HIBERNIA FUNDS

497 1 form.htm HIBERNIA FUNDS

PROSPECTUS

DECEMBER 31, 2002

[Logo of Hibernia Funds]

Hibernia Capital Appreciation Fund

Class A Shares

Class B Shares

Hibernia Louisiana Municipal Income Fund

Class A Shares

Class B Shares

Hibernia Mid Cap Equity Fund

Class A Shares

Class B Shares

Hibernia Total Return Bond Fund

Hibernia U.S. Government Income Fund

Hibernia Cash Reserve Fund

Class A Shares

Class B Shares

Hibernia U.S. Treasury Money Market Fund

PROSPECTUS

HIBERNIA FUNDS

Equity and Income Funds

HIBERNIA CAPITAL APPRECIATION FUND–CLASS A SHARES AND CLASS B SHARES

HIBERNIA LOUISIANA MUNICIPAL INCOME FUND–CLASS A SHARES AND CLASS B SHARES

HIBERNIA MID CAP EQUITY FUND–CLASS A SHARES AND CLASS B SHARES

HIBERNIA TOTAL RETURN BOND FUND

HIBERNIA U.S. GOVERNMENT INCOME FUND

Money Market Funds

HIBERNIA CASH RESERVE FUND—CLASS A SHARES AND CLASS B SHARES

HIBERNIA U.S. TREASURY MONEY MARKET FUND

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

CONTENTS

Fund Goals, Strategies, Performance and Risks		1
Principal Risks of Investing in a Fund		17
What are the Equity and Income Funds’ Fees and Expenses?		18
What are the Money Market Funds’ Fees and Expenses?		20
Principal Securities in Which the Funds Invest		22
What are the Specific Risks of Investing in a Fund?		26
What do Shares Cost?		29
How are the Funds Sold?		32
How to Purchase Shares		33
How to Redeem and Exchange Shares		34
Account and Share Information		36
Who Manages the Funds?		37
Financial Information		39

NOT FDIC INSURED

MAY LOSE VALUE

NO BANK GUARANTEE

DECEMBER 31, 2002

FUND GOALS, STRATEGIES, PERFORMANCE AND RISKS

Hibernia Funds offer seven portfolios, including two equity funds, three income funds and two money market funds. The following describes the investment goals, strategies and principal risks of each Fund.

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

1	HIBERNIA FUNDS

HIBERNIA CAPITAL APPRECIATION FUND

Goal

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

Strategy

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

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

Principal Risks

The value of equity securities in the Fund’s portfolio will rise and fall. These fluctuations could be a sustained trend or a drastic movement. The Fund’s portfolio will reflect changes in prices of individual portfolio stocks or general changes in stock valuations. Consequently, the Fund’s Share price may decline. The Adviser attempts to manage market risk by limiting the amount the Fund invests in each company’s equity securities. However, diversification will not protect the Fund against widespread or prolonged declines in the stock market. Other principal risks of investing in the Fund include the risks related to investing for growth; the risks posed by the fact that growth stocks in particular may experience a larger decline on a forecast of lower earnings, a negative fundamental development or an adverse market development.

Risk/Return Bar Chart and Table

The performance information shown below will help you analyze the Fund’s investment risks in light of its historical returns. The bar chart shows the variability of the Fund’s Class A Shares total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund’s performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

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

The Fund’s Class A Shares total return for the nine-month period from January 1, 2002 to September 30, 2002 was (26.54)%.

Within the period shown in the bar chart, the Fund’s Class A Shares highest quarterly return was 23.22% (quarter ended December 31, 1998). Its lowest quarterly return was (14.13)% (quarter ended September 30, 2001).

HIBERNIA FUNDS

Average Annual Total Return Table

The Average Annual Total Returns for the Fund’s Class A Shares are reduced to reflect applicable sales charges. Return Before Taxes is shown for all classes. In addition, Return After Taxes is shown for Class A Shares to illustrate the effect of federal taxes on Fund returns. Actual after tax returns depend on each investor’s personal tax situation, and are likely to differ from those shown. The table also shows returns for the Standard & Poor’s 500 Index (S&P 500), a broad-based market index. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund’s performance. The index is unmanaged, and it is not possible to invest directly in an index.

(For the periods ended December 31, 2001)

Class A	1 Year	5 Years	10 Years	Start of Performance¹

Return Before Taxes	(14.76)%	9.51%	11.54%	N/A

Return After Taxes on Distributions²	(15.53)%	7.43%	9.03%	N/A

Return After Taxes on Distributions and Sale of Fund Shares²	(8.28)%	7.46%	8.75%	N/A

Class B

Return Before Taxes	(16.09)%	9.43%	N/A	8.92%

S&P 500	(11.88)%	10.70%	12.93%	N/A

The Fund’s Class B Shares start of performance date was December 2, 1996.

After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. After-tax returns are not relevant to investors holding Shares through tax-deferred programs, such as IRA or 401(k) plans.

3	HIBERNIA FUNDS

HIBERNIA LOUISIANA MUNICIPAL INCOME FUND

Goal

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

Strategy

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

As a matter of investment policy which may be changed without shareholder approval, at least 80% of the Fund’s total assets will be invested in Louisiana municipal securities.

Principal Risks

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

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

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

HIBERNIA FUNDS

Risk/Return Bar Chart and Table

The performance information shown below will help you analyze the Fund’s investment risks in light of its historical returns. The bar chart shows the variability of the Fund’s Class A Shares total returns on a calendar year-by- year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund’s performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

The Fund’s Class A Shares total return for the nine-month period from January 1, 2002 to September 30, 2002 was 8.67%.

Within the period shown in the bar chart, the Fund’s Class A Shares highest quarterly return was 6.51% (quarter ended March 31, 1995). Its lowest quarterly return was (4.86)% (quarter ended March 31, 1994).

5	HIBERNIA FUNDS

Average Annual Total Return Table

The Average Annual Total Returns for the Fund’s Class A Shares are reduced to reflect applicable sales charges. Return Before Taxes is shown for all classes. In addition, Return After Taxes is shown for Class A Shares to illustrate the effect of federal taxes on Fund returns. Actual after tax returns depend on each investor’s personal tax situation, and are likely to differ from those shown. The table also shows returns for the Lehman Brothers Ten Year Insured Bond Index (LB10I), a broad-based market index. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund’s performance. The index is unmanaged, and it is not possible to invest directly in an index.

(For the periods ended December 31, 2001)

Class A	1 Year	5 Years	10 Years	Start of Performance¹

Return Before Taxes	1.26%	4.82%	5.92%	N/A

Return After Taxes on Distributions²	1.25%	4.71%	5.79%	N/A

Return After Taxes on Distributions and Sale of Fund Shares²	2.60%	4.82%	5.78%	N/A

Class B

Return Before Taxes	N/A	N/A	N/A	(7.41)%

LB10I	4.81%	6.10%	6.66%	N/A

The Fund’s Class B Shares start of performance date was November 15, 2001.

HIBERNIA FUNDS

HIBERNIA MID CAP EQUITY FUND

Goal

The Fund’s goal is total return.

Strategy

Under normal market conditions, the Fund intends to invest at least 80% of its total assets in equity securities of companies that, at the time of acquisition, have a market value capitalization ranging from $500 million to $10 billion. The Fund attempts to select companies whose potential for capital appreciation exceeds that of larger capitalization stocks commensurate with increased risk. The Fund’s Adviser will invest primarily in equity securities of companies with above-average earnings growth prospects or in companies where significant fundamental changes are taking place. These changes could include significant new products, services, or methods of distribution; restructuring or reallocating business; or significant share price appreciation.

Principal Risks

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

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

7	HIBERNIA FUNDS

Risk/Return Bar Chart and Table

The Fund’s Class A Shares total return for the nine-month period from January 1, 2002 to September 30, 2002 was (16.59)%.

Within the period shown in the bar chart, the Fund’s Class A Shares highest quarterly return was 24.63% (quarter ended December 31, 1998). Its lowest quarterly return was (15.07)% (quarter ended September 30, 2001).

HIBERNIA FUNDS

Average Annual Total Return Table

The Average Annual Total Returns for the Fund’s Class A Shares are reduced to reflect applicable sales charges. Return Before Taxes is shown for all classes. In addition, Return After Taxes is shown for Class A Shares to illustrate the effect of federal taxes on Fund returns. Actual after tax returns depend on each investor’s personal tax situation, and are likely to differ from those shown. The table also shows returns for the Standard & Poor’s 400 Mid Cap Index (S&P 400), a broad-based market index. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund’s performance. The index is unmanaged, and it is not possible to invest directly in an index.

(For the periods ended December 31, 2001)

Class A²	1 Year	Start of Performance¹

Return Before Taxes	(11.86)%	8.90%

Return After Taxes on Distributions³	(11.97)%	8.31%

Return After Taxes on Distributions and Sale of Fund Shares³	(7.13)%	7.28%

Class B

Return Before Taxes	(13.48)%	8.90%

S&P 400	(0.60)%	10.95%

The Fund’s Class A and Class B Shares start of performance dates were July 12, 1998 and July 13, 1998, respectively.

The Fund’s Class A Shares is the successor to a common trust fund (CTF) managed by the Advisor. At the commencement of operations for Class A Shares, the CTF’s assets were transferred to the Fund in exchange for Class A shares. The CTF was not registered under the Investment Company Act of 1940 (“1940 Act”) and is therefore not subject to the restrictions under the 1940 Act. If the CTF had been registered under the 1940 Act, return before taxes, return after taxes on distributions and return after taxes on distributions and sales of Class A Shares would have been disclosed below.

9	HIBERNIA FUNDS

HIBERNIA TOTAL RETURN BOND FUND

Goal

The Fund’s goal is to maximize total return.

Strategy

The Fund attempts to achieve its goal by investing in a diversified portfolio of investment grade U.S. government, mortgage backed, asset backed and corporate securities, as well as collateralized mortgage obligations. Under normal circumstances, the Fund will attempt to invest at least 80% of its assets in bonds. The Adviser allocates the Fund’s portfolio among business sectors and adjusts the credit quality of the portfolio by analyzing current economic and securities market conditions, particularly changes in interest rates and expected trends in corporate earnings. These factors also guide the selection of the maturity and the duration of portfolio securities. The Fund may invest in securities of any duration although generally, under normal conditions, the Fund’s average duration would tend toward the overall U.S. market average which is roughly 4.85 years at present. The Fund will attempt to achieve the capital appreciation component of total return by manipulating the duration of the portfolio, within certain parameters, in response to expected changes in interest rates.

Principal Risks

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

Risk/Return Bar Chart and Table

The performance information shown below will help you analyze the Fund’s investment risks in light of its historical returns. The bar chart shows the variability of the Fund’s total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund’s performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

The Fund’s total return for the nine-month period from January 1, 2002 to September 30, 2002 was 9.63%

Within the period shown in the bar chart, the Fund’s highest quarterly return was 6.10% (quarter ended June 30, 1995). Its lowest quarterly return was (3.16)% (quarter ended December 31, 2001).

HIBERNIA FUNDS

Average Annual Total Return Table

The Average Annual Total Returns for the Fund’s Shares are reduced to reflect applicable sales charges. Return Before Taxes is shown. In addition, Return After Taxes is shown for the Fund to illustrate the effect of federal taxes on Fund returns. Actual after tax returns depend on each investor’s personal tax situation, and are likely to differ from those shown. The table also shows returns for the Salomon Brothers Broad Investment Grade Bond Index (SBBIGBI), a broad-based market index. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund’s performance. The index is unmanaged and it is not possible to invest directly in an index.

(For the periods ended December 31, 2001)

	1 Year	5 Years	Start of Performance¹

Fund

Return Before Taxes	1.25%	4.95%	5.52%

Return After Taxes on Distributions²	(1.00)%	2.53%	3.10%

Return After Taxes on Distributions and Sale of Fund Shares²	0.76%	2.75%	3.20%

SBBIGBI	8.52%	7.44%	7.30%

The Fund’s start of performance date was November 2, 1992.

HIBERNIA U.S. GOVERNMENT INCOME FUND

Goal

The Fund’s goal is to provide current income.

Strategy

Current income includes, in general, discount earned on U.S. Treasury bills and agency discount notes, interest earned on all other U.S. government securities and mortgage-related securities, and short-term capital gains. The Fund attempts to achieve its investment objective by investing in investment grade securities which are guaranteed as to payment of principal and interest by the U.S. government or U.S. government agencies or instrumentalities. Under normal circumstances, at least 80% of the Fund’s total assets will be invested in such U.S. government securities. Under normal circumstances, the average duration of the Fund’s holdings will be 3-5 years. The Fund may also invest in corporate bonds, asset backed securities and certain privately issued mortgage-related securities, such as investment banking firms and companies related to the construction industry. The mortgage- related securities in which the Fund may invest may be: (i) privately issued securities which are collateralized by pools of mortgages in which each mortgage is guaranteed as to payment of principal and interest by an agency or instrumentality of the U.S. government; (ii) privately issued securities which are collateralized by pools of mortgages in which payment of principal and interest are guaranteed by the issuer and such guarantee is collateralized by U.S. government securities; and (iii) other privately issued securities in which the proceeds of the issuance are invested in mortgage- backed securities and payment of the principal and interest are supported by the credit of any agency or instrumentality of the U.S. government.

The mortgage-related securities provide for a periodic payment consisting of both interest and principal. The interest portion of these payments will be

11	HIBERNIA FUNDS

distributed by the Fund as income, and the capital portion will be reinvested.

Principal Risks

Risk/Return Bar Chart and Table

The Fund’s total return for the nine-month period from January 1, 2002 to September 30, 2002 was 7.76%

Within the period shown in the bar chart, the Fund’s highest quarterly return was 5.01% (quarter ended June 30, 1995). Its lowest quarterly return was (2.57)% (quarter ended March 31, 1994).

HIBERNIA FUNDS

Average Annual Total Return Table

The Average Annual Total Returns for the Fund’s Shares are reduced to reflect applicable sales charges. Return Before Taxes is shown. In addition, Return After Taxes is shown for the Fund to illustrate the effect of federal taxes on Fund returns. Actual after tax returns depend on each investor’s personal tax situation, and are likely to differ from those shown. The table also shows returns for the Salomon Brothers Medium Term Broad Index (SBMTBI), a broad-based market index. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund’s performance. The index is unmanaged and it is not possible to invest directly in an index.

(For the periods ended December 31, 2001)

	1 Year	5 Years	10 Years

Fund

Return Before Taxes	3.78%	5.87%	5.70%

Return After Taxes on Distributions¹	1.48%	3.45%	3.12%

Return After Taxes on Distributions and Sale of Fund Shares¹	2.26%	3.46%	3.24%

SBMTBI	8.73%	7.27%	6.97%

After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. After-tax returns are not relevant to investors holding Shares through tax-deferred programs, such as IRA or 401(k) plans.

HIBERNIA CASH RESERVE FUND

Goal

The Fund is a money market fund which seeks to maintain a stable net asset value (NAV) of $1.00 per Share. The Fund’s goal is current income consistent with stability of principal.

Strategy

The Fund’s portfolio consists of high quality money market instruments maturing in 397 days or less. As a matter of policy, which cannot be changed without shareholder approval, the average maturity of the securities in the Fund’s portfolio, computed on a dollar- weighted basis, will be 120 days or less. As a matter of operating policy, which may be changed without shareholder approval, the Fund will limit the average maturity of its portfolio to 90 days or less, in order to meet regulatory requirements. The Fund invests in high quality money market instruments that are either rated in the highest short-term rating category by one or more nationally recognized statistical rating organizations (NRSROs) or are of comparable quality to securities having such ratings. The Fund invests only in instruments denominated and payable in U.S. dollars.

