MILLENNIUM FUNDS INC, 497, 2000-11-03

MILLENNIUM FUNDS INC
497, 2000-11-03

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Millennium Funds, Inc.

PROSPECTUS
November 1, 2000

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Millennium Funds, Inc.

THE MILLENNIUM GROWTH FUND

THE MILLENNIUM GROWTH & INCOME FUND

PROSPECTUS

November 1, 2000

Non-diversified mutual funds that seek to invest in companies with the potential
for above average growth in earnings.

Shares of the Funds are offered to investors without any sales charges or Rule
12b-1 fees.

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
FUNDS' SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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TABLE OF CONTENTS
Page

RISK/RETURN SUMMARY ....................................................... 1
The Millennium Growth Fund ................................................ 1
Performance and Volatility ........................................ 3
Investor Expenses ................................................. 4

The Millennium Growth & Income Fund ....................................... 6
Performance and Volatility ........................................ 7
Investor Expenses ................................................. 9

INVESTMENT OBJECTIVES, STRATEGIES AND RISKS ............................... 11
The Millennium Growth Fund ........................................ 11
The Millennium Growth & Income Fund ............................... 12
More Information About Investments and Risks ...................... 13

MANAGEMENT ................................................................ 15

YOUR ACCOUNT .............................................................. 16
How to Contact the Funds .......................................... 16
General Information ............................................... 16
When and How NAV Is Determined .................................... 17
How to Buy Shares of the Funds .................................... 17
How to Sell Shares of the Funds ................................... 21

OTHER INFORMATION ......................................................... 24
Distributions ..................................................... 24
Taxes ............................................................. 24

FINANCIAL HIGHLIGHTS ...................................................... 26

RISK/RETURN SUMMARY - THE MILLENNIUM GROWTH FUND What is the Millennium Growth
Fund's investment objective?
The investment objective of the Millennium Growth Fund (the "Growth Fund") is
growth of capital.

How does the Growth Fund seek to achieve its investment objective?
Millennium Capital Advisors, Inc. (the "Advisor") selects equity securities for
the Growth Fund's portfolio that it believes are experiencing, or have the
potential to experience, growth in earnings that exceed the average growth rate
of companies within the Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500 Index"). The Advisor will also consider the relationship between the
price/earnings ratio of the security and its expected growth rate.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE GROWTH FUND?

STOCK MARKET VOLATILITY. Stock markets can be volatile. In other words, the
prices of stocks can rise or fall rapidly in response to developments affecting
a specific company or industry, or to changing economic, political or market
conditions. The Fund is subject to the general risk that the value of the Fund's
investments may decline if the stock markets perform poorly. There is a risk
that the Fund's investments will underperform either the securities markets
generally or particular segments of the securities markets.

GROWTH INVESTING. Growth stocks can perform differently than the market as a
whole and other types of stocks. The prices of growth stocks may increase or
decrease significantly in response to unexpected earnings reports or other news
about the company.

ISSUER SPECIFIC CHANGES. The value of an individual security can be more
volatile, and can perform differently, than the market as a whole. The price of
an individual issuer's securities can rise or fall dramatically in response to
such things as better or worse than expected earnings reports, news about the
development of a promising product, or the loss of key management personnel.
There is also the risk that the Advisor's assessment of the growth potential of
a specific security may prove incorrect.

NON-DIVERSIFICATION. The Fund is non-diversified, which means that it may invest
a greater percentage of its assets in the securities of particular issuers than
a diversified mutual fund. As a result, poor performance of a particular
security could have a more significant impact on the Fund's performance than it
would on the performance of a diversified fund.

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SMALL COMPANIES. The Growth Fund may invest without limit in companies with a
market capitalization of less than $500 million. Stocks of such companies are
subject to more abrupt or erratic price movements than the stocks of larger
companies. In addition, smaller companies usually do not pay significant
dividends. Although income is not a primary goal of the Growth Fund, dividends
tend to cushion returns in a falling market.

ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
securities for which no liquid trading market exists. The illiquid securities in
which the Fund may invest include investment partnerships, unregistered
securities of private companies, and other securities that have legal or
contractual restrictions on resale. Most mutual funds do not hold a significant
amount of illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a Fund might be unable to dispose
of restricted or other illiquid securities promptly or at reasonable prices and
might thereby experience difficulty satisfying redemption requests within seven
days.

You could lose money on your investment in the Fund, or the Fund may not perform
as well as other possible investments.

WHO MAY WANT TO INVEST IN THE GROWTH FUND?
You may want to purchase shares of the Fund if:

o You are willing to tolerate significant changes in the value of your
investment
o You are pursuing a long-term goal
o You are willing to accept higher short-term risk for potential
long-term returns

The Fund may not be appropriate for you if:

o You need regular income or stability of principal
o You are pursuing a short-term goal or investing emergency reserves

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PERFORMANCE AND VOLATILITY
The following bar chart and table show the performance of the Growth Fund during
the last year. The information in the table gives some indication of the risk of
an investment in the Fund by showing changes in the Fund's performance from year
to year since the Fund's inception and by comparing the Fund's performance to
the S&P 500 Index, a commonly accepted broad measure of stock market
performance. Past performance does not necessarily indicate how the Fund will
perform in the future.

The returns in the chart take into account the effect of fee waivers and expense
reimbursements by the Advisor. If the fee waivers and expense reimbursement had
not been in effect, the Fund's return would be lower than that shown.

MILLENNIUM GROWTH FUND
Per Share total return per calendar year

[Graph Depicted Here]

Graphs shows performance per share for the years 1998 and 1999.

The year to date return of the Growth Fund as of the end of the most recent
quarter ended September 30, 2000, was -6.39%. During the period shown in the bar
chart, the Growth Fund's highest return for a quarter was 92.41% (quarter ended
December 31, 1999) and the lowest return for a quarter was -11.21% (quarter
ended September 30, 1999).

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AVERAGE ANNUAL TOTAL RETURN
(for the periods ended December 31)
The returns in the following table include the effect of fee waivers and expense
reimbursements by the Advisor. If those waivers and reimbursements had not been
in effect, the return would have been lower than that shown.

Since
1998 1999 Inception
---- ---- ---------
Millennium Growth Fund* ............. 88.53% 103.59% 63.18%
S&P 500 Index** ..................... 28.34% 21.04% 22.37%

----------
* The Fund commenced operations on July 16, 1997.
** The S&P 500 Index is an unmanaged index. Index returns assume reinvestment
of dividends; unlike the Fund's return, however, they do not reflect any
fees or expenses.

INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

SHAREHOLDERS FEES (paid directly from your investments):
Redemption Fee (on shares held less than 180 days)1 ............. 2.00%

ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of net assets):
Management Fees ................................................ 0.95%
Distribution and/or Service (Rule 12b-1) Fees .................. 0.00%
Other Expenses2 ................................................ 1.55%
----
TOTAL ANNUAL FUND OPERATING EXPENSES ........................... 2.50%
Fee Waiver and Expense Reimbursements3 ......................... None
----
NET EXPENSES ................................................... 2.50%
====

1 Shares held less than 180 days are subject to a 2% Redemption Fee. For an
explanation of Redemption Fees see page 24.

2 Other Expenses include, administrative, custody, transfer agency,
shareholder servicing and other fees and expenses. Other Expenses have been
adjusted to reflect current expenses.

3 Actual Total Annual Operating Expenses for fiscal year ended June 30, 2000
were 1.45% after fee waivers and expense reimbursements of 0.37% by the
Advisor, that were provided for in an agreement between the Fund and the
Advisor that terminated October 31, 2000. The Advisor has entered into a
new contractual waiver agreement with the Fund to waive some or all of its
advisory fees or reimburse certain expenses of the Fund so that Total
Operating Expenses, excluding interest and extraordinary expenses, will not
exceed 2.50% of its net assets through October 31, 2001. Fees waived or
expenses reimbursed by the Advisor are subject to possible recoupment by
the Advisor.

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EXAMPLE:

This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of these periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Neither the 5% rate of return nor the
expenses shown above should be considered indications of past or future returns
and expenses. Although your actual costs may be higher or lower, based on these
assumptions your cost would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$253 $779 $1,331 $2,836

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RISK/RETURN SUMMARY -
THE MILLENNIUM GROWTH & INCOME FUND

WHAT IS THE MILLENNIUM GROWTH & Income Fund's investment objective? The
investment objective of the Millennium Growth & Income Fund (the "Growth &
Income Fund") is to seek growth of capital and dividend income.

HOW DOES THE GROWTH & Income Fund seek to achieve its investment objective?
The Advisor selects equity securities for the Growth & Income Fund's portfolio
that it believes are experiencing, or have the potential to experience, growth
in earnings that exceed the average growth rate of companies within the S&P 500
Index and that will provide dividend income. The Advisor will consider the
relationship between the price/earnings ratio of the security and its expected
growth rate.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE GROWTH & Income Fund?

STOCK MARKET VOLATILITY. Stock markets can be volatile. In other words, the
prices of stocks can rise or fall rapidly in response to developments affecting
a specific company or industry, or to changing economic, political or market
conditions. The Fund is subject to the general risk that the value of the Fund's
investments may decline if the stock markets perform poorly. There is a risk
that a Fund's investments will underperform either the securities markets
generally or particular segments of the securities markets.

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SMALL COMPANIES. The Growth & Income Fund may invest without limit in companies
with a market capitalization of less than $500 million. Stocks of such companies
are subject to more abrupt or erratic price movements than the stocks of larger
companies. In addition, smaller companies usually do not pay significant
dividends.

You could lose money on your investment in the Fund, or the Fund may not perform
as well as other possible investments.

WHO MAY WANT TO INVEST IN THE GROWTH & Income Fund?
You may want to purchase shares of the Fund if:

o You are willing to tolerate fluctuations in the value of your investment
o You are seeking income in addition to growth of your investment
o You are pursuing a long-term goal
o You are willing to accept higher short-term risk for potential
long-term returns

The Fund may NOT be appropriate for you if:
o You need stability of principal
o You are pursuing a short-term goal or investing emergency reserves

PERFORMANCE AND VOLATILITY

The following bar chart and table show the performance of the Growth & Income
Fund during the last year. The information in the table gives some indication of
the risk of an investment in the Fund by showing changes in the Fund's
performance from year to year since the Fund's inception and by comparing the
Fund's performance to the S&P 500 Index, a commonly accepted broad measure of
stock market performance. Past performance does not necessarily indicate how the
Fund will perform in the future.

Page 7

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MILLENNIUM GROWTH & INCOME FUND
per share total return per calendar year

[Graph Depicted Here]

Graphs shows performance per share for the year 1999.

The year to date return of the Growth & Income Fund as of the end of the most
recent quarter ended September 30, 2000, was -4.71%. During the period shown in
the bar chart, the Growth & Income Fund's highest return for a quarter was
91.51% (quarter ended December 31, 1999) and the lowest return for a quarter was
-11.26% (quarter ended June 30, 2000).

AVERAGE ANNUAL TOTAL RETURN
(for the period ended december 31)

The returns in the following table take into account the effect of fee waivers
and expense reimbursements by the Advisor. If the fee waivers and expense
reimbursement had not been in effect, the Fund's return would be lower than that
shown.
SINCE
1999 INCEPTION
---- ---------
Millennium Growth & Income Fund* 97.22% 82.48%
S&P 500 Index** 21.04% 20.55%

----------
* The Growth & Income Fund commenced operations on June 26, 1998.
** The S&P 500 Index is an unmanaged index. Index returns assume reinvestment
of dividends; unlike the Fund's return, however, they do not reflect any
fees or expenses.

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INVESTOR EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

SHAREHOLDER FEES
(paid directly from your investments):
Redemption Fee (on shares held less than 180 days)1 .................. 2.00%

ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets, as a percentage of net assets):
Management Fees ...................................................... 0.95%
Distribution and/or Service (Rule 12b-1) Fees ........................ 0.00%
Other Expenses2 ...................................................... 1.55%
----
TOTAL ANNUAL FUND OPERATING EXPENSES ................................. 2.50%
Fee Waiver and Expense Reimbursements3 ............................... None
----
NET EXPENSES ......................................................... 2.50%
====

1 Shares held less than 180 days are subject to a 2% Redemption Fee. For an
explanation of Redemption Fees see page 24.

2 Other Expenses include, administrative, custody, transfer agency,
shareholder servicing and other fees and expenses. Other Expenses has been
adjusted to reflect current expenses.

3 Actual Total Annual Operating Expenses for fiscal year ended June 30, 2000
was 1.45% after fee waivers and expense reimbursements of 0.59% by the
Advisor, that were provided for in an agreement between the Fund and the
Advisor that terminated October 31, 2000. The Advisor has entered into a
new contractual waiver agreement with the Fund to waive some or all of its
advisory fees or reimburse certain expenses of the Fund so that Total
Operating Expenses, excluding interest and extraordinary expenses, will not
exceed 2.50% of its net assets through October 31, 2001. Fees waived or
expenses reimbursed by the Advisor are subject to possible recoupment by
the Advisor.

Page 9

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EXAMPLE:
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$253 $779 $1,331 $2,836

Page 10

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INVESTMENT OBJECTIVES, STRATEGIES AND RISKS -
MILLENNIUM GROWTH FUND

This section of the prospectus describes the investment objective of the Growth
Fund, how the Advisor tries to achieve that objective, and the principal risks
of investing in the Growth Fund.

WHAT IS THE GROWTH FUND'S INVESTMENT OBJECTIVE? The investment objective of the
Growth Fund is to seek growth of capital. The Growth Fund's investment objective
is fundamental and may not be changed without shareholder approval.

HOW DOES THE GROWTH FUND TRY TO ACHIEVE ITS INVESTMENT OBJECTIVE? Under normal
market conditions, the Growth Fund will invest at least 85% of its total assets
in common stocks and securities having the characteristics of common stocks,
such as convertible securities, rights and warrants.

The Fund invests in small, medium and large companies. The size of a company is
measured by its "market capitalization." The market capitalization of a company
is the price of a share of the company's stock multiplied by the number of
shares of stock it has outstanding.

A company is considered small if its market capitalization is less than $500
million at the time of investment. The Fund may invest without limit in stocks
of small companies.

In seeking investments for the Fund, the Advisor's primary emphasis is on
evaluating a company's management, growth prospects, business operations,
competitive forces, revenues, earnings, cash flow and balance sheet in relation
to its share price. The Advisor may select stocks that it believes offer
substantial growth in any or all of the above criteria and/or stocks that it
believes are undervalued relative to its current price.

