25 $ 9.61 $ 10.09
--------------- -------------- --------------- --------------
--------------- -------------- --------------- --------------
Total Return (c)............................. (2.32)% 7.96% (1.98)% 7.50%
Ratio/Supplementary Data:
Ratios to average net assets:
Expenses, including reimbursement/waiver
of fees (d)............................. 0.68% 0.73% 0.64% 0.63%
Expenses, excluding reimbursement/waiver
of fees (d)............................. 0.75% 0.85% 0.70% 0.76%
Net investment income, including
reimbursement/waiver of fees (d)........ 5.15% 5.05% 5.80% 5.60%
Portfolio turnover rate...................... 7% 114% 169% 377%
Net assets at end of period (000's
omitted)................................... $ 65,856 $ 65,676 $146,265 $137,338
</TABLE>

- ------------------------------
(a) For the period March 29, 1998 (commencement of operations) through December
31, 1998 (Note 1).
(b) For the period March 25, 1998 (commencement of operations) through December
31, 1998 (Note 1).
(c) Total returns would have been lower had certain expenses not been reduced
during the period shown (Note 4).
(d) Annualized.

See Notes to Financial Statements. 27 Memorial Funds

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

FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
SELECTED PER SHARE DATA FOR AN AVERAGE SHARE OF THE FUND OUTSTANDING THROUGHOUT
EACH PERIOD:

<TABLE>
<CAPTION>
GROWTH
EQUITY FUND
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRUST TRUST INSTITUTIONAL INSTITUTIONAL
SHARES SHARES SHARES SHARES
--------------- -------------- --------------- --------------
SIX MONTHS PERIOD SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED
JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998(a) (UNAUDITED) 1998(a)
--------------- -------------- --------------- --------------

Net asset value, beginning of period......... $ 11.45 $ 10.00 $ 11.49 $ 10.00
--------------- -------------- --------------- --------------
Investment Operations:
Net investment income (loss)............. (0.08) 0.01 (0.07) 0.01
Net realized and unrealized gain on
investments............................. 1.54 2.05 1.55 2.09
--------------- -------------- --------------- --------------
Total from Investment Operations............. 1.46 2.06 1.48 2.10
--------------- -------------- --------------- --------------
Distributions from:
Net investment income...................... -- (0.01) (0.00)(d) (0.01)
Net realized gain on investments........... -- (0.60) -- (0.60)
--------------- -------------- --------------- --------------
Total Distributions.......................... -- (0.61) (0.00) (0.61)
--------------- -------------- --------------- --------------
Net asset value, end of period............... $ 12.91 $ 11.45 $ 12.97 $ 11.49
--------------- -------------- --------------- --------------
--------------- -------------- --------------- --------------
Total Return (b)............................. 12.79% 20.57% 12.92% 20.97%
Ratio/Supplementary Data:
Ratios to average net assets:
Expenses, including reimbursement/waiver
of fees (c)............................. 1.24% 1.25% 0.99% 1.00%
Expenses, excluding reimbursement/waiver
of fees (c)............................. 1.56% 2.29% 1.07% 1.19%
Net investment income (loss), including
reimbursement/ waiver of fees (c)....... (0.22)% 0.14% (0.09)% 0.16%
Portfolio turnover rate...................... 54% 135% 54% 135%
Net assets at end of period (000's
omitted)................................... $ 555 $ 373 $ 43,729 $ 26,426
</TABLE>

- ------------------------------
(a) For the period March 29, 1998 (commencement of operations) through December
31, 1998 (Note 1).
(b) Total returns would have been lower had certain expenses not been reduced
during the period shown (Note 4).
(c) Annualized.
(d) Distributions of net investment income per share were less than $0.01.

See Notes to Financial Statements. 28 Memorial Funds

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

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

<TABLE>
<CAPTION>
VALUE
EQUITY FUND
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRUST TRUST INSTITUTIONAL INSTITUTIONAL
SHARES SHARES SHARES SHARES
--------------- -------------- --------------- --------------
SIX MONTHS PERIOD SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED
JUNE 30, 1999 DECEMBER 31, JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998(a) (UNAUDITED) 1998(a)
--------------- -------------- --------------- --------------