Principal Risks

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

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

13	HIBERNIA FUNDS

Risk/Return Bar Chart and Table

Historically, the Fund has maintained a constant $1.00 NAV per Share. The bar chart shows the variability of the Fund’s Class A Shares total returns on a calendar year-end basis.

The Fund’s Class A Shares are sold without a sales charge (load). The total returns displayed above are based upon NAV.

The Fund’s Class A Shares total return for the nine-month period from January 1, 2002 to September 30, 2002 was 0.79%.

Within the period shown in the bar chart, the Fund’s Class A Shares highest quarterly return was 1.41% (quarter ended December 31, 2000). Its lowest quarterly return was 0.38% (quarter ended December 31, 2001).

Average Annual Total Return Table

The following table represents the Fund’s Average Annual Total Returns for the calendar periods ended December 31, 2001.

	1 Year	5 Years	10 Years	Start of Performance¹

Class A	3.35%	4.51%	4.12%	N/A

Class B	(2.93)%	N/A	N/A	2.73%

The Fund’s Class B Shares start of performance date was September 4, 1998.

The Fund’s Class A Shares and Class B Shares 7-Day Net Yield as of August 31, 2002, were 1.23% and 0.98%, respectively. You may call the Fund at 1-800-263-1078 for the current 7-Day Net Yield.

Past performance is no guarantee of future results. This information provides you with historical performance information so that you can analyze whether the Fund’s investment risks are balanced by its potential returns.

HIBERNIA FUNDS

HIBERNIA U.S. TREASURY MONEY MARKET FUND

Goal

The Fund is a money market fund which seeks to maintain a stable NAV of $1.00 per Share. The Fund’s goal is current income consistent with stability of principal and liquidity.

Strategy

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

Principal Risks

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

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

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

Risk/Return Bar Chart and Table

Historically, the Fund has maintained a constant $1.00 NAV per Share. The bar chart shows the variability of the Fund’s total returns on a calendar year-end basis.

The Fund’s Shares are sold without a sales charge (load). The total returns displayed above are based upon NAV.

The Fund’s total return for the nine-month period from January 1, 2002 to September 30, 2002 was 0.83%.

Within the period shown in the bar chart, the Fund’s highest quarterly return was 1.45% (quarters ended September 30, 2000 and December 31, 2000). Its lowest quarterly return was 0.43% (quarter ended December 31, 2001).

15	HIBERNIA FUNDS

Average Annual Total Return Table

The following table represents the Fund’s Average Annual Total Returns for calender periods ended December 31, 2001.

Calendar Period		Fund

1 Year		3.36%

5 Years		4.56%

Start of Performance¹		4.48%

The Fund’s start of performance date was July 16, 1993.

The Fund’s 7-Day Net Yield as of August 31, 2002 was 1.10%. You may call the Fund at 1-800-263-1078 for the current 7-Day Net Yield.

HIBERNIA FUNDS

PRINCIPAL RISKS OF INVESTING IN A FUND

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

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

Capital

Appreciation

Fund

Louisiana

Municipal

Income

Fund

Mid Cap

Equity

Fund

Total Return

Bond Fund

U.S.

Government

Income

Fund

Cash

Reserve

Fund

U.S.

Treasury

Money

Market

Fund

Stock Market Risk¹

Sector Risk²

Liquidity Risk³

Investing for Growth⁴

Company Size Risk⁵

Credit Risks⁶

Interest Rate Risk⁷

Prepayment Risk⁸

Call Risk⁹

Tax Risks¹⁰

Risks of Investing in Louisiana¹¹

The value of equity securities rise and fall.

Because issuers or companies providing credit enhancement with regard to a Fund’s securities may be concentrated in certain industry sectors, the creditworthiness of the Fund’s securities may be adversely affected by developments which adversely affect such sectors.

Limited trading opportunities for certain securities and the inability to sell a security at will could result in losses to a Fund.

Growth stocks in particular may experience a larger decline on a forecast of lower earnings, a negative fundamental development or an adverse market development.

The smaller the capitalization of a company, the less liquid its stock and the more volatile its price. Companies with smaller market capitalizations also tend to have unproven track records and are more likely to fail than companies with larger market capitalizations.

The possibility that an issuer will default on a security by failing to pay interest or principal when due.

Prices of fixed income securities rise and fall in response to interest rate changes.

When interest rates decline, unscheduled prepayments of principal could accelerate and require the Fund to reinvest the proceeds of the prepayments at lower interest rates.

A Fund’s performance may be adversely affected by the possibility that an issuer of a security held by a Fund may redeem the security prior to maturity at a price below its current market value.

Any failure of municipal securities invested in by a Fund to meet certain applicable legal requirements, or any proposed or actual changes in the federal or a state’s tax law, could adversely affect shareholders of a Fund.

Any economic, political, or regulatory developments affecting the value of the securities in the Fund’s portfolio could have a greater impact on the total value of the portfolio than would be the case if the portfolio were diversified among more issuers. The Louisiana economy is heavily dependent upon energy prices, both oil and gas. Any adverse economic conditions or developments affecting the state of Louisiana or its municipalities could impact the Fund’s portfolio. Investing in Louisiana municipal securities which meet the Fund’s quality standards may not be possible if the state of Louisiana and its municipalities do not maintain their current credit ratings.

17	HIBERNIA FUNDS

WHAT ARE THE EQUITY AND INCOME FUNDS’ FEES AND EXPENSES?

EQUITY AND INCOME FUNDS

FEES AND EXPENSES

Capital Appreciation Fund
Class A Shares

Capital Appreciation Fund
Class B Shares

Louisiana Municipal Income Fund Class A Shares

Louisiana Municipal Income Fund Class B Shares

Mid Cap Equity Fund Class A Shares

Mid Cap Equity Fund Class B Shares

Total Return Bond Fund

U.S. Government Income Fund

Shareholder Transaction Expenses

Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)

4.50%

None

3.00%

None

4.50%

None

3.00%

Maximum Sales Charge (Load) Imposed on Reinvested Dividends (as a percentage of offering price)

None

Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable)

None

5.50%¹

None

5.50%¹

None

5.50%¹

None

Redemption Fee (as a percentage of amount redeemed, if applicable)

None

Exchange Fee

None

Annual Fund Operating Expenses (Before Waivers)²

(As a percentage of average net assets)

Management Fee³

0.75%

0.45%

0.75%

0.70%

0.45%

Distribution (12b-1 Fee)⁴

0.25%

0.75%

0.25%

0.75%

0.25%

0.75%

0.25%

Shareholder Services Fee

None

0.25%

None

0.25%

None

0.25%

None

Other Expenses

0.23%

0.34%

0.37%

0.57%

0.36%

0.30%

Total Annual Fund Operating Expenses

1.23%

1.98%⁵

1.04%

1.82%⁵

1.57%

2.32%⁵

1.31%

1.00%

The contingent deferred sales charge is 5.50% in the first year, declining to 1.00% in the sixth year and then 0.00% thereafter. See “What Shares Cost—Sales Charge When You Redeem.”

Although not contractually obligated to do so, the Adviser and distributor waived certain amounts. These are shown below along with the net expenses the Funds actually paid for the fiscal year ended August 31, 2002.

Total Waiver of Fund Expenses		0.00%		0.00%		0.33%		0.23%		0.00%		0.00%		0.30%		0.31%
Total Actual Annual Fund Operating Expenses (after waivers)		1.23%		1.98%		0.71%		1.59%		1.57%		2.32%		1.01%		0.69%

The Adviser voluntarily waived a portion of the management fee of Louisiana Municipal Income Fund, Total Return Bond Fund and U.S. Government Income Fund. The voluntary waiver can be terminated at any time. The management fee paid by Louisiana Municipal Income Fund, Total Return Bond Fund and U.S. Government Income Fund (after voluntary reduction) was 0.22%, 0.40%, and 0.24%, respectively, for the fiscal year ended August 31, 2002.

The distribution (12b-1) fee for Louisiana Municipal Income Fund Class A Shares and U.S. Government Income Fund has been voluntarily reduced. This voluntary reduction can be terminated at any time. The distribution (12b-1) fee paid by the Louisiana Municipal Income Fund Class A Shares and U.S. Government Income Fund (after voluntary reduction) was 0.15% for both Funds for the year ended August 31, 2002.

After Class B Shares have been held for eight years from the date of purchase, they will automatically convert to Class A Shares on or about the 15th of the following month. Class A Shares incur lower operating expenses than Class B Shares.

HIBERNIA FUNDS

EXAMPLE

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

	1 Year	3 Years	5 Years	10 Years

Expenses assuming redemption

Capital Appreciation Fund—Class A Shares	$570	$823	$1,095	$1,872

Capital Appreciation Fund—Class B Shares	$751	$1,021	$1,268	$2,113

Louisiana Municipal Income Fund— Class A Shares	$403	$621	$857	$1,533

Louisiana Municipal Income Fund— Class B Shares	$735	$973	$1,185	$1,933

Mid Cap Equity Fund—Class A Shares	$603	$923	$1,267	$2,233

Mid Cap Equity Fund—Class B Shares	$785	$1,124	$1,440	$2,468

Total Return Bond Fund	$429	$703	$997	$1,832

U.S. Government Income Fund	$399	$609	$836	$1,488

Expenses assuming no redemption

Capital Appreciation Fund—Class B Shares	$201	$621	$1,068	$2,113

Louisiana Municipal Income Fund— Class B Shares	$185	$573	$985	$1,933

Mid Cap Equity Fund—Class B Shares	$235	$724	$1,240	$2,468

19	HIBERNIA FUNDS

WHAT ARE THE MONEY MARKET FUNDS’ FEES AND EXPENSES?

MONEY MARKET FUNDS

FEES AND EXPENSES

	Cash Reserve Fund Class A Shares	Cash Reserve Fund Class B Shares	US Treasury Money Market Fund


Shareholder Transaction Expenses

Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)	None	None	None

Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)	None	None	None

Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable)	None	5.50%¹	None

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

Exchange Fee	None	None	None

Annual Fund Operating Expenses (Before Waivers)²

(As percentage of average net assets)

Management Fees³	0.40%	0.40%	0.40%

Distribution (12b-1 fee)⁴	0.25%	0.75%	0.25%

Shareholder Services Fee	None	0.25%	None

Other Expenses	0.25%	0.25%	0.22%

Total Annual Fund Operating Expenses	0.90%	1.65%⁵	0.87%

The contingent deferred sales charge is 5.50% in the first year, declining to 1.00% in the sixth year and then 0.00% thereafter. See “What do Shares Cost—Sales Charge When You Redeem.”

Although not contractually obligated to do so, the adviser and distributor waived certain amounts. These are shown below along with the net expenses the Funds actually paid for the fiscal year ended August 31, 2002.

Total Waiver of Fund Expenses		0.06%		0.35%		0.25%
Total Actual Annual Fund Operating Expenses (after waivers)		0.84%		1.30%		0.62%

The Adviser voluntarily waived a portion of the management fee of Cash Reserve Fund. The voluntary waiver can be terminated at any time. The management fee paid by Cash Reserve Fund (after the voluntary reduction) was 0.36% for the fiscal year ended August 31, 2002.

The distribution (12b-1) fee for Cash Reserve Fund’s Class A Shares and Class B Shares has been voluntarily reduced. This voluntary reduction can be terminated at any time. The distribution (12b-1) fee paid by Cash Reserve Fund’s Class A Shares and Class B Shares (after the voluntary reduction) were 0.23% and 0.44%, respectively. Under Rule 12b-1 distribution plans, U.S. Treasury Money Market Fund can pay the distributor up to 0.25% as a 12b-1 fee. The U.S. Treasury Money Market Fund did not pay or accrue the distribution (12b-1) fee during the fiscal year ended August 31, 2002. The U.S. Treasury Money Market Fund has no present intention of paying or accruing the distribution (12b-1) fee for the fiscal year ending August 31, 2003.

HIBERNIA FUNDS

EXAMPLE

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

	1 Year		3 Years		5 Years		10 Years

Expenses assuming redemption

Cash Reserve Fund— Class A Shares	$	92	$	287	$	498	$	1,108

Cash Reserve Fund— Class B Shares	$	718	$	920	$	1,097	$	1,754

U.S. Treasury Money Market Fund	$	89	$	278	$	482	$	1,073

Expenses assuming no redemption
Cash Reserve Fund— Class B Shares	$	168	$	520	$	897	$	1,754

21	HIBERNIA FUNDS

PRINCIPAL SECURITIES IN WHICH THE FUNDS INVEST

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

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

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

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

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

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

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

EQUITY SECURITIES

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

Common Stocks

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

FIXED INCOME SECURITIES

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

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

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

Treasury Securities

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

Agency Securities

Agency securities are issued or guaranteed by a federal agency or other government sponsored entity acting under federal authority (a GSE). The United States supports some GSEs with its full faith and credit. Other

HIBERNIA FUNDS

GSEs receive support through federal subsidies, loans or other benefits. A few GSEs have no explicit financial support, but are regarded as having implied support because the federal government sponsors their activities. Agency securities are generally regarded as having low credit risks, but not as low as treasury securities.

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

CORPORATE DEBT SECURITIES

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

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

COMMERCIAL PAPER

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

Demand Instruments

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

MORTGAGE BACKED SECURITIES

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

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

Collateralized Mortgage Obligations (CMOs)

23	HIBERNIA FUNDS

backed securities. This creates different prepayment and interest rate risks for each CMO class.

Asset Backed Securities

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

TAX EXEMPT SECURITIES

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

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

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

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

General Obligation Bonds

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

Special Revenue Bonds

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

SPECIAL TRANSACTIONS

Repurchase Agreements

Repurchase agreements are transactions in which a Fund buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price exceeds the sale price, reflecting the Fund’s return on the transaction. This return is unrelated to the interest rate on the underlying security. The Funds will enter into repurchase

HIBERNIA FUNDS

agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the Adviser.

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

Repurchase agreements are subject to credit risks.

Temporary Defensive Investments

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

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

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

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

repurchase agreements; and

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

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

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

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

INVESTMENT RATINGS

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

25	HIBERNIA FUNDS

security is comparable to investment grade. The U.S. Government Income Fund may invest in corporate bonds rated A or better by S&P, Moody’s or Fitch. The Louisiana Municipal Income Fund and Total Return Bond Fund each invest in securities rated Baa or better by Moody’s or BBB or better by S&P or Fitch.

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

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

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

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

INDUSTRY CONCENTRATION

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

PORTFOLIO TURNOVER

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

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN A FUND?

STOCK MARKET RISKS

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

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

SECTOR RISKS

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

HIBERNIA FUNDS

LIQUIDITY RISKS

Trading opportunities are more limited for equity securities that are not widely held. This may make it more difficult to sell or buy a security at a favorable price or time. Consequently, a Fund may have to accept a lower price to sell a security, sell other securities to raise cash or give up an investment opportunity, any of which could have a negative effect on the Fund’s performance. Infrequent trading of securities may also lead to an increase in their price volatility.

RISKS RELATED TO INVESTING FOR GROWTH

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

RISKS RELATED TO COMPANY SIZE

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

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

INTEREST RATE RISKS

CREDIT RISKS

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

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

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

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

27	HIBERNIA FUNDS

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

PREPAYMENT RISKS

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

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

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

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

CALL RISKS

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

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

TAX RISKS

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

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

RISKS OF INVESTING IN LOUISIANA MUNICIPAL INCOME FUND

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

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

HIBERNIA FUNDS

and its municipalities do not maintain their current credit ratings.

