MEMORIAL FUNDS
497, 2001-01-19
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                       STATEMENT OF ADDITIONAL INFORMATION

                                   May 1, 2000


                          (as amended January 19, 2001)


                                     [LOGO]


                              GOVERNMENT BOND FUND

                               CORPORATE BOND FUND

                               GROWTH EQUITY FUND

                                VALUE EQUITY FUND

FUND INFORMATION:

Memorial Funds
Two Portland Square
Portland, Maine 04101
(888) 263-5593

INVESTMENT ADVISER:


Memorial Investment Advisors, Inc.
5847 San Felipe, Suite 875
Houston, Texas  77057


ACCOUNT INFORMATION
AND SHAREHOLDER SERVICES:

Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(888) 263-5593


         This  Statement  of  Additional  Information  or  SAI  supplements  the
Prospectuses dated May 1, 2000 and June 22, 2000, as may be amended from time to
time,  offering  Institutional  Shares of Government  Bond Fund,  Corporate Bond
Fund, Growth Equity Fund and Value Equity Fund (the "Funds").  This SAI is not a
prospectus  and  should  only be  read in  conjunction  with a  prospectus.  The
Prospectuses may be obtained, without charge, by contacting shareholder services
at the address or telephone number listed above.


         Financial  Statements  for the Funds for the year  ended  December  31,
1999, included in the Annual Report to shareholders,  are incorporated into this
SAI by reference.  Copies of the Annual Report may be obtained,  without charge,
by  contacting  shareholder  services at the address or telephone  number listed
above.


<PAGE>



TABLE OF CONTENTS
--------------------------------------------------------------------------------


GLOSSARY                                                                       1


1.  INVESTMENT POLICIES AND RISKS                                              2


2.  INVESTMENT LIMITATIONS                                                    13


3.  PERFORMANCE DATA AND ADVERTISING                                          15


4.  MANAGEMENT                                                                19


5.  PORTFOLIO TRANSACTIONS                                                    26


6.  ADDITIONAL PURCHASE AND REDEMPTION INFORMATION                            29


7.  TAXATION                                                                  31


8.  OTHER MATTERS                                                             35


APPENDIX A - DESCRIPTION OF SECURITIES RATINGS                               A-1


APPENDIX B - MISCELLANEOUS TABLES                                            B-1


APPENDIX C - PERFORMANCE DATA                                                C-1








<PAGE>

GLOSSARY
--------------------------------------------------------------------------------


         "Adviser" means Memorial Investment Advisors, Inc.


         "Board" means the Board of Trustees of the Trust.

         "CFTC" means the U.S. Commodities Futures Trading Commission.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Custodian" means the custodian of each Fund's assets.

         "FAdS" means Forum Administrative  Services, LLC, administrator of each
         Fund.

         "FAcS" means Forum  Accounting  Services,  LLC, the fund  accountant of
         each Fund.

         "FFS"  means  Forum Fund  Services,  LLC,  distributor  of each  Fund's
         shares.

         "Fitch" means Fitch IBCA, Inc.

         "Fund" means each of the separate series of the Trust to which this SAI
         relates as identified on the cover page.

         "Moody's" means Moody's Investors Service.

         "NAV" means net asset value.

         "NRSRO" means a nationally recognized statistical rating organization.

         "SEC" means the U.S. Securities and Exchange Commission.

         "S&P" means Standard & Poor's.

         "Stock Index  Futures"  means futures  contracts that relate to broadly
         based stock indices.


         "Subadviser"  means Northern Trust Investments,  Inc., American General
         Investment  Management, L.P., Davis Hamilton Jackson & Associates, L.P.
         or PPM America, Inc., as appropriate.


         "Transfer Agent" means Forum  Shareholder  Services,  LLC, the transfer
         agent and distribution disbursing agent of each Fund.

         "Trust" means Memorial Funds

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

         "U.S.  Treasury  Securities" means  obligations issued or guaranteed by
         the U.S. Treasury.

         "1933 Act" means the Securities Act of 1933, as amended.

         "1940 Act" means the Investment Company Act of 1940, as amended.




                                       1
<PAGE>




1.  INVESTMENT POLICIES AND RISKS
--------------------------------------------------------------------------------
The following  discussion  supplements the disclosure in the prospectuses  about
each Fund's investment techniques, strategies and risks.

A.       SECURITY RATINGS INFORMATION

The Funds'  investments  in fixed income  securities  are subject to credit risk
relating to the financial  condition of the issuers of the  securities  that the
Funds hold. To limit credit risk, each Fund generally may only invest its assets
in debt securities that are considered investment grade.  Investment grade means
rated in the top four long-term rating  categories or top two short-term  rating
categories by an NRSRO,  or unrated and  determined  by the  Subadviser to be of
comparable  quality.  Corporate  Bond Fund may  invest up to 5% of its assets in
securities  rated  below  investment  grade.   Non-investment  grade  securities
(commonly known as "junk bonds") have  significant  speculative  characteristics
and  generally  involve  greater  volatility  of  price  than  investment  grade
securities.

The lowest  long-term  ratings that are  investment  grade for corporate  bonds,
including  convertible  bonds, are "Baa" in the case of Moody's and "BBB" in the
case of S&P and Fitch;  for preferred stock are "Baa" in the case of Moody's and
"BBB"  in the  case  of S&P  and  Fitch;  and  for  short-term  debt,  including
commercial paper, are Prime-2 (P-2) in the case of Moody's, "A-2" in the case of
S&P and "F-2" in the case of Fitch.

Unrated securities may not be as actively traded as rated securities. A Fund may
retain  securities  whose rating has been lowered  below the lowest  permissible
rating  category (or that are unrated and  determined by the Subadviser to be of
comparable  quality to securities whose rating has been lowered below the lowest
permissible  rating  category) if the Subadviser  determines that retaining such
security is in the best interests of the Fund. Because a downgrade often results
in a  reduction  in the  market  price  of the  security,  sale of a  downgraded
security may result in a loss.

Moody's,  S&P and other NRSROs are private  services that provide ratings of the
credit  quality  of  debt  obligations,   including  convertible  securities.  A
description of the range of ratings assigned to various types of bonds and other
securities  by several  NRSROs is included in Appendix A to this SAI.  The Funds
may use these ratings to determine whether to purchase, sell or hold a security.
Ratings are general and are not absolute  standards of quality.  Securities with
the same maturity, interest rate and rating may have different market prices. If
an issue of  securities  ceases to be rated or if its rating is reduced after it
is purchased by a Fund,  the Subadviser  will determine  whether the Fund should
continue to hold the obligation. To the extent that the ratings given by a NRSRO
may change as a result of changes in such organizations or their rating systems,
the Subadviser  will attempt to substitute  comparable  ratings.  Credit ratings
attempt to evaluate  the safety of principal  and  interest  payments and do not
evaluate the risks of  fluctuations in market value.  Also,  rating agencies may
fail to make timely changes in credit  ratings.  An issuer's  current  financial
condition may be better or worse than a rating indicates.

B.       TEMPORARY DEFENSIVE POSITION

A Fund may assume a temporary defensive position and may invest without limit in
money market  instruments that are of prime quality.  Prime quality money market
instruments  are  those  instruments  that are  rated in one of the two  highest
short-term  rating  categories  by an NRSRO or, if not rated,  determined by the
Subadviser to be of comparable  quality.  Certain additional Funds may invest in
commercial  paper as an investment  and not as a temporary  defensive  position.
Except as noted below with respect to variable  master demand  notes,  issues of
commercial  paper  normally  have  maturities of less than nine months and fixed
rates of return.

Money market  instruments  usually have maturities of one year or less and fixed
rates of return. The money market instruments in which a Fund may invest include
U.S. Government Securities, commercial paper, time deposits, bankers acceptances
and  certificates  of deposit of banks doing  business in the United States that
have, at the time of investment,  total assets in excess of one billion  dollars
and that are insured by the Federal  Deposit  Insurance  Corporation,  corporate
notes and  short-term  bonds and money market mutual  funds.  The Funds may only
invest in money market mutual funds to the extent permitted by the 1940 Act.



                                       2
<PAGE>

The money  market  instruments  in which a Fund may invest may have  variable or
floating rates of interest.  These obligations  include master demand notes that
permit  investment of fluctuating  amounts at varying rates of interest pursuant
to direct  arrangement  with the issuer of the  instrument.  The issuer of these
obligations often has the right, after a given period, to prepay the outstanding
principal  amount of the  obligations  upon a specified  number of days' notice.
These  obligations   generally  are  not  traded,  nor  generally  is  there  an
established secondary market for these obligations.  To the extent a demand note
does  not  have a 7-day or  shorter  demand  feature  and  there  is no  readily
available market for the obligation, it is treated as an illiquid security.

Variable  amount master demand notes are unsecured  demand notes that permit the
indebtedness  thereunder  to vary and provide for  periodic  adjustments  in the
interest rate  according to the terms of the  instrument.  Because master demand
notes are direct lending  arrangements  between a Fund and the issuer,  they are
not normally  traded.  Although there is no secondary  market in the notes,  the
Fund may demand payment of principal and accrued interest at any time.  Variable
amount master demand notes must satisfy the same criteria as set forth above for
commercial paper.

C.       HEDGING AND OPTION INCOME STRATEGIES

A Fund may seek to hedge against a decline in the value of securities it owns or
an  increase  in the  price of  securities  that it plans  to  purchase.  A Fund
accomplishes a hedge by purchasing  options or writing (selling) covered options
on securities in which it has invested or on any securities index based in whole
or in part on securities  in which the Fund may invest.  Options may trade on an
exchange or the over-the-counter market.

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

The Funds have no current  intention  of  investing  in  futures  contracts  and
options  thereon for purposes  other than hedging.  Growth Equity Fund and Value
Equity Fund (the "Equity Funds") may buy or sell stock index futures  contracts,
such as contracts  on the S&P 500 stock  index.  The Bond Funds may buy and sell
bond index  futures  contracts.  In  addition,  all of the Funds may buy or sell
futures  contracts  on  Treasury  bills,  Treasury  bonds  and  other  financial
instruments.  The Funds may write covered options and buy options on the futures
contracts in which they may invest.

No Fund may  purchase  any  call or put  option  on a  futures  contract  if the
premiums  associated  with all such  options held by the Fund would exceed 5% of
the Fund's total assets as of the date the option is purchased. No Fund may sell
a put option if the exercise value of all put options  written by the Fund would
exceed 50% of the Fund's total assets.  Likewise, no Fund may sell a call option
if the exercise  value of all call options  written by the Fund would exceed the
value of the Fund's  assets.  In addition,  the current market value of all open
futures positions held by a Fund may not exceed 50% of its total assets.

These instruments are often referred to as  "derivatives,"  which may be defined
as financial  instruments whose  performance is derived,  at least in part, from
the  performance  of another asset (such as a security,  currency or an index of
securities).

The Funds may write any covered  options.  An option is covered if, as long as a
Fund is  obligated  under the  option,  it owns an  offsetting  position  in the
underlying  security or maintains  cash,  U.S.  Government  Securities  or other
liquid, high-grade debt securities with a value at all times sufficient to cover
the Fund's obligation under the option.

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



                                       3
<PAGE>

1.       IN GENERAL

A call option is a contract  pursuant to which the purchaser of the call option,
in return  for a premium  paid,  has the right to buy the  security  (or  index)
underlying the option at a specified  exercise price at any time during the term
of the option. The writer of the call option, who receives the premium,  has the
obligation upon exercise of the option to deliver the underlying  security (or a
cash amount  equal to the value of the index)  against  payment of the  exercise
price during the option period.

A put option gives its purchaser, in return for a premium, the right to sell the
underlying  security  (or  index) at a  specified  price  during the term of the
option.  The  writer  of the put  option,  who  receives  the  premium,  has the
obligation to buy the underlying security (or receive a cash amount equal to the
value of the index),  upon  exercise  at the  exercise  price  during the option
period.

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

There are a limited number of options contracts on securities indices and option
contracts may not be available on all securities  that a Fund may own or seek to
own.

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

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

COVERED  CALLS AND HEDGING.  Each Fund may purchase or sell (write) put and call
options  on  securities  to seek to hedge  against  a  decline  in the  value of
securities  owned by it or an increase in the price of securities which it plans
to  purchase.  Hedging or option  income  strategies  include  the  writing  and
purchase  of  exchange-traded   and   over-the-counter   options  on  individual
securities or financial  indices and the purchase and sale of financial  futures
contracts and related options.  Whether or not used for hedging purposes,  these
investment  techniques involve risks that are different in certain respects from
the investment risks associated with the other investments of a Fund.  Principal
among such risks are: (1) the possible  failure of such  instruments  as hedging
techniques in cases where the price  movements of the securities  underlying the
options or futures do not follow the price movements of the portfolio securities
subject to the hedge;  (2)  potentially  unlimited loss  associated with futures
transactions  and the possible lack of a liquid secondary market for closing out
a futures position;  and (3) possible losses resulting from the inability of the
Subadviser to correctly  predict the direction of stock prices,  interest  rates
and other economic factors.  To the extent a Fund invests in foreign securities,
it may also invest in options on foreign  currencies,  foreign  currency futures
contracts and options on those futures  contracts.  Use of these  instruments is
subject to regulation by the SEC, the several options and futures exchanges upon
which options and futures are traded or the CFTC.

Except as otherwise  noted in this SAI, the Funds will not use leverage in their
options and hedging  strategies.  In the case of transactions  entered into as a
hedge,  a Fund will hold  securities,  currencies  or other  options  or futures
positions  whose  values  are  expected  to  offset  ("cover")  its  obligations
thereunder.  A Fund will not enter into a hedging strategy that exposes it to an
obligation to another  party unless at least one of the following  conditions is


                                       4
<PAGE>

met. A Fund owns either an  offsetting  ("covered")  position;  or it owns cash,
U.S. Government Securities or other liquid securities (or other assets as may be
permitted  by the  SEC)  with a value  sufficient  at all  times  to  cover  its
potential obligations.  When required by applicable regulatory  guidelines,  the
Funds will set aside cash, U.S. Government Securities or other liquid securities
(or other assets as may be  permitted  by the SEC) in a segregated  account with
its custodian in the prescribed  amount.  Any assets used for cover or held in a
segregated  account  cannot be sold or closed  out while the  hedging  or option
income strategy is outstanding, unless they are replaced with similar assets. As
a result, there is a possibility that the use of cover or segregation  involving
a large percentage of a Fund's assets could impede  portfolio  management or the
Fund's ability to meet redemption requests or other current obligations.

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

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

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

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

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



                                       5
<PAGE>

2. RISKS

The Fund's  use of options  subjects  the Fund to certain  investment  risks and
transaction  costs to which it might  not  otherwise  be  subject.  These  risks
include:

o    Dependence on the Subadviser's  ability to predict  movements in the prices
     of  individual  securities  and  fluctuations  in  the  general  securities
     markets.

o    Imperfect  correlations  between  movements  in the prices of  options  and
     movements in the price of the  securities  (or indices)  hedged or used for
     cover, which may cause a given hedge not to achieve its objective.

o    The fact that the skills and techniques  needed to trade these  instruments
     are different from those needed to select the securities in which the Funds
     invest.

o    Lack of  assurance  that a  liquid  secondary  market  will  exist  for any
     particular  instrument at any particular time,  which,  among other things,
     may hinder a Fund's ability to limit exposures by closing its positions.

o    The  possible  need  to  defer  closing  out of  certain  options,  futures
     contracts and related options to avoid adverse tax consequences.

Other risks  include the  inability  of the Fund,  as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise  price,  and the possible  loss of the entire  premium paid for options
purchased by the Fund.

D.       CONVERTIBLE SECURITIES

The Funds may only invest in convertible securities that are investment grade.

1.       IN GENERAL

Convertible  securities,  which include convertible debt,  convertible preferred
stock and other securities  exchangeable under certain  circumstances for shares
of common stock, are fixed income  securities or preferred stock which generally
may be  converted  at a stated  price  within a  specific  amount of time into a
specified number of shares of common stock. A convertible  security entitles the
holder to  receive  interest  paid or accrued  on debt or the  dividend  paid on
preferred  stock  until  the  convertible   security  matures  or  is  redeemed,
converted,  or  exchanged.   Before  conversion,   convertible  securities  have
characteristics similar to nonconvertible debt securities or preferred equity in
that they  ordinarily  provide a stream of income with  generally  higher yields
than do those of common stocks of the same or similar issuers.  These securities
are usually senior to common stock in a company's capital structure, but usually
are subordinated to non-convertible debt securities.

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

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

2.       RISKS

Investment in convertible securities generally entails less risk than investment
in the issuer's common stock. The extent to which such risk is reduced, however,
depends in large measure upon the degree to which the convertible security sells
above its value as a fixed  income  security.  Convertible  securities  also are
subject to the risks of debt  securities:  that changes in interest  rates could
adversely  affect a convertible  security's value and that an issuer may default
on payments of interest or principal.



                                       6
<PAGE>

3.       VALUE OF CONVERTIBLE SECURITIES

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

E.       ILLIQUID AND RESTRICTED SECURITIES

No Fund may  acquire  securities  or invest in  repurchase  agreements  if, as a
result, more than 15% of the Fund's net assets (taken at current value) would be
invested in illiquid securities.

