MILESTONE FUNDS, 485BPOS, 1998-03-30

MILESTONE FUNDS
485BPOS, 1998-03-30

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<PAGE>

As filed with the Securities and Exchange Commission on March 30, 1998

File No. 33-81574
File No. 811-8620
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 7

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 10

THE MILESTONE FUNDS
(Formerly LEARNING ASSETS(TM))
(Exact Name of Registrant as Specified in its Charter)

One Executive Boulevard, Yonkers, New York 10701
(Address of Principal Executive Office)

Registrant's Telephone Number, including Area Code: 800-941-6453

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

Timothy J. Overzat
90 Washington Street
New York, New York 10286
(Name and Address of Agent for Service)

Copies of Communications to:
Susan Penry-Williams, Esq.
Kramer, Levin, Naftalis, & Frankel

919 Third Avenue
New York, New York 10019

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

It is proposed that this filing will become effective:

_X_ immediately upon filing pursuant to Rule 485, paragraph (b)

___ on [ date ] pursuant to Rule 485, paragraph (b)

___ 60 days after filing pursuant to Rule 485, paragraph (a)(i)

___ on [ date ] pursuant to Rule 485, paragraph (a)(i)

___ 75 days after filing pursuant to Rule 485, paragraph (a)(ii)

___ on [ date ] pursuant to Rule 485, paragraph (a)(ii)

___ this post-effective amendment designates a new effective date for
a previously filed post-effective amendment

Registrant has registered an indefinite number of shares of beneficial interest
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Accordingly, no fee is payable herewith. A Rule 24f-2
Notice for the Registrant's fiscal year ended November 30, 1997 was filed with
the Commission on February 25, 1998.

<PAGE>

CROSS REFERENCE SHEET
(as required by Rule 404 (c))

PART A

<TABLE>
<CAPTION>
Form N-1A Location in Prospectus
Item No. (Caption)
- ---------- -------------------------------------------
<S> <C>
Item 1. Cover Page Cover Page

Item 2. Synopsis Expenses of Investing in the Portfolio

Item 3. Condensed Financial Information Financial Highlights

Item 4. General Description of Registrant Prospectus Summary; Investment Objective
and Policies; Other Information

Item 5. Management of the Fund Prospectus Summary; Management of the
Trust

Item 5A. Management's Discussion of Fund Performance Not Applicable

Item 6. Capital Stock and Other Securities Investment Objective and Policies;
Dividends and Tax Matters; Other
Information

Item 7. Purchase of Securities Being Offered How to Invest in the Portfolio; Other
Information; Management of the Trust

Item 8. Redemption or Repurchase How to Invest in the Portfolio; How to
Redeem Shares of the Portfolio

Item 9. Pending Legal Proceedings Not Applicable
</TABLE>

<PAGE>

CROSS REFERENCE SHEET

(as required by Rule 404 (c))

PART B

<TABLE>
<CAPTION>
Form N-1A Location in Statement
of Additional Information
Item No. (Caption)
- ---------- -------------------------------------------
<S> <C>
Item 10. Cover Page Cover Page

Item 11. Table of Contents Cover Page

Item 12. General Information and History Other Information

Item 13. Investment Objectives and Policies Investment Policies; Investment
Limitations

Item 14. Management of the Fund Management

Item 15. Control Persons and Principal Holders of Management; Other Information
Securities

Item 16. Investment Advisory and Other Services Management

Item 17. Brokerage Allocation and Other Practices Portfolio Transactions

Item 18. Capital Stock and Other Securities Determination of Net Asset Value

Item 19. Purchase, Redemption and Pricing of Securities Determination of Net Asset Value;
Being Offered Additional Purchase and Redemptions
Information

Item 20. Tax Status Taxation

Item 21. Underwriters Management

Item 22. Calculation of Performance Data Advertising

Item 23. Financial Statements Other Information

</TABLE>

<PAGE>

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

----------------------
THE
MILESTONE
FUNDS

THE MILESTONE FUNDS
TREASURY OBLIGATIONS PORTFOLIO

ADVISER
Milestone Capital Management, L.P.

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

PRIMARY DEALER
Bear, Stearns & Co. Inc.
PROSPECTUS
MARCH 30, 1998
INSTITUTIONAL CLASS

<PAGE>

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

----------------------
THE
MILESTONE
FUNDS

THE MILESTONE FUNDS
TREASURY OBLIGATIONS PORTFOLIO
INSTITUTIONAL SHARES
One Executive Boulevard, Yonkers, New York 10701
(800) 941-MILE

This Prospectus offers Institutional Shares of the Treasury Obligations
Portfolio (the 'Portfolio'), a diversified, no-load money market portfolio of
The Milestone Funds (the 'Trust'), an open-end investment management company.
The Portfolio seeks to provide its shareholders with the maximum current income
that is consistent with the preservation of capital and the maintenance of
liquidity. Milestone Capital Management, L.P. serves as the Portfolio's
investment adviser.

TREASURY OBLIGATIONS PORTFOLIO invests only in short-term obligations of
the U.S. Treasury and repurchase agreements fully collateralized by
obligations of the U.S. Treasury.

This Prospectus provides you with information about the Trust and the Portfolio
which you should know before investing in shares of the Portfolio. A Statement
of Additional Information, dated March 30,1998, has been filed with the
Securities and Exchange Commission ('SEC') and is available free of charge by
contacting The Milestone Funds, One Executive Boulevard, Yonkers, New York
10701, or by calling (800) 941-MILE (6453). This information contained in the
Statement of Additional Information, as amended from time to time, is
incorporated by reference into this prospectus.

INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.

AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.

SHARES OF THE PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE PAGE
---- ----
<S> <C> <C> <C>
Prospectus Summary.............................. 2 Management of the Trust......................... 7
Expenses of Investing in the Portfolio.......... 3 How to Invest in the Portfolio.................. 10
Financial Highlights............................ 4 How to Redeem Shares of the Portfolio........... 11
Investment Objective and Policies............... 4 Dividends and Tax Matters....................... 12
Risk Considerations............................. 6 Other Information............................... 13
Additional Investment Policies and Practices.... 6
</TABLE>

PROSPECTUS SUMMARY

PORTFOLIO HIGHLIGHTS

INSTITUTIONAL SHARES. This prospectus offers Institutional Shares of the
Treasury Obligations Portfolio. The Treasury Obligations Portfolio (the
'Portfolio') is a money market fund that invests only in U.S. Treasury
obligations and repurchase agreements fully collateralized by U.S. Treasury
obligations. Institutional Shares are designed for institutional investors as a
convenient investment vehicle for short-term funds. The Portfolio also offers
Investor Shares, Service Shares, Financial Shares and Premium Shares by separate
prospectuses which are subject to different expenses that affect their
performance. For information about these shares, speak to your sales
representative or call (800) 941-MILE. See 'Other Information'.

MANAGEMENT. The Portfolio's investment adviser is Milestone Capital Management,
L.P. (the 'Adviser'), One Executive Boulevard, Yonkers, New York 10701. See
'Management of the Trust'.

ADMINISTRATION, UNDERWRITING AND SHAREHOLDER SERVICING. The administrator of the
Trust is The Bank of New York, 90 Washington Street, New York, New York 10286.
Bear, Stearns & Co. Inc. ('Bear Stearns'), 245 Park Avenue, New York, New York
10167, is the primary dealer of the Trust's shares and, under a separate
agreement with the Adviser, services the accounts of those shareholders of the
Trust who purchase their shares through Bear Stearns. CW Fund Distributors,
Inc., P. O. Box 5354, Cincinnati, Ohio 45201-5354, serves as statutory
underwriter of the Trust's shares. See 'Management of the Trust'.

PURCHASES AND REDEMPTIONS. Investors may purchase and redeem shares of
beneficial interest in the Portfolio without any sales loads or other charges
any day the New York Stock Exchange and the Federal Reserve Bank of New York are

open ('Fund Business Day') between the hours of 8:30 a.m. and 7:00 p.m. (Eastern
Time). To allow the Adviser to manage the Portfolio most effectively, investors
are encouraged to execute as many trades as possible before 2:30 p.m. If
Countrywide Fund Services, Inc. (the 'Transfer Agent') receives a firm
indication of the approximate size of a purchase by 2:30 p.m. (Eastern Time) and
the completed purchase order by 4:30 p.m., the shares purchased will earn
dividends on the same day. If the Transfer Agent receives a firm indication of
the approximate size of a redemption by 2:30 p.m. (Eastern

<PAGE>

Time), and the completed redemption order by 4:30 p.m., redemption proceeds will
ordinarily be wired that day, and the investor will not receive that day's
dividends. The minimum initial investment is $10,000,000. The Trust and Transfer
Agent each reserves the right to waive this minimum initial investment
limitation. There is no minimum subsequent investment. See 'How To Invest In The
Portfolio' and 'How To Redeem Shares Of The Portfolio'.

DIVIDENDS. Dividends of net investment income are declared daily and paid
monthly by the Portfolio and are reinvested in Portfolio shares unless the
shareholder has elected cash distributions. See 'Dividends and Tax Matters'.

EXPENSES OF INVESTING IN THE PORTFOLIO

The purpose of the following table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Trust will bear, either
directly or indirectly.

SHAREHOLDER TRANSACTION EXPENSES:

<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases.............................................. None
Maximum Sales Load Imposed on Reinvested Dividends................................... None
Deferred Sales Load.................................................................. None
Redemption Fees...................................................................... None
Exchange Fees........................................................................ None
</TABLE>

ANNUAL PORTFOLIO OPERATING EXPENSES (as a percentage of average annual net
assets):

<TABLE>
<S> <C>
Advisory Fees........................................................................ 0.10%
12b-1 Fees........................................................................... None
Shareholder Servicing Fees........................................................... 0.05%*
Other Expenses....................................................................... 0.05%
------

Total Operating Expenses............................................................. 0.20%
</TABLE>

* Under the Shareholder Servicing Plan, the Institutional Shares may incur
expenses up to .10% of the average daily net assets attributable to such
shares. For the current fiscal year, the Adviser has agreed to waive up to
100% of the shareholder servicing fee in order to limit the total expenses of
the Institutional Shares to .20%. This voluntary limitation may be terminated
at any time subject to shareholders receiving 30 days notice of such change.

For a further description of the various expenses incurred in the operation of
the Portfolio, see 'Management of the Trust'.

EXAMPLE

<TABLE>
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment in
Institutional Shares of the Portfolio, assuming a 5% annual return 1 Year 3 Years 5 Years 10 Years
and redemption at the end of each period:............................ $2 $6 $11 $26
</TABLE>

This example is based on the fees listed in the table and assumes the
reinvestment of dividends. The example should not be considered a representation
of past or future expenses or performance. Actual expenses may be greater or
less than those shown.

<PAGE>

FINANCIAL HIGHLIGHTS

The following financial highlights of the Portfolio's Institutional Shares have
been audited by Deloitte & Touche, LLP, independent certified public
accountants, for the year ended November 30, 1997 and McGladrey & Pullen, LLP,
independent certified public accountants, for the year ended November 30, 1996
and for the period June 20, 1995 through November 30, 1995. The financial
statements and independent accountant's report thereon of the Portfolio are
incorporated into the Statement of Additional Information.

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JUNE 20, 1995*
ENDED ENDED THROUGH
NOVEMBER 30, 1997 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.......... 0.053 0.052 0.026
Dividends from net investment
income....................... (0.053) (0.052) (0.026)
----------------- ----------- -----------
Ending net asset value per
share........................ $ 1.00 $ 1.00 $ 1.00
----------------- ----------- -----------
----------------- ----------- -----------
Total return................... 5.46% 5.37% 5.76%(a)
Ratios/supplemental data
Ratios to average net
assets:
Expenses (b)............ 0.20% 0.20% 0.20%(a)
Net investment income... 5.32% 5.21% 5.69%(a)
Net assets at the end of period
(000's omitted).............. $ 1,183,905 $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

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE

The Portfolio seeks to provide investors with maximum current income consistent
with the preservation of capital and the maintenance of liquidity. As with any
mutual fund, there is no assurance that the Portfolio will achieve this goal.