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

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

Non-diversification

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

WHAT DO SHARES COST?

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

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

The Louisiana Municipal Income Fund, Total Return Bond Fund and U.S. Government Income Fund generally value fixed income securities according to the mean between bid and asked prices as furnished by an independent pricing service, except that fixed income securities with remaining maturities of less than 60 days at the time of purchase may be valued at amortized cost.

The Cash Reserve Fund and U.S. Treasury Money Market Fund (the Money Market Funds) attempt to stabilize the NAV of their Shares at $1.00 by valuing the portfolio securities using the amortized cost method. The Funds cannot guarantee that their NAV will always re -

29	HIBERNIA FUNDS

main at $1.00 per Share. The Money Market Funds do not charge a front-end sales charge. NAV of the Money Market Funds is determined at 11:00 a.m. (Central time) and as of the end of regular trading (normally 3:00 p.m. Central time) each day the NYSE is open.

Each of the Funds reserve the ability to modify, in response to and for the duration of any extraordinary circumstances, when the Funds will be open for purchase, exchange and redemption transactions and when the Funds will calculate NAV.

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

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

SALES CHARGE WHEN YOU PURCHASE

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

Purchase Amount	Sales Charge as a Percentage of Public Offering Price	Sales Charge as a Percentage of NAV

$0 - $99,999	4.50%	4.71%

$100,000 - $249,000	3.75%	3.90%

$250,000 - $499,000	2.50%	2.56%

$500,000 - $999,999	2.00%	2.04%

$1,000,000 +	0.00%*	0.00%

* For transactions in excess of $1,000,000, a commission may be paid. If such a commission has been paid, the shareholder will be charged a 1% contingent deferred sales charge on any redemptions within 24 months of such purchase.

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

Purchase Amount	Sales Charge as a Percentage of Public Offering Price	Sales Charge as a Percentage of NAV

$0 - $99,999	3.00%	3.09%

$100,000 - $249,000	2.75%	2.83%

$250,000 - $499,000	2.50%	2.56%

$500,000—$999,999	2.00%	2.04%

$1,000,000 +	0.00%*	0.00%

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

The sales charge at purchase may be reduced or eliminated by:

purchasing Shares in greater quantities to reduce the applicable sales charge;

combining concurrent purchases of Shares:

–

by you, your spouse, and your children under age 21; or

–

of the same share class of two or more Funds (other than Money Market Funds);

accumulating purchases (in calculating the sales charge on an additional purchase, include the current value of previous Share purchases still invested in a Fund); or

signing a letter of intent to purchase a specific dollar amount of Shares within 13 months (call your investment professional or the Fund for more information).

A Fund may also permit purchases without a sales charge from time to time, at its own discretion.

HIBERNIA FUNDS

The sales charge will be eliminated when you purchase Shares:

within 30 days (within 120 days for IRA accounts) of redeeming Shares of an equal or greater amount of the same share class;

by exchanging shares from the same share class of another Fund (other than a Money Market Fund);

through wrap accounts or other investment programs where you pay the investment professional directly for services;

through investment professionals that receive no portion of the sales charge;

as a Trustee or employee of the Funds, the Adviser, the Distributor and their affiliates, and the immediate family members of these individuals; or

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

of any Class A Shares in excess of $ 1,000,000.*

SALES CHARGE WHEN YOU REDEEM

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

Class B Shares of Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity Fund and Cash Reserve Fund

Shares Held Up To		CDSC

1 year		5.50%

2 years		4.50%

3 years		4.00%

4 years		3.00%

5 years		2.00%

6 years		1.00%

7 years or more		0.00%

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

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

purchased with reinvested dividends or capital gains;

purchased within 30 days (120 days for an IRA account) of redeeming Shares of an equal or lesser amount;

that you exchanged into the same share class of another Hibernia Fund if the shares were held for the applicable CDSC holding period (other than a money market fund);

purchased through investment professionals who did not receive advanced sales payments;

if, after you purchase Shares, you become disabled as defined by the IRS;

if a Fund redeems your Shares and closes your account for not meeting the minimum balance requirement;

if your redemption is a required retirement plan distribution; or

upon the death of the last surviving shareholder of the account. The beneficiary on an account with a Transfer on Death registration is deemed the last surviving shareholder of the account.

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

Shares acquired through the reinvestment of dividends and long-term capital gains;

Shares held for more than six full years from the date of purchase; and

Shares held for fewer than seven years on a first-in, first-out basis.

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

CONVERSION FEATURE

Class B Shares include all Class B Shares which have been outstanding for less than the period ending eight years after the end of the month in which the share -

31	HIBERNIA FUNDS

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

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

HOW ARE THE FUNDS SOLD?

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

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

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

RULE 12b-1 PLAN

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

The Distributor may be paid a fee in an amount computed at an annual rate of up to 0.25% for Class A Shares of the Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity Fund and Cash Reserve Fund, up to 0.25% for Shares of the Total Return Bond Fund, U.S. Government Income Fund and the U.S. Treasury Money Market Fund and up to 0.75% for Class B Shares of the Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity Fund and Cash Reserve Fund of the average daily net assets of each class of Shares to finance

HIBERNIA FUNDS

any activity which is principally intended to result in the sale of Shares subject to the Distribution Plan.

HOW TO PURCHASE SHARES

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

THROUGH HILLC

You may call HILLC toll-free at 1-800-999-0426 to purchase Shares of all the Funds. Texas residents may purchase Shares only through HILLC.

Purchase orders for the Funds (except the Money Market Funds) are considered received when the appropriate Fund or its agent is notified of the purchase order. Purchase orders must be received by HNB or HILLC before 3:00 p.m. (Central time) and must be transmitted by HNB or HILLC to the appropriate Fund or its agent before 4:00 p.m. (Central time) in order for Shares to be purchased at that day’s public offering price.

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

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

Federal funds should be wired as follows:

Hibernia National Bank,

New Orleans, Louisiana

All requests must include:

Shareholder Name;

Fund Name and Share Class;

Title or name of account;

and Wire Order Number.

Shares cannot be purchased by wire on holidays or when the Federal Reserve is closed. On days in which the NYSE is open and the Federal Reserve is closed, transactions in the Money Market Funds are restricted. Money movement cannot occur when the Federal Reserve is closed.

THROUGH A BROKER/DEALER

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

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

SYSTEMATIC INVESTMENT PROGRAM

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

33	HIBERNIA FUNDS

HOW TO REDEEM AND EXCHANGE SHARES

You should redeem or exchange Shares:

directly from HNB or HILLC if you purchased Shares directly from one of them; or

through an investment professional if you purchased Shares through an investment professional.

DIRECTLY FROM HILLC

By Telephone

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

Equity and Income Funds

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

Money Market Funds

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

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

By Mail

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

Equity and Income Funds

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

Money Market Funds

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

Send requests by mail to:

HILLC

313 Carondelet Street

New Orleans, Louisiana 70130

All requests must include:

Shareholder Name;

Fund Name and Share Class, account number and account registration;

amount to be redeemed or exchanged;

signatures of all shareholders exactly as registered; and

if exchanging, the Fund Name and Share Class, account number and account registration into which you are exchanging.

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

THROUGH AN INVESTMENT PROFESSIONAL

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

HIBERNIA FUNDS

Signature Guarantees

Signatures must be guaranteed if:

your redemption will be sent to an address other than the address of record;

your redemption will be sent to an address of record that was changed within the last 30 days;

a redemption is payable to someone other than the shareholder(s) of record; or

if exchanging (transferring) into another fund with a different shareholder registration.

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

PAYMENT METHODS FOR REDEMPTIONS

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

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

to allow your purchase to clear;

during periods of market volatility; or

when a shareholder’s trade activity or amount adversely impacts a Fund’s ability to manage its assets.

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

REDEMPTIONS FROM RETIREMENT ACCOUNTS

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

EXCHANGE PRIVILEGE

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

To do this, you must:

ensure that the account registrations are identical;

you must exchange Shares having an NAV of at least $1,000; and

receive a prospectus for the Fund into which you wish to exchange.

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

An exchange of Class B Shares for Class B Shares of another Hibernia Fund will not be subject to a CDSC. However, if the shareholder redeems the exchanged for Shares within six years of the original purchase of Class B Shares, a CDSC will be imposed. For purposes of computing the CDSC, the length of time the share -

35	HIBERNIA FUNDS

holder has owned Class B Shares will be measured from the date of original purchase and will not be affected by the exchange.

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

SYSTEMATIC WITHDRAWAL PROGRAM (SWP)

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

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

Systematic Withdrawal Program On Class B Shares

You will not be charged a CDSC on SWP redemptions if:

you redeem 12% or less of your account value in a single year;

you reinvest all dividends and capital gains distributions; and

your account has at least a $10,000 balance when you establish the SWP (You cannot aggregate multiple Class B Share accounts to meet this minimum balance.)

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

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

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

ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND ACCOUNT STATEMENTS

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

DIVIDENDS AND CAPITAL GAINS

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

HIBERNIA FUNDS

a dividend. The Money Market Funds declare any dividends daily and pay them monthly to shareholders.

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

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

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

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

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

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

Fund		Distributions are expected to be primarily

Capital Appreciation Fund		Capital Gains

Mid Cap Equity Fund		Capital Gains

Total Return Bond Fund		Dividends

U.S. Government Income Fund		Dividends

Cash Reserve Fund		Dividends

U.S. Treasury Money Market Fund		Dividends

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

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

WHO MANAGES THE FUNDS?

The Board of Trustees governs the Funds. The Board selects and oversees the Adviser, HNB. The Adviser manages the Funds’ assets, including buying and selling

37	HIBERNIA FUNDS

portfolio securities. The Adviser’s address is Hibernia National Bank, Attn: Hibernia Funds, P.O. Box 61540, New Orleans, Louisiana 70161.

HNB, a national bank organized in 1890, is a wholly owned subsidiary of Hibernia Corporation (“Hibernia”). HNB has acted as investment adviser to the Trust since its inception in 1988. In 2000, HNB established a separately identifiable division, Hibernia Asset Management (“HAM”), through which all of its investment advisory services are conducted. HAM is an investment adviser registered under The Investment Adviser’s Act of 1940. Through its subsidiaries and affiliates, Hibernia offers a full range of financial services to the public, including commercial lending, depository services, cash management, retail banking, mortgage banking, discount brokerage, investment counseling, international banking, and trust services.

Hibernia is the largest publicly traded national banking company headquartered in Louisiana, Texas, Oklahoma, Arkansas or Mississippi. Hibernia is a $16.7-billion-asset organization with 263 banking locations in 34 Louisiana parishes and 16 Texas counties. It is either first, second or third in deposit market share in 31 Louisiana parishes and seven Texas counties. Hibernia’s Louisiana markets represent approximately 82% of the state’s population and 86% of its deposits. Its statewide Louisiana deposit share is 23.3%. As of December 31, 2002, the Private Client Group of HNB had approximately $9 billion under administration of which it had investment discretion over $4 billion. As part of their regular banking operations, HNB may make loans to public companies. Thus, it may be possible, from time to time, for a Fund to hold or acquire the securities of issuers which are also lending clients of HNB. The lending relationship will not be a factor in the selection of securities.

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

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

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

ADVISORY FEES

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

HIBERNIA FUNDS

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

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

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

39	HIBERNIA FUNDS

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HIBERNIA FUNDS FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Year Ended August 31,	Net Asset Value, Beginning of Period	Net Investment Income (Loss)	Net Realized and Unrealized Gain/(Loss) on Investments	Total from Investment Operations	Distributions from Net Investment Income	Distributions from Net Realized Gain on Investments	Distributions in Excess of Net Investment Income

Capital Appreciation Fund—Class A Shares
1998	$22.38	0.08	1.09	1.17	(0.07)	(2.34)	—
1999	$21.14	0.01	7.73	7.74	(0.00)⁽³⁾	(2.79)	(0.02)⁽⁴⁾
2000	$26.07	(0.01)	4.50	4.49	—	(3.15)	—
2001	$27.41	0.02	(6.07)	(6.05)	—	(0.52)	—
2002	$20.84	0.04	(3.44)	(3.40)	(0.02)	(0.92)	—

Capital Appreciation Fund—Class B Shares
1998	$22.32	(0.06)	1.07	1.01	—	(2.34)	—
1999	$20.99	(0.16)	7.66	7.50	—	(2.79)	—
2000	$25.70	(0.18)	4.39	4.21	—	(3.15)	—
2001	$26.76	(0.18)	(5.87)	(6.05)	—	(0.52)	—
2002	$20.19	(0.11)	(3.31)	(3.42)	—	(0.92)	—

Louisiana Municipal Income Fund—Class A Shares
1998	$11.21	0.56	0.32	0.88	(0.57)	(0.05)	(0.00)⁽³⁾⁽⁴⁾
1999	$11.47	0.54	(0.54)	0.00	(0.54)	(0.08)	—
2000	$10.85	0.56	0.09	0.65	(0.55)	(0.10)	—
2001	$10.85	0.53⁽⁵⁾	0.50	1.03	(0.53)	(0.02)	—
2002	$11.33	0.51⁽⁶⁾	0.07⁽⁶⁾	0.58	(0.51)	(0.00)⁽³⁾	—

Louisiana Municipal Income Fund—Class B Shares
2002⁽⁷⁾	$11.36	0.34⁽⁶⁾	0.05⁽⁶⁾	0.39	(0.35)	(0.00)⁽³⁾	—

Mid Cap Equity Fund—Class A Shares
1998⁽⁹⁾	$10.00	(0.01)	(1.85)	(1.86)	—	—	—
1999	$8.14	(0.05)⁽⁵⁾	3.26	3.21	—	—	—
2000	$11.35	(0.05)	4.71	4.66	—	—	—
2001	$16.01	(0.03)	(2.12)	(2.15)	—	(1.29)	—
2002	$12.57	(0.02)	(1.01)	(1.03)	—	(0.08)	—

Mid Cap Equity Fund—Class B Shares
1998⁽⁹⁾	$10.00	(0.01)	(1.86)	(1.87)	—	—	—
1999	$8.13	(0.13)⁽⁵⁾	3.29	3.16	—	—	—
2000	$11.29	(0.11)	4.63	4.52	—	—	—
2001	$15.81	(0.11)	(2.13)	(2.24)	—	(1.29)	—
2002	$12.28	0.18	(1.26)	(1.08)	—	(0.08)	—

Total Return Bond Fund
1998	$9.99	0.58	0.35	0.93	(0.58)	(0.07)	(0.00)⁽³⁾⁽⁴⁾
1999	$10.27	0.58	(0.57)	0.01	(0.57)	(0.03)	—
2000	$9.68	0.59	(0.07)	0.52	(0.58)	—	—
2001	$9.62	0.57	0.56	1.13	(0.59)	—	—
2002	$10.16	0.52^(5)(10)	—	0.52	(0.53)	—	—

(1)

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

(2)

This voluntary expense decrease is reflected in both the expense and net
investment income ratios.

(3)

Amount is less than $0.01 per share.

(4)

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

(5)

Per share information based on average shares outstanding.

