HIBERNIA FUNDS, 497, 1999-12-29

HIBERNIA FUNDS
497, 1999-12-29

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PROSPECTUS

DECEMBER 31, 1999

[LOGO OF HIBERNIA FUNDS]

Hibernia Capital Appreciation Fund
Class A Shares
Class B Shares

Hibernia Louisiana Municipal Income Fund

Hibernia Mid Cap Equity Fund
Class A Shares
Class B Shares

Hibernia Total Return Bond Fund

Hibernia U.S. Government Income Fund

Hibernia Cash Reserve Fund
Class A Shares
Class B Shares

Hibernia U.S. Treasury Money Market Fund

PROSPECTUS

HIBERNIA FUNDS

Equity and Income Funds

Hibernia Capital Appreciation Fund--Class A Shares and Class B Shares
Hibernia Louisiana Municipal Income Fund
Hibernia Mid Cap Equity Fund--Class A Shares and Class B Shares
Hibernia Total Return Bond Fund
Hibernia U.S. Government Income Fund

Money Market Funds

Hibernia Cash Reserve Fund--Class A Shares and Class B Shares
Hibernia U.S. Treasury Money Market Fund

As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.

<TABLE>
<CAPTION>
Contents
<S> <C>
Fund Goals, Strategies, Performance and Risks 1
Principal Risks of Investing in a Fund 13
What are the Equity and Income Funds' Fees
and Expenses? 14
What are the Money Market Funds' Fees and Expenses? 17
Principal Securities in Which the Funds Invest 18
What are the Specific Risks of Investing in a Fund? 23
What do Shares Cost? 27
How are the Funds Sold? 30
How to Purchase Shares 30
How to Redeem and Exchange Shares 31
Account and Share Information 34
Who Manages the Funds? 35
Financial Information 37
</TABLE>

NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE

DECEMBER 31, 1999

Fund Goals, Strategies, Performance and Risks

Hibernia Funds offer seven portfolios, including two equity funds, three income
funds and two money market funds. The following describes the investment goals,
strategies and principal risks of each Fund. The investment goal of each Fund
described in this section may be changed only upon the approval of a majority of
the outstanding shares of the Fund which would be affected by the change.

All mutual funds take investment risks. Therefore, it is possible to lose
money by investing in a Fund and there can be no assurance that a Fund will
achieve its goal. The shares offered by this prospectus are not deposits or
obligations of any bank, are not endorsed or guaranteed by Hibernia National
Bank or its affiliates, and are not insured or guaranteed by the Federal Deposit
Insurance Corporation, or any other government agency. An investment in money
market funds is neither insured nor guaranteed by the Federal Deposit Insurance
Corporation nor any government agency. Although money market funds seek to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in a money market fund.

Hibernia Capital Appreciation Fund

Goal

The Fund's goal is to provide growth of capital and income.

Strategy

The Fund attempts to achieve its goal by investing primarily in a professionally
managed, diversified portfolio of common stocks. The Adviser selects companies
using traditional research techniques, including assessment of earnings and
dividend growth prospects of the companies. Ordinarily, this investment
management style focuses on companies with high revenue and dividend growth.
However, other factors such as expected earnings and dividend growth and
traditional valuation measures will also be considered. Under normal
circumstances, at least 65% of the Fund's portfolio will be invested in common
stocks.

The Fund's investment approach is based on the conviction that over the long
term the economy will continue to expand and develop and that this economic
growth will be reflected in the growth of the revenues and earnings of publicly
held corporations. Given current market conditions of declining dividend yields,
the Adviser will focus primarily on growth of capital with growth of income
being of secondary importance.

Principal Risks

The value of equity securities in the Fund's portfolio will rise and fall. These
fluctuations could be a sustained trend or a drastic movement. The Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund's share price may
decline.

The Adviser attempts to manage market risk by limiting the amount the Fund
invests in each company's equity securities. However, diversification will not
protect the Fund against widespread or prolonged declines in the stock market.

Other principal risks of investing in the Fund include the risks related to
investing for growth; the risks posed by the fact that growth stocks in
particular may experience a larger decline on a forecast of lower earnings, a
negative fundamental development or an adverse market development.

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class A Shares of Hibernia Capital Appreciation Fund as
of the calendar year-end for each of 10 years.

The `y' axis reflects the "% Total Return" beginning with "-10%" and increasing
in increments of 10% up to 40%

The `x' axis represents calculation periods for the last ten calendar years of
the Fund, beginning with the earliest year. The light gray shaded chart features
10 distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Fund for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1989 through 1998, The percentages noted are: 31.91%, (1.98%),
31.25%, 0.22%, 14.38%, (2.64%), 37.69%, 23.19%, 31.59%, 26.32%.

The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.

The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.

The Fund's Class A Shares total return for the nine-month period from January 1,
1999 to September 30, 1999 was 3.96%.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 23.22% (quarter ended December 31, 1998). Its lowest
quarterly return was (13.37%) (quarter ended September 30, 1990). `

Average Annual Total Return Table

The following table represents the Fund's Average Annual Total Returns for the
calendar periods ending December 31, 1998. The table shows the Fund's total
returns averaged over a period of years relative to the Standard & Poor's 500
Composite Stock Price Index (S&P 500), a broad-based market index. Total returns
for the index shown do not reflect sales charges, expenses or other fees that
the SEC requires to be reflected in the Fund's performance. Indexes are
unmanaged, and it is not possible to invest directly in an index.

<TABLE>
<CAPTION>
Calendar Period Class A Class B S&P 500
<S> <C> <C> <C>
1 Year 20.66% 19.87% 28.58%
5 Years 21.26% N/A 24.06%
10 Years 17.69% N/A 19.21%
Start of Performance/1/ 17.52% 23.84% N/A
</TABLE>

/1/ The Fund's Class A Shares and Class B Shares start of performance dates were
October 14, 1988 and December 2, 1996, respectively.

Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
rewards.

Hibernia Louisiana Municipal Income Fund

Goal

The Fund's goal is to provide current income which is generally exempt from
federal regular income tax and the personal income taxes imposed by the state of
Louisiana. (Federal regular income tax does not include the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations.)

Strategy

The Fund attempts to achieve its goal by investing in a portfolio primarily
limited to Louisiana municipal securities. As a matter of policy, which cannot
be changed without shareholder approval, the Fund will invest its assets so
that, under normal circumstances, at least 80% of its annual interest income is
exempt from federal regular and Louisiana state income taxes or at least 80% of
its net assets are invested in obligations, the interest income from which is
exempt from federal regular and Louisiana state income taxes. The Fund will
generally purchase investment grade securities of a duration appropriate to
current market conditions. In expected rising interest rate environments, the
Adviser will generally choose securities of a shorter duration. In expected
falling interest rate environments, the Adviser will generally choose securities
of a longer duration.

As a matter of investment policy which may be changed without shareholder
approval, at least 65% of the Fund's total assets will be invested in Louisiana
municipal securities.

Principal Risks

Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.

Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.

The Fund is non-diversified. Compared to diversified mutual funds, it may
invest a higher percentage of its assets among fewer issuers of portfolio
securities. This increases the Fund's risk by magnifying the impact (positively
or negatively) that any one issuer has on the Fund's Share price and
performance.

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Hibernia Louisiana Municipal Income Fund as of the
calendar year-end for each of 10 years.

The `y' axis reflects the "% Total Return" beginning with "-5%" and increasing
in increments of 5% up to 20%

The `x' axis represents calculation periods for the last ten calendar years of
the Fund, beginning with the earliest year. The light gray shaded chart features
10 distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Fund for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1989 through 1998, The percentages noted are: 8.28%, 6.56%,
11.26%, 9.54%, 11.41%, (4.64%), 15.94%, 4.15%, 8.48%, 5.94%.

The bar chart shows the variability of the Fund's total returns on a calendar
year-end basis.

The total returns displayed for the Fund do not reflect the payment of any sales
charges or recurring shareholder account fees. If these charges or fees had been
included, the returns shown would have been lower.

The Fund's total return for the nine-month period from January 1, 1999 to
September 30, 1999 was (2.22%).

Within the period shown in the Chart, the Fund's highest quarterly return was
6.51% (quarter ended March 31, 1995). Its lowest quarterly return was (4.86%)
(quarter ended March 31, 1994).

Average Annual Total Return Table

The following table represents the Fund's Average Annual Total Returns for the
calendar periods ending December 31, 1998. The table shows the Fund's total
returns averaged over a period of years relative to the Lehman Ten Year Insured
Index (LTYII), a broad- based market index. Total returns for the index shown do
not reflect sales charges, expenses or other fees that the SEC requires to be
reflected in the Fund's performance. Indexes are unmanaged, and it is not
possible to invest directly in an index.

<TABLE>
<CAPTION>
Calendar Period Fund LTYII
<S> <C> <C>
1 Year 2.78% 6.59%
5 Years 5.13% 6.32%
10 Years 7.24% N/A
</TABLE>

Hibernia Mid Cap Equity Fund

Goal

The Fund's goal is total return.

Strategy

Under normal market conditions, the Fund intends to invest at least 65% of its
total assets in equity securities of companies that have a market value
capitalization ranging from $500 million to $10 billion. The Fund attempts to
select companies whose potential for capital appreciation exceeds that of larger
capitalization stocks commensurate with increased risk. The Fund's Adviser will
invest primarily in equity securities of companies with above-average earnings
growth prospects or in companies where significant fundamental changes are
taking place. These changes could include significant new products, services, or
methods of distribution; restructuring or reallocating business; or significant
share price appreciation.

Principal Risks

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The value of equity securities in the Fund's portfolio
will rise and fall. These fluctuations could be a sustained trend or a drastic
movement. The Fund's portfolio will reflect changes in prices of individual
portfolio stocks or general changes in stock valuations. Consequently, the
Fund's share price may decline. The Adviser attempts to manage market risk by
limiting the amount the Fund invests in each company's equity securities.
However, diversification will not protect the Fund against widespread or
prolonged declines in the stock market.

Because the Fund invests primarily in medium capitalization stocks, there are
some additional risk factors associated with investments in the Fund. In
particular, stocks in the medium capitalization sector of the United States
equity market tend to be slightly more volatile in price than larger
capitalization stocks, such as those included in the Standard & Poor's 500
Composite Price Index (S&P 500). This is because, among other things,
medium-sized companies have less certain growth prospects than larger companies;
have a lower degree of liquidity in the equity market; and tend to have a
greater sensitivity to changing economic conditions. Further, in addition to
exhibiting slightly higher volatility, the stocks of medium-sized companies may,
to some degree, fluctuate independently of the stocks of large companies. That
is, the stocks of medium-sized companies may decline in price as the price of
large company stocks rises or vice versa. You should expect that the Fund will
be more volatile than, and may fluctuate independently of, broad stock market
indices such as the S&P 500.

Other risks of investing in the Fund include the risks related to investing
for growth; the risks posed by the fact that growth stocks in particular may
experience a larger decline on a forecast of lower earnings, a negative
fundamental development or an adverse market development.

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class A Shares of Hibernia Mid Cap Equity Fund as of the
calendar year-end for each of 10 years.

The `y' axis reflects the "% Total Return" beginning with "-10%" and increasing
in increments of 10% up to 40%

The `x' axis represents calculation periods for the last ten calendar years of
the Fund, beginning with the earliest year. The light gray shaded chart features
10 distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Fund for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1989 through 1998, The percentages noted are: 33.57%, (0.37%),
30.44%, 2.97%, 12.66%, (6.23%), 33.43%, 18.83%, 30.87%, 22.47%.

The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.

The Fund's Class A Shares total return for the nine-month period from January 1,
1999 to September 30, 1999 was (0.36%).

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 47.40% (quarter ended March 31, 1998). Its lowest quarterly
return was (6.23%) (quarter ended December 31, 1994).

Average Annual Total Return Table*

The following table represents the Fund's Average Annual Total Returns for the
calendar periods ending December 31, 1998. The table shows the Fund's total
returns averaged over a period of years relative to the Standard & Poor's 400
Mid Cap Index (S&P 400), a broad-based market index. Total returns for the index
shown do not reflect sales charges, expenses or other fees that the SEC requires
to be reflected in the Fund's performance. Indexes are unmanaged, and it is not
possible to invest directly in an index.

<TABLE>
<CAPTION>
Calendar Period Class A Class B S&P 400
<S> <C> <C> <C>
1 Year 16.95% N/A 19.09%
5 Years 17.87% N/A 18.84%
10 Years 16.44% N/A 19.29%
Start of Performance/1/ 14.01% 4.50% N/A
</TABLE>

*Hibernia Mid Cap Equity Fund, Class A Shares is the successor to a collective
trust fund. The quoted performance data includes performance of the collective
trust fund for the period from 8/31/89 to 7/12/98 when the Fund commenced
operation, as adjusted to reflect the Fund's anticipated expenses. The
collective trust fund was not registered under the Investment Company Act of
1940 ("1940 Act") and therefore was not subject to certain investment
restrictions imposed by the 1940 Act. If the collective trust fund had been
registered under the 1940 Act, the performance may have been adversely
affected.

/1/ The Fund's Class A Shares and Class B Shares start of performance dates were
May 1, 1986 and July 13, 1998, respectively.

Hibernia Total Return Bond Fund

Goal

The Fund's goal is to maximize total return.

Strategy

The Fund attempts to achieve its goal by investing in a diversified portfolio of
investment grade U.S. government, mortgage backed, asset backed and corporate
securities, as well as collateralized mortgage obligations. Under normal
circumstances, the Fund will attempt to invest at least 65% of its assets in
bonds. The Adviser allocates the Fund's portfolio among busness sectors and
adjusts the credit quality of the portfolio by analyzing current economic and
securities market conditions, particularly changes in interest rates and
expected trends in corporate earnings. These factors also guide the selection of
maturity and duration of portfolio securities. The Fund may invest in securities
of any duration although generally, under normal conditions, the Fund's average
duration would tend toward the overall U.S. market average which is roughly 4.75
years at present. The Fund will attempt to achieve the capital appreciation
component of total return by manipulating the duration of the portfolio, within
certain parameters, in response to expected changes in interest rates.

Principal Risks

Other factors that may affect the Fund's returns include bond defaults or
increase in the risk of defaults, or early redemptions of portfolio securities.
Risk of prepayment on asset backed and mortgage backed securities will also
affect Fund returns.

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Hibernia Total Return Bond Fund as of the calendar
year-end for each of 6 years.

The `y' axis reflects the "% Total Return" beginning with "-5%" and increasing
in increments of 5% up to 20%

The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Fund's start of business through the calendar year
ended 1998. The light gray shaded chart features 6 distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund for each calendar year is stated directly
at the top of each respective bar, for the calendar years 1993 through 1998, The
percentages noted are: 8.18%, (2.65%), 16.97%, 2.41%, 7.40%, 7.63%.

The bar chart shows the variability of the Fund's total returns on a calendar
year-end basis.

The Fund's total return for the nine-month period from January 1, 1999 to
September 30, 1999 was (1.12%).

Within the period shown in the Chart, the Fund's highest quarterly return was
6.10% (quarter ended June 30, 1995). Its lowest quarterly return was (2.67%)
(quarter ended March 31, 1996).

Average Annual Total Return Table

The following table represents the Fund's Average Annual Total Returns for the
calendar periods ending December 31, 1998. The table shows the Fund's total
returns averaged over a period of years relative to the Salomon Brothers Broad
Investment Grade Bond Index (SBBIGBI), a broad-based market index. Total returns
for the index shown do not reflect sales charges, expenses or other fees that
the SEC requires to be reflected in the Fund's performance. Indexes are
unmanaged, and it is not possible to invest directly in an index.

<TABLE>
<CAPTION>
Calendar Period Fund SBBIGBI
<S> <C> <C>
1 Year 4.43% 8.71%
5 Years 5.50% 7.30%
Start of Performance/1/ 6.10% 7.79%
</TABLE>

/1/ The Fund's start of performance date was November 2, 1992.

Hibernia U.S. Government Income Fund

Goal

The Fund's goal is to provide current income.

Strategy

Current income includes, in general, discount earned on U.S. Treasury bills and
agency discount notes, interest earned on all other U.S. government securities
and mortgage-related securities, and short-term capital gains. The Fund attempts
to achieve its investment objective by investing in investment grade securities
which are guaranteed as to payment of principal and interest by the U.S.
government or U.S. government agencies or instrumentalities. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in such
U.S. government securities. Under normal circumstances, the average duration of
the Fund's holdings will be 3-5 years. The Fund may also invest in corporate
bonds, asset backed securities and certain privately issued mortgage-related
securities, such as investment banking firms and companies related to the
construction industry. The mortgage- related securities in which the Fund may
invest may be: (i) privately issued securities which are collateralized by pools
of mortgages in which each mortgage is guaranteed as to payment of principal and
interest by an agency or instrumentality of the U.S. government; (ii) privately
issued securities which are collateralized by pools of mortgages in which
payment of principal and interest are guaranteed by the issuer and such
guarantee is collateralized by U.S. government securities; and (iii) other
privately issued securities in which the proceeds of the issuance are invested
in mortgage-backed securities and payment of the principal and interest are
supported by the credit of any agency or instrumentality of the U.S. government.
The mortgage-related securities provide for a periodic payment consisting of
both interest and principal. The interest portion of these payments will be
distributed by the Fund as income, and the capital portion will be reinvested.

Principal Risks

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Hibernia U.S. Government Income Fund as of the calendar
year-end for each of 10 years.

The `y' axis reflects the "% Total Return" beginning with "-5%" and increasing
in increments of 5% up to 20%

The `x' axis represents calculation periods for the last ten calendar years of
the Fund, beginning with the earliest year. The light gray shaded chart features
10 distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Fund for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1989 through 1998, The percentages noted are: 11.59%, 9.03%,
14.71%, 4.88%, 7.74%, (3.31%), 15.49%, 3.73%, 8.18%, 7.89%.

The bar chart shows the variability of the Fund's total returns on a calendar
year-end basis.

The Fund's total return for the nine-month period from January 1, 1999 to
September 30, 1999 was (0.73%).

Within the period shown in the Chart, the Fund's highest quarterly return was
5.93% (quarter ended June 30, 1989). Its lowest quarterly return was (2.57%)
(quarter ended March 31, 1994).

Average Annual Total Return Table

The following table represents the Fund's Average Annual Total Returns for the
calendar periods ending December 31, 1998. The table shows the Fund's total
returns averaged over a period of years relative to the Salomon Brothers Medium
Term Broad Index (SBMTBI), a broad-based market index. Total returns for the
index shown do not reflect sales charges, expenses or other fees that the SEC
requires to be reflected in the Fund's performance. Indexes are unmanaged, and
it is not possible to invest directly in an index.

<TABLE>
<CAPTION>
Calendar Period Fund SBMTBI
<S> <C> <C>
1 Year 4.69% 7.88%
5 Years 5.57% 6.84%
10 Years 7.54% 8.77%
</TABLE>

Hibernia Cash Reserve Fund

Goal

The Fund is a money market fund which seeks to maintain a stable net asset value
(NAV) of $1 per Share. The Fund's goal is current income consistent with
stability of principal.

Strategy

The Fund's portfolio consists of high quality money market instruments maturing
in one year or less. As a matter of policy, which cannot be changed without
shareholder approval, the average maturity of the securities in the Fund's
portfolio, computed on a dollar- weighted basis, will be 120 days or less. As a
matter of operating policy, which may be changed without shareholder approval,
the Fund will limit the average maturity of its portfolio to 90 days or less, in
order to meet regulatory requirements. The Fund invests in high quality money
market instruments that are either rated in the highest short-term rating
category by one or more nationally recognized statistical rating organizations
(NRSROs) or of comparable quality to securities having such ratings. The Fund
invests only in instruments denominated and payable in U.S. dollars.

Principal Risks

Even though the Fund is a money market fund that seeks to maintain a stable NAV
it is possible to lose money by investing in the Fund.

Generally, in excess of 50% of the total assets of the Fund will be invested
in commercial paper and variable rate demand notes. Commercial paper issued by
finance companies will comprise more than 25% of the Fund's total assets, unless
the Fund is in a temporary defensive position as a result of economic
conditions. These policies may not be changed without shareholder approval.
Concentration of the Fund's portfolio in such obligations may entail additional
risks which are not encountered by funds with more diversified portfolios
including credit risk to such finance companies and temporary demand and supply
imbalances.

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Hibernia Cash Reserve Fund as of the calendar year-end
for each of 10 years.

The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 2% up to 10%

The `x' axis represents calculation periods for the last ten calendar years of
the Fund, beginning with the earliest year. The light gray shaded chart features
10 distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Fund for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1989 through 1998, The percentages noted are: 8.87%, 7.74%,
5.48%, 3.06%, 2.38%, 3.41%, 5.22%, 4.64%, 4.77%, 4.71%.

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Class A Shares total
returns on a calendar year-end basis.

The Fund's Class A Shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value. The Fund's Class A
Shares total return for the nine-month period from January 1, 1999 to September
30, 1999 was 3.06%.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 2.28% (quarter ended June 30, 1989). Its lowest quarterly
return was 0.57% (quarter ended December 31, 1993).

Average Annual Total Return Table

The following table represents the Fund's Average Annual Total Returns for
calendar periods ending December 31, 1998.

<TABLE>
<CAPTION>
Calendar Period Class A Class B
<S> <C> <C>
1 Year 4.71% N/A
5 Years 4.55% N/A
10 Years 5.01% N/A
Start of Performance/1/ 5.18% 1.16%
</TABLE>

/1/ The Fund's Class A Shares and Class B Shares start of performance dates were
October 14, 1988 and September 4, 1998, respectively.

The Fund's Class A Shares and Class B Shares 7-Day Net Yield as of December 31,
1998 were 4.29% and 3.54%, respectively. Investors may call the Fund at
1-800-341-7400 to obtain the current 7-Day Net Yield.

Hibernia U.S. Treasury Money Market Fund

Goal

The Fund is a money market fund which seeks to maintain a stable NAV of $1 per
Share. The Fund's goal is current income consistent with stability of principal
and liquidity.

Strategy

The Fund pursues its goal by investing in a portfolio of short-term U.S.
Treasury obligations which are issued by the U.S. government and are fully
guaranteed as to payment of principal and interest by the United States. The
Fund invests only in short-term U.S. Treasury obligations maturing in 397 days
or less. The average maturity of the U.S. Treasury obligations in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less.

Principal Risks

Even though the Fund is a money market fund that seeks to maintain a stable NAV,
it is possible to lose money by investing in the Fund.

Although the Fund invests in U.S. Treasury securities that are backed by the
full faith and credit of the United States, Fund Shares, themselves, are not
guaranteed or supported by the U.S. government.

While there is no assurance that the Cash Reserve Fund and U.S. Treasury Money
Market Fund (together, the Money Market Funds) will achieve their respective
investment goals, they endeavor to do so by following the strategies and
policies described in this prospectus and by complying with the diversification
and other requirements of Rule 2a-7 under the Investment Company Act of 1940,
which regulates money market funds.

Risk/Return Bar Chart and Table

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Hibernia U.S. Treasury Money Market Fund as of the
calendar year-end for each of 5 years.

The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 2% up to 6%

The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Fund's start of business through the calendar year
ended 1998. The light gray shaded chart features 6 distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund for each calendar year is stated directly
at the top of each respective bar, for the calendar years 1994 through 1998, The
percentages noted are: 3.55%, 5.44%, 4.95%, 4.88%, 4.75%,

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's total returns on a
calendar year-end basis.