1.       IN GENERAL

The term  "illiquid  securities"  means  securities  that  cannot be disposed of
within seven days in the ordinary course of business at approximately the amount
at  which  a  Fund  has  valued  the  securities.  Illiquid  securities  include
repurchase  agreements  not entitling the holder to payment of principal  within
seven days, purchased over-the-counter options, securities which are not readily
marketable and restricted securities. Restricted securities, except as otherwise
determined by the  Subadviser,  are  securities  subject to contractual or legal
restrictions on resale because they have not been registered under the 1933 Act.

2.       RISKS

Certain risks are associated  with holding  illiquid and restricted  securities.
For  instance,  limitations  on  resale  may  have  an  adverse  effect  on  the
marketability  of a security and a Fund might also have to register a restricted
security in order to dispose of it, resulting in expense and delay. A Fund might
not be able to dispose of  restricted  or  illiquid  securities  promptly  or at
reasonable   prices  and  might   thereby   experience   difficulty   satisfying
redemptions.  There can be no assurance  that a liquid market will exist for any
security at any particular time. Any security,  including securities  determined
by the Subadviser to be liquid, can become illiquid.

3.       DETERMINING LIQUIDITY

The Board has the  ultimate  responsibility  for  determining  whether  specific
securities  are liquid or  illiquid  and has  delegated  the  function of making
determinations of liquidity to the Subadviser,  pursuant to guidelines  approved
by the Board.  The  Subadviser  determines  and  monitors  the  liquidity of the
portfolio securities and reports periodically on its decisions to the Board. The
Subadviser  takes  into  account  a number  of  factors  in  reaching  liquidity
decisions,  including  but not  limited  to:  (1) the  frequency  of trades  and
quotations  for the security;  (2) the number of dealers  willing to purchase or
sell the security and the number of other potential buyers;  (3) the willingness
of dealers to undertake to make a market in the security;  and (4) the nature of
the  marketplace  trades,  including the time needed to dispose of the security,
the method of soliciting offers, and the mechanics of the transfer.

An  institutional  market  has  developed  for  certain  restricted  securities.
Accordingly,  contractual or legal  restrictions on the resale of a security may
not be  indicative  of the liquidity of the  security.  If such  securities  are


                                       7
<PAGE>

eligible for purchase by institutional buyers in accordance with Rule 144A under
the  1933  Act or  other  exemptions,  the  Subadviser  may  determine  that the
securities are not illiquid.

F.       WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS

Government Bond Fund and Corporate Bond Fund may purchase  securities offered on
a  "when-issued"  basis  and may  purchase  or  sell  securities  on a  "forward
commitment"  basis. When such transactions are negotiated,  the price,  which is
generally expressed in yield terms, is fixed at the time the commitment is made,
but  delivery  and  payment  for the  securities  take  place  at a later  date.
Normally,  the settlement  date occurs within two months after the  transaction,
but delayed  settlements beyond two months may be negotiated.  During the period
between a  commitment  and  settlement,  no payment  is made for the  securities
purchased by the purchaser and, thus, no interest  accrues to the purchaser from
the transaction.  At the time a Fund makes the commitment to purchase securities
on a when-issued or delayed delivery basis, the Fund will record the transaction
as a purchase and  thereafter  reflect the value each day of such  securities in
determining its net asset value.

1.       RISKS

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

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

Each Fund will  establish  and  maintain a  separate  account  with  cash,  U.S.
Government Securities and other liquid securities in an amount at least equal to
its  commitments  to purchase  securities on a when-issued  or delayed  delivery
basis. Except for dollar roll transactions, which are described below, Corporate
Bond Fund and Government Bond Fund will limit its investments in when-issued and
forward commitment securities to 15% of the value of the Fund's total assets.

G.       DOLLAR ROLL TRANSACTIONS.

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


                                       8
<PAGE>

transactions  for the purpose of acquiring  securities for their  portfolios and
not for investment leverage. Each Bond Fund will limit its obligations on dollar
roll transactions to 35% of the Fund's net assets.

H.       MISCELLANEOUS FIXED INCOME SECURITIES

1.       U.S. GOVERNMENT SECURITIES

Corporate  Bond Fund and  Government  Bond Fund (the "Bond  Funds"),  as well as
Growth  Equity Fund and Value  Equity  Fund if  assuming a  temporary  defensive
position,  may invest in U.S.  Government  Securities  including  U.S.  Treasury
Securities and obligations issued or guaranteed by U.S.  Government agencies and
instrumentalities  and  backed  by  the  full  faith  and  credit  of  the  U.S.
Government,  such as those  guaranteed by the Small Business  Administration  or
issued  by  the  Government  National  Mortgage   Association   ("Ginnie  Mae").
Government Bond Fund and Corporate Bond Fund may not invest more than 25% of its
total  assets  in  securities  issued  or  guaranteed  by any  single  agency or
instrumentality of the U.S. Government, except the U.S. Treasury.

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

2.       VARIABLE AND FLOATING RATE SECURITIES

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

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

3.       DEMAND NOTES

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

4.       GUARANTEED INVESTMENT CONTRACTS

Corporate Bond Fund may invest in guaranteed  investment  contracts ("GICs").  A
GIC is an arrangement with an insurance company under which the Fund contributes
cash to the  insurance  company's  general  account  and the  insurance  company


                                       9
<PAGE>

credits the contribution  with interest on a monthly basis. The interest rate is
tied to a specified market index and is guaranteed by the insurance  company not
to be less than a certain  minimum rate.  The Fund will purchase a GIC only when
the Subadviser has determined that the GIC presents  minimal credit risks to the
Fund  and is of  comparable  quality  to  other  instruments  that  the Fund may
purchase.

5.       ZERO-COUPON SECURITIES

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

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

Zero-coupon  securities  are sold at original issue discount and pay no interest
to  holders  prior to  maturity,  but the Fund must  include  a  portion  of the
original issue discount of the security as income.  Because of this, zero-coupon
securities may be subject to greater  fluctuation of market value than the other
securities  in which the Fund may invest.  The Fund  distributes  all of its net
investment  income,  and may have to sell  portfolio  securities  to  distribute
imputed income,  which may occur at a time when the  Sub-adviser  would not have
chosen to sell such  securities  and which may result in a taxable gain or loss.
The Corporate  Bond Fund will limit its  investment in  zero-coupon  securities,
except those issued through the U.S. Treasury's STRIPS program, to not more than
10% of the Fund's total assets.

6.       MORTGAGE-BACKED SECURITIES

The Bond Funds may  invest up to 25% of their  total  assets in  mortgage-backed
securities.  Government Bond Fund may only invest in mortgage-backed  securities
issued  by  the  government  or  government-related   issuers  described  below.
Corporate  Bond Fund may also invest in  mortgage-backed  securities  of private
issuers.

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

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

GOVERNMENT AND GOVERNMENT-RELATED GUARANTORS. The principal government guarantor
of  mortgage-backed  securities  is Ginnie  Mae, a  wholly-owned  United  States
Government  corporation  within the Department of Housing and Urban Development.
Mortgage-backed securities are also issued by Fannie Mae, a government-sponsored
corporation  owned entirely by private  stockholders  that is subject to general
regulation by the Secretary of Housing and Urban Development, and Freddie Mac, a
corporate instrumentality of the United States Government.  While Fannie Mae and


                                       10
<PAGE>

Freddie  Mac each  guarantee  the  payment  of  principal  and  interest  on the
securities they issue,  unlike Ginnie Mae securities,  their  securities are not
backed by the full faith and credit of the United States Government.

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

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

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

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

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

ADJUSTABLE RATE  MORTGAGE-BACKED  SECURITIES.  Adjustable  rate  mortgage-backed
securities  ("ARMs") are  securities  that have interest rates that are reset at
periodic  intervals,  usually by reference to some interest rate index or market
interest  rate.  Although  the rate  adjustment  feature  may act as a buffer to
reduce  sharp  changes  in  the  value  of  adjustable  rate  securities,  these
securities  are still  subject to  changes  in value  based on changes in market
interest  rates or  changes  in the  issuer's  creditworthiness.  Because of the
resetting of interest  rates,  adjustable  rate  securities are less likely than
non-adjustable  rate  securities of comparable  quality and maturity to increase
significantly  in value when market  interest rates fall.  Also, most adjustable
rate  securities  (or the  underlying  mortgages) are subject to caps or floors.


                                       11
<PAGE>

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

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

7.       ASSET-BACKED SECURITIES

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

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



                                       12
<PAGE>

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

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

A fundamental policy of a Fund cannot be changed without the affirmative vote of
the lesser of: (1) 50% of the outstanding  shares of the Fund; or (2) 67% of the
shares of the Fund present or represented at a shareholders meeting at which the
holders of more than 50% of the  outstanding  shares of the Fund are  present or
represented.  The Board may  change a  nonfundamental  policy of a Fund  without
shareholder approval.

A.       FUNDAMENTAL LIMITATIONS

Each  Fund's  investment  objective  is  fundamental.  Each Fund has adopted the
following investment limitations, which are fundamental policies of the Fund.

1.       ISSUANCE OF SENIOR SECURITIES

No Fund may issue senior  securities  except  pursuant to Section 18 of the 1940
Act and except that a Fund may borrow money subject to its investment limitation
on borrowing.

2.       UNDERWRITING ACTIVITIES

No Fund may act as an underwriter of securities of other issuers,  except to the
extent that, in connection with the disposition of portfolio securities,  a Fund
may be deemed to be an underwriter for purpose of the 1933 Act.

3.       CONCENTRATION

No Fund may  purchase  the  securities  of issuers  (other than U.S.  Government
Securities)  conducting  their  business  activity  in  the  same  industry  if,
immediately  after  such  purchase,  the value of a Fund's  investments  in such
industry would comprise 25% or more of the value of its total assets.

4.       PURCHASES AND SALES OF REAL ESTATE

No Fund may purchase or sell real estate or any interest therein,  except that a
Fund may invest in securities  issued or guaranteed by corporate or governmental
entities  secured  by  real  estate  or  interests  therein,  such  as  mortgage
pass-throughs and collateralized  mortgage  obligations,  or issued by companies
that invest in real estate or interests therein.

5.       PURCHASES AND SALES OF COMMODITIES

No Fund may  purchase or sell  physical  commodities  or  contracts,  options or
options on contracts to purchase or sell  physical  commodities;  provided  that
currency and  currency-related  contracts  and  contracts on indices will not be
deemed to be physical commodities.



                                       13
<PAGE>

6.       MAKING LOANS

No Fund  may make  loans  to  other  persons  except  for the  purchase  of debt
securities  that are  otherwise  permitted  investments  or  loans of  portfolio
securities  through the use of  repurchase  agreements,  or  securities  lending
programs and  agreements.  A Fund may pay fees to arrange  securities  loans and
each Fund will, as a fundamental  policy,  limit securities  lending to not more
than 331/3 % of the value of its total assets.

7.       DIVERSIFICATION

Each Fund is "diversified" as that term is defined in the 1940 Act. Accordingly,
no Fund may  purchase a security  if, as a result;  (1) more than 5% of a Fund's
total assets would be invested in the  securities of a single  issuer;  or (2) a
Fund would own more than 10% of the  outstanding  voting  securities of a single
issuer.  This  limitation  applies only to 75% of a Fund's total assets and does
not apply to U.S. Government Securities.

B.       NONFUNDAMENTAL LIMITATIONS

Each  Fund has  adopted  the  following  investment  limitations,  which are not
fundamental policies of the Fund.

1.       BORROWING

No Fund may purchase portfolio  securities if its outstanding  borrowings exceed
5% of its total assets or borrow for purposes other than meeting  redemptions in
an  amount  exceeding  5% of the  value  of its  total  assets  at the  time the
borrowing is made.

2.       ILLIQUID SECURITIES

No Fund may acquire  securities or invest in repurchase  agreements with respect
to any securities  if, as result,  more than 15% of the Fund's net assets (taken
at current value) would be invested in illiquid securities

3.       SHORT SALES

No Fund may make short sales of securities (except short sales against the box).

4.       PURCHASES ON MARGIN

No Fund may  purchase  securities  on margin  except  for the use of  short-term
credit  necessary  for  the  clearance  of  purchases  and  sales  of  portfolio
securities  but a Fund may make margin  deposits in  connection  with  permitted
transactions in options, futures contracts and options on futures contracts.

5.       UNSEASONED ISSUERS

No Fund may  invest  more than 5% of the  value of the  Fund's  total  assets in
securities  (other  than  fully   collateralized  debt  obligations)  issued  by
companies that have conducted continuous operations for less than three years.

6.       PLEDGING

No Fund may pledge,  mortgage,  hypothecate or encumber any of its assets except
to secure permitted  borrowings or to secure other permitted  transactions.  The
deposit in escrow of securities  in connection  with the writing of put and call
options,  collateralized  loans of securities and collateral  arrangements  with
respect  to  margin  for  futures  contracts  are not  deemed to be  pledges  or
hypothecations for this purpose.



                                       14
<PAGE>

7.       TRUSTEES' AND OFFICERS' HOLDINGS

No Fund may invest in or hold  securities of any issuer if officers and Trustees
of the Trust or the Adviser,  individually  owning beneficially more than 1/2 of
1% of the  securities  of the issuer,  in the  aggregate own more than 5% of the
issuer's securities.

8.       OIL, GAS OR MINERAL

No Fund may invest in  interests  in oil or gas or  interests  in other  mineral
exploration or development programs.

3.         PERFORMANCE DATA AND ADVERTISING
--------------------------------------------------------------------------------

A.       PERFORMANCE DATA

A Fund may quote  performance  in  various  ways.  All  performance  information
supplied  in  advertising,  sales  literature,   shareholder  reports  or  other
materials is historical and is not intended to indicate future returns.

A Fund may compare any of its performance information with:

o    Data published by independent evaluators such as Morningstar,  Inc., Lipper
     Analytical Services,  Inc., IBC/Donoghue,  Inc.,  CDA/Wiesenberger or other
     companies  which track the investment  performance of investment  companies
     ("Fund Tracking Companies").

o    The performance of other mutual funds.

o    The performance of recognized stock, bond and other indices,  including but
     not limited to the  Standard & Poor's  500(R)  Index,  the Russell  2000(R)
     Index,  the Russell  MidcapTM Index,  the Russell 1000(R) Value Index,  the
     Russell 2500(R) Index, the Morgan Stanley - Europe, Australian and Far East
     Index, the Dow Jones Industrial  Average,  the Salomon Brothers Bond Index,
     the Shearson Lehman Bond Index,  U.S.  Treasury  bonds,  bills or notes and
     changes in the Consumer Price Index as published by the U.S.  Department of
     Commerce.

Performance  information may be presented  numerically or in a table,  graph, or
similar illustration.

Indices are not used in the  management  of a Fund but rather are  standards  by
which the Fund's  Subadviser and shareholders may compare the performance of the
Fund to an unmanaged  composite of securities  with similar,  but not identical,
characteristics as the Fund.

A Fund may refer to: (1) general market performances over past time periods such
as those  published by Ibbotson  Associates (for instance,  its "Stocks,  Bonds,
Bills and Inflation  Yearbook");  (2) mutual fund performance rankings and other
data  published by Fund  Tracking  Companies;  and (3) material and  comparative
mutual  fund data and  ratings  reported  in  independent  periodicals,  such as
newspapers and financial magazines.

A Fund's  performance will fluctuate in response to market  conditions and other
factors.

A Fund's  performance may be quoted in terms of yield or total return.  A Fund's
yield is a way of showing  the rate of income the Fund earns on its  investments
as a percentage of the Fund's share price. To calculate  standardized  yield for
all  Funds,  each Fund  takes the income it earned  from its  investments  for a
30-day  period (net of  expenses),  divides it by the  average  number of shares
entitled  to  receive  dividends,  and  expresses  the  result as an  annualized
percentage rate based on the Fund's share price at the end of the 30-day period

A listing of certain  performance  data as of December  31, 1999 is contained in
Appendix C -- Performance Data.



                                       15
<PAGE>

B.       PERFORMANCE CALCULATIONS

1.       SEC YIELD

Standardized  SEC yields for a Fund used in advertising are computed by dividing
the Fund's interest income (in accordance with specific  standardized rules) for
a given 30 day or one month period,  net of expenses,  by the average  number of
shares entitled to receive income distributions during the period, dividing this
figure by the  Fund's  net asset  value per share at the end of the  period  and
annualizing  the  result  (assuming  compounding  of income in  accordance  with
specific standardized rules) in order to arrive at an annual percentage rate.

Capital gains and losses generally are excluded from these calculations.

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

Although  published  yield  information  is useful to you in  reviewing a Fund's
performance,  you should be aware that a Fund's yield fluctuates from day to day
and  that  the  Fund's  yield  for any  given  period  is not an  indication  or
representation  by the Fund of future  yields  or rates of return on the  Fund's
shares.  Financial  intermediaries  may charge their  customers that invest in a
Fund fees in  connection  with  that  investment.  This will have the  effect of
reducing the Fund's after-fee yield to those shareholders.

