<PAGE>
----------------
THE
MILESTONE
FUNDS
----------------
THE MILESTONE FUNDS
TREASURY OBLIGATIONS PORTFOLIO
ADVISER
Milestone Capital Management, L.P.
------------------
ANNUAL REPORT
NOVEMBER 30, 1999
<PAGE>
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THE
MILESTONE
FUNDS
----------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Our Shareholders........................ 3
Portfolio of Investments.......................... 4
Statement of Assets and Liabilities............... 6
Statement of Operations........................... 7
Statements of Changes in Net Assets............... 8
Notes to Financial Statements..................... 9
Financial Highlights.............................. 12
Independent Auditors' Report...................... 17
</TABLE>
2
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MILESTONE
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----------------
TREASURY OBLIGATIONS PORTFOLIO
LETTER TO OUR SHAREHOLDERS
DECEMBER 31, 1999
Dear Investors:
As we complete our FIFTH FULL YEAR of operation and look ahead to the new
millenium, we would like to express our heartfelt thanks to each of our
investors for your on-going confidence in the Milestone team. 1999 and each of
the four prior years have been highly successful ones for the Fund and its
shareholders because of your support.
Over the last five years, many "milestones" have been achieved on behalf of our
investors, including:
o 5 CONSECUTIVE YEARS OF STABLE ASSET GROWTH--since inception, total net assets
in the Fund have grown to $2.675 billion as of year-end 1999, reflecting an
11% increase over 1998 year-end levels.
o 5 CONSECUTIVE YEARS OF CONSISTENTLY COMPETITIVE PERFORMANCE-- the Fund's five
year gross compound annualized return is ranked in the Top 5 of IBC Financial
Data's Universe of Institutional Treasury and Repo Funds.
o 5 CONSECUTIVE YEARS OF ENHANCED LIQUIDITY MANAGEMENT--in 1999 the Fund's
cut-off time was moved to 5:00 p.m. Eastern Time to further accommodate
institutional investors' late day liquidity needs.
o 5 CONSECUTIVE YEARS OF VALUE-ADDED CLIENT SERVICE--listening closely to our
investors, providing direct daily access to our team of professionals, and
employing our expertise and cutting-edge technology to meet the unique
requirements of each client have enabled us to deliver the highest standard of
service to our shareholders. Innovative technological services such as
CashChat(TM) and custom-designed internet transaction websites have been
developed in anticipation of investors' continuously changing needs.
From a portfolio management perspective, the past year was a very eventful one
for the financial markets. In early 1999 it became evident that the worst of the
global crisis was over and many investors' concerns about the U.S. economy had
eased. In fact, the domestic economy was actually stronger than most economists
had forecasted. This unexpectedly strong growth triggered fears among investors
that inflationary pressures might re-emerge. Subsequently, signs that price
pressures were building began to appear in the form of tighter labor markets,
higher oil prices, and rising manufacturing prices. In response, by the end of
the second quarter and continuing into the third and fourth quarters, the
Federal Reserve raised short-term interest rates three times--bringing the Fed
Funds rate up to 5.50%. Given a continued robust economy and some signs of
accelerating inflation, we currently anticipate that the Federal Reserve will
raise rates at least twice in the first half of 2000.
In looking ahead to the coming year, we renew our commitment to work in
partnership with each of our clients to meet the full range of your liquidity
management, cash management, and related technology needs. Please let us know
how we can continue to be of greatest service to you throughout 2000.
/s/ Janet Tiebout Hanson /s/ Marc H. Pfeffer
JANET TIEBOUT HANSON MARC H. PFEFFER
Chairman of the Board of Trustees Chief Investment Officer
The Milestone Funds Milestone Capital Management, L.P.