(6)

Effective September 1, 2001 the Hibernia Louisiana Municipal Income Fund
adopted the provisions of the American Institute of Certified Public
Accountants (AICPA) Audit and Accounting Guide for Investment companies and
began accreting short and long term discounts on debt securities. For the
period ended August 31, 2002 this change had no effect on net investment
income per share or net realized and unrealized gain per share, but
increased the ratio of net investment income to average net assets from
4.58% to 4.59% for Class A Shares

(See Notes which are an integral part of the Financial Statements)

41	HIBERNIA FUNDS


			Ratio to Average Net Assets
Total Distributions	Net Asset Value, End of Period	Total Return⁽¹⁾	Expenses	Net Investment Income (Loss)	Expense Waiver/ Reimbursement⁽²⁾	Net Assets, End of Period (000 omitted)	Portfolio Turnover Rate


(2.41)	$21.14	5.12%	1.21%	0.32%	—	$279,778	62%
(2.81)	$26.07	38.35%	1.22%	0.03%	—	$352,876	44%
(3.15)	$27.41	18.55%	1.20%	(0.04)%	—	$380,073	8%
(0.52)	$20.84	(22.37)%	1.21%	0.07%	—	$265,817	2%
(0.94)	$16.50	(17.18)%	1.23%	0.18%	—	$217,744	3%


(2.34)	$20.99	4.36%	1.96%	(0.44)%	—	$10,840	62%
(2.79)	$25.70	37.35%	1.98%	(0.73)%	—	$18,435	44%
(3.15)	$26.76	17.65%	1.95%	(0.79)%	—	$21,159	8%
(0.52)	$20.19	(22.93)%	1.96%	(0.68)%	—	$15,245	2%
(0.92)	$15.85	(17.83)%	1.98%	(0.57)%	—	$11,849	3%


(0.62)	$11.47	8.04%	0.66%	4.94%	0.08%	$98,711	24%
(0.62)	$10.85	(0.08)%	0.66%	4.77%	0.29%	$92,702	17%
(0.65)	$10.85	6.23%	0.67%	5.20%	0.33%	$93,684	12%
(0.55)	$11.33	9.79%	0.66%	4.83%	0.33%	$98,822	9%
(0.51)	$11.40	5.32%	0.71%	4.59%⁽⁶⁾	0.33%	$84,361	10%


(0.35)	$11.40	3.60%	1.59%⁽⁸⁾	3.76%⁽⁶⁾⁽⁸⁾	0.23%⁽⁸⁾	$2,824	10%


—	$8.14	(18.60)%	1.89%⁽⁸⁾	(0.48)%⁽⁸⁾	0.20%⁽⁸⁾	$13,422	1%
—	$11.35	39.43%	1.76%	(0.44)%	0.70%	$18,283	55%
—	$16.01	41.06%	1.72%	(0.35)%	0.23%	$26,171	32%
(1.29)	$12.57	(14.05)%	1.58%	(0.21)%	0.15%	$36,985	20%
(0.08)	$11.46	(8.27)%	1.57%	(0.51)%	—	$42,545	12%


—	$8.13	(18.70)%	2.76%⁽⁸⁾	(1.22)%⁽⁸⁾	0.17%⁽⁸⁾	$567	1%
—	$11.29	38.87%	2.51%	(1.21)%	0.63%	$1,990	55%
—	$15.81	40.04%	2.47%	(1.10)%	0.23%	$4,090	32%
(1.29)	$12.28	(14.86)%	2.33%	(0.94)%	0.15%	$3,548	20%
(0.08)	$11.12	(8.87)%	2.32%	(1.26)%	—	$3,450	12%


(0.65)	$10.27	9.51%	1.08%	5.66%	0.17%	$79,957	31%
(0.60)	$9.68	(0.03)%	0.99%	5.69%	0.30%	$79,913	20%
(0.58)	$9.62	5.53%	0.98%	6.04%	0.30%	$77,909	11%
(0.59)	$10.16	12.08%	0.97%	5.79%	0.30%	$71,060	8%
(0.53)	$10.15	5.39%	1.01%	5.18%⁽¹⁰⁾	0.30%	$47,428	0%

and increased the ratio of net investment
income to average net assets from 3.75% to 3.76% for Class B Shares. Per
share, ratios and supplemental data for periods prior to September 1, 2001
have not been restated to reflect this change in presentation.

(7)

Reflects operations for the period from November 15, 2001(date of initial
public offering) to August 31, 2002.

(8)

Computed on an annualized basis.

(9)

Reflects operations for the period from July 13, 1998 (date of initial
public offering) to August 31, 1998.

(10)

Effective September 1, 2001, the Total Return Bond Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premiums on long term debt securities. The effect of this change for the fiscal year ended August 31, 2002 was to decrease net investment income per share by $0.01, increase net realized gain/loss per share by $0.01, and decrease the ratio of net investment income to average net assets from 5.34% to 5.18%. Per share, ratios and supplemental data for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation.

HIBERNIA FUNDS

HIBERNIA FUNDS FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Year Ended August 31,	Net Asset Value, Beginning of Period	Net Investment Income	Net Realized and Unrealized Gain/(Loss) on Investments	Total from Investment Operations	Distributions from Net Investment Income

U.S. Government Income Fund
1998	$9.98	0.61	0.34	0.95	(0.60)
1999	$10.33	0.57	(0.52)	0.05	(0.57)
2000	$9.81	0.58	0.03	0.61	(0.57)
2001	$9.85	0.59	0.46	1.05	(0.60)
2002	$10.30	0.61⁽³⁾	0.13⁽³⁾	0.74	(0.56)

Cash Reserve Fund—Class A Shares
1998	$1.00	0.05	—	0.05	(0.05)
1999	$1.00	0.04	—	0.04	(0.04)
2000	$1.00	0.05	—	0.05	(0.05)
2001	$1.00	0.05	—	0.05	(0.05)
2002	$1.00	0.01	(0.00)⁽⁴⁾	0.01	(0.01)

Cash Reserve Fund—Class B Shares
1999⁽⁵⁾	$1.00	0.03	—	0.03	(0.03)
2000	$1.00	0.04	—	0.04	(0.04)
2001	$1.00	0.04	—	0.04	(0.04)
2002	$1.00	0.01	(0.00)⁽⁴⁾	0.01	(0.01)

U.S. Treasury Money Market Fund
1998	$1.00	0.05	—	0.05	(0.05)
1999	$1.00	0.04	—	0.04	(0.04)
2000	$1.00	0.05	—	0.05	(0.05)
2001	$1.00	0.05	—	0.05	(0.05)
2002	$1.00	0.01	—	0.01	(0.01)

(1)

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

(2)

This voluntary expense decrease is reflected in both the expense and net investment income ratios.

(3)

Effective September 1, 2001, the U.S. Government Income Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premiums on long term debt securities. The effect of this change for the fiscal year ended August 31, 2002 was to decrease net investment income per share by $0.05, increase net realized gain/loss per share by $0.05, and decrease the ratio of net investment income to average net assets from 5.41% to 4.87%. Per share, ratios and supplemental data for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation.

(4)

Amount is less than $0.01 per share.

(5)

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

(6)

Computed on an annualized basis.

43	HIBERNIA FUNDS

		Ratio to Average Net Assets
Net Asset Value, End of Period	Total Return⁽¹⁾	Expenses	Net Investment Income	Expense Waiver/ Reimbursement⁽²⁾	Net Assets, End of Period (000 omitted)	Portfolio Turnover Rate


$10.33	9.74%	0.73%	5.98%	0.06%	$83,535	44%
$9.81	0.41%	0.70%	5.55%	0.27%	$84,242	24%
$9.85	6.47%	0.68%	5.96%	0.31%	$85,724	15%
$10.30	10.95%	0.68%	5.83%	0.31%	$85,017	27%
$10.48	7.39%	0.69%	4.87%⁽³⁾	0.31%	$85,093	39%


$1.00	4.82%	0.89%	4.72%	—	$149,219	—
$1.00	4.23%	0.92%	4.16%	—	$157,099	—
$1.00	5.10%	0.94%	5.03%	—	$232,410	—
$1.00	4.66%	0.90%	4.47%	—	$244,254	—
$1.00	1.27%	0.84%	1.28%	0.06%	$212,320	—


$1.00	3.37%	1.67%⁽⁶⁾	3.35%⁽⁶⁾	—	$77	—
$1.00	4.31%	1.69%	4.27%	—	$189	—
$1.00	3.88%	1.65%	3.34%	—	$509	—
$1.00	0.84%	1.30%	0.81%	0.35%	$696	—


$1.00	4.89%	0.63%	4.78%	—	$175,133	—
$1.00	4.23%	0.63%	4.14%	—	$213,793	—
$1.00	5.15%	0.63%	4.99%	—	$198,457	—
$1.00	4.68%	0.64%	4.56%	—	$210,102	—
$1.00	1.38%	0.62%	1.37%	—	$193,535	—

HIBERNIA FUNDS

A Statement of Additional Information (SAI) dated December 31, 2002, is incorporated by reference into this prospectus. Additional information about the Funds’ investments is contained in the Funds’ SAI, Annual and Semi-Annual Reports to shareholders as they become available. The Annual Report’s Management Discussion of Fund Performance discusses market conditions and investment strategies that significantly affected the Funds’ performance during their last fiscal year. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your investment professional or the Funds at 1-800-999-0124.

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

Hibernia Funds

5800 Corporate Drive

Pittsburgh, PA 15237-7010

www.Hiberniafunds.com

Edgewood Services, Inc., Distributor of the Funds

Investment Company Act File No. 811-5536

Cusip 428661102

Cusip 428661201

Cusip 428661508

Cusip 428661862

Cusip 428661607

Cusip 428661706

Cusip 428661805

Cusip 428661888

Cusip 428661300

Cusip 428661409

Cusip 428661870

006584 (12/02)

HIBERNIA FUNDS

Hibernia Capital Appreciation Fund

CLASS A SHARES

CLASS B SHARES

Hibernia Louisiana Municipal

Income Fund

CLASS A SHARES

CLASS B SHARES

Hibernia Mid Cap Equity Fund

CLASS A SHARES

CLASS B SHARES

Hibernia Total Return Bond Fund

Hibernia U.S. Government Income Fund

Hibernia Cash Reserve Fund

CLASS A SHARES

CLASS B SHARES

Hibernia U.S. Treasury Money

Market Fund

PORTFOLIOS OF HIBERNIA FUNDS

DECEMBER 31, 2002

[Logo of recycled paper]

PROSPECTUS

Edgewood Services, Inc., Distributor of the Funds 006584 (12/02)

Hibernia Funds
Statement of Additional Information

Hibernia Capital Appreciation Fund
Class A Shares And Class B Shares

Hibernia Louisiana Municipal Income Fund
Class A Shares And Class B Shares

Hibernia Mid Cap Equity Fund
Class A Shares And Class B Shares

Hibernia Total Return Bond Fund

Hibernia U.S. Government Income Fund

Hibernia Cash Reserve Fund
Class A Shares And Class B Shares

Hibernia U.S. Treasury Money Market Fund

(Portfolios of Hibernia Funds)

This Statement of Additional Information (SAI) is not a prospectus. Read this SAI in
conjunction with the prospectus for Hibernia Capital Appreciation Fund, Class A Shares and
Class B Shares, Hibernia Louisiana Municipal Income Fund, Class A Shares and Class B
Shares, Hibernia Mid Cap Equity Fund, Class A Shares and Class B Shares, Hibernia Total
Return Bond Fund, Hibernia U.S. Government Income Fund, Hibernia Cash Reserve Fund, Class A
Shares and Class B Shares, and Hibernia U.S. Treasury Money Market Fund (collectively, "The
Funds'') dated December 31, 2002.

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

December 31, 2002

Contents

How are the Funds Organized? 2
Securities in Which the Funds Invest 2
What do Shares Cost? 24
How are the Funds Sold? 26
Exchanging Securities for Shares 27
Cusip 428661102 Redemption in Kind 27
Cusip 428661201 Massachusetts Partnership
Cusip 428661508 Law 27
Cusip 428661862 Account and Share Information 28
Cusip 428661607 Tax Information 29
Cusip 428661706 Who Manages and Provides Services
Cusip 428661805 to the
Cusip 428661888 Funds?
Cusip 428661300 31
Cusip 428661409 How Do the Funds Measure Performance? 38
Cusip 428661870 Financial Information 45
Investment Ratings 45
006897 (12/02) Addresses
Inside Back Cover

Massachusetts Partnership
Law
27

How are the Funds Organized?

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

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

Securities In Which The Funds Invest

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

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

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

1 Cash Reserve Fund will not invest more than 25% of the value of its total assets in any
one industry except commercial paper of finance companies.

2 The Capital Appreciation Fund, Mid Cap Equity Fund and Total Return Fund will only
purchase securities issued in U.S. dollar denominations and will not invest more than 15%
of total assets in foreign securities.

3 The Capital Appreciation Fund and Mid Cap Equity Fund may utilize stock index futures
contracts, options and options on stock index futures contracts, subject to the limitation
that the value of these futures contracts and options will not exceed 20% of the Fund's
total assets. Each Fund will limit its purchase of options so that not more than 20% of its
net assets will be invested in option premiums. Each Fund will limit its option writing so
that the assets underlying such options will not exceed 25% of its total net assets.

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

5 The Funds may invest up to 10% of their respective total assets in restricted securities.
Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity Fund, Total
Return Bond Fund, and U.S. Government Income Fund will limit investments in illiquid
securities (including, as applicable, certain restricted securities not determined by the
Board to be liquid, non-negotiable time deposits, repurchase agreements providing for
settlement in more than seven days after notice, and over-the-counter options) to 15% of
their respective net assets. The Money Market Funds will limit investments in illiquid
securities to 10% of their respective net assets.

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

SECURITIES DESCRIPTIONS AND TECHNIQUES

EQUITY SECURITIES

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

Preferred Stocks

Preferred stocks have the right to receive specified dividends or distributions before the
issuer makes payments on its common stock. Some preferred stocks also participate in
dividends and distributions paid on common stock. Preferred stocks may also permit the
issuer to redeem the stock. A Fund may also treat such redeemable preferred stock as a
fixed income security.

Warrants

Warrants give a Fund the option to buy the issuer's equity securities at a specified price
(the exercise price) at a specified future date (the expiration date). The Fund may buy
the designated securities by paying the exercise price before the expiration date.
Warrants may become worthless if the price of the stock does not rise above the exercise
price by the expiration date. This increases the market risks of warrants as compared to
the underlying security. Rights are the same as warrants, except companies typically issue
rights to existing stockholders.

FIXED INCOME SECURITIES

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

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

Taxable Municipal Securities

Municipal securities are issued by states, counties, cities and other political
subdivisions and authorities. Although many municipal securities are exempt from federal
income tax, the Funds may invest in taxable municipal securities.

Mortgage Backed Securities

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

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

Collateralized Mortgage Obligations (CMOs)

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

Sequential CMOs

In a sequential pay CMO, one class of CMOs receives all principal payments and
prepayments. The next class of CMOs receives all principal payments after the first class
is paid off. This process repeats for each sequential class of CMO. As a result, each
class of sequential pay CMOs reduces the prepayment risks of subsequent classes.

The Funds will invest only in CMOs which are rated AAA by a nationally recognized
statistical rating organization (NRSRO) and which may be: (a) collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of principal and interest by
an agency or instrumentality of the U.S. government; (b) collateralized by pools of
mortgages in which payment of principal and interest is guaranteed by the issuer and such
guarantee is collateralized by U.S. government securities; or (c) securities in which the
proceeds of the issuance are invested in mortgage securities and payment of the principal
and interest are supported by the credit of an agency or instrumentality of the U.S.
government.

Z Classes and Residual Classes

CMOs must allocate all payments received from the underlying mortgages to some class. To
capture any unallocated payments, CMOs generally have an accrual (Z) class. Z classes do
not receive any payments from the underlying mortgages until all other CMO classes have
been paid off. Once this happens, holders of Z class CMOs receive all payments and
prepayments. Similarly, REMICs have residual interests that receive any mortgage payments
not allocated to another REMIC class.