The yields of a Fund are not fixed or guaranteed, and an investment in a Fund is
not insured or guaranteed.  Accordingly, yield information should not be used to
compare shares of a Fund with investment alternatives,  which, like money market
instruments or bank accounts, may provide a fixed rate of interest. Also, it may
not be  appropriate  to compare a Fund's yield  information  directly to similar
information regarding investment alternatives that are insured or guaranteed.

Yield is calculated according to the following formula:
                        a - b
         Yield = 2[(------ + 1)6  - 1]
                         cd

         Where:
           a   =   dividends and interest earned during the period
           b   =   expenses accrued for the period (net of reimbursements)
           c   =   the average  daily  number of shares  outstanding  during the
                   period that were  entitled to receive dividends

           d   =   the maximum offering price  per  share on the last day of the
                   period

2.       TOTAL RETURN CALCULATIONS

A Fund's total return shows its overall  change in value,  including  changes in
share price and assuming all of the Fund's distributions are reinvested.

AVERAGE ANNUAL TOTAL RETURN.  Average annual total return is calculated  using a
formula  prescribed  by the SEC. To  calculate  standard  average  annual  total
returns, a Fund: (1) determines the growth or decline in value of a hypothetical
historical  investment in a Fund over a stated  period;  and (2)  calculates the
annually compounded  percentage rate that would have produced the same result if
the rate of growth or decline in value had been  constant  over the period.  For
example,  a  cumulative  return of 100% over ten years would  produce an average
annual  total return of 7.18%.  While  average  annual  returns are a convenient
means of  comparing  investment  alternatives,  investors  should  realize  that
performance  is not constant  over time but changes from year to year,  and that
average  annual  returns  represent  averaged  figures  as opposed to the actual
year-to-year performance of the Fund.



                                       16
<PAGE>

Average annual total return is calculated according to the following formula:

         P (1+T) n = ERV

         Where:
                  P        =        a hypothetical initial payment of $1,000
                  T        =        average annual total return
                  N        =        number of years
                  ERV      =        ending redeemable value:

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

Because  average  annual  returns  tend to smooth out  variations  in the Fund's
returns,  shareholders  should  recognize  that  they are not the same as actual
year-by-year results.

OTHER  MEASURES  OF  TOTAL  RETURN.  Standardized  total  return  quotes  may be
accompanied by  non-standardized  total return figures calculated by alternative
methods.

o    A Fund may quote  unaveraged or cumulative  total returns,  which reflect a
     Fund's performance over a stated period of time.

o    Total  returns  may be stated in their  components  of income  and  capital
     (including capital gains and changes in share price) in order to illustrate
     the relationship of these factors and their contributions to total return.

Any total return may be quoted as a percentage or as a dollar amount, and may be
calculated for a single  investment,  a series of investments and/or a series of
redemptions over any time period.

Period total return is calculated according to the following formula:

         PT = (ERV/P-1)

         Where:
                  PT       =        period total return

                  The other definitions are the same as in  average annual total
                  return above

C.       OTHER MATTERS

A  Fund  may  also  include  various  information  in  its  advertising,   sales
literature,  shareholder reports or other materials  including,  but not limited
to: (1) portfolio holdings and portfolio allocation as of certain dates, such as
portfolio  diversification  by instrument  type, by  instrument,  by location of
issuer  or  by  maturity;  (2)  statements  or  illustrations  relating  to  the
appropriateness  of types of securities and/or mutual funds that may be employed
by an investor to meet specific  financial  goals,  such as funding  retirement,
paying for children's  education and financially  supporting aging parents;  (3)
information   (including  charts  and  illustrations)  showing  the  effects  of
compounding  interest  (compounding  is  the  process  of  earning  interest  on
principal plus interest that was earned  earlier;  interest can be compounded at
different  intervals,  such as annually,  quarterly or daily);  (4)  information
relating to inflation  and its effects on the dollar;  (for  example,  after ten
years the purchasing power of $25,000 would shrink to $16,621,  $14,968, $13,465
and $12,100,  respectively, if the annual rates of inflation were 4%, 5%, 6% and
7%, respectively); (5) information regarding the effects of automatic investment
and  systematic  withdrawal  plans,   including  the  principal  of  dollar-cost
averaging;  (6) biographical  descriptions of the Fund's portfolio  managers and
the portfolio management staff of the Fund's Subadviser,  summaries of the views
of the portfolio managers with respect to the financial markets, or descriptions
of the nature of the Subadviser's and its staff's management techniques; (7) the


                                       17
<PAGE>

results of a  hypothetical  investment in the Fund over a given number of years,
including the amount that the investment would be at the end of the period;  (8)
the  effects of  investing  in a  tax-deferred  account,  such as an  individual
retirement  account or Section 401(k) pension plan; (9) the net asset value, net
assets or number of shareholders of the Fund as of one or more dates; and (10) a
comparison of the Fund's  operations to the operations of other funds or similar
investment products,  such as a comparison of the nature and scope of regulation
of  the  products  and  the  products'  weighted  average  maturity,  liquidity,
investment policies, and the manner of calculating and reporting performance.

As an example of compounding,  $1,000 compounded  annually at 9.00% will grow to
$1,090 at the end of the first year (an  increase  in $90) and $1,118 at the end
of the second year (an increase in $98). The extra $8 that was earned on the $90
interest  from the first year is the compound  interest.  One  thousand  dollars
compounded  annually  at 9.00%  will  grow to $2,367 at the end of ten years and
$5,604 at the end of 20 years. Other examples of compounding are as follows:  at
7% and 12% annually, $1,000 will grow to $1,967 and $3,106, respectively, at the
end of ten years  and  $3,870  and  $9,646,  respectively,  at the end of twenty
years. These examples are for illustrative  purposes only and are not indicative
of a Fund's performance.

A Fund may advertise  information  regarding the effects of automatic investment
and  systematic  withdrawal  plans,  including  the  principal  of  dollar  cost
averaging.  In a  dollar-cost  averaging  program,  an investor  invests a fixed
dollar amount in a Fund at period  intervals,  thereby  purchasing  fewer shares
when prices are high and more shares when prices are low.  While such a strategy
does not  insure a profit or guard  against a loss in a  declining  market,  the
investor's  average cost per share can be lower than if fixed  numbers of shares
had been  purchased at those  intervals.  In evaluating  such a plan,  investors
should consider their ability to continue  purchasing  shares through periods of
low price levels. For example,  if an investor invests $100 a month for a period
of six months in a Fund the following will be the  relationship  between average
cost per share ($14.35 in the example given) and average price per share:

PERIOD      SYSTEMATIC INVESTMENT       SHARE PRICE          SHARES PURCHASED
 .....      ......................      ............       ......................
 .....      ......................      ............       ......................
  1                $100                    $10                     10.00
  2                $100                    $12                     8.33
  3                $100                    $15                     6.67
  4                $100                    $20                     5.00
  5                $100                    $18                     5.56
  6                $100                    $16                     6.25
 .....      ......................      ............       ......................
 .....      ......................      ............       ......................
    Total Invested $600      Average Price $15.17    Total Shares  41.81

In  connection  with  its  advertisements,  a Fund  may  provide  "shareholder's
letters" which serve to provide  shareholders or investors an introduction  into
the Fund's,  the Trust's or any of the Trust's  service  provider's  policies or
business practices. For instance,  advertisements may provide for a message from
the Fund's Subadviser that it has for more than twenty-five years been committed
to quality  products and outstanding  service to assist its customers in meeting
their financial goals and setting forth the reasons that the Subadviser believes
that it has been successful as a portfolio manager.

From time to time  marketing  materials may include a description of the Trust's
"manager of managers"  structure  which  include the  selection of an investment
consultant  and  sub-advisers  and the criteria for their  selection in terms of
asset size, investment expertise,  reputation and staffing.  Marketing materials
may include references to FAdS, a leading third party  administrator,  including
its  expertise,  staffing  and assets  under  administration  and  distribution.
Marketing  materials  may  explain  that the Trust may be used as an  investment
vehicle in many circumstances,  including a cemetery  merchandise trust, funeral
industry  pre-need  trusts,   corporate   retirement  plans,   IRAs,  and  other
association-related trusts.


                                       18
<PAGE>



4.  MANAGEMENT
--------------------------------------------------------------------------------

The business of the Trust is  conducted  under the  direction of the Board.  The
officers  and Trustees of the Trust may be  directors,  officers or employees of
(and persons providing services to the Trust may include) FFS, its affiliates or
affiliates of the Trust.

A.       TRUSTEES AND OFFICERS

TRUSTEES  AND  OFFICERS OF THE TRUST.  The  business and affairs of the Fund are
managed  under the  direction  of the Board in  compliance  with the laws of the
state of Delaware.  The names of the  Trustees and officers of the Trust,  their
position with the Trust, address, date of birth and principal occupations during
the past five years are set forth  below.  Each  Trustee  who is an  "interested
person" (as defined by the 1940 Act) of the Trust is indicated by an asterisk.
<TABLE>
<S>            <C>                              <C>                                     <C>

          NAME, ADDRESS                  POSITION(S)                     PRINCIPAL OCCUPATION(S) DURING
             AND AGE                      WITH FUND                           THE PAST FIVE YEARS


Christopher W. Hamm*               Chairman of the Board    President, Memorial Group, Inc. since 1998
5847 San Felipe, Suite 875         of Trustees,             Executive Director, CIBC Oppenheimer 1996-98
Houston, Texas 77057               President                Vice President, Paine Webber 1993-96

Born:  March 1967                  Valuation Committee,
                                   Member(1)
 .................................. ........................ .........................................................
 .................................. ........................ .........................................................
John Y. Keffer*                    Trustee                  President and Director, Forum Financial Services, Inc.
Two Portland Square                Valuation Committee,     for more than five years
Portland, Maine 04101              Member(1)                Director and sole shareholder (directly and indirectly)
Born:  July 1942                                            Forum Financial Group LLC, which owns (directly or
                                                            indirectly) Forum Administrative Services, LLC. Forum
                                                            Shareholder Services, LLC and Forum Investment
                                                            Advisers, LLC
                                                            Officer, Director or Trustee, various funds managed and
                                                            distributed by FAdS or FFS
 .................................. ........................ .........................................................
 .................................. ........................ .........................................................

Jay Brammer                        Trustee                  Executive Vice President, Gibralter Properties, Inc., a
3815 River Crossing Parkway,       Audit Committee,         real estate holding company, since 1995
Suite 350                          Member(2)                Executive Vice President, Gibraltar Mausoleum Corp.,

Indianapolis, Indiana 46240                                 1980-95
Born:  August 1957
 .................................. ........................ .........................................................
 .................................. ........................ .........................................................
J.B. Goodwin                       Trustee                  President, JBGoodwin Company, a comprehensive real
3933 Steck Avenue, B-101           Audit Committee,         estate and holding company, for more than five years
Austin, Texas 78759                Member(2)
Born:  December 1949
 .................................. ........................ .........................................................
 .................................. ........................ .........................................................
Robert Stillwell                   Trustee                  Attorney, Baker & Botts, a law firm, for more than five
3000 One Shell Plaza               Audit Committee,         years
Houston, Texas 77002               Chairman(2)
Born:  January 1937
 .................................. ........................ .........................................................
 .................................. ........................ .........................................................
Ronald H. Hirsch                   Vice President and       Managing Director of Operations and Finance, Forum
Two Portland Square                Treasurer                Financial Group since 9/99
Portland, Maine 04101                                       Member of the Board, Citibank Germany from 1991-1998
Born: October 1943
 .................................. ........................ .........................................................
 .................................. ........................ .........................................................
Thomas G. Sheehan                  Vice President           Managing Director and Counsel, Forum Financial Group,
Two Portland Square                                         LLC since 1993
Portland, Maine 04101                                       Special Counsel, Division of Investment Management SEC
Born:  November 1954                                        Officer, various funds managed and distributed by FAdS
                                                            or FFS


                                       19
<PAGE>

 .................................. ........................ .........................................................
          NAME, ADDRESS                  POSITION(S)                     PRINCIPAL OCCUPATION(S) DURING
             AND AGE                      WITH FUND                           THE PAST FIVE YEARS

 .................................. ........................ .........................................................
D. Blaine Riggle                   Secretary                Counsel, Forum Financial Group, LLC, since 1998
Two Portland Square                                         Associate Counsel, Wright Express Corporation (a Fleet
Portland, Maine 04101                                       credit card company), 3/97 - 1/98
Born:  November 1966                                        Associate at the law firm of Friedman, Babcock &
                                                            Gaythwaite, 1994 - 3/97
                                                            Officer, various funds managed and distributed by FAdS
                                                            or FFS
 .................................. ........................ .........................................................
 .................................. ........................ .........................................................
Marcella A. Cote                   Assistant Secretary      Senior Fund Specialist, Forum Financial Group, LLC,
Two Portland Square                                         since 1998
Portland, Maine 04101                                       Budget Analyst, State of Maine Department of Human
Born:  January 1947                                         Services, 2/97 - 5/98
                                                            Project Assistant, Muskie School of Public Service, 1994 - 2/97
                                                            Officer, various funds managed and distributed by FAdS or FFS
 .................................. ........................ .........................................................
 .................................. ........................ .........................................................
Dawn L. Taylor                     Assistant Treasurer      Tax Manager, Forum Financial Group, LLC, since 1997
Two Portland Square                                         Senior Tax Accountant, Purdy, Bingham & Burrell, LLC,
Portland, Maine 04101                                       1/97 - 10/97
Born:  May, 1964                                            Senior Fund Accountant, Forum Financial Group, LLC,
                                                            9/94 - 1/97
                                                            Tax Consultant, New England Financial Services, 6/86 - 9/94
                                                            Officer, various funds managed and distributed by FAdS or FFS
</TABLE>

(1)  The Valuation  Committee is responsible  for determining and monitoring the
     value of the Funds' assets.
(2)  The Audit Committee is responsible for meeting with the Trust's independent
     certified  public  accountants to: (a) review the arrangements and scope of
     any audit; (b) discuss matters of concern relating to the Trust's financial
     statements, including any adjustments to such statements recommended by the
     accountants,  or other results of any audit;  (c) consider the accountants'
     comments with respect to the Trust's financial  policies,  procedures,  and
     internal  accounting  controls;  and (d)  review  any form of  opinion  the
     accountants propose to render to the Trust.

B.       COMPENSATION OF TRUSTEES AND OFFICERS

Each  Trustee  receives  annual  fees of $5,000 and $500 for each Board  meeting
attended and is paid $500 for each committee  meeting  attended on a date when a
Board meeting is not held.

Trustees  are also  reimbursed  for  travel and  related  expenses  incurred  in
attending meetings of the Board.

Trustees that are affiliated with the Adviser receive no compensation  for their
services or reimbursement for their associated expenses. No officer of the Trust
is compensated by the Trust.



                                       20
<PAGE>

The  following  table sets forth the fees paid to each  Trustee by the Trust for
the fiscal year ending December 31, 1999.

<TABLE>
<S>                                      <C>                    <C>             <C>                       <C>

                                                         PENSION OR
                                                    RETIREMENT BENEFITS
                                   AGGREGATE         ACCRUED AS PART OF     ESTIMATED ANNUAL      TOTAL COMPENSATION
                               COMPENSATION FROM       FUND EXPENSES          BENEFITS UPON         FROM TRUST (1)
      NAME, POSITION                 TRUST                                     RETIREMENT

Christopher W. Hamm*                  $0                     $0                    $0                     $0
 ............................ ...................... ..................... ...................... .....................
 ............................ ...................... ..................... ...................... .....................
John Y. Keffer*                       $0                     $0                    $0                     $0
 ............................ ...................... ..................... ...................... .....................
 ............................ ...................... ..................... ...................... .....................
Jay Brammer (2)                       $0                     $0                    $0                     $0
 ............................ ...................... ..................... ...................... .....................
 ............................ ...................... ..................... ...................... .....................
J.B. Goodwin                         $7000                   $0                    $0                   $7,000
 ............................ ...................... ..................... ...................... .....................
 ............................ ...................... ..................... ...................... .....................
Robert Stillwell                    $6,500                   $0                    $0                   $6,500
</TABLE>


(1) The Trust is not a member of a fund complex.
(2) The Trustee waived all compensation for the full fiscal year.

C.       INVESTMENT ADVISER

1.       SERVICES OF ADVISER

The Adviser serves as investment  adviser to each Fund pursuant to an investment
advisory agreement with the Trust.  Under that agreement,  the Adviser furnishes
at  its  own  expense  all  services,  facilities  and  personnel  necessary  in
connection  with  managing  a  Fund's   investments   and  effecting   portfolio
transactions for a Fund.

2.       OWNERSHIP OF ADVISER/AFFILIATIONS


The Adviser is a  diversified  investment  services  company  owned  entirely by
Christopher  W. Hamm.  Memorial  Investment  Advisors,  Inc. is registered as an
investment adviser with the SEC under the 1940 Act.

Christopher W. Hamm is employed by the Adviser (or affiliates of the Adviser).