3
<PAGE>
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MILESTONE
FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1999
($ in Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL AMOUNT INTEREST RATE MATURITY DATE (NOTE 1)
- ------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 14.3%
U.S. TREASURY NOTES - 14.3%
<S> <C> <C> <C> <C>
$ 57,000 5.50% 3/31/00 $ 57,109
130,000 6.375% 5/15/00 130,806
60,000 5.50% 5/31/00 60,151
25,000 6.25% 8/31/00 25,128
15,000 4.50% 9/30/00 14,881
35,000 6.125% 9/30/00 35,185
323,260
- ------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (AMORTIZED COST $323,260) 323,260
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 85.7%
<CAPTION>
ABN AMRO, Inc., dated 11/30/99, repurchase price $100,016 (U.S. Treasury Bill: $21,750, 1/6/00; U.S. Treasury
Notes: $80,387, 5.25%-6.75%, 4/30/00-8/15/03; aggregate market value $102,000)
<S> <C> <C> <C> <C>
100,000 5.68% 12/1/99 100,000
<CAPTION>
Banc One Capital Markets, Inc., dated 11/30/99, repurchase price $100,016 (U.S. Treasury Bills: $13,156,
12/2/99-11/9/00; U.S. Treasury Bond: $74,700, 11.125%, 8/15/03; aggregate market value $102,003)
<S> <C> <C> <C> <C>
100,000 5.66% 12/1/99 100,000
<CAPTION>
Barclays Capital, Inc., dated 11/30/99, repurchase price $94,353 (U.S. Treasury Note: $95,043, 6.125%,
9/30/00; market value $96,226)
<S> <C> <C> <C> <C>
94,338 5.68% 12/1/99 94,338
<CAPTION>
Bear, Stearns & Co., Inc., dated 11/30/99, repurchase price $375,059 (U.S. Treasury Bills: $17,802,
2/17/00-10/12/00; U.S. Treasury Bond: $1,820, 8.25%, 5/15/05; U.S. Treasury Notes: $361,996, 4.50%-8.00%,
8/31/00-8/15/05; aggregate market value $385,197)
<S> <C> <C> <C> <C>
375,000 5.68% 12/1/99 375,000
<CAPTION>
Chase Securities, Inc., dated 11/30/99, repurchase price $105,017 (U.S. Treasury Notes: $104,169, 6.12%-7.50%,
11/15/01-6/30/02; aggregate market value $107,104)
<S> <C> <C> <C> <C>
105,000 5.66% 12/1/99 105,000
<CAPTION>
Deutsche Bank Securities, Inc., dated 11/30/99, repurchase price $105,017 (U.S. Treasury Bill: $20,816,
11/09/00; U.S. Treasury Notes: $87,649, 4.50%, 9/30/00; aggregate market value $107,101)
<S> <C> <C> <C> <C>
105,000 5.66% 12/1/99 105,000
<CAPTION>
Donaldson, Lufkin & Jenrette Securities Corp., dated 11/30/99, repurchase price $100,016 (U.S. Treasury Bond:
$12,078, 11.75%, 2/15/01; U.S. Treasury Note: $90,133, 5.25%, 8/15/03; aggregate market value $102,001)
<S> <C> <C> <C> <C>
100,000 5.67% 12/1/99 100,000
</TABLE>
4
<PAGE>
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MILESTONE
FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONT'D)
NOVEMBER 30, 1999
($ in Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
VALUE
PRINCIPAL AMOUNT INTEREST RATE MATURITY DATE (NOTE 1)
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 85.7% (CONT'D)
Greenwich Capital Markets, Inc., dated 11/30/99, repurchase price $100,016 (U.S. Treasury Bill: $100,000,
5/11/00; U.S. Treasury Notes: $4,427, 5.87%, 9/30/02-11/15/05; aggregate market value $102,005)
<S> <C> <C> <C> <C>
100,000 5.69% 12/1/99 100,000
<CAPTION>
Morgan Stanley & Co., Inc., dated 11/30/99, repurchase price $100,016 (U.S. Treasury Bill: $106,660, 8/17/00,
market value $102,508)
<S> <C> <C> <C> <C>
100,000 5.65% 12/1/99 100,000
<CAPTION>
Nesbitt Burns Securities, Inc., dated 11/30/99, repurchase price $100,016 (U.S. Treasury Bills: $105,422,
12/2/99-10/12/00; market value $102,001)
<S> <C> <C> <C> <C>
100,000 5.68% 12/1/99 100,000
<CAPTION>
Salomon Smith Barney, Inc., dated 11/30/99, repurchase price $100,016 (U.S. Treasury Note: $105,540, 5.25%,
5/15/04; market value $102,051)
<S> <C> <C> <C> <C>
100,000 5.68% 12/1/99 100,000
<CAPTION>
SG Cowen Securities Corp., dated 11/30/99, repurchase price $100,016 (U.S. Treasury Bills: $106,529,
1/13/00-10/12/00; market value $102,043)
<S> <C> <C> <C> <C>
100,000 5.68% 12/1/99 100,000
<CAPTION>
Warburg Dillon Read LLC, dated 9/24/99, repurchase price $95,918 (U.S. Treasury Bonds: $29,163, 9.37%-11.75%,