The Fund's shares are not sold subject to a sales charge (load). The total
returns displayed above are based upon net asset value.

The Fund's total return for the nine-month period from January 1, 1999 to
September 30, 1999 was 3.09%.

Within the period shown in the Chart, the Fund's highest quarterly return was
1.37% (quarter ended June 30, 1995). Its lowest quarterly return was 0.61%
(quarter ended March 31, 1994).

Average Annual Total Return Table

The following table represents the Fund's Average Annual Total Returns for
calendar periods ending December 31, 1998.

<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year 4.75%
5 Years 4.71%
Start of Performance/1/ 4.52%
</TABLE>

/1/ The Fund's start of performance date was July 16, 1993.

The Fund's 7-Day Net Yield as of December 31, 1998 was 4.09%. Investors may call
the Fund at 1-800-341-7400 to obtain the current 7-Day Net Yield.

Principal Risks of Investing in a Fund

In addition to the risks set forth below that are specific to an investment in a
particular Fund, there are risks common to all mutual funds.

For example, a Fund's share price may decline and an investor could lose
money. It is possible to lose money by investing in any of the Hibernia Funds.
Also there is no assurance that a Fund will achieve its investment goal.

<TABLE>
<CAPTION>
Louisiana
U.S. Treasury
Capital Municipal U.S. Cash
Money
Appreciation Income Mid Cap Total Return Government Reserve
Market
Fund Fund Equity Bond Fund Income Fund Fund
Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Stock Market Risk/1/ X X
Sector Risk/2/ X X X X
Liquidity Risk/3/ X X X X
Investing for Growth/4/ X X
Company Size Risk/5/ X
Foreign Investing X X X
Risk/6/
Credit Risks/7/ X X X X X
Interest Rate Risk/8/ X X X
Prepayment Risk/9/ X X X
Call Risk/10/ X X X
Tax Risks/11/ X
Risks of Investing X
in Louisiana/12/
</TABLE>

/1/ The value of equity securities rise and fall.
/2/ Because companies providing credit enhancement with regard to a Fund's
securities may be concentrated in certain industry sectors, the
creditworthiness of the Fund's securities may be adversely affected by
developments which adversely affect such sectors.
/3/ Limited trading opportunities for certain securities and the inability to
sell a security at will could result in losses to a Fund.
/4/ Growth stocks in particular may experience a larger decline on a forecast
of lower earnings, a negative fundamental development or an adverse market
development.
/5/ The smaller the capitalization of a company, the less liquid its stock and
the more volatile its price. Companies with smaller market capitalizations
also tend to have unproven track records and are more likely to fail than
companies with larger market capitalizations.

/6/ Foreign economic, political or regulatory conditions may be less favorable
than those of the United States.
/7/ The possibility that an issuer will default on a security by failing to pay
interest or principal when due.
/8/ Prices of fixed income securities rise and fall in response to interest
rate changes.
/9/ When interest rates decline, unscheduled prepayments of principal could
accelerate and require the Fund to reinvest the proceeds of the prepayments
at lower interest rates.
/10/ A Fund's performance may be adversely affected by the possibility that an
issuer of a security held by a Fund may redeem the security prior to
maturity at a price below its current market value.
/11/ Any failure of municipal securities invested in by a Fund to meet certain
applicable legal requirements, or any proposed or actual changes in the
federal or a state's tax law, could adversely affect shareholders of a
Fund.
/12/ Any economic, political, or regulatory developments affecting the value of
the securities in the Fund's portfolio could have a greater impact on the
total value of the portfolio than would be the case if the portfolio were
diversified among more issuers. The Louisiana economy is heavily dependent
upon energy prices, both oil and gas. Any adverse economic conditions or
developments affecting the state of Louisiana or its municipalities could
impact the Fund's portfolio. Investing in Louisiana municipal securities
which meet the Fund's quality standards may not be possible if the state of
Louisiana and its municipalities do not maintain their current credit
ratings.

What are the Equity and Income Funds' Fees and Expenses?

Equity and Income funds

Fees and expenses

<TABLE>
<CAPTION>
Capital
Capital Louisiana
Appreciation
Appreciation Municipal
Fund Class A Fund Class
B Income
Shares
Shares Fund
<S> <C>
<C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) 4.50%
None 3.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(as a percentage of offering price) None
None None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) None
5.50%/1/ None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
None None
Exchange Fee None
None None
Annual Fund Operating Expenses (Before Waivers)/2/
(as a percentage of average net assets)
Management Fee/3/ 0.75%
0.75% 0.45%
Distribution (12b-1 Fee)/4/ 0.25%
0.75% 0.25%
Shareholder Services Fee None
0.25% None
Other Expenses 0.23%
0.23% 0.25%
Total Annual Fund Operating Expenses 1.23%
1.98%/5/ 0.95%
</TABLE>

/1/ The contingent deferred sales charge is 5.50% in the first year, declining
to 1.00% in the sixth year and then 0.00% thereafter. See "What do Shares
CostSales Charge When You Redeem."
/2/ Although not contractually obligated to do so, the Adviser, administrator
and distributor waived certain amounts. These are shown below along with the
net expenses the Funds actually paid for the fiscal year ended August 31,
1999.

<TABLE>
<S> <C>
<C> <C>
Total Waiver of Fund Expenses 0.00%
0.00% 0.29%
Total Actual Annual Fund Operating Expenses (after waiver) 1.23%
1.98% 0.66%
</TABLE>

/3/ The Adviser voluntarily waived a portion of the management fee of Louisiana
Municipal Income Fund, Mid Cap Equity Fund, Total Return Bond Fund, and U.S.
Government Income Fund. The voluntary waiver can be terminated at any time.
The management fee paid by Louisiana Municipal Income Fund, Mid Cap Equity
Fund, Total Return Bond Fund, and U.S. Government Income Fund (after
voluntary waiver) was 0.24%, 0.17%, 0.40%, and 0.27%, respectively, for the
year ended August 31, 1999.
/4/ The distribution (12b-1) fee for Louisiana Municipal Income Fund and U.S.
Government Income Fund has been voluntarily waived. This voluntary waiver
can be terminated at any time. The distribution (12b-1) fee paid by the
Louisiana Municipal Income Fund and U.S. Government Income Fund (after
voluntary waiver) was 0.08% for both funds for the year ended August 31,
1999. 5Class B Shares convert to Class A Shares (which pay lower ongoing
expenses) approximately eight years after purchase.

What are the Equity and Income Funds' Fees and Expenses?

Equity and Income funds

Fees and expenses

<TABLE>
<CAPTION>
Mid Cap Mid Cap
Equity Equity
Total U.S.
Fund Fund
Return Government
Class A Class B
Bond Income
Shares Shares
Fund Fund
<S> <C> <C>
<C> <C>
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.50% None
3.00% 3.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (as a percentage of None None
None None
offering price)
Contingent Deferred Sales Charge (as a percentage of original purchase price or None 5.50%/1/
None None
redemption proceeds, as applicable)
Redemption Fee (as a percentage of amount redeemed, if applicable) None None
None None
Exchange Fee None None
None None

Annual Fund Operating Expenses (Before Waivers)2 (as a percentage of average
netassets)
Management Fee3 0.75% 0.75%
0.70% 0.45%
Distribution (12b-1 Fee)/4/ 0.25% 0.75%
0.25% 0.25%
Shareholder Services Fee None 0.25%
None None
Other Expenses 1.46%/5/ 1.46%/5/
0.34% 0.27%
Total Annual Fund Operating Expenses 2.46% 3.21%/6/
1.29% 0.97%
</TABLE>

/1/ The contingent deferred sales charge is 5.50% in the first year, declining
to 1.00% in the sixth year and then 0.00% thereafter. See "What do Shares
CostSales Charge When You Redeem."
/2/ Although not contractually obligated to do so, the Adviser, administrator,
distributor and shareholder services provider waived certain amounts. These
are shown below along with the net expenses the Funds actually paid for the
fiscal year ended August 31, 1999.

<TABLE>
<S> <C> <C>
<C> <C>
Total Waiver of Fund Expenses 0.70% 0.70%
0.30% 0.27%
Total Actual Annual Fund Operating Expenses (after waiver) 1.76% 2.51%
0.99% 0.70%
</TABLE>

/3/ The Adviser voluntarily waived a portion of the management fee of Louisiana
Municipal Income Fund, Mid Cap Equity Fund, Total Return Bond Fund, and U.S.
Government Income Fund. The voluntary waiver can be terminated at any time.
The management fee paid by Louisiana Municipal Income Fund, Mid Cap Equity
Fund, Total Return Bond Fund, and U.S. Government Income Fund (after
voluntary waiver) was 0.24%, 0.17%, 0.40%, and 0.27%, respectively, for the
year ended August 31, 1999.
/4/ The distribution (12b-1) fee for Louisiana Municipal Income Fund and U.S.
Government Income Fund has been voluntarily waived. This voluntary waiver
can be terminated at any time. The distribution (12b-1) fee paid by the
Louisiana Municipal Income Fund and U.S. Government Income Fund (after
voluntary waiver) was 0.08% for both funds for the year ended August 31,
1999.
/5/ The administrator voluntarily waived a portion of its fee for the Mid Cap
Equity Fund Class A and Class B Shares. The administrator can terminate this
voluntary waiver at any time. Total other expenses paid by the Mid Cap
Equity Fund Class A and Class B Shares (after voluntary waiver) was 1.34%
and 1.34%, respectively, for the year ended August 31, 1999.
/6/ Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.

EXAMPLE
This Example is intended to help you compare the cost of investing in each of
the Funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in each of the Funds for the time periods indicated and
then redeem all of your Shares at the end of those periods. Expenses assuming no
redemption are also shown. The Example also assumes that your investment has a
5% return each year and that each of the Funds' operating expenses are before
waivers as shown in the table and remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
<S> <C> <C> <C> <C>
Expenses assuming
redemption
Capital Appreciation $ 570 $ 823 $ 1,095 $
1,721
FundClass A Shares
Capital Appreciation $ 751 $ 1,021 $ 1,268 $
2,110
FundClass B Shares
Louisiana Municipal $ 394 $ 594 $ 810 $
1,431
Income Fund
Mid Cap Equity $ 688 $ 1,182 N/A
N/A
FundClass A Shares
Mid Cap Equity $ 874 $ 1,389 N/A
N/A
FundClass B Shares
Total Return BondFund $ 427 $ 697 $ 986 $
1,810
U.S. Government $ 396 $ 600 $ 820 $
1,454
Income Fund
Expenses assuming no
redemption
Capital Appreciation $ 201 $ 621 $ 1,068 $
2,110
FundClass B Shares
Mid-Cap Equity $ 324 $ 989 N/A
N/A
FundClass B Shares
</TABLE>

What are the Money Market Funds' Fees and Expenses?

MONEY MARKET FUNDS

FEES AND EXPENSES

Cash U.S. Treasury

Reserve Money Market

Fund Fund
Class A Class B
<S> <C>
<C> <C>
Shareholder Transactions Expenses
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
None None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
None None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) None
5.50%/1/ None

Redemption Fee (as a percentage of amount redeemed, if applicable) None
None None
Exchange Fee None
None None

Annual Fund Operating Expenses (as percentage of average net assets)
Management Fees 0.40%
0.40% 0.40%
Distribution (12b-1 fee) 0.25%
0.75% 0.25%/2/
Shareholder Services Fee None
0.25% None
Other Expenses 0.27%
0.27% 0.23%
Total Annual Fund Operating Expenses 0.92% 1.67%/3/ 0.88% 1 The contingent
deferred sales charge is 5.50% in the first year, declining to 1.00% in the
sixth year and then 0.00% thereafter.
See "What do Shares CostSales Charge When You Redeem."
2 Under Rule 12b-1 distribution plans, U.S. Treasury Money Market Fund can pay
the distributor up to 0.25% as a 12b-1 fee.
The U.S. Treasury Money Market Fund did not pay or accrue the distribution (12b-1) fee during the fiscal year
ended
August 31, 1999. The U.S. Treasury Money Market Fund has no present intention of paying or accruing the
distribution (12b-1)
fee for the fiscal year ending August 31, 2000.
3 Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.
</TABLE>

EXAMPLE
This Example is intended to help you compare the cost of investing in each of
the Funds with the cost of investing in other funds. The Example assumes that
you invest $10,000 in each of the Funds for the time periods indicated and then
redeem all of your Shares at the end of those periods. Expenses assuming no
redemption are also shown. The Example also assumes that your investment has a
5% return each year and that each of the Funds' operating expenses are before
waivers as shown in the table and remain the same. Wire-transferred redemption
of less than $5,000 may be subject to additional fees. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
U.S. Treasury
Cash Reserve Fund Money Market
Class A Class B Fund
<S> <C> <C> <C>
1 Year $ 94 $ 170 $ 90
3 Years $ 293 $ 526 $ 281
5 Years $ 509 N/A $ 488
10 Years $ 1,131 N/A $ 1,084
</TABLE>

You would pay the following on the same investment assuming no redemptions in:

<TABLE>
<CAPTION>
Cash Reserve Fund
Class B
<S> <C>
1 Year $170
3 Years $526
5 Years N/A
10 Years N/A
</TABLE>

Principal Securities in Which the Funds Invest

. The Capital Appreciation Fund and the Mid-Cap Equity Fund invest principally
in equity securities including common stocks.

. The Louisiana Municipal Income Fund invests principally in tax exempt
securities including general obligation bonds and special revenue bonds.

. The Total Return Bond Fund invests principally in fixed income securities
including treasury securities and corporate debt securities in addition to
mortgage backed securities, collateralized mortgage obligations and asset
backed securities.

. The U.S. Government Income Fund invests principally in fixed income securities
including treasury securities and agency securities in addition to
collateralized mortgage obligations.

. The Cash Reserve Fund invests principally in fixed income securities including
corporate debt securities, commercial paper and demand instruments in addition
to repurchase agreements.

. The U.S. Treasury Money Market Fund invests principally in fixed income
securities including treasury securities in addition to repurchase agreements.

Following are descriptions of each of these principal types of investments.

EQUITY SECURITIES

Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. A Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which the Funds invest as
noted in the chart.

Common Stocks

Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock.

FIXED INCOME SECURITIES

Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.

The following describes the types of fixed income securities in which the
Funds invest as noted in the chart.

Treasury Securities
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

Agency Securities

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.

The Funds treat mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does not
reduce the market and prepayment risks of these mortgage backed securities.

CORPORATE DEBT SECURITIES

Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. A Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers.

In addition, the credit risk of an issuer's debt security may vary based on
its priority for repayment. For example, higher ranking (senior) debt securities
have a higher priority than lower ranking (subordinated) securities. This means
that the issuer might not make payments on subordinated securities while
continuing to make payments on senior securities. In addition, in the event of
bankruptcy, holders of senior securities may receive amounts otherwise payable
to the holders of subordinated securities. Some subordinated securities, such as
trust preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer any
payment that would reduce its capital below regulatory requirements.

Commercial Paper

Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default. The short
maturity of commercial paper reduces both the market and credit risks as
compared to other debt securities of the same issuer.

Demand Instruments

Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Funds treat
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.

MORTGAGE BACKED SECURITIES

Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates, maturities
and other terms. Mortgages may have fixed or adjustable interest rates.
Interests in pools of adjustable rate mortgages are known as ARMs.

Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and pre-payments from the underlying mortgages.
As a result, the holders assume all the prepayment risks of the underlying
mortgages.

Collateralized Mortgage Obligations (CMOs)

CMOs, including interests in real estate mortgage investment conduits (REMICs),
allocate payments and prepayments from an underlying pass-through certificate
among holders of different classes of mortgage backed securities. This creates
different prepayment and interest rate risks for each CMO class.

Asset Backed Securities

Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities have prepayment risks. Like CMOs, asset
backed securities may be structured like Floaters, Inverse Floaters, IOs and
POs.

TAX EXEMPT SECURITIES

Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Typically, states, counties, cities and
other political subdivisions and authorities issue tax exempt securities. The
market categorizes tax exempt securities by their source of repayment. Louisiana
Municipal Income Fund invests in debt obligations, including industrial
development bonds, issued on behalf of the state of Louisiana, its political
subdivisions or agencies and debt obligations issued by or on behalf of any
state, territory or possession of the United States, including the district of
Columbia, or any political subdivision or agency of any of these.

Louisiana municipal securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.

Louisiana municipal securities include industrial development and pollution
control bonds issued by or on behalf of public authorities to provide financing
aid to acquire sites or construct and equip facilities for privately or publicly
owned corporations. The availability of this financing encourages these
corporations to locate within the sponsoring communities and thereby increases
local employment.

The interest from the municipal securities in which the Louisiana Municipal
Income Fund invests is, in the opinion of bond counsel for the issuers, or in
the opinion of officers of Hibernia Mutual Funds and/or the investment adviser
to the Fund, exempt from both federal regular income tax and the personal income
tax imposed by the state of Louisiana. (Municipal securities not issued by the
state of Louisiana, its political subdivisions or agencies, which may generate
interest income subject to the Louisiana personal income tax, may also be
purchased by the Fund.)

General Obligation Bonds

General obligation bonds are supported by the issuer's power to exact property
or other taxes. The issuer must impose and collect taxes sufficient to pay
principal and interest on the bonds. However, the issuer's authority to impose
additional taxes may be limited by its charter or state law.

Special Revenue Bonds

Special revenue bonds are payable solely from specific revenues received by the
issuer such as specific taxes, assessments, tolls, or fees. Bondholders may not
collect from the municipality's general taxes or revenues. For example, a
municipality may issue bonds to build a toll road, and pledge the tolls to repay
the bonds. Therefore, a shortfall in the tolls normally would result in a
default on the bonds.

SPECIAL TRANSACTIONS

Repurchase Agreements

Repurchase agreements are transactions in which a Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Funds will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.

A Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks.

Temporary Defensive Investments

During times of unusual market conditions, for defensive purposes and to
maintain liquidity, Capital Appreciation Fund, Mid Cap Equity Fund, Total Return
Bond Fund, and U.S. Government Income Fund may invest in cash and money market
instruments, such as the following:

. prime commercial paper (rated A-2 or above by Standard & Poor's (S&P), Prime-2
or above by Moody's Investors Service (Moody's), or F-2 or above by Fitch,
IBCA, Inc. (Fitch)) and Europaper (rated A-2 or above or Prime-2 or above). In
the case where commercial paper or Europaper has received different ratings
from different NRSROs, such commercial paper or Europaper is an acceptable
temporary investment so long as at least one rating is one of the preceding
high-quality ratings and provided the Adviser has determined that such
investment presents minimal credit risks;

. instruments of domestic and foreign banks and savings associations having
capital, surplus, and undivided profits of over $100 million or if the
principal amount of the instrument is insured by the FDIC or the Savings
Association Insurance Fund ("SAIF"). These instruments include certificates of
deposit, demand and time deposits, savings shares, ECDs, ETDs, Canadian Time
Deposits, and bankers' acceptances;

. securities issued and/or guaranteed as to payment of principal and interest
by the U.S. government, its agencies or instrumentalities;

. repurchase agreements; and

. other short-term money market instruments which are not rated but are
determined by the Adviser to be of comparable quality to the other temporary
obligations in which the Funds may invest.

Louisiana Municipal Income Fund may, from time to time, on a temporary basis, or
when the Adviser determines that market conditions call for a temporary
defensive posture, invest in short-term tax-exempt or taxable temporary
investments. These temporary investments include: notes issued by or on behalf
of municipal or corporate issuers; obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities; other debt securities; commercial
paper; certificates of deposit of banks; and repurchase agreements. Louisiana
Municipal Income Fund has no rating requirements applicable to temporary
investments. However, the investment adviser will limit temporary investments to
those it considers to be of high quality. Although the Fund is permitted to make
taxable, temporary investments, there is no current intention of generating
income subject to federal regular income tax.

For defensive purposes only, Total Return Bond Fund may also invest in
acceptable investments of the Fund with short-term maturities.

Funds employing defensive tactics may not attain their stated goal relative to
the period during which such tactics are employed.

INVESTMENT RATINGS

The Adviser will determine whether a security is investment grade based upon the
credit ratings given by one or more nationally recognized rating services. For
example, S&P, a rating service, assigns ratings to investment grade securities
(AAA, AA, A, and BBB) based on their assessment of the likelihood of the
issuer's inability to pay interest or principal (default) when due on each
security. Lower credit ratings correspond to higher credit risk. If a security
has not received a rating, a Fund must rely entirely upon the Adviser's credit
assessment that the security is comparable to investment grade. The U.S.
Government Income Fund may invest in corporate bonds rated A or better by S&P,
Moody's or Fitch. The Louisiana Municipal Income Fund, Mid Cap Equity Fund and
Total Return Bond Fund each invest in securities rated Baa or better by Moody's
or BBB or better by S&P or Fitch.

Money market instruments and commercial paper in which the Funds normally
invest are rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's or F-1 or F-2
by Fitch.

The notes, warrants, rights and convertible securities in which the Funds
invest are rated at least BBB by S&P or Fitch, or at least Baa by Moody's, or if
not rated, are determined by the Adviser to be of comparable quality.

The securities in which the Cash Reserve Fund invests must be rated in the
highest short-term rating categories by one or more NRSROs or be of comparable
quality to securities having such ratings. The Fund has been rated AAAm by
Moody's and in the highest class of acceptable investments by the National
Association of Insurance Companies.

If a security loses its rating or has its rating reduced after a Fund
purchases it, the Fund is not required to sell or otherwise dispose of the
security, but may consider doing so.

INDUSTRY CONCENTRATION

As previously stated, the Cash Reserve Fund may invest 25% or more of its assets
in commercial paper and variable rate demand notes. Generally, in excess of 50%
of the total assets of the Fund will be invested in commercial paper and
variable rate demand notes. Commercial paper issued by finance companies will
comprise more than 25% of the Fund's total assets, unless the Fund is in a
temporary defensive position as a result of economic conditions. These policies
may not be changed without shareholder approval. Concentration of the Fund's
portfolio in such obligations may entail additional risks which are not
encountered by funds with more diversified portfolios including credit risk to
such finance companies and temporary demand and supply imbalances.

PORTFOLIO TURNOVER

The Capital Appreciation Fund, Mid Cap Equity Fund and Total Return Bond Fund
actively trade portfolio securities in an attempt to achieve their respective
goal. Active trading will cause a Fund to have an increased portfolio turnover
rate, which is likely to generate shorter-term gains (losses) for its
shareholders, which are taxed at a higher rate than longer-term gains (losses).
Actively trading portfolio securities increases a Fund's trading costs and may
have an adverse impact on the Fund's performance.

What are the Specific Risks of Investing in a Fund?

STOCK MARKET RISKS

. The value of equity securities in a Fund's portfolio will rise and fall. These
fluctuations could be a sustained trend or a drastic movement. A Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, a Fund's share price may
decline.

. The Adviser attempts to manage market risk by limiting the amount a Fund
invests in each company's equity securities. However, diversification will not
protect a Fund against widespread or prolonged declines in the stock market.

SECTOR RISKS

. Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain
sector may underperform other sectors or the market as a whole. As the Adviser
allocates more of a Fund's portfolio holdings to a particular sector, the
Fund's performance will be more susceptible to any economic, business or other
developments which generally affect that sector.