Net asset value, beginning of period $ 9.16 $ 10.00 $ 9.19 $ 10.00
--------------- -------------- --------------- --------------
Investment Operations:
Net investment income.................... 0.03 0.02 0.04 0.03
Net realized and unrealized gain (loss)
on investments.......................... 0.53 (0.83) 0.53 (0.81)
--------------- -------------- --------------- --------------
Total from Investment Operations............. 0.56 (0.81) 0.57 (0.78)
--------------- -------------- --------------- --------------
Distributions from:
Net investment income...................... (0.04) (0.03) (0.04) (0.03)
--------------- -------------- --------------- --------------
Net asset value, end of period............... $ 9.68 $ 9.16 $ 9.72 $ 9.19
--------------- -------------- --------------- --------------
--------------- -------------- --------------- --------------
Total Return (b)............................. 6.10% (8.06)% 6.19% (7.76)%
Ratio/Supplementary Data:
Ratios to average net assets:
Expenses, including reimbursement/waiver
of fees (c)............................. 1.24% 1.25% 0.99% 1.00%
Expenses, excluding reimbursement/waiver
of fees (c)............................. 1.56% 2.40% 1.06% 1.25%
Net investment income, including
reimbursement/waiver of fees (c)........ 0.72% 0.34% 0.88% 0.59%
Portfolio turnover rate...................... 28% 37% 28% 37%
Net assets at end of period (000's
omitted)................................... $ 426 $ 304 $ 42,192 $ 30,670
</TABLE>

- ------------------------------
(a) For the period March 29, 1998 (commencement of operations) through December
31, 1998 (See Note 1).
(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. 29 Memorial Funds
<PAGE>
- --------------------------------------------------------------------------------

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------

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. As of June 30, 1999, there was one security, with a fair market value
of $299,906, held by the Corporate Bond Fund. 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--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 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 has a capital loss carryover in the
amount of $1,035,112, expiring December 31, 2006, available to offset future net
realized capital gains.

30 Memorial Funds

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

NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------

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. 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, L.P.

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

Currently, the Adviser pays the Sub-advisers of Government Bond Fund and
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). 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% at average annual net
assets levels of $250 million but less than $500 million, and 0.01% at average
annual net asset levels exceeding $500 million). As 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 Fund Services, LLC ("FFS"), 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. Prior
to May 1, 1999, Forum Financial Services, Inc., served as each Fund's
distributor. 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 FFS a distribution fee at an annual
rate of 0.25% of the average daily net assets of the Trust Shares of each Fund.
FFS 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 FFS as compensation for FFS'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.

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 remainder of the fiscal year.

31 Memorial Funds

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

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1999 (unaudited)
- --------------------------------------------------------------------------------

NOTE 4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES

The Adviser, Sub-advisers, FFS, FSS and FAcS may voluntarily waive a portion of
their fees. In addition, FAdS may, under certain circumstances, assume certain
expenses of the Funds. For the period ended June 30, 1999, the Sub-advisers and
FFS have voluntarily waived fees as follows:

<TABLE>
<CAPTION>
INVESTMENT
ADVISORY FFS TOTAL
--------- ---- --------
<S> <C> <C> <C>
Government Bond Fund............... $ 21,715 $ -- $ 21,715
Corporate Bond Fund................ 45,778 -- 45,778
Growth Equity Fund................. 14,447 580 15,027
Value Equity Fund.................. 12,880 440 13,320
</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 June 30, 1999, 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............... $ 8,621,133 $ 4,522,455 $ 8,621,133 $ --
Corporate Bond Fund................ 241,801,271 227,157,332 105,663,821 100,480,904
Growth Equity Fund................. 32,567,246 20,115,749 -- --
Value Equity Fund.................. 19,695,355 9,384,034 -- --
</TABLE>

For federal income tax purposes, the tax basis of investment securities owned as
of June 30, 1999, was the same as for financial reporting purposes. The
aggregate gross unrealized appreciation, the aggregate gross unrealized
depreciation and net unrealized appreciation (depreciation) of investment
securities owned, as of June 30, 1999, were as follows:

<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Government Bond Fund............... $67,169,707 $ 8,752 $2,133,610 $(2,124,858)
Corporate Bond Fund................ 148,356,148 363,923 4,044,233 (3,680,310)
Growth Equity Fund................. 39,204,836 6,027,420 950,508 5,076,912
Value Equity Fund.................. 40,230,962 4,754,775 2,340,815 2,413,960
</TABLE>

32 Memorial Funds
<PAGE>
THE MEMORIAL GROUP
5847 San Felipe
Suite 4545
Houston, Texas 77057

<TABLE>
<S> <C>
INVESTMENT ADVISER ADMINISTRATOR
Forum Investment Advisers, LLC Forum Administrative Services, LLC
Two Portland Square Two Portland Square
Portland, Maine 04101 Portland, Maine 04101
</TABLE>

TRANSFER AGENT & DIVIDEND DISBURSING AGENT
Forum Shareholder Services, LLC
Two Portland Square
Portland, Maine 04101

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.