2/15/01-2/15/06; U.S. Treasury Notes: $63,018, 5.50%-7.50%, 5/31/01-10/15/06; aggregate market value $96,905)
<S> <C> <C> <C> <C>
95,000 5.35% 2/18/00 95,000
<CAPTION>
Warburg Dillon Read LLC, dated 11/5/99, repurchase price $100,346 (U.S. Treasury Bonds: $30,303,
11.75%-12.37%, 2/15/01-5/15/04; U.S. Treasury Notes: $65,122, 5.12%-5.87%, 2/15/00-11/15/04; aggregate market
value $102,001)
<S> <C> <C> <C> <C>
100,000 5.42% 3/3/00 100,000
<CAPTION>
Warburg Dillon Read LLC, dated 11/30/99, repurchase price $255,040 (U.S. Treasury Bond: $29,615, 11.87%,
11/15/03; U.S. Treasury Notes: $220,680, 5.00%-6.62%, 2/28/01-7/15/06; aggregate market value $260,104)
<S> <C> <C> <C> <C>
255,000 5.67% 12/1/99 255,000
<CAPTION>
- ------------------------------------------------------------------------------------------------
<S> <C>
TOTAL REPURCHASE AGREEMENTS (COST $1,929,338) 1,929,338
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $2,252,598)--100.0% 2,252,598
LIABILITIES IN EXCESS OF OTHER ASSETS--(0.0)% (641)
- ------------------------------------------------------------------------------------------------
NET ASSETS--100.0% $2,251,957
================================================================================================
</TABLE>
See notes to financial statements.
5
<PAGE>
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THE
MILESTONE
FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at amortized cost (note 1) $ 323,260,070
Repurchase agreements, at value and cost (note 1) 1,929,338,000
Cash 766
Interest receivable 3,398,984
Deferred organization costs and prepaid expenses 33,174
--------------
Total assets 2,256,030,994
--------------
LIABILITIES:
Advisory fee payable 194,233
Shareholder Service fee payable- Investor Shares 68,478
Shareholder Service fee payable- Institutional Shares 47,188
Shareholder Service fee payable- Service Shares 5,944
Shareholder Service fee payable- Premium Shares 14,277
Distribution fee payable- Service Shares 1,219
Distribution fee payable- Premium Shares 11,928
Dividends payable 3,573,027
Accrued expenses 157,534
--------------
Total liabilities 4,073,828
--------------
NET ASSETS $2,251,957,166
==============
NET ASSETS BY CLASS OF SHARES:
Investor Shares $ 343,781,050
Institutional Shares 1,199,512,723
Financial Shares 599,948,205
Service Shares 39,916,573
Premium Shares 68,798,615
--------------
NET ASSETS $2,251,957,166
==============
SHARES OUTSTANDING
Investor Shares 343,781,050
==============
Institutional Shares 1,199,512,723
==============
Financial Shares 599,948,205
==============
Service Shares 39,916,573
==============
Premium Shares 68,798,615
==============
NET ASSET VALUE PER SHARE $1.00
==============
COMPOSITION OF NET ASSETS:
Shares of beneficial interest 2,251,957,166
==============
NET ASSETS $2,251,957,166
==============
</TABLE>
See notes to financial statements.
6
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FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest $ 116,653,875
--------------
EXPENSES (note 2):
Advisory fees 2,331,569
Administration fees 100,000
Shareholder Service fees
Investor Shares 771,601
Institutional Shares 723,586
Service Shares 126,471
Premium Shares 183,134
Distribution fees
Service Shares 26,620
Premium Shares 150,661
Custodian fees and expenses 188,442
Registration and filing fees 181,682
Transfer agent fees and expenses 165,082
Cash management fees 100,232
Publication expenses and rating service fees 82,699
Accounting service fees 60,597
Legal fees 45,272
Reports to shareholders 41,462
Amortization of organization costs 31,212
Insurance expense 26,533
Audit fees 20,771
Trustees' fees 12,381
Other expenses 33,385
--------------
Net expenses 5,403,392
--------------
NET INVESTMENT INCOME 111,250,483
NET REALIZED GAIN ON INVESTMENTS 31,662
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 111,282,145
==============
</TABLE>
See notes to financial statements.
