ARCH FUND INC, 497, 1997-11-25

ARCH FUND INC
497, 1997-11-25

Previous: PIONEER MID CAP FUND, NSAR-B, 1997-11-25

Next: ARCH FUND INC, 40-17F2, 1997-11-25

<PAGE> 1

THE ARCH FUND(R), INC.

THE ARCH GROWTH EQUITY PORTFOLIO

TRUST SHARES

<TABLE>
<S> <C>
For information, write: Or call your investment
P.O. Box 78069 representative or
St. Louis, Missouri 63178 the ARCH Funds' Service Center
at 1-800-452-4015
</TABLE>

The ARCH Fund, Inc. is an open-end management investment company that
currently offers Shares in eighteen investment portfolios. This Prospectus
describes the Trust Shares of the ARCH GROWTH EQUITY PORTFOLIO (the
"Portfolio"). Trust Shares are offered to financial institutions acting on their
own behalf or on behalf of certain qualified accounts.

THE ARCH GROWTH EQUITY PORTFOLIO'S investment objective is capital
appreciation. The Portfolio seeks to achieve this objective by investing
primarily in equity securities of companies selected on the basis of assessment
of earnings and the risk and volatility of each company's business. Other
factors, such as product position or market share, will also be considered.

Mississippi Valley Advisors Inc. ("MVA" or the "Adviser"), a wholly-owned
subsidiary of Mercantile Bank National Association ("Mercantile"), acts as
investment adviser for the Portfolio; Mercantile serves as custodian; BISYS Fund
Services Ohio, Inc. (the "Administrator") serves as administrator; and BISYS
Fund Services (the "Distributor") serves as sponsor and distributor.

This Prospectus sets forth concisely certain information about the
Portfolio that prospective investors should know before investing. Investors
should read this Prospectus and retain it for future reference. Additional
information about the Portfolio, contained in a Statement of Additional
Information dated September 2, 1997 (as revised November 21, 1997), has been
filed with the Securities and Exchange Commission and is incorporated by
reference in its entirety into this Prospectus. An investor may obtain the
Statement of Additional Information without charge by writing the Fund at P.O.
Box 78069, St. Louis, Missouri 63178 or by calling 1-800-452-4015.

Portfolio Shares are not bank deposits, are not federally insured or
guaranteed by the U.S. Government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other governmental agency, and are not the
obligations of or guaranteed or otherwise supported by any bank. An investment
in the Portfolio involves investment risk, including possible loss of principal.
------------------------

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

SEPTEMBER 2, 1997
(AS REVISED NOVEMBER 21, 1997)
<PAGE> 2

HIGHLIGHTS

The ARCH Fund, Inc. (the "Fund") is an open-end management investment
company (commonly known as a mutual fund) registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund offers investment
opportunities in eighteen investment portfolios. This Prospectus relates to one
of those portfolios: the ARCH GROWTH EQUITY PORTFOLIO (the "Portfolio"). In
addition, the Fund offers investment opportunities in the ARCH Treasury Money
Market, Money Market, Tax-Exempt Money Market, U.S. Government Securities,
Intermediate Corporate Bond, Bond Index, Government & Corporate Bond,
Short-Intermediate Municipal, Missouri Tax-Exempt Bond, National Municipal Bond,
Equity Income, Equity Index, Growth & Income Equity, Small Cap Equity, Small Cap
Equity Index, International Equity and Balanced Portfolios, which are described
in separate Prospectuses. The Portfolio represents a separate pool of assets
with a different investment objective and different policies than the Fund's
other portfolios (as described below under "Investment Objective, Policies and
Risk Considerations"). MVA serves as adviser, Mercantile as custodian, BISYS
Fund Services Ohio, Inc. as administrator and BISYS Fund Services as sponsor and
distributor. For information on expenses, fee waivers and services, see "Certain
Financial Information" and "Management of the Fund."

The following information generally describes the Portfolio and its
investment objective. There can be no assurance that the Portfolio will be able
to achieve its investment objective.

The Portfolio is designed for investors who seek capital growth and who are
prepared to accept the risks associated with an investment in equity securities.
See "Investment Objective, Policies and Risk Considerations" below.

Investors should note that the Portfolio may, subject to its investment
policies and limitations, invest in the securities of foreign issuers, enter
into repurchase agreements and reverse repurchase agreements, make securities
loans, invest in put and call options and futures and options on futures, and
make limited investments in illiquid securities and securities issued by other
investment companies. These investment practices involve investment risks of
varying degrees. For example, the securities of a foreign issuer entail certain
inherent risks, such as future political and economic developments and the
adoption of foreign governmental restrictions, that might adversely affect the
payment of dividends or principal and interest. Default by a counterparty to a
repurchase agreement or securities lending transaction could expose the
Portfolio to loss because of adverse market action or possible delay in
disposing of the underlying collateral. Reverse repurchase agreements are
subject to the risk that the market value of the securities sold by the
Portfolio will decline below the repurchase price which the Portfolio is
obligated to pay. Purchasing options is a specialized investment technique which
entails a substantial risk of loss of amounts paid as premiums to option
writers. There is no assurance that a liquid market will exist for a particular
futures contract at any particular time. The Portfolio may engage in short-term
trading, which may also involve greater risk and increase the Portfolio's
expenses. See "Investment Objective, Policies and Risk Considerations" below and
the Statement of Additional Information under "Investment Objective and
Policies."

The Fund offers investors the opportunity to invest in a variety of
professionally managed investments without having to become involved with
detailed management, accounting and safekeeping procedures normally related to
direct investments in securities. The Fund also offers the availability of a
family of eighteen mutual funds should your investment goals change.

2
<PAGE> 3

This Prospectus describes the Trust Shares of the Portfolio. For
information on purchasing, exchanging or redeeming Trust Shares of the
Portfolio, please see "How to Purchase and Redeem Shares" below.

3
<PAGE> 4

CERTAIN FINANCIAL INFORMATION

Shares of the Portfolio have been classified into four classes of
Shares -- Trust Shares, Institutional Shares, Investor A Shares and Investor B
Shares. Shares of each class in the Portfolio represent equal, pro rata
interests in the investments held by the Portfolio and are identical in all
respects, except that Shares of each class bear separate distribution and/or
shareholder administrative servicing fees and certain other operating expenses,
and enjoy certain exclusive voting rights on matters relating to these fees. See
"Other Information Concerning the Fund and Its Shares," "Management of the
Fund -- Administrative Services Plan" and "Management of the Fund -- Custodian
and Transfer Agent" below. As a result of payments for distribution and/or
shareholder administrative servicing fees and certain other operating expenses
that may be made in differing amounts, the net investment income of Trust
Shares, Institutional Shares, Investor A Shares and Investor B Shares in the
Portfolio can be expected, at any given time, to be different.

The Portfolio commenced operations on January 4, 1993 as the Arrow Equity
Portfolio, a separate investment portfolio (the "Predecessor Portfolio") of
Arrow Funds, which was organized as a Massachusetts business trust. On November
21, 1997, the Predecessor Portfolio was reorganized as a new portfolio of the
Fund. Prior to the reorganization, the Predecessor Portfolio offered and sold
shares of beneficial interest that were similar to the Fund's Investor A Shares.

4
<PAGE> 5

EXPENSE SUMMARY FOR TRUST SHARES

<TABLE>
<CAPTION>
GROWTH EQUITY
PORTFOLIO
-------------
<S> <C>
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fees................................................... .75%
12b-1 Fees................................................................. .00%
Other Expenses (including administration fees, administrative services fees
and other expenses) (net of fee waivers and expense
reimbursements)(1,2).................................................... .25%
----
TOTAL PORTFOLIO OPERATING EXPENSES (net of fee waivers and expense
reimbursements)(3)......................................................... 1.00%
====
</TABLE>

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

(1) Administrative services fees are payable at an annual rate not to exceed
.30%. Without fee waivers, administration fees would be .20%.

(2) Without fee waivers and expense reimbursements, Other Expenses would be .65%
and Total Portfolio Operating Expenses would be 1.40%. Such fee waivers and
expense reimbursements are expected to continue during the current fiscal
year.

EXAMPLE

<TABLE>
<S> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end of
each period:
</TABLE>

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Growth Equity Portfolio............................................. $ 10 $32
</TABLE>

THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN. Information about the actual performance of the
Predecessor Portfolio is contained in the Arrow Funds' Annual and Semi-Annual
Reports dated September 30, 1996 and March 31, 1997, respectively, which may be
obtained without charge by contacting the Fund at the address or telephone
number provided on page 1 of this Prospectus.

The purpose of the foregoing table is to assist in understanding the
various costs and expenses that an investor in the Portfolio's Trust Shares will
bear directly or indirectly. The table reflects the expenses which the Portfolio
expects to incur during the next twelve months on its Trust Shares. For more
complete descriptions of the various costs and expenses, see "Management of the
Fund" in this Prospectus and the Statement of Additional Information. The table
and example have not been audited by the Fund's independent auditors and do not
reflect any charges that may be imposed by financial institutions on their
customers.

5
<PAGE> 6

INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS

Although management will use its best efforts to achieve the investment
objective of the Portfolio, there can be no assurance that it will be able to do
so. The investment objective of the Portfolio may not be changed without the
affirmative vote of a majority of the outstanding Shares of the Portfolio.
Unless otherwise indicated, the investment policies and limitations set forth
below may be changed without shareholder approval, although shareholders will be
notified before any material change in these policies and limitations become
effective.

The Portfolio's investment objective is capital appreciation. The Portfolio
seeks to achieve this objective by investing primarily in equity securities of
companies selected on the basis of assessment of earnings and the risk and
volatility of each company's business. Other factors, such as product position
or market share, will also be considered by the Adviser.

The Portfolio invests primarily in equity securities of companies selected
by the Adviser on the basis of traditional research techniques. The equity
securities in which the Portfolio invests are primarily those of middle to large
capitalization issuers whose shares are listed on the New York and American
Stock Exchanges and Nasdaq. Company earnings are the primary consideration in
selecting portfolio securities. The Portfolio may invest in common stocks,
preferred stocks, convertible securities, corporate bonds, debentures, notes,
warrants, and put and call options on stocks, although normally it will invest
at least 65% of its total assets in common stocks. The lowest rated debt
obligation in which the Portfolio will invest will be rated Baa or better by
Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard &
Poor's Ratings Group ("S&P") or Fitch Investors Service, Inc. ("Fitch").
Securities rated Baa or BBB have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to weakened
capacity to make principal and interest payments than higher rated securities.
Downgrades will be evaluated on a case by case basis by the Adviser. The Adviser
will determine whether or not the security continues to be an acceptable
investment. If it is determined not to be an acceptable investment, the security
will be sold. The applicable ratings categories are described in Appendix A to
the Statement of Additional Information.

The Portfolio may invest in the securities of foreign issuers which are
freely traded on United States securities exchanges or in the over-the-counter
market in the form of depository receipts. Securities of a foreign issuer may
present greater risks in the form of nationalization, confiscation, domestic
marketability, or other national or international restrictions. As a matter of
practice, the Portfolio will not invest in the securities of a foreign issuer if
any such risk appears to the Adviser to be substantial. The Portfolio may not
invest more than 5% of its total assets in securities of foreign issuers. For
additional information on the risks of foreign securities, see "Risk Factors"
below.

In such proportions as, in the judgment of the Adviser, prevailing market
conditions warrant, the Portfolio may, for temporary defensive purposes, invest
in short-term money market instruments, securities issued and/or guaranteed as
to payment of principal and interest by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements.

RISK FACTORS

MARKET RISK. The Portfolio invests primarily in equity securities. As with
other mutual funds that invest primarily in equity securities, the Portfolio is
subject to market risks. That is, the possibility exists that common stocks will
decline over short or even extended periods of time and both the U.S. and

6
<PAGE> 7

certain foreign equity markets tend to be cyclical, experiencing both periods
when stock prices generally increase and periods when stock prices generally
decrease.

INTEREST RATE RISK. Generally, the market value of fixed income securities
held by the Portfolio can be expected to vary inversely to changes in prevailing
interest rates. During periods of declining interest rates, the market value of
investment portfolios comprised primarily of fixed income securities will tend
to increase, and during periods of rising interest rates, the market value will
tend to decrease. Fixed income securities with longer maturities, which tend to
produce higher yields, are subject to potentially greater capital appreciation
and depreciation than obligations with shorter maturities. Changes in the
financial strength of an issuer or changes in the ratings of any particular
security may also offset the value of these investments. Fluctuations in the
market value of fixed income securities subsequent to their acquisition will not
offset cash income from such securities but will be reflected in the Portfolio's
net asset value.

RISKS ASSOCIATED WITH FOREIGN SECURITIES. Investments in securities of
foreign issuers, whether made directly or indirectly, carry certain risks not
ordinarily associated with investments in securities of domestic issuers. Such
risks include future political and economic developments, and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions. In addition, with respect to certain countries, there is the
possibility of expropriation of assets, confiscatory taxation, political or
social instability or diplomatic developments which could adversely affect
investments in those countries.

There may be less publicly available information about a foreign company
than about a U.S. company, and foreign companies may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to or as uniform as those of U.S.-based companies. Foreign securities
markets, while growing in volume, have, for the most part, substantially less
volume than U.S. markets, and securities of many foreign companies are less
liquid and their prices more volatile than securities of comparable U.S.-based
companies. There is generally less government supervision and regulation of
foreign exchanges, brokers and issuers than there is in the United States. In
the event of a default by the issuer of a foreign security, it may be more
difficult to obtain or enforce a judgment against such issuer than it would be
against a domestic issuer. In addition, foreign banks and savings and loan
associations and foreign branches of U.S. banks and savings and loan
associations are subject to less stringent reserve requirements and to different
accounting, auditing, reporting, and recordkeeping standards than those
applicable to domestic branches of U.S. banks and savings and loan associations.

OTHER APPLICABLE POLICIES

Investment methods described in this Prospectus are among those which the
Portfolio has the power to utilize. Some may be employed on a regular basis;
others may not be used at all. Accordingly, reference to any particular method
or technique carries no implication that it will be utilized or, if it is, that
it will be successful.

U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities have historically involved little
risk of loss of principal if held to maturity. However, due to fluctuations in
interest rates, the market value of such securities may vary during the period a
shareholder owns Shares of the Portfolio. The U.S. Government securities in
which the

7
<PAGE> 8

Portfolio invests are either guaranteed or issued by the U.S. Government, its
agencies, or instrumentalities. These securities include, but are not limited
to, direct obligations of the U.S. Treasury such as U.S. Treasury bills, notes
and bonds; notes, bonds, and discount notes issued or guaranteed by U.S.
Government agencies and instrumentalities supported by the full faith and credit
of the United States; notes, bonds, and discount notes of U.S. Government
agencies or instrumentalities which receive or have access to federal funding;
and notes, bonds, and discount notes of other U.S. Government instrumentalities
supported only by the credit of the instrumentalities.

Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. Government are backed by the full faith and credit of the U.S.
Treasury. No assurances can be given that the U.S. Government will provide
financial support to other agencies or instrumentalities, since it is not
obligated to do so. These instrumentalities are supported by the issuer's right
to borrow an amount limited to a specific line of credit from the U.S. Treasury;
the discretionary authority of the U.S. Government to purchase certain
obligations of an agency or instrumentality; or the credit of the agency or
instrumentality.

MONEY MARKET INSTRUMENTS. Under certain circumstances described above, the
Portfolio may purchase "money market instruments," including commercial paper
and bank obligations.

Investment by the Portfolio in commercial paper will consist of issues that
are rated at the time of purchase in the highest rating category assigned by
S&P, Moody's or Fitch or, if unrated, deemed to be of comparable quality by the
Adviser at the time of purchase. Commercial paper may include variable and
floating rate instruments. See "Other Applicable Policies -- Variable and
Floating Rate Instruments" below.

Bank obligations include bankers' acceptances, negotiable certificates of
deposit and non-negotiable time deposits of U.S. or foreign banks and savings
and loan associations (collectively, "banks"), if the bank has capital, surplus
and undivided profits at the time of purchase in excess of $100,000,000 or if
the principal amount of the obligation is insured in full by the Bank Insurance
Fund or the Savings Association Insurance Fund, both of which are administered
by the Federal Deposit Insurance Corporation. Although the Portfolio may invest
in obligations of foreign banks or foreign branches of U.S. banks only when the
Adviser determines that the instrument presents minimal credit risks, such
investments nevertheless entail risks that are different from those of
investments in domestic obligations of U.S. banks. Foreign banks and foreign
branches of U.S. banks are subject to less stringent reserve requirements and to
different accounting, auditing, reporting and recordkeeping standards than those
applicable to domestic branches of U.S. banks. Investments in the obligations of
foreign banks or foreign branches of U.S. banks will not exceed 25% of the
Portfolio's total assets at the time of purchase.

VARIABLE AND FLOATING RATE INSTRUMENTS. The Portfolio may purchase rated
or unrated variable and floating rate instruments. These instruments may include
variable rate master demand notes that permit the indebtedness thereunder to
vary in addition to providing for periodic adjustments in the interest rate.
Unrated instruments purchased by the Portfolio will be determined by the Adviser
to be of comparable quality at the time of purchase to rated instruments that
may be purchased. The absence of an active secondary market for a particular
variable or floating rate instrument, however, could make it difficult for the
Portfolio to dispose of an instrument if the issuer were to default on its
payment obligation. The Portfolio could, for these or other reasons, suffer a
loss with respect to such instruments.

8
<PAGE> 9

REPURCHASE AGREEMENTS. Under certain circumstances described above and
subject to its investment objective and policies, the Portfolio may agree to
purchase U.S. Government securities or other securities from financial
institutions such as banks and broker-dealers, subject to the seller's agreement
to repurchase them at a mutually agreed-upon date and price ("repurchase
agreements"). The Portfolio will enter into repurchase agreements only with
financial institutions such as banks and broker-dealers that the Adviser
believes to be creditworthy. During the term of any repurchase agreement, the
Adviser will continue to monitor the creditworthiness of the seller and will
require the seller to maintain the value of the securities subject to the
agreement at not less than 102% of the repurchase price (including accrued
interest). Default by a seller could expose the Portfolio to possible loss
because of adverse market action or possible delay in disposing of the
underlying obligations. Because of the seller's repurchase obligations, the
securities subject to repurchase agreements do not have maturity limitations.
Although the Portfolio presently does not intend to enter into repurchase
agreements providing for settlement in more than seven days, the Portfolio has
the authority to do so subject to its limitation on the purchase of illiquid
securities described below. Repurchase agreements are considered to be loans
under the 1940 Act.

REVERSE REPURCHASE AGREEMENTS. Subject to its investment policies and
limitations, the Portfolio may borrow funds for temporary purposes by entering
into reverse repurchase agreements. Pursuant to such agreements, the Portfolio
would sell portfolio securities to financial institutions such as banks and
broker-dealers and agree to repurchase them at an agreed upon date and price.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Portfolio may decline below the repurchase price which
the Portfolio is obligated to pay. Reverse repurchase agreements are considered
to be borrowings by the Portfolio under the 1940 Act.

SECURITIES LENDING. To increase return or offset expenses, the Portfolio
may, from time to time, lend portfolio securities on a short-term basis or a
long-term basis, or both, to broker-dealers, banks or institutional borrowers
pursuant to agreements requiring that the loans be continuously secured by
collateral equal at all times in value to at least the market value of the
securities loaned. Collateral for such loans may include cash or marketable
securities. The collateral must be valued daily and, should the market value of
the loaned securities increase, the borrower must furnish additional collateral
to the lending Portfolio. By lending its securities, the Portfolio can increase
its income by continuing to receive interest on the loaned securities as well as
by either investing the cash collateral in short-term instruments or obtaining
yield in the form of interest paid by the borrower when marketable securities
are used as collateral. In accordance with current Securities and Exchange
Commission ("SEC") policies, the Portfolio is currently limiting its securities
lending to one-third of its total assets. Loans are subject to termination by
the Portfolio or the borrower at any time.

PUT AND CALL OPTIONS. The Portfolio may purchase put options on portfolio
securities. These options will be used as a hedge to attempt to protect
securities which the Portfolio holds against decreases in value. The Portfolio
may also write covered call options on all or any portion of its portfolio to
generate income. The Portfolio may only write call options on securities either
held in its portfolio, or which it has the right to obtain without payment of
further consideration, or for which it has segregated cash or liquid securities
in the amount of any additional consideration.

9
<PAGE> 10

investment dealers and other financial institutions (such as commercial banks or
savings associations) deemed creditworthy by the Adviser.

Over-the-counter options are two-party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options are
third party contracts with standardized strike prices and expiration dates and
are purchased from a clearing corporation. Exchange-traded options have a
continuous liquid market while over-the-counter options may not. The Portfolio
will not buy call options or write put options, other than to close out open
option positions, without further notification to shareholders.

When the Portfolio writes a call option, it risks not participating in any
rise in the value of the underlying security. In addition, when the Portfolio
purchases puts on financial futures contracts to protect against declines in
prices of portfolio securities, 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 its portfolio. This may cause the futures contract
and its corresponding put to react differently than the portfolio securities to
market changes. In addition, the Adviser could be incorrect in its expectations
about the direction or extent of market factors such as interest rate movements.
In such an event, the Portfolio may lose the purchase price of the put option.
Finally, it is not certain that a secondary market for options will exist at all
times. Although the Adviser will consider liquidity before entering into option
transactions, there is no assurance that a liquid secondary market on an
exchange will exist for any particular option or at any particular time. The
Portfolio's ability to establish and close out option positions depends on this
secondary market.

FUTURES AND OPTIONS ON FUTURES. The Portfolio may purchase and sell
futures contracts to hedge against the effects of changes in the value of
portfolio securities due to anticipated changes in interest rates and market
conditions. Futures contracts call for the delivery of particular debt
instruments at a certain time in the future. The seller of the contract agrees
to make delivery of the type of instrument called for in the contract and the
buyer agrees to take delivery of the instrument at the specified future time.

Stock index futures contracts are based on indices that reflect the market
value of common stock of the firms included in the indices. An index futures
contract is an agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to the differences between the value of the
index at the close of the last trading day of the contract and the price at
which the index contract was originally written.

The Portfolio may also write options and purchase put options on futures
contracts as a hedge to attempt to protect its portfolio securities against
decreases in value. When the Portfolio writes a call option on a futures
contract, it is undertaking the obligation of selling a futures contract at a
fixed price at any time during a specified period if the option is exercised.
Conversely, as purchaser of a put option on a futures contract, the Portfolio is
entitled (but not obligated) to sell a futures contract at the fixed price
during the life of the option.

The Portfolio may also write put options and purchase call options on
futures contracts as a hedge against rising purchase prices of portfolio
securities. The Portfolio will use these transactions to attempt to protect its
ability to purchase portfolio securities in the future at price levels existing
at the time it enters into the transactions. When the Portfolio writes a put
option on a futures contract, it is undertaking to buy a particular futures
contract at a fixed price at any time during a specified period if

10
<PAGE> 11

the option is exercised. As a purchaser of a call option on a futures contract,
the Portfolio is entitled (but not obligated) to purchase a futures contract at
a fixed price at any time during the life of the option.

The Portfolio may not purchase or sell futures contracts or related options
if immediately thereafter the sum of the amount of margin deposits on the
Portfolio's existing futures positions and premiums paid for related options
would exceed 5% of the market value of its total assets. When the Portfolio
purchases futures contracts, an amount of cash and liquid securities, equal to
the underlying commodity value of the futures contracts (less any related margin
deposits), will be deposited in a segregated account with the custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contracts is unleveraged. When the Portfolio sells
futures contracts, it will either own or have the right to receive the
underlying future or security, or will make deposits to collateralize the
position as discussed above.

When the Portfolio uses 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 its
portfolio. This may cause the futures contract and any related options to react
differently than the portfolio securities to market changes. In addition, the
Adviser could be incorrect in its expectations about the direction or extent of
market factors such as stock price movements. In these events, the Portfolio may
lose money on the futures contract or option.

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

SECURITIES OF OTHER INVESTMENT COMPANIES. The Portfolio may invest in
securities issued by other investment companies within the limits prescribed by
the 1940 Act, which include, subject to certain exceptions, a prohibition on the
Portfolio investing more than 10% of the value of its total assets in such
securities. Investment companies in which the Portfolio may invest may impose
distribution fees as well as other types of commissions or charges. Such charges
will be payable by the Portfolio and, therefore, will be borne indirectly by its
shareholders. The Portfolio will invest in securities issued by other investment
companies primarily for the purpose of investing short-term cash which has not
yet been invested in other portfolio securities. See the Statement of Additional
Information under "Investment Objective and Policies -- Securities of Other
Investment Companies."

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Portfolio purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete these
transactions may cause the Portfolio to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into these
transactions, and the market value of the securities purchased may vary from the
purchase prices.

The Portfolio may dispose of a commitment prior to settlement if the
Adviser deems it appropriate to do so. In addition, the Portfolio may enter into
transactions to sell its purchase commitments to third parties at current market
values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Portfolio may realize short-term profits or
losses upon the sale of such commitments.

11
<PAGE> 12

RESTRICTED AND ILLIQUID SECURITIES. The Portfolio may invest in restricted
securities. Restricted securities are any securities in which the Portfolio may
invest pursuant to its investment objective and policies but which are subject
to restriction on resale under federal securities law. The Portfolio will limit
investments in illiquid securities (including certain restricted securities not
determined by the Fund's Board of Directors to be liquid, non-negotiable time
deposits, over-the-counter options, and repurchase agreements providing for
settlement more than seven days after notice) to no more than 15% of its net
assets. The Portfolio intends that investments in securities that are not
registered under the Securities Act of 1933, as amended, but may be purchased by
institutional buyers under Rule 144A and for which a liquid trading market
exists, as determined by the Board of Directors of the Fund or the Adviser
(pursuant to guidelines adopted by the Board), will not be subject to the
Portfolio's 15% limitation on illiquid securities. This investment practice
could have the effect of increasing the level of illiquidity in the Portfolio to
the extent that qualified institutional buyers become, for a time, uninterested
in purchasing these restricted securities.

The Portfolio may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended. Section 4(2) commercial paper is restricted as to disposition
under federal securities law, and is generally sold to institutional investors,
such as the Portfolio, who agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) commercial paper is
normally resold to other institutional investors through or with the assistance
of the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity. The Portfolio believes that Section 4(2)
commercial paper and certain other restricted securities, which meet the
criteria for liquidity established by the Fund's Board of Directors, are quite
liquid. Therefore, the Portfolio intends to treat these securities as liquid and
not subject to the investment limitation applicable to illiquid securities. In
addition, because these securities are liquid, the Portfolio will not subject
such securities to the limitation otherwise applicable to restricted securities.

PORTFOLIO TRANSACTIONS. All orders for transactions in securities or
options on behalf of the Portfolio are placed by the Adviser with broker-dealers
that it selects. To the extent permitted by the 1940 Act and guidelines adopted
by the Fund's Board of Directors, the Portfolio may utilize the Distributor or
one or more of its affiliates as a broker in connection with the purchase or
sale of securities when the Adviser believes the charge for the transaction does
not exceed the usual and customary broker's commission.

INVESTMENT LIMITATIONS

The investment limitations set forth below are fundamental policies and may
be changed only by a vote of a majority of the outstanding Shares of the
Portfolio. Other investment limitations that also cannot be changed without a
vote of shareholders are contained in the Statement of Additional Information
under "Investment Objective and Policies."

1. With respect to 75% of the value of its total assets, the Portfolio
will not purchase securities issued by any one issuer (other than cash,
cash items or securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities and repurchase agreements collateralized by
such securities), if as a result more than 5% of the value of its total
assets would be invested in the

12
<PAGE> 13

securities of that issuer. The Portfolio will not acquire more than 10% of
the outstanding voting securities of any one issuer.

2. The Portfolio will not invest 25% or more of the value of its total
assets in any one industry, provided, however, that the Portfolio may
invest more than 25% of the value of its total assets in cash or certain
money market instruments (including instruments issued by a U.S. branch of
a domestic bank or savings and loan association having capital, surplus and
undivided profits in excess of $100,000,000 at the time of investment),
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and repurchase agreements collateralized by such
securities.

3. The Portfolio will not issue senior securities, except that the
Portfolio may borrow money directly or indirectly through reverse
repurchase agreements in amounts up to one-third the value of its total
assets, including the amount borrowed, and except to the extent that the
Portfolio may enter into futures contracts. The Portfolio will not borrow
money or engage in reverse repurchase agreements for investment leverage,
but rather as a temporary, extraordinary, or emergency measure to
facilitate management of its portfolio by enabling the Portfolio to, for
example, meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The Portfolio
will not purchase any securities while any borrowings in excess of 5% of
its total assets are outstanding.

4. The Portfolio will not lend any of its assets except portfolio
securities in an amount up to one-third the value of its total assets. The
Portfolio shall not be prevented from purchasing or holding U.S. Government
obligations, money market instruments, variable rate demand notes, bonds,
debentures, notes, certificates of indebtedness or other debt securities,
entering into repurchase agreements or engaging in other transactions where
permitted by the Portfolio's investment objective, policies and
limitations.

For purposes of Investment Limitation No. 2 above, money market instruments
shall include bankers' acceptances, negotiable certificates of deposit and
negotiable time deposits of U.S. or foreign banks and savings and loan
associations.

Except with respect to the Portfolio's policy regarding the borrowing of
money, if a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting solely from a change in
the value of the Portfolio's securities will not constitute a violation of such
limitation.