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INVESTMENT OBJECTIVES, STRATEGIES AND RISKS -
MILLENNIUM GROWTH & INCOME FUND

This section of the prospectus describes the investment objective of the Growth
& Income Fund, how the Advisor tries to achieve that objective, and the
principal risks of investing in the Fund.

WHAT IS THE GROWTH & INCOME FUND'S INVESTMENT OBJECTIVE? The investment
objective of the Growth & Income Fund is to seek growth of capital and dividend
income. The Fund's investment objective is fundamental and may not be changed
without shareholder approval.

HOW DOES THE GROWTH & INCOME FUND TRY TO ACHIEVE ITS INVESTMENT OBJECTIVE? Under
normal market conditions, the Growth & Income Fund will invest at least 85% of
its total assets in common stocks and securities having the characteristics of
common stocks, such as convertible securities, rights and warrants.

A company is considered small if it has a market capitalization of less than
$500 million at the time of investment. The Fund may invest without limit in
stocks of small companies.

In seeking investments for the Fund, the Advisor looks for companies with growth
potential and that provide dividend income. Before investing, the Advisor
evaluates a company's management, growth prospects, business operations,
competitive forces, revenues, earnings, cash flow and balance sheet in relation
to its share price. The Advisor may select stocks that it believes offer
substantial growth in any or all of the above criteria and/or stocks that it
believes are undervalued relative to its current price.

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MORE INFORMATION ABOUT INVESTMENTS AND RISKS
OPTIONS ON SECURITIES AND SECURITIES INDICES. Each Fund may purchase put and
call options and write (sell) covered call options on securities and financial
indices. These are instruments that give the Fund the right to buy or sell a
particular security, such as a stock or group of stocks, in the future at a
pre-determined price. The Advisor may use these options strategies for a variety
of reasons: to hedge against the risk of fluctuations in the prices of
securities that a Fund holds or may purchase; as an efficient means to adjust a
Fund's overall exposure to certain markets; in an effort to enhance income; as a
cash management tool; or to protect the value of a Fund's portfolio securities.

There is no assurance that the Advisor will be able to hedge successfully. A
Fund's ability to use these instruments successfully will depend on the
Advisor's ability to accurately predict movements in the prices of securities,
interest rates and the securities markets. The prices of options can be very
volatile. Investing for hedging purposes may result in certain transaction
costs, which may reduce the Fund's total return.

LENDING SECURITIES. Each Fund may lend its portfolio securities to brokers,
dealers or other financial institutions. Neither Fund may loan more than
one-third of its total assets. The principal risk of securities lending is that
the institution borrowing the securities may become insolvent. In this event,
the Fund could experience delays in recovering its securities and possibly
capital losses.

SHORT SELLING. Each Fund may sell securities short by borrowing securities it
does not own and selling them. A Fund is then obligated to replace the
securities borrowed by purchasing them at the market price at the time of
replacement. If the securities sold short increase in value between the time of
sale and the time a Fund purchases them, the Fund will incur a loss. On the
other hand, if the securities decline in value, a Fund may repurchase them at a
lower price and realize a profit.

BORROWING MONEY. Each Fund may borrow money from banks as a temporary measure
for emergency purposes, to facilitate redemption requests, or for "leverage", in
order to facilitate the possible purchase of additional securities. Each Fund
may borrow up to one-third of its total assets. The use of leverage involves
special risk considerations that may not be associated with other funds having
similar objectives and policies. Because substantially all of each Fund's assets
fluctuate in value, whereas the interest obligation resulting from a borrowing
is generally fixed, the net asset value ("NAV") per share of each Fund tends to
decrease more when its portfolio assets decrease in value than would otherwise
occur if the Fund did not borrow funds. Interest costs on borrowings, however,
may fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds. Under adverse market conditions, a
Fund might have to sell portfolio securities to meet interest or principal

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payments at a time when fundamental investment considerations would not favor
such sales.

SMALL COMPANIES. Each Fund may invest without limit in stocks of small companies
with a market capitalization less than $500 million. Investing in small
companies involves greater risk than is customarily associated with more
established companies. Stocks of small companies are subject to more abrupt or
erratic price movements than the stocks of larger companies. Small companies
often have limited product lines, markets, or financial resources, and their
management may lack depth and experience. Such companies usually do not pay
significant dividends that could cushion returns in a falling market. In
addition, certain small companies in which a Fund may invest, such as those
engaged in the technology sector, are increasingly sensitive to short product
cycles and aggressive pricing caused by the competitive pressures of advancing
technology and the number of companies and product offerings which continue to
expand. To the extent that either Fund does invest in small capitalization
stocks, there is the risk that its portfolio will be less marketable and may be
subject to greater fluctuations in price than a portfolio holding stocks of
larger issuers. Small capitalization stocks often pay no dividends.

INITIAL PUBLIC OFFERINGS. During 1999, the Funds have each participated in
initial public offerings ("IPOs"), many of which were successful. As a result,
these IPOs had a significant impact on the Fund's performance. There is no
guarantee that there will be as many successful IPOs in the future, or that the
Funds will continue to have access to successful IPOs. In addition, as Fund
assets grow, the positive impact of successful IPOs on Fund performance will
decrease.

VENTURE CAPITAL/PRIVATE PLACEMENTS. Companies in which a Fund invests on a
private basis ("venture capital investment companies") may not be able to
successfully market or commercialize their technology, products or business
concepts. This presents significant risk. Additionally, although some venture
capital investment companies may already have a commercially successful product
when a Fund invests, information technology products and services often have a
more limited market or life span than products in other industries. Thus, the
ultimate success of these companies often depends on their ability to
continually innovate in increasingly competitive markets. Their inability to do
so could affect a Fund's investment returns.

ILLIQUID SECURITIES. Each Fund may invest up to 15% of its respective net assets
in illiquid securities. Illiquid securities may offer a higher yield than
securities which are more readily marketable, but they may not always be
marketable on advantageous terms. The sale of illiquid securities often requires
more time and results in higher brokerage charges or dealer discounts than does
the sale of securities eligible for trading on national securities exchanges or
in the over-the-counter markets. A domestically traded security that is not
registered under the Securities Act of 1933 will not be considered illiquid if
the Advisor determines that an adequate investment trading market exists for
that security. However, there can be no assurance that a liquid market will
exist for any security at a particular time.

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PORTFOLIO TURNOVER. The Funds generally do not trade in securities for
short-term profits, but, when circumstances warrant, may buy or sell securities
without regard to the length of time held. In general, the higher the volume of
buying and selling, the greater the impact of brokerage commissions and other
transaction costs on a Fund's return. A higher portfolio turnover rate may also
generate capital gains that must be distributed to shareholders as income
subject to taxation. The average portfolio turnover rate for domestic stock
funds is approximately 85% according to Morningstar Inc. The portfolio turnover
rates for the fiscal year ending June 30, 2000 for the Growth Fund and the
Growth & Income Fund were 104.75% and 128.41%, respectively.

MANAGEMENT
The business of the Funds is managed under the direction of the Board of
Directors (the "Board"). The Board formulates the general policies of the Funds
and meets periodically to review the Funds' performance, monitor investment
activities and practices, and discuss other matters affecting the Funds.
Additional information regarding the Board, as well as the executive officers,
may be found in the Funds' Statement of Additional Information ("SAI").

THE ADVISOR
The Funds' investment advisor is Millennium Capital Advisors, Inc., 400
Montgomery Street, Suite 800, San Francisco, California 94104. Subject to the
general control of the Board, the Advisor makes investment decisions for the
Funds. For its services, the Advisor receives an advisory fee at an annual rate
of 0.95% of the average daily net assets of each Fund.

The Advisor, acting through its advisory affiliate, Ridgeway Helms Securities
Corporation, has provided brokerage and asset management services to individuals
and institutional investors since July 1995. The Advisor was organized under the
laws of the State of California and registered as an investment advisor with the
Securities and Exchange Commission in 1995.

PORTFOLIO MANAGER
Robert A. Dowlett is principally responsible for managing each Fund's portfolio.
Mr. Dowlett is the President of the Advisor and has been active in the
investment field professionally since 1992. Before founding the Advisor, he was
a financial consultant and guided portfolio manager with Smith Barney Inc.

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DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), One Freedom Valley Drive,
Oaks, Pennsylvania 19456, is the Distributor of the Funds. The Distributor
receives no compensation for distributing the Funds' shares.

YOUR ACCOUNT
HOW TO CONTACT THE FUNDS
For more information about a Fund or your account, you may write to us at:
Millennium Funds, Inc.
P.O. Box 446
Portland, ME 04112

Or you may write to us at our overnight mailing address:
Millennium Funds, Inc.
2 Portland Square
Portland, ME 04101

Or you may call us toll free at (800) 535-9169.

GENERAL INFORMATION
You pay no sales charge to buy or sell (redeem) shares of the Funds. (Although
not a sales charge, you will pay a 2.00% fee if you redeem shares that you have
held less than 180 days -- see "Redemption Fee" on page 24.) You may buy or
redeem shares at the NAV next calculated after the Transfer Agent receives your
request in proper form. For instance, if the Transfer Agent receives your
purchase request in proper form before 4:00 p.m. Eastern time, your transaction
will be priced at that day's NAV. If the Transfer Agent receives your purchase
request after 4:00 p.m. Eastern time, your transaction will be priced at the
next calculated NAV. The Funds will not accept orders that request a particular
day or price for the transaction or any other special conditions.

You will receive quarterly account statements and a confirmation of each
transaction. You should verify the accuracy of all transactions in your account
as soon as you receive any confirmation or account statement.

During unusual market conditions, each Fund may temporarily suspend your right
to sell your shares if the New York Stock Exchange ("NYSE") restricts trading,
the SEC declares an emergency, or for other reasons. Additional information may
be found in the Funds' SAI.

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WHEN AND HOW NAV IS DETERMINED
Each Fund calculates its NAV as of the close of the NYSE (normally 4:00 p.m.,
Eastern time) on each weekday except days when the NYSE is closed. The time at
which NAV is calculated may be changed in case of an emergency or if the NYSE
closes early. Each Fund's NAV is determined by taking the market value of all
securities owned by the Fund (plus all other assets such as cash), subtracting
all liabilities and then dividing the result (net assets) by the number of
shares outstanding. The Funds value securities for which market quotations are
readily available at current market value. If market quotations are not readily
available, then securities are valued at fair value, as determined by the Board.

HOW TO BUY SHARES OF THE FUNDS
TYPES OF ACCOUNTS
If you are making an initial investment in a Fund, you will need to open one of
the following types of accounts:

INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS. Individual and sole
proprietorship accounts are owned by one person, while joint accounts can have
two or more owners. Each individual owner of a joint account may give
instructions on purchases and redemptions without notice to the other owner (if
the account has telephone privileges). Account Applications and written
instructions to a Fund, or requests for transactions that require a signature
guarantee, must be signed by both or all owners exactly as each name appears on
the account.

UNIFORM GIFT OR TRANSFER TO A MINOR ACCOUNTS (UGMA, UTMA). Depending on the laws
of your state, you can set up a custodial account under the Uniform Gift (or
Transfers) to Minors Act. These custodial accounts provide a way to give money
to a child and obtain tax benefits. You can give up to $10,000 a year per child
without paying Federal gift tax under the Uniform Gift (or Transfers) to Minors
Act. To open a UGMA or UTMA account, you must include the minor's social
security number on the application, and the custodian, or trustee, of the UGMA
or UTMA must sign instructions in a manner indicating trustee capacity.

CORPORATE AND PARTNERSHIP ACCOUNTS. To open a corporate or partnership account,
or to send instructions to a Fund, the following documents are required:

o For corporations, a corporate resolution signed by an authorized person with
a signature guarantee.

o For partnerships, a certification for a partnership agreement, or the pages
from the partnership agreement that identify the general partners.

An authorized officer of the corporation or other legal entity must sign the
application.

Page 17

<PAGE>

TRUST ACCOUNTS. The trust must be established before you can open a trust
account. To open the account you must include the name of each trustee, the name
of the trust, and provide a certification for trust, or the pages from the trust
document that identify the trustees.

INDIVIDUAL RETIREMENT ACCOUNTS. The Funds offer IRA accounts, including
traditional and Roth IRAs. Fund shares may also be an appropriate investment for
other retirement plans. Before investing in any IRA or other retirement plan,
you should consult your tax advisor. Whenever making an investment in an IRA, be
sure to indicate the year in which the contribution is made.

HOW TO OPEN AN ACCOUNT
BY TELEPHONE. To open an account by telephone, call (800) 535-9169 to obtain
instructions and a fax number to which you should send your completed account
application. The Transfer Agent will establish your account and contact you with
your new account number.

After you have obtained an account number, you may instruct your bank to wire
the amount of your investment to:

Bankers Trust Company
New York, New York
ABA # 021001033
for credit to: Forum Shareholder Services, LLC Acct #01-465-547
Re: [Name of Fund]
[Your name]
[Your account number]

Your bank may charge a fee to wire money.

You will then need to mail a signed account application to:
Millennium Funds, Inc.
P.O. Box 446
Portland, ME 04112

Or, for overnight mailings:
Millennium Funds, Inc.
2 Portland Square
Portland, ME 04101

BY MAIL. To open an account by mail, please send your completed account
application, together with a check made payable to:

Millennium Funds, Inc.
P.O. Box 446
Portland, ME 04112

Or, for overnight mailings:

Millennium Funds, Inc.
2 Portland Square
Portland, ME 04101

Your check must be in U.S. dollars and drawn on a bank located in the United
States. We do not accept third-party checks, credit card checks, or cash.

AUTOMATIC INVESTMENT PLANS. Automatic Investment Plans ("AIP") allow you to
invest a specified amount of money in a Fund once or twice a month on specified
dates. Automatic investments must be for at least $100. The Funds do not charge
a fee for this service.

To open an AIP account, complete the "Automatic Investment Plans" section on
your account application, and mail it to us together with a voided check for the
account from which payments will be made. These payments will be taken from your
bank account by automated clearing house payment ("ACH"). To purchase additional
shares using ACH payments, call the Transfer Agent at (800) 535-9169 and inform
them of your purchase. These payments typically take two days. Your financial
institution may charge you a fee for this service.

PURCHASES THROUGH THIRD PARTIES. You may be able to invest in shares of a Fund
through a broker-dealer or other financial institution, if the broker-dealer has
made arrangements with the Distributor. If you invest through a broker-dealer or
other financial institution, the policies and fees charged by that institution
may be different than those of the Fund. Banks, broker-dealers, retirement plans
and financial advisors may charge transaction fees and may set different minimum
investments or limitations on buying or selling shares. Consult a representative
of your financial institution or retirement plan for further information.