3.       FEES

The Adviser's fee is calculated as a percentage of the applicable Fund's average
net assets.  The fee is accrued  daily by each Fund and is paid monthly based on
average net assets for the previous month.

In addition to receiving  its advisory fee from each Fund,  the Adviser may also
act and be  compensated  as  investment  manager for its clients with respect to
assets  that  are  invested  in a Fund.  If an  investor  in a Fund  also  has a
separately  managed  account with the Adviser with assets  invested in the Fund,
the Adviser will credit an amount equal to all or a portion of the fees received
by the Adviser against any investment management fee received from a client.



                                       21
<PAGE>

Table 1 in  Appendix B shows the dollar  amount of the fees paid by the Trust to
the  Adviser,  the  amount of the fee waived by the  Adviser  and the actual fee
received  by the  Adviser.  The  Adviser  has  agreed to waive  fees as shown in
Appendix B.

Each Fund pays Memorial Group, Inc.  ("Memorial  Group"), a shareholder  service
fee of 0.25% of the  Fund's  average  daily  net  assets  for the  provision  of
administrative and shareholder relations services. Memorial Group may pay all or
a portion  of the  shareholder  servicing  fee to other  entities,  which may be
affiliated  persons of Memorial  Group or of a Fund,  for providing  services to
specified shareholders.

Memorial  Group may sponsor  master  trusts or assist  cemetery  and/or  funeral
associations  in the  sponsorship  of master trusts which  provide,  among other
things,  investment options to cemetery endowment,  cemetary preneed and funeral
preneed trusts.

4.       OTHER PROVISIONS OF ADVISER'S AGREEMENT

The Adviser's  agreement  must be approved at least  annually by the Board or by
vote of the  shareholders,  and in either case by a majority of the Trustees who
are not parties to the agreement or interested persons of any such party.

The Adviser's  agreement is terminable without penalty by the Trust with respect
to a Fund on 60 days' written  notice to the Adviser when  authorized  either by
vote of a majority of the Fund's  shareholders or by a vote of a majority of the
Board, or by the Adviser on 60 days' written notice to the Trust.  The agreement
will terminate immediately upon its assignment.

5.       SUBADVISERS

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


           Northern Trust  Investment,  Inc.  ("NTI"),  50 South LaSalle Street,
           Chicago,  Illinois  60675,  manages the portfolio of GOVERNMENT  BOND
           FUND. NTI is an Illinois corporation that was incorporated on July 1,
           1988. NTI is registered as an investment adviser under the Investment
           Advisers Act of 1940 ("Advisers Act"). For its services, NTI receives
           an advisory  fee  (excluding  waivers)  from the Adviser at an annual
           rate of 0.20% of the Fund's average daily net assets.

           American General Investment  Management,  L.P.  ("AGIM"),  2929 Allen
           Parkway, 36th Floor,  Houston,  Texas 77019, manages the portfolio of
           CORPORATE  BOND  FUND.  AGIM  is  a  Delaware  corporation  that  was
           organized in 1998 and is registered  as an  investment  adviser under
           the  Advisers  Act.  AGIM is a wholly  owned  subsidiary  of American
           General Corporation,  a diversified financial services  organization.
           For its services,  AGIM receives an advisory fee (excluding  waivers)
           from the  Adviser at an annual  rate of 0.20% of the  Fund's  average
           daily net assets.


           Davis  Hamilton  Jackson &  Associates,  L.P.  ("DHJA"),  Two Houston
           Center, 909 Fannin Street,  Suite 550, Houston,  Texas 77010, manages
           the  portfolio of GROWTH EQUITY FUND.  DHJA is a limited  partnership
           formed under the laws of Delaware that is registered as an investment
           adviser under the Advisers Act. Affiliated Investment Managers Group,
           Inc. ("AMG"), a holding company that invests in investment management
           firms,  owns an interest in DHJA.  The  Executive  Committee of DHJA,
           comprised  of Robert  C.  David  and Jack R.  Hamilton,  is deemed to
           control DHJA. AMG does not  participate in the day-to-day  management
           or the investment process of DHJA. For its services, DHJA receives an
           advisory fee  (excluding  waivers) from the Adviser at an annual rate
           of 0.30% of the Fund's average daily net assets.



                                       22
<PAGE>

           PPM  America,  Inc.  ("PPM"),  225 West  Wacker  Drive,  Suite  1200,
           Chicago,  Illinois 60606, manages the portfolio of VALUE EQUITY FUND.
           PPM is a  Delaware  corporation  that  was  organized  in 1990 and is
           registered as an investment adviser under the Advisers Act. PPM is an
           indirect  wholly owned  subsidiary of Prudential  plc, a UK financial
           services  company.  For its  services,  PPM  receives an advisory fee
           (excluding  waivers)  from the  Adviser at an annual rate of 0.30% of
           the Fund's average daily net assets.

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

The Adviser performs internal due diligence on each Subadviser and monitors each
Subadviser's  performance using its proprietary investment adviser selection and
monitoring   process.   The  Adviser  will  be  responsible  for   communicating
performance   targets  and   evaluations  to   Subadvisers,   supervising   each
Subadviser's  compliance with the Fund's fundamental  investment  objectives and
policies, authorizing Subadvisers to engage in certain investment techniques for
the  Fund,  and  recommending  to the  Board of  Trustees  whether  sub-advisory
agreements should be renewed, modified or terminated.  The Adviser also may from
time to time recommend that the Board replace one or more Subadvisers or appoint
additional   Subadvisers,   depending  on  the  Adviser's   assessment  of  what
combination  of  Subadvisers  it believes will  optimize each Fund's  chances of
achieving its investment objectives. The sub-advisory agreements with respect to
the Funds are nearly identical to the Adviser's  agreement,  except for the fees
payable and certain other non-material matters.

D.       DISTRIBUTOR

1.       DISTRIBUTOR; SERVICES AND COMPENSATION OF DISTRIBUTOR

FFS, the distributor (also known as principal underwriter) of the shares of each
Fund,  is  located at Two  Portland  Square,  Portland,  Maine  04101.  FFS is a
registered  broker-dealer  and  is a  member  of  the  National  Association  of
Securities Dealers, Inc.

FFS,  FAdS,  FAcS,  the  Adviser  and the  Transfer  Agent  are each  controlled
indirectly  by  Forum  Financial  Group,  LLC.  John Y.  Keffer  controls  Forum
Financial Group, LLC.

Under  its  agreement  with the  Trust,  FFS acts as the  agent of the  Trust in
connection with the offering of shares of the Funds. FFS continually distributes
shares of the Funds on a best efforts  basis.  FFS has no obligation to sell any
specific quantity of Fund shares.

2.       OTHER PROVISIONS OF DISTRIBUTOR'S AGREEMENT

FFS's distribution  agreement must be approved at least annually by the Board or
by vote of the  shareholders,  and in either case by a majority of the  Trustees
who are not parties to the agreement or interested persons of any such party and
with  respect  to each  class of a Fund for which  there is an  effective  Plan,
Trustees who do not have any direct or indirect  financial  interest in any such
Plan applicable to the class or in any agreement to the Plan.

FFS's  agreement is  terminable  without  penalty by the Trust with respect to a
Fund on 60 days' written notice when authorized either by vote of a majority the
Fund's  outstanding  shareholders or by a vote of a majority of the Board, or by
FFS on 60 days' written notice to the Trust.



                                       23
<PAGE>

Under its  agreement,  FFS is not liable for any error of judgment or mistake of
law or for any act or  omission  in the  performance  of its  duties  to a Fund,
except for willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of reckless  disregard of its  obligations and duties
under the agreement.

Under its agreement, FFS and certain related parties (such as FFS's officers and
persons  that  control  FFS) are  indemnified  by the Trust  against any and all
claims and  expenses  in any way related to FFS's  actions (or  failures to act)
that are consistent with FFS's contractual  standard of care. This means that as
long as FFS satisfies its contractual  duties,  the Trust is responsible for the
costs of: (1) defending  FFS against  claims that FFS breached a duty it owed to
the Trust;  and (2) paying  judgments  against FFS. The Trust is not required to
indemnify  FFS if the Trust does not receive  written  notice of and  reasonable
opportunity  to defend against a claim against FFS in the Trust's own name or in
the name of FFS.

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

Investors who purchase  shares in this manner will be subject to the  procedures
of the institution through whom they purchase shares, which may include charges,
investment  minimums,  cutoff  times and other  restrictions  in addition to, or
different  from,  those listed  herein.  Information  concerning  any charges or
services  will be provided  to  customers  by the  financial  institution.  When
purchasing shares of the Fund in this manner,  you should acquaint yourself with
your  institution's  procedures  and should read the  Prospectus and this SAI in
conjunction with any materials and information provided by your institution. The
financial  institution  and not its customers will be the shareholder of record,
although  customers  may have the  right to vote  shares  depending  upon  their
arrangement with the institution.

E.       OTHER FUND SERVICE PROVIDERS

1.       ADMINISTRATOR

As  administrator,  pursuant to an agreement with the Trust, FAdS is responsible
for the supervision of the overall management of the Trust,  providing the Trust
with general office facilities and providing  persons  satisfactory to the Board
to serve as officers of the Trust.

For its  services,  FAdS  receives  fees from  each  Fund at an  annual  rate as
follows:  0.15% of the average  daily net assets under $150 million of each Fund
and 0.10% of the  average  daily net  assets  over $150  million  of each  Fund.
Notwithstanding  the above,  the  minimum fee per Fund shall be $30,000 per year
($2,500 per month). The fees are accrued daily by the Funds and are paid monthly
in arrears on the first day of each calendar month for services  performed under
the agreement during the prior calendar month.

Table 2 in  Appendix B shows the dollar  amount of the fees paid by the Trust to
FAdS, the amount of the fee waived by FAdS and the actual fee received by FAdS.

FAdS's  agreement  is  terminable  without  penalty by the Trust or by FAdS with
respect to a Fund on 60 days' written notice.  Under the agreement,  FAdS is not
liable for any error of judgment or mistake of law or for any act or omission in
the  performance of its duties to a Fund,  except for willful  misfeasance,  bad
faith or gross  negligence  in the  performance  of its  duties  or by reason of
reckless disregard of its obligations and duties under the agreement.

EXPENSE  LIMITATIONS.  FAdS and Memorial  Group,  Inc. have undertaken to assume
certain expenses of the Funds (or waive its fees).  This undertaking is designed
to place a  maximum  limit  on  expenses  (including  all fees to be paid to the
Adviser but excluding taxes, interest, brokerage commissions and other portfolio
transaction  expenses and  extraordinary  expenses) of: (1) 1.00% of the average
daily net assets of the  Institutional  Class of each Equity Fund; and (2) 0.75%


                                       24
<PAGE>

of the average daily net assets of the  Institutional  Class of Government  Bond
Fund,  0.75% of the  average  daily  net  assets of the  Institutional  Class of
Corporate Bond Fund.

2.       FUND ACCOUNTANT

As fund accountant,  pursuant to an agreement with the Trust, FAcS provides fund
accounting services to each Fund. These services include calculating the NAV per
share of each Fund (and class) and preparing the Funds' financial statements and
tax returns.

For its services, FAcS receives fees from each Fund at an annual rate of $36,000
plus certain share class charges.  FAcS is paid additional surcharges of $12,000
per year for each  additional  share  class of the Fund above one.  The fees are
accrued  daily by the Funds and are paid monthly based on the  transactions  and
positions for the previous month.

Table 3 in Appendix B shows the dollar  amount of the fees  payable by the Trust
to FAcS,  the amount of the fee waived by FAcS and the  actual fee  received  by
FAcS.

FAcS's  agreement  is  terminable  without  penalty by the Trust or by FAcS with
respect to a Fund on 60 days' written notice.  Under the agreement,  FAcS is not
liable any act or omission in the  performance  of its duties to a Fund,  except
for willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of reckless  disregard of its  obligations  and duties under
the agreement.  Under the agreement, in calculating a Fund's NAV per share, FAcS
is deemed not to have  committed an error if the NAV per share it  calculates is
within 1/10 of 1% of the actual NAV per share (after  recalculation) or any loss
to a shareholder  if the NAV difference is less than or equal to 1/2 of 1% or if
the loss in the  shareholder's  account  is less  than or equal  to  $10.00.  In
addition,  in  calculating  NAV per share  FAcS is not  liable for the errors of
others,  including the companies that supply  securities  prices to FAcS and the
Funds.

3.       TRANSFER AGENT

As transfer agent and distribution  paying agent,  pursuant to an agreement with
the Trust,  the  Transfer  Agent  maintains an account for each  shareholder  of
record of a Fund and is  responsible  for  processing  purchase  and  redemption
requests and paying  distributions to shareholders of record. The Transfer Agent
is located at Two Portland Square,  Portland, Maine 04101 and is registered as a
transfer agent with the SEC.

For its services,  the Transfer Agent receives a fee from each Fund at an annual
rate of $24,000 for the first share class,  $12,000 per  additional  share class
and $25.00 per shareholder  account. The fees are accrued daily by the Funds and
are paid  monthly in arrears.  Table 4 in Appendix B shows the dollar  amount of
the fees paid by the Trust to the Transfer  Agent,  the amount of the fee waived
by the Transfer Agent and the actual fee received by the Transfer Agent.

The Transfer Agent's agreement is terminable  without penalty by the Trust or by
the Transfer Agent with respect to a Fund on 60 days' written notice.  Under the
agreement,  the  Transfer  Agent is not  liable for any act or  omission  in the
performance of its duties to a Fund, except for willful misconduct, bad faith or
gross negligence in the performance of its duties under the agreement.

4.       CUSTODIAN

As custodian,  pursuant to an agreement  with the Trust,  Investors Bank & Trust
Company  safeguards  and  controls  the Funds' cash and  securities,  determines
income and  collects  interest on Fund  investments.  The  Custodian  may employ
foreign  subcustodians  to  provide  custody  of a Fund's  foreign  assets.  The
Custodian is located at 200 Clarendon Street, Boston, Massachusetts 02105.

For its services,  the Custodian receives a fee from each Fund at an annual rate
as follows:  (1) 0.02% of the average daily net assets of the Fund for the first
$100 million in Fund assets;  (2) 0.015% of the average  daily net assets of the


                                       25
<PAGE>

Fund for the next $100  million in Fund  assets;  and (3) 0.001% of the  average
daily net assets of the Fund for  remaining  Fund assets.  The Custodian is also
paid certain transaction fees. These fees are accrued daily by the Funds and are
paid  monthly  based on average  net assets and  transactions  for the  previous
month.

5.       LEGAL COUNSEL

Legal matters in connection  with the issuance of shares of the Trust are passed
upon by the law firm of Seward & Kissel LLP, 1200 G Street, NW,  Washington,  DC
20005.

6.       INDEPENDENT AUDITORS

KPMG LLP,  independent  auditors,  99 High Street,  Boston,  MA 02110, have been
selected as auditors  for each Fund.  The  auditors  audit the annual  financial
statements  of the  Funds  and  provide  the Funds  with an audit  opinion.  The
auditors also review certain regulatory filings of each Fund and each Fund's tax
returns.

5.       PORTFOLIO TRANSACTIONS

A.       HOW SECURITIES ARE PURCHASED AND SOLD

Purchases  and sales of portfolio  securities  that are fixed income  securities
(for instance,  money market instruments and bonds, notes and bills) usually are
principal transactions. In a principal transaction, the party from whom the Fund
purchases  or to whom the Fund sells is acting on its own behalf (and not as the
agent of some other party such as its customers).  These securities normally are
purchased  directly from the issuer or from an  underwriter  or market maker for
the  securities.  There  usually  are no  brokerage  commissions  paid for these
securities.

Purchases  and sales of portfolio  securities  that are equity  securities  (for
instance common stock and preferred  stock) are generally  effected;  (1) if the
security is traded on an exchange,  through brokers who charge commissions;  and
(2) if the security is traded in the "over-the-counter"  markets, in a principal
transaction  directly from a market maker. In  transactions on stock  exchanges,
commissions   are   negotiated.   When   transactions   are   executed   in   an
over-the-counter  market,  the  Subadviser  will seek to deal  with the  primary
market  makers;  but when  necessary  in order to  obtain  best  execution,  the
Subadviser will utilize the services of others.

Purchases of securities from  underwriters  include a disclosed fixed commission
or concession paid by the issuer to the underwriter,  and purchases from dealers
serving as market makers include the spread between the bid and asked price.

In the case of fixed income and equity securities traded in the over-the-counter
markets, there is generally no stated commission, but the price usually includes
an undisclosed commission or markup.

B.       COMMISSIONS PAID

Table 5 in Appendix B shows the aggregate brokerage  commissions with respect to
each Fund.  The data  presented are for the past three fiscal years or a shorter
period  if the  Fund has been in  operation  for a  shorter  period,  except  as
otherwise  noted. The table also indicates the reason for any material change in
the last two years in the amount of brokerage commissions paid by a Fund.

