<PAGE>
----------------
THE
MILESTONE
FUNDS
----------------
THE MILESTONE FUNDS
TREASURY OBLIGATIONS PORTFOLIO
ADVISER
Milestone Capital Management, L.P.
------------------
SEMI-ANNUAL REPORT
MAY 31, 1997
<PAGE>
THE
MILESTONE
FUNDS
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Our Shareholders........................ 3
Statement of Investments.......................... 4
Statement of Assets and Liabilities............... 6
Statement of Operations........................... 7
Statements of Changes in Net Assets............... 8
Financial Highlights.............................. 9-11
Notes to Financial Statements..................... 12-14
</TABLE>
2
<PAGE>
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THE
MILESTONE
FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
LETTER TO OUR SHAREHOLDERS
MAY 31, 1997
Dear Shareholder:
Throughout the first half of our fiscal year, the Fund sustained the steady pace
of growth established during 1996. Investments from both on-going and new
investors resulted in a 60% increase of the Fund's total assets from $1 billion
at year end to over $1.6 billion as of May 30, 1997. We want to thank you for
investing in the Fund, and we look forward to serving your cash management and
liquidity needs throughout the remainder of 1997 and beyond.
Our team of professionals has worked hard over the last six months to anticipate
and fully meet the expanding set of client relationship services and support
systems required by institutional investors like yourself. We deliver
information, execution, analytics, and documentation to the exact specifications
of each individual investor using a wide range of mediums--including phone,
facsimile, the internet, custom PC software, and Bloomberg. While technology
plays an increasingly important role in our business, we do not want to lose
sight of the importance of personal communication, access, and responsiveness.
Our Portfolio Management and Research Team continues to be directly available to
you and all our investors on a daily basis, and we encourage you to contact us
as often as you would like for both routine assistance and special requests.
As always we welcome your feedback and input. Above all, we appreciate the
opportunity to work together with you to help achieve your on-going short term
investment objectives.
Sincerely,
/s/ JANET TIEBOUT HANSON /s/ MARC H. PFEFFER
JANET TIEBOUT HANSON MARC H. PFEFFER
Chairman of the Board of Trustees Chief Investment Officer
The Milestone Funds Milestone Capital Management, L.P.
3
<PAGE>
----------------
THE
MILESTONE
FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
STATEMENT OF INVESTMENTS
MAY 31, 1997 (Unaudited)
($ in Thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL AMOUNT INTEREST RATE MATURITY DATE (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UNITED STATES TREASURY OBLIGATIONS - 15.3%
UNITED STATES TREASURY BILLS - 14.1%
$ 5,000 5.50% 8/21/97 $ 4,938
7,500 5.37% 9/18/97 7,378
67,500 5.15%-5.31% 1/08/98 65,334
35,000 5.16%-5.57% 2/05/98 33,724
30,000 5.37%-5.51% 3/05/98 28,743
60,000 5.45%-5.66% 4/02/98 57,168
40,000 5.47%-5.54% 4/30/98 37,958
-------
235,243
-------
UNITED STATES TREASURY NOTES - 1.2%
10,000 5.63% 10/31/97 10,000
10,000 6.00% 12/31/97 10,010
-------
20,010
-------
- ---------------------------------------------------------------------------------------------------------------
TOTAL UNITED STATES TREASURY OBLIGATIONS (AMORTIZED COST $255,253) 255,253
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
REPURCHASE AGREEMENTS - 85.1%
<TABLE>
<S> <C> <C> <C> <C>
Barclays de Zoete Wedd Securities, Inc., dated 5/30/97, repurchase price $80,037 (U.S. Treasury Bond: $14,697,
11.875%, 11/15/03; U.S. Treasury Notes: $62,084, 5.625%-6.75%, 5/31/97-11/30/01; aggregate market value $81,600)
80,000 5.53% 6/02/97 80,000
Bear, Stearns & Co. Inc., dated 5/30/97, repurchase price $80,037 (U.S. Treasury Bills: $19,278,
6/5/97-5/28/98; U.S. Treasury Bonds: $1,485, 10.75%-11.625%, 11/15/02-8/15/03; U.S. Treasury Notes: $59,967,
4.75%-9.25%, 6/30/97-5/15/02; aggregate market value $81,826)
80,000 5.55% 6/02/97 80,000
CIBC/Wood Gundy Securities Corp., dated 5/30/97, repurchase price $80,037 (U.S. Treasury Notes: $79,259,
5.375%-7.25%, 11/30/97-2/15/98; aggregate market value $81,602)
80,000 5.52% 6/02/97 80,000
CS First Boston Corp., dated 5/30/97, repurchase price $75,034 (U.S. Treasury Bill: $15, 4/02/98; U.S.