<PAGE>

INVESTMENT POLICIES

The Portfolio invests ONLY in U.S. Treasury obligations and repurchase
agreements fully collateralized by U.S. Treasury obligations. The Portfolio may
purchase U.S. Treasury obligations on a when-issued or forward commitment basis.
The Portfolio will maintain an average maturity, computed on a dollar-weighted
basis, of 90 days or less.

The following permissible investments and investment restrictions are
fundamental investment policies of the Portfolio that may not be changed without
shareholder approval:

PERMISSIBLE INVESTMENTS.

The Portfolio seeks to achieve its investment objective by investing ONLY in:

U.S. Treasury obligations maturing in 397 days or less. U.S. Treasury
obligations are securities issued by the United States Treasury, such as
Treasury bills, notes and bonds, that are fully guaranteed as to payment
of principal and interest by the United States Government.

Repurchase agreements fully collateralized by U.S. Treasury obligations.
Repurchase agreements are transactions in which the Portfolio purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon future date, normally
one-to-seven days later. The resale price reflects a market rate of
interest that is not related to the coupon rate or maturity of the
purchased security. The Portfolio enters into repurchase agreements ONLY
WITH PRIMARY DEALERS designated by the Federal Reserve Bank of New York
which the Adviser believes present minimal credit risks in accordance with
guidelines established by the Board of Trustees of the Trust (the
'Board'). The Adviser monitors the credit-worthiness of sellers under the
Board's general supervision. If a seller defaults on its repurchase
obligation, however, the Portfolio might suffer a loss.

The Portfolio may invest in U.S. Treasury obligations or repurchase agreements
without limit. Although the Portfolio intends to be fully invested in these
instruments, it may hold a de minimis amount of cash for a short period prior to
investment or payment of the proceeds of redemption.

In the future, the Portfolio may attempt to achieve its investment objectives by
holding, as its only investment securities, the securities of another investment
company having identical investment objectives and policies as the Portfolio in
accordance with the provisions of the Investment Company Act of 1940 or any
orders, rules or regulations thereunder adopted by the Securities and Exchange
Commission.

INVESTMENT RESTRICTIONS.

The Portfolio WILL NOT:

1. Invest in structured notes or instruments commonly known as
derivatives;

2. Invest in variable, adjustable or floating rate instruments of any
kind;

3. Enter into reverse repurchase agreements;

4. Invest in securities issued by agencies or instrumentalities of the
United States Government, such as the Federal National Mortgage
Association ('FNMA'), Government National Mortgage Association
('GNMA'), Federal Home Loan Mortgage Corp. ('Freddie Mac'), or the
Small Business Administration ('SBA'); or,

5. Invest in zero coupon bonds.

The Portfolio will make no investment unless the Adviser first determines that
it is eligible for purchase and presents minimal credit risks, pursuant to
procedures adopted by the Board. The Portfolio's investments are subject to the
restrictions imposed by Rule 2a-7 under the Investment Company Act of 1940.

<PAGE>

RISK CONSIDERATIONS

Although the Portfolio invests in short-term Treasury obligations, an investment
in the Portfolio is subject to risk even if all securities in the Portfolio's
portfolio are paid in full at maturity. All money market instruments, including
U.S. Treasury obligations, can change in value in response to changes in
interest rates, and a major change in rates could cause the share price to
change. While U.S. Treasury obligations are backed by the full faith and credit
of the U.S. Government, an investment in the Portfolio is neither insured nor
guaranteed by the U.S. Government or any other party. Thus, while the Portfolio
seeks to maintain a stable net asset value of $1.00 per share, there is no
assurance that it will do so. For a discussion of the risks associated with
particular investment practices of the Portfolio, see 'Additional Investment
Policies and Practices'.

ADDITIONAL INVESTMENT POLICIES AND PRACTICES

THE PORTFOLIO MAY NOT CHANGE ITS INVESTMENT OBJECTIVE OR ANY INVESTMENT POLICY

DESIGNATED AS FUNDAMENTAL WITHOUT SHAREHOLDER APPROVAL. Investment policies or
practices of the Portfolio that are not designated as fundamental may be changed
by the Board without shareholder approval, following notice to shareholders. The
Portfolio's additional fundamental and nonfundamental investment policies are
described further below and in the Statement of Additional Information.

BORROWING. As a fundamental investment policy, the Portfolio may only borrow
money for temporary or emergency purposes (not for leveraging or investment),
including the meeting of redemption requests, in amounts up to 33 1/3% of the
Portfolio's total assets. Interest costs on borrowings may fluctuate with
changing market rates of interest and may partially offset or exceed the return
earned on borrowed funds (or on the assets that were retained rather than sold
to meet the needs for which funds were borrowed). Under adverse market
conditions, the Portfolio might have to sell portfolio securities to meet
interest or principal payments at a time when investment considerations would
not favor such sales. As a nonfundamental investment policy, the Portfolio may
not purchase securities for investment while any borrowing equaling 5% or more
of the Portfolio's total assets is outstanding.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Portfolio may purchase new
issues of U.S. Treasury Obligations on a 'when-issued' basis or existing issues
of U.S. Treasury obligations on a 'delayed delivery' basis. The Portfolio would
enter into these forward commitments to obtain securities at prices that might
not be available in the future. The price is fixed when the commitment is made,
but the securities are delivered on a future date beyond the customary
settlement time and paid for upon delivery. The Portfolio assumes the risk that
the value of the securities on the delivery date may be more or less than the
purchase price. Failure by the other party to deliver a security purchased by
the Portfolio may result in a loss or a missed opportunity to make an
alternative investment. Commitments for when-issued or delayed delivery
transactions will be entered into only when the Portfolio intends to acquire the
securities. Although there is no limit on the amount of these commitments that
the Portfolio may make, under normal circumstances it will not commit more than
30% of its total assets to such purchases.

ILLIQUID SECURITIES. The Portfolio may invest no more than 10% of its net assets
in securities that at the time of purchase are illiquid, including repurchase
agreements having a maturity of more than seven days and not entitling the
holder to payment of principal within seven days. In addition, the Portfolio
will not invest in repurchase agreements having a maturity in excess of one
year. Under the supervision of, and pursuant to guidelines established by, the
Board, the Adviser determines and monitors the liquidity of portfolio
securities. The Portfolio will not purchase a security if, as a result, more
than 10% of its net assets would be invested in illiquid securities. If a
security becomes illiquid and, as a result, more than 10% of the Portfolio's net
assets are invested in illiquid securities, the Adviser will take reasonable
steps to reduce the Portfolio's holdings of illiquid securities to 10% or less
of its net assets.

<PAGE>

TEMPORARY DEFENSIVE POSITIONS. Under abnormal market or economic conditions, the

Portfolio temporarily may hold up to 100% of its investable assets in cash.

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES

The business of the Trust and the Portfolio is managed under the direction of
the Board of Trustees. The Board formulates the general policies of the
Portfolio and meets regularly to review the Portfolio's performance, monitor its
investment activities and practices, and review other matters affecting the
Portfolio and the Trust. Additional information regarding the Trustees, as well
as the Company's executive officers, may be found in the Statement of Additional
Information under the heading 'Management--Trustees and Officers'.

THE ADVISER

Milestone Capital Management, L.P. (the 'Adviser') serves as investment adviser
to the Portfolio pursuant to an investment advisory agreement with the Trust.
Subject to the general control of the Board, the Adviser continually manages the
Portfolio, including the purchase, retention and disposition of its securities
and other assets. The Adviser is a limited partnership organized under the laws
of the State of New York on August 1, 1994, and is a registered investment
adviser under the Investment Advisers Act of 1940. The General Partner of the
Adviser is Milestone Capital Management Corp., a New York corporation.

Janet Tiebout Hanson is President and Chief Executive Officer of the Adviser.
Ms. Hanson is also President and Chief Executive Officer of Milestone Capital
Management Corp., in which she holds the controlling interest. She is a former
vice-president of Goldman, Sachs & Co., a leading investment banking firm.
During her fourteen year tenure with Goldman Sachs, Ms. Hanson held significant
sales, marketing, and management positions in both the Fixed Income and Asset
Management Divisions, including co-manager of Money Market Sales in New York.
Ms. Hanson was responsible for developing many of the firm's key relationships
with major institutional investors. In addition, she was instrumental in raising
assets for Goldman Sachs Asset Management's money market and bond mutual funds.
Ms. Hanson holds a BA in government from Wheaton College in Massachusetts and an
MBA in finance from Columbia University.

Marc H. Pfeffer is Chief Investment Officer of the Adviser. He is primarily
responsible for the day-to-day management of the Treasury Obligations Portfolio
and heads the Adviser's portfolio management and research team. Before joining
the Adviser, Mr. Pfeffer was with Goldman, Sachs & Co. for eight years. As a
vice-president and portfolio manager of Goldman Sachs' Asset Management, he was
responsible for managing six institutional money market portfolios which grew to
over $3 billion in total assets as of November 1994. Mr. Pfeffer holds a BS in
finance from the State University of New York at Buffalo and an MBA in finance
from Fordham University.

expected sale of shares of the Portfolio without reimbursement from the Trust.
The Trust, on behalf of the Portfolio, is responsible for all expenses other
than those expressly borne by the Adviser under the investment advisory
agreement. The expenses borne by the Trust include, but are not limited to, the
investment advisory fee, administration fee, transfer agent fee, and custodian
fee, costs of preparing, printing and delivering to shareholders the Trust's
prospectuses, statements of additional information, and shareholder reports,
legal fees, auditing and tax fees, taxes, blue sky fees, SEC fees,

<PAGE>

compliance expenses, insurance expenses, and compensation of certain of the
Trust's Trustees, officers and employees and other personnel performing services
for the Trust. Should the expenses of the Portfolio (including the fees of the
Adviser but excluding interest, taxes, brokerage commissions, litigation and
indemnification expenses and other extraordinary expenses) for any fiscal year
exceed the limits prescribed by any state in which the Portfolio's shares are
qualified for sale, the Adviser will reduce its fee or reimburse expenses by the
amount of such excess.

ADMINISTRATOR

The Bank of New York, 90 Washington Street, New York, New York 10286 serves as
the administrator of the Trust, pursuant to an Administration Agreement with the
Trust.

The services The Bank of New York provides to the Trust include: coordinating
the activities of any third parties furnishing services to the Trust; providing
the necessary office space, equipment and personnel to perform administrative
and clerical functions for the Trust and preparing, filing and distributing
proxy materials, periodic reports to shareholders, registration statements and
other documents.

As compensation for services performed under the Administration Agreement, The
Bank of New York receives a monthly fee calculated at the annual rate of .04% of
the assets of the Portfolio as determined at each month end, with a maximum fee
of $100,000 per annum.

UNDERWRITER

CW Fund Distributors, Inc. (the 'Underwriter') serves as statutory underwriter
of the Portfolio's shares pursuant to an Underwriting Agreement with the Trust,
and as the agent of the Trust in connection with the offering of shares of the
Portfolio. The Underwriter is an affiliate of the Trust's transfer agent. See
'Transfer Agent'.

which investors may purchase or redeem shares. The Underwriter may compensate
certain persons who provide services in connection with the sale or expected
sale of shares of the Portfolio. Investors purchasing shares of the Portfolio
through another financial institution should read any materials and information
provided by the financial institution to acquaint themselves with its procedures
and any fees that it may charge.

PRIMARY DEALER

Bear, Stearns & Co. Inc. ('Bear Stearns') serves as primary dealer of the
Trust's shares. Bear Stearns is a full-service securities broker-dealer and
investment banking firm with global distribution capability. It is a member of
all major national securities exchanges with its headquarters at 245 Park
Avenue, New York, New York 10167.

Under its Primary Dealer Agreement with the Underwriter, Bear Stearns promotes
and arranges for the sale of shares of the Trust. Orders for the purchase or
redemption of shares of each series of the Trust are directed by Bear Stearns to
the Underwriter for execution. Bear Stearns receives no compensation for its
services under the Primary Dealer Agreement.