C.       ADVISER RESPONSIBILITY FOR PURCHASES AND SALES

Each  Subadviser  places  orders for the  purchase and sale of  securities  with
brokers and dealers selected by and in the discretion of the Subadviser. No Fund
has any  obligation to deal with any specific  broker or dealer in the execution
of portfolio  transactions.  Allocations of  transactions to brokers and dealers
and the  frequency of  transactions  are  determined by a Subadviser in its best
judgment  and in a manner  deemed to be in the best  interest of the Fund rather
than by any formula.



                                       26
<PAGE>

Each Subadviser  seeks "best  execution" for all portfolio  transactions.  This
means  that  the  Subadvisers  seek  the  most  favorable  price  and  execution
available.  A Subadviser's primary consideration in executing transactions for a
Fund is  prompt  execution  of  orders in an  effective  manner  and at the most
favorable price available.

1.       CHOOSING BROKER-DEALERS

The Funds may not always pay the lowest commission or spread available.  Rather,
in determining the amount of commissions (including certain dealer spreads) paid
in connection  with securities  transactions,  the Subadviser of each Fund takes
into  account  factors  such as  size of the  order,  difficulty  of  execution,
efficiency of the executing broker's facilities (including the research services
described below) and any risk assumed by the executing broker.

Consistent with applicable  rules and the  Subadviser's  duties,  the Subadviser
may: (1) consider  sales of shares of the Funds as a factor in the  selection of
broker-dealers to execute  portfolio  transactions for a Fund; and (2) take into
account  payments  made by  brokers  effecting  transactions  for a Fund  (these
payments  may be made to the Fund or to other  persons on behalf of the Fund for
services  provided to the Fund for which those other  persons would be obligated
to pay.

2.       OBTAINING RESEARCH FROM BROKERS

Each Subadviser may give consideration to research services furnished by brokers
to the Subadviser for its use and may cause a Fund to pay these brokers a higher
amount of  commission  than may be charged by other  brokers.  This  research is
designed  to augment the  Subadviser's  own  internal  research  and  investment
strategy capabilities. This research may be used by the Subadviser in connection
with services to clients other than the Funds, and not all research services may
be used by the Subadviser in connection with the Funds.  The  Subadviser's  fees
are not reduced by reason of the Subadviser's receipt of research services.

Each Subadviser has full brokerage discretion. It evaluates the range of quality
of a  broker's  services  in  placing  trades  including  securing  best  price,
confidentiality,  clearance and settlement capabilities, promptness of execution
and the financial stability of the broker-dealer.  Under certain  circumstances,
the  value of  research  provided  by a  broker-dealer  may be a  factor  in the
selection of a broker.  This research  would include  reports that are common in
the  industry.  Typically,  the  research  will be used  to  service  all of the
Subadviser's  accounts although a particular client may not benefit from all the
research  received on each  occasion.  The nature of the services  purchased for
clients include industry  research reports and periodicals,  quotation  systems,
software for portfolio management and formal databases.

Occasionally,  a Subadviser  may place an order with a broker and pay a slightly
higher  commission than another broker might charge.  If this is done it will be
because of the Subadviser's need for specific research, for specific expertise a
firm may have in a particular  type of transaction  (due to factors such as size
or  difficulty),  or  for  speed/efficiency  in  execution.  Since  most  of the
Subadvisers'  brokerage  commissions  for research are for economic  research on
specific companies or industries,  and since the Subadvisers are involved with a
limited number of securities,  most of the commission dollars spent for industry
and stock research directly benefit the Funds' shareholders.

There are occasions on which portfolio  transactions  may be executed as part of
concurrent  authorizations to purchase or sell the same securities for more than
one account  served by a  Subadviser,  some of which  accounts  may have similar
investment objectives. Although such concurrent authorizations potentially could
be  either  advantageous  or  disadvantageous  to  any  one or  more  particular
accounts,  they will be effected only when the Subadviser believes that to do so
will be in the best  interest of the  affected  accounts.  When such  concurrent
authorizations  occur,  the  objective  will be to allocate  the  execution in a
manner,  which  is  deemed  equitable  to the  accounts  involved.  Clients  are
typically  allocated  securities with prices averaged on a per-share or per-bond
basis.

In some cases, a client may direct a Subadviser to use a broker or dealer of the
client's  choice.  If the client  directs  the  Subadviser  to use a  particular
broker, the Subadviser may not be authorized to negotiate commissions and may be


                                       27
<PAGE>

unable to obtain volume discounts or best execution. In these cases, there could
be some disparity in commission charges among these clients.

3.       COUNTERPARTY RISK

Each Subadviser  monitors the  creditworthiness  of counterparties to its Fund's
transactions  and intends to enter into a transaction only when it believes that
the counterparty presents minimal and appropriate credit risks.

4.       TRANSACTIONS THROUGH AFFILIATES

The Subadvisers do not effect brokerage  transactions  through affiliates of the
Adviser or Subadviser (or affiliates of those persons).

5.       OTHER ACCOUNTS OF THE ADVISER OR SUBADVISER

Investment  decisions  for the Funds are made  independently  from those for any
other account or investment  company that is or may in the future become managed
by a Subadviser. Investment decisions are the product of many factors, including
basic  suitability  for the  particular  client  involved.  Thus,  a  particular
security  may be bought or sold for  certain  clients  even though it could have
been bought or sold for other clients at the same time.  Likewise,  a particular
security  may be bought for one or more  clients  when one or more  clients  are
selling  the  security.  In some  instances,  one client  may sell a  particular
security to another client.  It also sometimes  happens that two or more clients
simultaneously  purchase or sell the same  security.  In that event,  each day's
transactions in such security are, insofar as is possible,  averaged as to price
and  allocated  between  such  clients  in a  manner  which,  in the  respective
Subadviser's  opinion,  is equitable to each and in  accordance  with the amount
being purchased or sold by each.  There may be  circumstances  when purchases or
sales of a portfolio  security  for one client  could have an adverse  effect on
another client that has a position in that security. In addition, when purchases
or sales of the same  security for a Fund and other client  accounts  managed by
the Fund's Subadviser occurs contemporaneously,  the purchase or sale orders may
be  aggregated  in order to  obtain  any  price  advantages  available  to large
denomination purchases or sales.

6.       PORTFOLIO TURNOVER

The frequency of portfolio  transactions of a Fund (the portfolio turnover rate)
will vary from year to year depending on many factors.  Portfolio  turnover rate
is  reported  in the  Prospectus.  From time to time a Fund may engage in active
short-term  trading to take advantage of price  movements  affecting  individual
issues,  groups of issues or markets.  An annual portfolio turnover rate of 100%
would occur if all of the securities in a Fund were replaced once in a period of
one year.  Higher  portfolio  turnover  rates may result in increased  brokerage
costs to a Fund and a possible increase in short-term capital gains or losses.

D.       SECURITIES OF REGULAR BROKER-DEALERS

From time to time a Fund may acquire and hold securities  issued by its "regular
brokers  and  dealers" or the parents of those  brokers  and  dealers.  For this
purpose,  regular  brokers and dealers means the 10 brokers or dealers that: (1)
received the greatest  amount of  brokerage  commissions  during the Fund's last
fiscal year;  (2) engaged in the largest  amount of principal  transactions  for
portfolio  transactions  of the Fund during the Fund's last fiscal year;  or (3)
sold the largest amount of the Fund's shares during the Fund's last fiscal year.
During the past fiscal year,  there were no regular  brokers and dealers for any
Fund.




                                       28
<PAGE>

6.  ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
--------------------------------------------------------------------------------

A.       GENERAL INFORMATION

Shareholders  may effect  purchases or  redemptions  or request any  shareholder
privilege  in person at the  Transfer  Agent's  offices  located at Two Portland
Square, Portland, Maine 04101.

The Funds accept  orders for the purchase or redemption of shares on any weekday
except days when the New York Stock Exchange is closed.

B.       ADDITIONAL PURCHASE INFORMATION

Shares of each Fund are sold on a  continuous  basis by the  distributor  at net
asset  value  ("NAV")  per share  without  any sales  charge.  Accordingly,  the
offering price per share is the same as the NAV per share.

Fund shares are normally  issued for cash only.  In the Adviser or  Subadviser's
discretion,  however,  a Fund may  accept  portfolio  securities  that  meet the
investment  objective and policies of a Fund as payment for Fund shares.  A Fund
will only accept  securities  that: (1) are not restricted as to transfer by law
and are not illiquid;  and (2) have a value that is readily  ascertainable  (and
not established only by valuation procedures).

1.       IRAS

All  contributions  into an IRA  through  the  automatic  investing  service are
treated as IRA contributions made during the year the investment is received.

2.       UGMAS/UTMAS

If the trustee's name is not in the account  registration  of a gift or transfer
to minor  ("UGMA/UTMA")  account,  the investor must provide a copy of the trust
document.

3.       PURCHASES THROUGH FINANCIAL INSTITUTIONS

You may purchase and redeem shares  through  certain  broker-dealers,  banks and
other financial institutions.  Financial institutions may charge their customers
a fee for their services and are responsible for promptly transmitting purchase,
redemption and other requests to the Funds.

If you purchase shares through a financial  institution,  you will be subject to
the institution's procedures, which may include charges, limitations, investment
minimums, cutoff times and restrictions in addition to, or different from, those
applicable when you invest in a Fund directly. When you purchase a Fund's shares
through a financial institution, you may or may not be the shareholder of record
and,  subject  to your  institution's  procedures,  you  may  have  Fund  shares
transferred into your name. There is typically a three-day settlement period for
purchases and redemptions through broker-dealers. Certain financial institutions
may also enter purchase orders with payment to follow.

You may not be  eligible  for certain  shareholder  services  when you  purchase
shares through a financial  institution.  Contact your  institution  for further
information.  If you hold shares through a financial institution,  the Funds may
confirm  purchases  and  redemptions  to the financial  institution,  which will
provide  you with  confirmations  and  periodic  statements.  The  Funds are not
responsible  for the  failure  of any  financial  institution  to carry  out its
obligations.

Growth Equity Fund has  authorized  one or more brokers to receive on its behalf
purchase and redemption  orders.  Such brokers,  including  Charles Schwab & Co,
Inc., are authorized to designate other  intermediaries  to receive purchase and
redemption  orders on Growth  Equity Fund's  behalf.  Growth Equity Fund will be
deemed to have received a purchase or redemption order when an authorized broker
or, if applicable, a broker's authorized designee,  receives the order. Customer
orders  will be priced at Growth  Equity  Fund's Net Asset  Value next  computed


                                       29
<PAGE>

after they are  received  by an  authorized  broker or the  broker's  authorized
designee and accepted by the Growth Equity Fund.

Investors purchasing shares of the Funds through a financial  institution should
read any materials and  information  provided by the  financial  institution  to
acquaint  themselves  with its procedures and any fees that the  institution may
charge.

C.       ADDITIONAL REDEMPTION INFORMATION

A Fund  may  redeem  shares  involuntarily  to  reimburse  the Fund for any loss
sustained  by reason of the failure of a  shareholder  to make full  payment for
shares  purchased  by the  shareholder  or to  collect  any charge  relating  to
transactions  effected for the benefit of a shareholder which is applicable to a
Fund's shares as provided in the Prospectus.

1.       SUSPENSION OF RIGHT OF REDEMPTION

The right of  redemption  may not be  suspended,  except for any  period  during
which:  (1) the New York Stock  Exchange,  Inc. is closed (other than  customary
weekend and holiday  closings)  or during which the  SECdetermines  that trading
thereon is  restricted;  (2) an emergency (as determined by the SEC) exists as a
result  of  which  disposal  by a Fund  of  its  securities  is  not  reasonably
practicable or as a result of which it is not reasonably  practicable for a Fund
fairly to  determine  the value of its net  assets;  or (3) the SEC may by order
permit for the protection of the shareholders of a Fund.

2.       REDEMPTION-IN-KIND

Redemption  proceeds  normally are paid in cash.  Payments may be made wholly or
partly in portfolio  securities,  however,  if the Trust  determines  conditions
exist which would make payment in cash  detrimental  to the best  interests of a
Fund. If redemption proceeds are paid wholly or partly in portfolio  securities,
brokerage  costs may be incurred by the shareholder in converting the securities
to cash.  The Trust has filed an election  with the SEC pursuant to which a Fund
may  only  effect  a  redemption  in  portfolio  securities  if  the  particular
shareholder  is  redeeming  more than  $250,000  or 1% of the  Fund's  total net
assets, whichever is less, during any 90-day period.

D.       NAV DETERMINATION

In determining a Fund's NAV per share,  securities  for which market  quotations
are readily available are valued at current market value using the last reported
sales price.  If no sale price is reported,  the average of the last bid and ask
price is used. If no average price is available,  the last bid price is used. If
market quotations are not readily available,  then securities are valued at fair
value as determined by the Board (or its delegate).

E.       DISTRIBUTIONS

Distributions  of net  investment  income will be reinvested at a Fund's NAV per
share as of the last day of the period with respect to which the distribution is
paid. Distributions of capital gain will be reinvested at the NAV per share of a
Fund on the payment date for the  distribution.  Cash  payments may be made more
than seven days  following the date on which  distributions  would  otherwise be
reinvested.

F.       SHAREHOLDER SERVICES

RETIREMENT ACCOUNTS.  The Funds may be a suitable investment vehicle for part or
all of the assets held in Traditional  or Roth  individual  retirement  accounts
(collectively,  "IRAs").  Call the  Funds at  1-888-263-5593  to  obtain  an IRA
account  application.   Generally,   investment  earnings  in  an  IRA  will  be
tax-deferred  until  withdrawn.  If  certain  requirements  are met,  investment
earnings  held in a Roth  IRA will not be taxed  even  when  withdrawn.  You may
contribute up to $2,000  annually to an IRA. Only  contributions  to Traditional
IRAs are tax-deductible.  However,  that deduction may be reduced if you or your
spouse is an active participant in an employer-sponsored retirement plan and you


                                       30
<PAGE>

(or you and your spouse) have adjusted gross income above certain  levels.  Your
ability to contribute to a Roth IRA also may be restricted if you or, if you are
married, you and your spouse have adjusted gross income above certain levels.

Your  employer may also  contribute  to your IRA as part of a Savings  Incentive
Match Plan for Employees, or "SIMPLE plan," established after December 31, 1996.
Under a SIMPLE plan, you may  contribute up to $6,000  annually to your IRA, and
your employer must generally  match such  contributions  up to 3% of your annual
salary.  Alternatively,  your employer may elect to contribute to your IRA 2% of
the lesser of your earned income or $160,000.

This information on IRAs is based on regulations in effect as of January 1, 1999
and summarizes only some of the important federal tax  considerations  affecting
IRA  contributions.  These  comments  are not meant to be a  substitute  for tax
planning. Consult your tax advisors about your specific tax situation.

G.       EXCHANGES

By making an exchange by telephone,  you authorize the Transfer  Agent to act on
telephonic   instructions   believed  by  the  Transfer   Agent  to  be  genuine
instructions  from any person  representing  himself  or herself to be you.  The
records of the Transfer  Agent of such  instructions  are binding.  The exchange
procedures may be modified or terminated at any time upon appropriate  notice to
shareholders. For Federal income tax purposes, exchanges are treated as sales on
which a purchaser  will realize a capital gain or loss  depending on whether the
value of the shares  redeemed  is more or less than the  shareholder's  basis in
such shares at the time of such transaction.

You may  purchase,  with the proceeds  from a redemption of all or part of their
shares,  shares  of the same Fund of the  Trust or a  designated  class of Daily
Assets Government Fund, a money market fund of Forum Funds.

7.         TAXATION
--------------------------------------------------------------------------------

The tax  information  set forth in the  Prospectus  and the  information in this
section relates solely to U.S. federal income tax law and assumes that each Fund
qualifies  as  a  regulated   investment  company  (as  discussed  below).  Such
information is only a summary of certain key federal  income tax  considerations
affecting  each  Fund  and  its  shareholders  that  are  not  described  in the
Prospectus.  No attempt has been made to present a complete  explanation  of the
federal tax  treatment of the Funds or the  implications  to  shareholders.  The
discussions  here and in the  Prospectus  are not  intended as  substitutes  for
careful tax planning.

This  "Taxation"  section  is based on the Code and  applicable  regulations  in
effect on the date hereof. Future legislative or administrative changes or court
decisions  may  significantly  change the tax rules  applicable to the Funds and
their  shareholders.  Any  of  these  changes  or  court  decisions  may  have a
retroactive effect.

ALL INVESTORS  SHOULD  CONSULT  THEIR OWN TAX ADVISOR AS TO THE FEDERAL,  STATE,
LOCAL AND FOREIGN TAX PROVISIONS APPLICABLE TO THEM.

A.       QUALIFICATION AS A REGULATED INVESTMENT COMPANY

Each  Fund  intends  for each tax year to  qualify  as a  "regulated  investment
company"  under the  Code.  This  qualification  does not  involve  governmental
supervision of management or investment practices or policies of a Fund.

The tax year-end of each Fund is December 31 (the same as the Fund's fiscal year
end).