RISKS RELATED TO INVESTING FOR GROWTH

. Due to their relatively high valuations, growth stocks are typically more
volatile than value stocks. For instance, the price of a growth stock may
experience a larger decline on a forecast of lower earnings, a negative
fundamental development, or an adverse market development. Further, growth
stocks may not pay dividends or may pay lower dividends than value stocks.
This means they depend more on price changes for returns and may be more
adversely affected in a down market compared to value stocks that pay higher
dividends.

RISKS RELATED TO COMPANY SIZE

. Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more volatile
its price. Market capitalization is determined by multiplying the number of
its outstanding shares by the current market price per share.

. Companies with smaller market capitalizations also tend to have unproven track
records, a limited product or service base and limited access to capital.
These factors also increase risks and make these companies more likely to fail
than companies with larger market capitalizations.

INTEREST RATE RISKS

. Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.

. Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.

CREDIT RISKS

. Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, a Fund
will lose money.

. Many fixed income securities receive credit ratings from services such as S&P
and Moody's. These services assign ratings to securities by assessing the
likelihood of issuer default. Lower credit ratings correspond to higher credit
risk. If a security has not received a rating, a Fund must rely entirely upon
the Adviser's credit assessment.

. Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of a U.S. Treasury security with a comparable maturity (the spread)
measures the additional interest paid for risk. Spreads may increase generally
in response to adverse economic or market conditions. A security's spread may
also increase if the security's rating is lowered, or the security is
perceived to have an increased credit risk. An increase in the spread will
cause the price of the security to decline.

. Credit risk includes the possibility that a party to a transaction involving a
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.

. Trading opportunities are more limited for fixed income securities that have
not received any credit ratings, have received ratings below investment grade
or are not widely held.

PREPAYMENT RISKS

. Unlike traditional fixed income securities, which pay a fixed rate of interest
until maturity (when the entire principal amount is due) payments on mortgage
backed securities include both interest and a partial payment of principal.
Partial payment of principal may be comprised of scheduled principal payments
as well as unscheduled payments from the voluntary prepayment, refinancing, or
foreclosure of the underlying loans. These unscheduled prepayments of
principal create risks that can adversely affect a Fund holding mortgage
backed securities.

For example, when interest rates decline, the values of mortgage backed
securities generally rise. However, when interest rates decline, unscheduled
prepayments can be expected to accelerate, and a Fund would be required to
reinvest the proceeds of the prepayments at the lower interest rates then
available. Unscheduled prepayments would also limit the potential for capital
appreciation on mortgage backed securities.

Conversely, when interest rates rise, the values of mortgage backed securities
generally fall. Since rising interest rates typically result in decreased
prepayments, this could lengthen the average lives of mortgage backed
securities, and cause their value to decline more than traditional fixed income
securities.

. Generally, mortgage backed securities compensate for the increased risk
associated with prepayments by paying a higher yield. The additional interest
paid for risk is measured by the difference between the yield of a mortgage
backed security and the yield of a U.S. Treasury security with a comparable
maturity (the spread). An increase in the spread will cause the price of the
mortgage backed security to decline. Spreads generally increase in response to
adverse economic or market conditions. Spreads may also increase if the
security is perceived to have an increased prepayment risk or is perceived to
have less market demand.

CALL RISKS

. Call risk is the possibility that an issuer may redeem a fixed income security
before maturity (a call) at a price below its current market price. An
increase in the likelihood of a call may reduce the security's price.

. If a fixed income security is called, a Fund may have to reinvest the proceeds
in other fixed income securities with lower interest rates, higher credit
risks, or other less favorable characteristics.

TAX RISKS

. In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest
received and distributed by the Louisiana Municipal Income Fund to
shareholders to be taxable.

. Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.

RISKS OF INVESTING IN LOUISIANA

Yields on Louisiana municipal securities depend on a variety of factors,
including: the general conditions of the money market and the taxable and
municipal security markets; the size of the particular offering; the maturity of
the obligations; and the credit quality of the issue. The ability of the Fund to
achieve its goal also depends on the continuing ability of the issuers of
Louisiana municipal securities to meet their obligations for the payment of
interest and principal when due.

Further, the Louisiana economy is predominated by oil and gas; both the
exploration and production. Any adverse economic conditions or developments
affecting these industries, the state of Louisiana or its municipalities could
impact the Fund's portfolio. Investing in Louisiana municipal securities which
meet the Fund's quality standards may not be possible if the state of Louisiana
and its municipalities do not maintain their current credit ratings.

The Fund may invest more than 25% of the value of its total assets in
industrial development and pollution control bonds, which may result in more
than 25% of the Fund's total assets being invested in one industry. The Fund may
also invest more than 25% of its assets in housing bonds, which are revenue
bonds. Legislative actions at the state or federal level, changes in national or
regional economic conditions, or changes in the quality of mortgages securing
some housing bonds are some of the factors that could affect housing bonds.

Other factors that may affect the Fund's returns include bond defaults or
increase in the risk of defaults, or early redemptions of portfolio securities.

NON-DIVERSIFICATION

The Fund is a non-diversified investment company. An investment in the Fund,
therefore, may entail greater risk than would exist in a diversified investment
company because the higher percentage of investments across fewer issuers could
result in greater fluctuation in the total market value of the Fund's portfolio.
Any economic, political, or regulatory developments affecting the value of the
securities in the Fund's portfolio could have a greater impact on the total
value of the portfolio than would be the case if the portfolio were diversified
among more issuers. The Fund will attempt to minimize the risks associated with
a non-diversified portfolio by limiting, with respect to 75% of the Fund's total
assets, investments in one issuer to not more than 10% of the value of its total
assets. The total amount of the remaining 25% of the value of the Fund's total
assets could be invested in a single issuer, but only if the investment adviser
believes such a strategy to be prudent. In addition, the Fund intends to comply
with Subchapter M of the Internal Revenue Code. This undertaking requires that
at the end of each quarter of the taxable year, the aggregate value of all
investments in any one issuer (except U.S. government obligations, cash, and
money market instruments) which exceed 5% of the Fund's total assets not exceed
50% of the value of the Fund's total assets.

What do Shares Cost?

You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Capital Appreciation Fund, Louisiana Municipal Income
Fund, Mid Cap Equity Fund, Total Return Bond Fund and U.S. Government Income
Fund (collectively, the Equity and Income Funds) receive your transaction
request in proper form (as described in the prospectus), it is processed at the
next calculated NAV plus any applicable front-end sales charge (public offering
price). From time to time a Fund may purchase foreign securities that trade on
foreign markets on days the NYSE is closed. The value of a Fund's assets may
change on days you cannot purchase or redeem Shares. NAV of the Equity and
Income Funds is determined at the end of regular trading (normally 3:00 p.m.
Central time) each day the NYSE is open.

The Capital Appreciation Fund and Mid Cap Equity Fund generally value equity
securities according to the last sale price in the market in which they are
primarily traded (either a national securities exchange or the over-the-counter
market).

The Louisiana Municipal Income Fund, Total Return Bond Fund and U.S.
Government Income Fund generally value fixed income securities at the last sale
price on a national securities exchange, if available, otherwise, as determined
by an independent pricing service.

The Cash Reserve Fund and U.S. Treasury Money Market Fund (the Money Market
Funds) attempt to stabilize the NAV of their Shares at $1.00 by valuing the
portfolio securities using the amortized cost method. The Funds cannot guarantee
that their NAV will always remain at $1.00 per Share. The Money Market Funds do
not charge a front-end sales charge. NAV of the Money Market Funds is determined
at 11:00 a.m. (Central time) and as of the end of regular trading (normally 3:00
p.m. Central time) each day the NYSE is open.

The minimum initial investment for each Fund is $1,000. With respect to the
Money Market Funds, if the investment is in a retirement plan, the minimum
initial investment is $250. Subsequent investments must be in amounts of at
least $100. The Funds may choose to waive these minimum investment requirements
for Hibernia National Bank or its affiliates and for directors and employees of
Hibernia National Bank and the immediate family members of these individuals.

The following tables summarize the maximum sales charge that you will pay on
an investment in a Fund. Keep in mind that investment professionals may charge
you fees for their services in connection with your Share transactions.

SALES CHARGE WHEN YOU PURCHASE

Class A Shares of Capital Appreciation Fund and Mid Cap Equity Fund are sold
with a sales charge as follows:

Purchase Amount Sales Charge as Sales Charge as
a Percentage of a Percentage of
Public Offering NAV
Price
<S> <C> <C>
Less than $100,000 4.50% 4.71%
$100,000 but less 3.75% 3.90%
than $250,000
$250,000 but less 2.50% 2.56%
than $500,000
$500,000 but less 2.00% 2.04%
than $750,000
$750,000 but less than $1 1.00% 1.01%
million
$1 million but less than 0.50% 0.50%
$2 million
$2 million or greater 0.25% 0.25%
</TABLE>

Shares of Louisiana Municipal Income Fund, Total Return Bond Fund and U.S.
Government Income Fund are sold with a sales charge as follows:

<TABLE>
<CAPTION>
Purchase Amount Sales Charge as Sales Charge as
a Percentage of a Percentage of
Public Offering NAV
Price
<S> <C> <C>
Less than $100,000 3.00% 3.09%
$100,000 but less 2.50% 2.56%
than $250,000
$250,000 but less 2.00% 2.04%
than $500,000
$500,000 but less 1.00% 1.01%
than $750,000
$750,000 but less 0.75% 0.76%
than $1million
$1 million but less 0.50% 0.50%
than $2 million
$2 million or greater/1/ 0.25% 0.25%
</TABLE>

If your investment qualifies for a reduction or elimination of the sales charge
as described below, you or your investment professional should notify the Funds'
Distributor at the time of purchase. If the Distributor is not notified, you
will receive the reduced sales charge only on additional purchases, and not
retroactively on previous purchases.

The sales charge at purchase may be reduced or eliminated by:
. purchasing Shares in greater quantities to reduce the applicable sales
charge;
. combining concurrent purchases of Shares:
- by you, your spouse, and your children under age 21; or
- of the same share class of two or more Funds (other than Money Market
Funds);
. accumulating purchases (in calculating the sales charge on an additional
purchase, include the current value of previous Share purchases still invested
in the Fund); or
. signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).

The sales charge will be eliminated when you purchase Shares:

. within 30 days (within 120 days for IRA accounts) of redeeming Shares of an
equal or lesser amount of the same share class;
. by exchanging shares from the same share class of another Fund (other than a
Money Market Fund);
. through wrap accounts or other investment programs where you pay the
investment professional directly for services;
. through investment professionals that receive no portion of the sales
charge;

. as a Trustee or employee of the Funds, the Adviser, the Distributor and
their affiliates, and the immediate family members of these individuals;
. through the Trust Division of HNB or other affiliates of Hibernia, for Funds
which are held in a fiduciary, agency, custodial or similar capacity.

SALES CHARGE WHEN YOU REDEEM

Redemption proceeds of Class B Shares of Capital Appreciation Fund and Mid Cap
Equity Fund may be reduced by a sales charge, commonly referred to as a
contingent deferred sales charge (CDSC).

<TABLE>
<CAPTION>
Class B Shares of Capital Appreciation Fund, Mid Cap Equity Fund and Cash
Reserve Fund

<S> <C>
Shares Held Up To: CDSC
1 year 5.50%
2 years 4.50%
3 years 4.00%
4 years 3.00%
5 years 2.00%
6 years 1.00%
7 years or more 0.00%
</TABLE>

If your investment qualifies for elimination of the CDSC as described below, you
or your investment professional should notify the Distributor at the time of
redemption. If the Distributor is not notified, the CDSC will apply.

You will not be charged a CDSC when redeeming Class B Shares:

. purchased with reinvested dividends or capital gains;
. purchased within 30 days (120 days for an IRA account) of redeeming Shares
of an equal or lesser amount;
. that you exchanged into the same share class of another Fund if the shares
were held for the applicable CDSC holding period (other than a Money Market
Fund);
. purchased through investment professionals who did not receive advanced
sales payments;
. if, after you purchase Shares, you become disabled as defined by the IRS;

. if a Fund redeems your Shares and closes your account for not meeting the
minimum balance requirement;
. if your redemption is a required retirement plan distribution; or
. upon the death of the last surviving shareholder of the account.

To keep the sales charge as low as possible, the Funds redeem your Shares in
this order:

. Shares acquired through the reinvestment of dividends and long-term capital
gains;
. Shares held for more than six full years from the date of purchase; and .
Shares held for fewer than seven years on a first-in, first-out basis.

The CDSC is then calculated using the Share price at the time of purchase or
redemption, whichever is lower.

CONVERSION FEATURE

Class B Shares include all Class B Shares which have been outstanding for less
than the period ending eight years after the end of the month in which the
shareholder's order to purchase Class B Shares was accepted. At the end of this
eight-year period, Class B Shares will automatically convert to Class A Shares
of, as applicable, Capital Appreciation Fund, Mid Cap Equity Fund or Cash
Reserve Fund, in which case the Shares will be subject to a lower Rule 12b-1
distribution fee which is assessed on Class A Shares and will no longer be
subject to a shareholder services fee. Such conversion will be on the basis of
the relative NAV of the two classes, without the imposition of any sales charge,
fee or other charge. The purpose of the conversion feature is to relieve the
holders of the Class B Shares that have been outstanding for a period of time
sufficient for the distributor to have been compensated for distribution
expenses related to the Class B Shares from most of the burden of such
distribution-related expenses. This conversion is a non-taxable event.

For purposes of conversion to Class A Shares, Class B Shares purchased through
the reinvestment of dividends and distributions paid on Class B Shares in a
shareholder's Fund account will be considered to be held in a separate
sub-account. Each time any Class B Shares in the shareholder's Fund account
(other than those in the sub-account) convert to Class A Shares, an equal pro
rata portion of the Class B Shares in the sub-account will also convert to Class
A Shares. Orders for $250,000 or more will be invested in Class A Shares instead
of Class B Shares to maximize your return and minimize the sales charges and
marketing fees. Accounts held in the name of an investment professional may be
treated differently. Class B Shares will automatically convert into Class A
Shares after eight full years from the purchase date. This conversion is a
non-taxable event.

How are the Funds Sold?

The Capital Appreciation Fund, Mid-Cap Equity Fund and Cash Reserve Fund each
offer two Share classes: Class A Shares and Class B Shares, each representing
interests in a single portfolio of securities. The Louisiana Municipal Income
Fund, Total Return Bond Fund, U.S. Government Income Fund, and U.S. Treasury
Money Market Fund each offer a single class of Shares.

The Funds' Distributor, Federated Securities Corp., markets the Funds' Shares
described in this prospectus to institutions or individuals, directly or through
investment professionals. The Louisiana Municipal Income Fund may not be a
suitable investment for retirement plans or for non-Louisiana taxpayers because
it invests in Louisiana municipal securities.

When the Distributor receives marketing fees and sales charges, it may pay
some or all of them to investment professionals. The Distributor and its
affiliates may pay out of their assets other amounts (including items of
material value) to investment professionals for marketing and servicing Shares.

The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

RULE 12b-1 PLAN

The Funds (except U.S. Treasury Money Market Fund) have adopted a Rule 12b-1
Plan, which allows each Fund to pay fees for marketing and administrative
services to the Distributor and investment professionals for the sale,
distribution and customer servicing of a Fund's Shares. Because these Shares pay
marketing and administrative fees on an ongoing basis, your investment cost may
be higher over time than other shares with different sales charges and marketing
fees.

How to Purchase Shares

You may purchase Shares through Hibernia National Bank (HNB), Hibernia
Investments, L.L.C. (HISI) or an investment professional (broker/dealer). Shares
of the Money Market Funds may be purchased directly from the Distributor. The
Funds reserve the right to reject any request to purchase or exchange Shares.

THROUGH HNB OR HISI

. You may call HNB to place an order to purchase Shares of the all the Funds,
except Class B Shares of Capital Appreciation Fund and Mid Cap Equity Fund.
(Call toll-free 1-800-999-0426).

. You may call HISI toll-free at 1-800-999-0124 to purchase Shares of all the
Funds. Texas residents may purchase Shares only through HISI.

Purchase orders for the Funds (except the Money Market Funds) are considered
received when the appropriate Fund is notified of the purchase order. Purchase
orders must be received by HNB or HISI before 3:00 p.m. (Central time) and must
be transmitted by HNB or HISI to the appropriate Fund or its agent before 3:00
p.m. (Central time) in order for Shares to be purchased at that day's public
offering price.

Payment for Shares of the Money Market Funds may be made either by check or
federal funds. Payment by check must be included with the order.

Purchase orders for the Money Market Funds are considered received after
payment by check is converted into federal funds. When payment is made with
federal funds, the order is considered received immediately. Payment by federal
funds must be received before 11:00 a.m. (Central time) on the same day as the
order to earn dividends for that day. Purchase orders for the Money Market Funds
may still be placed after 11:00 a.m. (Central time) but payment for such orders
by federal funds must be received before 2:00 p.m. (Central time) and you will
not earn dividends for that day. If your check does not clear, your purchase
order will be canceled and you could be liable for any losses or fees the Funds
or their transfer agent incurs.

Federal funds should be wired as follows:

Hibernia National Bank,
New Orleans, Louisiana

All requests must include:

. Shareholder Name;
. Fund Name and Share Class;
. Title or name of account;
. and Wire Order Number.

Shares cannot be purchased by wire on holidays when wire transfers are
restricted.

THROUGH A BROKER/DEALER

. You may place an order through brokers and dealers to purchase Shares of the
Funds (except U.S. Treasury Money Market Fund and Class A Shares of Cash
Reserve Fund). Shares will be purchased at the public offering price next
determined after the Fund receives the purchase request from HNB or HISI,
which forwards the request to the transfer agent.

. Purchase requests through registered broker/dealers must be received by
Hibernia National Bank or HISI and transmitted to the Fund before 3:00 p.m.
(Central time) in order for shares to be purchased at that day's public
offering price.

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Fund shares at the NAV next determined after an order is received,
plus the applicable sales charge, if any. A shareholder of a Fund may apply for
participation in this program through HNB or HISI.

How to Redeem and Exchange Shares

You should redeem or exchange Shares:

. directly from HNB or HISI if you purchased Shares directly from one of them;
or
. through an investment professional if you purchased Shares through an
investment professional.

DIRECTLY FROM HNB OR HISI

By Telephone

You may redeem or exchange Shares by calling HNB at 1-800-999-0124, HISI at 1-
800-999-0426, or the Fund once you have completed the appropriate authorization
form (you may exchange Shares by calling the Distributor directly).

Equity and Income Funds

If you call before the end of regular trading on the NYSE (normally 3:00 p.m.
Central time) to redeem Shares of Capital Appreciation Fund, Louisiana Municipal
Income Fund, Mid Cap Equity Fund, Total Return Bond Fund or U.S. Government
Income Fund, you will receive a redemption amount based on that day's NAV.

Money Market Funds

If you call before 2:00 p.m. (Central time) to redeem from a Money Market Fund,
your redemption will be wired to you the same day. If you call before 11:00 a.m.
(Central time) you will not receive that day's dividend.

If you call after 2:00 p.m. (Central time) to redeem from a Money Market Fund,
your redemption will be wired to you the following business day. You will
receive that day's dividend.

By Mail

You may redeem or exchange Shares by mailing a written request to HNB or HISI.

Equity and Income Funds

You will receive a redemption amount based on the next calculated NAV after the
Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity Fund,
Total Return Bond Fund or U.S. Government Income Fund receives your written
request in proper form.

Money Market Funds

Your redemption request for a Money Market Fund will be processed on the day the
Fund receives your written request in proper form. Dividends are paid up to and
including the day that a redemption request is processed.

Send requests by mail to:
HISI
313 Carondelet Street
New Orleans, Louisiana 70130

All requests must include:
. Shareholder Name;
. Fund Name and Share Class, account number and account registration;

. amount to be redeemed or exchanged;
. signatures of all shareholders exactly as registered; and
. if exchanging, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

Call your investment professional or HISI at 1-800-999-0426 if you need special
instructions.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 3:00 p.m. Central time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.

Signature Guarantees Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days;
. a redemption is payable to someone other than the shareholder(s) of record;
or
. if exchanging (transferring) into another fund with a different shareholder
registration.

A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.

PAYMENT METHODS FOR REDEMPTIONS

Your redemption proceeds will be mailed by check to your address of record or
wired to your account at a domestic commercial bank that is a Federal Reserve
System member.

Redemption in Kind

Although the Funds intend to pay Share redemptions in cash, they reserve the
right to pay the redemption price in whole or in part by a distribution of a
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to five days:

. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts a Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from a Fund if
those checks are undeliverable and returned to the Fund.

REDEMPTIONS FROM RETIREMENT ACCOUNTS

In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in a Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.

EXCHANGE PRIVILEGE

Shareholders of any of the Funds are shareholders of Hibernia Funds. You may
exchange Class A Shares of Capital Appreciation Fund, Mid Cap Equity Fund, and
Cash Reserve Fund or Shares of Louisiana Municipal Income Fund, Total Return
Bond Fund, U.S. Government Income Fund, and U.S. Treasury Money Market Fund for
Shares of each of the portfolios of Hibernia Mutual Funds through a telephone
exchange program. Class B Shares of Capital Appreciation Fund, Mid Cap Equity
Fund, and Cash Reserve Fund may exchange Class B Shares through a telephone
exchange program.

To do this, you must:

. ensure that the account registrations are identical;
. you must exchange Shares having an NAV of at least $1,000; and
. receive a prospectus for the Fund into which you wish to exchange.

When an exchange is made from a Fund with a front end sales charge to a Fund
with no front end sales charge, the shares exchanged and acquired through
reinvested dividends retain the character of the exchanged Shares for purposes
of exercising further exchange privileges; thus, an exchange of such Shares for
Shares of a Fund with a front end sales charge would be at NAV.

An exchange of Class B shares for Class B Shares of another Hibernia Fund will
not be subject to a CDSC. However, if the shareholder redeems the exchanged-for
Shares within six years of the original purchase of Class B Shares, a CDSC will
be imposed. For purposes of computing the CDSC, the length of time the
shareholder has owned Class B Shares will be measured from the date of original
purchase and will not be affected by the exchange.

The Funds may modify or terminate the exchange privilege at any time. The
Funds' management or Adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading that is
detrimental to the Funds and other shareholders. If this occurs, the Funds may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Hibernia Funds.

SYSTEMATIC WITHDRAWAL PROGRAM (SWP)

You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the new account form or contact your
investment professional, HNB or HISI. Your account value must have a value of at
least $10,000, other than retirement accounts, at the time the program is
established. This program may reduce, and eventually deplete, your account.
Payments should not be considered yield or income.

Generally, it is not advisable to continue to purchase Class A Shares of
Capital Appreciation Fund, Mid Cap Equity Fund or Shares of Louisiana Municipal
Income Fund, Total Return Bond Fund, or U.S. Government Income Fund subject to a
sales charge while redeeming Shares using this program.

Systematic Withdrawal Program On

Class B Shares
You will not be charged a CDSC on redemptions if:
. you redeem 12% or less of your account value in a single year;
. you reinvest all dividends and capital gains distributions; and
. your account has at least a $10,000 balance when you establish the SWP (You
cannot aggregate multiple Class B Share accounts to meet this minimum
balance.)

You will be subject to a CDSC on redemption amounts that exceed the 12% annual
limit. In measuring the redemption percentage, your account is valued when you
establish the SWP and then annually at calendar year-end. You can redeem
monthly, quarterly, or semi-annually.