SHAREHOLDER SERVICES

The Trust has adopted a shareholder service plan under which it pays the Adviser
.10% of the average daily net assets of the Institutional Shares such 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

<PAGE>

Trust has authorized the Adviser to enter into agreements pursuant to which the
shareholder servicing agent performs certain shareholder services. For these
services, the Adviser pays the shareholder servicing agent a fee based upon the
average daily net assets of the Institutional Shares owned by investors for
which the shareholder servicing agent maintains a servicing relationship.

Among the services provided by shareholder servicing agents are: answering
customer inquiries regarding account matters; assisting shareholders in
designating and changing various account options; aggregating and processing
purchase and redemption orders and transmitting and receiving funds for
shareholder orders; transmitting, on behalf of the Trust, proxy statements,
prospectuses and shareholder reports to shareholders and tabulating proxies;
processing dividend payments and providing subaccounting services for Fund
shares held beneficially; and providing such other services as the Trust or a
shareholder may request.

the Trust and the Bear Stearns Accounts with any information either may need
about the other and to facilitate the processing of orders for the purchase or
redemption of shares. For these services, the Adviser, at its own expense and
from its own resources, pays Bear Stearns a fee. The Adviser may enter into
similar client service agreements with other persons who provide certain
shareholder services. These fees do not increase the amount of any advisory or
shareholder services fees paid to the Adviser.

TRANSFER AGENT

Countrywide Fund Services, Inc., a registered transfer agent, acts as the
Trust's transfer agent and dividend disbursing agent. The Transfer Agent
maintains an account for each shareholder of the Portfolio (unless such accounts
are maintained by sub-transfer agents or processing agents) and performs other
transfer agency and related functions.

The Transfer Agent is authorized to subcontract any or all of its functions to
one or more qualified sub-transfer agents, shareholder servicing agents, or
processing agents, who may be affiliates of the Transfer Agent, and who agree to
comply with the terms of the Transfer Agent's agreement with the Trust. Among
the services provided by such agents are answering customer inquiries regarding
account matters; assisting shareholders in designating and changing various
account options; aggregating and processing purchase and redemption orders and
transmitting and receiving funds for shareholder orders; transmitting, on behalf
of the Trust, proxy statements, prospectuses and shareholder reports to
shareholders and tabulating proxies; processing dividend payments and providing
subaccounting services for Portfolio shares held beneficially; and providing
such other services as the Trust or a shareholder may request. The Transfer
Agent may pay these agents for their services, but no such payment will increase
the Transfer Agent's compensation from the Trust.

<PAGE>

HOW TO INVEST IN THE PORTFOLIO

Shares of the Portfolio may be purchased by wire only. Shares are sold at the
net asset value next determined after receipt of a purchase order in the manner
described below. Purchase orders are accepted on any day on which the New York
Stock Exchange and the Federal Reserve Bank of New York are open ('Fund Business
Day') between the hours of 8:30 a.m. and 7:00 p.m. (Eastern Time). The Trust
does not determine net asset value, and purchase orders are not accepted, on the
days those institutions observe the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and Christmas.

the completed purchase order before 4:30 p.m. (Eastern Time), and the Custodian
receives Federal Funds the same day, purchases of shares of the Portfolio begin
to earn dividends that day. Completed orders received after 4:30 p.m. begin to
earn dividends the next Fund Business Day upon receipt of Federal Funds.

To allow the Adviser to manage the Portfolio most effectively, investors are
encouraged to execute as many trades as possible before 2:30 p.m. To protect the
Portfolio's performance and shareholders, the Adviser discourages frequent
trading in response to short-term market fluctuations. The Portfolio reserves
the right to refuse any investment that, in its sole discretion, would disrupt
the Portfolio's management.

If the Public Securities Association recommends that the government securities
markets close early, the Trust may advance the time at which the Transfer Agent
must receive notification of orders for purposes of determining eligibility for
dividends on that day. Investors who notify the Transfer Agent after the
advanced time become entitled to dividends on the following Fund Business Day.
If the Transfer Agent receives notification of a redemption request after the
advanced time, it ordinarily will wire redemption proceeds on the next Fund
Business Day.

If an investor does not remit Federal Funds, such payment must be converted into
Federal Funds. This usually occurs within one Fund Business Day of receipt of a
bank wire. Prior to receipt of Federal Funds, the investor's monies will not be
invested.

The following procedure will help assure prompt receipt of your Federal Funds
wire:

A. Telephone the Transfer Agent, Countrywide Fund Services, Inc., toll free at
(800) 363-7660 and provide the following information:

Your name
Address
Telephone number
Taxpayer ID number
The amount being wired
The identity of the bank wiring funds.

You will then be provided with a Portfolio account number. (Investors with
existing accounts must also notify the Trust before wiring funds.)

<PAGE>

B. Instruct your bank to wire the specified amount to the Trust as follows:

The Bank of New York, ABA # 021000018
A/C # 8900276541
FBO Milestone Funds Treasury Obligations Portfolio Operating Account

Ref: Shareholder Name and Account Number

An investor may open an account when placing an initial order by telephone,
provided the investor thereafter submits an Account Registration Form by mail.
An Account Registration Form is included with this Prospectus.

The Trust and the Transfer Agent each reserves the right to reject any purchase
order for any reason.

SHARE CERTIFICATES. The Transfer Agent maintains a share account for each
shareholder. The Trust does not issue share certificates.

ACCOUNT STATEMENTS. Monthly account statements are sent to investors to report
transactions such as purchases and redemptions as well as dividends paid during
the month.

MINIMUM INVESTMENT REQUIRED. The minimum initial investment in the Portfolio is
$10,000,000. There is no minimum subsequent investment. The Trust reserves the
right to waive the minimum investment requirement.

HOW TO REDEEM SHARES OF THE PORTFOLIO

Holders of shares of the Portfolio may redeem their shares without charge at the
net asset value next determined after the Portfolio receives the redemption
request. Redemption requests must be received in proper form and can be made by
telephone request or wire request on any Fund Business Day between the hours of
8:30 a.m. and 7:00 p.m. (Eastern Time).

BY TELEPHONE. Redemption requests may be made by telephoning the Transfer Agent,
Countrywide Fund Services, Inc., at (800) 363-7660. Shareholders must provide
the Transfer Agent with the shareholder's account number, the exact name in
which the shares are registered and some additional form of identification such
as a password. A redemption by telephone may be made only if the telephone
redemption authorization has been completed on the Account Registration Form
included with this Prospectus. In an effort to prevent unauthorized or
fraudulent redemption requests by telephone, the Transfer Agent will follow
reasonable procedures to confirm that such instructions are genuine. If such
procedures are followed, neither the Transfer Agent nor the Trust will be liable
for any losses due to unauthorized or fraudulent redemption requests.

<PAGE>

In times of drastic economic or market changes, it may be difficult to make
redemptions by telephone. If a shareholder cannot reach the Transfer Agent by
telephone, redemption requests may be mailed or hand-delivered to the Transfer
Agent.

WRITTEN REQUESTS. Redemption requests may be made by writing to The Milestone
Funds, c/o Countrywide Fund Services, Inc., P. O. Box 5354, Cincinnati, Ohio

45201-5354. Written requests must be in proper form. The shareholder will need
to provide the exact name in which the shares are registered, the Portfolio
name, account number, and the share or dollar amount requested.

A signature guarantee is required for any written redemption request and for any
instruction to change the shareholder's record name or address, a designated
bank account, the dividend election, or the telephone redemption or other option
elected on an account. Signature guarantees may be provided by any eligible
institution acceptable to the Transfer Agent, including a bank, a broker, a
dealer, national securities exchange, a credit union, or a savings association
which is authorized to guarantee signatures. Other procedures may be implemented
from time to time.

The Transfer Agent may request additional documentation to establish that a
redemption request has been authorized properly. A redemption request will not
be considered to have been received in proper form until such additional
documentation has been submitted to the Transfer Agent.

<TABLE>
<CAPTION>
FIRM INDICATION OF REDEMPTION
REQUEST AND APPROXIMATE SIZE OF COMPLETED REDEMPTION ORDER REDEMPTION PROCEEDS
REDEMPTION RECEIVED RECEIVED ORDINARILY DIVIDENDS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
By 2:30 p.m. Eastern Time By 4:30 p.m. Wired same Business Not earned on the
Eastern Time Day day request received

After 2:30 p.m. Eastern Time After 4:30 p.m. Wired next Business Earned on day request
Eastern Time Day received
</TABLE>

Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves
the right to redeem, upon 60 days written notice, all shares in an account with
an aggregate net asset value of less than $1,000,000 unless an investment is
made to restore the minimum value.

DIVIDENDS AND TAX MATTERS

DIVIDENDS AND DISTRIBUTIONS

DIVIDENDS. Dividends are declared daily and paid monthly, following the close of
the last Fund Business Day of the month. Shares purchased by wire before 4:30
p.m. (Eastern Time) begin earning dividends that day. Dividends are
automatically reinvested on payment dates in additional shares of the Portfolio
unless cash payments are requested by contacting the Trust. The election to
reinvest dividends and distributions or receive them in cash may be changed at
any time upon written notice to the Transfer Agent. All dividends and other

distributions are treated in the same manner for Federal income tax purposes
whether received in cash or reinvested in shares of the Portfolio. If no
election is made, all dividends and distributions will be reinvested.

CAPITAL GAINS DISTRIBUTIONS. Net realized short-term capital gains, if any, will
be distributed whenever the Trustees determine that such distributions would be
in the best interest of the shareholders, which would be at least once per year.
The Trust does not anticipate that the Portfolio would realize any long-term
capital gains, but should they occur, they also will be distributed at least
once every 12 months.

<PAGE>

TAX MATTERS

TAX STATUS OF THE PORTFOLIO. The Portfolio intends to qualify and continue to
qualify to be taxed as a 'regulated investment company' under the Internal
Revenue Code of 1986, as amended (the 'Code'). Accordingly, the Portfolio will
not be liable for Federal income taxes on the net investment income and capital
gains distributed to its shareholders. Because the Portfolio intends to
distribute all of its net investment income and net capital gains each year in
accordance with the timing requirements of the Code, the Portfolio should also
avoid Federal excise taxes.

DISTRIBUTIONS. Dividends paid by the Portfolio out of its net investment income
(including realized net short-term capital gains) are taxable to the
shareholders of the Portfolio as ordinary income. Distributions of net long-term
capital gains, if any, realized by the Portfolio are taxable to the shareholders
as long-term capital gains, regardless of the length of time the shareholder may
have held shares in the Portfolio at the time of distribution. Distributions are
subject to Federal income tax when they are paid, whether received in cash or
reinvested in shares of the Portfolio. Distributions declared in December and
paid in January, however, are taxable as if paid on December 31st.

The Portfolio is required by Federal law to withhold 31% of reportable payments
(which may include dividends and capital gain distributions) paid to a
non-corporate shareholder unless that shareholder certifies in writing that the
social security or other tax identification number provided is correct and that
the shareholder is not subject to backup withholding for prior underreporting to
the Internal Revenue Service.

Some states and localities do not tax dividends paid on shares of the Portfolio
that are attributable to interest from U.S. Treasury obligations (but not
necessarily interest earned on repurchase agreements).

Reports containing appropriate information with respect to the Federal income
tax status of dividends, distributions and redemptions, including the
proportions attributable to capital gains and interest on U.S. Treasury
obligations, paid during the year by the Portfolio will be mailed to
shareholders shortly after the close of each calendar year.

The foregoing is only a summary of some of the tax considerations generally
affecting the Portfolio and its shareholders. The Statement of Additional
Information contains a further discussion. Because other Federal, state or local
tax considerations may apply, investors are urged to consult their tax advisors.

OTHER INFORMATION

PORTFOLIO PERFORMANCE. The Portfolio may advertise its yield, which is based on
historical results and is not intended to indicate future performance. Yield
shows the rate of income the Portfolio has earned on its investments as a
percentage of the Portfolio's share price. To calculate yield, the Portfolio
takes the interest income it earned from its portfolio of investments for a
seven-day period (net of expenses), divides it by the average number of shares
entitled to receive dividends, and expresses the result as an annualized
percentage rate based on the Portfolio's share price at the end of the seven-day
period. The Portfolio's compounded annualized yield assumes the reinvestment of
dividends paid by the Portfolio, and therefore will be somewhat higher than the
annualized yield for the same period.