                                       31
<PAGE>

1.       MEANING OF QUALIFICATION

As a regulated  investment company, a Fund will not be subject to federal income
tax on the portion of its  investment  company  taxable  income  (i.e.,  taxable
interest,  dividends,  net short-term  capital gains, and other taxable ordinary
income, net of expenses) and net capital gain (i.e., the excess of net long-term
capital  gains  over net  short-term  capital  losses)  that it  distributes  to
shareholders.  In order to qualify to be taxed as a regulated investment company
a Fund must satisfy the following requirements:

o    The Fund must  distribute at least 90% of its  investment  company  taxable
     income for the tax year.  (Certain  distributions  made by a Fund after the
     close of its tax  year are  considered  distributions  attributable  to the
     previous tax year for purposes of satisfying this requirement.)

o    The Fund must derive at least 90% of its gross income from certain types of
     income derived with respect to its business of investing in securities.

o    The Fund must satisfy the following asset diversification test at the close
     of each  quarter of the  Fund's tax year:  (1) at least 50% of the value of
     the Fund's  assets  must  consist of cash and cash items,  U.S.  government
     securities,   securities  of  other  regulated  investment  companies,  and
     securities  of other  issuers (as to which the Fund has not  invested  more
     than 5% of the value of the Fund's total assets in securities of the issuer
     and as to which the Fund  does not hold  more  than 10% of the  outstanding
     voting securities of the issuer);  and (2) no more than 25% of the value of
     the Fund's total assets may be invested in the securities of any one issuer
     (other than U.S.  Government  securities and securities of other  regulated
     investment  companies),  or in two or more issuers  which the Fund controls
     and which are engaged in the same or similar trades or businesses.

Each Fund  generally  intends to  operate  in a manner  such that it will not be
liable for federal income tax.

2.       FAILURE TO QUALIFY

If for any tax year a Fund does not qualify as a regulated  investment  company,
all of its taxable  income  (including  its net capital gain) will be subject to
tax  at  regular   corporate  rates  without  any  deduction  for  dividends  to
shareholders,  and the dividends will be taxable to the shareholders as ordinary
income to the extent of a Fund's current and accumulated earnings and profits. A
portion   of   these   distributions   generally   may  be   eligible   for  the
dividends-received deduction in the case of corporate shareholders.

Failure to qualify as a regulated  investment company would thus have a negative
impact on a Fund's income and  performance.  It is possible that a Fund will not
qualify as a regulated investment company in any given tax year.

B.       FUND DISTRIBUTIONS

Each Fund anticipates  distributing  substantially all of its investment company
taxable  income  for  each  tax  year.  These   distributions   are  taxable  to
shareholders  as ordinary  income.  In the case of Growth  Equity Fund and Value
Equity  Fund,  a  portion  of  these  distributions  may  qualify  for  the  70%
dividends-received deduction for corporate shareholders.

Each Fund anticipates distributing substantially all of its net capital gain for
each tax year. These distributions  generally are made only once a year, usually
in November or December, but the Funds may make additional  distributions of net
capital  gain at any time during the year.  These  distributions  are taxable to
shareholders as long-term capital gain, regardless of how long a shareholder has
held  shares.  These  distributions  do not qualify  for the  dividends-received
deduction.

Each Fund may have capital loss carryovers (unutilized capital losses from prior
years).  These capital loss carryovers (which can be used for up to eight years)
may be used to offset any current  capital gain (whether  short- or  long-term).
All capital loss carryovers are listed in the Funds' financial  statements.  Any
such losses may not be carried back.



                                       32
<PAGE>

Distributions  by a Fund that do not  constitute  ordinary  income  dividends or
capital gain dividends will be treated as a return of capital. Return of capital
distributions  reduce the  shareholder's tax basis in the shares and are treated
as gain from the sale of the shares to the extent the shareholder's  basis would
be reduced below zero.

All  distributions  by a Fund will be  treated  in the  manner  described  above
regardless  of  whether  the  distribution  is paid in  cash  or  reinvested  in
additional  shares of the Fund (or of another  Fund).  Shareholders  receiving a
distribution  in the form of  additional  shares will be treated as  receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.

A  shareholder  may purchase  shares whose net asset value at the time  reflects
undistributed  net investment  income or recognized  capital gain, or unrealized
appreciation  in the  value  of the  assets  of a Fund.  Distributions  of these
amounts are taxable to the shareholder in the manner described  above,  although
the   distribution   economically   constitutes  a  return  of  capital  to  the
shareholder.

Shareholders purchasing shares of a Fund just prior to the ex-dividend date of a
distribution  will be taxed on the entire amount of the  distribution  received,
even though the net asset value per share on the date of the purchase  reflected
the amount of the distribution.

Ordinarily,  shareholders  are  required  to take  distributions  by a Fund into
account in the year in which they are made. A distribution  declared in October,
November  or December  of any year and  payable to  shareholders  of record on a
specified  date in those  months,  however,  is  deemed  to be  received  by the
shareholders  (and made by the Fund) on December 31 of that calendar year if the
distribution is actually paid in January of the following year.

Shareholders  will  be  advised  annually  as to the  U.S.  federal  income  tax
consequences of distributions made (or deemed made) to them during the year.

C.       CERTAIN TAX RULES APPLICABLE TO THE FUNDS TRANSACTIONS

For federal income tax purposes,  when put and call options  purchased by a Fund
expire  unexercised,  the  premiums  paid by the Fund  give  rise to  short-  or
long-term  capital losses at the time of expiration  (depending on the length of
the  respective  exercise  periods for the  options).  When put and call options
written by a Fund expire  unexercised,  the  premiums  received by the Fund give
rise  to  short-term  capital  gains  at the  time  of  expiration.  When a Fund
exercises a call, the purchase price of the underlying  security is increased by
the amount of the premium  paid by the Fund.  When a Fund  exercises a put,  the
proceeds from the sale of the  underlying  security are decreased by the premium
paid.  When a put or call written by a Fund is  exercised,  the  purchase  price
(selling  price in the case of a call) of the  underlying  security is decreased
(increased in the case of a call) for tax purposes by the premium received.

Certain  listed  options,  regulated  futures  contracts  and  forward  currency
contracts  are  considered  "Section  1256  contracts"  for  federal  income tax
purposes.  Section 1256 contracts held by a Fund at the end of each tax year are
"marked to market" and treated  for federal  income tax  purposes as though sold
for fair market value on the last business day of the tax year.  Gains or losses
realized  by a Fund on  Section  1256  contracts  generally  is  considered  60%
long-term and 40%  short-term  capital  gains or losses.  Each Fund can elect to
exempt its Section  1256  contracts,  which are part of a "mixed  straddle"  (as
described below) from the application of Section 1256.

Any option,  futures contract,  or other position entered into or held by a Fund
in  conjunction  with any  other  position  held by the Fund  may  constitute  a
"straddle"  for federal  income tax purposes.  A straddle of which at least one,
but not all, the positions are Section 1256  contracts,  may constitute a "mixed
straddle".  In general,  straddles  are subject to certain rules that may affect
the  character  and timing of a Fund's gains and losses with respect to straddle
positions by  requiring,  among other  things,  that:  (1) the loss  realized on
disposition  of one position of a straddle may not be  recognized  to the extent
that the Fund has  unrealized  gains with respect to the other  position in such
straddle; (2) the Fund's holding period in straddle positions be suspended while
the straddle  exists  (possibly  resulting in gain being  treated as  short-term
capital gain rather than long-term capital gain); (3) the losses recognized with
respect to certain  straddle  positions  which are part of a mixed  straddle and


                                       33
<PAGE>

which are  non-Section  1256  positions  be  treated  as 60%  long-term  and 40%
short-term  capital loss; (4) losses recognized with respect to certain straddle
positions which would otherwise constitute  short-term capital losses be treated
as  long-term  capital  losses;  and (5) the  deduction of interest and carrying
charges  attributable  to certain  straddle  positions may be deferred.  Various
elections  are  available  to a Fund,  which may  mitigate  the  effects  of the
straddle rules,  particularly with respect to mixed straddles.  In general,  the
straddle rules  described above do not apply to any straddles held by a Fund all
of the offsetting positions of which consist of Section 1256 contracts.

If a Fund invests in the securities of foreign issuers, the Fund's income may be
subject to foreign withholding taxes.

D.       FEDERAL EXCISE TAX

A 4% non-deductible excise tax is imposed on a regulated investment company that
fails to  distribute  in each  calendar  year an amount equal to: (1) 98% of its
ordinary  taxable  income for the calendar year; and (2) 98% of its capital gain
net income for the  one-year  period  ended on  October 31 (or  December  31, if
elected by the Fund) of the calendar year. The balance of the Fund's income must
be  distributed  during the next calendar year. A Fund will be treated as having
distributed any amount on which it is subject to income tax for any tax year.

For purposes of  calculating  the excise tax, each Fund: (1) reduces its capital
gain net income  (but not below its net  capital  gain) by the amount of any net
ordinary loss for the calendar year and (2) excludes  foreign currency gains and
losses  incurred after October 31 of any year (or December 31 if it has made the
election  described  above) in determining the amount of ordinary taxable income
for the current  calendar year. The Fund will include foreign currency gains and
losses incurred after October 31 in determining  ordinary taxable income for the
succeeding calendar year.

Each Fund  intends to make  sufficient  distributions  of its  ordinary  taxable
income and capital  gain net income  prior to the end of each  calendar  year to
avoid liability for the excise tax. Investors should note, however,  that a Fund
might in certain circumstances be required to liquidate portfolio investments to
make sufficient distributions to avoid excise tax liability.

E.       SALE OR REDEMPTION OF SHARES

In general,  a shareholder will recognize gain or loss on the sale or redemption
of shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the  shareholder's  adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the  shareholder
purchases  (for  example,  by  reinvesting  dividends)  other shares of the Fund
within 30 days before or after the sale or redemption (a so called "wash sale").
If disallowed,  the loss will be reflected in an upward  adjustment to the basis
of the shares purchased.  In general,  any gain or loss arising from the sale or
redemption of shares of a Fund will be considered  capital gain or loss and will
be  long-term  capital  gain or loss if the shares were held for longer than one
year.  Any capital loss arising from the sale or  redemption  of shares held for
six  months or less,  however,  is treated as a  long-term  capital  loss to the
extent of the amount of capital gain  distributions  received on such shares. In
determining  the  holding  period of such  shares for this  purpose,  any period
during which a shareholder's  risk of loss is offset by means of options,  short
sales or similar  transactions  is not counted.  Capital  losses in any year are
deductible  only  to  the  extent  of  capital  gains  plus,  in the  case  of a
non-corporate taxpayer, $3,000 of ordinary income.

F.       BACKUP WITHHOLDING

A Fund will be  required  in  certain  cases to  withhold  and remit to the U.S.
Treasury 31% of distributions,  and the proceeds of redemptions of shares,  paid
to any  shareholder:  (1)  who  has  failed  to  provide  its  correct  taxpayer
identification  number;  (2) who is subject to backup withholding by the IRS for
failure to report the receipt of interest or dividend  income  properly;  or (3)
who has failed to certify to a Fund that it is not subject to backup withholding
or that it is a corporation or other "exempt  recipient."  Backup withholding is
not an  additional  tax;  any  amounts so  withheld  may be  credited  against a
shareholder's federal income tax liability or refunded.



                                       34
<PAGE>

G.       FOREIGN SHAREHOLDERS

Taxation of a shareholder who under the Code is a nonresident  alien individual,
foreign trust or estate,  foreign corporation,  or foreign partnership ("foreign
shareholder"),  depends  on  whether  the  income  from a Fund  is  "effectively
connected" with a U.S. trade or business carried on by the foreign shareholder.

If the income  from a Fund is not  effectively  connected  with a U.S.  trade or
business carried on by a foreign  shareholder,  distributions of ordinary income
(and short-term capital gains) paid to a foreign  shareholder will be subject to
U.S.  withholding tax at the rate of 30% (or lower applicable  treaty rate) upon
the gross amount of the distribution. The foreign shareholder generally would be
exempt from U.S.  federal income tax on gain realized on the sale of shares of a
Fund and distributions of net capital gains from a Fund.

If the income from a Fund is effectively connected with a U.S. trade or business
carried on by a foreign shareholder, then ordinary income distributions, capital
gain distributions, and any gain realized upon the sale of shares of a Fund will
be subject to U.S. federal income tax at the rates  applicable to U.S.  citizens
or U.S. corporations.


In the case of a non-corporate  foreign  shareholder,  a Fund may be required to
withhold  U.S.  federal  income tax at a rate of 31% on  distributions  that are
otherwise exempt from withholding (or taxable at a reduced treaty rate),  unless
the  shareholder  furnishes  the Fund with  proper  notification  of its foreign
status.


The tax consequences to a foreign shareholder  entitled to claim the benefits of
an applicable tax treaty might be different from those described herein.

The tax rules of other countries with respect to  distributions  from a Fund can
differ from the U.S.  federal  income  taxation  rules  described  above.  These
foreign  rules  are not  discussed  herein.  Foreign  shareholders  are urged to
consult their own tax advisers as to the  consequences of foreign tax rules with
respect to an investment in a Fund.

H.       STATE AND LOCAL TAXES

The tax rules of the various  states of the U.S.  and local  jurisdictions  with
respect to  distributions  from a Fund can differ from the U.S.  federal  income
taxation rules  described  above.  These state and local rules are not discussed
herein.  Shareholders  are  urged  to  consult  their  tax  advisers  as to  the
consequences  of state and local tax rules with  respect to an  investment  in a
Fund.

8.  OTHER MATTERS
--------------------------------------------------------------------------------

GENERAL INFORMATION

The Trust  was  organized  as a  business  trust  under the laws of the State of
Delaware on November 26, 1997.  The Trust has operated under that name and as an
investment company since that date.

The  Trust is  registered  with the SEC as an  open-end,  management  investment
company  (a  "mutual  fund")  under the 1940 Act.  The  Trust  offers  shares of
beneficial interest in its series. As of the date hereof, the Trust consisted of
the following shares of beneficial interest:

o  Institutional  Shares of each of Government  Bond Fund,  Corporate Bond Fund,
Growth Equity Fund and Value Equity Fund.

Prior to February 29, 2000,  the Trust  consisted  of the  following  additional
shares of beneficial interest:

o Trust Shares of each of  Government  Bond Fund,  Corporate  Bond Fund,  Growth
Equity Fund and Value Equity Fund.



                                       35
<PAGE>

On February 28, 2000,  existing Trust Shares were  reclassified as Institutional
Shares of beneficial interest.

Each Fund is a series of Memorial  Funds.  It is not intended  that  meetings of
shareholders  be held except  when  required  by Federal or  Delaware  law.  All
shareholders of each Fund are entitled to vote at shareholders'  meetings unless
a matter is  determined  to affect only a specific  Fund (such as approval of an
advisory  agreement  for a Fund).  From  time to time,  large  shareholders  may
control  a Fund  or  Memorial  Funds.  The  Trust  has an  unlimited  number  of
authorized  shares of beneficial  interest.  The Board may, without  shareholder
approval,  divide the  authorized  shares into an  unlimited  number of separate
series and may divide series into classes of shares;  the costs of doing so will
be borne by the Trust.

Each Fund reserves the right to invest in one or more other investment companies
in a Core and Gateway(R) structure.

The Funds do not intend to exercise  control over the management of companies in
which they invest.

The Trust and each Fund will continue indefinitely until terminated.

Not all Funds of the Trust may be  available  for sale in the state in which you
reside.  Please check with your  investment  professional  to determine a Fund's
availability.

The Trust, the Adviser,  the  Subadvisers,  and FFS have adopted codes of ethics
under Rule 17j-1 of the 1940 Act which are  designed to  eliminate  conflicts of
interest  between  the  Funds and  personnel  of the  Funds,  the  Adviser,  the
Subadvisers  and FFS. The codes permit such  personnel to invest in  securities,
including securities that may be purchased or held by the Funds.

2.       SHAREHOLDER VOTING AND OTHER RIGHTS

Each  share of each  series  of the  Trust  has  equal  dividend,  distribution,
liquidation  and  voting  rights,   and  fractional  shares  have  those  rights
proportionately. Generally, shares will be voted separately by individual series
except:  (1) when  required  by  applicable  law,  shares  shall be voted in the
aggregate  and  not by  individual  series;  and  (2)  when  the  Trustees  have
determined  that the matter affects the interests of more than one series,  then
the shareholders of all such series shall be entitled to vote thereon.  Delaware
law does not require the Trust to hold annual meetings of  shareholders,  and it
is anticipated  that  shareholder  meetings will be held only when  specifically
required by federal or state law.  There are no conversion or preemptive  rights
in connection with shares of the Trust.

All shares,  when issued in accordance  with the terms of the offering,  will be
fully paid and non-assessable.

A shareholder in a series is entitled to the shareholder's pro rata share of all
distributions  arising from that series' assets and, upon redeeming shares, will
receive  the  portion of the  series'  net assets  represented  by the  redeemed
shares.

A shareholder or  shareholders  representing  33 1/3% or more of the outstanding
shares entitled to vote may, as set forth in the Trust Instrument, call meetings
of the  Trust  (or  Fund)  for any  purpose  related  to the  Trust  (or  Fund),
including,  in the case of a meeting  of the  Trust,  the  purpose  of voting on
removal of one or more Trustees.