Treasury Note: $75,710, 6.25%, 3/31/99; aggregate market value $76,512)
75,000 5.50% 6/02/97 75,000
Chase Securities, Inc., dated 5/30/97, repurchase price $80,037 (U.S. Treasury Bills: $83,581,
9/25/97-11/28/97; aggregate market value $81,602)
80,000 5.53% 6/02/97 80,000
</TABLE>
4
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----------------
TREASURY OBLIGATIONS PORTFOLIO
STATEMENT OF INVESTMENTS (CONT'D)
MAY 31, 1997 (Unaudited)
($ in Thousands)
REPURCHASE AGREEMENTS - 85.1% (CONT'D)
<TABLE>
<S> <C> <C> <C> <C>
Deutsche Morgan Grenfell/C.J. Lawrence, Inc., dated 5/30/97, repurchase price $75,035 (U.S. Treasury Notes:
$76,377, 4.75%-5.125%, 9/30/98-12/31/98; aggregate market value $76,500)
75,000 5.55% 6/02/97 75,000
Deutsche Morgan Grenfell/C.J. Lawrence, Inc., dated 5/30/97, repurchase price $285,131 (U.S. Treasury Notes:
$280,025, 5.125%-7.75%, 11/30/97-12/31/99; aggregate market value $290,700)
285,000 5.53% 6/02/97 285,000
Donaldson, Lufkin & Jenrette Securities Corp., dated 5/30/97, repurchase price $73,061 (U.S. Treasury Bill:
$21,326, 6/05/97; U.S. Treasury Note: $52,911, 5.625%, 10/31/97; aggregate market value $74,488)
73,027 5.52% 6/02/97 73,027
HSBC Securities, Inc., dated 5/30/97, repurchase price $80,037 (U.S. Treasury Notes: $79,484, 5.875%-7.875%,
6/30/01-12/31/01; aggregate market value $81,604)
80,000 5.52% 6/02/97 80,000
J.P. Morgan Securities, Inc., dated 5/30/96, repurchase price $75,035 (U.S. Treasury Bill: $77,288, 8/14/97,
market value $76,501)
75,000 5.52% 6/02/97 75,000
SBC Warburg, Inc., dated 5/30/97, repurchase price $360,167 (U.S. Treasury Bills: $7,517, 6/12/97-10/16/97;
U.S. Treasury Notes: $353,869, 5.00%-8.75%, 10/15/97-2/28/02; aggregate market value $367,250)
360,000 5.55% 6/02/97 360,000
UBS Securities, L.L.C., dated 5/30/97, repurchase price $75,035 (U.S. Treasury Bonds: $15,110, 10.75%-11.875%,
11/15/02-11/15/03; U.S. Treasury Note: $53,570, 8.50%, 2/15/00; aggregate market value $76,500)
75,000 5.53% 6/02/97 75,000
- ---------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS (AMORTIZED COST $1,418,027) 1,418,027
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (AMORTIZED COST $1,673,280) - 100.4% 1,673,280
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.4%) (6,454)
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $1,666,826
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
5
<PAGE>
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THE
MILESTONE
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----------------
TREASURY OBLIGATIONS PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at value and cost (note 1) $ 255,253,440
Repurchase agreements, at value and cost (note 1) 1,418,027,000
Cash 1,046
Receivable for investment securities sold 4,727,250
Interest receivable 736,742
Deferred organization costs and prepaid expenses 254,060
--------------
Total assets 1,678,999,538
--------------
LIABILITIES:
Advisory fee payable 136,065
Shareholder Service fee payable-Investor Shares 44,594
Shareholder Service fee payable-Institutional Shares 50,462
Shareholder Service fee payable-Service Shares 1,862
Shareholder Service fee payable-Premium Shares 5,664
Distribution fee payable-Service Shares 426
Distribution fee payable-Premium Shares 4,687
Dividends payable 7,115,310
Payable for investment securities purchased 4,726,250
Accrued expenses 88,221
--------------
Total liabilities 12,173,541
--------------
NET ASSETS $1,666,825,997
--------------
--------------
NET ASSETS BY CLASS OF SHARES:
Investor Shares $ 188,495,439
Institutional Shares 1,369,600,218
Financial Shares 19,596,206
Service Shares 8,531,384
Premium Shares 80,602,750
--------------
NET ASSETS $1,666,825,997
--------------
--------------
SHARES OUTSTANDING
Investor Shares 188,495,448
--------------
--------------
Institutional Shares 1,369,597,580
--------------
--------------
Financial Shares 19,596,032
--------------
--------------
Service Shares 8,531,417
--------------
--------------
Premium Shares 80,603,061
--------------
--------------