PRICING OF SHARES

The Portfolio's net asset value per Share is determined by the
Administrator as of the close of regular trading hours on the New York Stock
Exchange (the "Exchange") (currently 4:00 p.m. Eastern time) on each weekday,
with the exception of those holidays on which the Exchange or the Federal
Reserve Bank of St. Louis are closed (a "Business Day"). Currently, one or both
of these institutions are closed on the customary national business holidays of
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day (observed), Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day and Christmas Day (observed).

13
<PAGE> 14

Securities which are traded on a recognized stock exchange are valued at
the last sale price on the securities exchange on which such securities are
primarily traded or at the last sale price on the national securities market.
Securities traded on only over-the-counter markets are valued on the basis of
market values when available. Securities for which there are no transactions are
valued at the average of the current bid and asked prices. Other securities,
including restricted and other securities for which market quotations are not
readily available, and other assets are valued at fair value by the Adviser
under the supervision of the Board of Directors. Investments in debt securities
with remaining maturities of 60 days or less may be valued based upon the
amortized cost method. For further information about valuation of investments,
see "Net Asset Value" in the Statement of Additional Information.

The public offering price for each class of Shares is based upon net asset
value per Share plus, in the case of Investor A Shares, a front-end sales
charge. A class will calculate its net asset value per Share by adding the value
of the Portfolio's investments, cash and other assets attributable to the class,
subtracting the Portfolio's liabilities attributable to that class, and then
dividing the result by the total number of Shares in the class that are
outstanding. Because the operating expenses of Investor B Shares are higher than
those associated with the other classes of Shares, the net asset value per Share
of Investor B Shares of the Portfolio will generally be lower than the net asset
value per Share of Trust, Institutional or Investor A Shares of the Portfolio.

HOW TO PURCHASE AND REDEEM SHARES

PURCHASE OF SHARES

Trust Shares are sold to financial institutions, such as banks, trust
companies, thrift institutions, mutual funds or other financial institutions
(collectively "financial institutions"), acting on their own behalf or on behalf
of their qualified fiduciary accounts, employee benefit, retirement plan or
other such qualified accounts. Trust Shares are sold to qualified purchasers
without a sales charge imposed by the Fund or the Distributor. Generally,
investors purchase Trust Shares through a financial institution, which is
responsible for transmitting purchase orders directly to the Fund.

Purchases may be effected on Business Days when the Adviser, Distributor
and Mercantile (the Custodian) are open for business. The Fund reserves the
right to reject any purchase order, including purchases made with foreign and
third party drafts or checks.

Financial institutions placing orders directly or on behalf of their
customers should contact the Fund at 1-800-452-4015. Investors may also call the
Fund for information on how to purchase Shares.

All shareholders of record will receive confirmations of Share purchases,
exchanges and redemptions in the mail. If Shares are held in the name of banks
or other financial institutions, such institution is responsible for
transmitting purchase, exchange and redemption orders to the Fund on a timely
basis, recording all purchase, exchange and redemption transactions, and
providing regular account statements which confirm such transactions to
beneficial owners. Payment for orders which are not received or accepted will be
returned after prompt inquiry to the transmitting financial institution.

If purchase orders are received in good form and accepted by the Fund prior
to 4:00 p.m. (Eastern time) on any Business Day, Trust Shares will be priced
according to the net asset value per Share next

14
<PAGE> 15

determined on that day after receipt of the order. Immediately available funds
must be received by the Custodian prior to 4:00 p.m. on the next Business Day
following receipt of such order. If funds are not received by such date, the
order will be cancelled, and notice thereof will be given to the financial
institution placing the order.

EXCHANGE PRIVILEGE

The exchange privilege enables shareholders to exchange Trust Shares of the
Portfolio for Trust Shares of another portfolio offered by the Fund. Exchanges
for Trust Shares in another portfolio are effected at net asset value without
payment of any exchange or sales charges. In addition, Trust Shares of the
Portfolio may be exchanged for Investor A Shares of the Portfolio in connection
with the distribution of assets held in a qualified trust, agency or custodian
account with the trust department of Mercantile or any of its affiliated or
correspondent banks. Such exchanges will also be effected at net asset value
without payment of any exchange or sales charges. The exchange privilege may be
exercised only in those states where the class of Shares of such other portfolio
may be legally sold.

The Fund reserves the right to reject any exchange request. The exchange
privilege may be modified or terminated at any time upon 60 days' written notice
to shareholders. An investor may telephone an exchange request by calling his or
her financial institution, which is responsible for transmitting such exchange
request to the Fund. See "Other Exchange or Redemption Information" below. An
investor should consult the financial institution or the Fund for further
information regarding procedures for exchanging Shares.

In addition to the Growth Equity Portfolio described in this Prospectus,
the Fund currently offers Trust Shares in the following portfolios:

- The ARCH Treasury Money Market Portfolio
- The ARCH Money Market Portfolio
- The ARCH Tax-Exempt Money Market Portfolio
- The ARCH U.S. Government Securities Portfolio
- The ARCH Intermediate Corporate Bond Portfolio
- The ARCH Bond Index Portfolio
- The ARCH Government & Corporate Bond Portfolio
- The ARCH Short-Intermediate Municipal Portfolio
- The ARCH Missouri Tax-Exempt Bond Portfolio
- The ARCH National Municipal Bond Portfolio
- The ARCH Equity Income Portfolio
- The ARCH Equity Index Portfolio
- The ARCH Growth & Income Equity Portfolio
- The ARCH Small Cap Equity Portfolio
- The ARCH Small Cap Equity Index Portfolio
- The ARCH International Equity Portfolio
- The ARCH Balanced Portfolio

For information concerning these portfolios, please call 1-800-452-4015.
Shareholders exercising the exchange privilege with any of the other portfolios
offered by the Fund should request and review the portfolio's prospectus
carefully prior to making an exchange.

15
<PAGE> 16

REDEMPTION OF SHARES

Redemption orders should be placed with or through the same financial
institution that placed the original purchase order. Redemption orders are
effected at the Portfolio's net asset value per Share next determined after
receipt of the order by the Fund. The financial institution is responsible for
transmitting redemption orders to the Fund on a timely basis. Proceeds from
redemptions of Trust Shares of the Portfolio with respect to redemption orders
received and accepted by the Fund before 4:00 p.m. (Eastern time) on a Business
Day normally are sent electronically to the financial institution that placed
the redemption order the next Business Day after the Distributor's receipt of
the order in good form. No charge for sending redemption payments electronically
is currently imposed by the Fund, although a charge may be imposed in the
future. The Fund reserves the right to send redemption proceeds electronically
within seven days after receiving a redemption order if, in the judgment of the
Adviser, an earlier payment could adversely affect the Portfolio.

The Transfer Agent may require a signature guarantee by an eligible
guarantor institution. For purposes of this policy, the term "eligible guarantor
institution" shall include banks, brokers, dealers, credit unions, securities
exchanges and associations, clearing agencies and savings associations as those
terms are defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended. The Transfer Agent reserves the right to reject any signature guarantee
if (1) it has reason to believe that the signature is not genuine, (2) it has
reason to believe that the transaction would otherwise be improper, or (3) the
guarantor institution is a broker or dealer that is neither a member of a
clearing corporation nor maintains net capital of at least $100,000. The
signature guarantee requirement will be waived if all of the following
conditions apply: (1) the redemption check is payable to the shareholder(s) of
record and (2) the redemption check is mailed to the shareholder(s) at the
address of record or the proceeds are either mailed or sent electronically to a
commercial bank account previously designated on the account application. An
investor with questions or needing assistance should contact the financial
institution servicing his or her account or the Distributor. Additional
documentation may be required if the redemption is requested by a corporation,
partnership, trust, fiduciary, executor, or administrator.

Neither the Fund nor its service contractors will be liable for any loss,
damage, expense or cost arising out of any telephone redemption effected in
accordance with the Fund's telephone redemption procedures, upon instructions
reasonably believed to be genuine. The Fund will employ procedures designed to
provide reasonable assurance that instructions by telephone are genuine; if
these procedures are not followed, the Fund or its service contractors may be
liable for any losses due to unauthorized or fraudulent instructions. If, due to
temporary adverse conditions, investors are unable to effect telephone
transactions, Investors are encouraged to follow the procedures described in
"Other Exchange or Redemption Information" below.

OTHER EXCHANGE OR REDEMPTION INFORMATION

During periods of substantial economic or market change or activity,
telephone redemptions or exchanges may be difficult to complete. In such event,
Shares may be redeemed or exchanged by mailing the request directly to the
financial institution through which the original Shares were purchased or
directly to the Fund at P.O. Box 78069, St. Louis, Missouri 63178.

At various times, the Fund may be requested to redeem Shares for which it
has not yet received good payment. In such circumstances, the Fund may delay the
forwarding of proceeds until payment

16
<PAGE> 17

has been collected for the purchase of such Shares which may take up to 15 days
or more. To avoid delay in payment upon redemption shortly after purchasing
Shares, investors should purchase Shares by certified or bank check or by
electronic transfer. The Fund intends to pay cash for all Shares redeemed, but
under abnormal conditions which make payment in cash unwise, the Fund may make
payment wholly or partly in portfolio securities at their then market value
equal to the redemption price. In such cases, an investor may incur brokerage
costs in converting such securities to cash.

A shareholder may be required to redeem Shares in the Portfolio upon 60
days' written notice if the balance in the shareholder's account drops below
$500. The Fund will not require a shareholder to redeem Portfolio Shares if the
value of the shareholder's account drops below $500 due to fluctuations in net
asset value. Share balances may also be redeemed pursuant to arrangements
between financial institutions and their investors.

YIELDS AND TOTAL RETURNS

Yield and total return quotations are computed separately for Trust Shares,
Institutional Shares, Investor A Shares and Investor B Shares of the Portfolio.
YIELD AND TOTAL RETURN FIGURES WILL FLUCTUATE, ARE BASED ON HISTORICAL EARNINGS,
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The methods used to compute
the Portfolio's yields and total returns are described below and in the
Statement of Additional Information.

From time to time, performance information such as total return and yield
data for the Portfolio's Trust Shares may be quoted in advertisements or in
communications to shareholders. The yield is computed based on the net income of
such Shares during a 30-day (or one month) period identified in connection with
the particular yield quotation. More specifically, the yield is computed by
dividing the Portfolio's net income per Share during a 30-day (or one month)
period by the net asset value per Share on the last day of the period and
annualizing the result.

The Portfolio's total returns may be calculated on an average annual total
return basis, and may also be calculated on an aggregate total return basis, for
various periods. Average annual total returns with respect to Trust Shares
reflect the average annual percentage change in value of an investment in such
Shares over the particular measuring period. Aggregate total returns reflect the
cumulative percentage change in value over the measuring period. Both methods of
calculating total returns assume that dividends and capital gain distributions
made by the Portfolio during the period are reinvested in the Portfolio's Trust
Shares. When considering average annual total return figures for periods longer
than one year, it is important to note that the Portfolio's annual total return
for any one year in the period might have been more or less than the average for
the entire period.

Performance data of the Portfolio's Trust Shares may be compared to the
performance of other mutual funds with comparable investment objectives and
policies through various mutual fund or market indices and data such as that
provided by S&P, Lehman Brothers, Inc. or any of its affiliates, Ibbotson
Associates, Inc., Lipper Analytical Services, Inc. and Mutual Fund Forecaster.
References may also be made to indices or data published in Money Magazine,
Forbes, Barron's, The Wall Street Journal, The New York Times, Business Week,
American Banker, Institutional Investor, Pensions and Investments, U.S.A. Today,
Fortune, CDA/Weisenberger, Morningstar, Inc. and publications of a local or
regional nature. In addition to performance information, general information
about the Portfolio that appears in a

17
<PAGE> 18

publication such as those mentioned above may be included in advertisements and
in reports to shareholders.

Performance quotations of a class of Shares in the Portfolio represent past
performance and should not be considered as representative of future results.
Any account fees charged by a bank or other financial institution (as described
in "Management of the Fund -- Service Organizations" below) or other
institutions will not be included in the calculations of the Portfolio's yields
and total returns. Such fees, if any, will reduce the investor's net return on
an investment in the Portfolio. Investors may call 1-800-452-4015 to obtain
current yield and total return information.

DIVIDENDS AND DISTRIBUTIONS

Dividends from net investment income of the Portfolio are declared and paid
monthly as a dividend to shareholders of record. Dividends on each Share of the
Portfolio are determined in the same manner and are paid in the same amount,
irrespective of class, except that the Portfolio's Trust Shares and
Institutional Shares bear all expenses of the respective Administrative Services
Plans adopted for such Shares and the Portfolio's Investor A Shares and Investor
B Shares bear all expenses of the respective Distribution and Services Plans
adopted for such Shares. In addition, the Portfolio's Institutional Shares bear
the expense of certain sub-transfer agency fees. See "Management of the Fund"
and "Other Information Concerning the Fund and Its Shares" below.

Net realized capital gains of the Portfolio, if any, are distributed at
least annually. All dividends and distributions paid on the Portfolio's Shares
are automatically reinvested in additional Shares of the same class unless the
investor has (i) otherwise indicated on the account application, or (ii)
redeemed all the Shares held in the Portfolio, in which case a distribution will
be paid in cash. Reinvested dividends and distributions will be taxed in the
same manner as those paid in cash.

TAXES

FEDERAL TAXES

Management of the Fund believes that the Predecessor Portfolio qualified as
a "regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code") for the taxable year ended September 30, 1997. It is
intended that the Portfolio will qualify as a regulated investment company as
long as such qualification is in the best interests of shareholders. A regulated
investment company generally is exempt from federal income tax on amounts
distributed to shareholders.

18
<PAGE> 19

company taxable income and any net tax-exempt interest income each year. Such
dividends will be taxable as ordinary income to the Portfolio's shareholders who
are not currently exempt from federal income taxes, whether such income is
received in cash or reinvested in additional Shares. (Federal income taxes for
distributions to an IRA are deferred under the Code.) Such dividends will
qualify for the dividends received deduction for corporations to the extent of
the total qualifying dividends received by the Portfolio from domestic
corporations for the taxable year.

Substantially all of the Portfolio's net realized long-term capital gains,
if any, will be distributed at least annually to its shareholders. The Portfolio
will generally have no tax liability with respect to such gains and the
distributions will be taxable to shareholders who are not currently exempt from
federal income taxes as long-term capital gains, regardless of how long the
shareholders have held the Shares and whether such dividends are received in
cash or reinvested in additional Shares.

An investor considering purchasing Shares of the Portfolio on or just
before the record date of any dividend or capital gains distribution should be
aware that the amount of the forthcoming distribution, although in effect a
return of capital, will be taxable.

Dividends declared by the Portfolio in October, November, or December of
any year payable to shareholders of record on a specified date in such months
will be deemed to have been received by the shareholders and paid by the
Portfolio on December 31 of such year in the event such dividends are actually
paid during January of the following year.