3.       CERTAIN REORGANIZATION TRANSACTIONS

The  Trust or any Fund may be  terminated  upon the sale of its  assets  to,  or
merger with, another open-end,  management investment company or series thereof,
or upon liquidation and distribution of its assets.  Generally such terminations
must be approved  by the vote of the  holders of a majority  of the  outstanding
shares of the Trust or the Fund.  The Trustees may,  without  prior  shareholder
approval:  (1) cause the Trust or any Fund to merge or consolidate  with or into
one or more  entities,  if the  surviving  or  resulting  entity is the Trust or
another company registered as an open-end,  management  investment company under
the 1940 Act, or a series  thereof:  (2) cause any or all shares to be exchanged


                                       36
<PAGE>

under or pursuant  to any state or federal  statute to the extent  permitted  by
law; or (3) cause the Trust to  incorporate  or  organize  under the laws of any
state, commonwealth,  territory,  dependence, colony or possession of the United
States of America or in any foreign jurisdiction.

B.       FUND OWNERSHIP


As of December 1, 2000,  the  percentage  of shares  owned by all  officers  and
trustees  of the Trust as a group was as  follows.  To the extent  officers  and
trustees  own less than 1% of the  shares of each  Fund (or of the  Trust),  the
table reflects "N/A" for not applicable.


FUND (OR TRUST)                           PERCENTAGE OF SHARES OWNED
The Trust                                            N/A
 .................................. .............................................
 .................................. .............................................
Government Bond Fund                                 N/A
 .................................. .............................................
 .................................. .............................................
Corporate Bond Fund                                  N/A
 .................................. .............................................
 .................................. .............................................
Growth Equity Fund                                   N/A
 .................................. .............................................
 .................................. .............................................
Value Equity Fund                                    N/A


Also as of that date,  certain  shareholders  of record owned 5% or more of each
Fund.  Shareholders  known by a Fund to own  beneficially 5% or more of the Fund
are listed in Table 6 in Appendix B.


From time to time, certain shareholders may own a large percentage of the shares
of a Fund. Accordingly, those shareholders may be able to greatly affect (if not
determine) the outcome of a shareholder vote. As of April 1, 2000, the following
persons beneficially owned 25% or more of the shares of a Fund (or of the Trust)
and may be deemed to control  the Fund (or the Trust).  For each  person  listed
that is a  company,  the  jurisdiction  under the laws of which the  company  is
organized (if applicable) and the company's parents are listed.

CONTROLLING PERSON INFORMATION

                                                                   PERCENTAGE OF
SHAREHOLDER                                 FUND (OR TRUST)         SHARES OWNED
Southwest Guaranty Trust Company         Government Bond Fund          45.04%
 ........................................ ...................... ................
 ........................................ ...................... ................
Southwest Guaranty Trust Company         Value Equity Fund             26.88%
 ........................................ ...................... ................

C.       LIMITATIONS ON SHAREHOLDERS' AND TRUSTEES' LIABILITY

Delaware  law  provides  that  Fund   shareholders  are  entitled  to  the  same
limitations  of  personal   liability   extended  to   stockholders  of  private
corporations for profit. In the past, the securities  regulators of some states,
however,  have  indicated that they and the courts in their state may decline to
apply  Delaware  law on this  point.  The Trust  Instrument  contains an express
disclaimer of shareholder liability for the debts, liabilities,  obligations and
expenses of the Trust and requires that a disclaimer be given in each bond, note
or contract,  or other undertaking  entered into or executed by the Trust or the
Trustees.  The Trust's Trust Instrument (the document that governs the operation
of the Trust)  provides that the  shareholder,  if held to be personally  liable
solely by reason of being or having seen a shareholder of such series,  shall be
entitled out of the assets the applicable  series'  property to be held harmless
from  and  indemnified  against  all  losses  and  expenses  arising  from  such
liability.  The Trust  Instrument  also provides  that each series  shall,  upon
request,  assume the defense of any claim made against any  shareholder  for any
act or obligation of the series and satisfy any judgment thereon. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability is
limited to  circumstances  in which Delaware law does not apply,  no contractual
limitation of liability  was in effect,  and the portfolio is unable to meet its
obligations.  FAdS  believes  that,  in view of the  above,  there is no risk of
personal liability to shareholders.



                                       37
<PAGE>

The  Trust  Instrument  provides  that the  Trustees  shall not be liable to any
person  other  than the  Trust or its  shareholders  for any  act,  omission  or
obligation  of the Trust or any  Trustee.  In  addition,  the  Trust  Instrument
provides  that the  Trustees  shall not be liable for any act,  omission  or any
conduct whatsoever in his capacity as a Trustee,  provided that a Trustee is not
protected against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.

D.       REGISTRATION STATEMENT

This SAI and the Prospectus do not contain all the  information  included in the
Trust's  registration  statement  filed  with  the SEC  under  the 1933 Act with
respect to the securities offered hereby. The registration statement,  including
the  exhibits  filed  therewith,  may be  examined  at the  office of the SEC in
Washington, D.C.

Statements  contained  herein and in the  Prospectus  as to the  contents of any
contract or other documents are not necessarily complete, and, in each instance,
are qualified by, the copy of such contract or other documents filed as exhibits
to the registration statement.

E.       FINANCIAL STATEMENTS

The  financial  statements  of the Funds for the year ended  December  31,  1999
included  in the Annual  Report to  shareholders  of the Trust are  incorporated
herein  by  reference.  These  financial  statements  include  the  schedule  of
investments,  statement  of assets and  liabilities,  statement  of  operations,
statement of changes in net assets, financial highlights,  notes and independent
auditors' report.



                                       38
<PAGE>




APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
--------------------------------------------------------------------------------

A.       CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)

1.       MOODY'S INVESTORS SERVICE

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

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

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

BAA          Bonds  which  are  rated  Baa  are   considered   as   medium-grade
             obligations  (i.e.,  they are neither  highly  protected nor poorly
             secured).  Interest payments and principal security appear adequate
             for the present but certain  protective  elements may be lacking or
             may be characteristically unreliable over any great length of time.
             Such bonds lack outstanding investment  characteristics and in fact
             have speculative characteristics as well.

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

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

CAA          Bonds that are rated Caa are of poor  standing.  Such issues may be
             in default or there may be present  elements of danger with respect
             to principal or interest.

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

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

NOTE    Moody's applies  numerical  modifiers 1, 2, and 3 in each generic rating
        classification  from Aa through Caa.  The modifier 1 indicates  that the
        obligation ranks in the higher end of its generic rating  category;  the
        modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a
        ranking in the lower end of that generic rating category.



                                       A-1
<PAGE>

2.       STANDARD AND POOR'S CORPORATION

AAA          An obligation rated AAA has the highest rating assigned by Standard
             & Poor's. The obligor's  capacity to meet its financial  commitment
             on the obligation is extremely strong.

AA           An obligation rated AA differs from the  highest-rated  obligations
             only in small degree.  The obligor's capacity to meet its financial
             commitment on the obligation is very strong.

A            An obligation  rated A is somewhat more  susceptible to the adverse
             effects of changes in  circumstances  and economic  conditions than
             obligations  in  higher-rated  categories.  However,  the obligor's
             capacity to meet its  financial  commitment  on the  obligation  is
             still strong.

BBB          An obligation rated BBB exhibits  adequate  protection  parameters.
             However,  adverse economic conditions or changing circumstances are
             more  likely to lead to a weakened  capacity of the obligor to meet
             its financial commitment on the obligation.

NOTE         Obligations  rated BB, B, CCC,  CC,  and C are  regarded  as having
             significant  speculative  characteristics.  BB indicates  the least
             degree of  speculation  and C the highest.  While such  obligations
             will likely have some quality and protective characteristics, large
             uncertainties or major exposures to adverse conditions may outweigh
             these.

BB           An obligation  rated BB is less vulnerable to nonpayment than other
             speculative issues.  However, it faces major ongoing  uncertainties
             or exposure to adverse business,  financial, or economic conditions
             that could lead to the  obligor's  inadequate  capacity to meet its
             financial commitment on the obligation.

B            An  obligation  rated  B is  more  vulnerable  to  nonpayment  than
             obligations rated BB, but the obligor currently has the capacity to
             meet its financial commitment on the obligation.  Adverse business,
             financial,  or economic conditions will likely impair the obligor's
             capacity or  willingness  to meet its  financial  commitment on the
             obligation.

CCC          An obligation rated CCC is currently vulnerable to nonpayment,  and
             is  dependent  upon  favorable  business,  financial,  and economic
             conditions for the obligor to meet its financial  commitment on the
             obligation.  In  the  event  of  adverse  business,  financial,  or
             economic conditions, the obligor is not likely to have the capacity
             to meet its financial commitment on the obligation.

CC           An obligation rated CC is currently highly vulnerable to nonpayment

C            The C rating may be used to cover a  situation  where a  bankruptcy
             petition  has been filed or  similar  action  has been  taken,  but
             payments on this obligation are being continued.

D            An obligation rated D is in payment default.  The D rating category
             is used when payments on an obligation are not made on the date due
             even  if the  applicable  grace  period  has  not  expired,  unless
             Standard & Poor's  believes  that such payments will be made during
             such grace  period.  The D rating also will be used upon the filing
             of a  bankruptcy  petition  or the  taking of a  similar  action if
             payments on an obligation are jeopardized.

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

             The `r'  symbol is  attached  to the  ratings of  instruments  with
             significant  noncredit  risks. It highlights  risks to principal or
             volatility of expected returns that are not addressed in the credit
             rating.   Examples  include:   obligations  linked  or  indexed  to
             equities, currencies, or commodities; obligations exposed to severe
             prepayment  risk-such as interest-only or  principal-only  mortgage
             securities;  and  obligations  with unusually risky interest terms,
             such as inverse floaters.



                                       A-2
<PAGE>

3.       DUFF & PHELPS CREDIT RATING CO.

AAA       Highest credit quality.  The risk factors are  negligible,  being only
          slightly more than for risk-free U.S. Treasury debt.

AA+       High credit quality. Protection factors are strong. Risk is modest but
AA        may  vary slightly from time to time because of economic conditions.

A+,A,     Protection factors are average but adequate. However, risk factors are
A-        more variable in periods of greater economic stress.

BBB+      Below-average  protection factors but still considered  sufficient for
BBB       prudent   investment.    Considerable   variability   in  risk  during
BBB-      economic cycles.

BB+       Below investment grade but deemed likely to meet obligations when due.
BB        Present  or   prospective   financial   protection  factors  fluctuate
BB-       according  to  industry  conditions.  Overall  quality  may move up or
          down frequently within this category.

B+        Below  investment  grade and possessing risk that obligations will not
B         be  met  when due. Financial  protection factors will fluctuate widely
B-        according  to  economic cycles,  industry  conditions  and/or  company
          fortunes.  Potential  exists for frequent changes in the rating within
          this category or into a higher or lower rating grade.

CCC       Well  below  investment-grade  securities.   Considerable  uncertainty
          exists  as to timely  payment  of  principal,  interest  or  preferred
          dividends.  Protection  factors are narrow and risk can be substantial
          with unfavorable economic/industry conditions, and/or with unfavorable
          company developments.

DD        Defaulted debt obligations.  Issuer failed to meet scheduled principal
          and/or interest payments.

DP        Preferred stock with dividend arrearages.


4.       FITCH IBCA, INC.

INVESTMENT GRADE

AAA        Highest credit quality.  `AAA' ratings denote the lowest  expectation
           of  credit  risk.  They are  assigned  only in case of  exceptionally
           strong  capacity for timely  payment of financial  commitments.  This
           capacity is highly  unlikely to be adversely  affected by foreseeable
           events.

AA         Very high credit quality.  `AA' ratings denote a very low expectation
           of credit risk. They indicate very strong capacity for timely payment
           of  financial   commitments.   This  capacity  is  not  significantly
           vulnerable to foreseeable events.

A          High credit  quality.  `A' ratings denote a low expectation of credit
           risk.  The capacity for timely  payment of financial  commitments  is
           considered  strong.   This  capacity  may,   nevertheless,   be  more
           vulnerable to changes in circumstances or in economic conditions than
           is the case for higher ratings.



                                       A-3
<PAGE>

BBB        Good credit quality. `BBB' ratings indicate that there is currently a
           low  expectation  of credit risk.  The capacity for timely payment of
           financial commitments is considered adequate,  but adverse changes in
           circumstances  and in economic  conditions  are more likely to impair
           this capacity. This is the lowest investment-grade category.

SPECULATIVE GRADE

BB          Speculative.  `BB' ratings  indicate that there is a possibility  of
            credit  risk  developing,  particularly  as the  result  of  adverse
            economic   change  over  time;   however,   business  or   financial
            alternatives  may be available to allow financial  commitments to be
            met. Securities rated in this category are not investment grade.

B           Highly  speculative.  `B' ratings indicate that  significant  credit
            risk is present,  but a limited margin of safety remains.  Financial
            commitments are currently being met; however, capacity for continued
            payment is  contingent  upon a  sustained,  favorable  business  and
            economic environment.

CCC,       High default risk. Default is a real possibility.Capacity for meeting
CC,        financial commitments  is  solely  reliant upon sustained,  favorable
C          business or economic  developments.   A `CC'  rating  indicates  that
           default of some kind appears  probable.  `C' ratings  signal imminent
           default.

DDD,       Default. Securities  are  not  meeting  current  obligations  and are
DD,        extremely speculative.   `DDD'  designates  the highest potential for
D          recovery of amounts outstanding on any securities involved.  For U.S.
           corporates, for example, `DD' indicates expected recovery of 50% -90%
           of such  outstandings, and `D' the lowest  recovery  potential,  i.e.
           below 50%.



                                       A-4
<PAGE>



PREFERRED STOCK

1.       MOODY'S INVESTORS SERVICE

AAA          An issue  that is rated  "aaa" is  considered  to be a  top-quality
             preferred  stock.  This rating  indicates good asset protection and
             the least  risk of  dividend  impairment  within  the  universe  of
             preferred stocks.

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

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

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

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

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

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

CA           An issue that is rated  "ca"  is  speculative  in a high degree and
             is likely to be  in arrears on dividends  with little likelihood of
             eventual payments.

C            This is the lowest rated class of preferred  or  preference  stock.
             Issues  so rated can thus be  regarded  as  having  extremely  poor
             prospects of ever attaining any real investment standing.

NOTE         Moody's  applies  numerical  modifiers  1, 2, and 3 in each  rating
             classification: the modifier 1 indicates that the security ranks in
             the higher  end of its  generic  rating  category;  the  modifier 2
             indicates a mid-range ranking and the modifier 3 indicates that the
             issue ranks in the lower end of its generic rating category.



                                       A-5
<PAGE>



2.       STANDARD & POOR'S

AAA          This is the  highest  rating  that may be  assigned  by  Standard &
             Poor's to a preferred stock issue and indicates an extremely strong
             capacity to pay the preferred stock obligations.

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

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

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

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

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

C            A preferred stock rated C is a nonpaying issue.

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

N.R.         This  indicates  that no rating has been  requested,  that there is
             insufficient  information  on  which  to  base a  rating,  or  that
             Standard & Poor's does not rate a particular  type of obligation as
             a matter of policy.

NOTE         Plus (+) or minus (-).  To provide  more  detailed  indications  of
             preferred stock quality,  ratings from AA to CCC may be modified by
             the  addition  of a plus or minus  sign to show  relative  standing
             within the major rating categories.



                                       A-6
<PAGE>



C.       SHORT TERM RATINGS

1.       MOODY'S INVESTORS SERVICE

Moody's  employs the following three  designations,  all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

PRIME-1          Issuers  rated  Prime-1  (or  supporting  institutions)  have a
                 superior  ability  for  repayment  of  senior  short-term  debt
                 obligations.  Prime-1 repayment ability will often be evidenced
                 by many of the following characteristics:
                 o    Leading market positions in well-established industries.
                 o    High rates of return on funds employed.
                 o    Conservative   capitalization   structure   with  moderate
                      reliance on debt and ample asset protection.
                 o    Broad  margins in  earnings  coverage  of fixed  financial
                      charges and high internal cash generation.
                 o    Well-established  access to a range of  financial  markets
                      and assured sources of alternate liquidity.

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

PRIME-3          Issuers  rated  Prime-3 (or  supporting  institutions)  have an
                 acceptable   ability  for   repayment   of  senior   short-term
                 obligations.  The effect of industry characteristics and market
                 compositions  may be more  pronounced.  Variability in earnings
                 and  profitability  may  result in changes in the level of debt
                 protection   measurements  and  may  require   relatively  high
                 financial leverage. Adequate alternate liquidity is maintained.

NOT PRIME

                 Issuers  rated  Not Prime do not fall  within  any of the Prime
rating categories.



                                       A-7
<PAGE>



STANDARD & POOR'S

A-1              A  short-term  obligation  rated  A-1 is rated  in the  highest
                 category by Standard & Poor's.  The obligor's  capacity to meet
                 its financial  commitment on the  obligation is strong.  Within
                 this category,  certain  obligations are designated with a plus
                 sign (+). This  indicates  that the obligor's  capacity to meet
                 its  financial  commitment  on these  obligations  is extremely
                 strong.