Page 19

<PAGE>

INVESTMENT MINIMUMS.
Each Fund accepts investments in the following minimum amounts:

Minimum Minimum
Initial Subsequent
Type of Account Investment Investment
--------------- ---------- ----------

Individual, Sole Proprietorship or
Joint Accounts .................... $2,500 $100

Corporate, Partnership or Trust Accounts .. $2,500 $100

Uniform Gift or Transfer to a Minor
Accounts (UGMA, UTMA) ............. $1,000 $100

Individual Retirement Accounts (IRA) ...... $1,000 $100

Automatic Investment Plans ................ $1,000 $100

LIMITATIONS ON PURCHASES. The Funds reserve the right to refuse any purchase
request, particularly requests that could adversely affect a Fund or its
operations. This includes those from any individual or group who, in a Fund's
view, is likely to engage in excessive trading (usually defined as more than
four exchanges out of a Fund within a calendar year).

CANCELED OR FAILED PAYMENTS. The Funds accept checks and ACH transfers at full
value subject to collection. If your payment for shares is not received or
payment with a check or ACH transfer does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by a Fund
or the Transfer Agent, and the Fund may redeem other shares you own in the
account as reimbursement. Each Fund and its agents have the right to reject or
cancel any purchase, exchange, or redemption.

Page 20

<PAGE>

HOW TO SELL SHARES OF THE FUNDS
The Funds process redemption orders promptly. Your shares will be redeemed at
the NAV next determined after we receive your redemption request in good order.

You will generally receive redemption proceeds within a week. Delays may occur
in cases of very large redemptions, excessive trading or during unusual market
conditions. If you recently purchased your shares by check or through ACH
payment, redemption proceeds may not be available until your check has cleared
(which may take up to 15 days from your date of purchase).

By Mail. To redeem shares by mail, prepare a written request including:

o Your name(s) and signature(s)
o The name of the Fund, and your account number
o The dollar amount or number of shares you want to redeem
o How and where to send your proceeds
o A signature guarantee, if required (see "Signature Guarantee
Requirements" below)
o Any other required documentation, such as corporate resolutions or
trust documents

Mail your request and documentation to:
Millennium Funds, Inc.
P.O. Box 446
Portland, ME 04112

Or, for overnight mailings:
Millennium Funds, Inc.
2 Portland Square
Portland, ME 04101

Page 21

<PAGE>

BY WIRE. You may only request payment of your redemption proceeds by wire if you
have previously elected wire redemption privileges on your account application
or a separate form. Wire requests are only available if your redemption is for
$5,000 or more.

To request a wire redemption, mail us your request (see "By Mail"), or call us
with your request (see "By Telephone"). If you wish to make your wire request by
telephone, however, you must have previously elected telephone redemption
privileges on your account application or a separate form. Telephone redemptions
are not available for IRA accounts.

BY TELEPHONE. We accept redemption requests by telephone unless you have
declined telephone redemption privileges on your account application or a
separate form. Telephone redemptions are not available for IRA accounts.

To redeem shares by telephone, call us with your request at (800) 535-9169. You
will need to provide your account number and the exact name(s) in which the
account is registered. We may also require a password or additional forms of
identification.

Your proceeds will be mailed to you or wired to you (if you have elected wire
redemption privileges--see "By Wire" above).

Telephone redemptions are easy and convenient, but this account option involves
a risk of loss from unauthorized or fraudulent transactions. We will take
reasonable precautions to protect your account from fraud. You should do the
same by keeping your account information private and by reviewing immediately
any account statement and transaction confirmations that you receive. Neither
the Funds nor the Transfer Agent will be responsible for any losses due to
telephone fraud, so long as we have taken reasonable steps to verify the
caller's identity.

SYSTEMATIC WITHDRAWAL PLAN. If you own shares of a Fund with an aggregated value
of at least $10,000, you may make regular withdrawals from your account once a
month or once a quarter on a specified date. You also have the option of
receiving your withdrawals by check or by automatic deposit into your bank
account. Systematic withdrawals must be for at least $100.

To set up periodic withdrawals, complete the "Systematic Withdrawal Plan"
section on your account application and mail it to us with a voided check, if
applicable, for the account into which you would like the withdrawal proceeds
deposited. These payments are sent from your account to a designated bank
account by ACH payment. To redeem your shares using ACH payments, call the
Transfer Agent at (800) 535-9169 and inform them of your redemption.

Page 22

<PAGE>

REDEMPTIONS THROUGH THIRD PARTIES. If you hold shares through a broker-dealer or
other financial institution, you will have to redeem your shares through that
financial institution. The sales price of each share that you receive will be
the NAV next calculated after a Fund receives your redemption request. Consult a
representative of your financial institution for further information.

SIGNATURE GUARANTEE REQUIREMENTS. To protect you and the Funds against fraud,
signatures on certain requests must have a "signature guarantee." A signature
guarantee verifies the authenticity of your signature. You can obtain one from
most banking institutions or securities brokers, but not from a notary public.
For requests made in writing, a signature guarantee is required for any of the
following:

o Your redemption request is for $50,000 or more
o Changes to a shareholder's record name
o Redemption from an account for which the address or account registration
has changed within the last 30 days
o Sending proceeds to any person, address, brokerage firm or bank account not
on record
o Sending proceeds to an account with a different registration (name or
ownership) from yours
o Changes to telephone or wire redemption privileges and adding or changing
bank instructions

REDEMPTION FEE. Each Fund is designed for long-term investors. It is not
designed for short-term traders whose frequent purchases and redemptions can
generate substantial cash flow. These cash flows can unnecessarily disrupt a
Fund's investment program. Short-term traders often redeem when the market is
most turbulent, thereby forcing the sale of underlying securities held by a Fund
which could have a negative effect on the Fund's long-term investors.
Additionally, short-term trading drives up a Fund's transaction costs - measured
by both commissions and bid/ask spreads - which are borne by the remaining
long-term investors. Moreover, short-term sales have tax consequences that would
be borne by the remaining shareholders. For these reasons, each Fund assesses a
2.00% fee on the redemption of shares held for less than 180 days. Redemption
Fees will be paid to the Fund to help offset transaction costs.

To calculate Redemption Fees, each Fund will use the first-in, first-out (FIFO)
method to determine the holding period. Under this method, the date of the
redemption will be compared with the earliest purchase date of shares held in
the account. If this holding period is less than 180 days, a redemption fee will
be assessed. Thus, for example, shares purchased on January 1 of any year will
be subject to a 2% fee if they are redeemed before June 29 of that same year,
and shares redeemed on or after June 29 of that same year will not be subject to
any redemption fee.

Page 23

<PAGE>

INVOLUNTARY SALES OF YOUR SHARES. If the value of your account in a Fund falls
below $500 (not including IRAs), the Fund may ask you to increase your balance.
If the account value remains below $500 after 30 days, a Fund may close your
account and send you the proceeds. No redemption fee is charged under these
circumstances. The Funds will not close your account if it falls below these
amounts solely as a result of a reduction in your account's market value.

REDEMPTION IN KIND. Each Fund reserves the right to make redemptions "in kind"
if the amount requested is large enough to affect Fund operations. Redemptions
in kind are the payment of redemption proceeds in portfolio securities rather
than cash. If your shares are redeemed in kind, you will likely pay transaction
costs associated with any sale of the securities delivered to you, as well as
taxes on capital gains from any sale.

LOST ACCOUNTS. The Transfer Agent will consider your account lost if
correspondence to your address of record is returned as undeliverable, unless
the Transfer Agent determines your new address. When an account is lost, all
distributions on the account will be reinvested in additional shares of the
Fund. In addition, the amount of any outstanding (unpaid for six months or more)
checks for distributions that have been returned to the Transfer Agent will be
reinvested and the checks will be canceled.

OTHER INFORMATION
DISTRIBUTIONS.
Each Fund distributes its net investment income, if any, semi-annually. Any net
capital gain realized by a Fund will be distributed at least annually. All
distributions are reinvested in additional shares, unless you elect to receive
distributions in cash. For Federal income tax purposes, distributions are
treated the same whether they are received in cash or reinvested. Shares become
entitled to receive distributions on the day after the shares are issued.

TAXES
TAXES ON DISTRIBUTIONS. Each Fund operates in a manner such that it will not be
liable for Federal income or excise tax. Distributions of net investment income
or short-term capital gain are taxable to you as ordinary income. Distributions
of long-term capital gain are taxable to you as long-term capital gain,
regardless of how long you have held your shares. Distributions may also be
subject to state and local taxes.

Each Fund will mail reports to you containing information about the Fund's
distributions during the year after December 31 of each year. Consult your tax
advisor about the Federal, state and local tax consequences in your particular
circumstances.

Page 24

<PAGE>

TAXES ON REDEMPTIONS OF SHARES. The sale of Fund shares is a taxable transaction
for Federal income tax purposes. Your taxable gain or loss is computed by
subtracting your tax basis in the shares from the redemption proceeds. Because
your tax basis depends on the original purchase price and on the price at which
any dividends may have been reinvested, you should keep your account statement
so that you or your tax preparer will be able to determine whether a sale will
result in a taxable gain or loss.

BUYING A DIVIDEND. All distributions reduce the NAV of a Fund's shares by the
amount of the distribution. Unless your investment is in a tax-deferred account,
you may wish to avoid buying shares of the Fund shortly before a distribution.
If you do, you will pay the full pre-distribution price for your shares and
receive part of your investment back as a taxable distribution.

TAX WITHHOLDING. A Fund may be required to withhold U.S. Federal income tax at
the rate of 31 percent from all taxable distributions and from proceeds from
certain sales payable to shareholders who fail to provide the Fund with their
correct taxpayers identification number, fail to make required certifications,
or who have been notified by the IRS that they are subject to backup
withholding. Any such withheld amounts may be credited against the shareholder's
U.S. federal income tax liability.

ORGANIZATION. The Millennium Growth Fund and the Millennium Growth & Income Fund
are separate series of Millennium Funds, Inc. (the "Company"), an open-end
registered management investment company. The Company was incorporated under the
laws of the State of Maryland on February 20, 1998, as "The Millennium RHIM
Funds, Inc." On September 22, 1999, the Company's Articles of Incorporation were
amended to change the name to "Millennium Funds, Inc."

It is not intended that meetings of shareholders be held except when required by
Federal or Maryland law and all shareholders of a Fund are entitled to vote at
shareholders' meetings. From time to time, large shareholders may control a
Fund.

Page 25

<PAGE>

FINANCIAL HIGHLIGHTS
The following table is intended to help you understand the financial performance
of the Millennium Growth and the Millennium Growth & Income Funds since they
commenced operations. Total return in the table represents the rate an investor
would have earned (or lost) on an investment in the Fund (assuming the
reinvestment of all distributions). The information for the fiscal year ended
June 30, 2000 has been audited by PricewaterhouseCoopers. The financial
information for the years ended prior to June 30, 2000 has been audited by other
independent accountants. The Funds' financial statements and the auditor's
report are included in the Annual Report, which is available upon request,
without charge.

Page 26

<PAGE>

Millennium Funds, Inc.
GROWTH FUND
FINANCIAL HIGHLIGHTS
(for a fund share outstanding throughout each period)

FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 1998**
------------- ------------- ---------------

<S> <C> <C> <C>
Net asset value, beginning of period ........... $ 16.41 $ 11.78 $ 10.00

INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) ................... (0.15) (0.15) (0.07)
Net realized and unrealized gain
on investments ......................... 8.03 7.50 1.85
------------- ------------ ------------
Total from investment operations ............... 7.88 7.35 1.78
------------- ------------ ------------

LESS DISTRIBUTIONS
Dividends from net investment income ........... 0.00 0.00 0.00
Distribution from realized gains
from security transactions ............. (4.65) (2.72) 0.00
------------- ------------ ------------
Total distributions ............................ (4.65) (2.72) 0.00
------------- ------------ ------------

Net asset value, end of period ................. $ 19.64 $ 16.41 $ 11.78
============= ============ ============

Total return ................................... 55.34% 65.99% 17.80%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ........... $ 23,361 $ 8,459 $ 9,869
Ratio of expenses to average
net assets ............................. 1.45% 1.45% 1.45% *
Ratio of expenses to average
net assets, before reimbursement ....... 1.82% 3.46% 2.48% *
Ratio of net investment income (loss) to
average net assets ..................... (1.05%) (0.85%) (0.87%)*
Ratio of net investment income (loss) to
average net assets, before reimbursement (1.42%) (2.86%) (1.90%)*
Portfolio turnover rate ........................ 104.75% 984.07% 110.76%

<FN>
----------
* Annualized
** Commencement of operations was July 16, 1997.
</FN>
</TABLE>

Millennium Funds, Inc.
GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
(for a fund share outstanding throughout each period)

FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 1998**
------------- ------------- ---------------

Net asset value, beginning of period ... $ 13.83 $ 10.00 $ 10.00

Income from investment operations
Net investment income (loss) ........... (0.14) (0.06) 0.00
Net realized and unrealized gain
on investments ................. 7.19 4.12 0.00
------------- ---------- ----------
Total from investment operations ....... 7.05 4.06 0.00
------------- ---------- ----------

Less distributions
Dividends from net investment income ... 0.00 0.00 0.00
Distribution from realized gains
from security transactions ..... (3.55) (0.23) 0.00
------------- ---------- ----------
Total distributions .................... (3.55) (0.23) 0.00
------------- ---------- ----------

Net asset value, end of period ......... $ 17.33 $ 13.83 $ 10.00
=========== ========== ==========

Total return ........................... 57.04% 40.79% 0.00%

Ratios/supplemental data
Net assets, end of period (in 000's) ... $ 16,407 $ 8,781 $ 1,172
Ratio of expenses to average
net assets ..................... 1.45% 1.45% 1.45%
Ratio of expenses to average
net assets, before reimbursement 2.04% 2.24% 5.31%
Ratio of net investment income (loss)
to average net assets .......... (1.00%) (0.47%) (1.45%)
Ratio of net investment income (loss)
to average net assets, before
reimbursement .................. (1.59%) (1.26%) (5.31%)
Portfolio turnover rate ................ 128.41% 578.98% 0.00%

<FN>
----------
* Annualized
** Commencement of operations was June 26, 1998.
</FN>
</TABLE>

Page 28

<PAGE>

FOR MORE INFORMATION
The following documents are available free upon request:

ANNUAL/SEMI-ANNUAL REPORTS. Additional information about each Fund's investments
is available in the Funds' annual and semi-annual reports to shareholders. In
the annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected each Fund's performance during
its last fiscal year.

STATEMENT OF ADDITIONAL INFORMATION. The SAI provides more detailed information
about the Funds and is incorporated by reference into this Prospectus. This
means that the SAI, for legal purposes, is a part of this prospectus.