The Portfolio may be required in certain cases to withhold and remit to the
U.S. Treasury 31% of taxable dividends or gross sale proceeds paid to
shareholders who have failed to provide a correct tax identification number in
the manner required, who are subject to withholding by the Internal Revenue
Service for failure to properly include on their return payments of taxable
interest or dividends, or who have failed to certify to the Portfolio that they
are not subject to backup withholding when required to do so or that they are
"exempt recipients."

A taxable gain or loss may be realized by an investor upon redemption,
transfer or exchange of Shares, depending upon the cost of such Shares when
purchased and their price at the time of redemption, transfer or exchange. If an
investor holds Shares for six months or less and during that time receives an
exempt-interest dividend on those Shares, any loss realized on the sale or
exchange of those Shares will be disallowed to the extent of the exempt-interest
dividend.

STATE AND LOCAL TAXES

The application of state and local taxes may have different consequences
from those of the federal income tax law described above. In particular,
shareholders should note that dividends paid by the Portfolio may be taxable to
investors under state or local law as dividend income even though all or a
portion of such dividends may be derived from interest on obligations that, if
realized directly, would be exempt from such income taxes.

MISCELLANEOUS

19
<PAGE> 20

to their own tax situation. Shareholders will be advised at least annually as to
the federal income tax consequences of distributions made each year.

MANAGEMENT OF THE FUND

The Fund is managed under the direction of its Board of Directors. The
Statement of Additional Information contains the names of and general background
information concerning each director.

INVESTMENT ADVISER

Mississippi Valley Advisors Inc. ("MVA") serves as the investment adviser
to the Portfolio. MVA's principal office is located at One Mercantile Center,
Seventh & Washington Streets, St. Louis, Missouri 63101. MVA is a wholly-owned
subsidiary of Mercantile. As of December 31, 1996, MVA had approximately $7.9
billion in assets under investment management, including the Fund's assets,
which were approximately $2.5 billion. MVA also serves as investment adviser to
each of the Fund's other portfolios.

Subject to the general supervision of the Fund's Board of Directors and in
accordance with the Fund's investment policies, MVA manages the Portfolio, makes
investment decisions with respect to and places orders for all purchases and
sales of the Portfolio's securities and other investments, and directs the
maintenance of the Portfolio's records relating to such purchases and sales.

For the services provided and expenses assumed pursuant to the investment
advisory agreement, MVA is entitled to receive fees, computed daily and payable
monthly, at the annual rate of .75% of the Portfolio's average daily net assets.

MVA may from time to time voluntarily reduce all or a portion of its
advisory fee to increase the net income of the Portfolio available for
distributions as dividends. The voluntary fee reduction will cause the return of
the Portfolio to be higher than it would otherwise be in the absence of such
reduction.

The Predecessor Portfolio bore advisory fees during the fiscal year ended
September 30, 1996 pursuant to the investment advisory agreement then in effect
with Mark Twain Bank, its former adviser, at the effective annual rate of .75%
of its average daily net assets after fee waivers. Without fee waivers, the
Predecessor Portfolio would have borne advisory fees at the annual rate of .75%
of its average daily net assets.

Gregory A. Glidden is the person primarily responsible for the day-to-day
management of the Portfolio. Mr. Glidden, Senior Associate, has been with MVA
since 1983. For the past 13 years, he has served as a stock analyst and has
managed several of Mercantile's common funds. He managed the Predecessor
Portfolio since October, 1997 and also manages the Fund's Equity Income
Portfolio.

ADMINISTRATOR

BISYS Fund Services Ohio, Inc., located at 3435 Stelzer Road, Columbus,
Ohio 43219, acts as the Portfolio's Administrator. The Administrator also serves
as the administrator to each of the Fund's other portfolios.

20
<PAGE> 21

Organizations under the Administrative Services Plan described below. For its
services, the Administrator is entitled to receive a fee, computed daily and
payable monthly, at the annual rate of .20% of the Portfolio's average daily net
assets.

From time to time, the Administrator may voluntarily waive all or a portion
of the fees otherwise payable by the Portfolio in order to increase the net
income available for distribution to shareholders.

The Predecessor Portfolio bore administrative fees during the fiscal year
ended September 30, 1996 pursuant to the administrative services agreement then
in effect with Federated Administrative Services, its former administrator, at
the effective annual rate of .39% of its average daily net assets.

DISTRIBUTOR

Trust Shares of the Portfolio are sold continuously by the Distributor,
BISYS Fund Services ("BISYS"), an affiliate of the Administrator. BISYS is a
registered broker-dealer with principal offices at 3435 Stelzer Road, Columbus,
Ohio 43219. The Distributor also acts as distributor to each of the Fund's other
portfolios.

ADMINISTRATIVE SERVICES PLAN

The Fund has adopted an Administrative Services Plan with respect to the
Trust Shares of the Portfolio. Pursuant to the Administrative Services Plan,
Trust Shares are sold to banks and other financial institutions (which may
include Mercantile or its affiliated or correspondent banks) acting on behalf of
their qualified accounts (such financial institutions collectively, the "Service
Organizations") which agree to provide certain shareholder administrative
services for their clients or account holders (collectively, the "customers")
who are the beneficial owners of such Shares. The holders of Trust Shares bear
their pro rata portion of the fees which may be paid to Service Organizations
for such services at an annual rate of up to .30% of the average daily net
assets of the Portfolio's Trust Shares owned beneficially by a Service
Organization's customers.

SERVICE ORGANIZATIONS

The servicing agreements adopted under the Administrative Services Plan
(collectively, the "Servicing Agreements") require the Service Organizations
receiving such compensation (which may include Mercantile and its affiliates) to
perform certain services, including providing administrative services with
respect to the beneficial owners of Trust Shares of the Portfolio, such as
establishing and maintaining accounts and records for their customers who invest
in such Shares, assisting customers in processing purchase, exchange and
redemption requests, and responding to customer inquiries concerning their
investments.

Under the Servicing Agreements and upon notice to the Fund, a Service
Organization may subcontract with one or more entities for the performance of
certain services provided under its Servicing Agreements with the Fund. Such
Service Organization shall be as fully responsible to the Fund for the acts or
omissions of any sub-contractor as it would be for its own acts or omissions.
The fees payable to any sub-contractor are paid by the Service Organization out
of the fees it receives from the Fund.

21
<PAGE> 22

The Fund understands that Service Organizations providing such
administrative services may also charge fees to their customers beneficially
owning such Shares. These fees would be in addition to any amounts which may be
received by such a Service Organization under its Servicing Agreement with the
Fund. The Fund's Servicing Agreements require a Service Organization to disclose
to its customers any compensation payable to the Service Organization by the
Portfolio and any other compensation payable by its customers in connection with
their investment in such Shares. Customers of such Service Organizations
receiving servicing fees should read this Prospectus in light of the terms
governing their accounts with their Service Organization.

CUSTODIAN AND TRANSFER AGENT

Mercantile Bank National Association, an affiliate of the Fund and a
wholly-owned subsidiary of Mercantile Bancorporation, Inc., with principal
offices located at One Mercantile Center, 8th and Locust Streets, St. Louis,
Missouri 63101, serves as Custodian of the Portfolio's assets. BISYS Fund
Services Ohio, Inc. also serves as the Portfolio's transfer agent and dividend
disbursing agent. Its address is 3435 Stelzer Road, Columbus, Ohio 43219.

REGULATORY MATTERS

Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any affiliate
thereof from sponsoring, organizing, or controlling the shares of a registered,
open-end investment company continuously engaged in the issuance of its shares,
and prohibit banks generally from issuing, underwriting, selling, or
distributing securities such as Shares of the Portfolio. Such banking laws and
regulations do not prohibit such a holding company or affiliate, or banks, from
acting as investment adviser, transfer agent, or custodian to such an investment
company, or from purchasing shares of such a company as agent for and upon the
order of customers. Mercantile, MVA, Service Organizations that are banks or
bank affiliates, and broker-dealers that are bank affiliates are subject to such
laws and regulations, but believe they may perform the services for the
Portfolio contemplated by their respective agreements, this Prospectus and the
Statement of Additional Information without violating applicable banking laws
and regulations. In addition, state securities laws on this issue may differ
from the interpretation of federal laws expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.

Should future legislative, judicial, or administrative action prohibit or
restrict the activities of such companies in connection with the provision of
services on behalf of the Portfolio and its shareholders, the Fund might be
required to alter materially or discontinue its arrangements with such companies
and change its method of operation. It is not expected that investors would
suffer any adverse financial consequences as a result of any of these
occurrences.

If current restrictions preventing a bank from legally sponsoring,
organizing, controlling, or distributing shares of an investment company were
relaxed, Mercantile, or an affiliate of Mercantile, would consider the
possibility of offering to perform additional services for the Portfolio. It is
not possible, of course, to predict whether or in what form such legislation
might be enacted or the terms upon which Mercantile, or such an affiliate, might
offer to provide such services.

Conflict of interest restrictions may apply to the receipt of compensation
paid pursuant to a Servicing Agreement by the Portfolio to a financial
intermediary in connection with the investment of

22
<PAGE> 23

fiduciary funds in the Portfolio's Shares. Institutions, including banks
regulated by the Comptroller of the Currency and investment advisers and other
money managers subject to the jurisdiction of the Securities and Exchange
Commission, the Department of Labor or state securities commissions, should
consult legal counsel before entering into Servicing Agreements.

EXPENSES

Except as noted above and in the Statement of Additional Information under
"Investment Advisory and Administrative Contracts" and "Custodian and Transfer
Agent," the Fund's service contractors bear all of their own expenses in
connection with the performance of their services, except that the Distributor
is compensated pursuant to the Distribution and Services Plans (as described
below under "Other Information Concerning the Fund and its Shares"). The
Portfolio's expenses are deducted from the total income of the Portfolio before
dividends and distributions are paid. These expenses include, but are not
limited to, fees paid to the Adviser and Administrator, transfer agency fees,
fees and expenses of officers and directors who are not affiliated with the
Adviser or the Distributor, taxes, interest, legal fees, custodian fees,
auditing fees, 12b-1 fees, servicing fees, certain fees and expenses in
registering and qualifying the Portfolio and its Shares for distribution under
federal and state securities laws, costs of preparing and printing prospectuses
and statements of additional information for regulatory purposes and for
distribution to existing shareholders, the expense of reports to shareholders,
shareholders' meetings and proxy solicitations, fidelity bond and directors' and
officers' liability insurance premiums, the expense of using independent pricing
services and other expenses which are not expressly assumed by the Adviser,
Distributor or Administrator under their respective agreements with the Fund.
The Fund also pays for brokerage fees, commissions and other transaction
charges, if any, in connection with the purchase and sale of portfolio
securities. Any general expenses of the Fund that are not readily identifiable
as belonging to a particular portfolio will be allocated among all the Fund's
portfolios by or under the direction of the Board of Directors in a manner the
Board determines to be fair and equitable. Any expenses relating only to a
particular class of Shares within a portfolio will be borne solely by such
class. See "Certain Financial Information" and "Management of the Fund" above
for additional information regarding expenses of the Portfolio.

OTHER INFORMATION CONCERNING
THE FUND AND ITS SHARES

DESCRIPTION OF SHARES

The Fund was organized on September 9, 1982 as a Maryland corporation and
is a mutual fund of the type known as an "open-end management investment
company." The Fund's principal office is located at 3435 Stelzer Road, Columbus,
Ohio 43219.

The Fund's Charter authorizes the Board of Directors to issue up to seven
billion full and fractional shares of common stock, and to classify and
reclassify any unauthorized and unissued shares into one or more classes of
shares. The Board of Directors may similarly classify or reclassify any class of
shares into one or more series.

Pursuant to such authority, the Board of Directors has authorized the
issuance of the following series of shares representing interests in the
Portfolio, which is classified as a diversified company

23
<PAGE> 24

under the 1940 Act: 50 million Trust Shares, 25 million Institutional Shares, 25
million Investor A Shares and 25 million Investor B Shares. Institutional,
Investor A and Investor B Shares of the Portfolio are described in separate
prospectuses which are available from the Distributor at the telephone number on
page 1 of this Prospectus. The Board of Directors has also authorized the
issuance of additional classes of shares representing interests in other
investment portfolios of the Fund, which are likewise described in separate
prospectuses available from the Distributor. Shares in the Portfolio will be
issued without Share certificates.

The Trust Shares of the Portfolio are described in this Prospectus. The
Portfolio also offers Institutional Shares, Investor A Shares and Investor B
Shares. Institutional Shares, which are offered to financial institutions acting
on behalf of accounts for which they do not exercise investment discretion, are
sold without a sales charge. Investor A Shares and Investor B Shares are sold
through selected broker-dealers and other financial intermediaries to individual
or institutional customers. Investor A Shares of the Portfolio are sold with a
maximum 4.5% front-end sales charge and Investor B Shares of the Portfolio are
sold with a maximum 5.0% contingent deferred sales charge. Trust, Institutional,
Investor A and Investor B Shares bear their pro rata portion of all operating
expenses paid by the Portfolio, except that Trust Shares and Institutional
Shares bear all payments under the Portfolio's respective Administrative
Services Plans adopted for such Shares and Investor A Shares and Investor B
Shares bear all payments under the Portfolio's respective Distribution and
Services Plans adopted for such Shares. In addition, Institutional Shares of the
Portfolio bear the expense of certain sub-transfer agency fees.

Payments under the Administrative Services Plan for Institutional Shares
are made to Service Organizations for administrative services provided to the
Service Organizations' clients or account holders who are the beneficial owners
of Institutional Shares. Payments under the Administrative Services Plan may not
exceed .30% (on an annual basis) of the average daily net asset value of the
Portfolio's outstanding Institutional Shares.

Payments under the Distribution and Services Plans for Investor A Shares
and Investor B Shares are made to (i) the Distributor or another person for
providing distribution assistance and assuming certain related expenses, and
(ii) Service Organizations for administrative services provided to the Service
Organizations' clients or account holders who are the beneficial owners of
Investor A Shares or Investor B Shares. Payments under the Distribution and
Services Plan for Investor A Shares may not exceed .30% (on an annual basis) of
the average daily net asset value of Investor A Shares of the Portfolio.
Payments under the Distribution and Services Plan for Investor B Shares may not
exceed 1.00% (on an annual basis) of the average daily net asset value of
outstanding Investor B Shares of the Portfolio. Distribution payments made under
the Distribution and Services Plans are subject to the requirements of Rule
12b-1 under the 1940 Act.

The Fund offers various services and privileges in connection with Investor
A Shares and Investor B Shares of the Portfolio that are not offered in
connection with its Trust Shares or Institutional Shares, including an automatic
investment program and an automatic withdrawal plan. In addition, each class of
Shares offers different exchange privileges.