The degree of increased or decreased prepayment risks depends upon the structure of the
CMOs. However, the actual returns on any type of mortgage backed security depend upon the
performance of the underlying pool of mortgages, which no one can predict and will vary
among pools.

Zero Coupon Securities

Zero coupon securities do not pay interest or principal until final maturity unlike debt
securities that provide periodic payments of interest (referred to as a coupon payment).
Investors buy zero coupon securities at a price below the amount payable at maturity. The
difference between the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to receive interest and
principal, which increases the interest rate and credit risks of a zero coupon security.

There are many forms of zero coupon securities. Some are issued at a discount and are
referred to as zero coupon or capital appreciation bonds. Others are created from interest
bearing bonds by separating the right to receive the bond's coupon payments from the right
to receive the bond's principal due at maturity, a process known as coupon stripping.
Treasury STRIPs, Treasury Income Growth Receipts (TIGRs) and Certificates of Accrual on
Treasuries (CATs) are the most common forms of stripped zero coupon securities. In
addition, some securities give the issuer the option to deliver additional securities in
place of cash interest payments, thereby increasing the amount payable at maturity. These
are referred to as pay-in-kind or PIK securities.

Bank Instruments

Bank instruments are unsecured interest bearing deposits with banks. Bank instruments
include bank accounts, time deposits, certificates of deposit and banker's acceptances.
Yankee instruments are denominated in U.S. dollars and issued by U.S. branches of foreign
banks. Eurodollar instruments are denominated in U.S. dollars and issued by non-U.S.
branches of U.S. or foreign banks.

Credit Enhancement

Credit enhancement consists of an arrangement in which a company agrees to pay amounts due
on a fixed income security if the issuer defaults. In some cases the company providing
credit enhancement makes all payments directly to the security holders and receives
reimbursement from the issuer. Normally, the credit enhancer has greater financial
resources and liquidity than the issuer. For this reason, the Adviser usually evaluates
the credit risk of a fixed income security based solely upon its credit enhancement.

Common types of credit enhancement include guarantees, letters of credit, bond insurance
and surety bonds. Credit enhancement also includes arrangements where securities or other
liquid assets secure payment of a fixed income security. If a default occurs, these assets
may be sold and the proceeds paid to the defaulted security's holders. Either form of
credit enhancement reduces credit risks by providing another source of payment for a fixed
income security.

Convertible Securities

Convertible securities are fixed income securities that a Fund has the option to exchange
for equity securities at a specified conversion price. The option allows a Fund to realize
additional returns if the market price of the equity securities exceeds the conversion
price. For example, a Fund may hold fixed income securities that are convertible into
shares of common stock at a conversion price of $10 per share. If the market value of the
shares of common stock reached $12, a Fund could realize an additional $2 per share by
converting its fixed income securities.

Convertible securities have lower yields than comparable fixed income securities. In
addition, at the time a convertible security is issued the conversion price exceeds the
market value of the underlying equity securities. Thus, convertible securities may provide
lower returns than non-convertible fixed income securities or equity securities depending
upon changes in the price of the underlying equity securities. However, convertible
securities permit a Fund to realize some of the potential appreciation of the underlying
equity securities with less risk of losing its initial investment.

The Funds treat convertible securities as both fixed income and equity securities for
purposes of their investment policies and limitations, because of their unique
characteristics.

Tax Exempt Securities

Private Activity Bonds

Private activity bonds are special revenue bonds used to finance private entities. For
example, a municipality may issue bonds to finance a new factory to improve its local
economy. The municipality would lend the proceeds from its bonds to the company using the
factory, and the company would agree to make loan payments sufficient to repay the bonds.
The bonds would be payable solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan normally would result in
a default on the bonds.

The interest on many types of private activity bonds is subject to the federal alternative
minimum tax (AMT). The Louisiana Municipal Income Fund may invest in bonds subject to AMT.

Tax Increment Financing Bonds

Tax increment financing (TIF) bonds are payable from increases in taxes or other revenues
attributable to projects financed by the bonds. For example, a municipality may issue TIF
bonds to redevelop a commercial area. The TIF bonds would be payable solely from any
increase in sales taxes collected from merchants in the area. The bonds could default if
merchants' sales, and related tax collections, failed to increase as anticipated.

Municipal Notes

Municipal notes are short-term tax exempt securities. Many municipalities issue such notes
to fund their current operations before collecting taxes or other municipal revenues.
Municipalities may also issue notes to fund capital projects prior to issuing long-term
bonds. The issuers typically repay the notes at the end of their fiscal year, either with
taxes, other revenues or proceeds from newly issued notes or bonds.

Municipal Leases

Municipalities may enter into leases for equipment or facilities. In order to comply with
state public financing laws, these leases are typically subject to annual appropriation.
In other words, a municipality may end a lease, without penalty, by not providing for the
lease payments in its annual budget. After the lease ends, the lessor can resell the
equipment or facility but may lose money on the sale.

The Louisiana Municipal Income Fund may invest in securities supported by pools of
municipal leases. The most common type of lease backed securities are certificates of
participation (COPs). However, the Fund may also invest directly in individual leases.

Participation Interests

The Louisiana Municipal Income Fund may purchase participation interests from financial
institutions such as commercial banks, savings associations, and insurance companies. These
participation interests give the Fund an undivided interest in Louisiana municipal
securities.

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

Liquidity Puts

The Louisiana Municipal Income Fund may purchase a right to sell a security held by it back
to the issuer or to another party at an agreed upon price at any time during a stated
period or on a certain date. These rights are also referred to as standby commitments.

Municipal Bond Insurance

The Louisiana Municipal Income Fund may purchase municipal securities covered by insurance
which guarantee the timely payment of principal at maturity and interest on such
securities. These insured municipal securities are either (1) covered by an insurance
policy applicable to a particular security, whether obtained by the issuer of the security
or by a third party (Issuer-Obtained Insurance) or (2) insured under master insurance
policies issued by municipal bond insurers, which may be purchased by the Fund (Policies).

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

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

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

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

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

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

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

Under the Policies, municipal bond insurers unconditionally guarantee to the Fund the
timely payment of principal and interest on the insured municipal securities when and as
such payments shall become due but shall not be paid by the issuer, except that in the
event of any acceleration of the due date of the principal by reason of mandatory or
optional redemption (other than acceleration by reason of mandatory sinking fund payment),
default or otherwise, the payments guaranteed will be made in such amounts and at such
times as payments of principal would have been due had there not been such acceleration.
The municipal bond insurers will be responsible for such payments less any amounts received
by the Fund from any trustee for the municipal bond issuers or from any other source. The
Policies do not guarantee payment on an accelerated basis, the payment of any redemption
premium, the value of the Shares of the Fund, or payments of any tender purchase price upon
the tender of the municipal securities. The Policies also do not insure against nonpayment
of principal of or interest on the securities resulting from the insolvency, negligence or
any other act or omission of the trustee or other paying agent for the securities.
However, with respect to small issue industrial development municipal bonds and pollution
control revenue municipal bonds covered by the Policies, the municipal bond insurers
guarantee the full and complete payments required to be made by or on behalf of an issuer
of such municipal securities, if there occurs any change in the tax-exempt status of
interest on such municipal securities, including principal, interest or premium payments,
if any, as and when required to be made by or on behalf of the issuer pursuant to the terms
of such municipal securities. A "when-issued" municipal security will be covered under the
Policies upon the settlement date of the issuer of such "when-issued" municipal security.
In determining to insure municipal securities held by the Fund, each municipal bond insurer
has applied its own standards, which correspond generally to the standards established for
determining the insurability of new issues of municipal securities. This insurance is
intended to reduce financial risk, but the cost thereof and compliance with investment
restrictions imposed under the Policies will reduce the yield to shareholders of the
Fund.If a Policy terminates as to municipal securities sold by the Fund on the date of
sale, in which event municipal bond insurers will be liable only for those payments of
principal and interest that are then due and owing, the provision for insurance will not
enhance the marketability of securities held by the Fund, whether or not the securities are
in default or subject to significant risk of default, unless the option to obtain permanent
insurance is exercised. On the other hand, since Issuer-Obtained Insurance will remain in
effect as long as the insured municipal securities are outstanding, such insurance may
enhance the marketability of municipal securities covered thereby, but the exact effect, if
any, on marketability cannot be estimated. The Fund generally intends to retain any
securities that are in default or subject to significant risk of default and to place a
value on the insurance, which ordinarily will be the difference between the market value of
the defaulted security and the market value of similar securities of minimum investment
grade (i.e., rated "BBB") that are not in default. To the extent that the Fund holds
defaulted securities, it may be limited in its ability to manage its investments and to
purchase other municipal securities. Except as described above with respect to securities
that are in default or subject to significant risk of default, the Fund will not place any
value on the insurance in valuing the municipal securities that it holds.

Variable Rate Demand Instruments

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

Foreign Securities

Foreign securities are securities of issuers based outside the United States. The Funds
consider an issuer to be based outside the United States if:

o it is organized under the laws of, or has a principal office located in, another
country;

o the principal trading market for its securities is in another country; or

o it (or its subsidiaries) derived in its most current fiscal year at least 50% of its
total assets, capitalization, gross revenue or profit from goods produced, services
performed, or sales made in another country.

Foreign securities are primarily denominated in foreign currencies. Along with the risks
normally associated with domestic securities of the same type, foreign securities are
subject to currency risks and risks of foreign investing. Trading in certain foreign
markets is also subject to liquidity risks.

Depositary Receipts

Depositary receipts represent interests in underlying securities issued by a foreign
company. Depositary receipts are not traded in the same market as the underlying
security. The foreign securities underlying American Depositary Receipts (ADRs) are traded
in the United States. ADRs provide a way to buy shares of foreign-based companies in the
United States rather than in overseas markets. ADRs are also traded in U.S. dollars,
eliminating the need for foreign exchange transactions. The foreign securities underlying
European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), and International
Depositary Receipts (IDRs), are traded globally or outside the United States. Depositary
receipts involve many of the same risks of investing directly in foreign securities,
including currency risks and risks of foreign investing.

Foreign Exchange Contracts

In order to convert U.S. dollars into the currency needed to buy a foreign security, or to
convert foreign currency received from the sale of a foreign security into U.S. dollars, a
Fund may enter into spot currency trades. In a spot trade, the Fund agrees to exchange one
currency for another at the current exchange rate. The Fund may also enter into derivative
contracts in which a foreign currency is an underlying asset. The exchange rate for
currency derivative contracts may be higher or lower than the spot exchange rate. Use of
these derivative contracts may increase or decrease the Fund's exposure to currency risks.

Foreign Government Securities

Foreign government securities generally consist of fixed income securities supported by
national, state or provincial governments or similar political subdivisions. Foreign
government securities also include debt obligations of supranational entities, such as
international organizations designed or supported by governmental entities to promote
economic reconstruction or development, international banking institutions and related
government agencies. Examples of these include, but are not limited to, the International
Bank for Reconstruction and Development (the World Bank), the Asian Development Bank, the
European Investment Bank and the Inter-American Development Bank.

Foreign government securities also include fixed income securities of quasi-governmental
agencies that are either issued by entities owned by a national, state or equivalent
government or are obligations of a political unit that are not backed by the national
government's full faith and credit. Further, foreign government securities include
mortgage-related securities issued or guaranteed by national, state or provincial
governmental instrumentalities, including quasi-governmental agencies.

Brady Bonds

Brady Bonds are U.S. dollar denominated debt obligations that foreign governments issue in
exchange for commercial bank loans. The International Monetary Fund (IMF) typically
negotiates the exchange to cure or avoid a default by restructuring the terms of the bank
loans. The principal amount of some Brady Bonds is collateralized by zero coupon U.S.
Treasury securities which have the same maturity as the Brady Bonds. However, neither the
U.S. government nor the IMF has guaranteed the repayment of any Brady Bond.

Derivative Contracts

Derivative contracts are financial instruments that require payments based upon changes in
the values of designated (or underlying) securities, currencies, commodities, financial
indices or other assets. Some derivative contracts (such as futures, forwards and options)
require payments relating to a future trade involving the underlying asset. Other
derivative contracts (such as swaps) require payments relating to the income or returns
from the underlying asset. The other party to a derivative contract is referred to as a
counterparty.

Many derivative contracts are traded on securities or commodities exchanges. In this case,
the exchange sets all the terms of the contract except for the price. Investors make
payments due under their contracts through the exchange. Most exchanges require investors
to maintain margin accounts through their brokers to cover their potential obligations to
the exchange. Parties to the contract make (or collect) daily payments to the margin
accounts to reflect losses (or gains) in the value of their contracts. This protects
investors against potential defaults by the counterparty. Trading contracts on an exchange
also allows investors to close out their contracts by entering into offsetting contracts.

For example, a Fund could close out an open contract to buy an asset at a future date by
entering into an offsetting contract to sell the same asset on the same date. If the
offsetting sale price is more than the original purchase price, the Fund realizes a gain;
if it is less, the Fund realizes a loss. Exchanges may limit the amount of open contracts
permitted at any one time. Such limits may prevent the Fund from closing out a position.
If this happens, the Fund will be required to keep the contract open (even if it is losing
money on the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to close out a
contract could also harm the Fund by preventing it from disposing of or trading any assets
it has been using to secure its obligations under the contract.

The Funds may also trade derivative contracts over-the-counter (OTC) in transactions
negotiated directly between a Fund and the counterparty. OTC contracts do not necessarily
have standard terms, so they cannot be directly offset with other OTC contracts. In
addition, OTC contracts with more specialized terms may be more difficult to price than
exchange traded contracts.

Depending upon how a Fund uses derivative contracts and the relationships between the
market value of a derivative contract and the underlying asset, derivative contracts may
increase or decrease the Fund's exposure to interest rate and currency risks, and may also
expose the Fund to liquidity and leverage risks. OTC contracts also expose the Fund to
credit risks in the event that a counterparty defaults on the contract.

The Funds may trade in the following types of derivative contracts.

Futures Contracts

Futures contracts provide for the future sale by one party and purchase by another party of
a specified amount of an underlying asset at a specified price, date, and time. Entering
into a contract to buy an underlying asset is commonly referred to as buying a contract or
holding a long position in the asset. Entering into a contract to sell an underlying asset
is commonly referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts. Futures contracts traded OTC
are frequently referred to as forward contracts.

The Funds (except the Money Market Funds) may buy and sell the following types of futures
contracts: financial futures contracts, and, in the case of Capital Appreciation Fund and
Mid Cap Equity Fund, stock index futures.

For the immediate future, Capital Appreciation Fund and Mid Cap Equity Fund will enter into
futures contracts directly only when they desire to exercise a financial futures put option
in their respective portfolio rather than either closing out the option or allowing it to
expire.

Options

Options are rights to buy or sell an underlying asset for a specified price (the exercise
price) during, or at the end of, a specified period. A call option gives the holder
(buyer) the right to buy the underlying asset from the seller (writer) of the option. A
put option gives the holder the right to sell the underlying asset to the writer of the
option. The writer of the option receives a payment, or premium, from the buyer, which the
writer keeps regardless of whether the buyer uses (or exercises) the option.

The Funds may:

o Buy call options on financial futures contracts in anticipation of an increase in the
value of the underlying asset;

o Buy put options on financial futures contracts in anticipation of a decrease in the
value of the underlying asset (Except Capital Appreciation Fund); and

o Buy or write options to close out existing options positions.