A-2              A short-term  obligation rated A-2 is somewhat more susceptible
                 to the adverse effects of changes in circumstances and economic
                 conditions  than  obligations  in  higher  rating   categories.
                 However,   the   obligor's   capacity  to  meet  its  financial
                 commitment on the obligation is satisfactory.

A-3              A short-term  obligation rated A-3 exhibits adequate protection
                 parameters.  However,  adverse economic  conditions or changing
                 circumstances are more likely to lead to a weakened capacity of
                 the obligor to meet its financial commitment on the obligation.

B                A  short-term   obligation   rated  B  is  regarded  as  having
                 significant speculative characteristics.  The obligor currently
                 has  the  capacity  to meet  its  financial  commitment  on the
                 obligation;  however, it faces major ongoing uncertainties that
                 could lead to the  obligor's  inadequate  capacity  to meet its
                 financial commitment on the obligation.

C                A  short-term  obligation  rated C is currently  vulnerable  to
                 nonpayment and is dependent upon favorable business, financial,
                 and economic  conditions  for the obligor to meet its financial
                 commitment on the obligation.

D                A short-term  obligation rated D is in payment  default.  The D
                 rating  category is used when payments on an obligation are not
                 made on the date due even if the  applicable  grace  period has
                 not  expired,  unless  Standard  & Poor's  believes  that  such
                 payments  will be made during such grace  period.  The D rating
                 also will be used upon the filing of a  bankruptcy  petition or
                 the taking of a similar action if payments on an obligation are
                 jeopardized.

FITCH IBCA, INC.

F1            Obligations  assigned  this rating have the highest  capacity  for
              timely repayment under Fitch IBCA's national rating scale for that
              country,  relative to other obligations in the same country.  This
              rating is  automatically  assigned  to all  obligations  issued or
              guaranteed  by  the  sovereign  state.   Where  issues  possess  a
              particularly strong credit feature, a "+" is added to the assigned
              rating.

F2            Obligations  supported by a strong  capacity for timely  repayment
              relative  to other  obligors  in the same  country.  However,  the
              relative  degree  of risk  is  slightly  higher  than  for  issues
              classified  as `A1'  and  capacity  for  timely  repayment  may be
              susceptible to adverse changes in business, economic, or financial
              conditions.

F3            Obligations supported by an adequate capacity for timely repayment
              relative to other  obligors in the same country.  Such capacity is
              more  susceptible  to adverse  changes in business,  economic,  or
              financial conditions than for obligations in higher categories.

B             Obligations  for  which  the  capacity  for  timely  repayment  is
              uncertain  relative  to other  obligors in the same  country.  The
              capacity for timely repayment is susceptible to adverse changes in
              business, economic, or financial conditions.

C             Obligations  for  which  there  is a high risk of default to other
              obligors in the same country or which are in default.




                                       A-8
<PAGE>




APPENDIX B - MISCELLANEOUS TABLES
--------------------------------------------------------------------------------

TABLE 1 - INVESTMENT ADVISORY FEES

The  following  tables show the dollar  amount of fees paid to the Adviser  with
respect to each Fund, the amount of fee that was waived by the Adviser,  if any,
and the actual fee received by the Adviser.

<TABLE>
<S>                            <C>                           <C>                   <C>                   <C>

                                                         ADVISORY FEE      ADVISORY FEE WAIVED       ADVISORY FEE
GOVERNMENT BOND FUND                                         PAID                                      RETAINED

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $154,352              $44,740               $109,612
     Period March 30, 1998-December 31, 1998               $99,857               $42,530               $57,327
TRUST SHARES
     Period March 30, 1998-December 31, 1998                 $75                   $40                   $35

                                                         ADVISORY FEE          ADVISORY FEE          ADVISORY FEE
CORPORATE BOND FUND                                          PAID                 WAIVED               RETAINED

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $332,876              $96,486               $236,390
     Period March 26, 1998-December 31, 1998               $266,091              $118,031              $148,060

                                                         ADVISORY FEE          ADVISORY FEE          ADVISORY FEE
GROWTH EQUITY FUND                                           PAID                 WAIVED               RETAINED

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $141,611              $24,853               $116,758
     Period March 30, 1998-December 31, 1998               $82,725               $31,022               $51,703
TRUST SHARES
     Year Ended December 31, 1999                           $1,791                 $310                 $1,481
     Period March 30, 1998-December 31, 1998                 $881                  $341                  $540

                                                         ADVISORY FEE          ADVISORY FEE          ADVISORY FEE
VALUE EQUITY FUND                                            PAID                 WAIVED               RETAINED

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $131,299              $22,597               $108,702
     Period March 30, 1998-December 31, 1998               $70,265               $26,411               $43,854
TRUST SHARES
     Year Ended December 31, 1999                           $1,261                 $219                 $1,042
     Period March 30, 1998-December 31, 1998                 $793                  $309                  $484
</TABLE>




                                       B-1
<PAGE>



TABLE 2 - ADMINISTRATION FEES

The following tables show the dollar amount of fees paid to FAdS with respect to
each Fund.

                                                      ADMINISTRATION FEE
GOVERNMENT BOND FUND                                         PAID

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $100,664
     Period March 30, 1998-December 31, 1998               $52,647
TRUST SHARES
     Period March 30, 1998-December 31, 1998                 $32

                                                      ADMINISTRATION FEE
CORPORATE BOND FUND                                          PAID

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $216,654
     Period March 26, 1998-December 31, 1998               $135,972

                                                      ADMINISTRATION FEE
GROWTH EQUITY FUND                                           PAID

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $60,690
     Period March 30, 1998-December 31, 1998               $31,021
TRUST SHARES
     Year Ended December 31, 1999                            $768
     Period March 30, 1998-December 31, 1998                 $324

                                                      ADMINISTRATION FEE
VALUE EQUITY FUND                                            PAID

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $56,271
     Period March 30, 1998-December 31, 1998               $26,313
TRUST SHARES
     Year Ended December 31, 1999                            $541
     Period March 30, 1998-December 31, 1998                 $290




                                       B-2
<PAGE>



TABLE 3 - ACCOUNTING FEES

The following tables show the dollar amount of fees paid to FAcS with respect to
each Fund, the amount of fee that was waived by FAcS, if any, and the actual fee
received by FAcS.
<TABLE>
<S>                          <C>                           <C>                      <C>                <C>

                                                     ACCOUNTING FEE PAID      ACCOUNTING FEE        ACCOUNTING FEE
GOVERNMENT BOND FUND                                                              WAIVED               RETAINED

INSTITUTIONAL SHARES

     Year Ended December 31, 1999                          $39,000                  $0                 $39,000
     Period March 30, 1998-December 31, 1998               $27,637                $2,909               $24,728
TRUST SHARES

     Period March 30, 1998-December 31, 1998                 $621                  $155                  $466

                                                     ACCOUNTING FEE PAID      ACCOUNTING FEE        ACCOUNTING FEE
CORPORATE BOND FUND                                                               WAIVED               RETAINED

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $57,000                  $0                 $57,000
     Period March 26, 1998-December 31, 1998               $31,581                  $0                 $31,581

                                                     ACCOUNTING FEE PAID      ACCOUNTING FEE        ACCOUNTING FEE
GROWTH EQUITY FUND                                                                WAIVED               RETAINED

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $50,364                  $0                 $50,364
     Period March 30, 1998-December 31, 1998               $35,110                $2,827               $32,283
TRUST SHARES
     Year Ended December 31, 1999                            $636                   $0                   $636
     Period March 30, 1998-December 31, 1998                $1,148                 $237                  $911

                                                     ACCOUNTING FEE PAID      ACCOUNTING FEE        ACCOUNTING FEE
VALUE EQUITY FUND                                                                 WAIVED               RETAINED

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $50,515                  $0                 $50,515
     Period March 30, 1998-December 31, 1998               $35,108                $2,829               $32,279
TRUST SHARES
     Year Ended December 31, 1999                            $485                   $0                   $485
     Period March 30, 1998-December 31, 1998                $1,150                 $236                  $914

</TABLE>



                                       B-3
<PAGE>



TABLE 4 - TRANSFER AGENCY FEES

The following tables show the dollar amount of shareholder  service fees paid to
the Transfer  Agent with respect to Shares of each Fund,  the amount of fee that
was waived by Transfer  Agent,  if any,  and the actual fee received by Transfer
Agent.
<TABLE>
<S>                          <C>                           <C>                      <C>                 <C>

                                                     TRANSFER AGENCY FEE   TRANSFER AGENCY FEE   TRANSFER AGENCY FEE
GOVERNMENT BOND FUND                                         PAID                 WAIVED               RETAINED

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $24,601                  $0                  24,601
     Period March 30, 1998-December 31, 1998               $19,899                  $0                 $19,899
TRUST SHARES
     Period March 30, 1998-December 31, 1998                 $474                  $474                   $0

                                                     TRANSFER AGENCY FEE   TRANSFER AGENCY FEE   TRANSFER AGENCY FEE
CORPORATE BOND FUND                                          PAID                 WAIVED               RETAINED

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $25,020                  $0                  25,020
     Period March 26, 1998-December 31, 1998               $19,851                  $0                 $19,851

                                                     TRANSFER AGENCY FEE   TRANSFER AGENCY FEE   TRANSFER AGENCY FEE
GROWTH EQUITY FUND                                           PAID                 WAIVED               RETAINED

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $36,083                  $0                 $36,083
     Period March 30, 1998-December 31, 1998               $27,454                  $0                 $27,454
TRUST SHARES
     Year Ended December 31, 1999                            $675                   $0                   $675
     Period March 30, 1998-December 31, 1998                $1,020                 $765                  $255

                                                     TRANSFER AGENCY FEE   TRANSFER AGENCY FEE   TRANSFER AGENCY FEE
VALUE EQUITY FUND                                            PAID                 WAIVED               RETAINED

INSTITUTIONAL SHARES
     Year Ended December 31, 1999                          $36,137                  $0                 $36,137
     Period March 30, 1998-December 31, 1998               $27,432                  $0                 $27,432
TRUST SHARES
     Year Ended December 31, 1999                            $489                   $0                   $489
     Period March 30, 1998-December 31, 1998                $1,011                 $760                  $251
</TABLE>




                                       B-4
<PAGE>




TABLE 5 - COMMISSIONS

The following table shows the aggregate  brokerage  commissions  with respect to
each Fund that incurred  brokerage  costs. The data is for the past three fiscal
years or shorter period if the Fund has been in operation for a shorter period.

                                              AGGREGATE COMMISSION
FUND                                                  PAID

GOVERNMENT BOND FUND
     Year Ended December 31, 1999                      $0
     Period Ended December 31, 1998                    $0
CORPORATE BOND FUND
     Year Ended December 31, 1999                      $0
     Period Ended December 31, 1998                    $0
GROWTH EQUITY FUND
     Year Ended December 31, 1999                    $71,000
     Period Ended December 31, 1998                  $76,818
VALUE EQUITY FUND
     Year Ended December 31, 1999                    $75,000
     Period Ended December 31, 1998                  $46,000



                                       B-5
<PAGE>



TABLE 6 - 5% SHAREHOLDERS

The  following  table  lists the  persons  who owned of record 5% or more of the
outstanding shares of a Fund as of March 31, 2000.
<TABLE>
<S>                                                                                 <C>                         <C>

FUND                            NAME AND ADDRESS                                     SHARES                  % OF FUND

GOVERNMENT BOND FUND            Southwest Guaranty Trust Company                    3,302,288.073               45.04
                                10411 Westheimer Suite 200
                                Houston, TX  77042

                                Southwest Guaranty Trust Company                    1,324,341.280               18.06
                                10411 Westheimer Suite 200
                                Houston, TX  77042

                                CNOM & Co.                                            555,706.456                7.58
                                C/O Nationsbank
                                P.O. Box 831575
                                Dallas, TX  75283-1575

                                First Union National Bank                             541,821.790                7.39
                                1525 West Wt. Harris Blvd. #1151
                                Charlottle, NC  28288

                                Miter & Co.                                           452,735.295                6.17
                                C/O Marshall & Ilsley Trust Co.
                                P.O. Box 2977
                                Milwaukee, WI  53202-2977

CORPORATE BOND FUND             Miter & Co.                                         2,856,929.942               17.57
                                C/O Marshall & Ilsley Trust Co.
                                P.O. Box 2977
                                Milwaukee, WI  53202-2977

                                First Union National Bank                           2,582,095.381               15.88
                                1525 West Wt. Harris Blvd. #1151
                                Charlotte, NC  28288

                                Southwest Guaranty Trust Company                    2,362,452.587               14.53
                                10411 Westheimer Suite 200
                                Houston, TX  77042

                                Southwest Guaranty Trust Company                    1,682,667.093               10.35
                                10411 Westheimer Suite 200
                                Houston, TX  77042

                                Var & Co.                                           1,154,351.456                7.10
                                C/O US Bank National Association
                                P.O. Box 64010
                                St. Paul, MN  55164-0010

GROWTH EQUITY FUND              Southwest Guaranty Trust Company                      770,479.766               24.90
                                10411 Westheimer Suite 200
                                Houston, TX  77042



                                       B-6
<PAGE>

                                Miter & Co.                                           566,101.612               18.30
                                C/O Marshall & Ilsley Trust Co.
                                P.O. Box 2977
                                Milwaukee, WI  53202-2977

                                Var & Co.                                             448,994.872               14.51
                                C/O US Bank National Association
                                P.O. Box 64010
                                St. Paul, MN  55164-0010

                                First Union National Bank                             437,855.025               14.51
                                1525 West Wt. Harris Blvd. #1151
                                Charlottle, NC  28288

                                Var & Co.                                             236,480.161                7.64
                                C/O US Bank National Association
                                P.O. Box 64010
                                St. Paul, MN  55164-0010

VALUE EQUITY FUND               Southwest Guaranty Trust Company                    1,051,112.658               26.88
                                10411 Westheimer Suite 200
                                Houston, TX  77042

                                Miter & Co.                                           661,145.320               16.91
                                C/O Marshall & Ilsley Trust Co.
                                P.O. Box 2977
                                Milwaukee, WI  53202-2977

                                Var & Co.                                             616,252.549               15.76
                                C/O US Bank National Association
                                P.O. Box 64010
                                St. Paul, MN  55164-0010

                                First Union National Bank                             498,098.195               12.74
                                1525 West Wt. Harris Blvd. #1151
                                Charlottle, NC  28288
</TABLE>




                                       B-7
<PAGE>



APPENDIX C - PERFORMANCE DATA
--------------------------------------------------------------------------------

TABLE 1 - YIELDS

For the  30-day  period  ended  December  31,  1999,  the  annualized  yield  of
Institutional  Shares of  Government  Bond Fund and  Corporate  Bond Fund was as
follows.

GOVERNMENT BOND FUND                YIELD

     Institutional Shares           5.52%


CORPORATE BOND FUND                 YIELD

     Institutional Shares           6.88%

TABLE 2 - TOTAL RETURNS

The average  annual total return of each class of each Fund for the period ended
December 31, 1999, was as follows.

NON STANDARDIZED RETURNS (WITHOUT A SALES LOAD)
<TABLE>
<S>                         <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
                                                  CALENDAR
GOVERNMENT BOND           ONE MONTH   THREE        YEAR TO    ONE          THREE       FIVE          TEN       SINCE
FUND                                   MONTHS       DATE      YEAR         YEARS       YEARS        YEARS    INCEPTION

Institutional Shares        -0.71%     -0.58%      -2.39%      -2.39%       N/A         N/A          N/A        3.03%

                                                  CALENDAR
CORPORATE BOND            ONE MONTH   THREE        YEAR TO    ONE YEAR     THREE       FIVE          TEN       SINCE
FUND                                   MONTHS       DATE                   YEARS       YEARS        YEARS    INCEPTION

Institutional Shares      -0.53%      -0.46%       -1.77%      -1.77%       N/A         N/A        N/A        3.13%

                                                   CALENDAR
GROWTH EQUITY             ONE MONTH   THREE         YEAR TO    ONE YEAR    THREE       FIVE        TEN         SINCE
FUND                                    MONTHS       DATE                  YEARS       YEARS       YEARS     INCEPTION

Trust Shares                7.69%       16.69%      24.56%      24.56%      N/A         N/A        N/A       26.06%
Institutional Shares        7.48%       16.32%      24.44%      24.44%      N/A         N/A        N/A       26.23%

                                                   CALENDAR
VALUE EQUITY              ONE MONTH   THREE         YEAR TO    ONE YEAR    THREE       FIVE        TEN        SINCE
FUND                                    MONTHS       DATE                  YEARS       YEARS      YEARS     INCEPTION

Trust Shares                3.46%       2.25%       -3.75%      -3.75%      N/A         N/A        N/A        -6.73%
Institutional Shares        3.20%       1.88%       -3.96%      -3.96%      N/A         N/A        N/A        -6.67%

</TABLE>


                                       C-1
<PAGE>



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