24
<PAGE> 25

portfolio will vote together as a single class on matters relating to the
portfolio's investment advisory agreement and investment objective and
fundamental policies. Only holders of Trust Shares, however, will vote on
matters relating to the Administrative Services Plan for Trust Shares and only
holders of Institutional Shares will vote on matters pertaining to the
Administrative Services Plan for Institutional Shares. Similarly, only holders
of Investor A Shares will vote on matters pertaining to the Distribution and
Services Plan for Investor A Shares and only holders of Investor B Shares will
vote on matters pertaining to the Distribution and Services Plan for Investor B
Shares.

The Fund is not required, and currently does not intend, to hold annual
meetings of shareholders except as required by the 1940 Act or other applicable
law. Upon the written request of the holders of 10% or more of the outstanding
Shares, the Fund will call a special meeting of shareholders to vote on the
question of removal of a director.

Shares of the Fund's portfolios have noncumulative voting rights and,
accordingly, the holders of more than 50% of the Fund's outstanding Shares
(irrespective of portfolio or class) may elect all of the Directors. Shares have
no preemptive rights and only such conversion and exchange rights as the Board
may grant in its discretion. When issued for payment as described in this
Prospectus, Shares will be fully paid and nonassessable.

MISCELLANEOUS

As used in this Prospectus, a "vote of a majority of the outstanding
Shares" of the Portfolio means, with respect to the approval of an investment
advisory agreement or a change in an investment objective or fundamental
investment policy, the affirmative vote of the lesser of (a) more than 50% of
the outstanding Shares of the Portfolio (irrespective of class), or (b) 67% or
more of the Shares of the Portfolio (irrespective of class) present at a meeting
if more than 50% of the outstanding Shares of the Portfolio are represented at
the meeting in person or by proxy.

As of June 3, 1997, Mercantile and its affiliates possessed, of record on
behalf of their underlying customer accounts, voting or investment power with
respect to more than 25% of the Fund's outstanding Shares. Therefore, Mercantile
may be deemed to be a controlling person of the Fund within the meaning of the
1940 Act.

Inquiries regarding the Portfolio may be directed to the Fund at
1-800-452-4015.

25
<PAGE> 26

[This Page Intentionally Left Blank]
<PAGE> 27

[This Page Intentionally Left Blank]
<PAGE> 28

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE PORTFOLIO'S
STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE PORTFOLIO, THE FUND, OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE PORTFOLIO, THE FUND OR THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Highlights................................ 2
Certain Financial Information............. 4
Expense Summary for Trust Shares.......... 5
Investment Objective, Policies and Risk
Considerations.......................... 6
Investment Limitations.................... 12
Pricing of Shares......................... 13
How to Purchase and Redeem Shares......... 14
Purchase of Shares...................... 14
Exchange Privilege...................... 15
Redemption of Shares.................... 16
Other Exchange or Redemption
Information........................... 16
Yields and Total Returns.................. 17
Dividends and Distributions............... 18
Taxes..................................... 18
Management of the Fund.................... 20
Other Information Concerning the Fund
and Its Shares.......................... 23
Miscellaneous........................... 25
</TABLE>

Investment Adviser:
Mississippi Valley Advisors Inc.
a wholly-owned subsidiary of
Mercantile Bank
National Association
Distributor:
BISYS Fund Services

THE ARCH FUND(R), INC.

GROWTH EQUITY PORTFOLIO
TRUST SHARES
LOGO

PROSPECTUS

SEPTEMBER 2, 1997
(AS REVISED NOVEMBER 21, 1997)
<PAGE> 29

THE ARCH FUND(R), INC.

THE ARCH GROWTH EQUITY PORTFOLIO

INSTITUTIONAL SHARES

<TABLE>
<S> <C>
For information, write: Or call your investment
P.O. Box 78069 representative or
St. Louis, Missouri 63178 the ARCH Funds' Service Center
at 1-800-452-4015
</TABLE>

The ARCH Fund, Inc. is an open-end management investment company that
currently offers Shares in eighteen investment portfolios. This Prospectus
describes the Institutional Shares of the ARCH GROWTH EQUITY PORTFOLIO (the
"Portfolio"). Institutional Shares are offered to financial institutions acting
on behalf of accounts for which they do not exercise investment discretion.

SEPTEMBER 2, 1997
(AS REVISED NOVEMBER 21, 1997)
<PAGE> 30

HIGHLIGHTS

The Arch Fund, Inc. (the "Fund") is an open-end management investment
company (commonly known as a mutual fund) registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund offers investment
opportunities in eighteen investment portfolios. This Prospectus relates to one
of those portfolios: the ARCH GROWTH EQUITY PORTFOLIO (the "Portfolio"). In
addition, the Fund offers investment opportunities in the ARCH Treasury Money
Market, Money Market, Tax-Exempt Money Market, U.S. Government Securities,
Intermediate Corporate Bond, Bond Index, Government & Corporate Bond,
Short-Intermediate Municipal, Missouri Tax-Exempt Bond, National Municipal Bond,
Equity Income, Equity Index, Growth & Income Equity, Small Cap Equity, Small Cap
Equity Index, International Equity and Balanced Portfolios, which are described
in separate Prospectuses. The Portfolio represents a separate pool of assets
with a different investment objective and different policies than the Fund's
other portfolios (as described below under "Investment Objective, Policies and
Risk Considerations"). MVA serves as adviser, Mercantile as custodian, BISYS
Fund Services Ohio, Inc. as administrator, and BISYS Fund Services as sponsor
and distributor. For information on expenses, fee waivers and services, see
"Certain Financial Information" and "Management of the Fund."

The following information generally describes the Portfolio and its
investment objective. There can be no assurance that the Portfolio will be able
to achieve its investment objective.

The Growth Equity Portfolio is designed for investors who seek capital
growth and who are prepared to accept the risks associated with an investment in
equity securities. See "Investment Objective, Policies and Risk Considerations"
below.

Investors should note that the Portfolio may, subject to its investment
policies and limitations, invest in the securities of foreign issuers, enter
into repurchase agreements and reverse repurchase agreements, make securities
loans, invest in put and call options and futures and options on futures and
make limited investments in illiquid securities and securities issued by other
investment companies. These investment practices involve investment risks of
varying degrees. For example, the securities of a foreign issuer entail certain
inherent risks, such as future political and economic developments and the
adoption of foreign government restrictions, that might adversely affect the
payment of dividends or principal and interest. Default by a counterparty to a
repurchase agreement or securities lending transaction could expose the
Portfolio to loss because of adverse market action or possible delay in
disposing of the underlying collateral. Reverse repurchase agreements are
subject to the risk that the market value of the securities sold by the
Portfolio will decline below the repurchase price which the Portfolio is
obligated to pay. Purchasing options is a specialized investment technique which
entails a substantial risk of loss of amounts paid as premiums to option
writers. There is no assurance that a liquid market will exist for a particular
futures contract at any particular time. The Portfolio may engage in short-term
trading, which may also involve greater risk and increase the Portfolio's
expenses. See "Investment Objective, Policies and Risk Considerations" below and
the Statement of Additional Information under "Investment Objective and
Policies."

This Prospectus describes the Institutional Shares of the Portfolio. For
information on purchasing, exchanging or redeeming Institutional Shares of the
Portfolio, please see "How to Purchase and Redeem Shares" below.

2
<PAGE> 31

CERTAIN FINANCIAL INFORMATION

Shares of the Portfolio have been classified into four classes of
Shares--Trust Shares, Institutional Shares, Investor A Shares and Investor B
Shares. Shares of each class in the Portfolio represent equal, pro rata
interests in the investments held by the Portfolio and are identical in all
respects, except that Shares of each class bear separate distribution and/or
shareholder administrative servicing fees and certain other operating expenses,
and enjoy certain exclusive voting rights on matters relating to these fees. See
"Other Information Concerning the Fund and Its Shares," "Management of the
Fund--Administrative Services Plan" and "Management of the Fund--Custodian,
Transfer Agent and Sub-Transfer Agent" below. As a result of payments for
distribution and/or shareholder administrative servicing fees and certain other
operating expenses that may be made in differing amounts, the net investment
income of Trust Shares, Institutional Shares, Investor A Shares and Investor B
Shares in the Portfolio can be expected, at any given time, to be different.

3
<PAGE> 32

EXPENSE SUMMARY FOR INSTITUTIONAL SHARES

<TABLE>
<CAPTION>
GROWTH
EQUITY
PORTFOLIO
---------
<S> <C>
ANNUAL PORTFOLIO OPERATING EXPENSES (as a percentage of average net assets)
Investment Advisory Fees........................................................... .75%
12b-1 Fees......................................................................... .00%
Other Expenses (including administration fees, administrative services fees and
other expenses) (net of fee waivers and expense reimbursements)(1,2)............ .55%
---
TOTAL PORTFOLIO OPERATING EXPENSES (net of fee waivers and expense
reimbursements)(3)................................................................. 1.30%
===
</TABLE>

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

(1) Administrative services fees are payable at an annual rate not to exceed
.30%. Without fee waivers, administration fees would be .20%.

<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) a
5% annual return and (2) redemption at the end of each period:
Growth Equity Portfolio..................................................... $ 13 $41
</TABLE>

The purpose of the foregoing table is to assist in understanding the
various costs and expenses that an investor in the Portfolio's Institutional
Shares will bear directly or indirectly. The table reflects the expenses which
the Portfolio expects to incur during the next twelve months on its
Institutional Shares. For more complete descriptions of the various costs and
expenses, see "Management of the Fund" in this Prospectus and the Statement of
Additional Information. The table and example have not been audited by the
Fund's independent auditors and do not reflect any charges that may be imposed
by financial institutions on their customers.

4
<PAGE> 33

INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS

The Portfolio invests primarily in equity securities of companies selected
by the Adviser on the basis of traditional research techniques. The equity
securities in which the Portfolio invests are primarily those of middle to large
capitalization issuers whose shares are listed on the New York and American
Stock Exchanges. Company earnings are the primary consideration in selecting
portfolio securities. The Portfolio may invest in common stocks, preferred
stocks, convertible securities, corporate bonds, debentures, notes, warrants,
and put and call options on stocks, although normally it will invest at least
65% of its total assets in common stocks. The lowest rated debt obligation in
which the Portfolio will invest will be rated Baa or better by Moody's Investors
Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Ratings Group
("S&P") or Fitch Investors Service, Inc. ("Fitch"). Securities rated Baa or BBB
have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal and
interest payments than higher rated securities. Downgrades will be evaluated on
a case by case basis by the Adviser. The Adviser will determine whether or not
the security continues to be an acceptable investment. If it is determined not
to be an acceptable investment, the security will be sold. The applicable
ratings categories are described in Appendix A to the Statement of Additional
Information.

RISK FACTORS

MARKET RISK. The Portfolio invests primarily in equity securities. As with
other mutual funds that invest primarily in equity securities, the Portfolio is
subject to market risks. That is, the

5
<PAGE> 34

possibility exists that common stocks will decline over short or even extended
periods of time and both the U.S. and certain foreign equity markets tend to be
cyclical, experiencing both periods when stock prices generally increase and
periods when stock prices generally decrease.

OTHER APPLICABLE POLICIES

6
<PAGE> 35

during the period a shareholder owns Shares of the Portfolio. The U.S.
Government securities in which the Portfolio invests are either guaranteed or
issued by the U.S. Government, its agencies, or instrumentalities. These
securities include, but are not limited to, direct obligations of the U.S.
Treasury such as U.S. Treasury bills, notes and bonds; notes, bonds, and
discount notes issued or guaranteed by U.S. Government agencies and
instrumentalities supported by the full faith and credit of the United States;
notes, bonds, and discount notes of U.S. Government agencies or
instrumentalities which receive or have access to federal funding; and notes,
bonds, and discount notes of other U.S. Government instrumentalities supported
only by the credit of the instrumentalities.

MONEY MARKET INSTRUMENTS. Under certain circumstances described above, the
Portfolio may purchase "money market instruments," including commercial paper
and bank obligations.

7
<PAGE> 36

payment obligation. The Portfolio could, for these or other reasons, suffer a
loss with respect to such instruments.

8
<PAGE> 37

portfolio, or which it has the right to obtain without payment of further
consideration, or for which it has segregated cash or liquid securities in the
amount of any additional consideration.

The Portfolio may purchase and write over-the-counter options on portfolio
securities in negotiated transactions with the buyers or writers of the options
when options on the portfolio securities held by the Portfolio are not traded on
an exchange. The Portfolio purchases and writes options only with investment
dealers and other financial institutions (such as commercial banks or savings
associations) deemed creditworthy by the Adviser.

9
<PAGE> 38

10
<PAGE> 39

be advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market value of the securities purchased may vary
from the purchase prices.

11
<PAGE> 40

INVESTMENT LIMITATIONS

1. With respect to 75% of the value of its total assets, the Portfolio will
not purchase securities issued by any one issuer (other than cash, cash items or
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements collateralized by such securities),
if as a result more than 5% of the value of its total assets would be invested
in the securities of that issuer. The Portfolio will not acquire more than 10%
of the outstanding voting securities of any one issuer.

2. The Portfolio will not invest 25% or more of the value of its total
assets in any one industry, provided, however, that the Portfolio may invest
more than 25% of the value of its total assets in cash or certain money market
instruments (including instruments issued by a U.S. branch of a domestic bank or
savings and loan association having capital, surplus and undivided profits in
excess of $100,000,000 at the time of investment), securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements collateralized by such securities.

3. The Portfolio will not issue senior securities, except that the
Portfolio may borrow money directly or indirectly through reverse repurchase
agreements in amounts up to one-third the value of its total assets, including
the amount borrowed, and except to the extent that the Portfolio may enter into
futures contracts. The Portfolio will not borrow money or engage in reverse
repurchase agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure to facilitate management of its portfolio by
enabling the Portfolio to, for example, meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Portfolio will not purchase any securities while any
borrowings in excess of 5% of its total assets are outstanding.

12
<PAGE> 41

PRICING OF SHARES

The public offering price for each class of Shares is based upon net asset
value per Share plus, in the case of Investor A Shares, a front-end sales
charge. A class will calculate its net asset value per Share by adding the value
of the Portfolio's investments, cash and other assets attributable to the class,
subtracting the Portfolio's liabilities attributable to that class, and then
dividing the result by the total number of Shares in the class that are
outstanding. Because the operating expenses of Investor B Shares are higher than
those associated with the other classes of Shares, the net asset value per Share
of Investor B Shares of the Portfolio will generally be lower that the net asset
value per Share of Trust, Institutional or Investor A Shares of the Portfolio

HOW TO PURCHASE AND REDEEM SHARES

PURCHASE OF SHARES

Institutional Shares are sold to financial institutions, such as banks,
trust companies, thrift institutions, mutual funds or other financial
institutions (collectively "financial institutions") acting on behalf of their
employee benefit, retirement plan or other such accounts for which they do not
have investment discretion. Institutional Shares are sold to qualified
purchasers without a sales charge imposed by the Fund or the Distributor.
Generally, investors purchase Institutional Shares through a financial
institution, which is responsible for transmitting purchase orders directly to
the Fund.