The Funds may also write call options on portfolio securities to generate income from
premiums, and in anticipation of a decrease or only limited increase in the value of the
underlying asset. If a call written by the Fund is exercised, the Fund foregoes any
possible profit from an increase in the market price of the underlying asset over the
exercise price plus the premium received.

The Funds may also write put options on portfolio securities to generate income from
premiums, and in anticipation of an increase or only limited decrease in the value of the
underlying asset. In writing puts, there is a risk that a Fund may be required to take
delivery of the underlying asset when its current market price is lower than the exercise
price.

When a Fund writes options on futures contracts, it will be subject to margin requirements
similar to those applied to futures contracts.

Mid Cap Equity Fund may utilize stock index futures contracts, options and options on stock
index futures contracts, subject to the limitation that the value of these futures
contracts and options will not exceed 20% of the Fund's total assets.

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

Hedging

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

Derivative Contracts

The Funds may also trade derivative contracts over-the-counter (OTC) in transactions
negotiated directly between the Fund and the counterparty. OTC contracts do not
necessarily have standard terms, so they cannot be directly offset with other OTC
contracts. In addition, OTC contracts with more specialized terms may be more difficult to
price than exchange traded contracts.

Depending upon how a Fund uses derivative contracts and the relationships between the
market value of a derivative contract and the underlying asset, derivative contracts may
increase or decrease the Fund's exposure to market and currency risks, and may also expose
the Fund to liquidity and leverage risks. OTC contracts also expose the Fund to credit
risks in the event that a counterparty defaults on the contract.

The Funds may trade in the following types of derivative contracts.

Futures And Options Transactions

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

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

Financial Futures Contracts

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

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

Purchasing Put Options on Financial Futures Contracts

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

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

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

Writing Call Options on Financial Futures Contracts

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

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

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

Writing Put Options on Financial Futures Contracts

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

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

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

Purchasing Call Options on Financial Futures Contracts

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

Limitation on Open Futures Position

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

Margin in Futures Transactions

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

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

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

Purchasing Put and Call Options on Portfolio Securities

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

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

Writing Covered Put and Call Options on Portfolio Securities

As writer of a call option, a Fund has the obligation, upon exercise of the option during
the option period, to deliver the underlying security upon payment of the exercise price.
As a writer of a put option, a Fund has the obligation to purchase a security from the
purchaser of the option upon the exercise of the option.

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

Stock Index Futures and Options

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

Special Transactions

Reverse Repurchase Agreements

Reverse repurchase agreements are repurchase agreements in which a Fund is the seller
(rather than the buyer) of the securities, and agrees to repurchase them at an agreed upon
time and price. A reverse repurchase agreement may be viewed as a type of borrowing by the
Fund. Reverse repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must repurchase the underlying
security at a higher price, regardless of the market value of the security at the time of
repurchase.

Delayed Delivery Transactions

Delayed delivery transactions, including when issued transactions, are arrangements in
which a Fund buys securities for a set price, with payment and delivery of the securities
scheduled for a future time. During the period between purchase and settlement, no payment
is made by the Fund to the issuer and no interest accrues to the Fund. The Fund records
the transaction when it agrees to buy the securities and reflects their value in
determining the price of its shares. Settlement dates may be a month or more after
entering into these transactions so that the market values of the securities bought may
vary from the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for a Fund. Delayed delivery transactions also involve credit risks in the
event of a counterparty default.

To Be Announced Securities (TBAs)

As with other delayed delivery transactions, a seller agrees to issue a TBA security at a
future date. However, the seller does not specify the particular securities to be
delivered. Instead, a Fund agrees to accept any security that meets specified terms. For
example, in a TBA mortgage backed transaction, a Fund and the seller would agree upon the
issuer, interest rate and terms of the underlying mortgages. The seller would not identify
the specific underlying mortgages until it issues the security. TBA mortgage backed
securities increase interest rate risks because the underlying mortgages may be less
favorable than anticipated by a Fund.

Dollar Rolls

Dollar rolls are transactions where a Fund sells mortgage backed securities with a
commitment to buy similar, but not identical, mortgage backed securities on a future date
at a lower price. Normally, one or both securities involved are TBA mortgage backed
securities. Dollar rolls are subject to interest rate risks and credit risks.

Securities Lending

A Fund may lend portfolio securities to borrowers that the Adviser deems creditworthy. In
return, the Fund receives cash or liquid securities from the borrower as collateral. The
borrower must furnish additional collateral if the market value of the loaned securities
increases. Also, the borrower must pay the Fund the equivalent of any dividends or
interest received on the loaned securities.

The Fund will reinvest cash collateral in securities that qualify as an acceptable
investment for the Fund. However, the Fund must pay interest to the borrower for the use
of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower. The Fund will
not have the right to vote on securities while they are on loan, but it will terminate a
loan in anticipation of any important vote. The Fund may pay administrative and custodial
fees in connection with a loan and may pay a negotiated portion of the interest earned on
the cash collateral to a securities lending agent or broker.

Securities lending activities are subject to interest rate risks and credit risks.

Asset Coverage

In order to secure its obligations in connection with derivatives contracts or special
transactions, a Fund will either own the underlying assets, enter into an offsetting
transaction or set aside readily marketable securities with a value that equals or exceeds
the Fund's obligations. Unless the Fund has other readily marketable assets to set aside,
it cannot trade assets used to secure such obligations without entering into an offsetting
derivative contract or terminating a special transaction. This may cause the Fund to miss
favorable trading opportunities or to realize losses on derivative contracts or special
transactions.

Investing in Securities of Other Investment Companies

The Funds may invest assets in securities of other investment companies, including the
securities of affiliated money market funds, as an efficient means of carrying out their
investment policies and managing their uninvested cash. Any such investment by a Fund may
be subject to duplicate expenses. However, the Adviser will waive its investment advisory
fee on assets invested in securities of other investment companies. The Adviser believes
that the benefits and efficiencies of this approach should outweigh the potential
additional expenses. The Funds may also invest in such securities directly.

Investment Ratings

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

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

INVESTMENT RISKS

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

Liquidity Risks

o Trading opportunities are more limited for equity securities that are not widely
held. This may make it more difficult to sell or buy a security at a favorable price or
time. Consequently, a Fund may have to accept a lower price to sell a security, sell
other securities to raise cash or give up an investment opportunity, any of which could
have a negative effect on the Fund's performance. Infrequent trading of securities may
also lead to an increase in their price volatility.

o Liquidity risk also refers to the possibility that a Fund may not be able to sell a
security or close out a derivative contract when it wants to. If this happens, the Fund
will be required to continue to hold the security or keep the position open, and the
Fund could incur losses.

o OTC derivative contracts generally carry greater liquidity risk than exchange-traded
contracts.

Currency Risks

o Exchange rates for currencies fluctuate daily. The combination of currency risk and
market risk tends to make securities traded in foreign markets more volatile than
securities traded exclusively in the United States.

o The Adviser attempts to manage currency risk by limiting the amount a Fund invests in
securities denominated in a particular currency. However, diversification will not
protect a Fund against a general increase in the value of the U.S. dollar relative to
other currencies.

Risks of Foreign Investing

o Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Securities in foreign
markets may also be subject to taxation policies that reduce returns for U.S. investors.

o Foreign companies may not provide information (including financial statements) as
frequently or to as great an extent as companies in the United States. Foreign companies
may also receive less coverage than U.S companies by market analysts and the financial
press. In addition, foreign countries may lack uniform accounting, auditing and
financial reporting standards or regulatory requirements comparable to those applicable
to U.S. companies. These factors may prevent a Fund and its Adviser from obtaining
information concerning foreign companies that is as frequent, extensive and reliable as
the information available concerning companies in the United States.

o Foreign countries may have restrictions on foreign ownership of securities or may
impose exchange controls, capital flow restrictions or repatriation restrictions which
could adversely affect the liquidity of a Fund's investments.

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

Risks Related To Hedging

When a Fund uses financial futures and options on futures as hedging devices, there is a
risk that the prices of the securities subject to the futures contracts may not correlate
perfectly with the prices of the securities in the Fund's portfolio. This may cause the
futures contracts and any related options to react differently than the portfolio
securities to market changes. In addition, a Fund's Adviser could be incorrect in its
expectations about the direction or extent of market factors, such as interest rate
movements. In these events, the Fund may lose money on the futures contracts or options.
When a Fund writes a call option, it retains the risk of a market decline in the price of
the underlying security, but gives up the right to capital appreciation of that security
above the "strike price" of the option.

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

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

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

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

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

Fundamental INVESTMENT Objectives and Policies

The investment objectives and fundamental policies of the Fund's may not be changed by the
Fund's Board without shareholder approval.

o Capital Appreciation Fund seeks to provide growth of capital and income;

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

o Mid Equity Cap Fund seeks total return;

o Total Return Bond Fund seeks to maximize total return;

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

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

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

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

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

INVESTMENT LIMITATIONS

Diversification of Investments

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

Issuing Senior Securities and Borrowing Money

A Fund may borrow money, directly or indirectly, and issue senior securities to the maximum
extent permitted under the Investment Company Act of 1940 ("1940 Act").

Concentration of Investments

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

Investing in Real Estate

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

Investing in Commodities

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

Underwriting

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

Lending Cash or Securities

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

The above limitations cannot be changed unless authorized by the Board and by the "vote of
a majority of its outstanding voting securities," as defined by the 1940 Act. The following
limitations, however, may be changed by the Board without shareholder approval.
Shareholders will be notified before any material change in these limitations becomes
effective.

Buying on Margin

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

Pledging Assets

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

Restricted and Illiquid Securities

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

Acquiring Securities

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

Investing in Other Investment Companies

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

Writing Covered Call Options and Purchasing Put Options

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

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

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

Regulatory Compliance

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

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's (except the Money Market Funds) portfolio securities are
determined as follows:

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

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

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

o for fixed income securities, according to the mean between bid and asked prices as
furnished by an independent pricing service, except that fixed income securities with
remaining maturities of less than 60 days at the time of purchase may be valued at
amortized cost; and

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

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

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

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

Trading in Foreign Securities

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

What Do Shares Cost?

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

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

REDUCING or eliminating THE FRONT-END SALES CHARGE

You can reduce or eliminate the applicable front-end sales charge for the Equity and Income
Funds, as follows. Hibernia National Bank (HNB) or the Distributor must be notified by you
in writing or by your financial institution in order to reduce or eliminate the sales
charge.

Quantity Discounts

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

Accumulated Purchases

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

Concurrent Purchases

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

Letter of Intent

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

Reinvestment Privilege

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

Purchases by Affiliates of the Fund

The following individuals may buy Shares at NAV without any sales charge because there are
nominal sales efforts associated with their purchases.

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

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

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

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

o Trustees/Directors and employees of Edgewood Services, Inc. or its affiliates;

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

o investors who purchase Shares through The Personal Portfolio Manager(R), an investment
program sponsored by Hibernia Investments, L.L.C. (HILLC) or other similar asset
allocation programs made available through financial institutions who have established
dealer agreements with Edgewood Services, Inc.

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE - Class B Shares

These reductions or eliminations are offered because: no sales commissions have been
advanced to the investment professional selling Shares; the shareholder has already paid a
Contingent Deferred Sales Charge (CDSC); or nominal sales efforts are associated with the
original purchase of Shares.

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

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

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

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

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

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

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

How are the Funds Sold?

Under the Distributor's Contract with the Fund, the Distributor (Edgewood Services, Inc.)
offers Shares on a continuous, best-efforts basis.

front-end SALES CHARGE REALLOWANCES

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

RULE 12B-1 PLAN

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

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

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

SHAREHOLDER SERVICES - class b shares

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

SUPPLEMENTAL PAYMENTS

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

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

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

When an investment professional sells Class A Shares of greater than $1,000,000 but less
than $3,000,000 in any one transaction, the investment professional may receive an amount
up to 1% of the Class A Shares so purchased. When an investment professional sells Class A
Shares of greater than $3,000,000 but less than $7,000,000 in any one transaction, the
investment professional may receive an amount up to 0.50% of the Class A Shares so
purchased. When an investment professional sells Class A Shares of greater than $7,000,000
in any one transaction, the investment professional may receive an amount up to 0.25% of
the Class A Shares so purchased. When an advance commission is paid under this program,
redemptions within 24 months of the applicable purchase will be subject to a 1.00%
contingent deferred sales charge as disclosed in the prospectus.

Exchanging Securities for Shares

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

Redemption in Kind

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

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

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

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

Massachusetts Partnership Law

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

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

Account and Share Information

VOTING RIGHTS

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

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

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

As of December 2, 2002, the following shareholders of each Fund owned of record,
beneficially, or both, 5% or more of a Fund's outstanding Shares:

Hibernia Capital Appreciation Fund (Class A Shares)

HIBILA, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
5,640,958 Class A Shares (43.50%); HIBSPEC, Marshall & Ilsley Trust Co., Milwaukee,
Wisconsin, owned approximately 2,483,390 Class A Shares (19.15%); HIBFUND, Marshall &
Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately 2,093,248 Class A Shares
(16.14%); and Hibernia National Bank, RPO Retirement Security Plan of Hibernia, New
Orleans, Louisiana, owned approximately 1,669,801 Class A Shares (12.88%).

Hibernia Capital Appreciation Fund (Class B Shares)

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

Hibernia Louisiana Municipal Income Fund (Class A Shares)

HIBILA, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
2,935,906 Class A Shares (39.17%); HIBSPEC, Marshall & Ilsley Trust Co., Milwaukee,
Wisconsin, owned approximately 626,558 Class A Shares (8.36%); and HIBFUND, Marshall &
Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately 695,595 Class A Shares (9.28%).

Hibernia Louisiana Municipal Income Fund (Class B Shares)

Donaldson Lufkin Jenrette, Securities Corporation Inc., Jersey City, New Jersey, owned
approximately 66,531 Class B Shares (21.07%)

Hibernia Mid Cap Equity Fund (Class A Shares)

HIBFUND, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
2,531,710 Class A Shares (63.86%); Hibernia National Bank, RPO Retirement Security Plan of
Hibernia Corp., New Orleans, Louisiana, owned approximately 549,839 Class A Shares
(13.87%); and HIBILA, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned
approximately 585,111 Class A Shares (14.76%).

Hibernia Mid Cap Equity Fund (Class B Shares)

Donaldson Lufkin Jenrette, Securities Corporation Inc., Jersey City, New Jersey, owned
approximately 24,471Class B Shares (8.08%)

Hibernia Total Return Bond Fund

HIBFUND, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
3,257,260 Shares (69.63%); Hibernia National Bank, RPO Retirement Security Plan of
Hibernia., New Orleans, Louisiana, owned approximately 689,738 Shares (14.74%); and
HIBSPEC, Marshall Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately 474,972
Shares (10.15%).

Hibernia U.S. Government Income Fund

HIBILA, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
2,918,915 Shares (35.29%); HIBSPEC, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin,
owned approximately 2,465,128 Shares (29.80%); HIBFUND, Marshall & Ilsley Trust Co.,
Milwaukee, Wisconsin, owned approximately 1,893,530 Shares (22.89%).

Hibernia Cash Reserve Fund (Class A Shares)

HIBSPEC, Marshall & Ilsley Trust Co., Milwaukee, Wisconsin, owned approximately
145,825,255 Class A Shares (63.94%); Hibernia National Bank RPO Retirement Security Plan of
Hibernia, New Orleans, Louisiana, owned approximately 25,400,557 Class A Shares (11.14%);
and Hibernia Insurance LLC, New Orleans, Louisiana owned approximately 16,547,068 Class A
Shares (7.25%).