You can get free copies of both reports and the SAI, request other information
and discuss your questions about a Fund by contacting the Fund at:

Millennium Funds, Inc.
One Freedom Valley Drive
Oaks, PA 19456

Or,

(800) 535-9169

You can also review the Funds' reports and SAI by visiting the Public Reference
Room of the Securities and Exchange Commission at 450 Fifth Street, NW,
Washington, DC 20549. You may call (202) 942-8090 for the business hours of the
public reference room. You may also obtain copies, for a fee, by writing to the
Public Reference Room at this address, or by calling (800) SEC-0330.

You may also download a free, text-only version from the Commission's Internet
website at www.sec.gov.

The Millennium Funds, Inc.'s Investment Company Act file number is 811-08729.

<PAGE>

MILLENNIUM FUNDS, INC.

THE MILLENNIUM GROWTH FUND
THE MILLENNIUM GROWTH & INCOME FUND

STATEMENT OF ADDITIONAL INFORMATION

DATED NOVEMBER 1, 2000

This Statement of Additional Information ("SAI") is not a prospectus, and it
should be read in conjunction with the prospectus dated November 1, 2000, as
amended from time to time, of The Millennium Growth Fund (the "Growth Fund") and
The Millennium Growth & Income Fund (the "Growth & Income Fund") (collectively,
the "Funds"), each a series of Millennium Funds, Inc. (the "Company").

The financial statements for the Funds for the year ended June 30, 2000,
included in the Annual Report to shareholders, are incorporated into this SAI by
reference. You may obtain copies of the prospectus and Annual Report by writing
the Company at 400 Montgomery Street, San Francisco, California 94104; or by
calling (800) 535-9169.

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

Page Cross-reference to section in the
prospectus

Investment Objective and Policies Risk/Return Summaries; Investment
Objectives, Strategies and Risks

Management Management

Portfolio Transactions and Brokerage Not Applicable

Net Asset Value Your Account

Taxation Other Information

Performance Information Risk/Return Summaries Performance and
Volatility

General Information Not Applicable

Financial Statements Not Applicable

Appendix A (Description of Debt Ratings) Not Applicable

Appendix B (Miscellaneous Tables) Management

Appendix C (Performance Data) Risk/Return Summaries Performance and
Volatility

-1-
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The Company is registered as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act"). The Growth Fund and the Growth
& Income Fund are each non-diversified series of the Company. They are currently
the only series of the Company.

The investment objective of the Growth Fund is growth of capital. The investment
objective of the Growth & Income Fund is growth of capital and dividend income.
There is no assurance that either Fund will achieve its objective. The
discussion below supplements information contained in the prospectus as to
investment policies of each Fund.

CONVERTIBLE SECURITIES AND WARRANTS.
Each Fund may invest in convertible securities and warrants. A convertible
security is a fixed income security (a debt instrument or a preferred stock)
which may be converted at a stated price within a specified period of time into
a certain quantity of the common stock of the same or a different issuer.
Convertible securities are senior to common stocks in an issuer's capital
structure, but are usually subordinated to similar non-convertible securities.
While providing a fixed income stream (generally higher in yield than the income
derivable from common stock but lower than that afforded by a similar
nonconvertible security), a convertible security also gives an investor the
opportunity, through its conversion feature, to participate in the capital
appreciation of the issuing company depending upon a market price advance in the
convertible security's underlying common stock.

A warrant gives the holder a right to purchase at any time during a specified
period a predetermined number of shares of common stock at a fixed price. Unlike
convertible debt securities or preferred stock, warrants do not pay a fixed
dividend. Investments in warrants involve certain risks, including the possible
lack of a liquid market for resale of the warrants, potential price fluctuations
as a result of speculation or other factors, and failure of the price of the
underlying security to reach or have reasonable prospects of reaching a level at
which the warrant can be prudently exercised (in which event the warrant may
expire without being exercised, resulting in a loss of the Fund's entire
investment therein).

CASH POSITIONS AND DEFENSIVE STRATEGIES
At times, each Fund may employ temporary defensive strategies in response to
unfavorable economic, market, political or other conditions. At such times, a
Fund may increase its cash reserves without limit by holding high quality,
short-term debt securities and money market instruments and by entering into
repurchase agreements. These investments are inconsistent with the Funds'
primary investment strategies. As a result during these periods, a Fund may not
achieve its objective.

SHORT-TERM INVESTMENTS
Each Fund may invest in any of the following securities and instruments:

BANK CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS.
A Fund may acquire certificates of deposit, bankers' acceptances and time
deposits. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by a Fund will be
dollar-denominated obligations of domestic or foreign banks or financial
institutions which at the time of purchase have capital, surplus and undivided
profits in excess of $100 million (including assets of both domestic and foreign
branches), based on latest published reports, or less than $100 million if the
principal amount of such bank obligations are fully insured by the U.S.
Government. If a Fund holds instruments of foreign banks or financial
institutions, it may be subject to additional investment risks that are

-2-
<PAGE>

different in some respects from those incurred by a fund which invests only in
debt obligations of U.S. domestic issuers. See "Foreign Investments" below. Such
risks include future political and economic developments, the possible
imposition of withholding taxes on interest income payable on the securities by
the particular country in which the issuer is located, the possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on these securities.

Domestic banks and foreign banks are subject to different governmental
regulations with respect to the amount and types of loans which may be made and
interest rates which may be charged. In addition, the profitability of the
banking industry depends largely upon the availability and cost of funds for the
purpose of financing lending operations under prevailing money market
conditions. General economic conditions, as well as exposure to credit losses
arising from possible financial difficulties of borrowers, play an important
part in the operations of the banking industry.

As a result of federal and state laws and regulations, domestic banks are, among
other things, required to maintain specified levels of reserves, limited in the
amount which they can loan to a single borrower, and subject to other
regulations designed to promote financial soundness. However, such laws and
regulations do not necessarily apply to foreign bank obligations that a Fund may
acquire.

In addition to purchasing certificates of deposit and bankers' acceptances, to
the extent permitted under its investment objective and policies stated above
and in its prospectus, each Fund may make interest-bearing time or other
interest-bearing deposits in commercial or savings banks. Time deposits are
non-negotiable deposits maintained at a banking institution for a specified
period of time at a specified interest rate.

SAVINGS ASSOCIATION OBLIGATIONS.
Each Fund may invest in certificates of deposit (interest-bearing time deposits)
issued by savings banks or savings and loan associations that have capital,
surplus and undivided profits in excess of $100 million, based on latest
published reports, or less than $100 million if the principal amount of such
obligations is fully insured by the U.S. Government.

COMMERCIAL PAPER, SHORT-TERM NOTES AND OTHER CORPORATE OBLIGATIONS.
Each Fund may invest a portion of its assets in commercial paper and short-term
notes. Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper and short-term notes will normally have
maturities of less than nine months and fixed rates of return, although such
instruments may have maturities of up to one year.

Commercial paper and short-term notes will consist of issues rated at the time
of purchase "A-2" or higher by S&P, "Prime-1" or "Prime-2" by Moody's, or
similarly rated by another nationally recognized statistical rating organization
or, if unrated, will be determined by Millennium Capital Advisors, Inc. (the
"Advisor") to be of comparable quality. These rating symbols are described in
the Appendix attached hereto.

Corporate obligations include bonds and notes issued by corporations to finance
longer-term credit needs that could not be supported by commercial paper. While
such obligations generally have maturities of ten years or more, a Fund may
purchase corporate obligations which have remaining maturities of one year or
less from the date of purchase and which are rated "AA" or higher by S&P or "Aa"
or higher by Moody's.

-3-
<PAGE>

GOVERNMENT OBLIGATIONS.
Each Fund may make short-term investments in U.S. Government obligations. Such
obligations include Treasury bills, certificates of indebtedness, notes and
bonds, and issues of such entities as the Government National Mortgage
Association ("GNMA"), Export-Import Bank of the United States, Tennessee Valley
Authority, Resolution Funding Corporation, Farmers Home Administration, Federal
Home Loan Banks, Federal Intermediate Credit Banks, Federal Farm Credit Banks,
Federal Land Banks, Federal Housing Administration, Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation, and the Student
Loan Marketing Association.

Each of these obligations, such as those of the GNMA, are supported by the full
faith and credit of the U.S. Treasury; others, such as those of the
Export-Import Bank of United States, are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the FNMA, are supported by
the discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored instrumentalities if it is not obligated to do so
by law.

The Funds may invest in sovereign debt obligations of foreign countries. A
sovereign debtor's willingness or ability to repay principal and interest in a
timely manner may be affected by a number of factors, including its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which it may be
subject. Emerging market governments could default on their sovereign debt. Such
sovereign debtors also may be dependent on expected disbursements from foreign
governments, multilateral agencies and other entities abroad to reduce principal
and interest arrearages on their debt. The commitments on the part of these
governments, agencies and others to make such disbursements may be conditioned
on a sovereign debtor's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to meet
such conditions could result in the cancellation of such third parties'
commitments to lend funds to the sovereign debtor, which may further impair such
debtor's ability or willingness to service its debt in a timely manner.

FOREIGN INVESTMENTS AND CURRENCIES

Each Fund may invest in securities of foreign issuers, provided that they are
publicly traded in the United States.

DEPOSITARY RECEIPTS.
Depositary Receipts ("DRs") include American Depositary Receipts ("ADRs"),
European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") or
other forms of depositary receipts. DRs are receipts typically issued in
connection with a U.S. or foreign bank or trust company which evidence ownership
of underlying securities issued by a foreign corporation.

RISKS OF INVESTING IN FOREIGN AND EMERGING MARKET SECURITIES.
Investments in foreign and emerging market securities involve certain inherent
risks, including the following:

POLITICAL AND ECONOMIC FACTORS.
Individual foreign economies of certain countries may differ favorably or
unfavorably from the United States' economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency, diversification, and balance of payments position. The
internal politics of certain foreign countries may not be as stable as those of
the United States. Governments in certain foreign countries also continue to
participate to a significant degree, through ownership interest or regulation,
in their respective economies. Action by these governments could include
restrictions on foreign investment, nationalization, expropriation of goods or
imposition of taxes, and could have a significant effect on market prices of
securities and payment of interest. The economies of many foreign countries are
heavily dependent upon international trade and are accordingly affected by the
trade policies and economic conditions of their trading partners. Enactment by
these trading partners of protectionist trade legislation could have a
significant adverse effect upon the securities markets of such countries.

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CURRENCY FLUCTUATIONS.
Each Fund may invest in securities denominated in foreign currencies.
Accordingly, a change in the value of any such currency against the U.S. dollar
will result in a corresponding change in the U.S. dollar value of a Fund's
assets denominated in that currency. Such changes will also affect a Fund's
income. The value of a Fund's assets may also be affected significantly by
currency restrictions and exchange control regulations enacted from time to
time.

TAXES.
The interest and dividends payable on certain of a Fund's foreign portfolio
securities may be subject to foreign withholding taxes, thus reducing the net
amount of income available for distribution to the Fund's shareholders.

OPTIONS ON SECURITIES

PURCHASING PUT AND CALL OPTIONS.
Each Fund may purchase covered "put" and "call" options with respect to
securities which are otherwise eligible for purchase by the Fund subject to
certain restrictions. Each Fund will engage in trading of such derivative
securities exclusively for hedging purposes.

If a Fund purchases a put option, the Fund acquires the right to sell the
underlying security at a specified price at any time during the term of the
option (for "American-style" options) or on the option expiration date (for
"European-style" options). Purchasing put options may be used as a portfolio
investment strategy when the Advisor perceives significant short-term risk but
substantial long-term appreciation for the underlying security. The put option
acts as an insurance policy, as it protects against significant downward price
movement while it allows full participation in any upward movement. If a Fund is
holding a security which it feels has strong fundamentals, but for some reason
may be weak in the near term, the Fund may purchase a put option on such
security, thereby giving itself the right to sell such security at a certain
strike price throughout the term of the option. Consequently, a Fund will
exercise the put only if the price of such security falls below the strike price
of the put. The difference between the put's strike price and the market price
of the underlying security on the date a Fund exercises the put, less
transaction costs, will be the amount by which the Fund will be able to hedge
against a decline in the underlying security. If during the period of the option
the market price for the underlying security remains at or above the put's
strike price, the put will expire worthless, representing a loss of the price
the Fund paid for the put, plus transaction costs. If the price of the
underlying security increases, the profit a Fund realizes on the sale of the
security will be reduced by the premium paid for the put option less any amount
for which the put may be sold.

If a Fund purchases a call option, it acquires the right to purchase the
underlying security at a specified price at any time during the term of the
option. The purchase of a call option is a type of insurance policy to hedge
against losses that could occur if the Fund has a short position in the
underlying security and the security thereafter increases in price. Each Fund
will exercise a call option only if the price of the underlying security is
above the strike price at the time of exercise. If during the option period the
market price for the underlying security remains at or below the strike price of
the call option, the option will expire worthless, representing a loss of the
price paid for the option, plus transaction costs. If the call option has been
purchased to hedge a short position of a Fund in the underlying security and the
price of the underlying security thereafter falls, the profit the Fund realizes
on the cover of the short position in the security will be reduced by the
premium paid for the call option less any amount for which such option may be
sold.

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Prior to exercise or expiration, an option may be sold when it has remaining
value by a purchaser through a "closing sale transaction," which is accomplished
by selling an option of the same series as the option previously purchased. Each
Fund generally will purchase only those options for which the Advisor believes
there is an active secondary market to facilitate closing transactions.

WRITING CALL OPTIONS.
Each Fund may write covered call options. A call option is "covered" if a Fund
owns the security underlying the call or has an absolute right to acquire the
security without additional cash consideration (or, if additional cash
consideration is required, cash or cash equivalents in such amount as are held
in a segregated account by the Custodian). The writer of a call option receives
a premium and gives the purchaser the right to buy the security underlying the
option at the exercise price. The writer has the obligation upon exercise of the
option to deliver the underlying security against payment of the exercise price
during the option period. If the writer of an exchange-traded option wishes to
terminate his obligation, he may effect a "closing purchase transaction." This
is accomplished by buying an option of the same series as the option previously
written. A writer may not effect a closing purchase transaction after it has
been notified of the exercise of an option.

Effecting a closing transaction in the case of a written call option will permit
a Fund to write another call option on the underlying security with either a
different exercise price, expiration date or both. Also, effecting a closing
transaction will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other investments of a Fund. If
a Fund desires to sell a particular security from its portfolio on which it has
written a call option, it will effect a closing transaction prior to or
concurrent with the sale of the security.