ADDITIONAL CONDITIONS

Telephone Transactions

The Funds will record your telephone instructions. If a Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

Share Certificates

The Funds no longer issue share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Funds, you must
return the certificates with your written redemption or exchange request. For
your protection, send your certificates by registered or certified mail, but do
not endorse them.

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases, redemptions and exchanges except for
systematic transactions. In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.

DIVIDENDS AND CAPITAL GAINS

The Capital Appreciation Fund and Mid Cap Equity Fund declare and pay any
dividends quarterly to shareholders. The Louisiana Municipal Income Fund, Total
Return Bond Fund and U.S. Government Income Fund declare and pay any dividends
monthly to shareholders. Dividends are paid to all shareholders invested in a
Fund on the record date. The record date is the date on which a shareholder must
officially own Shares in order to earn a dividend. The Money Market Funds
declare any dividends daily and pay them monthly to shareholders.

If you purchase Shares by wire, you begin earning dividends on the day your
wire is received. If you purchase Shares by check, you begin earning dividends
on the business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.

In addition, the Funds pay any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.

If you purchase Shares (other than Money Market Fund Shares) just before a
Fund declares a dividend or capital gain distribution, you will pay the full
price for the Shares and then receive a portion of the price back in the form of
a taxable distribution, whether or not you reinvest the distribution in Shares.
Therefore, you should consider the tax implications of purchasing Shares shortly
before a Fund declares a dividend or capital gain. Contact your investment
professional or HNB for information concerning when dividends and capital gains
will be paid.

The Money Market Funds do not expect to realize any capital gains or losses.
If capital gains or losses were to occur, they could result in an increase or
decrease in dividends.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.

TAX INFORMATION

The Funds send an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. For all the Funds (except
Louisiana Municipal Income Fund), Fund distributions of dividends and capital
gains are taxable to you whether paid in cash or reinvested in the Fund.
Dividends are taxable as ordinary income; capital gains are taxable at different
rates depending upon the length of time a Fund holds its assets.

<TABLE>
<CAPTION>
Fund Distributions
are expected to
be primarily
<S> <C>
Capital Appreciation Fund Capital Gains
Mid Cap Equity Fund Capital Gains
Total Return Bond Fund Dividends
U.S. Government Income Fund Dividends
Cash Reserve Fund Dividends
U.S. Treasury Money Market Fund Dividends
</TABLE>

With regard to the Louisiana Municipal Income Fund, it is anticipated that
distributions will be primarily dividends that are exempt from federal income
tax, although a portion of the Fund's dividends may not be exempt. Dividends may
be subject to state and local taxes, although the Fund's dividends will be
exempt from Louisiana state personal income tax to the extent they are derived
from interest on obligations exempt from Louisiana personal income taxes.
Capital gains and non-exempt dividends are taxable whether paid in cash or
reinvested in the Fund. It is likely that you will be required to include
interest from a portion of the municipal securities owned by the Fund in
calculating the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.

Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state, and local tax liability.

Who Manages the Funds?

The Board of Trustees governs the Funds. The Board selects and oversees the
Adviser, HNB. The Adviser manages the Funds' assets, including buying and
selling portfolio securities. The Adviser's address is Hibernia Funds, P.O. Box
61540, New Orleans, Louisiana 70161.

HNB, a national bank organized in 1890, is a wholly owned subsidiary of
Hibernia Corporation ("Hibernia"). HNB has acted as investment adviser to the
Trust since its inception in 1988. Through its subsidiaries and affiliates,
Hibernia offers a full range of financial services to the public, including
commercial lending, depository services, cash management, retail banking,
mortgage banking, discount brokerage, investment counseling, international
banking, and trust services.

Hibernia is the largest publicly traded national banking company headquartered
in Louisiana, Texas, Oklahoma, Arkansas or Mississippi. When pending mergers are
complete, Hibernia would be a $15.1-billion-asset organization with 257 banking
locations in 34 Louisiana parishes and 13 Texas counties. It would be either
first, second or third in deposit market share in 32 Louisiana parishes and six
Texas counties. Hibernia's Louisiana markets represent approximately 82% of the
state's population and 86% of its deposits. Its statewide Louisiana deposit
share would be 21%.

As of December 31, 1998, the Trust Group had $7 billion under administration
of which it had investment discretion over $2.4 billion.

As part of their regular banking operations, HNB may make loans to public
companies. Thus, it may be possible, from time to time, for a Fund to hold or
acquire the securities of issuers which are also lending clients of HNB. The
lending relationship will not be a factor in the selection of securities.

John A. Cain became Capital Appreciation Fund's portfolio manager in March
1995 and Mid Cap Equity Fund's portfolio manager in June 1998. Mr. Cain is a
Vice President and Trust Investment Officer, specializing in equity and balanced
account management for Hibernia since May 1985. He has 40 years of investment
management experience both in the brokerage and trust industries. He earned his
B.B.A. from the University of Mississippi.

Jeffrey R. Tanguis has been Louisiana Municipal Income Fund's portfolio
manager since 1988 and portfolio manager of Total Return Bond Fund since 1995.
Mr. Tanguis joined Hibernia in 1984 and is currently a Vice President and Trust
Investment Officer of Hibernia. Mr. Tanguis received a B.S. from Louisiana State
University.

Martin C. Sirera has been the portfolio manager of the U.S. Government Income
Fund, Cash Reserve Fund and U.S. Treasury Money Market Fund since 1999. Mr.
Sirera joined Hibernia National Bank in 1996 and is currently a Vice President,
Trust Investment Officer and a portfolio manager responsible for monitoring and
managing personal trust, employee benefit, and investment management agency
accounts. Prior to joining Hibernia, Mr. Sirera was a portfolio manager for
Regions Bank in Mobile, Alabama from October 1995 through March 1996. Before
that, he was a portfolio manager for First NBC in New Orleans, Louisiana from
January 1993 through September 1995. Mr. Sirera is a Chartered Financial Analyst
and received his B.S. degree in Finance from the University of New Orleans.

ADVISORY FEES

The Adviser receives an annual investment advisory fee at annual rates equal to
percentages of the relevant Fund's average net assets, as follows: Capital
Appreciation Fund--0.75%; Louisiana Municipal Income Fund--0.45%; Mid Cap Equity
Fund--0.75%, Total Return Bond Fund--0.70%; U.S. Government Income Fund--0.45%;
Cash Reserve Fund and U.S. Treasury Money Market Fund--0.40%. The Adviser may
voluntarily choose to waive a portion of its fee or reimburse a Fund for certain
operating expenses.

Year 2000 Readiness

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Funds, that rely on computers.

While it is impossible to determine in advance all of the risks to the Funds,
a Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Funds' service providers have been making changes to their computer
systems to fix any Year 2000 problems. In addition, they have been working to
gather information from third-party providers to determine their Year 2000
readiness.

Year 2000 problems would also increase the risks of a Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser has been
reviewing information regarding the Year 2000 readiness of issuers of securities
each Fund may purchase. However, this may be difficult with certain issuers. For
example, funds dealing with foreign service providers or investing in foreign
securities will have difficulty determining the Year 2000 readiness of those
entities. The financial impact of these issues for the Funds is still being
determined. There can be no assurance that potential Year 2000 problems would
not have a material adverse effect on a Fund.

Financial Information

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand a Fund's financial performance
for its past five fiscal years, or since inception, if the life of a Fund is
shorter. Some of the information is presented on a per share basis. Total
returns represent the rate an investor would have earned (or lost) on an
investment in a Fund, assuming reinvestment of any dividends and capital gains.

This information has been audited by Ernst & Young, LLP whose report, along
with the Funds' audited financial statements, is included in the Annual Report.

Hibernia Funds Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
Net Realized and
Net Asset Unrealized Distributions
Distributions Distributions
Value, Net Gain/(Loss) on Total from from Net from
Net in Excess of
Year Ended Beginning Investment Investment Investment Investment Realized Gain
on Net Investment
August 31, of Period Income (Loss) Transactions Operations Income
Investment Income
<S> <C> <C> <C> <C> <C>
<C> <C>
Capital Appreciation FundClass A Shares
1995 $13.81 0.22 2.54 2.76 (0.21)
(0.27) --
1996 $16.09 0.19 2.62 2.81 (0.19)
(0.84) --
1997 $17.87 0.15 6.51 6.66 (0.16)
(1.99) --
1998 $22.38 0.08 1.09 1.17 (0.07)
(2.34) --
1999 $21.14 0.01 7.73 7.74 (0.00)/8/
(2.79) (0.02)/3/
Capital Appreciation FundClass B Shares
1997/1/ $18.90 (0.01)/2/ 3.48 3.47 --
- -- (0.05)/3/
1998 $22.32 (0.06) 1.07 1.01 --
(2.34) --
1999 $20.99 (0.16) 7.66 7.50 --
(2.79) --
Louisiana Municipal Income Fund
1995 $10.82 0.59 0.24 0.83 (0.58)
(0.08) --
1996 $10.99 0.60 (0.05) 0.55 (0.60)
- -- --
1997 $10.94 0.57 0.28 0.85 (0.58)
- -- --
1998 $11.21 0.56 0.32 0.88 (0.57)
(0.05) (0.00)/3/,/8/
1999 $11.47 0.54 (0.54) 0.00 (0.54)
(0.08) --
Mid Cap Equity FundClass A Shares
19987 $10.00 (0.01) (1.85) (1.86) --
- -- --
1999 $ 8.14 (0.05)2 3.26 3.21 --
- -- --
Mid Cap Equity FundClass B Shares
19987 $10.00 (0.01) (1.86) (1.87) --
- -- --
1999 $ 8.13 (0.13)2 3.29 3.16 --
- -- --
Total Return Bond Fund
1995 $ 9.64 0.56 0.39 0.95 (0.54)
- -- --
1996 $10.05 0.56 (0.27) 0.29 (0.57)
- -- --
1997 $ 9.77 0.60 0.23 0.83 (0.61)
- -- --
1998 $ 9.99 0.58 0.35 0.93 (0.58)
(0.07) (0.00)/3/,/8/
1999 $10.27 0.58 (0.57) 0.01 (0.57) (0.03)
</TABLE>

1 Reflects operations for the period from December 2, 1996 (date of initial
public offering) to August 31, 1997.

2 Per share information presented is based on the monthly average number of
shares outstanding divided by the net operating loss due to large fluctuations
in the number of shares outstanding during the period.

3 These distributions in excess of net investment income were a result of
certain book and tax timing differences. These distributions do not represent
a return of capital for federal tax purposes.

4 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

5 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

<TABLE>
<CAPTION>
Ratios to Average Net Assets
Net Net Investment
Net Asset Investment Expense Income Net Assets,
Total Value, End Total Income (after (Loss) End of
Period Portfolio
Distributions of Period Return/4/ Expenses/5/ (Loss)/5/ waivers) (after waivers) (000
omitted) Turnover Rate
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
(0.48) $16.09 20.71% 1.25% 1.46% 1.25% 1.46%
$144,476 69%
(1.03) $17.87 18.03% 1.24% 1.08% 1.24% 1.08%
$169,648 69%
(2.15) $22.38 39.56% 1.24% 0.72% 1.24% 0.72%
$283,040 62%
(2.41) $21.14 5.12% 1.21% 0.32% 1.21% 0.32%
$279,778 62%
(2.81) $26.07 38.35% 1.22% 0.03% 1.22% 0.03%
$352,876 44%

(0.05) $22.32 18.40% 1.99%/6/ (0.09%)/6/ 1.99%/6/ (0.09%)/6/ $
4,635 62%
(2.34) $20.99 4.36% 1.96% (0.44%) 1.96% (0.44%) $
10,840 62%
(2.79) $25.70 37.35% 1.98% (0.73%) 1.98% (0.73%) $
18,435 44%

(0.66) $10.99 8.20% 0.85% 5.46% 0.77% 5.54% $
67,600 22%
(0.60) $10.94 5.04% 0.82% 5.29% 0.74% 5.37% $
65,717 17%
(0.58) $11.21 8.31% 0.77% 5.11% 0.69% 5.19%
$101,441 17%
(0.62) $11.47 8.04% 0.74% 4.86% 0.66% 4.94% $
98,711 24%
(0.62) $10.85 (0.08%) 0.95% 4.48% 0.66% 4.77% $
92,702 17%

-- $ 8.14 (18.60%) 2.09%/6/ (0.68%)/6/ 1.89%/6/ (0.48%)/6/ $
13,422 1%
-- $11.35 39.43% 2.46% (1.14%) 1.76% (0.44%) $
18,283 55%
-- $ 8.13 (18.70%) 2.93%/6/ (1.39%)/6/ 2.76%/6/ (1.22%)/6/ $
567 1%
-- $11.29 38.87% 3.14% (1.84%) 2.51% (1.21%) $
1,990 55%

(0.54) $10.05 10.19% 1.30% 5.71% 1.30% 5.71% $
69,455 91%
(0.57) $ 9.77 2.90% 1.29% 5.57% 1.29% 5.57% $
71,188 38%
(0.61) $ 9.99 8.71% 1.29% 6.00% 1.29% 6.00% $
71,867 65%
(0.65) $10.27 9.51% 1.25% 5.49% 1.08% 5.66% $
79,957 31%
(0.60) $ 9.68 (0.03%) 1.29% 5.39% 0.99% 5.69% $
79,913 20%
</TABLE>

6 Computed on an annualized basis.
7 Reflects operations for the period from July 13, 1998 (date of initial public
offering) to August 31, 1998.
8 Amount is less than $0.01 per share.

Hibernia Funds Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
Net Realized and
Net Asset Unrealized Distributions
Distributions Distributions
Value, Net Gain/(Loss) on Total from from Net from
Net in Excess of
Year Ended Beginning Investment Investment Investment Investment Realized Gain
on Net Investment
August 31, of Period Income (Loss) Transactions Operations Income
Investment Income
<S> <C> <C> <C> <C> <C>
<C> <C>
U.S. Government Income Fund
1995 $ 9.92 0.71 0.20 0.91 (0.69)
- -- --
1996 $10.14 0.67 (0.30) 0.37 (0.69)
- -- --
1997 $ 9.82 0.62 0.18 0.80 (0.64)
- -- --
1998 $ 9.98 0.61 0.34 0.95 (0.60)
- -- --
1999 $10.33 0.57 (0.52) 0.05 (0.57)
- -- --
Cash Reserve FundClass A Shares
1995 $ 1.00 0.05 -- 0.05 (0.05)
- -- --
1996 $ 1.00 0.05 -- 0.05 (0.05)
- -- --
1997 $ 1.00 0.05 -- 0.05 (0.05)
- -- --
1998 $ 1.00 0.05 -- 0.05 (0.05)
- -- --
1999 $ 1.00 0.04 -- 0.04 (0.04)
- -- --
Cash Reserve FundClass B Shares
19991 $ 1.00 0.03 -- 0.03 (0.03)
- -- --
U.S. Treasury Money Market Fund
1995 $ 1.00 0.05 -- 0.05 (0.05)
- -- --
1996 $ 1.00 0.05 -- 0.05 (0.05)
- -- --
1997 $ 1.00 0.05 -- 0.05 (0.05)
- -- --
1998 $ 1.00 0.05 -- 0.05 (0.05)
- -- --
1999 $ 1.00 0.04 -- 0.04 (0.04)
- -- --
</TABLE>

1 Reflects operations for the period from September 4, 1998 (date of initial
public offering) to August 31, 1999.

2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

3 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

4 Computed on an annualized basis.

<TABLE>
<CAPTION>
Ratios to Average Net Assets
Net Net Investment
Net Asset Investment Expense Income Net Assets,
Total Value, End Total Income (after (Loss) End of
Period Portfolio
Distributions of Period Return/2/ Expenses/3/ (Loss)/3/ waivers) (after waivers) (000
omitted) Turnover Rate
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
(0.69) $10.14 9.60% 0.88% 6.96% 0.82% 7.02% $
42,593 5%
(0.69) $ 9.82 3.72% 0.93% 6.58% 0.87% 6.64% $
37,544 27%
(0.64) $ 9.98 8.39% 0.94% 6.25% 0.88% 6.31% $
59,438 72%
(0.60) $10.33 9.74% 0.79% 5.92% 0.73% 5.98% $
83,535 44%
(0.57) $ 9.81 0.41% 0.97% 5.28% 0.70% 5.55% $
84,242 24%

(0.05) $ 1.00 4.97% 0.86% 4.87% 0.86% 4.87%
$191,242 --
(0.05) $ 1.00 4.79% 0.87% 4.69% 0.87% 4.69%
$168,344 --
(0.05) $ 1.00 4.70% 0.89% 4.59% 0.89% 4.59%
$150,377 --
(0.05) $ 1.00 4.82% 0.89% 4.72% 0.89% 4.72%
$149,219 --
(0.04) $ 1.00 4.23% 0.92% 4.16% 0.92% 4.16%
$157,099 --

(0.03) $ 1.00 3.37% 1.67%/4/ 3.35%/4/ 1.67%/4/ 3.35%/4/ $
77 --

(0.05) $ 1.00 5.15% 0.68% 4.93% 0.46% 5.15%
$116,489 --
(0.05) $ 1.00 5.08% 0.66% 4.73% 0.44% 4.95%
$136,068 --
(0.05) $ 1.00 4.92% 0.64% 4.67% 0.50% 4.81%
$154,624 --
(0.05) $ 1.00 4.89% 0.63% 4.78% 0.63% 4.78%
$175,133 --
(0.04) $ 1.00 4.23% 0.63% 4.14% 0.63% 4.14%
$213,793 --
</TABLE>

[LOGO OF FEDERATED]
World-Class Investment Manager

Hibernia Funds

Hibernia Capital Appreciation Fund

Class A Shares and Class B Shares

Hibernia Louisiana Municipal Income Fund

Hibernia Mid Cap Equity Fund

Class A Shares and Class B Shares

Hibernia Total Return Bond Fund

Hibernia U.S. Government Income Fund

Hibernia Cash Reserve Fund

Class A Shares and Class B Shares

Hibernia U.S. Treasury Money Market Fund

Portfolios of Hibernia Funds

DECEMBER 31, 1999

A Statement of Additional Information (SAI) dated December 31, 1999, is
incorporated by reference into this prospectus. Additional information about the
Funds' investments is contained in the Funds' Annual and Semi-Annual Reports to
shareholders as they become available. The Annual Report's Management Discussion
and Analysis discusses market conditions and investment strategies that
significantly affected the Funds' performance during their last fiscal year. To
obtain the SAI, Annual Report, Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Trust at
1-800-999-0124.

You can obtain information about the Funds (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.

PROSPECTUS

[LOGO OF FEDERATED]

Hibernia Funds
Federator Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-5536

Cusip 428661102 Cusip 428661201 Cusip 428661508 Cusip 428661607 Cusip 428661706
Cusip 428661805 Cusip 428661888 Cusip 428661300 Cusip 428661409 Cusip 428661870

006584 (12/99)

Federated is a registered mark
of Federated Investors, Inc.
1999 (C)Federated Investors, Inc.

[RECYCLED LOGO]

Statement of Additional Information

Hibernia Capital Appreciation Fund - Class A Shares and Class B Shares

Hibernia Louisiana Municipal Income Fund

Hibernia Mid Cap Equity Fund - Class A Shares and Class B Shares

Hibernia Total Return Bond Fund

Hibernia U.S. Government Income Fund

Hibernia Cash Reserve Fund - Class A Shares and Class B Shares

Hibernia U.S. Treasury Money Market Fund

(Portfolios of Hibernia Funds)

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Hibernia Capital Appreciation Fund,
Class A Shares and Class B Shares, Hibernia Louisiana Municipal Income Fund,
Hibernia Mid Cap Equity Fund, Class A Shares and Class B Shares, Hibernia Total
Return Bond Fund, Hibernia U.S. Government Income Fund, Hibernia Cash Reserve
Fund, Class A Shares and Class B Shares, and Hibernia U.S. Treasury Money Market
Fund dated December 31, 1999.

This SAI incorporates by reference the Funds' Annual Report. Obtain the
prospectus or the Annual Report without charge by calling 1-800-999-0124.

DECEMBEr 31,1999

Contents
How are the Funds Organized?
2
Securities in Which the Funds Invest
2
Securities Descriptions, Techniques and Risks
5
What do Shares Cost?
24
How are the Funds Sold?
26
Exchanging Securities for Shares
27
Redemption in Kind
27
Massachusetts Partnership Law
27
Account and Share Information
27
Tax Information
29
Who Manages and Provides Services to the Funds?
30
How Do the Funds Measure Performance?
35
Financial Information
40
Investment Ratings
41
Addresses Inside
Back Cover
Cusip 428661102 Cusip 428661201 Cusip 428661508 Cusip 428661607 Cusip 428661706
Cusip 428661805 Cusip 428661888 Cusip 428661300 Cusip 428661409 Cusip 428661870
006897 (12/99)

<PAGE>

HOW ARE THE FUNDS ORGANIZED?

Hibernia Capital Appreciation Fund (Capital Appreciation Fund), Hibernia Mid Cap
Equity Fund (Mid Cap Equity Fund), Hibernia Total Return Bond Fund (Total Return
Bond Fund), Hibernia U.S. Government Income Fund (U.S. Government Income Fund)
(together, the Equity and Income Funds) are diversified portfolios of Hibernia
Funds (Trust). Hibernia Cash Reserve Fund (Cash Reserve Fund) and Hibernia U.S.
Treasury Money Market Fund (U.S. Treasury Money Market Fund, and together with
Cash Reserve Fund, the Money Market Funds) are also diversified portfolios of
the Trust. Louisiana Municipal Income Fund is a non-diversified portfolio of the
Trust. The Trust is an open-end, management investment company that was
established as a Massachusetts business trust under the laws of the Commonwealth
of Massachusetts on April 8, 1988. The Trust changed its name from Tower Mutual
Funds to Hibernia Funds on November 1, 1998.

The Board of Trustees (the Board) has established two classes of shares of the
Capital Appreciation Fund, Mid Cap Equity Fund and Cash Reserve Fund, known as
Class A Shares and Class B Shares. This SAI relates to all of the Funds and
their respective classes of Shares (Shares). The Funds' investment adviser is
Hibernia National Bank (Adviser).