13
<PAGE> 42

Financial institutions placing orders directly or on behalf of their
clients should contact the Fund at 1-800-452-4015. Investors may also call the
Fund for information on how to purchase Shares.

All shareholders of record will receive confirmations of Share purchases,
exchanges and redemptions in the mail. An investor's Shares are held in the name
of the financial institution that has entered into a servicing agreement with
the Fund, and such financial institution is responsible for transmitting
purchase, exchange and redemption orders to the Fund on a timely basis,
recording all purchase, exchange and redemption transactions, and providing
regular account statements which confirm such transactions to beneficial owners
(or arranging for such services). Payment for orders which are not received or
accepted will be returned after prompt inquiry to the transmitting financial
institution.

If purchase orders are received in good form and accepted by the Fund prior
to 4:00 p.m. (Eastern time) on any Business Day, Institutional Shares will be
priced according to the net asset value per Share next determined on that day
after receipt of the order. Immediately available funds must be received by the
Custodian prior to 4:00 p.m. on the next Business Day following receipt of such
order. If funds are not received by such date, the order will be cancelled, and
notice thereof will be given to the financial institution placing the order.

EXCHANGE PRIVILEGE

The exchange privilege enables shareholders to exchange Institutional
Shares of the Portfolio for Institutional Shares of another portfolio offered by
the Fund. Exchanges for Institutional Shares in another portfolio are effected
at net asset value without payment of any exchange or sales charges. The
exchange privilege may be exercised only in those states where Institutional
Shares of such other portfolio may be legally sold.

The Fund reserves the right to reject any exchange request. The exchange
privilege may be modified or terminated at any time upon 60 days' written notice
to shareholders. An investor may telephone an exchange request by calling his or
her financial institution, which is responsible for transmitting such request to
the Fund. See "Other Exchange or Redemption Information" below. An investor
should consult the financial institution or the Fund for further information
regarding procedures for exchanging Shares.

In addition to the Growth Equity Portfolio described in this Prospectus,
the Fund currently offers Institutional Shares in the following portfolios:

- The ARCH Treasury Money Market Portfolio

- The ARCH Money Market Portfolio

- The ARCH U.S. Government Securities Portfolio

- The ARCH Intermediate Corporate Bond Portfolio

- The ARCH Bond Index Portfolio

- The ARCH Government & Corporate Bond Portfolio

- The ARCH Equity Income Portfolio

- The ARCH Equity Index Portfolio

- The ARCH Growth & Income Equity Portfolio

14
<PAGE> 43

- The ARCH Small Cap Equity Portfolio

- The ARCH Small Cap Equity Index Portfolio

- The ARCH International Equity Portfolio

- The ARCH Balanced Portfolio

For information concerning these portfolios, please call 1-800-452-4015.
Shareholders exercising the exchange privilege with any of the other portfolios
in the Fund should request and review the portfolio's prospectus carefully prior
to making an exchange.

REDEMPTION OF SHARES

Redemption orders should be placed with or through the same financial
institution that placed the original purchase order. Redemption orders are
effected at the Portfolio's net asset value per Share next determined after
receipt of the order by the Fund. The financial institution is responsible for
transmitting redemption orders to the Fund on a timely basis. Proceeds from
redemptions of Institutional Shares of the Portfolio with respect to redemption
orders received and accepted by the Fund before 4:00 p.m. (Eastern time) on a
Business Day normally are sent electronically to the financial institution that
placed the redemption order the next Business Day after the Distributor's
receipt of the order in good form. A charge for sending redemption payments
electronically may be imposed by the Fund. The Fund reserves the right to send
redemption proceeds electronically within seven days after receiving a
redemption order if, in the judgment of the Adviser, an earlier payment could
adversely affect the Portfolio.

A written request for redemption must be received by the Fund in order to
honor the request. The Transfer Agent may require a signature guarantee by an
eligible guarantor institution. For purposes of this policy, the term "eligible
guarantor institution" shall include banks, brokers, dealers, credit unions,
securities exchanges and associations, clearing agencies and savings
associations as those terms are defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended. The Transfer Agent reserves the right to
reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000. The signature guarantee requirement will be waived
if all of the following conditions apply: (1) the redemption check is payable to
the shareholder(s) of record and (2) the redemption check is mailed to the
shareholder(s) at the address of record or the proceeds are either mailed or
sent electronically to a commercial bank account previously designated on the
account application. An investor with questions or needing assistance should
contact the financial institution servicing his or her account or the
Distributor. Additional documentation may be required if the redemption is
requested by a corporation, partnership, trust, fiduciary, executor, or
administrator.

Neither the Fund nor its service providers will be liable for any loss,
damage, expense or cost arising out of any telephone redemption effected in
accordance with the Fund's telephone redemption procedures, upon instructions
reasonably believed to be genuine. The Fund will employ procedures designed to
provide reasonable assurance that instructions by telephone are genuine; if
these procedures are not followed, the Fund or its service providers may be
liable for any losses due to unauthorized or fraudulent instructions. If, due to
temporary adverse conditions, investors are

15
<PAGE> 44

unable to effect telephone transactions, investors are encouraged to follow the
procedures described in "Other Exchange or Redemption Information" below.

OTHER EXCHANGE OR REDEMPTION INFORMATION

At various times, the Fund may be requested to redeem Shares for which it
has not yet received good payment. In such circumstances, the Fund may delay the
forwarding of proceeds until payment has been collected for the purchase of such
Shares which may take up to 15 days or more. To avoid delay in payment upon
redemption shortly after purchasing Shares, investors should purchase Shares by
certified or bank check or by electronic transfer. The Fund intends to pay cash
for all Shares redeemed, but under abnormal conditions which make payment in
cash unwise, the Fund may make payment wholly or partly in portfolio securities
at their then market value equal to the redemption price. In such cases, an
investor may incur brokerage costs in converting such securities to cash.

YIELDS AND TOTAL RETURNS

From time to time, performance information such as total return and yield
data for the Portfolio's Institutional Shares may be quoted in advertisements or
in communications to shareholders. The yield is computed based on the net income
of such Shares during a 30-day (or one month) period identified in connection
with the particular yield quotation. More specifically, the yield is computed by
dividing the Portfolio's net income per Share during a 30-day (or one month)
period by the net asset value per Share on the last day of the period and
analyzing the result.

The Portfolio's total returns may be calculated on an average annual total
return basis, and may also be calculated on an aggregate total return basis, for
various periods. Average annual total returns with respect to Institutional
Shares reflect the average annual percentage change in value of an investment in
such Shares over the particular measuring period. Aggregate total returns
reflect the cumulative percentage change in value over the measuring period.
Both methods of calculating total returns assume that dividends and capital gain
distributions made by the Portfolio during the period are reinvested in the
Portfolio's Institutional Shares. When considering average annual total

16
<PAGE> 45

return figures for periods longer than one year, it is important to note that
the Portfolio's annual total return for any one year in the period might have
been more or less than the average for the entire period.

Performance data of the Portfolio's Institutional Shares may be compared to
the performance of other mutual funds with comparable investment objectives and
policies through various mutual fund or market indices and data such as that
provided by S&P, Lehman Brothers, Inc. or any of its affiliates, Ibbotson
Associates, Inc., Lipper Analytical Services, Inc. and Mutual Fund Forecaster.
References may also be made to indices or data published in Money Magazine,
Forbes, Barron's, The Wall Street Journal, The New York Times, Business Week,
American Banker, Institutional Investor, Pensions and Investments, U.S.A. Today,
Fortune, CDA/Weisenberger, Morningstar, Inc. and publications of a local or
regional nature. In addition to performance information, general information
about the Portfolio that appears in a publication such as those mentioned above
may be included in advertisements and in reports to shareholders.

Performance quotations of a class of Shares in the Portfolio represent past
performance and should not be considered as representative of future results.
Any account fees charged by Service Organizations (as described under
"Management of the Fund--Service Organizations") or other institutions will not
be included in the calculations of the Portfolio's yields and total returns.
Such fees, if any, will reduce the investor's net return on an investment in the
Portfolio. Investors may call 1-800-452-4015 to obtain current yield and total
return information.

DIVIDENDS AND DISTRIBUTIONS

Net investment income of the Portfolio is declared and paid monthly as a
dividend to shareholders of record. Dividends on each Share of the Portfolio are
determined in the same manner and are paid in the same amount, irrespective of
class, except that the Portfolio's Trust Shares and Institutional Shares bear
all expenses of the respective Administrative Services Plans adopted for such
Shares and the Portfolio's Investor A Shares and Investor B Shares bear all
expenses of the respective Distribution and Services Plans adopted for such
Shares. In addition, the Portfolio's Institutional Shares bear the expense of
certain sub-transfer agency fees. See "Management of the Fund" and "Other
Information Concerning the Fund and Its Shares" below.

TAXES

FEDERAL TAXES

Management of the Fund believes that the Predecessor Portfolio qualified as
a "regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"), for the taxable year ended September 30, 1997. It is
intended that the Portfolio will qualify as a regulated

17
<PAGE> 46

investment company as long as such qualification is in the best interests of
shareholders. A regulated investment company generally is exempt from federal
income tax on amounts distributed to shareholders.

Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Portfolio distribute to its
shareholders an amount equal to at least the sum of 90% of its investment
company taxable income and 90% of its exempt-interest income (if any) net of
certain deductions for such year. In general, the Portfolio's investment company
taxable income will be its taxable income, including dividends, interest and
short-term capital gains (the excess of net short-term capital gain over net
long-term capital loss), subject to certain adjustments and excluding the excess
of any net long-term capital gain for the taxable year over the net short-term
capital loss, if any, for such year. It is the policy of the Portfolio to
distribute as dividends substantially all of its investment company taxable
income and any net tax-exempt interest income each year. Such dividends will be
taxable as ordinary income to the Portfolio's shareholders who are not currently
exempt from federal income taxes, whether such income is received in cash or
reinvested in additional Shares. (Federal income taxes for distributions to an
IRA are deferred under the Code.) In the case of the Portfolio, such dividends
will qualify for the dividends received deduction for corporations to the extent
of the total qualifying dividends received by the Portfolio from domestic
corporations for the taxable year.

A taxable gain or loss may be realized by an investor upon redemption,
transfer or exchange of Shares, depending upon the cost of such Shares when
purchased and their price at the time of redemption, transfer or exchange. If an
investor holds Shares for six months or less and during that time receives an
exempt interest dividend on those Shares, any loss realized on the sale or
exchange of those Shares will be disallowed to the extent of the exempt-interest
dividend.

18
<PAGE> 47

STATE AND LOCAL TAXES

MISCELLANEOUS

The foregoing summarizes some of the important federal and state tax
considerations generally affecting the Portfolio and its shareholders and is not
intended as a substitute for careful tax planning. Accordingly, potential
investors in the Portfolio should consult their tax advisers with specific
reference to their own tax situation. Shareholders will be advised at least
annually as to the federal income tax consequences of distributions made each
year.

MANAGEMENT OF THE FUND

The Fund is managed under the direction of its Board of Directors. The
Statement of Additional Information contains the names of and general background
information concerning each director.

INVESTMENT ADVISER

19
<PAGE> 48

fee waivers, the Predecessor Portfolio would have borne advisory fees at the
annual rate of .75% of its average daily net assets.

Gregory A. Glidden is the person primarily responsible for the day-to-day
management of the Portfolio. Mr. Glidden, Senior Associate, has been with MVA
since 1983. For the past 13 years, he has served as a stock analyst and has
managed several Mercantile common funds. He managed the Predecessor Portfolio
since October, 1997 and also manages the Fund's Equity Income Portfolio.

ADMINISTRATOR

The Administrator generally assists in all aspects of each Portfolio's
administration and operation and also monitors and performs other services
pertaining to the Portfolio's arrangements with Service Organizations under the
Administrative Services Plan described below. For its services, the
Administrator is entitled to receive a fee, computed daily and payable monthly,
at the annual rate of .20% of the Portfolio's average daily net assets.

DISTRIBUTOR

Institutional Shares of the Portfolio are sold continuously by the
Distributor, BISYS Fund Services ("BISYS"), an affiliate of the Administrator.
BISYS is a registered broker-dealer with principal offices at 3435 Stelzer Road,
Columbus, Ohio 43219. The Distributor also acts as distributor to each of the
Fund's other portfolios.

ADMINISTRATIVE SERVICES PLAN

The Fund has adopted an Administrative Services Plan with respect to
Institutional Shares of the Portfolio. Pursuant to the Administrative Services
Plan, Institutional Shares are sold to banks and other financial institutions
(which may include Mercantile or its affiliated or correspondent banks) on
behalf of their qualified accounts (such financial institutions collectively,
the "Service Organizations"), which agree to provide certain shareholder
administrative services for their clients or account holders (collectively, the
"customers") who are the beneficial owners of such Shares. The holders of
Institutional Shares bear separately their pro rata portion of the fees which
may be paid to Service Organizations for such services at an annual rate of up
to .30% of the average daily net assets of the Portfolio's Institutional Shares
owned beneficially by a Service Organization's customers.

20
<PAGE> 49

SERVICE ORGANIZATIONS

The servicing agreements adopted under the Administrative Services Plan
(collectively, the "Servicing Agreements") require the Service Organizations
receiving such compensation (which may include Mercantile and its affiliates) to
perform certain services, including providing administrative services with
respect to the beneficial owners of Institutional Shares of the Portfolio, such
as establishing and maintaining accounts and records for their customers who
invest in such Shares, assisting customers in processing purchase, exchange and
redemption requests, and responding to customer inquiries concerning their
investments.

CUSTODIAN, TRANSFER AGENT AND SUB-TRANSFER AGENT

Pursuant to an agreement with BISYS Fund Services Ohio, Inc. and in
connection with the Institutional Shares offered to its customers, a financial
institution (which may include Mercantile or its affiliated or correspondent
banks) may serve as sub-transfer agent with respect to the underlying beneficial
owners of Institutional Shares. For the account maintenance services provided, a
sub-transfer agent is entitled to receive an annual fee of $30 with respect to
each beneficial owner's holding in Institutional Shares (irrespective of the
number of portfolios of the Fund in which such Institutional Shares are held).

REGULATORY MATTERS

21
<PAGE> 50

ing securities such as Shares of the Portfolio. Such banking laws and
regulations do not prohibit such a holding company or affiliate, or banks, from
acting as investment adviser, transfer agent, or custodian to such an investment
company, or from purchasing shares of such a company as agent for and upon the
order of customers. Mercantile, MVA, Service Organizations that are banks or
bank affiliates, and broker-dealers that are bank affiliates are subject to such
laws and regulations, but believe they may perform the services for the
Portfolio contemplated by their respective agreements, this Prospectus and the
Statement of Additional Information without violating applicable banking laws
and regulations. In addition, state securities laws on this issue may differ
from the interpretation of federal laws expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.