A Fund will realize a gain from a closing transaction if the cost of the closing
transaction is less than the premium received from writing the option or if the
proceeds from the closing transaction are more than the premium paid to purchase
the option. A Fund will realize a loss from a closing transaction if the cost of
the closing transaction is more than the premium received from writing the
option or if the proceeds from the closing transaction are less than the premium
paid to purchase the option. However, because increases in the market price of a
call option will generally reflect increases in the market price of the
underlying security, any loss to a Fund resulting from the repurchase of a call
option is likely to be offset in whole or in part by appreciation of the
underlying security owned by the Fund.

RISKS OF INVESTING IN OPTIONS.
There are several risks associated with transactions in options on securities.
Options may be more volatile than the underlying securities and, therefore, on a
percentage basis, an investment in options may be subject to greater fluctuation
than an investment in the underlying securities themselves. There are also
significant differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing a given
transaction not to achieve its objective. In addition, a liquid secondary market
for particular options may be absent for reasons which include the following:
there may be insufficient trading interest in certain options; restrictions may
be imposed by an exchange on opening transactions or closing transactions or
both; trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options of underlying securities;
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; the facilities of an exchange or clearing corporation may not at all
times be adequate to handle current trading volume; or one or more exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that class
or series of options) would cease to exist, although outstanding options that
had been issued by a clearing corporation as a result of trades on that exchange
would continue to be exercisable in accordance with their terms.

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A decision as to whether, when and how to use options involves the exercise of
skill and judgment, and even a well-conceived transaction may be unsuccessful to
some degree because of market behavior or unexpected events.

DEALER OPTIONS.
Each Fund will engage in transactions involving dealer options as well as
exchange-traded options. Certain additional risks are specific to dealer
options. While a Fund might look to a clearing corporation to exercise
exchange-traded options, the Fund would need to rely on the dealer from which it
purchased a dealer option in order to exercise such an option. Failure by the
dealer to do so would result in the loss of the premium paid by a Fund as well
as loss of the expected benefit of the transaction.

Exchange-traded options generally have a continuous liquid market while dealer
options may not. Consequently, a Fund may generally be able to realize the value
of a dealer option it has purchased only by exercising or reselling the option
to the dealer who issued it. Similarly, when a Fund writes a dealer option, the
Fund may generally be able to close out the option prior to its expiration only
by entering into a closing purchase transaction with the dealer to whom the Fund
originally wrote the option. While each Fund will seek to enter into dealer
options only with dealers who will agree to and which are expected to be capable
of entering into closing transactions with the Fund, there can be no assurance
that a Fund will at any time be able to liquidate a dealer option at a favorable
price at any time prior to expiration. Unless a Fund, as a covered dealer call
option writer, is able to effect a closing purchase transaction, it will not be
able to liquidate securities (or other assets) used as cover until the option
expires or is exercised. In the event of insolvency of the other party, a Fund
may be unable to liquidate a dealer option. With respect to options written by a
Fund, the inability to enter into a closing transaction may result in material
losses to the Fund. For example, because a Fund must maintain a secured position
with respect to any call option on a security it writes, the Fund may not sell
the assets which it has segregated to secure the position while it is obligated
under the option. This requirement may impair a Fund's ability to sell portfolio
securities at a time when such sale might be advantageous.

The Staff of the Securities and Exchange Commission (the "Commission") has taken
the position that purchased dealer options are illiquid securities. Each Fund
may treat the cover used for written dealer options as liquid if the dealer
agrees that the Fund may repurchase the dealer option it has written for a
maximum price to be calculated by a predetermined formula. In such cases, the
dealer option would be considered illiquid only to the extent the maximum
purchase price under the formula exceeds the intrinsic value of the option.
Accordingly, each Fund will treat dealer options as subject to the Fund's
limitation on illiquid securities. If the Commission changes its position on the
liquidity of dealer options, each Fund will change its treatment of such
instruments accordingly.

SPREAD TRANSACTIONS.
Each Fund may purchase covered spread options from securities dealers. These
covered spread options are not presently exchange-listed or exchange-traded. The
purchase of a spread option gives a Fund the right to put securities that it
owns at a fixed dollar spread or fixed yield spread in relationship to another
security that the Fund does not own, but which is used as a benchmark. The risk
to a Fund, in addition to the risks of dealer options described above, is the
cost of the premium paid as well as any transaction costs. The purchase of
spread options will be used to protect a Fund against adverse changes in
prevailing credit quality spreads, i.e., the yield spread between high quality
and lower quality securities. This protection is provided only during the life
of the spread options.

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REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements with respect to its portfolio
securities. Pursuant to such agreements, a Fund acquires securities from
financial institutions such as banks and broker-dealers as are deemed to be
creditworthy by the Advisor, subject to the seller's agreement to repurchase and
the Fund's agreement to resell such securities at a mutually agreed upon date
and price. The repurchase price generally equals the price paid by a Fund plus
interest negotiated on the basis of current short-term rates (which may be more
or less than the rate on the underlying portfolio security). Securities subject
to repurchase agreements will be held by the Custodian or in the Federal
Reserve/Treasury Book-Entry System or an equivalent foreign system. The seller
under a repurchase agreement will be required to maintain the value of the
underlying securities at not less than 102% of the repurchase price under the
agreement. If the seller defaults on its repurchase obligation, a Fund will
suffer a loss to the extent that the proceeds from a sale of the underlying
securities are less than the repurchase price under the agreement. Bankruptcy or
insolvency of such a defaulting seller may cause a Fund's rights with respect to
such securities to be delayed or limited. Repurchase agreements are considered
to be loans under the 1940 Act.

WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED SETTLEMENTS

Each Fund may purchase securities on a "when-issued," forward commitment or
delayed settlement basis. In this event, the Custodian will set aside cash or
liquid portfolio securities equal to the amount of the commitment in a separate
account. Normally, the Custodian will set aside portfolio securities to satisfy
a purchase commitment. In such a case, a Fund may be required subsequently to
place additional assets in the separate account in order to assure that the
value of the account remains equal to the amount of the Fund's commitment. It
may be expected that a Fund's net assets will fluctuate to a greater degree when
it sets aside portfolio securities to cover such purchase commitments than when
it sets aside cash.

Each Fund does not intend to engage in these transactions for speculative
purposes but only in furtherance of its investment objective. Because a Fund
will set aside cash or liquid portfolio securities to satisfy its purchase
commitments in the manner described, the Fund's liquidity and the ability of the
Advisor to manage it may be affected in the event the Fund's forward
commitments, commitments to purchase when-issued securities and delayed
settlements ever exceeded 15% of the value of its net assets.

Each Fund will purchase securities on a when-issued, forward commitment or
delayed settlement basis only with the intention of completing the transaction.
If deemed advisable as a matter of investment strategy, however, a Fund may
dispose of or renegotiate a commitment after it is entered into, and may sell
securities it has committed to purchase before those securities are delivered to
the Fund on the settlement date. In these cases a Fund may realize a taxable
capital gain or loss. When a Fund engages in when-issued, forward commitment and
delayed settlement transactions, it relies on the other party to consummate the
trade. Failure of such party to do so may result in a Fund's incurring a loss or
missing an opportunity to obtain a price credited to be advantageous.

The market value of the securities underlying a when-issued purchase, forward
commitment to purchase securities, or a delayed settlement and any subsequent
fluctuations in their market value is taken into account when determining the
market value of a Fund starting on the day the Fund agrees to purchase the
securities. A Fund does not earn interest on the securities it has committed to
purchase until they are paid for and delivered on the settlement date.

SHORT SALES

Each Fund is authorized to make short sales of securities it owns or has the
right to acquire at no added cost through conversion or exchange of other
securities it owns (referred to as short sales "against the box") and to make
short sales of securities which it does not own or have the right to acquire.

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In a short sale that is not "against the box," a Fund sells a security which it
does not own, in anticipation of a decline in the market value of the security.
To complete the sale, a Fund must borrow the security (generally from the broker
through which the short sale is made) in order to make delivery to the buyer.
The Fund is then obligated to replace the security borrowed by purchasing it at
the market price at the time of replacement. The Fund is said to have a "short
position" in the securities sold until it delivers them to the broker. The
period during which a Fund has a short position can range from one day to more
than a year. Until the security is replaced, the proceeds of the short sale are
retained by the broker, and the Fund is required to pay to the broker a
negotiated portion of any dividends or interest which accrue during the period
of the loan. To meet current margin requirements, each Fund is also required to
deposit with the broker additional cash or securities so that the total deposit
with the broker is maintained daily at 150% of the current market value of the
securities sold short (100% of the current market value if a security is held in
the account that is convertible or exchangeable into the security sold short
within 90 days without restriction other than the payment of money).

Short sales by a Fund that are not made "against the box" create opportunities
to increase the Fund's return but, at the same time, involve specific risk
considerations and may be considered a speculative technique. Since a Fund in
effect profits from a decline in the price of the securities sold short without
the need to invest the full purchase price of the securities on the date of the
short sale, the Fund's net asset value per share will tend to increase more when
the securities it has sold short decrease in value, and to decrease more when
the securities it has sold short increase in value, than would otherwise be the
case if it had not engaged in such short sales. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any premium,
dividends or interest a Fund may be required to pay in connection with the short
sale. Furthermore, under adverse market conditions, a Fund might have difficulty
purchasing securities to meet its short sale delivery obligations, and might
have to sell portfolio securities to raise the capital necessary to meet its
short sale obligations at a time when fundamental investment considerations
would not favor such sales.

If a Fund makes a short sale "against the box," the Fund would not immediately
deliver the securities sold and would not receive the proceeds from the sale.
The seller is said to have a short position in the securities sold until it
delivers the securities sold, at which time it receives the proceeds of the
sale. To secure its obligation to deliver securities sold short, a Fund will
deposit in escrow in a separate account with the Custodian an equal amount of
the securities sold short or securities convertible into or exchangeable for
such securities. A Fund can close out its short position by purchasing and
delivering an equal amount of the securities sold short, rather than by
delivering securities already held by the Fund, because the Fund might want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short.

A Fund's decision to make a short sale "against the box" may be a technique to
hedge against market risks when the Advisor believes that the price of a
security may decline, causing a decline in the value of a security owned by the
Fund or a security convertible into or exchangeable for such security. In such
case, any future losses in the Fund's long position would be reduced by a gain
in the short position. The extent to which such gains or losses in the long
position are reduced will depend upon the amount of securities sold short
relative to the amount of the securities a Fund owns, either directly or
indirectly, and, in the case where the Fund owns convertible securities, changes
in the investment values or conversion premiums of such securities.

BORROWING MONEY.
Each Fund may borrow money from banks as a temporary measure for emergency
purposes, to facilitate redemption requests, or for "leverage", in order to
facilitate the possible purchase of additional securities. Each Fund may borrow
up to one-third of its total assets. The use of leverage involves special risk
considerations that may not be associated with other funds having similar
objectives and policies. Because substantially all of each Fund's assets
fluctuate in value, whereas the interest obligation resulting from a borrowing
is generally fixed, the net asset value per share of each Fund tends to decrease
more when its portfolio assets decrease in value than would otherwise occur if
the Fund did not borrow funds. Interest costs on borrowings, however, may
fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds. Under adverse market conditions, a
Fund might have to sell portfolio securities to meet interest or principal
payments at a time when fundamental investment considerations would not favor
such sales.

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SECURITIES LOANS.

Each Fund may make secured loans of its portfolio securities, on either a
short-term or long-term basis, amounting to not more than 33 1/3% of its total
assets, thereby realizing additional income. The risks in lending portfolio
securities, as with other extensions of credit, consist of possible delay in
recovery of the securities or possible loss rights in the collateral should the
borrower fail financially. As a matter of policy, securities loans are made to
broker-dealers pursuant to agreements requiring that the loans be continuously
secured by collateral consisting of cash or short-term debt obligations at least
equal at all times to the value of the securities on loan, "marked-to-market"
daily. The borrower pays to a lender-Fund an amount equal to any dividends or
interest received on securities lent. Each Fund retains all or a portion of the
interest received on the collateral or receives a fee from the borrower.
Although voting rights, or rights to consent, with respect to the loaned
securities may pass to the borrower, each Fund retains the right to call the
loans at any time on reasonable notice, and it will do so to enable that Fund to
exercise voting rights on any matters materially affecting the investment. The
Funds may also call such loans in order to sell the securities.

RISKS OF INVESTING IN SMALL COMPANIES

As stated in the prospectus, each Fund may purchase securities of companies with
market capitalization below $500 million. Additional risks of such investments
include the markets on which such securities are frequently traded. In many
instances the securities of smaller companies are traded only over-the-counter
or on a regional securities exchange, and the frequency and volume of their
trading is substantially less than is typical of larger companies. Therefore,
the securities of smaller companies may be subject to greater and more abrupt
price fluctuations.

Small companies often have limited product lines, markets, or financial
resources, and their management may lack depth and experience. Such companies
usually do not pay significant dividends that could cushion returns in a falling
market. In addition, certain small companies in which a Fund may invest, such as
those engaged in the technology sector, are increasingly sensitive to short
product cycles and aggressive pricing caused by the competitive pressures of
advancing technology and the growing number of companies and product offerings.
To the extent that either Fund invests in small capitalization stocks, there is
the risk that its portfolio will be less marketable than a portfolio holding
stocks of larger issuers. Small capitalization stocks often pay no dividends.

When making large sales, a Fund may have to sell portfolio holdings at discounts
from quoted prices or may have to make a series of small sales over an extended
period of time due to the trading volume of smaller company securities.
Investors should be aware that, based on the foregoing factors, an investment in
each Fund may be subject to greater price fluctuations than an investment in a
fund that invests exclusively in larger, more established companies. The
Advisor's research efforts may also play a greater role in selecting securities
for each Fund than in a fund that invests in larger, more established companies.

INITIAL PUBLIC OFFERINGS.

During 1999, the Funds each participated in initial public offerings ("IPOs"),
many of which were successful. As a result, these IPOs had a significant impact
on the Fund's performance. There is no guarantee that there will be as many
successful IPOs in the future, or that the Funds will continue to have access to
successful IPOs. In addition, as Fund assets grow, the positive impact of
successful IPOs on Fund performance will decrease.

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VENTURE CAPITAL/PRIVATE PLACEMENTS

Companies in which a Fund invests on a private basis ("venture capital
investment companies") may not be able to successfully market or commercialize
their technology, products or business concepts. This presents significant risk.
Additionally, although some venture capital investment companies may already
have a commercially successful product when a Fund invests, information
technology products and services often have a more limited market or life span
than products in other industries. Thus, the ultimate success of these companies
often depends on their ability to continually innovate in increasingly
competitive markets. Their inability to do so could affect a Fund's investment
returns.