SECURITIES IN WHICH THE FUNDS INVEST

Following is a table that indicates which types of securities are a:
P = Principal investment of a Fund; (shaded in chart) A = Acceptable (but not
principal) investment of a Fund; or N = Not an acceptable investment of a Fund.
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Securities in which the Capital Louisiana Mid Cap Total U.S. Cash U.S. Treasury
Funds Invest: Appreciation Municipal Equity Fund Return Government Reserve Money Market Fund
Fund Income Fund Bond Fund Income Fund Fund
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Equity Securities P N P N N N N
- -------------------------- ---------------- -------------- ----------- ---------------- ---------- ------------------
- -------------------------- ------------ ----------- ---------------- ---------- ------------------
Common Stocks P N P N N N N
- -------------------------- ---------------- -------------- ------------ ----------- ----------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Preferred Stocks A N A N N N N
- -------------------------- ---------------- -------------- ------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Warrants A N A N N N N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Fixed Income Securities A A A P P P P
- -------------------------- ---------------- -------------- ------------ ----------- ----------
- -------------------------- ---------------- ------------------
Treasury Securities A A A P P A P
- -------------------------- ---------------- -------------- ------------ ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Agency Securities A A A A P A N
- -------------------------- -------------- ------------ ---------------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Corporate Debt A A A P A P N
Securities
----------- ----------
- -------------------------- ---------------- -------------- ------------ ---------------- ------------------
Commercial Paper1 A A A A A P N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------

<PAGE>

- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Securities in which the Capital Louisiana Mid Cap Total U.S. Cash U.S. Treasury
Funds Invest: Appreciation Municipal Equity Fund Return Government Reserve Money Market Fund
Fund Income Fund Bond Fund Income Fund Fund
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Demand Instruments A A A A N P N
- -------------------------- ---------------- -------------- ------------ ---------- ------------------
- -------------------------- ---------------- ------------ ----------- ---------------- ------------------
Taxable Municipal N A N A A N N
Securities
- -------------------------- ---------------- -------------- ------------ ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Mortgage Backed N N N P A N N
Securities
- -------------------------- ---------------- -------------- ------------ ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Collateralized N N N P P N N
Mortgage Obligations
(CMOs)
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ---------- ------------------
Sequential CMOs N N N A A N N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Z Classes and N N N N A N N
Residual Classes
- -------------------------- ---------------- -------------- ------------ ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Asset Backed N N N P A A N
Securities
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Zero Coupon Securities A A A A A A A
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- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Bank Instruments A A A A A A N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Credit Enhancement N A N N N A N
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- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Convertible Securities A N A A A N N
- -------------------------- ---------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Tax Exempt Securities N P N A N N N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
General Obligation N P N N N N N
Bonds
- -------------------------- ---------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Special Revenue Bonds N P N N N N N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Private Activity Bonds N A N N N N N

- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------

<PAGE>

- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Tax Increment N A N N N N N
Financing Bonds
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Municipal Notes N A N N N N N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Municipal Leases N A N N N N N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Participation N A N N N N N
Interests
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Variable Rate Demand N A N A N A N
Instruments
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Foreign Securities2 A N A A N A N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Depositary Receipts A N A A N A N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Foreign Exchange A N A A N A N
Contracts
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Foreign Government A N A A N N N
Securities
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Brady Bonds A N A A N N N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Derivative Contracts A A A A A N N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Futures Contracts3/4 A A A A A N N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Options3 A A A A A N N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Special Transactions A A A A A A N
- -------------------------- ---------------- -------------- ------------ ----------- ----------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Repurchase Agreements A A A A A P P
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Reverse Repurchase A A A A A A N
Agreements
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Delayed Delivery A A A A A A A
Transactions
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
To Be Announced A A N N A A N
Securities (TBAs)
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Dollar Rolls A A N A A N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Securities Lending A A A A A N N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Asset Coverage A A A A A A N
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Shares of Other A A A A A A A
Investment Companies
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
Restricted and A A A A A A A
Illiquid Securities5
- -------------------------- ---------------- -------------- ------------ ----------- ---------------- ---------- ------------------
</TABLE>

1 Cash Reserve Fund will not invest more than 25% of the value of its total
assets in any one industry except commercial paper of finance companies. 2 The
Capital Appreciation Fund, Mid Cap Equity Fund and Total Return Fund will only
purchase securities issued in U.S. dollar denominations and will not invest more
than 15% of total assets in foreign securities. 3 The Capital Appreciation Fund
and Mid Cap Equity Fund may utilize stock index futures contracts, options and
options on stock index futures contracts, subject to the limitation that the
value of these futures contracts and options will not exceed 20% of the Fund's
total assets. Each Fund will limit its purchase of options so that not more than
20% of its net assets will be invested in option premiums. Each Fund will limit
its option writing so that the assets underlying such options will not exceed
25% of its total net assets. 4 A Fund will not participate in futures
transactions if the sum of its initial margin deposits will exceed 5% of the
value of the market value of the Fund's total assets, after taking into account
the unrealized profits and losses on those contracts into which it has entered.
5 The Funds may invest up to 10% of their respective total assets in restricted
securities. Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap
Equity Fund, Total Return Bond Fund, and U.S. Government Income Fund will limit
investments in illiquid securities (including, as applicable, certain restricted
securities not determined by the Trustees to be liquid, non-negotiable time
deposits, repurchase agreements providing for settlement in more than seven days
after notice, and over-the-counter options) to 15% of their respective net
assets. The Money Market Funds will limit investments in illiquid securities to
10% of their respective net assets.

SECURITIES IN WHICH THE FUNDS INVEST

Permitted securities and investment techniques are set forth in the securities
chart in the prospectus. Securities and techniques principally used by the Funds
to meet their respective goals are also described in the prospectus. Other
securities and techniques used by the Funds to meet their respective goals are
described below.

SECURITIES DESCRIPTIONS AND TECHNIQUES
Equity Securities
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. A Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which the Funds may
invest.
Preferred Stocks
Preferred stocks have the right to receive specified dividends or
distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on
common stock. Preferred stocks may also permit the issuer to redeem the
stock. A Fund may also treat such redeemable preferred stock as a fixed
income security. Warrants Warrants give a Fund the option to buy the
issuer's equity securities at a specified price (the exercise price) at a
specified future date (the expiration date). The Fund may buy the
designated securities by paying the exercise price before the expiration
date. Warrants may become worthless if the price of the stock does not rise
above the exercise price by the expiration date. This increases the market
risks of warrants as compared to the underlying security. Rights are the
same as warrants, except companies typically issue rights to existing
stockholders.
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities. A security's yield measures the
annual income earned on a security as a percentage of its price. A security's
yield will increase or decrease depending upon whether it costs less (a
discount) or more (a premium) than the principal amount. If the issuer may
redeem the security before its scheduled maturity, the price and yield on a
discount or premium security may change based upon the probability of an early
redemption. Securities with higher risks generally have higher yields. The
following describes the types of fixed income securities in which the Funds
invest.
Taxable Municipal Securities
Municipal securities are issued by states, counties, cities and other
political subdivisions and authorities. Although many municipal securities
are exempt from federal income tax, the Funds may invest in taxable
municipal securities. Mortgage Backed Securities Mortgage backed securities
represent interests in pools of mortgages. The mortgages that comprise a
pool normally have similar interest rates, maturities and other terms.
Mortgages may have fixed or adjustable interest rates. Interests in pools
of adjustable rate mortgages are known as ARMs. Mortgage backed securities
come in a variety of forms. Many have extremely complicated terms. The
simplest form of mortgage backed securities are pass-through certificates.
An issuer of pass-through certificates gathers monthly payments from an
underlying pool of mortgages. Then, the issuer deducts its fees and
expenses and passes the balance of the payments onto the certificate
holders once a month. Holders of pass-through certificates receive a pro
rata share of all payments and pre-payments from the underlying mortgages.
As a result, the holders assume all the prepayment risks of the underlying
mortgages.

<PAGE>

Collateralized Mortgage Obligations (CMOs)
CMOs, including interests in real estate mortgage investment conduits
(REMICs), allocate payments and prepayments from an underlying
pass-through certificate among holders of different classes of mortgage
backed securities. This creates different prepayment and interest rate
risks for each CMO class.

Sequential CMOs
In a sequential pay CMO, one class of CMOs receives all principal
payments and prepayments. The next class of CMOs receives all
principal payments after the first class is paid off. This process
repeats for each sequential class of CMO. As a result, each class
of sequential pay CMOs reduces the prepayment risks of subsequent
classes. The Funds will invest only in CMOs which are rated AAA by
an NRSRO and which may be: (a) collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government; (b) collateralized by pools of mortgages in which
payment of principal and interest is guaranteed by the issuer and
such guarantee is collateralized by U.S. government securities; or
(c) securities in which the proceeds of the issuance are invested
in mortgage securities and payment of the principal and interest
are supported by the credit of an agency or instrumentality of the
U.S. government.

Z Classes and Residual Classes
CMOs must allocate all payments received from the underlying
mortgages to some class. To capture any unallocated payments, CMOs
generally have an accrual (Z) class. Z classes do not receive any
payments from the underlying mortgages until all other CMO classes
have been paid off. Once this happens, holders of Z class CMOs
receive all payments and prepayments. Similarly, REMICs have
residual interests that receive any mortgage payments not
allocated to another REMIC class. The degree of increased or
decreased prepayment risks depends upon the structure of the CMOs.
However, the actual returns on any type of mortgage backed
security depend upon the performance of the underlying pool of
mortgages, which no one can predict and will vary among pools.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final
maturity unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities at
a price below the amount payable at maturity. The difference between the
purchase price and the amount paid at maturity represents interest on the
zero coupon security. Investors must wait until maturity to receive
interest and principal, which increases the interest rate and credit risks
of a zero coupon security. There are many forms of zero coupon securities.
Some are issued at a discount and are referred to as zero coupon or capital
appreciation bonds. Others are created from interest bearing bonds by
separating the right to receive the bond's coupon payments from the right
to receive the bond's principal due at maturity, a process known as coupon
stripping. Treasury STRIPs, Treasury Income Growth Receipts (TIGRs) and
Certificates of Accrual on Treasuries (CATs) are the most common forms of
stripped zero coupon securities. In addition, some securities give the
issuer the option to deliver additional securities in place of cash
interest payments, thereby increasing the amount payable at maturity. These
are referred to as pay-in-kind or PIK securities.

<PAGE>

Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances. Yankee instruments are denominated in U.S.
dollars and issued by U.S. branches of foreign banks. Eurodollar
instruments are denominated in U.S. dollars and issued by non-U.S. branches
of U.S. or foreign banks. Credit Enhancement Credit enhancement consists of
an arrangement in which a company agrees to pay amounts due on a fixed
income security if the issuer defaults. In some cases the company providing
credit enhancement makes all payments directly to the security holders and
receives reimbursement from the issuer. Normally, the credit enhancer has
greater financial resources and liquidity than the issuer. For this reason,
the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement. Common types of credit
enhancement include guarantees, letters of credit, bond insurance and
surety bonds. Credit enhancement also includes arrangements where
securities or other liquid assets secure payment of a fixed income
security. If a default occurs, these assets may be sold and the proceeds
paid to the defaulted security's holders. Either form of credit enhancement
reduces credit risks by providing another source of payment for a fixed
income security.
Convertible Securities
Convertible securities are fixed income securities that a Fund has the option to
exchange for equity securities at a specified conversion price. The option
allows the Fund to realize additional returns if the market price of the equity
securities exceeds the conversion price. For example, the Fund may hold fixed
income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, the Fund could realize an additional $2 per share by
converting its fixed income securities. Convertible securities have lower yields
than comparable fixed income securities. In addition, at the time a convertible
security is issued the conversion price exceeds the market value of the
underlying equity securities. Thus, convertible securities may provide lower
returns than non-convertible fixed income securities or equity securities
depending upon changes in the price of the underlying equity securities.
However, convertible securities permit a Fund to realize some of the potential
appreciation of the underlying equity securities with less risk of losing its
initial investment.

The Funds treat convertible securities as both fixed income and equity
securities for purposes of their investment policies and limitations, because of
their unique characteristics. Tax Exempt Securities Tax exempt securities are
fixed income securities that pay interest that is not subject to regular federal
income taxes. Typically, states, counties, cities and other political
subdivisions and authorities issue tax exempt securities. The market categorizes
tax exempt securities by their source of repayment.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The municipality
would lend the proceeds from its bonds to the company using the
factory, and the company would agree to make loan payments sufficient
to repay the bonds. The bonds would be payable solely from the
company's loan payments, not from any other revenues of the
municipality. Therefore, any default on the loan normally would result
in a default on the bonds. The interest on many types of private
activity bonds is subject to the federal alternative minimum tax (AMT).
The Louisiana Municipal Income Fund may invest in bonds subject to AMT.
Tax Increment Financing Bonds Tax increment financing (TIF) bonds are
payable from increases in taxes or other revenues attributable to
projects financed by the bonds. For example, a municipality may issue
TIF bonds to redevelop a commercial area. The TIF bonds would be
payable solely from any increase in sales taxes collected from
merchants in the area. The bonds could default if merchants' sales, and
related tax collections, failed to increase as anticipated. Municipal
Notes Municipal notes are short-term tax exempt securities. Many
municipalities issue such notes to fund their current operations before
collecting taxes or other municipal revenues. Municipalities may also
issue notes to fund capital projects prior to issuing long-term bonds.
The issuers typically repay the notes at the end of their fiscal year,
either with taxes, other revenues or proceeds from newly issued notes
or bonds. Municipal Leases Municipalities may enter into leases for
equipment or facilities. In order to comply with state public financing
laws, these leases are typically subject to annual appropriation. In
other words, a municipality may end a lease, without penalty, by not
providing for the lease payments in its annual budget. After the lease
ends, the lessor can resell the equipment or facility but may lose
money on the sale. The Louisiana Municipal Income Fund may invest in
securities supported by pools of municipal leases. The most common type
of lease backed securities are certificates of participation (COPs).
However, the Fund may also invest directly in individual leases.
Participation Interests The Louisiana Municipal Income Fund may
purchase participation interests from financial institutions such as
commercial banks, savings associations, and insurance companies. These
participation interests give the Fund an undivided interest in
Louisiana municipal securities.

The municipal securities subject to the participation interests are not
limited to maturities of one year or less, so long as the participation
interests include the right to demand payment, typically within seven
days, from the issuers of those interests. The Fund will purchase only
participation interests which have such a demand feature or which
mature in less than one year. The financial institutions from which the
Fund purchases participation interests frequently provide or secure
irrevocable letters of credit or guarantees to assure that the
participation interests are of high quality. The Trustees will
determine that participation interests meet the prescribed quality
standards for the Fund.

<PAGE>

Liquidity Puts
The Louisiana Municipal Income Fund may purchase a right to sell a
security held by it back to the issuer or to another party at an agreed
upon price at any time during a stated period or on a certain date.
These rights are also referred to as standby commitments. Municipal
Bond Insurance The Louisiana Municipal Income Fund may purchase
municipal securities covered by insurance which guarantee the timely
payment of principal at maturity and interest on such securities. These
insured municipal securities are either (1) covered by an insurance
policy applicable to a particular security, whether obtained by the
issuer of the security or by a third party (Issuer-Obtained Insurance)
or (2) insured under master insurance policies issued by municipal bond
insurers, which may be purchased by the Fund (Policies).

The Fund will require or obtain municipal bond insurance when
purchasing municipal securities which would not otherwise meet the
Fund's quality standards. The Fund may also require or obtain municipal
bond insurance when purchasing or holding specific municipal securities
when, in the opinion of the Fund's Adviser, such insurance would
benefit the Fund, for example, through improvement of portfolio quality
or increased liquidity of certain securities. The Fund's Adviser
anticipates that more than 50% of the Fund's net assets will be
invested in municipal securities which are insured.

Issuer-Obtained Insurance policies are noncancellable and continue in
force as long as the municipal securities are outstanding and their
respective insurers remain in business. If a municipal security is
covered by Issuer-Obtained Insurance, then such security need not be
insured by the Policies purchased by the Fund.

The Fund may purchase two types of Policies issued by municipal bond
insurers. One type of Policy covers certain municipal securities only
during the period in which they are in the Fund's portfolio. In the
event that a municipal security covered by such a Policy is sold from
the Fund, the insurer of the relevant Policy will be liable only for
those payments of interest and principal which are then due and owing.

The other type of Policy covers municipal securities not only while
they remain in the Fund's portfolio but also until their final maturity
even if they are sold out of the Fund's portfolio, so that the coverage
may benefit all subsequent holders of those municipal securities. The
Fund will obtain insurance which covers municipal securities until
final maturity even after they are sold out of the Fund's portfolio
only if, in the judgment of the Adviser, the Fund would receive net
proceeds from the sale of those securities, after deducting the cost of
such permanent insurance and related fees, significantly in excess of
the proceeds it would receive if such municipal securities were sold
without insurance.

The premiums for the Policies are paid by the Fund and the yield on the
Fund's portfolio is reduced thereby. Premiums for the Policies are paid
by the Fund monthly, and are adjusted for purchases and sales of
municipal securities during the month. Depending upon the
characteristics of the municipal security held by the Fund, the annual
premium for the Policies are estimated to range from 0.1% to 0.25% of
the value of the municipal securities covered under the Policies, with
an average annual premium rate of approximately 0.175%.

The Fund may purchase Policies from MBIA Corp. (MBIA), AMBAC Indemnity
Corporation (AMBAC), Financial Guaranty Insurance Company (FGIC), Bond
Investors Guaranty Insurance Company (BIG), or any other municipal bond
insurer which is rated AAA by S&P or Aaa by Moody's. Each Policy
guarantees the payment of principal and interest on the municipal
securities it insures. The Policies will have the same general
characteristics and features. A municipal security will be eligible for
coverage if it meets certain requirements set forth in a Policy. In the
event interest or principal on an insured municipal security is not
paid when due, the insurer covering the security will be obligated
under its Policy to make such payment not later than 30 days after it
has been notified by the Fund that such non-payment has occurred. The
insurance feature reduces financial risk, but the cost thereof and the
restrictions on investments imposed by the guidelines in the insurance
policies reduce the yield to shareholders.

MBIA, AMBAC, FGIC, and BIG will not have the right to withdraw coverage
on securities insured by their Policies so long as such securities
remain in the Fund's portfolio, nor may MBIA, AMBAC, FGIC, and BIG
cancel their Policies for any reason except failure to pay premiums
when due. MBIA, AMBAC, FGIC, and BIG will reserve the right at any time
upon 90 days' written notice to the Fund to refuse to insure any
additional municipal securities purchased by the Fund after the
effective date of such notice. The Trustees will reserve the right to
terminate any policy if it determines that the benefits to the Fund of
having its portfolio insured under such policy are not justified by the
expense involved.

Under the Policies, municipal bond insurers unconditionally guarantee
to the Fund the timely payment of principal and interest on the insured
municipal securities when and as such payments shall become due but
shall not be paid by the issuer, except that in the event of any
acceleration of the due date of the principal by reason of mandatory or
optional redemption (other than acceleration by reason of mandatory
sinking fund payment), default or otherwise, the payments guaranteed
will be made in such amounts and at such times as payments of principal
would have been due had there not been such acceleration. The municipal
bond insurers will be responsible for such payments less any amounts
received by the Fund from any trustee for the municipal bond issuers or
from any other source. The Policies do not guarantee payment on an
accelerated basis, the payment of any redemption premium, the value of
the Shares of the Fund, or payments of any tender purchase price upon
the tender of the municipal securities. The Policies also do not insure
against nonpayment of principal of or interest on the securities
resulting from the insolvency, negligence or any other act or omission
of the trustee or other paying agent for the securities. However, with
respect to small issue industrial development municipal bonds and
pollution control revenue municipal bonds covered by the Policies, the
municipal bond insurers guarantee the full and complete payments
required to be made by or on behalf of an issuer of such municipal
securities, if there occurs any change in the tax-exempt status of
interest on such municipal securities, including principal, interest or
premium payments, if any, as and when required to be made by or on
behalf of the issuer pursuant to the terms of such municipal
securities. A "when-issued" municipal security will be covered under
the Policies upon the settlement date of the issuer of such
"when-issued" municipal security. In determining to insure municipal
securities held by the Fund, each municipal bond insurer has applied
its own standards, which correspond generally to the standards
established for determining the insurability of new issues of municipal
securities. This insurance is intended to reduce financial risk, but
the cost thereof and compliance with investment restrictions imposed
under the Policies will reduce the yield to shareholders of the Fund.

If a Policy terminates as to municipal securities sold by the Fund on
the date of sale, in which event municipal bond insurers will be liable
only for those payments of principal and interest that are then due and
owing, the provision for insurance will not enhance the marketability
of securities held by the Fund, whether or not the securities are in
default or subject to significant risk of default, unless the option to
obtain permanent insurance is exercised. On the other hand, since
Issuer-Obtained Insurance will remain in effect as long as the insured
municipal securities are outstanding, such insurance may enhance the
marketability of municipal securities covered thereby, but the exact
effect, if any, on marketability cannot be estimated. The Fund
generally intends to retain any securities that are in default or
subject to significant risk of default and to place a value on the
insurance, which ordinarily will be the difference between the market
value of the defaulted security and the market value of similar
securities of minimum investment grade (i.e., rated "BBB") that are not
in default. To the extent that the Fund holds defaulted securities, it
may be limited in its ability to manage its investments and to purchase
other municipal securities. Except as described above with respect to
securities that are in default or subject to significant risk of
default, the Fund will not place any value on the insurance in valuing
the municipal securities that it holds.

Variable Rate Demand Instruments
Variable rate demand instruments are securities that require the issuer or a
third party, such as a dealer or bank, to repurchase the security for its face
value upon demand. The securities also pay interest at a variable rate intended
to cause the securities to trade at their face value. The Funds treat demand
instruments as short-term securities, because their variable interest rate
adjusts in response to changes in market rates, even though their stated
maturity may extend beyond thirteen months.

<PAGE>

Foreign Securities
Foreign securities are securities of issuers based outside the United States.
The Funds consider an issuer to be based outside the United States if: o it is
organized under the laws of, or has a principal office located in, another
country; o the principal trading market for its securities is in another
country; or o it (or its subsidiaries) derived in its most current fiscal year
at least 50% of its total assets,
capitalization, gross revenue or profit from goods produced, services
performed, or sales made in another country.
Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing. Trading
in certain foreign markets is also subject to liquidity risks.
Depositary Receipts
Depositary receipts represent interests in underlying securities issued by
a foreign company. Depositary receipts are not traded in the same market as
the underlying security. The foreign securities underlying American
Depositary Receipts (ADRs) are traded in the United States. ADRs provide a
way to buy shares of foreign-based companies in the United States rather
than in overseas markets. ADRs are also traded in U.S. dollars, eliminating
the need for foreign exchange transactions. The foreign securities
underlying European Depositary Receipts (EDRs), Global Depositary Receipts
(GDRs), and International Depositary Receipts (IDRs), are traded globally
or outside the United States. Depositary receipts involve many of the same
risks of investing directly in foreign securities, including currency risks
and risks of foreign investing. Foreign Exchange Contracts In order to
convert U.S. dollars into the currency needed to buy a foreign security, or
to convert foreign currency received from the sale of a foreign security
into U.S. dollars, a Fund may enter into spot currency trades. In a spot
trade, the Fund agrees to exchange one currency for another at the current
exchange rate. The Fund may also enter into derivative contracts in which a
foreign currency is an underlying asset. The exchange rate for currency
derivative contracts may be higher or lower than the spot exchange rate.
Use of these derivative contracts may increase or decrease the Fund's
exposure to currency risks. Foreign Government Securities Foreign
government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations
of supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government
agencies. Examples of these include, but are not limited to, the
International Bank for Reconstruction and Development (the World Bank), the
Asian Development Bank, the European Investment Bank and the Inter-American
Development Bank. Foreign government securities also include fixed income
securities of quasi-governmental agencies that are either issued by
entities owned by a national, state or equivalent government or are
obligations of a political unit that are not backed by the national
government's full faith and credit. Further, foreign government securities
include mortgage-related securities issued or guaranteed by national, state
or provincial governmental instrumentalities, including quasi-governmental
agencies.