Conflict of interest restrictions may apply to the receipt of compensation
paid pursuant to a Servicing Agreement by the Portfolio to a financial
intermediary in connection with the investment of fiduciary funds in the
Portfolio's Shares. Institutions, including banks regulated by the Comptroller
of the Currency and investment advisers and other money managers subject to the
jurisdiction of the Securities and Exchange Commission, the Department of Labor
or state securities commissions, should consult legal counsel before entering
into Servicing Agreements.

EXPENSES

22
<PAGE> 51

Distributor or Administrator under their respective agreements with the Fund.
The Fund also pays for brokerage fees, commissions and other transaction
charges, if any, in connection with the purchase and sale of portfolio
securities. Any general expenses of the Fund that are not readily identifiable
as belonging to a particular portfolio will be allocated among all the Fund's
portfolios by or under the direction of the Board of Directors in a manner the
Board determines to be fair and equitable. Any expenses relating only to a
particular class of Shares within a portfolio will be borne solely by such
class. See "Certain Financial Information" and "Management of the Fund" above
for additional information regarding expenses of the Portfolio.

OTHER INFORMATION CONCERNING THE FUND AND ITS SHARES

DESCRIPTION OF SHARES

Pursuant to such authority, the Board of Directors has authorized the
issuance of the following series of shares representing interests in the
Portfolio, which is classified as a diversified company under the 1940 Act: 50
million Trust Shares, 25 million Institutional Shares, 25 million Investor A
Shares and 25 million Investor B Shares. Investor A Shares, Investor B Shares
and Trust Shares of the Portfolio are described in separate prospectuses which
are available from the Distributor at the telephone number on page 1 of this
Prospectus. The Board of Directors has also authorized the issuance of
additional classes of shares representing interests in other investment
portfolios of the Fund, which are likewise described in separate prospectuses
available from the Distributor. Shares in the Portfolio will be issued without
Share certificates.

The Institutional Shares of the Portfolio are described in this Prospectus.
The Portfolio also offers Trust Shares, Investor A Shares and Investor B Shares.
Trust Shares, which are offered to financial institutions acting on their own
behalf or on behalf of certain qualified accounts, are sold without a sales
charge. Investor A Shares and Investor B Shares are sold through selected
broker-dealers and other financial intermediaries to individual or institutional
customers. Investor A Shares of the Portfolio are sold with a maximum 4.5%
front-end sales charge and Investor B Shares of the Portfolio are sold with a
maximum 5.0% contingent deferred sales charge. Trust Shares, Institutional
Shares, Investor A Shares and Investor B Shares bear their pro rata portion of
all operating expenses paid by the Portfolio, except that Trust Shares and
Institutional Shares bear all payments under the Portfolio's respective
Administrative Services Plans adopted for such Shares and Investor A Shares,
Investor B Shares bear all payments under the Portfolio's respective
Distribution and Services Plans adopted for such Shares. In addition,
Institutional Shares of the Portfolio bear the expense of certain sub-transfer
agency fees.

23
<PAGE> 52

Payments under the Administrative Services Plan for Trust Shares are made
to Service Organizations for administrative services provided to the Service
Organizations' clients or account holders who are the beneficial owners of Trust
Shares. Payments under the Administrative Services Plan may not exceed .30% (on
an annual basis) of the average daily net asset value of the Portfolio's
outstanding Trust Shares.

Payments under the Distribution and Services Plans for Investor A Shares
and Investor B Shares are made to (i) the Distributor or another person for
providing distribution assistance and assuming certain related expenses, and
(ii) Service Organizations for administrative services provided to the Service
Organizations' clients or account holders who are the beneficial owners of
Investor A Shares or Investor B Shares. Payments under the Distribution and
Services Plan for Investor A Shares may not exceed .30% (on an annual basis) of
the average daily net asset value of the outstanding Investor A Shares of the
Portfolio. Payments under the Distribution and Services Plan for Investor B
Shares may not exceed 1.00% (on an annual basis) of the average daily net asset
value of outstanding Investor B Shares of the Portfolio. Distribution payments
made under the Distribution and Services Plans are subject to the requirements
of Rule 12b-1 under the 1940 Act.

Shareholders are entitled to one vote for each full Share held and
proportionate fractional votes for fractional Shares held. Shares of all
portfolios of the Fund will vote together and not by class unless otherwise
required by law or permitted by the Board of Directors. All shareholders of a
particular portfolio will vote together as a single class on matters relating to
the portfolio's investment advisory agreement and investment objective and
fundamental policies. Only holders of Trust Shares, however, will vote on
matters relating to the Administrative Services Plan for Trust Shares and only
holders of Institutional Shares will vote on matters pertaining to the
Administrative Services Plan for Institutional Shares. Similarly, only holders
of Investor A Shares will vote on matters pertaining to the Distribution and
Services Plan for Investor A Shares and only holders of Investor B Shares will
vote on matters pertaining to the Distribution and Services Plan for Investor B
Shares.

24
<PAGE> 53

MISCELLANEOUS

Inquiries regarding the Portfolio may be directed to the Fund at
1-800-452-4015.

25
<PAGE> 54

[This Page Intentionally Left Blank]
<PAGE> 55

[This Page Intentionally Left Blank]
<PAGE> 56

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Highlights................................ 2
Certain Financial Information............. 3
Expense Summary for Institutional
Shares.................................. 4
Investment Objective, Policies and Risk
Considerations.......................... 5
Pricing of Shares......................... 13
How to Purchase and Redeem Shares......... 13
Exchange Privilege...................... 14
Redemption of Shares.................... 15
Other Exchange or Redemption
Information........................... 16
Yields and Total Returns.................. 16
Dividends and Distributions............... 17
Taxes..................................... 17
Management of the Fund.................... 19
Other Information Concerning the
Fund and its Shares..................... 23
Miscellaneous............................. 25
</TABLE>

Investment Adviser:
Mississippi Valley Advisors Inc.
a wholly-owned subsidiary of
Mercantile Bank
National Association
Distributor:
BISYS Fund Services

THE ARCH FUND(R), INC.

GROWTH EQUITY PORTFOLIO
INSTITUTIONAL SHARES

PROSPECTUS

SEPTEMBER 2, 1997
(AS REVISED NOVEMBER 21, 1997)
<PAGE> 57

THE ARCH FUND(R), INC.

THE ARCH GROWTH EQUITY PORTFOLIO

INVESTOR A SHARES AND INVESTOR B SHARES

<TABLE>
<S> <C>
For information, write: Or call your investment
P.O. Box 78069 representative or
St. Louis, Missouri 63178 the ARCH Funds' Service Center
at 1-800-452-2724
</TABLE>

The ARCH Fund, Inc. (the "Fund") is an open-end management investment
company that currently offers Shares in eighteen investment portfolios. This
Prospectus describes the Investor A Shares and the Investor B Shares in the ARCH
GROWTH EQUITY PORTFOLIO (the "Portfolio"). Investor A Shares and Investor B
Shares are sold through selected broker-dealers and other financial
intermediaries to individual or institutional customers. Investor A Shares are
sold with a front-end sales charge. Investor B Shares are sold with a contingent
deferred sales charge.

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

SEPTEMBER 2, 1997
(AS REVISED NOVEMBER 21, 1997)
<PAGE> 58

HIGHLIGHTS

The Fund is an open-end, management investment company (commonly known as a
mutual fund) registered under the Investment Company Act of 1940, as amended
(the "1940 Act"). The Fund offers investment opportunities in eighteen
investment portfolios. This Prospectus relates to one of those Portfolios: the
ARCH GROWTH EQUITY PORTFOLIO. In addition, the Fund offers investment
opportunities in the ARCH Treasury Money Market, Money Market, Tax-Exempt Money
Market, U.S. Government Securities, Intermediate Corporate Bond, Bond Index,
Government & Corporate Bond, Short-Intermediate Municipal, Missouri Tax-Exempt
Bond, National Municipal Bond, Equity Income, Equity Index, Growth & Income
Equity, Small Cap Equity, Small Cap Equity Index, International Equity and
Balanced Portfolios, which are described in separate Prospectuses. The Portfolio
represents a separate pool of assets with a different investment objective and
different policies than the Fund's other portfolios (as described below under
"Investment Objective, Policies and Risk Considerations"). MVA serves as
adviser, Mercantile as custodian, BISYS Fund Services Ohio, Inc. as
administrator and BISYS Fund Services as sponsor and distributor. For
information on expenses, fee waivers, and services, see "Certain Financial
Information," "Financial Highlights" and "Management of the Fund."

The following information generally describes the Portfolio and its
investment objective. There can be no assurance that the Portfolio will be able
to achieve its investment objective.

The Portfolio is designed for investors who seek capital appreciation and
who are prepared to accept the risks associated with an investment in equity
securities. See "Investment Objective, Policies and Risk Considerations" below.

Investors should note that the Portfolio may, subject to its investment
policies and limitations, invest in the securities of foreign issuers, enter
into repurchase agreements and reverse repurchase agreements, make securities
loans, invest in put and call options and futures and options on futures, and
make limited investments in illiquid securities and securities issued by other
investment companies. These investment practices involve investment risks of
varying degrees. For example, the securities of a foreign issuer entail certain
inherent risks, such as future political and economic developments and the
adoption of foreign government restrictions, that might adversely affect the
payment of dividends or principal and interest. Default by a counterparty to a
repurchase agreement or securities lending transaction could expose a Portfolio
to loss because of adverse market action or possible delay in disposing of the
underlying collateral. Reverse repurchase agreements are subject to the risk
that the market value of the securities sold by the Portfolio will decline below
the repurchase price which the Portfolio is obligated to pay. Purchasing options
is a specialized investment technique which entails a substantial risk of loss
of amounts paid as premiums to option writers. There is no assurance that a
liquid market will exist for a particular futures contract at any particular
time. The Portfolio may engage in short-term trading, which may also involve
greater risk and increase the Portfolio's expenses. See "Investment Objective,
Policies and Risk Considerations" below and the Statement of Additional
Information under "Investment Objective and Policies."

2
<PAGE> 59

offers the economic advantages of block trading in securities and the
availability of a family of eighteen mutual funds should an investor's
investment goals change.

This Prospectus describes the Investor A Shares and the Investor B Shares
of the Portfolio. Investor A Shares of the Portfolio are sold with a front-end
sales charge. Investor B Shares are sold with a contingent deferred sales
charge. For information on purchasing, exchanging or redeeming Investor A Shares
and Investor B Shares of the Portfolio, please see "How to Purchase and Redeem
Shares" below. For a discussion comparing Investor A Shares and Investor B
Shares, please see "Characteristics of Investor A Shares and Investor B Shares,"
and "Factors to Consider When Selecting Investor A Shares or Investor B Shares"
on pages 21 and 22, respectively.

3
<PAGE> 60

CERTAIN FINANCIAL INFORMATION

Shares of the Portfolio have been classified into four classes of
Shares -- Trust Shares, Institutional Shares, Investor A Shares and Investor B
Shares. Shares of each class in the Portfolio represent equal, pro rata
interests in the investments held by the Portfolio and are identical in all
respects, except that Shares of each class bear separate distribution and/or
shareholder administrative servicing fees and certain other operating expenses,
and enjoy certain exclusive voting rights on matters relating to these fees. See
"Other Information Concerning the Fund and Its Shares," "Management of the
Fund -- Distribution and Services Plans," and "Management of the
Fund -- Custodian and Transfer Agent" below. As a result of payments for
distribution and/or shareholder administrative servicing fees and certain other
operating expenses that may be made in differing amounts, the net investment
income of Trust Shares, Institutional Shares, Investor A Shares and Investor B
Shares in the Portfolio can be expected, at any given time, to be different.

The Portfolio commenced operations on January 4, 1993 as the Arrow Equity
Portfolio, a separate investment portfolio (the "Predecessor Portfolio") of
Arrow Funds, which was organized as a Massachusetts business trust. On November
21, 1997, the Predecessor Portfolio was reorganized as a new portfolio of the
Fund. Prior to the reorganization, the Predecessor Portfolio offered and sold
shares of beneficial interests that were similar to the Fund's Investor A
Shares.

EXPENSE SUMMARY FOR
INVESTOR A AND INVESTOR B SHARES

<TABLE>
<CAPTION>
GROWTH EQUITY PORTFOLIO
------------------------
INVESTOR A INVESTOR B
---------- ----------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Front-End Sales Load Imposed on Purchases
(as a percentage of offering price)........................................ 4.5%(1) NONE
Deferred Sales Charge (as a percentage of offering price).................... NONE 5.0%(2)
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fees..................................................... .75% .75%
12b-1 Fees, including distribution and service fees.......................... .30% 1.00%
Other Expenses (including administration fees and other expenses)
(net of fee waivers and expense reimbursements)(3,4)....................... .25% .25%
---------- ----------
TOTAL PORTFOLIO OPERATING EXPENSES
(net of fee waivers and expense reimbursements)(5)......................... 1.30% 2.00%
======== ========
</TABLE>

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

(1) Reduced sales charge may be available. See "How to Purchase and Redeem
Shares -- Reduced Sales Charges -- Investor A Shares."

(2) This amount applies to redemptions during the first year. The deferred sales
charge decreases to 4.0%, 3.0%, 3.0%, 2.0% and 1.0% for redemptions made
during the second through sixth years, respectively. No deferred sales
charge is charged after the sixth year. See "How to Purchase and Redeem
Shares -- Applicable Sales Charge -- Investor B Shares."

(3) Without fee waivers, administration fees would be .20%.

(4) Without fee waivers and/or expense reimbursements, Other Expenses and Total
Portfolio Operating Expenses would be .35% and 1.40%, respectively, for
Investor A Shares and .35% and 2.10%, respectively, for Investor B Shares.

4
<PAGE> 61

EXAMPLE

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end
of each period:
Growth Equity Portfolio
Investor A Shares(1)........................................ $ 58 $ 84 $ 117 $202
Investor B Shares
Assuming complete redemption at end of period(2).......... $ 70 $ 93 $ 131 $222
Assuming no redemption.................................... $ 20 $ 63 $ 111 $222
</TABLE>

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

(1) Assumes deduction at time of purchase of maximum applicable front-end sales
charge.

(2) Assumes deduction of maximum applicable contingent deferred sales charge.

The purpose of the foregoing table is to assist in understanding the
various costs and expenses that an investor in the Portfolio's Investor A Shares
or Investor B Shares will bear directly or indirectly. The information contained
in the table reflects the expenses the Portfolio expects to incur during the
next twelve months on its Investor A and Investor B Shares. For more complete
descriptions of the various costs and expenses, see "Management of the Fund" in
this Prospectus and the Statement of Additional Information. The table and
example have not been audited by the Fund's independent auditors and do not
reflect any charges that may be imposed by financial institutions on their
customers.