ILLIQUID SECURITIES

Each Fund may not invest more than 15% of the value of its net assets in
securities that at the time of purchase have legal or contractual restrictions
on resale or are otherwise illiquid. The Advisor will monitor the amount of
illiquid securities in each Fund's portfolio, under the supervision of the
Company's Board of Directors, to ensure compliance with the Fund's investment
restrictions.

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 (the "Securities Act"), securities
which are otherwise not readily marketable, and repurchase agreements having a
maturity of longer than seven days. Securities which have not been registered
under the Securities Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and a Fund might be unable
to dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemption requests
within seven days. A Fund might also have to register such restricted securities
in order to dispose of them, resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.

In recent years, however, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the Commission under the Securities
Act, the Company's Board of Directors may determine that such securities are not
illiquid securities notwithstanding their legal or contractual restrictions on
resale. In all other cases, however, securities subject to restrictions on
resale will be deemed illiquid.

INVESTMENT RESTRICTIONS

The Company (on behalf of each Fund) has adopted the following restrictions as
fundamental policies, which may not be changed without the favorable vote of the
holders of a "majority," as defined in the 1940 Act, of the outstanding voting
securities of a Fund. Under the 1940 Act, the "vote of the holders of a majority
of the outstanding voting securities" means the vote of the holders of the
lesser of (i) 67% of the shares of a Fund represented at a meeting at which the
holders of more than 50% of its outstanding shares are represented or (ii) more
than 50% of the outstanding shares of a Fund.

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As a matter of fundamental policy, each Fund is non-diversified. Each Fund's
investment objective is also fundamental.

In addition, each Fund may not:

1. Issue senior securities, borrow money or pledge its assets, except
that (i) a Fund may borrow from banks in amounts not exceeding one-third of its
total assets (including the amount borrowed); and (ii) this restriction shall
not prohibit a Fund from engaging in options transactions or short sales;

2. Purchase securities on margin, except such short-term credits as may
be necessary for the clearance of transactions and except that a Fund may borrow
money from banks to purchase securities;

3. Act as underwriter (except to the extent a Fund may be deemed to be
an underwriter in connection with the sale of securities in its investment
portfolio);

4. Invest 25% or more of its total assets, calculated at the time of
purchase and taken at market value, in any one industry (other than U.S.
Government securities);

5. Purchase or sell real estate or interests in real estate or real
estate limited partnerships (although a Fund may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate);

6. Purchase or sell commodities or commodity futures contracts, except
that a Fund may purchase and sell foreign currency contracts in accordance with
any rules of the Commodity Futures Trading Commission;

7. Make loans of money (except for purchases of debt securities
consistent with the investment policies of a Fund and except for repurchase
agreements); or

8. Make investments for the purpose of exercising control or
management.

Each Fund also observes the following restrictions as a matter of
operating but not fundamental policy, pursuant to positions taken by federal
regulatory authorities:

Each Fund may not:

1. Invest in the securities of other investment companies or purchase
any other investment company's voting securities or make any other investment in
other investment companies except to the extent permitted by federal law; or

2. Invest more than 15% of its assets in securities which are
restricted as to disposition or otherwise are illiquid or have no readily
available market (except for securities which are determined by the Board of
Directors to be liquid).

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MANAGEMENT

The overall management of the business and affairs of the Company is vested with
its Board of Directors (the "Board"). The Board approves all significant
agreements between the Company and persons or companies furnishing services to
it, including the agreements with the Advisor, Administrator, Custodian and
Transfer Agent. The day to day operations of the Company are delegated to its
officers, subject to each Fund's investment objective and policies and to
general supervision by the Board of Directors.

The Directors and officers of the Company their ages and positions with the
Company, their business addresses and principal occupations during the past five
years are:

PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE POSITION DURING PAST FIVE YEARS
--------------------- -------- ----------------------

Robert A. Dowlett* Director President, Millennium Capital Advisors,
400 Montgomery Street Inc. since 1995. Prior thereto,
San Francisco, CA 94104 financial consultant and portfolio
Age 32 manager with Smith Barney Inc.

D. Ian Hopper Director Chief Software Architect, Northern
930 East Evelyn Avenue Telecom since 1982.
Sunnyvale, CA 94086
Age 39

Mark T. Mortarotti Director Support Engineer, Hewlett Packard Co.
7409 Rollingdell Drive since 1986; Member of Mortarotti
Cupertino, CA 95014-5812 Investment Co. since 1980
Age
-----

Glenn Pierce Director Quality Consultant, Hewlett Packard Co.
315 Zephyr Ranch Drive since 1997; Order Administration
Sacramento, CA 95831 Manager, Hewlett Packard Co., 1995-
Age 1997; Operations Support Manager,
----- Hewlett Packard Co., 1985-1995.

COMPENSATION OF DISINTERESTED DIRECTORS

NAME AND POSITION AGGREGATE COMPENSATION FROM THE COMPANY**
------------------ ---------------------------------------

Robert A. Dowlett* $0
D. Ian Hopper, Director $1400
Mark T. Mortarotti $0
Glenn Pierce $0

--------------------------
*Denotes a Director who is an "interested person" of the Company under the 1940
Act.

**Each of the disinterested directors receives $1000 per year plus $100 for each
meeting attended. The company has no pension or retirement plan. No other entity
affiliated with the Company pays any compensation to the Directors.

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<PAGE>

THE ADVISOR

SERVICES OF ADVISOR

Subject to the supervision of the Board of Directors, investment management and
related services for each Fund are provided by the Advisor, pursuant to an
Investment Advisory Agreement (the "Advisory Agreement") entered into between
the Advisor and the Company, on behalf of each Fund.

Under each Advisory Agreement, the Advisor agrees to invest the assets of each
Fund in accordance with the investment objective, policies and restrictions of
such Fund as set forth in the Fund's and Company's governing documents,
including, without limitation, the Company's Article of Incorporation and
By-Laws; each Fund's prospectus, statement of additional information, and
undertakings; and such other limitations, policies and procedures as the
Directors of the Company may impose from time to time in writing to the Advisor.
In providing such services, the Advisor shall at all times adhere to the
provisions and restrictions contained in the federal securities laws, applicable
state securities laws, the Code, and other applicable law.

Without limiting the generality of the foregoing, the Advisor has agreed to (i)
furnish each Fund with advice and recommendations with respect to the investment
of the Fund's assets, (ii) effect the purchase and sale of portfolio securities;
(iii) manage and oversee the investments of each Fund, subject to the ultimate
supervision and direction of the Company's Board of Directors; (iv) vote proxies
and take other actions with respect to each Fund's securities; (v) maintain the
books and records required to be maintained with respect to the securities in
each Fund's portfolio; (vi) furnish reports, statements and other data on
securities, economic conditions and other matters related to the investment of
each Fund's assets which the Directors or the officers of the Company may
reasonably request; and (vi) render to the Company's Board of Directors such
periodic and special reports as the Board may reasonably request.

COMPENSATION
As compensation for the Advisor's services, each Fund pays it an advisory fee at
the rate specified in the prospectus. The Adviser's fee is calculated as a
percentage of the applicable Fund's average net assets. The fee is accrued daily
by the Funds and is paid monthly based on average net assets for the previous
month.

The Advisor has agreed, at its own expense, to maintain such staff and employ or
retain such personnel and consult with such other persons as it shall from time
to time determine to be necessary to the performance of its obligations under
each Advisory Agreement. Personnel of the Advisor may serve as officers of the
Company provided they do so without compensation from the Company. Without
limiting the generality of the foregoing, the staff and personnel of the Advisor
shall be deemed to include persons employed or retained by the Advisor to
furnish statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Advisor or the Company's Board of Directors may desire and reasonably
request. With respect to the operation of each Fund, the Advisor has agreed to
be responsible for the expenses of printing and distributing extra copies of the
Fund's prospectus, statement of additional information, and sales and
advertising materials (but not the legal, auditing or accounting fees attendant
thereto) to prospective investors (but not to existing shareholders); and the
costs of any special Board of Directors meetings or shareholder meetings
convened for the primary benefit of the Advisor.

Table 1 in Appendix B shows the dollar amount of the fees payable by the Company
to the Adviser, the amount of the fee waived by the Adviser and the actual fee
received by the Adviser. The data is for the past three fiscal years or shorter
period if a Fund has been in operation for a shorter period.

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<PAGE>

EXPENSE LIMITATIONS
In addition to the fees payable to the Advisor and the Administrator, the
Company is responsible for its operating expenses, including: fees and expenses
incurred in connection with the issuance, registration and transfer of its
shares; brokerage and commission expenses; all expenses of transfer, receipt,
safekeeping, servicing and accounting for the cash, securities and other
property of the Company for the benefit of each Fund including all fees and
expenses of its custodian, shareholder services agent and accounting services
agent; interest charges on any borrowings; costs and expenses of pricing and
calculating its daily net asset value and of maintaining its books of account
required under the 1940 Act; taxes, if any; a pro rata portion of expenditures
in connection with meetings of each Fund's shareholders and the Company's Board
of Directors that are properly payable by a Fund; salaries and expenses of
officers and fees and expenses of members of the Company's Board of Directors or
members of any advisory board or committee who are not members of, affiliated
with or interested persons of the Advisor or Administrator; insurance premiums
on property or personnel of each Fund which insure to its benefit, including
liability and fidelity bond insurance; the cost of preparing and printing
reports, proxy statements, prospectuses and statements of additional information
of each Fund or other communications for distribution to existing shareholders;
legal, auditing and accounting fees; trade association dues; fees and expenses
(including legal fees) of registering and maintaining registration of its shares
for sale under federal and applicable state and foreign securities laws; all
expenses of maintaining and servicing shareholder accounts, including all
charges for transfer, shareholder recordkeeping, dividend disbursing,
redemption, and other agents for the benefit of each Fund, if any; and all other
charges and costs of its operation plus any extraordinary and non-recurring
expenses, except as otherwise prescribed in each Advisory Agreement.

CONTRACTUAL WAIVER AGREEMENT
The Advisor has entered into a contractual waiver agreement with the Company,
pursuant to which the Advisor has agreed to waive or limit its fees. In
connection with this agreement, the Advisor will assume other expenses so that
the total annual ordinary operating expenses of the Funds (which excludes
interest, taxes, brokerage commissions, extraordinary expenses such as
litigation, other expenses not incurred in the ordinary course of each fund's
business, and expenses of any counsel or other persons or services retained by
the Company's directors who are not "interested persons" (as defined in the 1940
Act) of the Advisor) do not exceed:

FUND
----
Growth Fund 2.50%
Growth & Income Fund 2.50%

Each Fund will, at a later date, reimburse the Advisor for management fees
waived and other expenses assumed by the Advisor during the previous three
years, but only if, after such reimbursement, the Fund's expense ratio does not
exceed the percentage described above. The Advisor will only be reimbursed for
fees waived or expenses assumed after the effective date of the expense
limitation agreement.

The contractual waiver agreement provides that these expense limitations shall
continue through October 31, 2001. Thereafter, and on an annual basis
thereafter, the agreement will require Board approval of its continuance unless
the Advisor provides written notice to the Company of its intent to terminate
the agreement at least 30 days prior to the end of the then-current term. In
addition, the agreement will terminate automatically upon termination of the
Advisory Agreement, or it may be terminated by the Company, without payment of
any penalty, upon 90 days' prior written notice to the Advisor at its principal
place of business.

OWNERSHIP OF ADVISOR/AFFILIATIONS
Robert A. Dowlett owns 100% of, and controls, the Advisor. Mr. Dowlett acts as
portfolio manager to the Funds and for private accounts. Through the Advisor's
affiliate, Ridgeway Helms Securities Corporation, he also provides brokerage
services for individuals and institutions. Mr. Dowlett is the only director or
officer of the Company that is employed by the Advisor or its affiliate,
Ridgeway Helms Securities Corporation.

-15-
<PAGE>

OTHER PROVISIONS OF ADVISOR'S AGREEMENT
Under each Advisory Agreement, the Advisor will not be liable to the Company or
a Fund or any shareholder for any act or omission in the course of, or connected
with, rendering services or for any loss sustained by the Company except in the
case of a breach of fiduciary duty with respect to the receipt of compensation
for services (in which case any award of damages will be limited as provided in
the 1940 Act) or of willful misfeasance, bad faith or gross negligence, or
reckless disregard of its obligations and duties under the Agreement.

Each Advisory Agreement will initially remain in effect for a period not to
exceed two years. Thereafter, if not terminated, each Advisory Agreement will
continue automatically for successive annual periods, provided that such
continuance is specifically approved at least annually (i) by a majority vote of
the Independent Directors cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Board of Directors or by vote of a
majority of the outstanding voting securities of each Fund.

Each Advisory Agreement is terminable by vote of the Board of Directors or by
the holders of a majority of the outstanding voting securities of a Fund at any
time without penalty, on 60 days written notice to the Advisor. Each Advisory
Agreement also may be terminated by the Advisor on 60 days written notice to the
Company. Each Advisory Agreement terminates automatically upon its assignment
(as defined in the 1940 Act).

THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments Company ("SEI" Investments'), and the Company are parties to
a distribution agreement (the "Distribution Agreement") with respect to shares
of the Funds. The Distributor receives no compensation for distribution of
shares of the Funds.

The Distribution Agreement shall remain in effect for a period of two years
after the effective date of the agreement and is renewable annually. The
Distribution Agreement may be terminated by the Distributor, by a majority vote
of the Directors who are not interested persons and have no financial interest
in the Distribution Agreement or by a majority vote of the outstanding
securities of the Company upon not more than 60 days' written notice by either
party or upon assignment by the Distributor.

THE ADMINISTRATOR
The Company and SEI Investments Mutual Funds Services (the "Administrator") have
entered into an administration agreement (the "Administration Agreement"). The
Administration Agreement provides that the Administrator shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Company
in connection with the matters to which the Administration Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Administrator in the performance of its duties or from
reckless disregard by it of its duties and obligations thereunder. The
Administration Agreement shall remain in effect for a period of five (5) years
after the effective date of the agreement and shall continue in effect for
successive periods of five (5) years unless terminated by either party on not
less than 90 days' prior written notice to the other party.