<PAGE>

Brady Bonds
Brady Bonds are U.S. dollar denominated debt obligations that foreign
governments issue in exchange for commercial bank loans. The International
Monetary Fund (IMF) typically negotiates the exchange to cure or avoid a
default by restructuring the terms of the bank loans. The principal amount
of some Brady Bonds is collateralized by zero coupon U.S. Treasury
securities which have the same maturity as the Brady Bonds. However,
neither the U.S. government nor the IMF has guaranteed the repayment of any
Brady Bond.
Derivative Contracts
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty. Many
derivative contracts are traded on securities or commodities exchanges. In this
case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, a Fund could close out an open contract to buy an asset at a future
date by entering into an offsetting contract to sell the same asset on the same
date. If the offsetting sale price is more than the original purchase price, the
Fund realizes a gain; if it is less, the Fund realizes a loss. Exchanges may
limit the amount of open contracts permitted at any one time. Such limits may
prevent the Fund from closing out a position. If this happens, the Fund will be
required to keep the contract open (even if it is losing money on the contract),
and to make any payments required under the contract (even if it has to sell
portfolio securities at unfavorable prices to do so). Inability to close out a
contract could also harm the Fund by preventing it from disposing of or trading
any assets it has been using to secure its obligations under the contract.

The Funds may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how a Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to interest
rate and currency risks, and may also expose the Fund to liquidity and leverage
risks. OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract. The Funds may trade in the following
types of derivative contracts.
Futures Contracts
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset
is commonly referred to as buying a contract or holding a long position in
the asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts. Futures
contracts traded OTC are frequently referred to as forward contracts. The
Funds (except the Money Market Funds) may buy and sell the following types
of futures contracts: financial futures contracts, and, in the case of
Capital Appreciation Fund and Mid Cap Equity Fund, stock index futures. For
the immediate future, Capital Appreciation Fund and Mid Cap Equity Fund
will enter into futures contracts directly only when they desire to
exercise a financial futures put option in their respective portfolio
rather than either closing out the option or allowing it to expire. Options
Options are rights to buy or sell an underlying asset for a specified price
(the exercise price) during, or at the end of, a specified period. A call
option gives the holder (buyer) the right to buy the underlying asset from
the seller (writer) of the option. A put option gives the holder the right
to sell the underlying asset to the writer of the option. The writer of the
option receives a payment, or premium, from the buyer, which the writer
keeps regardless of whether the buyer uses (or exercises) the option. The
Funds may:
o Buy call options on financial futures contracts in anticipation of an
increase in the value of the underlying asset.;
o Buy put options on financial futures contracts in anticipation of a
decrease in the value of the underlying asset (Except Capital Appreciation
Fund); and
o Buy or write options to close out existing options positions.
The Funds may also write call options on portfolio securities to generate
income from premiums, and in anticipation of a decrease or only limited
increase in the value of the underlying asset. If a call written by the
Fund is exercised, the Fund foregoes any possible profit from an increase
in the market price of the underlying asset over the exercise price plus
the premium received. The Funds may also write put options on portfolio
securities to generate income from premiums, and in anticipation of an
increase or only limited decrease in the value of the underlying asset. In
writing puts, there is a risk that a Fund may be required to take delivery
of the underlying asset when its current market price is lower than the
exercise price. When a Fund writes options on futures contracts, it will be
subject to margin requirements similar to those applied to futures
contracts. Mid Cap Equity Fund may utilize stock index futures contracts,
options and options on stock index futures contracts, subject to the
limitation that the value of these futures contracts and options will not
exceed 20% of the Fund's total assets.

Each Fund will limit its purchase of options so that not more than 20% of
its net assets will be invested in option premiums. Each Fund will limit
its option writing so that the assets underlying such options will not
exceed 25% of its total net assets.

Hedging

Hedging transactions are intended to reduce specific risks. For example, to
protect a Fund against circumstances that would normally cause a Fund's
portfolio securities to decline in value, the Fund may buy or sell a derivative
contract that would normally increase in value under the same circumstances. A
Fund may also attempt to hedge by using combinations of different derivatives
contracts, or derivatives contracts and securities. A Fund's ability to hedge
may be limited by the costs of the derivatives contracts. A Fund may attempt to
lower the cost of hedging by entering into transactions that provide only
limited protection, including transactions that (1) hedge only a portion of its
portfolio, (2) use derivatives contracts that cover a narrow range of
circumstances or (3) involve the sale of derivatives contracts with different
terms. Consequently, hedging transactions may not eliminate risk even if they
work as intended. In addition, hedging strategies are not always successful, and
could result in increased expenses and losses to the Fund.

Derivative Contracts
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty. Many
derivative contracts are traded on securities or commodities exchanges. In this
case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, a Fund could close out an open contract to buy an asset at a future
date by entering into an offsetting contract to sell the same asset on the same
date. If the offsetting sale price is more than the original purchase price, the
Fund realizes a gain; if it is less, the Fund realizes a loss. Exchanges may
limit the amount of open contracts permitted at any one time. Such limits may
prevent the Fund from closing out a position. If this happens, the Fund will be
required to keep the contract open (even if it is losing money on the contract),
and to make any payments required under the contract (even if it has to sell
portfolio securities at unfavorable prices to do so). Inability to close out a
contract could also harm the Fund by preventing it from disposing of or trading
any assets it has been using to secure its obligations under the contract.

Futures And Options Transactions
The Funds (except the Money Market Funds) may engage in or reserve the
right to engage in put and call options, financial futures, and options
on futures as discussed for those Funds in the prospectus. For purposes
of Capital Appreciation Fund and Mid Cap Equity Fund, financial futures
may include stock index futures.

The Funds will maintain positions in securities, option rights, and
segregated cash subject to puts and calls until the options are
exercised, closed, or have expired. An option position may be closed
out only on an exchange which provides a secondary market for an option
of the same series.

Financial Futures Contracts
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in
the contract ("going short") and the buyer who agrees to take delivery
of the security ("going long") at a certain time in the future.
Financial futures contracts call for the delivery of particular debt
securities issued or guaranteed by the U.S. Treasury or by specified
agencies or instrumentalities of the U.S. government.

In the fixed income securities market, price moves inversely to
interest rates. A rise in rates means a drop in price. Conversely, a
drop in rates means a rise in price. In order to hedge their holdings
of securities, the Funds could enter into contracts to deliver
securities at a predetermined price (i.e., "go short") to protect
themselves against the possibility that the prices of their securities
may decline during the Funds' anticipated holding period. The Funds
would "go long" (agree to purchase securities in the future at a
predetermined price) to hedge against a decline in market interest
rates.

Purchasing Put Options on Financial Futures Contracts
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified
price, the purchase of a put option on a futures contract entitles (but
does not obligate) its purchaser to decide on or before a future date
whether to assume a short position at the specified price.

A Fund could purchase put options on futures to protect portfolio
securities against decreases in value resulting from an anticipated
increase in market interest rates or as a means of reducing
fluctuations in the net asset value of shares of the Fund. Generally,
if the hedged portfolio securities decrease in value during the term of
an option, the related futures contracts will also decrease in value
and the option will increase in value. In such an event, a Fund will
normally close out its option by selling an identical option. If the
hedge is successful, the proceeds received by a Fund upon the sale of
the second option will be large enough to offset both the premium paid
by such Fund for the original option plus the realized decrease in
value of the hedged securities.

Alternately, a Fund may exercise its put to close out the position. To
do so, it would simultaneously enter into a futures contract of the
type underlying the option (for a price less than the strike price of
the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If a Fund
neither closes out nor exercises an option, the option will expire on
the date provided in the option contract, and only the premium paid for
the contract will be lost.

Writing Call Options on Financial Futures Contracts
In addition to purchasing put options on futures, a Fund may write
listed call options on futures contracts for U.S. government securities
to hedge its portfolio against an increase in market interest rates.
When a Fund writes a call option on a futures contract, it is
undertaking the obligation of assuming a short futures position
(selling a futures contract) at the fixed strike price at any time
during the life of the option if the option is exercised. As market
interest rates rise, causing the prices of futures to go down, a Fund's
obligation under a call option on a future (to sell a futures contact)
costs less to fulfill, causing the value of such Fund's call option
position to increase.

In other words, as the underlying futures price goes down below the
strike price, the buyer of the option has no reason to exercise the
call, so that Fund keeps the premium received for the option. This
premium can offset the drop in value of such Fund's fixed income
securities which is occurring as interest rates rise.

Prior to the expiration of a call written by a Fund, or exercise of it
by the buyer, such Fund may close out the option by buying an identical
option. If the hedge is successful, the cost of the second option will
be less than the premium received by the Fund for the initial option.
The new premium income of the Fund will then offset the decrease in
value of the hedged securities.

Writing Put Options on Financial Futures Contracts
The Funds may write listed put options on financial futures contracts
for U.S. government securities to hedge their portfolios against a
decrease in market interest rates. When a Fund writes a put option on a
futures contract, it receives a premium for undertaking the obligation
to assume a long futures position (buying a futures contract) at a
fixed price at any time during the life of the option. As market
interest rates decrease, the market price of the underlying futures
contract increases.

As the market value of the underlying futures contract increases, the
buyer of the put option has less reason to exercise the put because the
buyer can sell the same futures contract at a higher price in the
market. The premium received by the Fund can then be used to offset the
higher prices of portfolio securities to be purchased in the future due
to the decrease in market interest rates.

Prior to the expiration of the put option, or its exercise by the
buyer, a Fund may close out the option by buying an identical option.
If the hedge is successful, the cost of buying the second option will
be less than the premium received by such Fund for the initial option.

Purchasing Call Options on Financial Futures Contracts
When a Fund purchases a call option on a futures contract, it is
purchasing the right (not the obligation) to assume a long futures
position (buy a futures contract) at a fixed price at any time during
the life of the option. As market interest rates fall, the value of the
underlying futures contract will normally increase, resulting in an
increase in value of such Fund's option position. When the market price
of the underlying futures contract increases above the strike price
plus premium paid, a Fund could exercise its option and buy the futures
contract below market price.

Limitation on Open Futures Position
A Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds
the current market value of its portfolio plus or minus the unrealized
gain or loss on those open positions, adjusted for the correlation of
volatility between the hedged securities and the futures contracts. If
this limitation is exceeded at any time, a Fund will take prompt action
to close out a sufficient number of open contracts to bring its open
futures and options positions within this limitation.

Margin in Futures Transactions
Unlike the purchase or sale of a security, a Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of "initial margin" in cash
or U.S. Treasury bills with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that
futures contract initial margin does not involve the borrowing of funds
by the Fund to finance the transactions. Initial margin is in the
nature of a performance bond or good-faith deposit on the contract
which is returned to the Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied.

A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the
Fund pays or receives cash, called "variation margin," equal to the
daily change in value of the futures contract. This process is know as
"marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the
broker of the amount one would owe the other if the futures contract
expires. In computing its daily net asset value, a Fund will
mark-to-market its open futures positions.

The Funds are also required to deposit and maintain margin when they
write call options on futures contracts.

Purchasing Put and Call Options on Portfolio Securities
The Funds may purchase put and call options on portfolio securities to
protect against price movements in particular securities. A put option
gives a Fund, in return for a premium, the right to sell the underlying
security to the writer (seller) at a specified price during the term of
the option. A call option gives a Fund, in return for a premium, the
right to buy the underlying security from the seller.

Capital Appreciation Fund may only buy put options which are listed on
a recognized options exchange.

Writing Covered Put and Call Options on Portfolio Securities
As writer of a call option, a Fund has the obligation, upon exercise of
the option during the option period, to deliver the underlying security
upon payment of the exercise price. As a writer of a put option, a Fund
has the obligation to purchase a security from the purchaser of the
option upon the exercise of the option.

A Fund may only write call options either on securities held in its
portfolio or on securities which it has the right to obtain without
payment of further consideration (or has segregated cash in the amount
of any additional consideration). In the case of put options, a Fund
will segregate cash or U.S. Treasury obligations with a value equal to
or greater than the exercise price of the underlying securities.

Stock Index Futures and Options

The Mid Cap Equity Fund may utilize stock index futures contracts,
options and options on stock index futures contracts, subject to the
limitation that the value of these futures contracts and options will
not exceed 20% of the Fund's total assets. These futures contracts and
options will be used to handle cash flows into and out of the Fund and
to potentially reduce transactional costs, since transactional costs
associated with futures and options contracts can be lower than costs
stemming from direct investments in stocks.

<PAGE>

Special Transactions
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which a Fund is
the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must
repurchase the underlying security at a higher price, regardless of the
market value of the security at the time of repurchase. Delayed Delivery
Transactions Delayed delivery transactions, including when issued
transactions, are arrangements in which a Fund buys securities for a set
price, with payment and delivery of the securities scheduled for a future
time. During the period between purchase and settlement, no payment is made
by the Fund to the issuer and no interest accrues to the Fund. The Fund
records the transaction when it agrees to buy the securities and reflects
their value in determining the price of its shares. Settlement dates may be
a month or more after entering into these transactions so that the market
values of the securities bought may vary from the purchase prices.
Therefore, delayed delivery transactions create interest rate risks for a
Fund. Delayed delivery transactions also involve credit risks in the event
of a counterparty default.
To Be Announced Securities (TBAs)
As with other delayed delivery transactions, a seller agrees to issue a
TBA security at a future date. However, the seller does not specify the
particular securities to be delivered. Instead, the Fund agrees to
accept any security that meets specified terms. For example, in a TBA
mortgage backed transaction, the Fund and the seller would agree upon
the issuer, interest rate and terms of the underlying mortgages. The
seller would not identify the specific underlying mortgages until it
issues the security. TBA mortgage backed securities increase interest
rate risks because the underlying mortgages may be less favorable than
anticipated by the Fund. Dollar Rolls Dollar rolls are transactions
where a Fund sells mortgage backed securities with a commitment to buy
similar, but not identical, mortgage backed securities on a future date
at a lower price. Normally, one or both securities involved are TBA
mortgage backed securities. Dollar rolls are subject to interest rate
risks and credit risks.
Securities Lending
A Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from
the borrower as collateral. The borrower must furnish additional collateral
if the market value of the loaned securities increases. Also, the borrower
must pay the Fund the equivalent of any dividends or interest received on
the loaned securities. The Fund will reinvest cash collateral in securities
that qualify as an acceptable investment for the Fund. However, the Fund
must pay interest to the borrower for the use of cash collateral. Loans are
subject to termination at the option of the Fund or the borrower. The Fund
will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund
may pay administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash collateral to a
securities lending agent or broker. Securities lending activities are
subject to interest rate risks and credit risks. Asset Coverage In order to
secure its obligations in connection with derivatives contracts or special
transactions, a Fund will either own the underlying assets, enter into an
offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has
other readily marketable assets to set aside, it cannot trade assets used
to secure such obligations without entering into an offsetting derivative
contract or terminating a special transaction. This may cause the Fund to
miss favorable trading opportunities or to realize losses on derivative
contracts or special transactions.
Investing in Securities of Other Investment Companies
The Funds may invest assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out their investment policies and managing their uninvested cash.
Any such investment by a Fund may be subject to duplicate expenses. However, the
Adviser will waive its investment advisory fee on assets invested in securities
of other investment companies. The Adviser believes that the benefits and
efficiencies of this approach should outweigh the potential additional expenses.
The Funds may also invest in such securities directly.

Investment Ratings
A nationally recognized rating service's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's ("S&P"), MIG-1 or
MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or F-1+, F-1, or F-2 by
Fitch IBCA, Inc. ("Fitch") are all considered to be rated in one of the two
highest short-term rating categories. The Cash Reserve Fund will follow
applicable regulations in determining whether a security rated by more than one
rating service can be treated as being in one of the two highest short-term
rating categories; currently, such securities must be rated by two rating
services in one of their two highest rating categories. See "Regulatory
Compliance."

The Adviser will determine whether a security is investment grade based upon the
credit ratings given by one or more nationally recognized rating services. For
example, Standard &Poor's, a rating service, assigns ratings to investment grade
securities (AAA, AA, A, and BBB) based on their assessment of the likelihood of
the issuer's inability to pay interest or principal (default) when due on each
security. Lower credit ratings correspond to higher credit risk. If a security
has not received a rating, a Fund must rely entirely upon the Adviser's credit
assessment that the security is comparable to investment grade.

INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. A Fund's
principal risks are described in the prospectus. Additional risk factors are
outlined below.

Liquidity Risks
o Trading opportunities are more limited for equity securities that are not
widely held. This may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, a Fund may have to accept a lower
price to sell a security, sell other securities to raise cash or give up an
investment opportunity, any of which could have a negative effect on the
Fund's performance. Infrequent trading of securities may also lead to an
increase in their price volatility.
o Liquidity risk also refers to the possibility that a Fund may not be able
to sell a security or close out a derivative contract when it wants to. If
this happens, the Fund will be required to continue to hold the security or
keep the position open, and the Fund could incur losses.
o OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

<PAGE>

Currency Risks
o Exchange rates for currencies fluctuate daily. The combination of currency
risk and market risk tends to make securities traded in foreign markets
more volatile than securities traded exclusively in the U.S.
o The Adviser attempts to manage currency risk by limiting the amount a Fund
invests in securities denominated in a particular currency. However,
diversification will not protect a Fund against a general increase in the
value of the U.S. dollar relative to other currencies.
Risks of Foreign Investing
o Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable than those of the United States.
Securities in foreign markets may also be subject to taxation policies that
reduce returns for U.S. investors.
o Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the
United States. Foreign companies may also receive less coverage than United
States companies by market analysts and the financial press. In addition,
foreign countries may lack uniform accounting, auditing and financial
reporting standards or regulatory requirements comparable to those
applicable to U.S. companies. These factors may prevent a Fund and its
Adviser from obtaining information concerning foreign companies that is as
frequent, extensive and reliable as the information available concerning
companies in the United States.
o Foreign countries may have restrictions on foreign ownership of securities
or may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.

o Trading opportunities are more limited for fixed income securities that
have not received any credit ratings, have received ratings below
investment grade or are not widely held.
Risks Related To Hedging
When a Fund uses financial futures and options on futures as hedging devices,
there is a risk that the prices of the securities subject to the futures
contracts may not correlate perfectly with the prices of the securities in the
Fund's portfolio. This may cause the futures contracts and any related options
to react differently than the portfolio securities to market changes. In
addition, the Fund's Adviser could be incorrect in its expectations about the
direction or extent of market factors, such as interest rate movements. In these
events, the Fund may lose money on the futures contracts or options. When a Fund
writes a call option, it retains the risk of a market decline in the price of
the underlying security, but gives up the right to capital appreciation of that
security above the "strike price" of the option.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although a Fund's Adviser will consider
liquidity before entering into options transactions, there is no assurance that
a liquid secondary market on an exchange will exist for any particular futures
contract or option at any particular time. The Funds' ability to establish and
close out futures and options positions depends on this secondary market.

o A Fund will not participate in futures transactions if the sum of its
initial margin deposits on open contracts will exceed 5% of the market
value of the Fund's total assets, after taking into account the unrealized
profits and losses on those contracts into which it has entered;

o The Funds will not enter into these contracts for speculative purposes; and

o Since the Funds do not constitute a commodity pool, they will not market as
such, nor serve as vehicles for trading in the commodities futures or
commodity options markets.

In this regard, the Funds will disclose to all prospective investors the
limitations on its futures and options transactions, and will make clear that
these transactions are entered into only for bona fide hedging purposes or such
other purposes permitted under regulations promulgated by the Commodity Futures
Trading Commission (CFTC). The Funds intend to claim an exclusion from
registration as a commodity pool operator under the regulations promulgated by
the CFTC. When a Fund purchases futures contracts or writes put options on
futures contracts , an amount of cash and cash equivalents equal to the
underlying commodity value of the futures contracts (less any related margin
deposits) or equal to the exercise price of the put options will be deposited in
a segregated account with the Fund's custodian (or broker, if legally permitted)
to collateralize the position and thereby insure that the use of such futures
contracts is unleveraged.

Fundamental INVESTMENT Objectives and Policies
The investment objective and fundamental policies of a Fund may not be changed
by the Fund's Trustees without shareholder approval.
Capital Appreciation Fund seeks to provide growth of capital and income;

Louisiana Municipal Income Fund seeks to provide current income which
is generally exempt from federal regular income tax and the personal income
taxes imposed by the state of Louisiana;

Mid Equity Cap Fund seeks total return;

Total Return Bond Fund seeks to maximize total return;

U.S. Government Income Fund seeks to provide current income;

Cash Reserve Fund seeks to provide current income consistent with stability of
principal; and

U.S. Treasury Money Market Fund seeks to provide current income consistent with
stability of principal and liquidity.

As a matter of fundamental policy, the Louisiana Municipal Income Fund will
invest its assets so that, under normal circumstances, at least 80% of its
annual interest income is exempt from federal regular and Louisiana state income
taxes or at least 80% of its net assets are invested in obligations, the
interest income from which is exempt from federal regular and Louisiana state
income taxes.

As a matter of fundamental policy, the average maturity of the securities in
Cash Reserve Fund's portfolio, computed on a dollar-weighted basis, will be 120
days or less.

INVESTMENT LIMITATIONS

Diversification of Investments
With respect to securities comprising 75% of the value of its total assets, a
Fund (except Louisiana Municipal Income Fund) will not purchase securities of
any one issuer (other than cash; cash items, securities issued or guaranteed by
the government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such U.S. government securities; and
securities of other investment companies) if, as a result, more than 5% of the
value of its total assets would be invested in securities of that issuer, or the
Fund would own more than 10% of the outstanding voting securities of that
issuer.

Issuing Senior Securities and Borrowing Money
A Fund may borrow money, directly or indirectly, and issue senior securities to
the maximum extent permitted under the Investment Company Act of 1940.

Concentration of Investments
Capital Appreciation Fund and Mid Cap Equity Fund will not invest 25% or more of
their respective total assets in securities of issuers having their principal
business activities in the same industry. Total Return Bond Fund will not invest
25% or more of the value of its total assets in any one industry. However,
investing in U.S. government obligations shall not be considered investments in
any one industry. Cash Reserve Fund will not invest more than 25% of the value
of its total assets in any one industry except commercial paper of finance
companies. However, investing in bank instruments (such as time and demand
deposits and certificates of deposit), U.S. government obligations or
instruments secured by these money market instruments, such as repurchase
agreements, shall not be considered investments in any one industry. With
respect to securities comprising 75% of the value of its total assets, U.S.
Treasury Money Market Fund will not purchase securities of any one issuer (other
than cash, cash items or securities issued or guaranteed by the government of
the United States or its agencies or instrumentalities and repurchase agreements
collateralized by U.S. Treasury securities) if as a result more than 5% of the
value of its total assets would be invested in the securities of that issuer.
(For purposes of this limitation, U.S. Treasury Money Market Fund considers
instruments issued by a U.S. branch of a domestic bank having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment, to be
"cash items.")

Investing in Real Estate
A Fund may not purchase or sell real estate, provided that this restriction does
not prevent the Fund from investing in issuers which invest, deal, or otherwise
engage in transactions in real estate or interests therein, or investing in
securities that are secured by real estate or interests therein. A Fund may
exercise its rights under agreements relating to such securities, including the
right to enforce security interests and to hold real estate acquired by reason
of such enforcement until that real estate can be liquidated in an orderly
manner.

Investing in Commodities
A Fund may not purchase or sell physical commodities, provided that the Fund may
purchase securities of companies that deal in commodities.

Underwriting
A Fund may not underwrite the securities of other issuers, except that the Fund
may engage in transactions involving the acquisition, disposition or resale of
its portfolio securities, under circumstances where it may be considered to be
an underwriter under the Securities Act of 1933.

Lending Cash or Securities
A Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.

The above limitations cannot be changed unless authorized by the Board of
Trustees (Board) and by the "vote of a majority of its outstanding voting
securities," as defined by the Investment Company Act. The following
limitations, however, may be changed by the Board without shareholder approval.
Shareholders will be notified before any material change in these limitations
becomes effective.