NET ASSET VALUE PER SHARE $1.00
--------------
--------------
COMPOSITION OF NET ASSETS:
Shares of beneficial interest $1,666,823,538
Undistributed net realized gain 2,459
--------------
NET ASSETS $1,666,825,997
--------------
--------------
</TABLE>
See notes to financial statements.
6
<PAGE>
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----------------
TREASURY OBLIGATIONS PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $39,422,160
-----------
EXPENSES (note 2):
Advisory fees 724,598
Administration fees 46,221
Shareholder Service fees
Investor Shares 207,662
Institutional Shares 317,950
Service Shares 1,862
Premium Shares 5,664
Distribution fees
Service Shares 426
Premium Shares 4,687
Registration and filing fees 100,116
Custodian fees and expenses 77,900
Transfer agent fees and expenses 54,933
Publication expenses and rating service fees 41,826
Accounting service fees 21,520
Cash management fees 18,440
Amortization of organization costs 15,565
Reports to shareholders 14,110
Legal fees 13,828
Audit fees 9,972
Insurance expense 6,370
Trustees' fees 4,958
Other expenses 1,549
-----------
Total expenses 1,690,157
Fees waived (note 2) (55,227)
-----------
Net expenses 1,634,930
-----------
NET INVESTMENT INCOME 37,787,230
NET REALIZED GAIN ON INVESTMENTS 4,771
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $37,792,001
-----------
-----------
</TABLE>
See notes to financial statements.
7
<PAGE>
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THE
MILESTONE
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----------------
TREASURY OBLIGATIONS PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED FOR THE YEAR
MAY 31, 1997 ENDED
(UNAUDITED) NOVEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 37,787,230 $ 42,132,617
Net realized gain on investments 4,771 4,144
--------------- --------------
Net increase in net assets
resulting from operations 37,792,001 42,136,761
--------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - Investor
Shares (4,181,624) (4,744,317)
Net investment income -
Institutional Shares (33,317,002) (37,388,300)
Net investment income - Financial
Shares (138,915) --
Net investment income - Service
Shares (37,762) --
Net investment income - Premium
Shares (111,927) --
Net realized gain on investments
- Investor Shares (371) (573)
Net realized gain on investments
- Institutional Shares (1,921) (3,571)
Net realized gain on investments
- Financial Shares (20) --
Net realized gain on investments
- Service Shares -- --
Net realized gain on investments
- Premium Shares -- --
--------------- --------------
Total distributions to
shareholders (37,789,542) (42,136,761)
--------------- --------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST*:
Sale of shares - Investor Shares 847,823,868 1,119,656,967
Sale of shares - Institutional
Shares 4,622,704,083 6,057,708,590
Sale of shares - Financial Shares 369,597,000 --
Sale of shares - Service Shares 9,775,783 --
Sale of shares - Premium Shares 80,758,003 --
Reinvested dividends - Investor
shares 1,854,700 4,490,794
Reinvested dividends -
Institutional Shares 21,478,261 23,817,018
Reinvested dividends - Financial
Shares 103,193 --
Reinvested dividends - Service
Shares -- --
Reinvested dividends - Premium
Shares -- --
Cost of shares repurchased -
Investor Shares (744,098,214) (1,123,505,861)
Cost of shares repurchased -
Institutional Shares (4,171,757,907) (5,413,511,051)
Cost of shares repurchased -
Financial Shares (350,104,161) --
Cost of shares repurchased -
Service Shares (1,244,366) --
Cost of shares repurchased -
Premium Shares (154,942) --
--------------- --------------
Net increase in net assets from
shares of beneficial interest 686,735,301 668,656,457
--------------- --------------
Total Increase 686,737,760 668,656,457
NET ASSETS:
Beginning of period 980,088,237 311,431,780
--------------- --------------
End of period $ 1,666,825,997 $ 980,088,237
--------------- --------------
--------------- --------------
</TABLE>
* Share transactions at net asset value of $1.00 per share.