-16-
<PAGE>

The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a
wholly owned subsidiary of SEI Investments, is the owner of all beneficial
interest in the Administrator. SEI Investments and its subsidiaries and
affiliates, including the Administrator, are leading providers of funds
evaluation services, trust accounting systems, and brokerage and information
services to financial institutions, institutional investors, and money managers.
The Administrator and its affiliates also serve as administrator or
sub-administrator to the following other mutual funds including, but without
limitation: The Achievement Funds Trust, The Advisors' Inner Circle Fund, Alpha
Select Funds, Amerindo Funds Inc., The Arbor Fund, ARK Funds, Armada Funds, The
Armada Advantage Fund, Bishop Street Funds, CNI Charter Funds, CUFUND, The
Expedition Funds, First American Funds, Inc., First American Investment Funds,
Inc., First American Strategy Funds, Inc., First Omaha Funds, Inc., Friends
Ivory Funds, HighMark Funds, Huntington Funds, Huntington VA Funds, The Nevis
Fund, Inc., Oak Associates Funds, The PBHG Funds, Inc., PBHG Insurance Series
Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, Pitcairn Funds, SEI
Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI
Institutional Investments Trust, SEI Institutional Managed Trust, SEI Insurance
Products Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Funds,
STI Classic Variable Trust, TIP Funds, UAM Funds Trust, UAM Funds, Inc. and UAM
Funds, Inc. II.

TRANSFER AGENT
As transfer agent and dividend disbursing agent, pursuant to an agreement with
the Company, Forum Shareholder Services, LLC ("FSS") 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. FSS
is registered as a transfer agent with the SEC. FSS's account maintenance fees
are included in the fees paid under its Administrative Services agreements with
the Company. Under its Transfer Agency and Services agreement with the Company,
FSS receives certain transaction fees and charges for certain additional
services rendered to the Fund. FSS is also entitled to reimbursement for its
out-of-pocket expenses and compensation for certain reports that it may from
time to time prepare for the Company.

The agreement between the Company and FSS is terminable without penalty by the
Company or by FSS with respect to a Fund on 90 days' written notice. Under the
agreement, FSS 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 negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under the
agreement.

CUSTODIAN
As custodian, pursuant to an agreement with the Company, Union Bank of
California, 475 Sansome Street, San Francisco, California 94111, 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.

LEGAL COUNSEL
Legal matters in connection with the issuance of shares of the Company are
passed upon by Spitzer & Feldman P.C. Spitzer & Feldman P.C. has relied upon the
opinion of Venable Baetjer and Howard LLP, for matters relating to Maryland law.

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP have been selected as independent accountants for
each Fund. The independent accountants audit the annual financial statements of
the Funds and provide the Funds with an audit opinion. The independent
accountants also review certain regulatory filings of the Funds and the Funds'
tax returns.

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<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

HOW SECURITIES ARE PURCHASED AND SOLD
Each Advisory Agreement states that the Advisor shall be responsible for
broker-dealer selection and for negotiation of brokerage commission rates,
provided that the Advisor shall not direct orders to an affiliated person of the
Advisor without general prior authorization to use such affiliated broker or
dealer by the Company's Board of Directors. In all portfolio transactions on
behalf of a Fund, the Advisor seeks "best execution," i.e. that the broker or
dealer is able to execute the order promptly and at the best obtainable
securities price. In selecting a broker-dealer to execute each particular
transaction, the Advisor may also consider: the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of each Fund on a continuing basis.

The Advisor is further authorized to allocate the orders placed by it on behalf
of a Fund to such brokers or dealers who also provide research or statistical
material, or other services, to the Company, the Advisor, or any affiliate of
either. Such allocation shall be in such amounts and proportions as the Advisor
shall determine, and the Advisor shall report on such allocations regularly to
the Board of Directors of the Company, indicating the broker-dealers to whom
such allocations have been made and the basis therefore. The Advisor may also
consider sales of shares of a Fund as a factor in the selection of brokers or
dealers to execute portfolio transactions, subject to the requirements of best
execution, i.e., that such brokers or dealers are able to execute the order
promptly and at the best obtainable securities price. In addition, the Board has
authorized the Advisor to enter into agreements with brokers or dealers pursuant
to which the Advisor may direct brokerage transactions to brokers or dealers
that will provide or pay for other services for the Funds.

On occasions when the Advisor deems the purchase or sale of a security to be in
the best interest of a Fund as well as other clients of the Advisor, the Advisor
to the extent permitted by applicable laws and regulations, may aggregate the
securities to be so purchased or sold in order to obtain the most favorable
price or lower brokerage commissions and the most efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Advisor in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to a Fund and to such other clients.

COMMISSIONS PAID
Table 3 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. 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.

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.
Following is a list of the regular brokers and dealers of each Fund whose
securities (or the securities of the parent company) were acquired during the
past fiscal year and the aggregate value of the Funds' holdings of those
securities as of the Funds' most recent fiscal year.

NAME OF FUND REGULAR BROKER OR DEALER VALUE OF SECURITIES HELD
------------ ------------------------ ------------------------

None

NET ASSET VALUE
The net asset value of each Fund's shares will fluctuate and is determined as of
the close of trading on the New York Stock Exchange (the "NYSE") (currently 4:00
p.m. Eastern time) each business day. The NYSE annually announces the days on
which it will not be open for trading. The most recent announcement indicates
that it will not be open on the following days: New Year's Day, Dr. Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. However, the NYSE may close
on days not included in that announcement.

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<PAGE>

The net asset value per share is computed by dividing the value of the
securities held by a Fund plus any cash or other assets (including interest and
dividends accrued but not yet received) minus all liabilities (including accrued
expenses) by the total number of shares in the Fund outstanding at such time.

Generally, each Fund's investments are valued at market value or, in the absence
of a market value, at fair value as determined in good faith by the Advisor
pursuant to procedures approved by or under the direction of the Board.

Each Fund's securities, including ADRs, EDRs and GDRs, which are traded on
securities exchanges are valued at the last sale price on the exchange on which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any reported sales, at the mean between
the last available bid and asked price. Securities that are traded on more than
one exchange are valued on the exchange determined by the Advisor to be the
primary market. Securities traded in the over-the-counter market are valued at
the mean between the last available bid and asked price prior to the time of
valuation. Securities and assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Board.

Short-term debt obligations with remaining maturities in excess of 60 days are
valued at current market prices, as discussed above. Short-term securities with
60 days or less remaining to maturity are, unless conditions indicate otherwise,
amortized to maturity based on their cost to each Fund if acquired within 60
days of maturity or, if already held by the Fund on the 60th day, based on the
value determined on the 61st day.

An option that is written by a Fund is generally valued at the last sale price
or, in the absence of the last sale price, the last offer price. An option that
is purchased by a Fund is generally valued at the last sale price or, in the
absence of the last sale price, the last bid price. If an options exchange
closes after the time at which a Fund's net asset value is calculated, the last
sale or last bid and asked prices as of that time will be used to calculate the
net asset value.

All other assets of a Fund are valued in such manner as the Board in good faith
deems appropriate to reflect their fair value.

TAXATION
Each Fund intends to qualify to be treated as a regulated investment company
("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). To qualify as a RIC, a Fund must distribute to shareholders at least
90% of its investment company taxable income (which includes, among other items,
dividends, taxable interest and the excess of net short-term capital gains over
net long-term capital losses), and meet certain diversification of assets,
source of income, and other requirements of the Code. By meeting these
requirements, a Fund generally will not be subject to Federal income tax on its
investment company taxable income and net capital gains (the excess of net
long-term capital gains over net short-term capital losses) designated by the
Fund as capital gain dividends and distributed to shareholders. If a Fund does
not meet all of these Code requirements, it will be taxed as an ordinary
corporation and its distributions will be taxed to shareholders as ordinary
income. In determining the amount of capital gains to be distributed, any
capital loss carryover from prior years will be applied against capital gains to
reduce the amount of distributions paid. In addition, any losses incurred in the
taxable year subsequent to October 31 will be deferred to the next taxable year
and used to reduce distributions in the subsequent year.

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<PAGE>

In order to qualify for treatment as a RIC, a Fund must distribute annually to
shareholders at least 90% of its investment company taxable income and must meet
several additional requirements. Among these requirements are, in general, the
following: (1) at least 90% of a Fund's gross income each taxable year must be
derived from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of securities or foreign currencies, or
other income derived with respect to its business of investing in securities or
currencies; (2) at the close of each quarter of a Fund's taxable year, at least
50% of the value of its total assets must be represented by cash and cash items,
U.S. Government securities, securities of other RICs and other securities,
limited in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Fund's assets and that does not represent more than 10% of the
outstanding voting securities of such issuer; and (3) at the close of each
quarter of a Fund's taxable year, not more than 25% of the value of its assets
may be invested in securities (other than U.S. Government securities or the
securities of other RICs) of any one issuer.

Amounts, other than tax-exempt interest, not distributed on a timely basis in
accordance with a calendar year distribution requirement may be subject to a
nondeductible 4% excise tax. To prevent imposition of the excise tax, each Fund
must distribute for the calendar year an amount equal to the sum of (1) at least
98% of its ordinary income (excluding any capital gains or losses) for the
calendar year, (2) at least 98% of the excess of its capital gains over capital
losses (adjusted for certain ordinary losses) for the one-year period ending
October 31 of such year, and (3) all ordinary income and capital gain net income
(adjusted for certain ordinary losses) for previous years that were not
distributed during such years. A distribution will be treated as paid on
December 31 of a calendar year if it is declared by a Fund during October,
November or December of that year to shareholders of record on a date in such a
month and paid by the Fund during January of the following year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.

Under the Code, dividends derived from interest, and any short-term capital
gains, are taxable to shareholders as ordinary income for federal and state tax
purposes, regardless of whether such dividends are taken in cash or reinvested
in additional shares. Distributions made from the Fund's net realized long-term
capital gains (if any) and designated as capital gain dividends are taxable to
shareholders as long-term capital gains, regardless of the length of time Fund
shares are held. Corporate investors are not eligible for the dividends-received
deduction with respect to distributions derived from interest on short or
long-term capital gains from the Fund but may be entitled to such a deduction in
respect to distributions attributable to dividends received by the Fund. A
distribution will be treated as paid on December 31st of a calendar year if it
is declared by the Fund in October, November or December of the year with a
record date in such a month and paid by the Fund during January of the following
year. Such distributions will be taxable to shareholders in the calendar year
the distributions are declared, rather than the calendar year in which the
distributions are received.

Distributions paid by the Fund from net long-term capital gains (excess of
long-term capital gains over long-term capital losses), if any, whether received
in cash or reinvested in additional shares, are taxable as long-term capital
gains, regardless of the length of time you have owned shares in the Fund.
Distributions paid by the Fund from net short-term capital gains (excess of
short-term capital gains over short-term capital losses), if any, whether
received in cash or reinvested in additional shares are taxable as ordinary
income. Capital gains distributions are made when the Fund realizes net capital
gains on sales of portfolio securities during the year.

A sale of the Fund's shares is a taxable event and may result in a capital gain
or loss. A capital gain or loss may be realized from an ordinary redemption of
shares, a checkwriting redemption, or an exchange of shares between two mutual
funds (or two portfolios of a mutual fund).

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<PAGE>

Dividend distributions, capital gains distributions, and capital gains or losses
from redemptions and exchanges may be subject to state and local taxes.

Certain of the options, futures, contracts, and forward foreign currency
exchange contracts in which a Fund may invest are so-called "section 1256
contracts". With certain exceptions, realized gains or losses on section 1256
contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"). Also, section 1256 contracts held by a Fund at the
end of each taxable year (and, generally, for purposes of the 4% excise tax, on
October 31 of each year) are "marked-to-market" with the result that unrealized
gains or losses are treated as though they were realized and the resulting gain
or loss is treated as 60/40 gain or loss. Investors should consult their own tax
advisors in this regard.

Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by a Fund. In addition, losses realized
by a Fund on a position that is part of a straddle may be deferred under the
straddle rules, rather than being taken into account in calculating the taxable
income for the taxable year in which such losses are realized. Because only a
few regulations implementing the straddle rules have been promulgated, the tax
consequences to a Fund of hedging transactions are not entirely clear. The
hedging transactions may increase the amount of short-term capital gain realized
by a Fund which is taxed as ordinary income when distributed to stockholders.

A Fund may make one or more of the elections available under the Code which are
applicable to straddles. If a Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.

Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders, and will be taxed to shareholders as ordinary income or long-term
capital gain, may be increased or decreased substantially as compared to a Fund
that did not engage in such hedging transactions.

Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time a Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain forward contracts, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of
the security or contract and the date of disposition also are treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"section 988" gains or losses, may increase, decrease, or eliminate the amount
of a Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.

Income received by a Fund from sources within foreign countries may be subject
to withholding and other similar income taxes imposed by the foreign country.

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<PAGE>

Generally, a credit for foreign taxes is available but is subject to the
limitation that it may not exceed the shareholder's U.S. tax attributable to his
or her total foreign source taxable income. For this purpose, if Fund qualifies
as a regulated investment company, the source of the Fund's income flows through
to its shareholders. With respect to a Fund, gains from the sale of securities
will be treated as derived from U.S. sources and certain currency fluctuation
gains, including fluctuation gains from foreign currency-denominated debt
securities, receivables and payable, will be treated as ordinary income derived
from U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income (as defined for purposes of the
foreign tax credit) including foreign source passive income of a Fund. The
foreign tax credit may offset only 90% of the alternative minimum tax imposed on
corporations and individuals, and foreign taxes generally may not be deducted in
computing alternative minimum taxable income.

Each Fund is required to report to the Internal Revenue Service ("IRS") all
distributions to shareholders except in the case of certain exempt shareholders.
All such distributions generally are subject to withholding of Federal income
tax at a rate of 31% ("backup withholding") in the case of non-exempt
shareholders if (1) the shareholder fails to furnish the Fund with and to
certify the shareholder's correct taxpayer identification number or social
security number, (2) the IRS notifies the Fund or a shareholder that the
shareholder has failed to report properly certain interest and dividend income
to the IRS and to respond to notices to that effect, or (3) when required to do
so, the shareholder fails to certify that he is not subject to backup
withholding. If the withholding provisions are applicable, any such
distributions whether reinvest in addition shares or taken in cash, will be
reduced by the amounts required to be withheld.

The foregoing discussion relates only to Federal income tax law as applicable to
U.S. persons (i.e., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). Distributions by a Fund also may be subject
to state and local taxes and their treatment under state and local income tax
laws may differ from the Federal income tax treatment. Shareholders should
consult their tax advisors with respect to particular questions of Federal,
state and local taxation. Shareholders who are not U.S. persons should consult
their tax advisors regarding U.S. and foreign tax consequences of ownership of
shares of a Fund, including the likelihood that distributions to them would be
subject to withholding of U.S. tax at a rate of 30% (or at a lower rate under a
tax treaty).