The Portfolio's advertisements may refer to ratings and rankings among similar
funds by independent evaluators such as Morningstar, Lipper Analytical Services,
Inc. or IBC Financial Data, Inc. In addition, the performance of the Portfolio
may be compared to recognized indices of market performance. The comparative
material found in the Portfolio's advertisements, sales literature, or reports
to shareholders may contain performance ratings. This material is not to be
considered representative or indicative of future performance.

<PAGE>

DETERMINATION OF NET ASSET VALUE. The net asset value per share of the Portfolio
is determined at 4:30 p.m. (Eastern Time) on each Fund Business Day. The net
asset value is determined by subtracting total liabilities from total assets and
dividing the remainder by the number of shares outstanding. The Portfolio's
securities are valued at their amortized cost which does not take into account
unrealized gains or losses on securities. This method involves initially valuing
an instrument at its cost and thereafter assuming a constant amortization to
maturity of any premium paid or accreting discount received. The amortized cost
method minimizes changes in the market value of the securities held by the
Portfolio and helps it maintain a stable price of $1.00 per share.

CUSTODIAN AND ACCOUNTING AGENT. The Bank of New York, New York, New York, is
custodian for the securities and cash of the Trust. The Bank of New York is also
the accounting agent for the Portfolio, with responsibility for calculating the
net asset value of the Institutional Class and for maintaining its books and
records.

LEGAL COUNSEL. Legal counsel to the Trust is provided by Kramer, Levin, Naftalis
& Frankel, New York, New York.

INDEPENDENT AUDITORS. The independent auditors for the Trust are Deloitte &
Touche, LLP, New York, New York.

THE TRUST, ITS SHARES AND CLASSES. The Trust is registered with the SEC as an
open-end management investment company and was organized as a business trust
under the laws of the State of Delaware on July 14, 1994. The Board has the
authority to issue an unlimited number of shares of beneficial interest of
separate series with no par value per share and to create classes of shares
within each series. If shares of separate series are issued, each share of each
series would be entitled to participate equally in dividends and other
distributions and the proceeds of any liquidation of that series. Voting rights
would not be cumulative and the shares of each series of the Trust would be
voted separately except when an aggregate vote is required by law.

In addition to Institutional Shares, the Portfolio offers Investor Shares,
Financial Shares, Service Shares and Premium Shares (individually, a 'Class') by
separate prospectuses. Each Class of shares has a different distribution
arrangement. Also, to the extent one Class bears expenses different from the
other Classes, the amount of dividends and other distributions it receives, and
its performance, will differ. Shareholders of one Class have the same voting
rights as shareholders of the other Classes, except that separate votes are
taken by each Class of the Portfolio if the interests of one Class differ from
the interests of the others. For information about Investor Shares, Financial
Shares, Service Shares or Premium Shares, please call (800) 941-MILE, or ask
your sales representative which Class would be a suitable investment.

Delaware law does not require a registered investment company to hold annual
meetings of shareholders, and it is anticipated that shareholder meetings will
be held only when specifically required by Federal or state law. Shareholders
have available procedures for requiring the Trustees to call a meeting and for
removing Trustees. Shares issued by the Trust have no conversion, subscription
or preemptive rights. See 'OTHER INFORMATION--The Trust and its Shareholders' in
the Statement of Additional Information.

As of March 6, 1998, the Trustees and officers of the Portfolio in the
aggregate owned less than one percent of the outstanding shares of the
Portfolio.

No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, the Statement of
Additional Information and the Portfolio's official sales literature in
connection with the offering of the Portfolio's shares, and if given or made,
such information or representations must not be relied upon as having been
authorized by the Trust. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.

<PAGE>

[S]
----------------------

----------------------
THE
MILESTONE
FUNDS

Adviser
- ------------------------------------------------------------------------------
Milestone Capital Management, L.P.
One Executive Boulevard
Yonkers, NY 10701

Administrator / Custodian
- ------------------------------------------------------------------------------
The Bank of New York
90 Washington Street
New York, NY 10286

Underwriter / Transfer Agent
- ------------------------------------------------------------------------------
CW Fund Distributors, Inc. / Countrywide Fund Services, Inc.
P. O. Box 5354
Cincinnati, OH 45201-5354

Primary Dealer
- ------------------------------------------------------------------------------
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167

Legal Counsel
- ------------------------------------------------------------------------------
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022

Independent Auditors
- ------------------------------------------------------------------------------
Deloitte & Touche, LLP
Two World Financial Center
New York, NY 10281-1434

The Milestone Funds
800-941-MILE

<PAGE>

THE
MILESTONE
FUNDS

THE MILESTONE FUNDS
TREASURY OBLIGATIONS PORTFOLIO

ADVISER
Milestone Capital Management, L.P.

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

PRIMARY DEALER
Bear, Stearns & Co. Inc.

PROSPECTUS

MARCH 30, 1998

INVESTOR CLASS

<PAGE>

THE
MILESTONE
FUNDS

THE MILESTONE FUNDS
TREASURY OBLIGATIONS PORTFOLIO
INVESTOR SHARES

One Executive Boulevard, Yonkers, New York 10701
(800) 941-MILE

This Prospectus offers Investor Shares of the Treasury Obligations Portfolio
(the 'Portfolio'), a diversi- fied, no-load money market portfolio of The
Milestone Funds (the 'Trust'), an open-end investment management company. The
Portfolio seeks to provide its shareholders with the maximum current income that
is consistent with the preservation of capital and the maintenance of liquidity.
Milestone Capital Management, L.P. serves as the Portfolio's investment adviser.

TREASURY OBLIGATIONS PORTFOLIO invests only in short-term obligations of
the U.S. Treasury and repurchase agreements fully collateralized by
obligations of the U.S. Treasury.

This Prospectus provides you with information about the Trust and the Portfolio
which you should know before investing in shares of the Portfolio. A Statement
of Additional Information, dated March 30, 1998, has been filed with the
Securities and Exchange Commission ('SEC') and is available free of charge by
contacting The Milestone Funds, One Executive Boulevard, Yonkers, New York
10701, or by calling (800) 941-MILE (6453). This information contained in the
Statement of Additional Information, as amended from time to time, is
incorporated by reference into this prospectus.

INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.

AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.

<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE PAGE
---- ----
<S> <C> <C> <C>
Prospectus Summary.............................. 2 Management of the Trust......................... 7
Expenses of Investing in the Portfolio.......... 3 How to Invest in the Portfolio.................. 10
Financial Highlights............................ 4 How to Redeem Shares of the Portfolio........... 11
Investment Objective and Policies............... 5 Dividends and Tax Matters....................... 13
Risk Considerations............................. 6 Other Information............................... 14
Additional Investment Policies and
Practices..................................... 6
</TABLE>

PROSPECTUS SUMMARY

PORTFOLIO HIGHLIGHTS

INVESTOR SHARES. This prospectus offers Investor Shares of the Treasury
Obligations Portfolio. The Treasury Obligations Portfolio (the 'Portfolio') is a
money market fund that invests only in U.S. Treasury obligations and repurchase
agreements fully collateralized by U.S. Treasury obligations. Investor Shares
are designed for certain institutional and high net worth investors as a
convenient investment vehicle for short-term funds. The Portfolio also offers
Institutional Shares, Service Shares, Financial Shares and Premium Shares by
separate prospectuses which are subject to different expenses that affect their
performance. For information about these shares, speak to your sales
representative or call (800) 941-MILE. See 'Other Information'.

MANAGEMENT. The Portfolio's investment adviser is Milestone Capital Management,
L.P. (the 'Adviser'), One Executive Boulevard, Yonkers, New York 10701. See
'Management of the Trust'.

<PAGE>

Time), and the completed redemption order by 4:30 p.m., redemption proceeds will
ordinarily be wired that day, and the investor will not receive that day's
dividends. The minimum initial investment is $1,000,000. The Trust and the
Transfer Agent each reserves the right to waive this minimum initial investment
limitation. There is no minimum subsequent investment. See 'How To Invest In The
Portfolio' and 'How To Redeem Shares Of The Portfolio'.

EXPENSES OF INVESTING IN THE PORTFOLIO

The purpose of the following table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Trust will bear, either
directly or indirectly.

SHAREHOLDER TRANSACTION EXPENSES:

Maximum Sales Load Imposed on Purchases................................. None
Maximum Sales Load Imposed on Reinvested Dividends...................... None
Deferred Sales Load..................................................... None
Redemption Fees......................................................... None
Exchange Fees........................................................... None

ANNUAL PORTFOLIO OPERATING EXPENSES (as a percentage of average annual net
assets):

<TABLE>
<S> <C>
Advisory Fees........................................................... 0.10%
12b-1 Fees.............................................................. None
Shareholder Servicing Fees.............................................. 0.25%
Other Expenses.......................................................... 0.06%
-----
Total Operating Expenses................................................ 0.41%
</TABLE>

For a further description of the various expenses incurred in the operation of
the Portfolio, see 'Management of the Trust'.

EXAMPLE

<TABLE>
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment in 1 Year 3 Years 5 Years 10 Years
Investor Shares of the Portfolio, assuming a 5% annual return and ------ ------- ------- --------
redemption at the end of each period: ............................... $4 $13 $23 $52
</TABLE>

<PAGE>

FINANCIAL HIGHLIGHTS

The following financial highlights of the Portfolio's Investor Shares have been
audited by Deloitte & Touche, LLP, independent certified public accountants, for
the year ended November 30, 1997 and McGladrey & Pullen, LLP, independent
certified public accountants, for the year ended November 30, 1996 and for the
period December 30, 1994 through November 30, 1995. The financial statements and
independent accountant's report thereon of the Portfolio are incorporated into
the Statement of Additional Information.

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR DECEMBER 30, 1994*
ENDED ENDED THROUGH
NOVEMBER 30, 1997 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.............. 0.051 0.050 0.051
Dividends from net investment

income........................... (0.051) (0.050) (0.051)
--------- --------- ---------
Ending net asset value per share... $ 1.00 $ 1.00 $ 1.00
--------- --------- ---------
--------- --------- ---------

Total return....................... 5.23% 5.11% 5.71%(a)
Ratios/supplemental data
Ratios to average net assets:
Expenses (b)................... 0.41% 0.45% 0.38%(a)
Net investment income.......... 5.13% 4.99% 5.63%(a)
Net assets at the end of period
(000's omitted).................. $385,229 $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

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

The following permissible investments and investment restrictions are
fundamental investment policies of the Portfolio that may not be changed without
shareholder approval:

PERMISSIBLE INVESTMENTS.

The Portfolio seeks to achieve its investment objective by investing ONLY in:

U.S. Treasury obligations maturing in 397 days or less. U.S. Treasury
obligations are securities issued by the United States Treasury, such as

Treasury bills, notes and bonds, that are fully guaranteed as to payment
of principal and interest by the United States Government.

INVESTMENT RESTRICTIONS.

The Portfolio WILL NOT:

1. Invest in structured notes or instruments commonly known as
derivatives;

2. Invest in variable, adjustable or floating rate instruments of any
kind;

<PAGE>

3. Enter into reverse repurchase agreements;

5. Invest in zero coupon bonds.

The Portfolio will make no investment unless the Adviser first determines that

it is eligible for purchase and presents minimal credit risks, pursuant to
procedures adopted by the Board. The Portfolio's investments are subject to the
restrictions imposed by Rule 2a-7 under the Investment Company Act of 1940.

RISK CONSIDERATIONS

ADDITIONAL INVESTMENT POLICIES AND PRACTICES

THE PORTFOLIO MAY NOT CHANGE ITS INVESTMENT OBJECTIVE OR ANY INVESTMENT POLICY
DESIGNATED AS FUNDAMENTAL WITHOUT SHAREHOLDER APPROVAL. Investment policies or
practices of the Portfolio that are not designated as fundamental may be changed
by the Board without shareholder approval, following notice to shareholders. The
Portfolio's additional fundamental and nonfundamental investment policies are
described further below and in the Statement of Additional Information.