Hibernia Cash Reserve Fund (Class B Shares)

Donaldson Lufkin Jenrette, Securities Corporation Inc., Jersey City, New Jersey, owned
approximately 279,091 Class B Shares (35.93%).

Hibernia U.S. Treasury Money Market Fund

HIBSPEC, Marshall & Ilsley Trust Co., Milwaukee Wisconsin, owned approximately
142,458,628 Shares (72.96%).

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

Tax Information

FEDERAL INCOME TAX

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

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

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

FOREIGN INVESTMENTS

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

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

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

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

Louisiana Municipal Income Fund--Additional Tax Information

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

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

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

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

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

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

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

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

Other State and Local Taxes

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

Who Manages and Provides Services to the Funds?

BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders. The
following tables give information about each Board member and the senior officers of
the Funds. Where required, the tables separately list Board members who are
"interested persons" of the Fund (i.e., "Interested" Board members) and those who are
not (i.e., "Independent" Board members). The Trust currently is comprised of seven
portfolios. Unless otherwise noted, each Board member oversees all portfolios in the
Hibernia Fund Complex and serves for an indefinite term.

As of December 2, 2002, the Funds' Board and Officers as a group owned less than 1% of the
outstanding Class A Shares and Class B Shares of Capital Appreciation Fund, Louisiana
Municipal Income Fund, Mid Cap Equity Fund and Cash Reserve Fund and less than 1% of the
outstanding Shares of Total Return Bond Fund, U.S. Government Income Fund and U.S. Treasury
Money Market Fund.

------------------------------------------------------------------------
Name Principal Occupations Aggregate
Birth Date for Past Five Years, Compensation
Address Other Directorships Held From Trust
Position With Trust and Previous Positions
Date Service Began
------------------------------------------------------------------------
------------------------------------------------------------------------
INTERESTED TRUSTEES BACKGROUND AND COMPENSATION
------------------------------------------------------------------------

Edward C. Gonzales* Principal Occupations: $0
Birth Date: October 22, 1930 President, Executive
Federated Investors Tower Vice President and
1001 Liberty Avenue Treasurer of some of the
Pittsburgh, PA Funds in the Federated
TRUSTEE Investors Fund Complex;
Vice Chairman, Federated
Began Serving: September 1991 Investors, Inc.;
Trustee, Federated
Administrative Services.

Previous Positions:
Trustee or Director of
some of the Funds in the
Federated Fund Complex;
CEO and Chairman,
Federated Administrative
Services.
------------------------------

------------------------------------------------------------------------
INDEPENDENT TRUSTEES BACKGROUND AND COMPENSATION
------------------------------------------------------------------------
------------------------------------------------------------------------
Arthur Rhew Dooley, Jr. Principal Occupation:
Birth Date: December 17, 1942 Registered Professional $18,000
2575 Ashley Street Engineer; Chairman and
Beaumont, TX CEO, Dooley
TRUSTEE Tackaberry, Inc.
Began Serving: July 1999 (distributors and
fabricators of fire
protection and safety
equipment),
1967 to Present.

Other Directorships Held:
Chairman and CEO, dba
Entire Business Technology
Center, 1983 to 1999;
Director, Loop Cold
Storage Company.

Previous Positions:
Director, UTM.D. Anderson
Cancer Center Board of
Visitors; Director, Texas
Energy Museum; Member,
World Presidents
Organization (former YPO
Members); Member, Society
of Fire Protection
Engineers.
------------------------------------------------------------------------
------------------------------------------------------------------------
Teri G. Fontenot Principal Occupation:
Birth Date: June 16, 1953 President and Chief $18,000
18933 E. Pinnacle Circle Executive Officer of
Baton Rouge, LA Woman's Hospital,
TRUSTEE Certified Public
Began Serving: June 2001 Accountant, MBA.

Other Directorships Held:
Immediate Past Chair of
Greater Baton Rouge
Chamber of Commerce, Chair
of Louisiana Hospital
Association, Federal
Reserve Bank of
Atlanta-New Orleans Branch
Board, Alliance Bank
Board, Committee of 100,
Chair-Elect Hospital
Billing and Collection
Services, Inc.; Board,
Louisiana Perinatal
Commission; LA Research
and Technology Foundation
Board; National Institute
of Health-Advisory Council
of Women's' Health
Research.
------------------------------------------------------------------------
------------------------------------------------------------------------
Principal Occupations:
Joe N. Averett, Jr. President of Crystal Gas $18,000
Birth Date: February 4, 1943 Storage, Inc., a wholly
11000 Seville Quarters owned subsidiary of El
Shreveport, LA Paso (NYSE:EPG).
TRUSTEE
Began Serving: June 2001
------------------------------------------------------------------------
------------------------------------------------------------------------
OFFICERS**
------------------------------------------------------------------------
------------------------------------------------------------------------

Peter J. Germain Principal Occupations: $0
Birth Date: September 3, 1959 Senior Vice President of
1001 Liberty Avenue Federated Services Company.
Pittsburgh, PA
PRESIDENT AND ASSISTANT Previous Position: Senior
SECRETARY Corporate Counsel,
Federated Investors, Inc.
------------------------------------------------------------------------
Principal Occupations: $0
Richard J. Thomas Treasurer of the Federated
Birth Date: June 17, 1954 Investors Fund Complex;
1001 Liberty Avenue Senior Vice President,
Pittsburgh, PA Federated Administrative
TREASURER Services.

Previous Positions: Vice
President, Federated
Administrative Services;
held various management
positions within Funds
Financial Services
Division of Federated
Investors, Inc.
------------------------------------------------------------------------

Timothy S. Johnson Principal Occupations: $0
Birth Date: July 31, 1961 Counsel, Reed Smith LLP.
1001 Liberty Avenue
Pittsburgh, PA Previous Positions: Vice
SECRETARY President and Corporate
Counsel, Federated
Services Company;
Secretary, Edgewood
Services, Inc.; Secretary
or Assistant Secretary of
various funds distributed
by Edgewood Services, Inc.
and Federated Securities
Corp.
------------------------------------------------------------------------

* Mr. Gonzales is deemed an interested Trustee due to the positions that he holds with
Federated Investors, Inc., the parent company for the Funds' distributor.

**Officers do not receive any compensation from the Funds.

COMMITTEES of the board
Board Committee Committee Functions Meetings Held
During Last
Committee Members Fiscal Year
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Executive Edward C. In between meetings of the full Board, None
Gonzales the Executive Committee generally may
exercise all the powers of the full Board
in the management and direction of the
business and conduct of the affairs of
the Trust in such manner as the Executive
Committee shall deem to be in the best
interests of the Trust. However, the
Executive Committee cannot elect or
remove Board members, increase or
decrease the number of Trustees, elect or
remove any Officer, declare dividends,
issue shares or recommend to shareholders
any action requiring shareholder approval.

Audit Joe N. The Audit Committee reviews and Two
Averett, Jr. recommends to the full Board the
--------------- independent auditors to be selected to
Arthur Rhew audit the Fund`s financial statements;
Dooley, Jr. meet with the independent auditors
Teri G. periodically to review the results of the
Fontenot audits and report the results to the full
Board; evaluate the independence of the
auditors, review legal and regulatory
matters that may have a material effect
on the financial statements, related
compliance policies and programs, and the
related reports received from regulators;
review the Fund`s internal audit
function; review compliance with the
Fund's code of conduct/ethics; review
valuation issues; monitor inter-fund
lending transactions; review custody
services and issues and investigate any
matters brought to the Committee's
attention that are within the scope of
its duties.

Board ownership of shares in the HIBERNIA fUNDS AS OF dECEMBER 31, 2001

Dollar
Interested Range of
Board Member Name Shares Owned
in Funds
--------------------------------
Edward Gonzales NONE

--------------------------------------------------------------------------------------------
Dollar
Independent Range of
Board Member Name hares Owned
S in Funds
--------------------------------
Joe N. Averett, Jr.$50,001-$100,000
Arthur Rhew NONE
Dooley, Jr.
Teri G. Fontenot NONE

INVESTMENT ADVISER
--------------------------------------------------------------------------------------------

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

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

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

Approval of Investment Advisory Contract

As required by the 1940 Act, the Fund's Board has reviewed the Funds investment advisory
contract. The Board's decision to approve the contract reflects the exercise of its
business judgment on whether to continue the existing arrangements. During its review of
the contract, the Board considers many factors, among the most material of which are: the
Funds' investment objectives and long term performance; the Adviser's management
philosophy, personnel, and processes; the preferences and expectations of Fund shareholders
and their relative sophistication; the continuing state of competition in the mutual fund
industry; comparable fees in the mutual fund industry; the range and quality of services
provided to the Fund and its shareholders by the Hibernia organization in addition to
investment advisory services; and the Funds' relationship to other funds in the Hibernia
fund family.

In assessing the Adviser's performance of its obligations, the Board also considers whether
there has occurred a circumstance or event that would constitute a reason for it to not
renew an advisory contract. In this regard, the Board is mindful of the potential
disruptions of the Funds' operations and various risks, uncertainties and other effects
that could occur as a result of a decision to terminate or not renew an advisory contract.
In particular, the Board recognizes that most shareholders have invested in the Funds on
the strength of the Adviser's industry standing and reputation and in the expectation that
the Adviser will have a continuing role in providing advisory services to the Funds.

The Board also considers the compensation and benefits received by the Adviser. This
includes fees received for services provided to the Funds by other entities in the Hibernia
organization and research services received by the Adviser from brokers that execute Fund
trades, as well as advisory fees. In this regard, the Board is aware that various courts
have interpreted provisions of the 1940 Act and have indicated in their decisions that the
following factors may be relevant to an Adviser's compensation: the nature and quality of
the services provided by the Adviser, including the performance of the Funds; the Adviser's
cost of providing the services; the extent to which the Adviser may realize "economies of
scale" as the Funds grow larger; any indirect benefits that may accrue to the Adviser and
its affiliates as a result of the Adviser's relationship with the Funds; performance and
expenses of comparable funds; and the extent to which the independent Board members are
fully informed about all facts bearing on the Adviser's service and fee. The Funds' Board
is aware of these factors and takes them into account in its review of the Funds' advisory
contract.

The Board considers and weighs these circumstances in light of its substantial accumulated
experience in governing the Funds and working with Hibernia on matters relating to the
Funds, and is assisted in its deliberations by the advice of independent legal counsel. In
this regard, the Board requests and receives a significant amount of information about the
Funds and the Hibernia organization. Hibernia provides much of this information at each
regular meeting of the Board, and furnishes additional reports in connection with the
particular meeting at which the Board's formal review of the advisory contract occurs. In
between regularly scheduled meetings, the Board may receive information on particular
matters as the need arises. Thus, the Board's evaluation of an advisory contract is
informed by reports covering such matters as: the Adviser's investment philosophy,
personnel, and processes; a Fund's short- and long-term performance (in absolute terms as
well as in relationship to its particular investment program and certain competitor or
"peer group" funds), and comments on the reasons for performance; a Fund's expenses
(including the advisory fee itself and the overall expense structure of a Fund, both in
absolute terms and relative to similar and/or competing funds, with due regard for
contractual or voluntary expense limitations); the use and allocation of brokerage
commissions derived from trading a Fund's portfolio securities; the nature and extent of
the advisory and other services provided to a Fund by the Adviser and its affiliates;
compliance and audit reports concerning the Funds and the companies that service them; and
relevant developments in the mutual fund industry and how the Funds and/or Hibernia are
responding to them.

The Board also receives financial information about Hibernia, including reports on the
compensation and benefits Hibernia derives from its relationships with the Funds. These
reports cover not only the fees under the advisory contracts, but also fees received for
providing other services to the Funds under separate contracts (e.g., for serving as the
Funds' custodian). The reports also discuss any indirect benefit Hibernia may derive from
its receipt of research services from brokers who execute fund trades.

The Board bases its decision to approve an advisory contract on the totality of the
circumstances and relevant factors, and with a view to past and future long-term
considerations. Not all of the factors and considerations identified above are relevant to
every fund, nor does the Board consider any one of them to be determinative. Because the
totality of circumstances includes considering the relationship of each Fund to the
Hibernia family of funds, the Board does not approach consideration of every Fund's
advisory contract as if that were the only Fund offered by Hibernia.

Code of Ethics Restrictions On Personal Trading

As required by SEC rules, the Funds, their Adviser, and Distributor have adopted codes of
ethics. These codes govern securities trading activities of investment personnel, Fund
Trustees, and certain other employees. Although they do permit these people to trade in
securities, including those that a Fund could buy, they also contain significant safeguards
designed to protect the Funds and their shareholders from abuses in this area, such as
requirements to obtain prior approval for, and to report, particular transactions.

BROKERAGE TRANSACTIONS

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

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

Research Services

Research services may include advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies; receipt of quotations
for portfolio evaluations; and similar services. Research services may be used by the
Adviser or by affiliates in advising other accounts. To the extent that receipt of these
services may replace services for which the Adviser or its affiliates might otherwise have
paid, it would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting those brokers who offer brokerage and research
services to execute securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the brokerage and
research services provided. For the fiscal year ended August 31, 2002, the Funds' Adviser
directed brokerage transactions to certain brokers due to research services they provided.

For the fiscal year ended August 31, 2002, the Fund's Adviser directed brokerage
transactions to certain brokers due to research services they provided. Total amount of
transactions for the Capital Appreciation Fund was $9,283,026, for which the Fund paid
$46,856 per share in brokerage commissions. Total amount of transactions for the Mid Cap
Equity Fund was $19,082,572, for which the Fund paid $26,410 per share in brokerage
commissions.

ADMINISTRATOR

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

Average Aggregate
-------------------- Daily Net Assets
Maximum of the Federated Funds
Administrative Fee
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of
$750 million

The administrative fee received during any fiscal year shall be at least $50,000 per
portfolio. Federated Administrative Services may voluntarily waive a portion of its fee and
may reimburse the Funds for expenses.
--------------------------------------------------------------------------------------------

Federated Administrative Services also provides, or causes the provision of, certain
accounting and recordkeeping services with respect to the Funds' portfolio investments for
a fee based on each Fund's assets, plus out-of-pocket expenses.

CUSTODIAN

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

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

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

INDEPENDENT Auditors

The independent auditor for the Trust, Ernst & Young LLP, conducts its audits in
accordance with auditing standards generally accepted in the United States of America,
which require it to plan and perform its audits to provide reasonable assurance about
whether the Fund's financial statements and financial highlights are free of material
misstatement.