PERFORMANCE INFORMATION

PERFORMANCE CALCULATIONS

TOTAL RETURN
Average annual total return quotations used in each Fund's advertising and
promotional materials are calculated according to the following formula:
n
P(1 + T) = ERV

where "P" equals a hypothetical initial payment of $1000; "T"
equals average annual total return; "n" equals the number of
years; and "ERV" equals the ending redeemable value at the end
of the period of a hypothetical $1000 payment made at the
beginning of the period.

Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication. Average annual total
return, or "T" in the above formula, is computed by finding the average annual
compounded rates of return over the period that would equate the initial amount
invested to the ending redeemable value. Average annual total return assumes the
reinvestment of all dividends and distributions.

-22-
<PAGE>

YIELD
Annualized yield quotations used in each Fund's advertising and promotional
materials are calculated by dividing the Fund's investment income for a
specified thirty-day period, net of expenses, by the average number of shares
outstanding during the period, and expressing the result as an annualized
percentage (assuming semi-annual compounding) of the net asset value per share
at the end of the period. Yield quotations are calculated according to the
following formula:

6
YIELD = 2 [(a-b + 1) - 1]
----
cd

where "a" equals dividends and interest earned during the
period; "b" equals expenses accrued for the period, net of
reimbursements; "c" equals the average daily number of shares
outstanding during the period that are entitled to receive
dividends and "d" equals the maximum offering price per share
on the last day of the period.

Except as noted below, in determining net investment income earned during the
period ("a" in the above formula), each Fund calculates interest earned on each
debt obligation held by it during the period by (1) computing the obligation's
yield to maturity, based on the market value of the obligation (including actual
accrued interest) on the last business day of the period or, if the obligation
was purchased during the period, the purchase price plus accrued interest; (2)
dividing the yield to maturity by 360 and multiplying the resulting quotient by
the market value of the obligation (including actual accrued interest). Once
interest earned is calculated in this fashion for each debt obligation held by a
Fund, net investment income is then determined by totaling all such interest
earned.

For purposes of these calculations, the maturity of an obligation with one or
more call provisions is assumed to be the next date on which the obligation
reasonably can be expected to be called or, if none, the maturity date.

PERFORMANCE DATA IN ADVERTISING AND PROMOTIONAL MATERIALS
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.
Performance data of a Fund quoted in advertising and other promotional materials
represents past performance and is not intended to predict or indicate future
results. The return and principal value of an investment in a Fund will
fluctuate in response to market conditions and other factors. An investor's
redemption proceeds may be more or less than the original investment amount.

A Fund may compare any of its performance information with:

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

The performance of other mutual funds.

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 Midcap(TM) 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.

-23-
<PAGE>

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 Advisor 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 listing of certain performance data as of June 30, 2000, is contained in
Appendix C -- Performance Data.

OTHER INFORMATION
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 investment advisor, summaries of
the views of the portfolio managers with respect to the financial markets, or
descriptions of the nature of the Advisor's and its staff's management
techniques; (7) the 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 earning Federally and, if applicable,
state tax-exempt income from the Fund or 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.

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<PAGE>

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 SHARE PRICE SHARES PURCHASED
INVESTMENT
--------------------------------------------------------------------------------
1 $100 $10.00 10.00
2 $100 12.00 8.33
3 $100 15.00 6.67
4 $100 20.00 5.00
5 $100 18.00 5.56
6 $100 16.00 6.25

TOTAL AVERAGE TOTAL
INVESTED $600 PRICE $15.17 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 Company's or any of the Company's service provider's policies or
business practices. For instance, advertisements may provide for a message from
the Advisor 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 Advisor believes
that it has been successful as a portfolio manager.

GENERAL INFORMATION

COMPANY HISTORY
The Company was incorporated under the laws of the State of Maryland on February
20, 1998. The Ridgeway Helms Millennium Fund, the predecessor fund to the Growth
Fund, was originally a series of the Advisors Series Trust (organized as a
Delaware business trust on October 3, 1996). Such Fund was reorganized as a
series of the Company on June 15, 1998, upon the approval of the majority of the
then-current shareholders of such Fund. The Articles of Incorporation permit the
Company to issue its shares of common stock in any number of series. Currently,
the Growth Fund and the Growth & Income Fund are the only series of the Company.
The Board of Directors may, from time to time, issue other series, the assets
and liabilities of which will be separate and distinct from any other series. On
September 22, 1999, the Company's Articles of Incorporation were amended to
change the Company's name to "Millennium Funds, Inc."

COMMON STOCK
The Company's Articles of Incorporation permit the Directors to issue full and
fractional shares of common stock into a greater or lesser number of shares
without thereby changing the proportionate beneficial interest in each Fund.
Each share represents an interest in a Fund proportionately equal to the
interest of each other share. Upon the Fund's liquidation, all shareholders
would share pro rata in the net assets of the Fund available for distribution to
shareholders.

-25-
<PAGE>

Shares issued by each Fund have no preemptive, conversion, or subscription
rights. Shareholders have equal and exclusive rights as to dividends and
distributions as declared by a Fund and to the net assets of the Fund upon
liquidation or dissolution. Each Fund, as a separate series of the Company,
votes separately on matters affecting only the Fund (e.g., approval of the
Investment Advisory Agreement); all series of the Company vote as a single class
on matters affecting all series jointly or the Company as a whole (e.g.,
election or removal of Directors). Voting rights are not cumulative, so that the
holders of more than 50% of the shares voting in any election of Directors can,
if they so choose, elect all of the Directors. While the Company is not required
and does not intend to hold annual meetings of shareholders, such meetings may
be called by the Directors in their discretion, or upon demand by the holders of
10% or more of the outstanding shares of the Company for the purpose of removing
Directors.

The By-Laws require the issuance of stock certificates, upon request from a
shareholder. If stock certificates are issued, they must be returned by the
registered owners prior to the transfer or redemption of shares represented by
such certificates.

If they deem it advisable and in the best interest of shareholders, the Board of
Directors may create additional series of shares. The Board of Directors has
currently created two series of shares and may create additional series in the
future, which have separate assets and liabilities. Income and operating
expenses not specifically attributable to a particular Fund are to be allocated
fairly among the Funds by the Directors, generally on the basis of the relative
net assets of each Fund.

Rule 18f-2 under the Investment Company Act provides that as to any investment
company which has two or more series outstanding and as to any matter required
to be submitted to shareholder vote, such matter is not deemed to have been
effectively acted upon unless approved by the holders of a "majority" (as
defined in the Rule) of the voting securities of each series affected by the
matter. Such separate voting requirements do not apply to the election of
Directors or the ratification of the selection of accountants. The Rule contains
special provisions for cases in which an advisory contract is approved by one or
more, but not all, series. A change in investment policy may go into effect as
to one or more series whose holders so approve the change even though the
required vote is not obtained as to the holders of other affected series.

FUND OWNERSHIP
As of September 30, 2000, the percentage of shares owned by all officers and
Directors of the Company as a group was as follows. To the extent officers and
Directors own less than 1% of the shares of each class of shares of a Fund (or
of the Company), the table reflects "N/A" for not applicable.

FUND PERCENTAGE OF SHARES OWNED
---- --------------------------

Millennium Growth Fund _______%

Millennium Growth & Income Fund _______%

Also as of that date, certain shareholders of record owned 5% or more of a class
of shares of a Fund. These shareholders and any shareholder known by a Fund to
own beneficially 5% or more of a class of shares of a Fund are listed in Table 4
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 September 30, 2000, the
following persons beneficially owned 25% or more of the shares of a Fund (or of
the Company) and may be deemed to control the Fund (or the Company). 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.

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<PAGE>

FUND (OR COMPANY) SHAREHOLDER PERCENTAGE OF
SHARES OWNED
----------------- ----------- ---------------

Millennium Growth Fund None N/A

Millennium Growth & Income Fund None N/A

FINANCIAL STATEMENTS

Shareholders will receive reports semi-annually showing the investments of each
Fund and other financial information. In addition, shareholders will receive
annual financial statements audited by the Fund's independent accountants. The
Semi-Annual Report to Shareholders dated December 31, 1999 for the Company is
incorporated herein by reference. Shareholder Reports are available upon request
at no charge.

The financial statements of the Funds for the year ended June 30, 2000, included
in the Annual Report to shareholders of the Company are incorporated herein by
reference. These financial statements only include the schedules of investments,
statements of assets and liabilities, statements of operations, statements of
changes in net assets, financial highlights, notes and independent accountants
report.

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<PAGE>

APPENDIX A

DESCRIPTION OF DEBT RATINGS

MOODY'S INVESTORS SERVICE, INC.: CORPORATE BOND RATINGS

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

Moody's applies numerical modifiers "1", "2" and "3" to both the Aaa
and Aa rating classifications. 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--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime 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 period of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

STANDARD & POOR'S CORPORATION: CORPORATE BOND RATINGS

AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA--Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.

A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

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

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<PAGE>

COMMERCIAL PAPER RATINGS

Moody's commercial paper ratings are assessments of the issuer's
ability to repay punctually promissory obligations. Moody's employs the
following three designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers: Prime 1--highest quality; Prime
2--higher quality; Prime 3--high quality.

A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment. Ratings are graded into four categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.

Issues assigned the highest rating, A, are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers "1", "2" and "3" to indicate the relative degree of safety. The
designation A-1 indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. A "+" designation is applied to those issues
rated "A-1" which possess extremely strong safety characteristics. Capacity for
timely payment on issues with the designation "A-2" is strong. However, the
relative degree of safety is not as high as for issues designated A-1. Issues
carrying the designation "A-3" have a satisfactory capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effect of changes in
circumstances than obligations carrying the higher designations.

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<PAGE>

APPENDIX B

MISCELLANEOUS TABLES

TABLE 1 - INVESTMENT ADVISORY FEES

The following table shows the dollar amount of fees payable to the Advisor with
respect to each Fund, the amount of fee that was waived by the Advisor, if any,
and the actual fee received by the Advisor.

ADVISORY FEE AMOUNT OF FUND ADVISORY FEE
PAYABLE EXPENSES RETAINED
REIMBURSED
------------------------------------------------------------------
MILLENNIUM GROWTH FUND

Year Ended June 30, 2000 $160,499 $ 63,667 $96,832

Year Ended June 30, 1999 $ 61,253 $129,715 ($68,462)

Period Ended June 30, 1998 $ 64,806 $ 70,509 ($5,703)

MILLENNIUM GROWTH & INCOME FUND

Year Ended June 30, 2000 $127,715 $ 79,868 $47,847

Year Ended June 30, 1999 $ 72,146 $ 60,726 $11,420

Period Ended June 30, 1998 $ 2 $ 131 ($129)

TABLE 2 - ADMINISTRATION TRANSFER AGENCY AND FUND ACCOUNTING FEES

The following table shows the dollar amount of fees payable to ADS for its
administration, transfer agency and fund accounting services provided to each
Fund, the amount of fee that was waived by ADS, if any, and the actual fee
received by ADS.

ADMINISTRATION ADMINISTRATION ADMINISTRATION
FEE PAYABLE FEE WAIVED FEE RETAINED
--------------------------------------------------------------------------------
MILLENNIUM GROWTH FUND

Year Ended June 30, 2000 $63,608 $0 $63,608

Year Ended June 30, 1999 $26,287 $0 $26,287

Period Ended June 30, 1998 $28,684 $0 $28,684

MILLENNIUM GROWTH & INCOME FUND

Year Ended June 30, 2000 $48,421 $0 $48,421

Year Ended June 30, 1999 $25,502 $0 $25,502

Period Ended June 30, 1998 $1 $0 $1

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<PAGE>

TABLE 3 - BROKERAGE 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 PAID

MILLENNIUM GROWTH FUND
Year Ended June 30, 2000 $18,049
Year Ended June 30, 1999 $20,765
Period Ended June 30, 1998 $ 3,886

MILLENNIUM GROWTH & INCOME FUND
Year Ended June 30, 2000 $11,503
Year Ended June 30, 1999 $17,392
Period Ended June 30, 1998 $0

TABLE 4 - 5% SHAREHOLDERS

The following table lists (1) the persons who owned of record 5% or more of the
outstanding shares of a class of shares of a Fund and (2) any person known by a
Fund to own beneficially 5% or more of a class of shares of a Fund, as of
September 30, 2000.

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<PAGE>

FUND NAME AND ADDRESS NUMBER PERCENTAGE
OF SHARES OF FUND
--------------------------------------------------------------------------------
MILLENNIUM GROWTH FUND
Bear Stearns
f/b/o Hines 78,951.9670 7.226%
1 Metrotech Center North
Brooklyn, NY 11201

Bear Stearns
1 Metrotech Center North
Brooklyn, NY 11201
f/b/o Esther Nagao IRA 117,574.6290 10.761%

Charles Schwab & Co.
f/b/o various customers
101 Montgomery Street
San Francisco, CA 94104 168,509.7820 15.423%
MILLENNIUM GROWTH &
INCOME FUND
Charles Schwab & Co.
f/b/o various customers
101 Montgomery Street
San Francisco, CA 94104 71,444.0630 6.987%

Bear Stearns
1 Metrotech Center North
Brooklyn, NY 11201
f/b/o Esther F. Nagao TTEE 91,961.1530 8.994%

Bear Stearns
1 Metrotech Center North
Brooklyn, NY 11201
f/b/o Middlemist 105,766.9170 10.344%

Bear Stearns
1 Metrotech Center North
Brooklyn, NY 11201
f/b/o Mortarotti 109,593.8760 10.719%

Bear Stearns
1 Metrotech Center North
Brooklyn, NY 11201
f/b/o Mortarotti 114,122.3200 11.161%

Bear Stearns
1 Metrotech Center North
Brooklyn, NY 11201
f/b/o Esther Nagao 177,344.1970 17.345%

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<PAGE>

APPENDIX C

PERFORMANCE DATA

TABLE 1 - TOTAL RETURNS

The average annual total return of each Fund for the period ended June 30, 2000,
was as follows.
<TABLE>
<CAPTION>

FUND ONE MONTH(1) THREE YEAR TO ONE YEAR THREE FIVE LIFE OF
MONTHS(1) DATE YEARS YEARS THE FUND

<S> <C> <C> <C> <C> <C> <C> <C>
MILLENNIUM GROWTH
FUND 31.90% -15.02% -9.07%% 55.34% N/A N/A 45.52%(2)

MILLENNIUM GROWTH
& INCOME FUND 33.00% -13.70% -11.26% 57.04% N/A N/A 48.21%(3)

<FN>

1 Annualized.
2 The Millennium Growth Fund commenced operations on July 16, 1997.
3 The Millennium Growth & Income Fund commenced operations on June 26, 1998.
</FN>
</TABLE>

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