<PAGE>

missed opportunity to make an alternative investment. Commitments for
when-issued or delayed delivery transactions will be entered into only when the
Portfolio intends to acquire the securities. Although there is no limit on the
amount of these commitments that the Portfolio may make, under normal
circumstances it will not commit more than 30% of its total assets to such
purchases.

TEMPORARY DEFENSIVE POSITIONS. Under abnormal market or economic conditions, the
Portfolio temporarily may hold up to 100% of its investable assets in cash.

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES

THE ADVISER

sales, marketing, and management positions in both the Fixed Income and Asset
Management Divisions, including co-manager of Money Market Sales in New York.
Ms. Hanson was responsible for developing many of the firm's key relationships
with major institutional investors. In addition, she was instrumental in raising
assets for Goldman Sachs Asset Management's money market and bond mutual funds.
Ms. Hanson holds a BA in government from Wheaton College in Massachusetts and an
MBA in finance from Columbia University.

<PAGE>

For its services, the Adviser receives a fee at an annual rate equal to 0.10% of
the Portfolio's average daily net assets. The Adviser is responsible for payment
of salaries of its portfolio manager and staff as well as other expenses
necessary to the performance of its duties under the investment advisory
agreement. The Adviser may, at its own expense and from its own resources,
compensate certain persons who provide services in connection with the sale or
expected sale of shares of the Portfolio without reimbursement from the Trust.
The Trust, on behalf of the Portfolio, is responsible for all expenses other
than those expressly borne by the Adviser under the investment advisory
agreement. The expenses borne by the Trust include, but are not limited to, the
investment advisory fee, administration fee, transfer agent fee, and custodian
fee, costs of preparing, printing and delivering to shareholders the Trust's
prospectuses, statements of additional information, and shareholder reports,
legal fees, auditing and tax fees, taxes, blue sky fees, SEC fees, compliance
expenses, insurance expenses, and compensation of certain of the Trust's
Trustees, officers and employees and other personnel performing services for the
Trust. Should the expenses of the Portfolio (including the fees of the Adviser
but excluding interest, taxes, brokerage commissions, litigation and
indemnification expenses and other extraordinary expenses) for any fiscal year
exceed the limits prescribed by any state in which the Portfolio's shares are
qualified for sale, the Adviser will reduce its fee or reimburse expenses by the
amount of such excess.

ADMINISTRATOR

The Bank of New York, 90 Washington Street, New York, New York 10286 serves as
the administrator of the Trust, pursuant to an Administration Agreement with the
Trust.

and clerical functions for the Trust and preparing, filing and distributing
proxy materials, periodic reports to shareholders, registration statements and
other documents.

<PAGE>

UNDERWRITER

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. The Underwriter may enter into arrangements with banks,
broker-dealers or other financial institutions ('Selected Dealers') through
which investors may purchase or redeem shares. The Underwriter may compensate
certain persons who provide services in connection with the sale or expected
sale of shares of the Portfolio. Investors purchasing shares of the Portfolio
through another financial institution should read any materials and information
provided by the financial institution to acquaint themselves with its procedures
and any fees that it may charge.

PRIMARY DEALER

SHAREHOLDER SERVICES

The Trust has adopted a shareholder service plan under which it pays the Adviser
.25% of the average daily net assets of the Investor Shares such 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 agent performs certain shareholder
services. For these services, the Adviser pays the shareholder servicing agent a
fee based upon the average daily net assets of the Investor Shares owned by
investors for which the shareholder servicing agent maintains a servicing
relationship.

The Adviser has entered into a separate Client Services Agreement with Bear
Stearns under which it provides distribution assistance and various services to
those shareholders of the Trust who purchase shares of the Portfolio through
Bear Stearns (the 'Bear Stearns Accounts'). Under the Client Services Agreement,
Bear Stearns furnishes such facilities and personnel as are necessary to provide
the Trust and the Bear Stearns Accounts with any information either may need
about the other and to facilitate the processing of orders for the purchase or
redemption of shares. For these services, the Adviser, at its own expense and

<PAGE>

from its own resources, pays Bear Stearns a fee. The Adviser may enter into
similar client service agreements with other persons who provide certain
shareholder services. These fees do not increase the amount of any advisory or
shareholder services fees paid to the Adviser.

TRANSFER AGENT

shareholders and tabulating proxies; processing dividend payments and providing
subaccounting services for Portfolio shares held beneficially; and providing
such other services as the Trust or a shareholder may request. The Transfer
Agent may pay these agents for their services, but no such payment will increase
the Transfer Agent's compensation from the Trust.

HOW TO INVEST IN THE PORTFOLIO

To purchase shares of the Portfolio by Federal Reserve wire, call the Transfer
Agent, Countrywide Fund Services, Inc., at (800) 363-7660 or call your sales
representative. If the Transfer Agent receives a firm indication of the
approximate size of the intended investment before 2:30 p.m. (Eastern Time) and
the completed purchase order before 4:30 p.m. (Eastern Time), and the Custodian
receives Federal Funds the same day, purchases of shares of the Portfolio begin
to earn dividends that day. Completed orders received after 4:30 p.m. begin to
earn dividends the next Fund Business Day upon receipt of Federal Funds.

<PAGE>

notification of a redemption request after the advanced time, it ordinarily will
wire redemption proceeds on the next Fund Business Day.

If an investor does not remit Federal Funds, such payment must be converted into
Federal Funds. This usually occurs within one Fund Business Day of receipt of a

bank wire. Prior to receipt of Federal Funds, the investor's monies will not be
invested.

The following procedure will help assure prompt receipt of your Federal Funds
wire:

A. Telephone the Transfer Agent, Countrywide Fund Services, Inc., toll free at
(800) 363-7660 and provide the following information:

Your name
Address
Telephone number
Taxpayer ID number
The amount being wired
The identity of the bank wiring funds.

You will then be provided with a Portfolio account number. (Investors with
existing accounts must also notify the Trust before wiring funds.)

B. Instruct your bank to wire the specified amount to the Trust as follows:

The Bank of New York, ABA # 021000018
A/C # 8900276541
FBO Milestone Funds Treasury Obligations Portfolio Operating Account
Ref: Shareholder Name and Account Number

The Trust and the Transfer Agent each reserves the right to reject any purchase
order for any reason.

SHARE CERTIFICATES. The Transfer Agent maintains a share account for each
shareholder. The Trust does not issue share certificates.

ACCOUNT STATEMENTS. Monthly account statements are sent to investors to report
transactions such as purchases and redemptions as well as dividends paid during
the month.

MINIMUM INVESTMENT REQUIRED. The minimum initial investment in the Portfolio is
$1,000,000. There is no minimum subsequent investment. The Trust reserves the
right to waive the minimum investment requirement.

HOW TO REDEEM SHARES OF THE PORTFOLIO

<PAGE>

account number, the exact name in which the shares are registered and some
additional form of identification such as a password. A redemption by telephone
may be made only if the telephone redemption authorization has been completed on
the Account Registration Form included with this Prospectus. In an effort to
prevent unauthorized or fraudulent redemption requests by telephone, the
Transfer Agent will follow reasonable procedures to confirm that such
instructions are genuine. If such procedures are followed, neither the Transfer
Agent nor the Trust will be liable for any losses due to unauthorized or
fraudulent redemption requests.

WRITTEN REQUESTS. Redemption requests may be made by writing to The Milestone
Funds, c/o Countrywide Fund Services, Inc., P.O. Box 5354, Cincinnati, Ohio
45201-5354. Written requests must be in proper form. The shareholder will need
to provide the exact name in which the shares are registered, the Portfolio
name, account number, and the share or dollar amount requested.

<TABLE>
<CAPTION>
FIRM INDICATION OF REDEMPTION
REQUEST AND APPROXIMATE SIZE OF COMPLETED REDEMPTION ORDER REDEMPTION PROCEEDS

REDEMPTION RECEIVED RECEIVED ORDINARILY DIVIDENDS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
By 2:30 p.m. Eastern Time By 4:30 p.m. Eastern Time Wired same Business Not earned on the day
Day request received

After 2:30 p.m. Eastern Time After 4:30 p.m. Eastern Time Wired next Business Earned on day request
Day received
</TABLE>

Due to the cost to the Trust of maintaining smaller accounts, the Trust reserves
the right to redeem, upon 60 days written notice, all shares in an account with
an aggregate net asset value of less than $100,000 unless an investment is made
to restore the minimum value.

<PAGE>

DIVIDENDS AND TAX MATTERS

DIVIDENDS AND DISTRIBUTIONS

TAX MATTERS

accordance with the timing requirements of the Code, the Portfolio should also
avoid Federal excise taxes.

<PAGE>

OTHER INFORMATION

CUSTODIAN AND ACCOUNTING AGENT. The Bank of New York, New York, New York, is
custodian for the securities and cash of the Trust. The Bank of New York is also
the accounting agent for the Portfolio, with responsibility for calculating the
net asset value of the Investor Class and for maintaining its books and records.

LEGAL COUNSEL. Legal counsel to the Trust is provided by Kramer, Levin, Naftalis
& Frankel, New York, New York.

INDEPENDENT AUDITORS. The independent auditors for the Trust are Deloitte &
Touche, LLP, New York, New York.

In addition to Investor Shares, the Portfolio offers Institutional Shares,
Financial Shares, Service Shares and Premium Shares (individually, a 'Class') by
separate prospectuses. Each Class has a different distribution arrangement.
Also, to the extent one Class bears expenses different from the other Classes,
the amount of dividends and other distributions it receives, and its
performance, will differ. Shareholders of one Class have the same voting rights
as shareholders of the other Classes, except that separate votes are taken by
each

<PAGE>

Class of the Portfolio if the interests of one Class differ from the interests
of the others. For information about Institutional Shares, Financial Shares,
Service Shares or Premium Shares, please call (800) 941-MILE, or ask your sales
representative which Class would be a suitable investment.

As of March 6, 1998, the Trustees and officers of the Portfolio in the
aggregate owned less than one percent of the outstanding shares of the
Portfolio.

<PAGE>

THE
MILESTONE
FUNDS

Adviser
-----------------------------------------------------------------
Milestone Capital Management, L.P.
One Executive Boulevard
Yonkers, NY 10701

Administrator / Custodian
-----------------------------------------------------------------
The Bank of New York
90 Washington Street
New York, NY 10286

Underwriter / Transfer Agent
-----------------------------------------------------------------
CW Fund Distributors, Inc. / Countrywide Fund Services, Inc.
P. O. Box 5354
Cincinnati, OH 45201-5354

Primary Dealer
-----------------------------------------------------------------
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167

Legal Counsel
-----------------------------------------------------------------
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022

Independent Auditors
-----------------------------------------------------------------
Deloitte & Touche, LLP
Two World Financial Center
New York, NY 10281-1434

The Milestone Funds
800-941-MILE

<PAGE>

The Milestone Funds
Treasury Obligations Portfolio

ADVISER
Milestone Capital Management, L.P.

PROSPECTUS

MARCH 30, 1998

FINANCIAL SHARES

<PAGE>

The Milestone Funds
Treasury Obligations Portfolio
Financial Shares
One Executive Boulevard, Yonkers, New York 10701
(800) 941-MILE

This Prospectus offers Financial Shares of the Treasury Obligations Portfolio
(the "Portfolio"), a diversified, no-load money market portfolio of The
Milestone Funds (the "Trust"), an open-end investment management company. The
Portfolio seeks to provide its shareholders with the maximum current income that
is consistent with the preservation of capital and the maintenance of liquidity.
Milestone Capital Management, L.P. serves as the Portfolio's investment adviser.

Treasury Obligations Portfolio invests only in short-term obligations
of the U.S. Treasury and repurchase agreements fully collateralized by
obligations of the U.S. Treasury.