Buying on Margin
A Fund will not purchase securities on margin provided that the Fund may obtain
short-term credits necessary for the clearance of purchases and sales of
securities.

Pledging Assets
A Fund will not mortgage, pledge or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.

Restricted and Illiquid Securities
A Fund may invest in restricted securities. Restricted securities are any
securities in which a Fund may invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Trustees certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Funds will limit their purchase, together
with other illiquid securities to 15% (for the Money Market Funds, 10%)of their
net assets.

Acquiring Securities
Cash Reserve Fund will not acquire the voting securities of any issuer. It will
not invest in securities of a company for the purpose of exercising control or
management.

Investing in Other Investment Companies
A Fund may invest its assets in securities of other investment companies as an
efficient means of carrying out its investment policies. It should be noted that
investment companies incur certain expenses, such as management fees, and,
therefore, any investment by the Fund in shares of other investment companies
may be subject to such duplicate expenses. At the present time, the Fund expects
that its investments in other investment companies may include shares of money
market funds, including funds affiliated with the Fund's investment adviser.

Writing Covered Call Options and Purchasing Put Options
Capital Appreciation Fund and Mid Cap Equity Fund will not write call options on
securities unless the securities are held in the Fund's portfolio or unless the
Fund is entitled to them in deliverable form without further payment or after
segregating cash in the amount of any further payment. A Fund will not purchase
put options on securities, other than put options on stock indices, unless the
securities are held in the Fund's portfolio and not more than 5% of the value of
the Fund's net assets would be invested in premiums on open put option
positions.

Total Return Bond Fund will not purchase put options on securities unless the
securities are held in the Fund's portfolio. The Fund will not write put or call
options or purchase put or call options in excess of 5% of the value of its
total assets.

U.S. Government Income Fund will not write covered put and call options on
securities unless the securities are held in the Fund's portfolio or unless the
Fund is entitled to them in deliverable form without further payment or after
segregating cash or U.S. Treasury obligations with a value equal to or greater
than the exercise price of the underlying securities. The Fund will not purchase
put options on securities unless the securities are held in the Fund's
portfolio.

Regulatory Compliance
The Money Market Funds may follow non-fundamental operational policies that are
more restrictive than the fundamental investment limitations, as set forth in
the prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the Funds
will comply with the various requirements of Rule 2a-7 (the Rule), which
regulates money market mutual funds. The Funds will determine the effective
maturity of investments according to the Rule. The Funds may change these
operational policies to reflect changes in the laws and regulations without the
approval of its shareholders.

DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's (except the Money Market Funds) portfolio securities
are determined as follows:

for equity securities, according to the last sale price in the market
in which they are primarily traded (either a national securities exchange or
the over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

for fixed income securities, at the last sale price on a national
securities exchange, if available, otherwise, as determined by an independent
pricing service;

o futures contracts and options are generally valued at market values
established by the exchanges on which they are traded at the close of trading
on such exchanges. Options traded in the over-the-counter market are
generally valued according to the mean between the last bid and the last
asked price for the option as provided by an investment dealer or other
financial institution that deals in the option. The Board may determine in
good faith that another method of valuing such investments is necessary to
appraise their fair market value;

for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as
determined in good faith by the Board; and

for all other securities at fair value as determined in good faith by the
Board.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.

The Board has decided that the best method for determining the value of the
Money Market Funds' portfolio instruments is amortized cost. Under this method,
portfolio instruments are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at current
market value. Accordingly, neither the amount of daily income nor the net asset
value is affected by any unrealized appreciation or depreciation of the
portfolio. In periods of declining interest rates, the indicated daily yield on
Shares of the Fund computed by dividing the annualized daily income on the
Fund's portfolio by the net asset value computed as above may tend to be higher
than a similar computation made by using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the opposite may be
true.

The Money Market Funds' use of the amortized cost method of valuing portfolio
instruments depends on their compliance with certain conditions in the Rule
promulgated by the SEC under the Investment Company Act of 1940. Under the Rule,
the Trustees must establish procedures reasonably designed to stabilize the net
asset value per Share, as computed for purposes of distribution and redemption,
at $1.00 per Share, taking into account current market conditions and the Funds'
investment objective. The procedures include monitoring the relationship between
the amortized cost value per Share and the net asset value per Share based upon
available indications of market value. The Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps they consider appropriate (such as
redemption in kind or shortening the average portfolio maturity) to minimize any
material dilution or other unfair results arising from differences between the
two methods of determining net asset value.

Trading in Foreign Securities
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its NAV, a Fund
values foreign securities at the latest closing price on the exchange on which
they are traded immediately prior to the closing of the NYSE. Certain foreign
currency exchange rates may also be determined at the latest rate prior to the
closing of the NYSE. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at current rates. Occasionally, events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the NYSE. If such events materially affect the
value of portfolio securities, these securities may be valued at their fair
value as determined in good faith by the Funds' Board, although the actual
calculation may be done by others.

WHAT DO SHARES COST?

The Funds' (except the Money Market Funds) net asset value (NAV) per Share
fluctuates and is based on the market value of all securities and other assets
of the Fund.

The NAV for Class A Shares and Class B Shares of Capital Appreciation Fund and
Mid Cap Equity Fund may differ due to the variance in daily net income realized
by each class. Such variance will reflect only accrued net income to which the
shareholders of a particular class are entitled.

REDUCING or eliminating THE FRONT-END SALES CHARGE
You can reduce or eliminate the applicable front-end sales charge for the Equity
and Income Funds, as follows. HNB or the Distributor must be notified by you in
writing or by your financial institution in order to reduce or eliminate the
sales charge.

Quantity Discounts
Larger purchases of Class A Shares of Capital Appreciation Fund and Mid Cap
Equity Fund and Shares of Louisiana Municipal Income Fund, Total Return Bond
Fund, or U.S. Government Income Fund reduce the sales charge you pay. You can
combine purchases of Shares made on the same day by you, your spouse and your
children under age 21. In addition, purchases made at one time by a trustee or
fiduciary for a single trust estate or a single fiduciary account can be
combined.

Accumulated Purchases
If you make an additional purchase of Shares, you can count previous Share
purchases still invested in a Fund in calculating the applicable sales charge on
the additional purchase.

Concurrent Purchases
You can combine concurrent purchases of Class A Shares of Capital Appreciation
Fund and Mid Cap Equity Fund and Shares of Louisiana Municipal Income Fund,
Total Return Bond Fund, or U.S. Government Income Fund in calculating the
applicable sales charge. The sales charge will be reduced after the purchase is
confirmed.

Letter of Intent
You can sign a Letter of Intent committing to purchase a certain amount of the
Class A Shares of Capital Appreciation Fund and Mid Cap Equity Fund and Shares
of Louisiana Municipal Fund, Total Return Bond Fund, and U.S. Government Income
Fund within a 13-month period to combine such purchases in calculating the sales
charge. The Fund's custodian will hold Shares in escrow equal to the maximum
applicable sales charge. If you complete the Letter of Intent, the Custodian
will release the Shares in escrow to your account. If you do not fulfill the
Letter of Intent, the Custodian will redeem the appropriate amount from the
Shares held in escrow to pay the sales charges that were not applied to your
purchases.

Reinvestment Privilege
You may reinvest, within 30 days (within 120 days for an IRA account), your
Share redemption proceeds at the next determined NAV without any sales charge.
Hibernia National Bank or the Distributor must be notified by you or your
financial institutional in writing of the reinvestment in order to eliminate a
sales charge. If you redeem your Shares in a Fund, there may be tax
consequences.

Purchases by Affiliates of the Fund
The following individuals may buy Shares at NAV without any sales charge because
there are nominal sales efforts associated with their purchases.

o the Trust Division of Hibernia National Bank or other affiliates of
Hibernia National Bank for funds which are held in a fiduciary, agency,
custodial, or similar capacity;

o Trustees/Directors and employees of the Trust, Hibernia National Bank, or
their affiliates and the spouses, children, parents, and the parents of the
spouse of any such person;

o retired Trustees/Directors and retired employees of Hibernia National
Bank, and the spouse, children, parents and the parents of the spouse of any
such person;

o any accounts for which such an employee serves in a fiduciary, agency,
custodial, or similar capacity;

o Trustees/Directors and employees of Federated Securities Corp. or its
affiliates;

o retired Trustees/Directors and retired employees of any bank or
investment dealer who has a sales agreement with Federated Securities Corp. with
regard to the Funds, and their spouses and children; and

investors who purchase shares through The Personal Portfolio
Manager(R), an investment program sponsored by Hibernia Investment
Securities, Inc. (HISI) or other similar asset allocation programs made
available through financial institutions who have established dealer
agreements with Federated Securities Corp.

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE - Class B Shares
These reductions or eliminations are offered because: no sales commissions have
been advanced to the investment professional selling Shares; the shareholder has
already paid a Contingent Deferred Sales Charge (CDSC); or nominal sales efforts
are associated with the original purchase of Shares.

Upon notification to the Distributor or the Funds' transfer agent, no CDSC will
be imposed on redemptions:

o the portion of which is attributable to increases in the value of the
account due to increases in the net asset value per Share;

o of shares acquired through reinvestment of dividends and capital gains;

o of Shares held for more than six years after the end of the calendar month
of acquisition;

o following the death or post-purchase disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, of the last surviving
shareholder;

o representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age of 70
1/2; and

o which are involuntary redemptions processed by the Fund because the
accounts do not meet the minimum balance requirements.

HOW ARE THE FUNDS SOLD?

Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.

front-end SALES CHARGE REALLOWANCES
For sales of Class A Shares of Capital Appreciation Fund and Mid Cap Equity Fund
and Shares of Louisiana Municipal Income Fund, Total Return Bond Fund, and U.S.
Government Income Fund, Hibernia National Bank and any authorized dealer will
normally receive up to 100% of the applicable sales charge. Any portion of the
sales charge which is not paid to HNB, HISI or a dealer will be retained by the
Distributor. For sales of Class B Shares of Capital Appreciation Fund, Mid Cap
Equity Fund, and Cash Reserve Fund, HISI and any authorized dealer will normally
receive up to 100% of the contingent deferred sales charge. Any portion of the
sales charge or contingent deferred sales charge which is not paid to HNB, HISI,
or a dealer will be retained by the Distributor. However, the Distributor, in
its sole discretion, may uniformly offer to pay to HNB, HISI or a dealer selling
shares of the Funds, all or a portion of the sales charge or contingent deferred
sales charge it normally retains. Such payments may, to the extent permitted by
applicable laws, rules and regulations, take the form of cash or promotional
incentives, such as payment of certain expenses of qualified employees and their
spouses to attend informational meetings about the Funds or other special events
at recreational facilities, or items of material value.

RULE 12B-1 PLAN
As a reimbursement-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for the provision of administrative services (such as the provision of office
space, equipment, telephone facilities and various personnel, including
clerical, supervisory, and computer, as necessary or beneficial to establish and
maintain shareholder accounts and records, processing purchase and redemption
transactions, and performing other services) marketing activities (such as
advertising, printing and distributing prospectuses, and providing incentives to
investment professionals) to promote sales of Shares so that a Fund's overall
assets are maintained or increased. This helps the Fund achieve economies of
scale, reduce per Share expenses, and provide cash for orderly portfolio
management and Share redemptions. In addition, the Funds' service providers that
receive asset-based fees also benefit from stable or increasing a Fund's assets.

The Fund reimburses the Distributor only for those payments made to investment
professionals up to the maximum Rule 12b-1 Plan fee. The Distributor may seek
reimbursement in following years for any unreimbursed expenses permitted under
the Plan. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.

SHAREHOLDER SERVICES - class b shares
The Capital Appreciation Fund, Mid Cap Equity Fund and Cash Reserve Fund may pay
Federated Shareholder Services Company, a subsidiary of Federated Investors,
Inc. (Federated), for providing shareholder services and maintaining shareholder
accounts. Federated Shareholder Services Company may select others to perform
these services for their customers and may pay them fees.

SUPPLEMENTAL PAYMENTS
Investment professionals and financial institutions may be paid fees out of the
assets of the Distributor, HISI, Hibernia National Bank, or their affiliates
(but not out of a Fund's assets). The Distributor may be reimbursed by the
Adviser or its affiliates.

Investment professionals and financial institutions receive such fees for
providing distribution-related or shareholder services such as sponsoring sales,
providing sales literature, conducting training seminars for employees, and
engineering sales-related computer software programs and systems. Also,
investment professionals may, to the extent permitted by applicable laws, rules
and regulations, be paid cash or promotional incentives, such as reimbursement
of certain expenses relating to attendance at informational meetings about the
Funds or other special events at recreational-type facilities, or items of
material value.

When an investment professional's customer purchases shares, the investment
professional may receive an amount up to 5.50% of the NAV of Class B Shares.

In addition, the Distributor may pay investment professionals 0.25% of the
purchase price of $1 million or more of Class A Shares that its customer has not
redeemed over the first year.

EXCHANGING SECURITIES FOR SHARES

You may contact the Distributor to request a purchase of Shares in exchange for
securities you own with a value of at least $25,000. The Funds reserve the right
to determine whether to accept your securities. A Fund will value your
securities in the same manner as it values its assets. This exchange is treated
as a sale of your securities for federal tax purposes.

REDEMPTION IN KIND

Although the Funds intend to pay Share redemptions in cash, they reserve the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Funds' portfolio securities.

Because the Funds have elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Funds are obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash
unless the Funds' Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Funds' Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Funds.

In the unlikely event a shareholder is held personally liable for a Fund's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of a Fund. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS
Each share of a Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.

All Shares of a Fund have equal voting rights, except that in matters affecting
only a particular Fund or class, only Shares of that Fund or class are entitled
to vote.

Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.

<PAGE>

As of December 9, 1999, the following shareholders of each Fund owned of record,
beneficially, or both, 5% or more of a Fund's outstanding Shares:

Hibernia Capital Appreciation Fund (Class A Shares)

Hibila, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
6, 358,531 Shares (42.45%); Hibspec, Marshall & Ilsley Trust Co., Milwaukee,
Wisconsin, owned approximately 2,604,033 Shares (17.38%); Hibfund, Marshall &
Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately 2,444,259 Shares
(16.32%); Hibernia National Bank, RPO Retirement Sec. Pl. of Hibernia, New
Orleans, Louisiana, owned approximately 1,482,711 Shares (9.90%).

Hibernia Capital Appreciation Fund (Class B Shares)

There were no shareholders of record who owned 5% or more of the Fund's Class B
Shares.

Hibernia Louisiana Municipal Income Fund

Hibila, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
2,990,855 Shares (36.08%); Hibspec, Marshall & Ilsley Trust Co., Milwaukee,
Wisconsin, owned approximately 1,006,728 Shares (12.14%); Hibfund, Marshall &
Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately 598,582 Shares
(7.22%).

Hibernia Mid Cap Equity Fund (Class A Shares)

Hibfund, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
1,495,880 Shares (87.64%).

Hibernia Mid Cap Equity Fund (Class B Shares)

Donaldson Lufkin Jenrette Securities Corporation, Inc., Jersey City, New Jersey,
owned approximately 15,093 Shares (7.29%).

Hibernia Total Return Bond Fund

Hibfund, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
4,865,988 Shares (59.12%); Hibila, Marshall & Ilsley Trust Co., Milwaukee,
Wisconsin, owned approximately 1,860,423 Shares (22.60%); Hibspec, Marshall &
Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately 819,030 Shares
(9.95%); Hibernia National Bank, RPO Retirement Sec. Pl. of Hibernia, New
Orleans, Louisiana, owned approximately 551,072 Shares (6.70%).

Hibernia U.S. Government Income Fund

Hibila, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
3,056,596 Shares (35.22%); Hibspec, Marshall & Ilsley Trust Co., Milwaukee,
Wisconsin, owned approximately 2,312,675 Shares (26.65%); Hibfund, Marshall &
Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately 2,095,392 Shares
(24.14%).

Hibernia Cash Reserve Fund (Class A Shares)

Hibspec, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
101,243,575 Shares (65.10%); Hibernia National Bank, RPO Retirement Sec. Pl. of
Hibernia, New Orleans, Louisiana, owned approximately 18,773,969 Shares
(12.07%).

Hibernia Cash Reserve Fund (Class B Shares)

Donaldson Lufkin Jenrette Securities Corporation Inc., Jersey City, New Jersey,
owned approximately 207,191 Shares (77.86%).

Hibernia U.S. Treasury Money Market Fund

Hibspec, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
152,619,213 Shares (70.45%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

<PAGE>

TAX INFORMATION

FEDERAL INCOME TAX
The Funds intend to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.

Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by a Fund.

The Mid Cap Equity Fund and U.S. Government Income Fund is entitled to a loss
carry-forward, which may reduce the taxable income or gain that the Fund would
realize, and to which the shareholder would be subject, in the future.

FOREIGN INVESTMENTS
If the Capital Appreciation Fund, Mid Cap Equity Fund, Total Return Bond Fund,
or Cash Reserve Fund purchase foreign securities, their investment income may be
subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of Fund assets to be invested within various countries is uncertain.
However, the Fund intends to operate so as to qualify for treaty-reduced tax
rates when applicable.

Distributions from a Fund may be based on estimates of book income for the year.
Book income generally consists solely of the coupon income generated by the
portfolio, whereas tax-basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of
fixed-income securities denominated in foreign currencies, it is difficult to
project currency effects on an interim basis. Therefore, to the extent that
currency fluctuations cannot be anticipated, a portion of distributions to
shareholders could later be designated as a return of capital, rather than
income, for income tax purposes, which may be of particular concern to simple
trusts.

If a Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to federal income taxes upon disposition of PFIC investments.

If more than 50% of the value of a Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Code may
limit a shareholder's ability to claim a foreign tax credit. Shareholders who
elect to deduct their portion of the Fund's foreign taxes rather than take the
foreign tax credit must itemize deductions on their income tax returns.

Louisiana Municipal Income Fund--Additional Tax Information
Shareholders are not required to pay federal regular income tax on any dividends
received from Louisiana Municipal Income Fund that represent net interest on
tax-exempt municipal securities. However, under the Tax Reform Act of 1986,
dividends representing net interest earned on some municipal securities may be
included in calculating the federal individual alternative minimum tax or the
federal alternative minimum tax for corporations.

The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal to
the regular taxable income of the taxpayer increased by certain "tax-preference"
items not included in regular taxable income and reduced by only a portion of
the deductions allowed in the calculation of the regular tax.

The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax-preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons, and other public facilities, private
activity bonds provide benefits to private parties. Louisiana Municipal Income
Fund may purchase all types of municipal securities, including private activity
bonds. Thus, in any tax year, a portion of the Fund's dividends may be treated
as a tax-preference item.

In addition, in the case of a corporate shareholder, dividends of the Fund which
represent interest on municipal bonds may be subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporation's
"adjusted current earnings." The corporate alternative minimum tax treats 75% of
the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax-preference item.

"Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any Fund dividend, and alternative minimum taxable income does not
include the portion of the Fund's dividend attributable to municipal bonds which
are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.

Dividends of Louisiana Municipal Income Fund representing net interest income
earned on some temporary investments and any realized net short-term gains are
taxed as ordinary income.

These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.

Louisiana Taxes. Under existing Louisiana laws, distributions made by the Fund
are not subject to Louisiana income taxes provided that such distributions
qualify as exempt-interest dividends, and represent interest from obligations
which are issued by the State of Louisiana or any of its political subdivisions,
which interest is exempt from federal income tax. Conversely, to the extent that
distributions made by the Fund are attributable to other types of obligations,
such distributions will be subject to Louisiana income taxes.

Other State and Local Taxes
Income from Louisiana Municipal Income Fund is not necessarily free from state
income taxes in states other than Louisiana or from personal property taxes.
With respect to all the Funds, shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax laws.

WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS?

BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Fund
Complex for the most recent calendar year. The Trust is comprised of seven
funds. The Trust is the only investment company in the Complex.

As of December 9, 1999, the Funds' Board and Officers as a group owned less than
1% of the outstanding Class A Shares and Class B Shares of Capital Appreciation
Fund, Mid Cap Equity Fund and Cash Reserve Fund and less than 1% of the
outstanding Shares of Louisiana Municipal Income Fund, Total Return Bond Fund,
U.S. Government Income Fund and U.S. Treasury Money Market Fund.

An asterisk (*) denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940. A pound sign (#) denotes a Member
of the Board's Executive Committee, which handles the Board's responsibilities
between its meetings. A plus sign (+) denotes a Member of the Board's Audit
Committee, which operates pursuant to a Charter approved by the Board.

<PAGE>

- -----------------------------------------------------------------------------------------------------------------
Name
Birth Date Aggregate
Address Principal Occupations Compensation
Position With Trust for Past Five Years From Trust
- -----------------------------------------------------------------------------------------------------------------

<PAGE>

Edward C. Gonzales*# Trustee or Director of some of the Funds in the $0
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice
Federated Investors Tower President and Treasurer of some of the Funds in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated
Pittsburgh, PA Investors, Inc.; Vice President, Federated
PRESIDENT; TREASURER; TRUSTEE Investment Management Company and Federated
Investment Counseling, Federated Global Investment
Management Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated
Securities Corp.; Trustee, Federated Shareholder
Services Company.

- ----------------------------------------------------------------------------------------------------------------
Robert L. diBenedetto, Gynecologist; President/CEO, Louisiana Medical $10,200
M.D.+ Birth Date: April Mutual Insurance Company; Medical Director Emeritus,
14, 1928 Women's Hospital.
781 Colonial Drive
- -----------------------------------
Baton Rouge, LA
TRUSTEE
- -----------------------------------------------------------------------------------------------------------------
Arthur Rhew Dooley, Jr.@+ Registered Professional Engineer; Chairman and CEO,
Birth Date: December 17, 1942 Dooley Tackaberry, Inc. (distributors and $0
4849 Cardinal Drive fabricators of fire protection and safety
Beaumont, TX 77536 equipment), 1967 to Present; Chairman and CEO,
TRUSTEE Spindeltop Computer Systems, Inc. dba Entire
Business Technology Center, 1983 to
Present; Director, Loop Cold Storage
Company; Director, UTM.D. Anderson Cancer
Center Board of Visitors; Director, Texas
Energy Museum; Member, World Presidents
Organization (former YPO Members); Member,
Society of Fire Protection Engineers.

- -----------------------------------------------------------------------------------------------------------------
James A. Gayle, Sr.+
Birth Date: September 27, 1923 Board of Directors, Louisiana Forestry Association; $13,800
613 Turtle Creek Drive President, Jim Gayle Interests, Inc.; Retired from
Shreveport, LA International Paper Company, August 1985.
TRUSTEE
- -----------------------------------------------------------------------------------------------------------------
J. Gordan Reische#+
Birth Date: September 11, 1931 Retired Managing Partner, New Orleans office, KPMG - $13,800
20 Dogwood Drive LLP.
Covington, LA
TRUSTEE; CHAIRMAN, AUDIT COMMITTEE
- --------------------------------------------------------------------------------------------------------------
----
Jeffrey W. Sterling Vice President, Mutual Fund Services.
Birth Date: February 5, 1947 $0
Federated Investors Tower
Pittsburgh, PA
VICE PRESIDENT; ASSISTANT TREASURER

- -----------------------------------------------------------------------------------------------------------------
Peter J. Germain Senior Vice President and Director, Mutual Fund
Birth Date: September 3, 1959 Services Division, Federated Services Company; $0
Federated Investors Tower Formerly Senior Corporate Counsel, Federated
Pittsburgh, PA Investors (1992-1997).
SECRETARY

- -----------------------------------------------------------------------------------------------------------------
</TABLE>

@ Mr. Dooley was elected to the Board on September 13, 1999, and, therefore has
not received any remuneration from the Trust during either the last fiscal year
or last calendar year.

INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Funds.

The Adviser shall not be liable to the Trust or any Fund shareholder for any
losses that may be sustained in the purchase, holding, or sale of any security
or for anything done or omitted by it, except acts or omissions involving
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed upon it by its contract with the Trust.

Because of the internal controls maintained by HNB to restrict the flow of
non-public information, Fund investments are typically made without any
knowledge of HNB's or it's affiliates' lending relationships with an issuer.

BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the Funds
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Funds' Board.

Research Services
Research services may include advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services may be used by the Adviser or by affiliates in advising other accounts.
To the extent that receipt of these services may replace services for which the
Adviser or its affiliates might otherwise have paid, it would tend to reduce
their expenses. The Adviser and its affiliates exercise reasonable business
judgment in selecting those brokers who offer brokerage and research services to
execute securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided.

For the fiscal year ended August 31, 1999, the Fund's Adviser directed brokerage
transactions to certain brokers due to research services they provided. The
total amount of these transactions for Capital Appreciation Fund was $452,490
for which the Fund paid $323,228 in brokerage commissions and the total amount
of these transactions for Mid Cap Equity Fund was $31,578 for which the Fund
paid $24,490 in brokerage commissions.

Investment decisions for the Funds are made independently from those of other
accounts managed by the Adviser. When a Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Funds and the accounts in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit a Fund, it is possible
that this procedure could adversely impact the price paid or received and/or the
position obtained or disposed of by a Fund.

ADMINISTRATOR
Federated Administrative Services, a subsidiary of Federated, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Funds. Federated Administrative
Services provides these at the following annual rate of the average aggregate
daily net assets of the Funds as specified below:

Maximum Administrative Fee Average Aggregate Daily Net Assets of the
Federated Funds
0.150 of 1% on the first $250 million
- -------------------------------
0.125 of 1% on the next $250 million
- -------------------------------
0.100 of 1% on the next $250 million
- -------------------------------
0.075 of 1% on assets in excess of $750 million
- -------------------------------
The administrative fee received during any fiscal year shall be at least $50,000
per portfolio. Federated Administrative Services may voluntarily waive a portion
of its fee and may reimburse the Funds for expenses.
- --------------------------------------------------------------------------------
Federated Administrative Services also provides, or causes the provision of,
certain accounting and recordkeeping services with respect to the Funds'
portfolio investments for a fee based on each Fund's assets, plus out-of-pocket
expenses.

<PAGE>

CUSTODIAN
Hibernia National Bank, New Orleans, Louisiana, is custodian for the securities
and cash of the Funds.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Funds pay the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders. The fee is based on
the level of a Fund's average net assets for the period, plus out-of- pocket
expenses.

INDEPENDENT Auditors
The independent auditor for the Funds, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Funds' financial
statements and financial highlights are free of material misstatement.
<TABLE>
<CAPTION>

FEES PAID BY THE FUNDs FOR SERVICES

Capital Appreciation Fund
For the Year Ended August 31 1999 1998 1997
Advisory Fee Earned $2,663,596 $2,417,253 $1,674,455
- ----------------------------------------
Advisory Fee Reduction $0 $0 $0
- ----------------------------------------
Brokerage Commissions $323,228 $488,045 $294,766
- ----------------------------------------
Administrative Fee $395,787 $374,710 $277,600
- ----------------------------------------
12b-1 Fee
- ----------------------------------------
Class A Shares $849,270 $784,161 N/A
- ----------------------------------------
Class B Shares $115,785 $64,769 N/A
- ----------------------------------------
Shareholder Services Fee
- ----------------------------------------
Class B Shares $38,595 N/A N/A
- ----------------------------------------

- -------------------------------------------------------------------------------------------------------------------

Louisiana Municipal Income Fund
For the Year Ended August 31 1999 1998 1997
Advisory Fee Earned $440,117 $450,310 $488,,596
- ----------------------------------------
Advisory Fee Reduction $200,207 $80,055 $61,649
- ----------------------------------------
Brokerage Commissions $0 $0 $0
- ----------------------------------------
Administrative Fee $109,123 $116,480 $95,787
- ----------------------------------------
12b-1 Fee $203,273 N/A N/A
- ----------------------------------------

- -------------------------------------------------------------------------------------------------------------------

Mid Cap Equity Fund
For the Year Ended August 31 1999 7/13* - 8/31, 1997
1998
Advisory Fee Earned $138,101 $15,872 N/A
- ----------------------------------------
Advisory Fee Reduction 98,423 $0 N/A
- ----------------------------------------
Brokerage Commissions 24,490 $0 N/A
- ----------------------------------------
Administrative Fee 50,001 $6,713 N/A
- ----------------------------------------
12b-1 Fee
- ----------------------------------------
Class A Shares $42,585 N/A N/A
- ----------------------------------------
Class B Shares $10,345 N/A N/A
- ----------------------------------------
Shareholder Services Fee
- ----------------------------------------
Class B Shares $3,448 N/A N/A
- ----------------------------------------
* Date of initial public offering
- -------------------------------------------------------------------------------------------------------------------

<PAGE>

Total Return Bond Fund
For the Year Ended August 31 1999 1998 1997
Advisory Fee Earned $552,433 $532,051 $346,773
- ----------------------------------------
Advisory Fee Reduction $236,757 $131,063 $0
- ----------------------------------------
Brokerage Commissions $0 $0 $0
- ----------------------------------------
Administrative Fee $88,052 $88,402 $87,209
- ----------------------------------------
12b-1 Fee $197,297 N/A N/A
- ----------------------------------------
Shareholder Services Fee $0 N/A N/A
- ----------------------------------------

- -------------------------------------------------------------------------------------------------------------------

U.S. Government Income Fund
For the Year Ended August 31 1999 1998 1997
Advisory Fee Earned $377,953 $289,526 $190,313
- ----------------------------------------
Advisory Fee Reduction $155,377 $38,603 $25,375
- ----------------------------------------
Brokerage Commissions $0 $0 $0
- ----------------------------------------
Administrative Fee $93,703 $74,793 $52,512
- ----------------------------------------
12b-1 Fee 174,971 N/A N/A
- ----------------------------------------
Shareholder Services Fee $0 N/A N/A
- ----------------------------------------

- -------------------------------------------------------------------------------------------------------------------

Cash Reserve Fund
For the Year Ended August 31 1999 1998 1997
Advisory Fee Earned $639,664 $658,507 $682,458
- ----------------------------------------
Advisory Fee Reduction $0 $0 $0
- ----------------------------------------
Brokerage Commissions $0 $0 $0
- ----------------------------------------
Administrative Fee $178,384 $191,658 $213,586
- ----------------------------------------
12b-1 Fee
- ----------------------------------------
Class A Shares $399,400 N/A N/A
- ----------------------------------------
Class B Shares $1,167 N/A N/A
- ----------------------------------------
Shareholder Services Fee
- ----------------------------------------
Class B Shares $390 N/A N/A
- ----------------------------------------

- -------------------------------------------------------------------------------------------------------------------

U.S. Treasury Money Market Fund
For the Year Ended August 31 1999 1998 1997
Advisory Fee Earned $934,658 $718,045 $598,805
- ----------------------------------------
Advisory Fee Reduction $0 $0 $214,099
- ----------------------------------------
Brokerage Commissions $0 $0 $0
- ----------------------------------------
Administrative Fee $266,324 $208,245 $186,989
- ----------------------------------------
12b-1 Fee $0 N/A N/A
- ----------------------------------------
Shareholder Services Fee $0 N/A N/A
- ----------------------------------------

- -------------------------------------------------------------------------------------------------------------------
</TABLE>

With respect to Capital Appreciation Fund, Mid Cap Equity Fund, and Cash Reserve
Fund, fees are allocated among classes based on their pro rata share of Fund
assets, except for marketing (Rule 12b-1) fees and shareholder services fees,
which are borne only by the applicable class of Shares.

<PAGE>

HOW DO THE FUNDS MEASURE PERFORMANCE?

The Funds may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.

Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in a Fund's or any class of Shares'
expenses; and various other factors.

Share performance (except the Money Market Funds) fluctuates on a daily basis
largely because net earnings fluctuate daily. Both net earnings and offering
price per Share are factors in the computation of yield and total return.

Average Annual Total Returns and Yield

Capital Appreciation Fund
Total returns for Class A Shares are given for the one-year, five-year and
ten-year periods ended August 31, 1999. Total returns for Class B Shares are
given for the one-year and Start of Performance periods ended August 31, 1999.

Yields are given for the 30-day period ended August 31, 1999.

- --------------------------------------------------------------------------------
30-Day Period 1 Year 5 Years 10 Years
Class A Shares
- -------------------------
Total Return N/A 32.10% 22.53% 15.40%
- -------------------------
Yield 0.00% N/A N/A N/A
- -------------------------

- -------------------------
30-Day Period 1 Year 5 Years Start of Performance on December 2, 1996
- -------------------------
Class B Shares
- -------------------------
Total Return N/A 31.85% N/A 20.18%
- -------------------------
Yield 0.00% N/A N/A N/A
- --------------------------------------------------------------------------------

Louisiana Municipal Income Fund
- --------------------------------------------------------------------------------
Total returns are given for the one-year, five-year and ten-year periods ended
August 31, 1999.

Yield and Tax Equivalent Yield are given for the 30-day period ended August 31,
1999.

30-Day Period 1 Year 5 Years 10 Years
Total Return N/A (3.04%) 5.22% 6.49%
- -------------------------
Yield 4.80% N/A N/A N/A
- -------------------------
Tax Equivalent Yield 7.95% N/A N/A N/A
- --------------------------------------------------------------------------------

<PAGE>

Mid Cap Equity Fund
- --------------------------------------------------------------------------------
Total returns for Class A Shares are given for the one-year, five-year and
ten-year periods ended August 31, 1999. Total returns for Class B Shares is
given for the one-year and Start of Performance periods ended August 31, 1999.

Yields are given for the 30-day period ended August 31, 1999.

- --------------------------------------------------------------------------------
30-Day Period 1 Year 5 Years 10 Years
Class A Shares*
- -------------------------
Total Return N/A 33.22% 18.57% 13.77%
- -------------------------
Yield 0.00% N/A N/A N/A
- -------------------------

- -------------------------
30-Day Period 1 Year 5 Years Start of Performance on July 13, 1998
- -------------------------
Class B Shares
- -------------------------
Total Return N/A 33.37% N/A 7.35%
- -------------------------
Yield 0.00% N/A N/A N/A
- --------------------------------------------------------------------------------
* Hibernia Mid Cap Equity Fund, Class A Shares is the successor to a collective trust fund. The quoted
performance data includes performance of the collective trust fund for the period from 8/31/89 to 7/12/98 when
the Fund commenced operation, as adjusted to reflect the Fund's anticipated expenses. The collective trust fund
was not registered under the Investment Company Act of 1940 ("1940 Act") and therefore was not subject to certain
investment restrictions imposed by the 1940 Act. If the collective trust fund
had been registered under the 1940 Act, the performance may have been adversely
affected.
- --------------------------------------------------------------------------------

Total Return Bond Fund
Total returns are given for the one-year, five-year and Start of Performance
periods ended August 31, 1999.

Yield is given for the 30-day period ended August 31, 1999.

30-Day Period 1 Year 5 Years Start of Performance on November 2, 1992
Total Return N/A (3.05%) 5.53% 5.18%
- -------------------------
Yield 5.50% N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------

U.S. Government Income Fund
- -------------------------------------------------------------------------------------------------------------------
Total returns are given for the one-year, five-year and ten-year periods ended
August 31, 1999.

Yield is given for the 30-day period ended August 31, 1999.

30-Day Period 1 Year 5 Years 10 Years
Total Return N/A (2.61%) 5.65% 6.57%
- -------------------------
Yield 5.71% N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------

<PAGE>

Cash Reserve Fund
- -------------------------------------------------------------------------------------------------------------------
Total returns for Class A Shares are given for the one-year, five-year and ten
year periodsended August 31, 1999. Total return for Class B Shares is given for
the Start of Performance period ended August 31, 1999.

Yield and Effective Yield are given for the 7-day period ended August 31, 1999.

7-Day Period 1 Year 5 Years 10 Years
Class A Shares
- -------------------------
Total Return N/A 4.23% 4.70% 4.68%
- -------------------------
Yield 4.32% N/A N/A N/A
- -------------------------
Effective Yield 4.41% N/A N/A N/A
- -------------------------

- -------------------------
Start of Performance on September
7-Day Period 1 Year 5 Years 4, 1998
- -------------------------
Class B Shares
- -------------------------
Total Return N/A N/A N/A 3.37%
- -------------------------
Yield 3.55% N/A N/A N/A
- -------------------------
Effective Yield 3.61% N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------

U.S. Treasury Money Market Fund
- -------------------------------------------------------------------------------------------------------------------
Total returns are given for the one-year, five-year and Start of Performance
periods ended August 31, 1999.

Yield and Effective Yield are given for the 7-day period ended August 31, 1999.

7-Day Period 1 Year 5 Years Start of Performance on July 16,
1993
Total Return N/A 4.23% 4.85% 4.48%
- -------------------------
Yield 4.27% N/A N/A N/A
- -------------------------
Effective Yield 4.36% N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------------------
</TABLE>

TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

When Shares of a Fund are in existence for less than a year, the Fund may
advertise cumulative total return for that specific period of time, rather than
annualizing the total return.

YIELD, EFFECTIVE YIELD and tax-equivalent yield
The yield of Equity and Income Fund Shares is calculated by dividing: (i) the
net investment income per Share earned by the Shares over a 30-day period; by
(ii) the maximum offering price per Share on the last day of the period. This
number is then annualized using semi-annual compounding. This means that the
amount of income generated during the 30-day period is assumed to be generated
each month over a 12-month period and is reinvested every six months.

The tax-equivalent yield of Louisiana Municipal Income Fund Shares is calculated
similarly to the yield, but is adjusted to reflect the taxable yield that Shares
would have had to earn to equal the actual yield, assuming the maximum combined
federal and state tax rate. The yield, effective yield and tax-equivalent yield
do not necessarily reflect income actually earned by Shares because of certain
adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.

The yield of Money Market Fund Shares is based upon the seven days ending on the
day of the calculation, called the "base period." This yield is calculated by:
determining the net change in the value of a hypothetical account with a balance
of one Share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional Shares purchased with
dividends earned from the original one Share and all dividends declared on the
original and any purchased Shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.

The effective yield of Money Market Fund Shares is calculated by compounding the
unannualized base-period return by: adding one to the base-period return,
raising the sum to the 365/7th power; and subtracting one from the result.

To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Louisiana
Municipal Income Fund. The interest earned by the municipal securities owned by
the Fund generally remains free from federal regular income tax and is often
free from state and local taxes as well. However, some of the Louisiana
Municipal Income Fund's income may be subject to the federal alternative minimum
tax and state and/or local taxes.

Taxable Yield Equivalent for 1999 - STATE OF LOUISIANA

Combined Federal and State
Income Tax Bracket: 19.00% 34.00% 37.00% 42.00% 45.60%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,050 $43,051-104,050 $104,051-158,550 $158,551-283,150 Over 283,150
Single Return $1-25,750 $25,751-62,450 $62,451-130,250 $130,251-283,150 Over 283,150
Tax Exempt Yield: Taxable Yield Equivalent:
- ---------------------------------------
2.00% 2.47% 3.03% 3.17% 3.45% 3.68%
2.50% 3.09% 3.79% 3.97% 4.31% 4.60%
3.00% 3.70% 4.55% 4.76% 5.17% 5.51%
3.50% 4.32% 5.30% 5.56% 6.03% 6.43%
4.00% 4.94% 6.06% 6.35% 6.90% 7.35%
4.50% 5.56% 6.82% 7.14% 7.76% 8.27%
5.00% 6.17% 7.58% 7.94% 8.62% 9.19%
5.50% 6.79% 8.33% 8.73% 9.48% 10.11%
6.00% 7.41% 9.09% 9.52% 10.34% 11.03%
6.50% 8.02% 9.85% 10.32% 11.21% 11.95%
</TABLE>

Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Furthermore, additional state and local taxes paid on
comparable taxable investments were not used to increase federal deductions.

PERFORMANCE COMPARISONS
Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the
Investment Company Institute.

A Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.

A Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which a Fund uses in advertising may include:

oLipper Analytical Services, Inc., ranks funds in various fund
categories by making comparative calculations using total return. Total
return assumes the reinvestment of all income dividends and capital
gains distributions, if any. From time to time, the Money Market Funds
will quote the Lipper ranking in the "money market instruments funds"
category in advertising and sales literature.

oBank Rate Monitor National Index, Miami Beach, Florida, is a financial
reporting service which publishes weekly average rates of 50 leading
bank and thrift institution money market deposit accounts. The rates
published in the index are averages of the personal account rates
offered on the Wednesday prior to the date of publication by ten of the
largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. Account minimums range upward from
$2,500 in each institution, and compounding methods vary. If more than
one rate is offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.

oDow Jones Industrial Average ("DJIA") represents share prices of
selected blue-chip industrial corporations as well as public utility
and transportation companies. The DJIA indicates daily changes in the
average price of stocks in any of its categories. It also reports total
sales for each group of industries. Because it represents the top
corporations of America, the DJIA index is a leading economic indicator
for the stock market as a whole.

oStandards & Poor's Daily Stock Price Index of 500 Common Stocks, a
composite index of common stocks in industry, transportation, and
financial and public utility companies, compares total returns of funds
whose portfolios are invested primarily in common stocks. In addition,
the Standard & Poor's index assumes reinvestment of all dividends paid
by stock listed on the index. Taxes due on any of these distributions
are not included, nor are brokerage or other fees calculated in the
Standard & Poor's figures.

oLehman Brothers Government/Corporate Total Index is compromised of
approximately 5,000 issues which include: non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate bonds
guaranteed by the U.S. government and quasi-federal corporations; and
publicly issued, fixed rate, non-convertible domestic bonds of
companies in industry, public utilities, and finance. The average
maturity of these bonds approximates nine years. Tracked by Lehman
Brothers, Inc., the index calculates total returns for one-month,
three-months, twelve months, and ten-year periods and year-to-date.

oSalomon Brothers AAA-AA Corporate Index calculates total returns of
approximately 775 issues which include long-term, high grade domestic
corporate taxable bonds, rated AAA-AA with maturities of twelve years
or more and companies in industry, public utilities, and finance.

oMerrill Lynch Corporate & Government Master Index is an unmanaged
index comprised of approximately 4,821 issues which include corporate
debt obligations rated BBB or better and publicly issued,
non-convertible domestic debt of the U.S. government or any agency
thereof. These quality parameters are based on composite of rating
assigned by Standard and Poor's and Moody's Investors Service, Inc.
Only notes and bonds with a minimum maturity of one year are included.

oMerrill Lynch Corporate Master Index is an unmanaged index comprised
of approximately 4,356 corporate debt obligations rated BBB or better.
These quality parameters are based on composites of ratings assigned by
Standard and Poor's and Moody's Investors Service, Inc. Only bonds with
a minimum maturity of one year are included.

oSalomon Brothers Broad Investment-Grade ("Big") Bond Index is designed
to provide the investment-grade bond manager with an all-inclusive
universe of institutionally traded U.S. Treasury, agency, mortgage and
corporate securities which can be used as a benchmark. The BIG Index is
market capitalization-weighted and includes all fixed rate bonds with a
maturity of one year or longer and a minimum of $50-million amount
outstanding at entry ($200 million for mortgage coupons) and remain in
the index until their amount falls below $25 million.

oMorningstar, Inc., an independent rating service , is the publisher of
the bi-weekly Mutual Funds Values. Mutual Funds Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.

FINANCIAL INFORMATION

The Financial Statements for the Funds for the fiscal year ended August 31,
1999, are incorporated herein by reference to the Annual Report to Shareholders
of Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity
Fund, Total Return Bond Fund, U.S. Government Income Fund, Cash Reserve Fund and
U.S. Treasury Money Market Fund dated August 31, 1999.

<PAGE>

INVESTMENT RATINGS

Standard and Poor's Municipal Bond Rating Definitions
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.

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

BB, B, CCC, CC - Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties of major risk exposures to adverse
conditions.

C - The rating C is reserved for income bonds on which no interest is being
paid.

D - Debt rated D is in default, and payments of interest and/or repayment of
principal is in arrears.

Standard & Poor's Short-Term Municipal Obligation Ratings
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.

SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.

SP-2--Satisfactory capacity to pay principal and interest.

Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)

Commercial Paper (CP) Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.

A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

Long-Term Debt Ratings
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.

A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.

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

Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they compromise 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.

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 some time in the future.

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

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

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

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

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

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

Moody's Investors Service, Inc., Short-Term Municipal Obligation Ratings
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.

MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.

MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.

Moody's Investors Service, Inc. Short-Term Debt Rating Definitions
Prime-1 - Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:

- - Leading market positions in well established industries.

- - High rates of return on funds employed.

- - Conservative capitalization structure with moderate reliance on debt and ample
asset protection.

- - Broad margins in earning coverage of fixed financial charges and high internal
cash generation.

- - Well-established access to a range of financial markets and assured sources
of alternate liquidity

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

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

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

Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.

Commercial Paper (CP) Ratings
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.

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

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

Aa--Bonds 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.

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.

NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.

NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.

NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's. NR(3)--The underlying issuer/obligor/guarantor has
other outstanding debt rated A by S&P or Moody's.

Fitch IBCA, Inc.. Short-Term Debt Rating Definitions
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment, only slightly less in degree than issues rated
F-1+.

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

Fitch IBCA, Inc. Long-Term Debt Rating Definitions
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

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

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

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

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

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

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

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

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

Moody's Investors Service, Inc. Commercial Paper Ratings
Prime-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:

o Leading market positions in well-established industries;

o High rates of return on funds employed;

o Conservative capitalization structure with moderate reliance on debt and
ample asset protection;

o Broad margins in earning coverage of fixed financial charges and high
internal cash generation; and

o Well-established access to a range of financial markets and assured sources
of alternate liquidity.

Prime-2--Issuers rated Prime-1 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

Standard and Poor's Commercial Paper Ratings
A-1--This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

Fitch IBCA, Inc. Commercial Paper Rating Definitions
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.

FITCH-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

<PAGE>

ADDRESSES

Hibernia Capital Appreciation Fund - Class A Shares and Class B Shares

Hibernia Louisiana Municipal Income Fund

Hibernia Mid Cap Equity Fund - Class A Shares and Class B Shares

Hibernia Total Return Bond Fund

Hibernia U.S. Government Income Fund

Hibernia Cash Reserve Fund - Class A Shares and Class B Shares

Hibernia U.S. Treasury Money Market Fund

(Portfolios of Hibernia Funds)

5800 Corporate Drive
Pittsburgh, PA 15237-7010

Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Investment Adviser
Hibernia National Bank
Attention: Hibernia Funds
P.O. Box 61540
New Orleans, Louisiana 70161

Custodian
Hibernia National Bank
Attention: Hibernia Funds
P.O. Box 61540
New Orleans, Louisiana 70161

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072