7
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MILESTONE
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----------------
TREASURY OBLIGATIONS PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
NOVEMBER 30, 1999 NOVEMBER 30, 1998
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 111,250,483 $ 115,476,358
Net realized gain on investments 31,662 13,517
--------------- ---------------
Net increase in net assets
resulting from operations 111,282,145 115,489,875
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income-Investor
Shares (14,208,869) (15,266,103)
Net investment
income-Institutional Shares (64,901,816) (76,898,628)
Net investment income-Financial
Shares (26,644,144) (12,891,937)
Net investment income-Service
Shares (2,274,224) (6,109,949)
Net investment income-Premium
Shares (3,221,430) (4,309,741)
Net realized gain on
investments-Investor Shares (4,352) (2,431)
Net realized gain on
investments-Institutional
Shares (18,836) (7,083)
Net realized gain on
investments-Financial Shares (7,100) (1,428)
Net realized gain on
investments-Service Shares (429) (1,850)
Net realized gain on
investments-Premium Shares (945) (725)
--------------- ---------------
Total distributions to
shareholders (111,282,145) (115,489,875)
--------------- ---------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST*:
Sale of shares-Investor Shares 1,688,702,990 1,943,037,601
Sale of shares-Institutional
Shares 7,809,424,119 11,020,380,539
Sale of shares-Financial Shares 4,949,618,119 1,099,712,000
Sale of shares-Service Shares 168,815,130 288,570,874
Sale of shares-Premium Shares 141,659,128 191,389,622
Reinvested dividends-Investor
shares 6,276,557 5,666,907
Reinvested
dividends-Institutional Shares 43,482,802 54,977,458
Reinvested dividends-Financial
Shares 16,920,776 5,026,423
Reinvested dividends-Service
Shares 104,680 37,555
Reinvested dividends-Premium
Shares 6,289 --
Cost of shares
repurchased-Investor Shares (1,772,286,339) (1,912,845,866)
Cost of shares
repurchased-Institutional Share (8,340,229,339) (10,572,428,163)
Cost of shares
repurchased-Financial Shares (4,681,146,718) (880,647,883)
Cost of shares
repurchased-Service Shares (238,995,904) (420,683,543)
Cost of shares
repurchased-Premium Shares (158,804,282) (189,690,783)
--------------- ---------------
Net increase (decrease) in net
assets from shares of
beneficial interest (366,451,992) 632,502,741
--------------- ---------------
Total Increase (decrease) (366,451,992) 632,502,741
NET ASSETS:
Beginning of period 2,618,409,158 1,985,906,417
--------------- ---------------
End of period $ 2,251,957,166 $ 2,618,409,158
=============== ===============
</TABLE>
* Share transactions at net asset value of $1.00 per share.
See notes to financial statements.
8
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----------------
TREASURY OBLIGATIONS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
NOTE 1. SUMMARY OF ORGANIZATION AND
SIGNIFICANT ACCOUNTING POLICIES
The Milestone Funds (the "Trust") was formed as a Delaware business trust on
July 14, 1994. The Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940. It currently has one
diversified investment portfolio, the Treasury Obligations Portfolio (the
"Portfolio") which is authorized to issue an unlimited number of shares of
beneficial interest without par value. The Portfolio is currently authorized to
issue five classes of shares, Investor Shares, Institutional Shares, Financial
Shares, Service Shares and Premium Shares. The Trust commenced the offering of
Investor Shares of the Portfolio on December 30, 1994, Institutional Shares on
June 20, 1995, Financial Shares on March 13, 1997, Services Shares on May 2,
1997 and Premium Shares on May 20, 1997. The Trust's financial statements are
prepared in accordance with generally accepted accounting principles.
VALUATION OF SECURITIES - Securities in which the Portfolio invests are valued
at amortized cost. Under the amortized cost method, a portfolio instrument is
valued at cost and any premium or discount is amortized on a constant basis to
maturity. Amortization of premium and accretion of market discount is charged to
income.