This Prospectus provides you with information about the Trust and the Portfolio
which you should know before investing in shares of the Portfolio. A Statement
of Additional Information, dated March 30, 1998, has been filed with the
Securities and Exchange Commission ("SEC") and is available free of charge by
contacting The Milestone Funds, One Executive Boulevard, Yonkers, New York
10701, or by calling (800) 941-MILE (6453). This information contained in the
Statement of Additional Information, as amended from time to time, is
incorporated by reference into this prospectus.

Investors should read and retain this Prospectus for future reference.

An investment in the Portfolio is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Portfolio will maintain a
stable net asset value of $1.00 per share.

Shares of the Portfolio are not deposits or obligations of, or guaranteed by,
any depository institution. Shares are not insured by the FDIC, the Federal
Reserve Board, or any other agency, and are subject to investment risk,
including the possible loss of principal.

<PAGE>

TABLE OF CONTENTS

Page
----
Prospectus Summary.................................................... 2
Expenses of Investing in the Portfolio................................ 3

Financial Highlights.................................................. 4

Investment Objective and Policies..................................... 4
Risk Considerations................................................... 5
Additional Investment Policies and Practices.......................... 5
Management of the Trust............................................... 6
How to Invest in the Portfolio........................................ 9
How to Redeem Shares of the Portfolio................................. 11
Dividends and Tax Matters............................................. 12
Other Information..................................................... 13

PROSPECTUS SUMMARY

PORTFOLIO HIGHLIGHTS

Financial Shares. This prospectus offers Financial Shares of the Treasury
Obligations Portfolio. The Treasury Obligations Portfolio (the "Portfolio") is
a money market fund that invests only in U.S. Treasury obligations and
repurchase agreements fully collateralized by U.S. Treasury obligations.
Financial Shares are designed primarily for use by large institutional
investors. The Portfolio also offers Institutional Shares, Investor Shares,
Service Shares and Premium Shares by separate prospectus which are subject to
different expenses that affect their performance. For further information
about these shares call (800) 941-MILE. See "Other Information".

Management. The Portfolio's investment adviser is Milestone Capital Management,
L.P. (the "Adviser"), One Executive Boulevard, Yonkers, New York 10701. See
"Management of the Trust".

Administration and Underwriting. The administrator of the Trust is The Bank of
New York, 90 Washington Street, New York, New York 10286. CW Fund Distributors,
Inc., P. O. Box 5354, Cincinnati, Ohio 45201-5354, serves as statutory
underwriter of the Trust's shares. See "Management of the Trust".

Purchases and Redemptions. Investors may purchase and redeem shares of
beneficial interest in the Portfolio without any sales loads or other charges
any day the New York Stock Exchange and the Federal Reserve Bank of New York are
open ("Fund Business Day") between the hours of 8:30 a.m. and 7:00 p.m. (Eastern
Time). To allow the Adviser to manage the Portfolio most effectively, investors
are encouraged to execute as many trades as possible before 2:30 p.m. If

<PAGE>

Countrywide Fund Services, Inc. (the "Transfer Agent") receives a firm
indication of the approximate size of a purchase by 2:30 p.m. (Eastern Time),
and the completed purchase order by 4: 30 p.m., the shares purchased will earn
dividends on the same day. If the Transfer Agent receives a firm indication of
the approximate size of a redemption by 2:30 p.m. (Eastern Time), and the
completed redemption order by 4: 30 p.m., redemption proceeds will ordinarily
be wired that day, and the investor will not receive that day's dividends. The
minimum initial investment is $20,000,000. The Trust and the Transfer Agent
each reserves the right to waive this minimum initial investment limitation.
There is no minimum subsequent investment. See "How To Invest In The
Portfolio" and "How To Redeem Shares Of The Portfolio".

Dividends. Dividends of net investment income are declared daily and paid
monthly by the Portfolio and are reinvested in Portfolio shares unless the
shareholder has elected cash distributions. See "Dividends and Tax Matters".

EXPENSES OF INVESTING IN THE PORTFOLIO

The purpose of the following table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Trust will bear, either
directly or indirectly.

<TABLE>
<S> <C>
Shareholder Transaction Expenses:

Maximum Sales Load Imposed on Purchases........................................ None
Maximum Sales Load Imposed on Reinvested Dividends............................. None
Deferred Sales Load............................................................ None
Redemption Fees................................................................ None
Exchange Fees.................................................................. None

Annual Portfolio Operating Expenses (as a percentage of annual average net
assets):

Advisory Fees.................................................................. 0.10%
Other Expenses................................................................. 0.05%
-----
Total Operating Expenses....................................................... 0.15%
=====
</TABLE>

Example

<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment in Financial Shares of the Portfolio,

assuming a 5% annual return and redemption at the end 1 Year 3 Years 5 Years 10 Years
of each period: . . . . $2 $5 $8 $19
--- ---

</TABLE>

3
<PAGE>

FINANCIAL HIGHLIGHTS

The following financial highlights of the Portfolio's Financial Shares have
been audited by Deloitte & Touche, LLP, independent certified public
accountants. The financial statements and independent accountant's report
thereon of the Portfolio are incorporated into the Statement of Additional
Information.

For the period
March 13, 1997*
through
November 30, 1997
-----------------

Per share operating performance for a share outstanding
throughout the period
Beginning net asset value per share $ 1.00
-----------

Net investment income 0.038

Dividends from net investment income (0.038)

Ending net asset value per share $ 1.00
-----------

Total return 5.52%(a)

Ratios/supplemental data
Ratios to average net assets:
Expenses 0.14%(a)
Net investment income 5.45%(a)

Net assets at the end of period (000's omitted) $ 90,465
-----------

(a) Annualized

* Commencement of operations

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

4
<PAGE>

The Portfolio invests only in U.S. Treasury obligations and repurchase
agreements fully collateralized by U.S. Treasury obligations. The Portfolio may
purchase U.S. Treasury obligations on a when-issued or forward commitment basis.
The Portfolio will maintain an average maturity, computed on a dollar-weighted
basis, of 90 days or less.

The following permissible investments and investment restrictions are
fundamental investment policies of the Portfolio that may not be changed without
shareholder approval:

Permissible Investments. The Portfolio seeks to achieve its investment objective
by investing only in:

U.S. Treasury obligations maturing in 397 days or less. U.S. Treasury
obligations are securities issued by the United States Treasury, such as
Treasury bills, notes and bonds, that are fully guaranteed as to payment of
principal and interest by the United States Government.

Repurchase agreements fully collateralized by U.S. Treasury obligations.
Repurchase agreements are transactions in which the Portfolio purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon future date, normally
one-to-seven days later. The resale price reflects a market rate of
interest that is not related to the coupon rate or maturity of the
purchased security. The Portfolio enters into repurchase agreements only
with primary dealers designated by the Federal Reserve Bank of New York
which the Adviser believes present minimal credit risks in accordance with
guidelines established by the Board of Trustees of the Trust (the "Board").
The Adviser monitors the credit-worthiness of sellers under the Board's
general supervision. If a seller defaults on its repurchase obligation,
however, the Portfolio might suffer a loss.

In the future, the Portfolio may attempt to achieve its investment objectives by

holding, as its only investment securities, the securities of another investment
company having identical investment objectives and policies as the Portfolio in
accordance with the provisions of the Investment Company Act of 1940 or any
orders, rules or regulations thereunder adopted by the Securities and Exchange
Commission.

Investment Restrictions. The Portfolio will not:

1. Invest in structured notes or instruments commonly known as
derivatives;

2. Invest in variable, adjustable or floating rate instruments of any
kind;

3. Enter into reverse repurchase agreements;

5
<PAGE>

4. Invest in securities issued by agencies or instrumentalities of the
United States Government, such as the Federal National Mortgage
Association ("FNMA"), Government National Mortgage Association
("GNMA"), Federal Home Loan Mortgage Corp. ("Freddie Mac"), or the
Small Business Administration ("SBA"); or,

5. Invest in zero coupon bonds.

RISK CONSIDERATIONS

ADDITIONAL INVESTMENT POLICIES AND PRACTICES

The Portfolio may not change its investment objective or any investment policy
designated as fundamental without shareholder approval. Investment policies or
practices of the Portfolio that are not designated as fundamental may be changed
by the Board without shareholder approval, following notice to shareholders. The
Portfolio's additional fundamental and nonfundamental investment policies are

described further below and in the Statement of Additional Information.

Borrowing. As a fundamental investment policy, the Portfolio may only borrow
money for temporary or emergency purposes (not for leveraging or investment),
including the meeting of redemption requests, in amounts up to 33 1/3% of the
Portfolio's total assets. Interest costs on borrowings may fluctuate with
changing market rates of interest and may partially offset or exceed the return
earned on borrowed funds (or on the assets that were retained rather than sold
to meet the needs for which funds were borrowed). Under adverse market
conditions, the Portfolio might have to sell portfolio securities to meet
interest or principal payments at a time when investment considerations would
not favor such sales. As a nonfundamental investment policy, the Portfolio may
not purchase securities for investment while any borrowing equaling 5% or more
of the Portfolio's total assets is outstanding.

6
<PAGE>

When-Issued and Delayed Delivery Transactions. The Portfolio may purchase new
issues of U.S. Treasury Obligations on a "when-issued" basis or existing issues
of U.S. Treasury obligations on a "delayed delivery" basis. The Portfolio would
enter into these forward commitments to obtain securities at prices that might
not be available in the future. The price is fixed when the commitment is made,
but the securities are delivered on a future date beyond the customary
settlement time and paid for upon delivery. The Portfolio assumes the risk that
the value of the securities on the delivery date may be more or less than the
purchase price. Failure by the other party to deliver a security purchased by
the Portfolio may result in a loss or a missed opportunity to make an
alternative investment. Commitments for when-issued or delayed delivery
transactions will be entered into only when the Portfolio intends to acquire the
securities. Although there is no limit on the amount of these commitments that
the Portfolio may make, under normal circumstances it will not commit more than
30% of its total assets to such purchases.

Illiquid Securities. The Portfolio may invest no more than 10% of its net assets
in securities that at the time of purchase are illiquid, including repurchase
agreements having a maturity of more than seven days and not entitling the
holder to payment of principal within seven days. In addition, the Portfolio
will not invest in repurchase agreements having a maturity in excess of one
year. Under the supervision of, and pursuant to guidelines established by, the
Board, the Adviser determines and monitors the liquidity of portfolio
securities. The Portfolio will not purchase a security if, as a result, more
than 10% of its net assets would be invested in illiquid securities. If a
security becomes illiquid and, as a result, more than 10% of the Portfolio's net
assets are invested in illiquid securities, the Adviser will take reasonable
steps to reduce the Portfolio's holdings of illiquid securities to 10% or less
of its net assets.

Temporary Defensive Positions. Under abnormal market or economic conditions, the
Portfolio temporarily may hold up to 100% of its investable assets in cash.

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES

7
<PAGE>

THE ADVISER

Milestone Capital Management, L.P. (the "Adviser") serves as investment adviser
to the Portfolio pursuant to an investment advisory agreement with the Trust.
Subject to the general control of the Board, the Adviser continually manages the
Portfolio, including the purchase, retention and disposition of its securities
and other assets. The Adviser is a limited partnership organized under the laws
of the State of New York on August 1, 1994, and is a registered investment
adviser under the Investment Advisers Act of 1940. The General Partner of the
Adviser is Milestone Capital Management Corp., a New York corporation.

The Trust, on behalf of the Portfolio, is responsible for all expenses other
than those expressly borne by the Adviser under the investment advisory
agreement. The expenses borne by the Trust include, but are not limited to, the
investment advisory fee, administration fee, transfer agent fee, and custodian
fee, costs of preparing, printing and delivering to shareholders the Trust's
prospectuses, statements of additional information, and shareholder reports,
legal fees, auditing and tax fees, taxes, blue sky fees, SEC fees, compliance
expenses, insurance expenses, and compensation of certain of the Trust's
Trustees, officers and employees and other personnel performing services for the
Trust. Should the expenses of the Portfolio (including the fees of the Adviser
but excluding interest, taxes, brokerage commissions, litigation and
indemnification expenses and other extraordinary expenses) for any fiscal year
exceed

8
<PAGE>

the limits prescribed by any state in which the Portfolio's shares are qualified
for sale, the Adviser will reduce its fee or reimburse expenses by the amount of
such excess.