See notes to financial statements.
8
<PAGE>
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THE
MILESTONE
FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INVESTOR
SHARES
-----------------------------------------------------------------
FOR THE SIX MONTHS FOR THE PERIOD
ENDED FOR THE YEAR DECEMBER 30, 1994*
MAY 31, 1997 ENDED THROUGH
(UNAUDITED) NOVEMBER 30, 1996 NOVEMBER 30, 1995
------------------ ----------------- ------------------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE FOR A SHARE
OUTSTANDING THROUGHOUT
THE PERIOD
Beginning net asset value
per share $1.00 $1.00 $1.00
----- ----- -----
Net investment income 0.025 0.050 0.051
Dividends from net
investment income (0.025) (0.050) (0.051)
----- ----- -----
Ending net asset value
per share $1.00 $1.00 $1.00
----- ----- -----
----- ----- -----
TOTAL RETURN 5.08%(a) 5.11% 5.71%(a)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets:
Expenses(b) 0.41%(a) 0.45% 0.38%(a)
Net investment income 5.03%(a) 4.99% 5.63%(a)
Net assets at the end of
period (000's omitted) $188,495 $82,915 $82,273
</TABLE>
(a) Annualized
(b) Net of advisory, shareholder servicing, and administration fees waived and
expenses reimbursed of 0.00%, 0.01% and 0.14%, respectively.
* Commencement of operations.
See notes to financial statements.
9
<PAGE>
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THE
MILESTONE
FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
FINANCIAL HIGHLIGHTS (CONT'D)
<TABLE>
<CAPTION>
INSTITUTIONAL
SHARES
----------------------------------------------------------------
FOR THE SIX MONTHS FOR THE PERIOD
ENDED FOR THE YEAR JUNE 20, 1995*
MAY 31, 1997 ENDED THROUGH
(UNAUDITED) NOVEMBER 30, 1996 NOVEMBER 30, 1995
------------------ ----------------- -----------------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE FOR A SHARE
OUTSTANDING THROUGHOUT
THE PERIOD
Beginning net asset value
per share $1.00 $1.00 $1.00
----- ----- -----
Net investment income 0.026 0.052 0.026
Dividends from net
investment income (0.026) (0.052) (0.026)
----- ----- -----
Ending net asset value
per share $1.00 $1.00 $1.00
----- ----- -----
----- ----- -----
TOTAL RETURN 5.30%(a) 5.37% 5.76%(a)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets:
Expenses(b) 0.20%(a) 0.20% 0.20%(a)
Net investment income 5.24%(a) 5.21% 5.69%(a)
Net assets at the end of
period (000's omitted) $1,369,600 $897,173 $229,159
</TABLE>
(a) Annualized
(b) Net of advisory, shareholder servicing, and administration fees waived and
expenses reimbursed of 0.01%, 0.02% and 0.17%, respectively.
* Commencement of operations.
See notes to financial statements.