REPURCHASE AGREEMENTS - The Portfolio may purchase securities from financial
institutions subject to the seller's agreement to repurchase and the Portfolio's
agreement to resell the securities at par. The investment adviser only enters
into repurchase agreements with financial institutions that are primary dealers
and deemed to be creditworthy by the investment adviser in accordance with
procedures adopted by the Board of Trustees. Securities purchased subject to
repurchase agreements are maintained with a custodian of the Portfolio and must
have, at all times, an aggregate market value greater than or equal to the
repurchase price plus accrued interest. If the market value of the underlying
securities falls below 102% of the value of the repurchase price, the Portfolio
will require the seller to deposit additional collateral by the next Portfolio
business day. In the event that the seller under the agreement defaults on its
repurchase obligation or fails to deposit sufficient collateral, the Portfolio
has the contractual right, subject to the requirements of applicable bankruptcy
and insolvency laws, to sell the underlying securities and may claim any
resulting loss from the seller.
SECURITY TRANSACTIONS - Security transactions are recorded on the trade date.
Realized gains and losses are recorded on the identified cost basis. The cost of
investments for federal income tax purposes at November 30, 1999 is
substantially the same as shown on the accompanying portfolio of investments.
MULTIPLE CLASS ALLOCATIONS - Each share of the classes represents an undivided,
proportionate interest in the Portfolio. All income, expenses (other than class
specific expenses), and realized gains or losses are allocated daily to each
class of shares based on the relative value of the shares of each class. The
Portfolio's class specific expenses include Shareholder Service fees,
Distribution fees and certain registration fees that are in accordance with
procedures adopted by the Board of Trustees regarding the offering of multiple
classes of shares by open-end, management investment companies. In addition,
that are differences between the classes of shares with respect to the minimum
investment required and voting rights affecting each class.
9
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MILESTONE
FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONT'D)
NOVEMBER 30, 1999
INCOME TAXES - It is the Portfolio's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its investment company taxable income and net realized gains,
if applicable, to its shareholders. Therefore, no provision has been made for
federal income taxes.
INTEREST INCOME AND DIVIDENDS TO SHAREHOLDERS - Interest income is accrued as
earned. Dividends to shareholders from each class of the Portfolio's net
investment income are declared daily and distributed monthly. Net realized
capital gains, unless offset by any available capital loss carryforwards, are
distributed at least annually.
ACCOUNTING ESTIMATES - The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
ORGANIZATION COSTS - Organization costs are being amortized on a straight line
basis over five years.
NOTE 2. INVESTMENT ADVISORY AND OTHER SERVICES
Milestone Capital Management, L.P. (the "Adviser") serves as investment adviser
to the Portfolio pursuant to an investment advisory agreement with the Trust.
For its services, the Adviser receives a fee at an annual rate equal to 0.10% of
the average daily net assets of the Portfolio.
The Trust had adopted a Shareholder Service Plan providing that the Trust may
obtain the services of the Adviser and other qualified financial institutions to
act as shareholder servicing agents for their customers. Under this plan, the
Trust has authorized the Adviser to enter into agreements pursuant to which the
shareholder servicing agents perform certain shareholder services. For these
services, the Adviser receives from the Trust a fee at an annual rate equal to
0.25% of the average daily net assets of the Investor Shares, Service Shares and
Premium Shares. For Institutional Shares, the Adviser receives from the Trust a
fee at an annual rate up to 0.10% of the average daily net assets. For the year
ended November 30, 1999, the Adviser received a 0.05% shareholder service fee.
Effective December 1, 1999, the Board of Trustees of the Milestone Funds
consented to and adopted a Shareholder Service Plan for the Financial Class of
the Portfolio. Under this plan, the Adviser will receive from the Trust an
annual shareholder service fee of up to 0.05% of the average daily net assets of
the Financial Shares. The Adviser pays the shareholder servicing agents these
amounts with respect to shares owned by investors for which the shareholder
servicing agents maintain a servicing relationship pursuant to the Shareholder
Servicing Agreement.
10
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----------------
TREASURY OBLIGATIONS PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONT'D)
NOVEMBER 30, 1999
The Trust has adopted a Distribution Plan for the Service Shares and the Premium
Shares. The plan provides that the Portfolio may finance activities which are
primarily intended to result in the sale of the Service and Premium Shares,
including, but not limited to, advertising, printing of prospectuses and reports
for other than existing shareholders, preparation and distribution of
advertising material and sales literature and payments to dealers who enter into
agreements with the Trust of Underwriter. Pursuant to this plan, the Portfolio
may incur distribution expenses related to the sale of the Service and Premium
Shares of up to 0.25% and 0.35% of the average daily net assets of the Service
and Premium Shares, respectively. The plan will only make payment for expenses
actually incurred on a first-in, first-out basis. The plan may carry forward for
an unlimited number of years any unreimbursed expenses. As of November 30, 1999,
there were no unreimbursed expenses. For the year ended November 30, 1999, the
Portfolio incurred 0.05% and 0.20% of these distribution expenses for the
Service and the Premium Shares.