The Adviser may enter into separate agreements with third parties that provide
various services to those shareholders of the Trust who purchase shares of the
Portfolio. For these services, the Adviser, at its own expense and from its own
resources, may pay a fee which would not increase the amount of any advisory
fees paid to the Adviser by the Portfolio.

ADMINISTRATOR

The Bank of New York, 90 Washington Street, New York, New York 10286 serves as
the administrator of the Trust, pursuant to an Administration Agreement with the
Trust.

UNDERWRITER

CW Fund Distributors, Inc. (the "Underwriter") serves as 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. See "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. The Underwriter may enter into arrangements with banks,
broker-dealers or other financial institutions ("Selected Dealers") through
which investors may purchase or redeem shares. The Underwriter may compensate
certain persons who provide services in connection with the sale or expected
sale of shares of the Portfolio. Investors purchasing shares of the Portfolio
through another financial institution should read any materials and information
provided by the financial institution to acquaint themselves with its procedures
and any fees that it may charge.

9
<PAGE>

TRANSFER AGENT

HOW TO INVEST IN THE PORTFOLIO

Purchasing Shares. Shares of the Portfolio may be purchased by wire only. Shares
are sold at the net asset value next determined after receipt of a purchase
order in the manner described below. Purchase orders are accepted on any day on
which the New York Stock Exchange and the Federal Reserve Bank of New York are
open ("Fund Business Day") between the hours of 8:30 a.m. and 7:00 p.m. (Eastern
Time). The Trust does not determine net asset value, and purchase orders are not
accepted, on the days those institutions observe the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving and

Christmas.

To purchase shares of the Portfolio by Federal Reserve wire, call the Transfer
Agent, Countrywide Fund Services, Inc., at (800) 363-7660 or call your sales
representative. If the Transfer Agent receives a firm indication of the
approximate size of the intended investment before 2:30 p.m. (Eastern Time) and
the completed purchase order before 4: 30 p.m. (Eastern Time), and the Custodian
receives Federal Funds the same day, purchases of shares of the Portfolio begin
to earn dividends that day. Completed orders received after 4: 30 p.m. begin to
earn dividends the next Fund Business Day upon receipt of Federal Funds.

10
<PAGE>

The following procedure will help assure prompt receipt of your Federal Funds
wire:

A. Telephone the Transfer Agent, Countrywide Fund Services, Inc., toll
free at (800) 363-7660 and provide the following information:

Your name
Address
Telephone number
Taxpayer ID number
The amount being wired
The identity of the bank wiring funds.

You will then be provided with a Portfolio account number. (Investors with
existing accounts must also notify the Trust before wiring funds.)

B. Instruct your bank to wire the specified amount to the Trust as
follows:

The Bank of New York, ABA # 021000018
A/C # 8900276541
FBO Milestone Funds Treasury Obligations Portfolio Operating Account
Ref: Shareholder Name and Account Number

The Trust and the Transfer Agent each reserves the right to reject any purchase
order for any reason.

Share Certificates. The Transfer Agent maintains a share account for each
shareholder. The Trust does not issue share certificates.

Account Statements. Monthly account statements are sent to investors to report
transactions such as purchases and redemptions as well as dividends paid during
the month.

11
<PAGE>

Minimum Investment Required. The minimum initial investment in the Portfolio is
$20,000,000. There is no minimum subsequent investment. The Trust reserves the
right to waive the minimum investment requirement.

HOW TO REDEEM SHARES OF THE PORTFOLIO

Redeeming Shares. Holders of shares of the Portfolio may redeem their shares
without charge at the net asset value next determined after the Portfolio
receives the redemption request. Redemption requests must be received in proper
form and can be made by telephone request or wire request on any Fund Business
Day between the hours of 8:30 a.m. and 7:00 p.m. (Eastern Time).

By Telephone. Redemption requests may be made by telephoning the Transfer Agent,
Countrywide Fund Services, Inc., at (800) 363-7660. Shareholders must provide
the Transfer Agent with the shareholder's account number, the exact name in
which the shares are registered and some additional form of identification such
as a password. A redemption by telephone may be made only if the telephone
redemption authorization has been completed on the Account Registration Form
included with this Prospectus. In an effort to prevent unauthorized or
fraudulent redemption requests by telephone, the Transfer Agent will follow
reasonable procedures to confirm that such instructions are genuine. If such
procedures are followed, neither the Transfer Agent nor the Trust will be liable
for any losses due to unauthorized or fraudulent redemption requests.

In times of drastic economic or market changes, it may be difficult to make

redemptions by telephone. If a shareholder cannot reach the Transfer Agent by
telephone, redemption requests may be mailed or hand-delivered to the Transfer
Agent.

Written Requests. Redemption requests may be made by writing to The Milestone
Funds, c/o Countrywide Fund Services, Inc., P. O. Box 5354, Cincinnati, Ohio
45201-5354. Written requests must be in proper form. The shareholder will need
to provide the exact name in which the shares are registered, the Portfolio
name, account number, and the share or dollar amount requested.

12
<PAGE>

Firm Indication of Redemption Completed Redemption
Request and Approximate Size of Redemption Proceeds
Redemption Received Order Received Ordinarily Dividends
- ------------------------------- -------------- ------------------- ---------------------
<S> <C> <C> <C>
By 2:30 p.m. Eastern Time By 4:30 p.m. Wired same Business Not earned on the
Eastern Time Day day request received

After 2:30 p.m. Eastern Time After 4:30 p.m. Wired next Business Earned on day
Eastern Time Day request received

</TABLE>

Due to the cost to the Trust of maintaining smaller accounts, the Trust
reserves the right to redeem, upon 60 days written notice, all shares in an
account with an aggregate net asset value of less than $2,000,000,000 unless
an investment is made to restore the minimum value.

DIVIDENDS AND TAX MATTERS

DIVIDENDS AND DISTRIBUTIONS

Dividends. Dividends are declared daily and paid monthly, following the close of
the last Fund Business Day of the month. Shares purchased by wire before 4:30
p.m. (Eastern Time) begin earning dividends that day. Dividends are
automatically reinvested on payment dates in additional shares of the Portfolio
unless cash payments are requested by contacting the Trust. The election to
reinvest dividends and distributions or receive them in cash may be changed at
any time upon written notice to the Transfer Agent. All dividends and other
distributions are treated in the same manner for Federal income tax purposes
whether received in cash or reinvested in shares of the Portfolio. If no
election is made, all dividends and distributions will be reinvested.

Capital Gains Distributions. Net realized short-term capital gains, if any, will
be distributed whenever the Trustees determine that such distributions would be
in the best interest of the shareholders, which would be at least once per year.
The Trust does not anticipate that the Portfolio would realize any long-term
capital gains, but should they occur, they also will be distributed at least
once every 12 months.

TAX MATTERS

Tax Status of the Portfolio. The Portfolio intends to qualify and continue to
qualify to be taxed as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, the Portfolio will
not be liable for Federal income taxes on the net investment income and capital
gains distributed to its shareholders. Because the Portfolio intends to
distribute all of its net investment income and net capital gains each year in
accordance with the timing requirements of the Code, the Portfolio should also
avoid Federal excise taxes.

13
<PAGE>

Distributions. Dividends paid by the Portfolio out of its net investment income
(including realized net short-term capital gains) are taxable to the
shareholders of the Portfolio as ordinary income. Distributions of net long-term
capital gains, if any, realized by the Portfolio are taxable to the shareholders
as long-term capital gains, regardless of the length of time the shareholder may
have held shares in the Portfolio at the time of distribution. Distributions are
subject to Federal income tax when they are paid, whether received in cash or
reinvested in shares of the Portfolio. Distributions declared in December and
paid in January, however, are taxable as if paid on December 31st.

OTHER INFORMATION

Portfolio Performance. The Portfolio may advertise its yield, which is based on
historical results and is not intended to indicate future performance. Yield
shows the rate of income the Portfolio has earned on its investments as a
percentage of the Portfolio's share price. To calculate yield, the Portfolio
takes the interest income it earned from its portfolio of investments for a
seven-day period (net of expenses), divides it by the average number of shares
entitled to receive dividends, and expresses the result as an annualized
percentage rate based on the Portfolio's share price at the end of the seven-day
period. The Portfolio's compounded annualized yield assumes the reinvestment of
dividends paid by the Portfolio, and therefore will be somewhat higher than the
annualized yield for the same period.

14
<PAGE>

comparative material found in the Portfolio's advertisements, sales literature,
or reports to shareholders may contain performance ratings. This material is not
to be considered representative or indicative of future performance.

Determination of Net Asset Value. The net asset value per share of the Portfolio
is determined at 4:30 p.m. (Eastern Time) on each Fund Business Day. The net
asset value is determined by subtracting total liabilities from total assets and
dividing the remainder by the number of shares outstanding. The Portfolio's
securities are valued at their amortized cost which does not take into account
unrealized gains or losses on securities. This method involves initially valuing
an instrument at its cost and thereafter assuming a constant amortization to
maturity of any premium paid or accreting discount received. The amortized cost

method minimizes changes in the market value of the securities held by the
Portfolio and helps it maintain a stable price of $1.00 per share.

Custodian and Accounting Agent. The Bank of New York, New York, New York, is
custodian for the securities and cash of the Trust. The Bank of New York is also
the accounting agent for the Portfolio, with responsibility for calculating the
net asset value of the Financial Shares and for maintaining its books and
records.

Legal Counsel. Legal counsel to the Trust is provided by Kramer, Levin, Naftalis
& Frankel, New York, New York.

Independent Auditors. The independent auditors for the Trust are Deloitte &
Touche, LLP, New York, New York.

The Trust, Its Shares and Classes. The Trust is registered with the SEC as an
open-end management investment company and was organized as a business trust
under the laws of the State of Delaware on July 14, 1994. The Board has the
authority to issue an unlimited number of shares of beneficial interest of
separate series with no par value per share and to create classes of shares
within each series. If shares of separate series are issued, each share of each
series would be entitled to participate equally in dividends and other
distributions and the proceeds of any liquidation of that series. Voting rights
would not be cumulative and the shares of each series of the Trust would be
voted separately except when an aggregate vote is required by law.

In addition to Financial Shares, the Portfolio offers Institutional Shares,
Investor Shares, Service Shares and Premium Shares by separate prospectus. Each
class of shares has a different distribution arrangement. Also, to the extent
one class bears expenses different from the other class, the amount of dividends
and other distributions it receives, and its performance, will differ.
Shareholders of one class have the same voting rights as shareholders of the
other class, except that separate votes are taken by each class of the Portfolio
if the interests of one class differ from the interests of the other. For
information about Institutional Shares, Investor Shares, Service Shares and
Premium Shares, please call (800) 941-MILE.

Delaware law does not require a registered investment company to hold annual
meetings of shareholders, and it is anticipated that shareholder meetings will
be held only when specifically

15
<PAGE>

required by Federal or state law. Shareholders have available procedures for
requiring the Trustees to call a meeting and for removing Trustees. Shares
issued by the Trust have no conversion, subscription or preemptive rights. See
"OTHER INFORMATION - The Trust and its Shareholders" in the Statement of
Additional Information.

As of March 6, 1998, the Trustees and officers of the Portfolio in the
aggregate owned less than one percent of the outstanding shares of the
Portfolio.

<PAGE>

The Milestone Funds

Adviser
Milestone Capital Management, L.P.
One Executive Boulevard
Yonkers, NY 10701

Administrator / Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Underwriter / Transfer Agent

CW Fund Distributors, Inc. / Countrywide Fund Services, Inc.
P. O. Box 5354
Cincinnati, OH 45201-5354

Legal Counsel
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022

Independent Auditors
Deloitte & Touche, LLP
Two World Financial Center
New York, NY 10281-1434

The Milestone Funds
800-941-MILE

<PAGE>

The Milestone Funds
Treasury Obligations Portfolio

ADVISER
Milestone Capital Management, L.P.