10
<PAGE>
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MILESTONE
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----------------
TREASURY OBLIGATIONS PORTFOLIO
FINANCIAL HIGHLIGHTS (CONT'D)
<TABLE>
<CAPTION>
FINANCIAL SERVICE PREMIUM
SHARES SHARES SHARES
--------------- ------------- -------------
FOR THE FOR THE FOR THE
PERIOD PERIOD PERIOD
MARCH 13, 1997* MAY 2, 1997* MAY 20, 1997*
THROUGH THROUGH THROUGH
MAY 31, 1997 MAY 31, 1997 MAY 31, 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED)
--------------- ------------- -------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE FOR A SHARE
OUTSTANDING THROUGHOUT
THE PERIOD
Beginning net asset value
per share $1.00 $1.00 $1.00
----- ----- -----
Net investment income 0.011 0.004 0.002
Dividends from net
investment income (0.011) (0.004) (0.002)
----- ----- -----
Ending net asset value per
share $1.00 $1.00 $1.00
----- ----- -----
----- ----- -----
TOTAL RETURN 5.36%(a) 5.07%(a) 4.93%(a)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Expenses 0.15%(a) 0.45%(a) 0.60%(a)
Net investment income 5.35%(a) 5.07%(a) 4.94%(a)
Net assets at the end of
period (000's omitted) $19,596 $ 8,531 $80,603
</TABLE>
(a) Annualized
* Commencement of investment operations.
See notes to financial statements.
11
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----------------
TREASURY OBLIGATIONS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 (Unaudited)
NOTE 1. SUMMARY OF ORGANIZATION AND
SIGNIFICANT ACCOUNTING POLICIES
The Milestone Funds (the 'Trust') was formed as a Delaware business trust on
July 14, 1994. The Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940. It currently has one
diversified investment portfolio, the Treasury Obligations Portfolio (the
'Portfolio') which is authorized to issue an unlimited number of shares of
beneficial interest without par value. The Portfolio is currently authorized to
issue five classes of shares, Investor Shares, Institutional Shares, Financial
Shares, Service Shares and Premium Shares. The Trust commenced the offering of
Investor Shares of the Portfolio on December 30, 1994, Institutional Shares on
June 20, 1995, Financial Shares on March 13, 1997, Service Shares on May 2, 1997
and Premium Shares on May 20, 1997. The Trust's financial statements are
prepared in accordance with generally accepted accounting principles.
VALUATION OF SECURITIES - Securities in which the Portfolio invests are valued
at amortized cost. Under the amortized cost method, a portfolio instrument is
valued at cost and any premium or discount is amortized on a constant basis to
maturity. Amortization of premium and accretion of market discount is charged to
income.
REPURCHASE AGREEMENTS - The Portfolio may purchase securities from financial
institutions subject to the seller's agreement to repurchase and the Portfolio's
agreement to resell the securities at par. The investment adviser only enters
into repurchase agreements with financial institutions that are primary dealers
and deemed to be creditworthy by the investment adviser in accordance with
procedures adopted by the Board of Trustees. Securities purchased subject to
repurchase agreements are maintained with a custodian of the Portfolio and must
have, at all times, an aggregate market value greater than or equal to the
repurchase price plus accrued interest. If the value of the underlying
securities falls below 102% of the value of the repurchase price plus accrued
interest, the Portfolio will require the seller to deposit additional collateral
by the next Portfolio business day. In the event that the seller under the
agreement defaults on its repurchase obligation or fails to deposit sufficient
collateral, the Portfolio has the contractual right, subject to the requirements
of applicable bankruptcy and insolvency laws, to sell the underlying securities
and may claim any resulting loss from the seller.
SECURITY TRANSACTIONS - Security transactions are recorded on the trade date.
Realized gain and losses are recorded on the identified cost basis. The cost of
investments for federal income tax purposes at May 31, 1997 is the same as shown
on the accompanying statement of investments.
CLASS SPECIFIC EXPENSES - Each share of the classes represents an undivided,
proportionate interest in the Portfolio. The Portfolio's class specific expenses
include Shareholder Service fees, Distribution fees and certain registration
fees that are in accordance with procedures adopted by the Board of Trustees
regarding the offering of multiple classes of shares by open-end, management
investment companies. In addition, there are differences between the classes of
shares with respect to the minimum investment required and voting rights
affecting each class.
12
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----------------
TREASURY OBLIGATIONS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONT'D)
MAY 31, 1997 (Unaudited)
INCOME TAXES - It is the Portfolio's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its investment company taxable income and net realized gains,
if applicable, to its shareholders. Therefore, no provision has been made for
federal income taxes.