Effective December 7, 1998, Unified Fund Services, Inc. became the Trust's
transfer agent and dividend disbursing agent, replacing Countrywide Fund
Services, Inc. Effective December 7, 1998, Unified Management Corporation became
the Trust's Underwriter of the Portfolio's shares, replacing CW Fund
Distributors, Inc., pursuant to an Underwriting Agreement with the Trust and
serving under the same terms and conditions as the previous underwriter. The
Underwriter is an affiliate of the Trust's transfer agent. The Underwriter is
reimbursed for all costs and expenses incurred in this capacity but receives no
further compensation for its services under the Underwriting Agreement.
11
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----------------
TREASURY OBLIGATIONS PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INVESTOR
SHARES
------------------------------------------------------------------------
FOR THE
PERIOD
DECEMBER 30,
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR 1994*
ENDED ENDED ENDED ENDED THROUGH
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE FOR A SHARE
OUTSTANDING THROUGHOUT
THE PERIOD
Beginning net asset value
per share $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Net investment income 0.046 0.051 0.051 0.050 0.051
Dividends from net
investment income (0.046) (0.051) (0.051) (0.050) (0.051)
------- ------- ------- ------- -------
Ending net asset value per share $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN 4.69% 5.23% 5.23% 5.11% 5.71%(a)
RATIOS/SUPPLEMENT DATA
Ratios to average net assets:
Expenses(b) 0.40% 0.40% 0.41% 0.45% 0.38%(a)
Net investment income 4.60% 5.08% 5.13% 4.99% 5.63%(a)
Net assets at the end of
the period (000's omitted) $343,781 $421,088 $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%, 0.00%, 0.00%, 0.01% and 0.14%, for each of the
respective periods presented.
* Commencement of operations.
See notes to financial statements.
12
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MILESTONE
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----------------
TREASURY OBLIGATIONS PORTFOLIO
FINANCIAL HIGHLIGHTS (CONT'D)
<TABLE>
<CAPTION>
INSTITUTIONAL
SHARES
------------------------------------------------------------------------
FOR THE
PERIOD
JUNE 20,
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR 1995*
ENDED ENDED ENDED ENDED THROUGH
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE FOR A SHARE
OUTSTANDING THROUGHOUT
THE PERIOD
Beginning net asset value
per share $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Net investment income 0.048 0.053 0.053 0.052 0.026
Dividends from net
investment income (0.048) (0.053) (0.053) (0.052) (0.026)
------- ------- ------- ------- -------
Ending net asset value per
share $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN 4.91% 5.45% 5.46% 5.37% 5.76%(a)
RATIOS/SUPPLEMENT DATA
Ratios to average net assets:
Expenses(b) 0.20% 0.20% 0.20% 0.20% 0.20%(a)
Net investment income 4.79% 5.30% 5.32% 5.21% 5.69%(a)
Net assets at the end of
the period (000's omitted) $1,199,513 $1,686,835 $1,183,905 $897,173 $229,159
</TABLE>
(a) Annualized
(b) Net of advisory, shareholder servicing, and administration fees waived and
expenses reimbursed of 0.00%, 0.01%, 0.01%, 0.02% and 0.17%, for each of the
respective periods presented.
* Commencement of operations.
See notes to financial statements.
13
<PAGE>
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THE
MILESTONE
FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
FINANCIAL HIGHLIGHTS (CONT'D)
<TABLE>
<CAPTION>
FINANCIAL
SHARES
-----------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR MARCH 13, 1997*
ENDED ENDED THROUGH
NOVEMBER 30, 1999 NOVEMBER 30, 1998 NOVEMBER 30, 1997
----------------- ----------------- -----------------
<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 0.049 0.054 0.038
Dividends from net investment income (0.049) (0.054) (0.038)
------- ------- -------
Ending net asset value per share $1.00 $1.00 $1.00
===== ===== =====
TOTAL RETURN 4.97% 5.50% 5.52%(a)
RATIOS/SUPPLEMENT DATA
Ratios to average net assets:
Expenses 0.14% 0.15% 0.14%(a)
Net investment income 4.90% 5.28% 5.45%(a)
Net assets at the end of the period (000's omitted) $599,948 $314,556 $90,465
</TABLE>
(a) Annualized
* Commencement of operations.