PROSPECTUS

MARCH 30, 1998

SERVICE SHARES

<PAGE>

The Milestone Funds
Treasury Obligations Portfolio
Service Shares
One Executive Boulevard, Yonkers, New York 10701
(800) 941-MILE

This Prospectus offers Service Shares of the Treasury Obligations Portfolio (the
"Portfolio"), a diversified, no-load money market portfolio of The Milestone
Funds (the "Trust"), an open-end investment management company. The Portfolio
seeks to provide its shareholders with the maximum current income that is
consistent with the preservation of capital and the maintenance of liquidity.
Milestone Capital Management, L.P. serves as the Portfolio's investment adviser.

Treasury Obligations Portfolio invests only in short-term obligations of
the U.S. Treasury and repurchase agreements fully collateralized by
obligations of the U.S. Treasury.

This Prospectus provides you with information about the Trust and the Portfolio
which you should know before investing in shares of the Portfolio. A Statement
of Additional Information, dated March 30, 1998, has been filed with the
Securities and Exchange Commission ("SEC") and is available free of charge by
contacting The Milestone Funds, One Executive Boulevard, Yonkers, New York
10701, or by calling (800) 941-MILE (6453). This information contained in the
Statement of Additional Information, as amended from time to time, is
incorporated by reference into this prospectus.

Investors should read and retain this Prospectus for future reference.

An investment in the Portfolio is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Portfolio will maintain a
stable net asset value of $1.00 per share.

<PAGE>

TABLE OF CONTENTS

Page
----
Prospectus Summary ........................................................ 2
Expenses of Investing in the Portfolio .................................... 3

Financial Highlights ...................................................... 4

Investment Objective and Policies ......................................... 4
Risk Considerations ....................................................... 5
Additional Investment Policies and Practices .............................. 6
Management of the Trust ................................................... 7
How to Invest in the Portfolio ............................................ 10
How to Redeem Shares of the Portfolio ..................................... 12
Dividends and Tax Matters ................................................. 13
Other Information ......................................................... 14

PROSPECTUS SUMMARY

PORTFOLIO HIGHLIGHTS

Service Shares. This prospectus offers Service Shares of the Treasury
Obligations Portfolio. The Treasury Obligations Portfolio (the "Portfolio") is
a money market fund that invests only in U.S. Treasury obligations and
repurchase agreements fully collateralized by U.S. Treasury obligations.
Service Shares are designed primarily for use by banks and other financial
institutions acting for themselves or in an advisory, agency, custodial,
fiduciary or other similar capacity. The Portfolio also offers Institutional
Shares, Investor Shares, Financial Shares and Premium Shares by separate
prospectus which are subject to different expenses that affect their
performance. For further information about these shares call (800) 941-MILE.
See "Other Information".

Management. The Portfolio's investment adviser is Milestone Capital Management,
L.P. (the "Adviser"), One Executive Boulevard, Yonkers, New York 10701. See
"Management of the Trust".

2
<PAGE>

8:30 a.m. and 7:00 p.m. (Eastern Time). To allow the Adviser to manage the
Portfolio most effectively, investors are encouraged to execute as many trades
as possible before 2:30 p.m. If Countrywide Fund Services, Inc. (the "Transfer
Agent") receives a firm indication of the approximate size of a purchase by 2:30
p.m. (Eastern Time), and the completed purchase order by 4: 30 p.m., the shares
purchased will earn dividends on the same day. If the Transfer Agent receives a
firm indication of the approximate size of a redemption by 2:30 p.m. (Eastern
Time), and the completed redemption order by 4: 30 p.m., redemption proceeds
will ordinarily be wired that day, and the investor will not receive that day's
dividends. The minimum initial investment is $500,000. The Trust and the
Transfer Agent each reserves the right to waive this minimum initial investment
limitation. There is no minimum subsequent investment. See "How To Invest In The
Portfolio" and "How To Redeem Shares Of The Portfolio".

EXPENSES OF INVESTING IN THE PORTFOLIO

The purpose of the following table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Trust will bear, either
directly or indirectly.

<TABLE>
<S> <C>
Shareholder Transaction Expenses:

Annual Portfolio Operating Expenses (as a percentage of annual average net
assets):

Advisory Fees.................................................................. 0.10%
12b-1 Fees..................................................................... 0.05%*
Shareholder Servicing Fees..................................................... 0.25%
Other Expenses................................................................. 0.05%
-----
Total Operating Expenses....................................................... 0.45%
=====
</TABLE>

.........

* Under the Rule 12b-1 Plan of the Portfolio's Service Shares, the Service
Shares may incur distribution expenses of up to 0.25% of the average daily
net assets attributable to such Shares. For the current fiscal year, the
Adviser has agreed to limit the total expenses of the Service Shares to
0.45%. This voluntary limitation may be terminated at any time subject to
shareholders receiving 30 days notice of such change.

For a further description of the various expenses incurred in the operation of
the Portfolio, see "Management of the Trust".

3
<PAGE>

Example

<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment in Service Shares of the Portfolio,
assuming a 5% annual return and redemption at the end 1 Year 3 Years 5 Years 10 Years
of each period: . . . . $5 $14 $25 $57
</TABLE>

FINANCIAL HIGHLIGHTS

The following financial highlights of the Portfolio's Service Shares have been
audited by Deloitte & Touche, LLP, independent certified public accountants.
The financial statements and independent accountant's report thereon of the
Portfolio are incorporated into the Statement of Additional Information.

For the period
May 2, 1997*
through
November 30, 1997
-----------------

Per share operating performance for a share outstanding
throughout the period
Beginning net asset value per share $ 1.00
------------

Net investment income 0.030

Dividends from net investment income (0.030)

Ending net asset value per share $ 1.00
------------

Total return 5.21%(a)

Ratios/supplemental data
Ratios to average net assets:
Expenses 0.45%(a)
Net investment income 5.15%(a)

Net assets at the end of period (000's omitted) $ 242,068
------------

4
<PAGE>

(a) Annualized

* Commencement of operations

INVESTMENT OBJECTIVE AND POLICIES

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

The following permissible investments and investment restrictions are
fundamental investment policies of the Portfolio that may not be changed without
shareholder approval:

Permissible Investments. The Portfolio seeks to achieve its investment objective
by investing only in:

principal and interest by the United States Government.

Repurchase agreements fully collateralized by U.S. Treasury obligations.
Repurchase agreements are transactions in which the Portfolio purchases a
security and simultaneously commits to resell that security to the seller
at an agreed-upon price on an agreed-upon future date, normally
one-to-seven days later. The resale price reflects a market rate of
interest that is not related to the coupon rate or maturity of the
purchased security. The Portfolio enters into repurchase agreements only
with primary dealers designated by the Federal Reserve Bank of New York
which the Adviser believes present minimal credit risks in accordance with
guidelines established by the Board of Trustees of the Trust (the "Board").
The Adviser monitors the credit-worthiness of sellers under the Board's
general supervision. If a seller defaults on its repurchase obligation,
however, the Portfolio might suffer a loss.

5
<PAGE>

Investment Restrictions. The Portfolio will not:

1. Invest in structured notes or instruments commonly known as
derivatives;

2. Invest in variable, adjustable or floating rate instruments of any
kind;

3. Enter into reverse repurchase agreements;

5. Invest in zero coupon bonds.

restrictions imposed by Rule 2a-7 under the Investment Company Act of 1940.

RISK CONSIDERATIONS

ADDITIONAL INVESTMENT POLICIES AND PRACTICES

6
<PAGE>

notice to shareholders. The Portfolio's additional fundamental and
nonfundamental investment policies are described further below and in the
Statement of Additional Information.

the Portfolio may result in a loss or a missed opportunity to make an
alternative investment. Commitments for when-issued or delayed delivery
transactions will be entered into only when the Portfolio intends to acquire the
securities. Although there is no limit on the amount of these commitments that
the Portfolio may make, under normal circumstances it will not commit more than
30% of its total assets to such purchases.

Temporary Defensive Positions. Under abnormal market or economic conditions, the
Portfolio temporarily may hold up to 100% of its investable assets in cash.

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES

7
<PAGE>

THE ADVISER

Janet Tiebout Hanson is President and Chief Executive Officer of the Adviser.
Ms. Hanson is also President and Chief Executive Officer of Milestone Capital

Management Corp., in which she holds the controlling interest. She is a former
vice-president of Goldman, Sachs & Co., a leading investment banking firm.
During her fourteen year tenure with Goldman Sachs, Ms. Hanson held significant
sales, marketing, and management positions in both the Fixed Income and Asset
Management Divisions, including co-manager of Money Market Sales in New York.
Ms. Hanson was responsible for developing many of the firm's key relationships
with major institutional investors. In addition, she was instrumental in raising
assets for Goldman Sachs Asset Management's money market and bond mutual funds.
Ms. Hanson holds a BA in government from Wheaton College in Massachusetts and an
MBA in finance from Columbia University.

8
<PAGE>

agreement. The expenses borne by the Trust include, but are not limited to, the
investment advisory fee, administration fee, transfer agent fee, and custodian
fee, costs of preparing, printing and delivering to shareholders the Trust's
prospectuses, statements of additional information, and shareholder reports,
legal fees, auditing and tax fees, taxes, blue sky fees, SEC fees, compliance
expenses, insurance expenses, and compensation of certain of the Trust's
Trustees, officers and employees and other personnel performing services for the
Trust. Should the expenses of the Portfolio (including the fees of the Adviser
but excluding interest, taxes, brokerage commissions, litigation and
indemnification expenses and other extraordinary expenses) for any fiscal year
exceed the limits prescribed by any state in which the Portfolio's shares are
qualified for sale, the Adviser will reduce its fee or reimburse expenses by the
amount of such excess.

ADMINISTRATOR

The Bank of New York, 90 Washington Street, New York, New York 10286 serves as
the administrator of the Trust, pursuant to an Administration Agreement with the
Trust.

UNDERWRITER

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. The Underwriter may enter into arrangements with banks,
broker-dealers or other financial institutions ("Selected Dealers") through
which investors may purchase or redeem shares. The Underwriter may compensate
certain persons who provide services in connection with the sale or expected
sale of shares of the Portfolio. Investors purchasing shares of the Portfolio
through another financial institution should read any

9
<PAGE>

materials and information provided by the financial institution to acquaint
themselves with its procedures and any fees that it may charge.

DISTRIBUTION PLAN

The Trust has adopted a distribution plan for Service Shares. Pursuant to this
Plan, the Portfolio may incur distribution expenses related to the sale of
Service Shares of up to .25% per annum of the Portfolio's average daily net
assets attributable to such Shares. The Plan provides that the Portfolio may
finance activities which are primarily intended to result in the sale of Service
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. The Plan will only make payments 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. Such amounts
payable will be disclosed in the financial statements of the annual report to
the Portfolio. If the Plan is terminated in accordance with its terms, the
obligations of the Portfolio to make payments pursuant to the Plan will cease
and the Portfolio will not be required to make any payments past the date the
Plan terminates.

SHAREHOLDER SERVICES

The Trust has adopted a shareholder service plan under which it pays the Adviser
.25% of the average daily net assets of the Service Shares such 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 agent performs certain shareholder
services. For these services, the Adviser pays the shareholder servicing agent a
fee based upon the average daily net assets of the Service Shares owned by
investors for which the shareholder servicing agent maintains a servicing
relationship.

Among the services provided by shareholder servicing agents are: answering
customer inquiries regarding account matters; assisting shareholders in
designating and changing various account options; aggregating and processing
purchase and redemption orders and transmitting and receiving funds for
shareholder orders; transmitting, on behalf of the Trust, proxy statements,
prospectuses and shareholder reports to shareholders and tabulating proxies;
processing dividend payments and providing subaccounting services for Portfolio
shares held beneficially; and providing such other services as the Trust or a
shareholder may request.

TRANSFER AGENT

10
<PAGE>

of the Trust, proxy statements, prospectuses and shareholder reports to
shareholders and tabulating proxies; processing dividend payments and providing
subaccounting services for Portfolio shares held beneficially; and providing
such other services as the Trust or a shareholder may request. The Transfer
Agent may pay these agents for their services, but no such payment will increase
the Transfer Agent's compensation from the Trust.