INTEREST INCOME AND DIVIDENDS TO SHAREHOLDERS - Interest income is accrued as
earned. Dividends to shareholders from each class of the Portfolio's net
investment income are declared daily and distributed monthly. Net realized
capital gains, unless offset by any available capital loss carryforwards, are
distributed at least annually.
ACCOUNTING ESTIMATES - The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
ORGANIZATION COSTS - Organization costs are being amortized on a straight line
basis over five years.
NOTE 2. INVESTMENT ADVISORY AND OTHER SERVICES
Milestone Capital Management, L.P. (the 'Adviser') serves as investment adviser
to the Portfolio pursuant to an investment advisory agreement with the Trust.
For its services, the Adviser receives a fee at an annual rate equal to 0.10% of
the average daily net assets of the Portfolio.
The Trust has adopted a Shareholder Service Plan providing that the Trust may
obtain the services of the Adviser and other qualified financial institutions to
act as shareholder servicing agents for their customers. Under this plan, the
Trust has authorized the Adviser to enter into agreements pursuant to which the
shareholder servicing agents perform certain shareholder services. For these
services, the Adviser receives from the Trust a fee of 0.05%, 0.25%, 0.25% and
0.25% of the average daily net assets of the Institutional Shares, Investor
Shares, Service Shares and Premium Shares, respectively. The Adviser pays the
shareholder servicing agents up to these amounts with respect to shares owned by
investors for which the shareholder servicing agents maintain a servicing
relationship pursuant to the Shareholder Servicing Agreement. For the six months
ended May 31, 1997, the Adviser waived 55,227 of its shareholder servicing fee
for the Institutional Shares.
The Trust has adopted a Distribution Plan for the Service Shares and the Premium
Shares. The plan provides that the Portfolio may finance activities which are
primarily intended to result in the sale of the Service and Premium Shares,
including, but not limited to, advertising, printing of prospectuses and reports
for other than existing shareholders, preparation and distribution of
advertising material and sales literature and payments to dealers who enter into
agreements with the Trust or Underwriter. Pursuant to this plan, the Portfolio
may
13
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THE
MILESTONE
FUNDS
----------------
incur distribution expenses related to the sale of the Service and Premium
Shares of up to 0.25% and 0.35% of the average daily net assets of the Service
and Premium Shares, respectively. The plan will only make payment for expenses
actually incurred on a first-in, first-out basis. The plan may carry forward for
an unlimited number of years any unreimbursed expenses. As of May 31, 1997,
there were no unreimbursed expenses payable by the Trust. For the six months
ended May 31, 1997, the Portfolio incurred 0.06% and 0.21% of these distribution
expenses for the Service and the Premium Shares, in the amounts of $426 and
$4,687, respectively.
MGF Service Corp. acts as the Trust's transfer agent and dividend disbursing
agent. Midwest Group Financial Services, Inc. (the 'Underwriter') serves as the
statutory underwriter of the Portfolio's shares pursuant to an Underwriting
Agreement with the Trust. The Underwriter is an affiliate of the Trust's
transfer agent. The Underwriter is reimbursed for all costs and expenses
incurred in this capacity but receives no further compensation for its services
under the Underwriting Agreement.
14
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THE
MILESTONE
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----------------
Adviser
- --------------------------------------------------------------------------------
Milestone Capital Management, L.P.
One Odell Plaza
Yonkers, NY 10701
Underwriter / Transfer Agent
- --------------------------------------------------------------------------------
Midwest Group Financial Services, Inc. / MGF Service Corp.
P.O. Box 5354
Cincinnati, OH 45201-5354
800-363-7660
Primary Dealer
- --------------------------------------------------------------------------------
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167
Administrator / Custodian
- --------------------------------------------------------------------------------
The Bank of New York
90 Washington Street
New York, NY 10286
Legal Counsel
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, NY 10022
This report is authorized for distribution
only to current shareholders and to others
who have received a copy of The Milestone Funds prospectus.
The Milestone Funds
One Odell Plaza, Yonkers, New York 10701
800-941-MILE