See notes to financial statements.
14
<PAGE>
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THE
MILESTONE
FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
FINANCIAL HIGHLIGHTS (CONT'D)
<TABLE>
<CAPTION>
SERVICE
SHARES
-----------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR MAY 2, 1997*
ENDED ENDED THROUGH
NOVEMBER 30, 1999 NOVEMBER 30, 1998 NOVEMBER 30, 1997
----------------- ----------------- -----------------
<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 0.046 0.051 0.030
Dividends from net investment income (0.046) (0.051) (0.030)
------- ------- -------
Ending net asset value per share $1.00 $1.00 $1.00
===== ===== =====
TOTAL RETURN 4.65% 5.19% 5.21%(a)
RATIOS/SUPPLEMENT DATA
Ratios to average net assets:
Expenses 0.45% 0.45% 0.45%(a)
Net investment income 4.50% 5.07% 5.15%(a)
Net assets at the end of the period (000's omitted) $39,917 $109,993 $242,068
</TABLE>
(a) Annualized
* Commencement of operations.
See notes to financial statements.
15
<PAGE>
----------------
THE
MILESTONE
FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
FINANCIAL HIGHLIGHTS (CONT'D)
<TABLE>
<CAPTION>
PREMIUM
SHARES
-----------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR MAY 20, 1997*
ENDED ENDED THROUGH
NOVEMBER 30, 1999 NOVEMBER 30, 1998 NOVEMBER 30, 1997
----------------- ----------------- -----------------
<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 0.044 0.049 0.027
Dividends from net investment income (0.044) (0.049) (0.027)
------- ------- -------
Ending net asset value per share $1.00 $1.00 $1.00
===== ===== =====
TOTAL RETURN 4.49% 5.03% 5.06%(a)
RATIOS/SUPPLEMENT DATA
Ratios to average net assets:
Expenses 0.60% 0.60% 0.60%(a)
Net investment income 4.40% 4.92% 5.01%(a)
Net assets at the end of the period (000's omitted) $68,799 $85,937 $84,239
</TABLE>
(a) Annualized
* Commencement of operations.
See notes to financial statements.
16
<PAGE>
----------------
THE
MILESTONE
FUNDS
----------------
TREASURY OBLIGATIONS PORTFOLIO
INDEPENDENT AUDITORS' REPORT
THE BOARD OF TRUSTEES AND SHAREHOLDERS
TREASURY OBLIGATIONS PORTFOLIO OF THE MILESTONE FUNDS
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Treasury Obligations Portfolio of The
Milestone Funds as of November 30, 1999, the related statements of operations
for the year then ended and of changes in net assets for each of the years in
the two-year period then ended, and the financial highlights for the periods
ended November 30, 1999, November 30, 1998 and November 30, 1997. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights of the Fund for the year ended November 30, 1996 and for the period
ended November 30, 1995 were audited by other auditors whose report, dated
January 14, 1997, expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1999, by correspondence with the Fund's custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Treasury Obligations Portfolio of The Milestone Funds, as of November 30, 1999,
the results of its operations, the changes in its net assets and the financial
highlights for the respective stated periods, in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
New York, New York
December 30, 1999
17
<PAGE>
<PAGE>
<PAGE>
----------------
THE
MILESTONE
FUNDS
----------------
Adviser
- --------------------------------------------------------------------------------
Milestone Capital Management, L.P.
One Executive Boulevard
Yonkers, NY 10701
Underwriter / Transfer Agent
- --------------------------------------------------------------------------------
Unified Management Corp. / Unified Fund Services, Inc.
431 North Pennsylvania Street
Indianapolis, Indiana 46204-1806
800-363-7660
Primary Dealer
- --------------------------------------------------------------------------------
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167
Administrator / Custodian
- --------------------------------------------------------------------------------
The Bank of New York
90 Washington Street
New York, NY 10286
Legal Counsel
- --------------------------------------------------------------------------------
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
Independent Auditors
- --------------------------------------------------------------------------------
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1434
This report is authorized for distribution
only to current shareholders and to others
who have received a copy of The Milestone Funds prospectus.
The Milestone Funds
One Executive Boulevard, Yonkers, New York 10701
800-941-MILE