FEES PAID BY THE FUNDs FOR SERVICES

Capital Appreciation Fund
For the Year Ended August 2002 2001 2000
31
Advisory Fee Earned $1,995,296 $2,595,257 $2,838,677
Advisory Fee Reduction $0 $0 $0
Brokerage Commissions $46,856
$79,911 $117,909
Administrative Fee $298,019 $376,558 $417,052
12b-1 Fee
Class A Shares $629,683 -- --
Class B Shares $106,248 -- --
Shareholder Services Fee
Class B Shares $35,416 -- --

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

Louisiana Municipal Income Fund
For the Year Ended August 2002 2001 2000
31
Advisory Fee Earned $407,423 $394,892 $440,117
Advisory Fee Reduction $208,239 $201,833 $200,207
Administrative Fee $101,494 $96,704 $109,123
12b-1 Fee -- --
Class A Shares $223,955 -- --
Class B Shares $7,173 -- --

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

Mid Cap Equity Fund
For the Year Ended August 2002 2001 2000
31
Advisory Fee Earned $325,694 $253,594 $182,506
Advisory Fee Reduction $0 $51,974 $48,668
Brokerage Commissions $26,410 $30,406 $13,416
Administrative Fee $50,000 $50,000 $41,507
12b-1 Fee
Class A Shares $99,742 -- --
Class B Shares $26,468 -- --
Shareholder Services Fee
Class B Shares $8,822 -- --

Total Return Bond Fund
--------------------------------------------------------------------------------------------
For the Year Ended August 2002 2001 2000
31
Advisory Fee Earned $418,286 $525,310 $548,348
Advisory Fee Reduction $179,266 $225,133 $235,006
Administrative Fee $66,880 $81,695 $86,332
12b-1 Fee $149,388 -- --

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

U.S. Government Income Fund
For the Year Ended August 2002 2001 2000
31
Advisory Fee Earned $379,613 $375,414 $380,907
Advisory Fee Reduction $177,153 $175,193 $177,757
Administrative Fee $94,641 $90,831 $93,275
12b-1 Fee $210,896 -- --

Cash Reserve Fund
--------------------------------------------------------------------------------------------
For the Year Ended August 2002 2001 2000
31
Advisory Fee Earned $929,548 $966,744 $814,922
Advisory Fee Reduction $92,119 -- --
Administrative Fee $260,426 $262,951 $224,005
12b-1 Fee
Class A Shares $579,310 -- --
Class B Shares $4,972 -- --
Shareholder Services Fee
Class B Shares $1,657 -- --

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

U.S. Treasury Money Market Fund
For the Year Ended August 2002 2001 2000
31
Advisory Fee Earned $944,700 $940,871 $839,826
Administrative Fee $264,302 $255,943 $231,333
With respect to Capital Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity
Fund, and Cash Reserve Fund, fees are allocated among classes based on their pro rata share
of Fund assets, except for marketing (Rule 12b-1) fees and shareholder services fees, which
are borne only by the applicable class of Shares.
--------------------------------------------------------------------------------------------

How Do the Funds Measure Performance?

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

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

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

Average Annual Total Returns and Yield

Capital Appreciation Fund
Total returns for Class A Shares and Class B Shares are given for the one-year, five-year,
ten-year and/or Start of Performance periods ended August 31, 2002.

1 Year 5 Years 10 Years
Class A Shares
Total Return
Before Taxes (20.90)% 1.15% 9.97%
After Taxes on 21.61)% 0.75)% .53%
Distributions ( ( 7
After Taxes on 11.95)% 0.86)% .62%
Distributions and
Sale of Shares ( ( 7
Start of Performance
1 Year 5 Years on December 2, 1996
Class B Shares
Total Return
Before Taxes (22.15)% 1.06% 4.05%
After Taxes on 22.88)% 0.85)% .33%
Distributions ( ( 2
After Taxes on 12.64)% .84% .28%
Distributions and
Sale of Shares ( 0 3

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

Louisiana Municipal Income Fund
Total returns for Class A Shares and Class B Shares are given for the one-year, five-year,
ten-year and/or Start of Performance periods ended August 31, 2002.

Yield and Tax Equivalent Yield are given for the 30-day period ended August 31, 2002.

30-Day
---------------- Period 5 Years 10
1 Year Years
Class A Shares
Total Return N/A
Before Taxes 2.17% 5.16% 5.88%
After Taxes on .16% .76%
Distributions 2 5.05% 5
After Taxes on .06% .77%
Distributions and
Sale of Shares 3 5.07% 5
Yield 3.48% N/A N/A N/A
Tax Equivalent 6.28% N/A N/A N/A
Yield
30-Day Start of Performance
Period on November 15, 2001
Class B Shares
Total Return N/A
Before Taxes (1.90)%
After Taxes on 1.91)%
Distributions (
After Taxes on .06%
Distributions and
Sale of Shares 0
Yield 3.69% N/A
Tax Equivalent 6.66% N/A
Yield

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

Mid Cap Equity Fund
Total returns for Class A Shares and Class B Shares are given for the one-year, five-year,
ten-year and/or Start of Performance periods ended August 31, 2002.

1 Year 5 Years10 Years
Class A Shares*
Total Return
Before Taxes (12.40)7.58% 12.66%
After Taxes on 12.50) 2.45%
Distributions ( 7.18% 1
After Taxes on 7.55)% 1.02%
Distributions and
Sale of Shares ( 6.29% 1

Start of
1 Year Performance
on July 13, 1998
Class B Shares
Total Return
Before Taxes ((((13.85)% 4.65%
After Taxes on (((1 97)%
Distributions ( 3. 9.74%
After Taxes on 8.(8 9)%
Distributions and
Sale of Shares ( .3 3.84%

* Hibernia Mid Cap Equity Fund, Class A Shares, is the successor to a collective trust
fund. The quoted performance data includes performance of the collective trust fund for the
period from 8/31/90 to 7/12/98 when the Fund commenced operation, as adjusted to reflect
the Fund's anticipated expenses. The collective trust fund was not registered under the
1940 Act and therefore was not subject to certain investment restrictions imposed by the
1940 Act. If the collective trust fund had been registered under the 1940 Act, the
performance may have been adversely affected.
--------------------------------------------------------------------------------------------

Total Return Bond Fund
Total returns are given for the one-year, five-year and Start of Performance periods ended
August 31,2002.

Yield is given for the 30-day period ended August 31, 2002.

Start of
---------------- 30- Performance
Day on November
Period 1 Year 5 2, 1992
Years
Total Return N/A
Before Taxes 2.27% 5.77% 5.92%
After Taxes on .17% .51%
Distributions 0 3.38% 3
After Taxes on .32% .52%
Distributions and
Sale of Shares 1 3.41% 3
Yield 3.91% N/A N/A N/A

U.S. Government Income Fund
--------------------------------------------------------------------------------------------
Total returns are given for the one-year, five-year and ten-year periods ended August 31,
2002.

Yield is given for the 30-day period ended August 31, 2002.

30-
---------------- Day
Period 1 Year 5 Years10 Years

Total Return N/A
Before Taxes 4.15% 6.28% 5.91%
After Taxes on 2.00% 3.91% 3.34%
Distributions
After Taxes on
Distributions ----- 2.48% 3.82% 3.40%
and Sale of
Shares
Yield 3.87% N/A N/A N/A

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

Cash Reserve Fund
Total returns for Class A Shares and Class B Shares are given for the one-year, five-year,
ten-year and/or Start of Performance periods ended August 31, 2002.

Yield and Effective Yield are given for the 7-day period ended August 31, 2002.

7-Day Period 1 Year 5 Years 10 Years
Class A Shares
Total Return N/A 1.27% 4.01% 3.97%
Yield 1.23% N/A N/A N/A
Effective Yield 1.23% N/A N/A N/A

--------------------------------------------------------------------------------------------
Start of Performance
7-Day Period 1 Year on September 4, 1998
Class B Shares
Total Return N/A (4.66%) 2.41%
Yield 0.98% N/A N/A
Effective Yield 0.98% N/A N/A

U.S. Treasury Money Market Fund
--------------------------------------------------------------------------------------------
Total returns are given for the one-year, five-year and Start of Performance periods ended
August 31, 2002.

Yield and Effective Yield are given for the 7-day period ended August 31, 2002.

Start of
7-Day Period 1 Year 5 Years Performance
on July 16, 1993
Total Return N/A 1.38% 4.06% 4.23%
Yield 2.79% N/A N/A N/A
Effective Yield 2.82% N/A N/A N/A

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

The average annual total return for Shares is the average compounded rate of return for a
given period that would equate a $10,000 initial investment to the ending redeemable value
of that investment. The ending redeemable value is computed by multiplying the number of
Shares owned at the end of the period by the NAV per Share at the end of the period. The
number of Shares owned at the end of the period is based on the number of Shares purchased
at the beginning of the period with $10,000, less any applicable sales charge, adjusted
over the period by any additional Shares, assuming the annual reinvestment of all dividends
and distributions. Total returns after taxes are calculated in a similar manner, but
reflect additional standard assumptions required by the SEC.

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

Yield, Effective Yield and Tax-Equivalent Yield
The yield of the Equity and Income Fund Shares is calculated by dividing: (i) the net
investment income per Share earned by the Shares over a 30-day period; by (ii) the maximum
offering price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated during the
30-day period is assumed to be generated each month over a 12-month period and is
reinvested every six months. The tax-equivalent yield of Louisiana Municipal Income Fund
Shares is calculated similarly to the yield, but is adjusted to reflect the taxable yield
that Shares would have had to earn to equal the actual yield, assuming the maximum combined
federal and state tax rate. The yield, effective yield and tax-equivalent yield do not
necessarily reflect income actually earned by Shares because of certain adjustments
required by the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.

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

The effective yield of Money Market Fund Shares is calculated by compounding the
unannualized base-period return by: adding one to the base-period return, raising the sum
to the 365/7th power; and subtracting one from the result. The tax-equivalent yield of the
Louisiana Municipal Income Fund's Shares is calculated similarly to the yield, but is
adjusted to reflect the taxable yield that Shares would have had to earn to equal the
actual yield, assuming the maximum combined federal and state tax rate.

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

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

TAX EQUIVALENCY TABLE
TAXABLE YIELD EQUIVALENT FOR 2002
STATE OF LOUISIANA

------------ ---------- ---------- --------------------------------------------
COMBINED
FEDERAL 14.00% 21.00% 33.00% 36.00% 41.00% 44.60%
& STATE

------------ ------------------------------------------------------------------
------------ ---------- ---------- --------------------------------------------
JOINT $0 - $12,001 - $46,701- $112,851- $171,951- OVER
RETURN: $12,000 $46,700 $112,850 $171,950 $307,050 $307,050

------------
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT

------------ ---------- ---------- --------------------------------------------
------------ ---------- ---------- --------------------------------------------
0.50% 0.58% 0.63% 0.75% 0.78% 0.85% 0.90%

1.00% 1.16% 1.27% 1.49% 1.56% 1.69% 1.81%

1.50% 1.74% 1.90% 2.24% 2.34% 2.54% 2.71%

2.00% 2.33% 2.53% 2.99% 3.13% 3.39% 3.61%

2.50% 2.91% 3.16% 3.73% 3.91% 4.24% 4.51%

3.00% 3.49% 3.80% 4.48% 4.69% 5.08% 5.42%

3.50% 4.07% 4.43% 5.22% 5.47% 5.93% 6.32%

4.00% 4.65% 5.06% 5.97% 6.25% 6.78% 7.22%

4.50% 5.23% 5.70% 6.72% 7.03% 7.63% 8.12%

5.00% 5.81% 6.33% 7.46% 7.81% 8.47% 9.03%

5.50% 6.40% 6.96% 8.21% 8.59% 9.32% 9.93%

6.00% 6.98% 7.59% 8.96% 9.38% 10.17% 10.83%

6.50% 7.56% 8.23% 9.70% 10.16% 11.02% 11.73%

7.00% 8.14% 8.86% 10.45% 10.94% 11.86% 12.64%

7.50% 8.72% 9.49% 11.19% 11.72% 12.71% 13.54%

8.00% 9.30% 10.13% 11.94% 12.50% 13.56% 14.44%

8.50% 9.88% 10.76% 12.69% 13.28% 14.41% 15.34%

9.00% 10.47% 11.39% 13.43% 14.06% 15.25% 16.25%

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

TAX EQUIVALENCY TABLE
TAXABLE YIELD EQUIVALENT FOR 2002
STATE OF LOUISIANA

------------ ---------- ---------- --------------------------------------------
COMBINED
FEDERAL 12.00% 19.00% 33.00% 36.00% 41.00% 44.60%
& STATE

------------ ------------------------------------------------------------------
------------ ------------------------------------------------------------------
SINGLE $0 - $6,001 - $27,951- $67,701- $141,251- OVER
RETURN: $6,000 $27,950 $67,700 $141,250 $307,050 $307,050

------------ ------------------------------------------------------------------
------------
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT

------------ ---------- ---------- --------------------------------------------
------------ ---------- ---------- --------------------------------------------
0.50% 0.57% 0.62% 0.75% 0.78% 0.85% 0.90%

1.00% 1.14% 1.23% 1.49% 1.56% 1.69% 1.81%

1.50% 1.70% 1.85% 2.24% 2.34% 2.54% 2.71%

2.00% 2.27% 2.47% 2.99% 3.13% 3.39% 3.61%

2.50% 2.84% 3.09% 3.73% 3.91% 4.24% 4.51%

3.00% 3.41% 3.70% 4.48% 4.69% 5.08% 5.42%

3.50% 3.98% 4.32% 5.22% 5.47% 5.93% 6.32%

4.00% 4.55% 4.94% 5.97% 6.25% 6.78% 7.22%

4.50% 5.11% 5.56% 6.72% 7.03% 7.63% 8.12%

5.00% 5.68% 6.17% 7.46% 7.81% 8.47% 9.03%

5.50% 6.25% 6.79% 8.21% 8.59% 9.32% 9.93%

6.00% 6.82% 7.41% 8.96% 9.38% 10.17% 10.83%

6.50% 7.39% 8.02% 9.70% 10.16% 11.02% 11.73%

7.00% 7.95% 8.64% 10.45% 10.94% 11.86% 12.64%

7.50% 8.52% 9.26% 11.19% 11.72% 12.71% 13.54%

8.00% 9.09% 9.88% 11.94% 12.50% 13.56% 14.44%

8.50% 9.66% 10.49% 12.69% 13.28% 14.41% 15.34%

9.00% 10.23% 11.11% 13.43% 14.06% 15.25% 16.25%

PERFORMANCE COMPARISONS
Advertising and sales literature may include:

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

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

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

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

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

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

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

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

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

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

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

oStandards & Poor's 400 Mid Cap Index is a capitalization weighted index of common stocks
representing all major industries in the mid range of the U.S. stock market.

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

Lehman Brothers 10-Year State General Obligations Bond Index is an unmanaged index
comprised of state general obligation debt issues with maturity ranges between 9 and 11
years.

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

oSalomon Brothers Broad Investment Grade Bond Index is an unmanaged market value weighted index
composed of over 4,000 individually priced securities with a quality rating of at least
BBB. Each issue has a minimum maturity of one year with an outstanding par amount of at
least $25 million.

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

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

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

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

Financial Information

The Financial Statements for the Funds for the fiscal year ended August 31, 2002, are
incorporated herein by reference to the combined Annual Report to Shareholders of Capital
Appreciation Fund, Louisiana Municipal Income Fund, Mid Cap Equity Fund, Total Return Bond
Fund, U.S. Government Income Fund, Cash Reserve Fund and U.S. Treasury Money Market Fund
dated August 31, 2002.

Investment Ratings

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A - Bonds which are rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present which suggest a susceptibility
to impairment some time in the future.

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

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

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

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

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

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

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

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

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

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

- Leading market positions in well established industries.

- High rates of return on funds employed.

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

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

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

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

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

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

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

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

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

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

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

A--Bonds which are rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present which suggest a susceptibility
to impairment sometime in the future.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

o Leading market positions in well-established industries;

o High rates of return on funds employed;

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

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

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

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

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

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

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

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

Addresses

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

Hibernia Louisiana Municipal Income Fund - Class A Shares and Class B Shares

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

Hibernia Total Return Bond Fund

Hibernia U.S. Government Income Fund

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

Hibernia U.S. Treasury Money Market Fund

(Portfolios of Hibernia Funds)

5800 Corporate Drive
Pittsburgh, PA 15237-7010

Distributor
Edgewood Services, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Investment Adviser
Hibernia Asset Management
Attention: Hibernia Funds
P.O. Box 61540
New Orleans, LA 70161

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

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

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