Because of the payments for distribution services (12b-1 fees) under the
Distribution and Services Plans as shown in the above table, long-term
shareholders of Investor A Shares and Investor B Shares of the Portfolio may pay
more than the economic equivalent of the maximum front-end sales load permitted
by the National Association of Securities Dealers, Inc.

FINANCIAL HIGHLIGHTS

The "Financial Highlights" in the following table supplements the
Predecessor Portfolio's financial statements, which are contained in the Arrow
Funds' Annual and Semi-Annual Reports dated September 30, 1996 and March 31,
1997, respectively, and incorporated by reference into the Statement of
Additional Information, and sets forth certain historical results for shares of
beneficial interest of the Predecessor Portfolio which were similar to Investor
A Shares of the Fund. The financial statements and the data reported in the
Financial Highlights for the fiscal years ended September 30, 1996, 1995 and
1994 and for the fiscal period ended September 30, 1993 were audited by KPMG
Peat Marwick LLP, independent accountants for the Predecessor Portfolio, whose
report thereon is incorporated by reference into the Statement of Additional
Information. The financial statements and the data reported in the Financial
Highlights for the six-month period ended March 31, 1997 is unaudited.

5
<PAGE> 62

Further information about the performance of the Predecessor Portfolio is
contained in the Arrow Funds' Annual and Semi-Annual Reports dated September 30,
1996 and March 31, 1997, respectively, which may be obtained without charge by
contacting the Funds at the address or telephone number on page 1 of this
Prospectus.

PREDECESSOR GROWTH EQUITY FUND
(FOR A SHARE OUTSTANDING THROUGH EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, ---------------------------------------------------
1997 1996 1995 1994 1993(a)
----------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 15.06 $ 13.80 $ 9.74 $ 10.02 $ 10.00
Income from investment operations
Net investment income.................. 0.06 0.12 0.10 0.07 0.04
Net realized and unrealized gain (loss)
on investments....................... 1.14 1.32 4.05 (0.25) 0.02
------- ------- ------- ------- -------
Total from investment operations....... 1.20 1.44 4.15 (0.18) 0.06
------- ------- ------- ------- -------
Less distributions
Distributions from net investment
income............................... (0.05) (0.11) (0.09) (0.07) (0.04)
Distributions from net realized gain on
investments.......................... (1.05) (0.07) -- (0.03) --
------- ------- ------- ------- -------
Total distributions.................... (1.10) (0.18) (0.09) (0.10) (0.04)
------- ------- ------- ------- -------
Net asset value, end of period........... $ 15.16 $ 15.06 $ 13.80 $ 9.74 $ 10.02
======= ======= ======= ======= =======
Total return(b).......................... 7.98% 10.48% 42.90% (1.84%) 0.60%
Ratios to average net assets
Expenses............................... 1.14%* 1.17% 1.28% 1.36% 1.32%*
Net investment income.................. 0.50%* 0.86% 0.90% 0.74% 0.62%*
Expense waiver/reimbursement(c)........ 0.25%* 0.28% 0.30% 0.28% 0.30%*
Supplemental data
Net assets, end of period (000
omitted)............................. $58,555 $55,573 $43,708 $30,282 $31,159
Average commission rate paid(d)........ $0.0905 $0.0757 -- -- --
Portfolio turnover..................... 25% 45% 45% 127% 54%
</TABLE>

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

* Computed on an annualized basis.

(a) Reflects operations for the period from January 4, 1993 (date of initial
public investment) to September 30, 1993.

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

(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1,
1995.

6
<PAGE> 63

INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS

The Portfolio invests primarily in equity securities of companies selected
by the Adviser on the basis of traditional research techniques. The equity
securities in which the Portfolio invests are primarily those of middle to large
capitalization issuers whose shares are listed on the New York and American
Stock Exchanges. Company earnings are the primary consideration in selecting
portfolio securities. The Portfolio may invest in common stocks, preferred
stocks, convertible securities, corporate bonds, debentures, notes, warrants,
and put and call options on stocks, although normally it will invest at least
65% of its total assets in common stocks. The lowest rated debt obligation in
which the Portfolio will invest will be rated Baa or better by Moody's Investors
Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Ratings Group
("S&P") or Fitch Investors Service, Inc. ("Fitch"). Securities rated Baa or BBB
have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal and
interest payments than higher rated securities. Downgrades will be evaluated on
a case by case basis by the Adviser. The Adviser will determine whether or not
the security continues to be an acceptable investment. If it is determined not
to be an acceptable investment, the security will be sold. The applicable
ratings categories are described in Appendix A to the Statement of Additional
Information.

RISK FACTORS

7
<PAGE> 64

exists that common stocks will decline over short or even extended periods of
time and both the U.S. and certain foreign equity markets tend to be cyclical,
experiencing both periods when stock prices generally increase and periods when
stock prices generally decrease.

OTHER APPLICABLE POLICIES

Investment methods described in this Prospectus are among those which the
Portfolio has the power to utilize. Some may be employed on a regular basis;
others may not be used at all. Accordingly, reference to any particular method,
or technique carries no implication that it will be utilized or, if it is, that
it be will successful.

8
<PAGE> 65

MONEY MARKET INSTRUMENTS. Under certain circumstances described above, the
Portfolio may purchase "money market instruments," including commercial paper
and bank obligations.

VARIABLE AND FLOATING RATE INSTRUMENTS. The Portfolio may purchase rated or
unrated variable and floating rate instruments. These instruments may include
variable rate master demand notes that permit the indebtedness thereunder to
vary in addition to providing for periodic adjustments in the interest rate.
Unrated instruments purchased by the Portfolio will be determined by the Adviser
to be of comparable quality at the time of purchase to rated instruments that
may be purchased. The absence of an active secondary market for a particular
variable or floating rate instrument, however,

9
<PAGE> 66

could make it difficult for the Portfolio to dispose of an instrument if the
issuer were to default on its payment obligation. The Portfolio could, for these
or other reasons, suffer a loss with respect to such instruments.

10
<PAGE> 67

portfolio, or which it has the right to obtain without payment of further
consideration, or for which it has segregated cash or liquid securities in the
amount of any additional consideration.

FUTURES AND OPTIONS ON FUTURES. The Portfolio may purchase and sell futures
contracts to hedge against the effects of changes in the value of portfolio
securities due to anticipated changes in interest rates and market conditions.
Futures contracts call for the delivery of particular debt instruments at a
certain time in the future. The seller of the contract agrees to make delivery
of the type of instrument called for in the contract and the buyer agrees to
take delivery of the instrument at the specified future time.

11
<PAGE> 68

12
<PAGE> 69

advantageous. Settlement dates may be a month or more after entering into these
transactions, and the market value of the securities purchased may vary from the
purchase prices.

13
<PAGE> 70

INVESTMENT LIMITATIONS

1. With respect to 75% of the value of its total assets, the Portfolio will
not purchase securities issued by any one issuer (other than cash, cash items or
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements collateralized by such securities),
if as a result more than 5% of the value of its total assets would be invested
in the securities of that issuer. The Portfolio will not acquire more than 10%
of the outstanding voting securities of any one issuer.

2. The Portfolio will not invest 25% or more of the value of its total
assets in any one industry, provided, however, that the Portfolio may invest
more than 25% of the value of its total assets in cash or certain money market
instruments (including instruments issued by a U.S. branch of a domestic bank or
savings and loan association having capital, surplus and undivided profits in
excess of $100,000,000 at the time of investment), securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements collateralized by such securities.

3. The Portfolio will not issue senior securities, except that the
Portfolio may borrow money directly or indirectly through reverse repurchase
agreements in amounts up to one-third the value of its total assets, including
the amount borrowed, and except to the extent that the Portfolio may enter into
futures contracts. The Portfolio will not borrow money or engage in reverse
repurchase agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure to facilitate management of its portfolio by
enabling the Portfolio to, for example, meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Portfolio will not purchase any securities while any
borrowings in excess of 5% of its total assets are outstanding.

14
<PAGE> 71

PRICING OF SHARES

The Portfolio's net asset value per Share is determined by the
Administrator as of the close of regular trading hours on the New York Stock
Exchange (the "Exchange") (currently 4:00 p.m. Eastern time) on each weekday
with the exception of those holidays on which the Exchange or the Federal
Reserve Bank of St. Louis are closed (a "Business Day"). Currently one or both
of these institutions are closed on the customary national business holidays of
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day (observed), Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day and Christmas Day (observed).

The public offering price for each class of Shares is based upon net asset
value per Share plus, in the case of Investor A Shares, a front-end sales
charge. A class will calculate its net asset value per Share by adding the value
of the Portfolio's investments, cash and other assets attributable to the class,
subtracting the Portfolio's liabilities attributable to that class, and then
dividing the result by the total number of Shares in the class that are
outstanding. Because the operating expenses of Investor B Shares are higher than
those associated with the other classes of shares, the net asset value per Share
of Investor B Shares of the Portfolio will generally be lower than the net asset
value per Share of Trust, Institutional or Investor A Shares of the Portfolio.

HOW TO PURCHASE AND REDEEM SHARES

PURCHASE OF SHARES

Investor A Shares of the Portfolio are sold subject to a front-end sales
charge. Investor B Shares of the Portfolio are sold subject to a back-end sales
charge. This back-end sales charge declines over time and is known as a
"contingent deferred sales charge." Before choosing between Investor A Shares or
Investor B Shares of the Portfolio, investors should read "Characteristics of
Investor A Shares and Investor B Shares" and "Factors to Consider When Selecting
Investor A Shares or Investor B Shares" below.

Investor A Shares and Investor B Shares are sold through broker-dealers or
other organizations acting on behalf of their customers. Generally, investors
purchase Investor A Shares or Investor B Shares through a broker-dealer
organization which has a sales agreement with the Distributor or through an
organization which has entered into a servicing agreement with the Fund with
respect to Investor A Shares and/or Investor B Shares. The organization is
responsible for

15
<PAGE> 72

transmitting purchase orders directly to the Fund. Investors purchasing Shares
of the Portfolio must specify at the time of investment whether they are
purchasing Investor A Shares or Investor B Shares.

The minimum initial investment in the Portfolio is $1,000 and the minimum
for each subsequent investment is $100, except for investments made through (a)
the Automatic Investment Program, in which case the initial minimum and
subsequent minimum investments are $50, (b) a sweep program available through an
investor's financial institution, in which case there are no minimum
investments, (c) a payroll deduction program, in which case there is no minimum
initial investment and minimum subsequent investments are $25 per month, or (d)
a wrap fee program, in which case there are no minimum investments. The minimum
initial investment to participate in the Automatic Exchange Program is $5,000.
See "How to Purchase and Redeem Shares -- Exchange Privileges -- Automatic
Exchange Program" below for additional requirements.

All orders for new IRAs or other retirement plan accounts placed through
BISYS Fund Services Ohio, Inc. (the "Transfer Agent") must be accompanied by an
account application. Account applications may be obtained from your investment
representative or the Fund at 1-800-452-ARCH (2724).

Organizations placing orders directly or on behalf of their customers
should contact the Fund at 1-800-452-ARCH (2724). Investors may also call the
Fund for information on how to purchase Shares.

EFFECTIVE TIME OF PURCHASE. If purchase orders are received in good form
and accepted by the Fund prior to 4:00 p.m. (Eastern time) on any Business Day,
Shares will be priced according to the net asset value per Share next determined
on that day after receipt of the order. Immediately available funds must be
received by the Custodian prior to 4:00 p.m. within three Business Days
following the receipt of such order. If funds are not received by such date, the
order will be cancelled, and notice thereof will be given to the person or
organization placing the order.

In the case of an order for the purchase of Shares placed through a
broker-dealer, it is the responsibility of the broker-dealer to promptly
transmit the order to the Distributor. If the broker-dealer fails to do so, the
investor's right to that day's closing price must be settled between the
investor and the broker-dealer. Payment for orders which are not received or
accepted will be returned after prompt inquiry to the transmitting organization.

PURCHASES BY MAIL. To purchase Shares of the Portfolio by mail, complete an
account application and send it to the Fund along with a check (or other
negotiable bank draft or money order) in at least the minimum initial purchase
amount, made payable to the Portfolio. Investors purchasing Shares by mail must
indicate whether they wish to buy Investor A Shares or Investor B Shares.
Subsequent purchases of Shares of the Portfolio may be made at any time in at
least the minimum subsequent purchase amount by mailing a check payable to the
Portfolio.

All shareholders of record will receive confirmations of Share purchases,
exchanges, and redemptions in the mail. If Shares are held in the name of an
organization, such organization is

16
<PAGE> 73

responsible for transmitting purchase, exchange and redemption orders to the
Fund on a timely basis, recording all purchase, exchange and redemption
transactions, and providing regular account statements which confirm such
transactions to beneficial owners (or arranging for such services).

AUTOMATIC INVESTMENT PROGRAM (AIP)

Shareholders may open an account or add to their investment on a monthly
basis in a minimum amount of $50, on the 20th day (or the next Business Day
after the 20th) of each month. Under the AIP, funds may be automatically
withdrawn from the shareholder's checking account (as long as the shareholder's
bank is a member of the Automated Clearing House). Such funds are invested in
Investor A or Investor B Shares, as appropriate, at the net asset value plus any
applicable front-end sales charge next determined on the day an order is
effected by the Transfer Agent. An investor may apply for participation in the
AIP through the organization servicing his or her Fund account and by completing
the supplementary AIP authorization form. The AIP may be modified or terminated
by a shareholder on 30 days' written notice to his or her investment
representative or to the Fund, or by the Fund at any time.

The AIP is one means by which investors may use "Dollar Cost Averaging" in
making investments. Dollar Cost Averaging can be useful in investing in
portfolios such as the Portfolio whose price per Share fluctuates. Instead of
trying to time market performance, a fixed dollar amount is invested in
Portfolio Shares at predetermined intervals. This may help investors to reduce
their average cost per Share because the agreed upon fixed investment amount
allows more Shares to be purchased during periods of lower Share prices and
fewer Shares during periods of higher prices. In order to be effective, Dollar
Cost Averaging should usually be followed on a sustained, consistent basis.
Investors should be aware, however, that Shares bought using Dollar Cost
Averaging are made without regard to their price on the day of investment or to
market trends. In addition, while investors may find Dollar Cost Averaging to be
beneficial, it will not prevent a loss if an investor ultimately redeems his or
her Shares at a price which is lower than their purchase price.

APPLICABLE SALES CHARGES -- INVESTOR A SHARES

The public offering price for Investor A Shares of the Portfolio is the sum
of the net asset value of the Shares being purchased plus any applicable sales
charge. No sales charge is assessed on the reinvestment of dividends and capital
gain distributions. The sales charge is assessed as follows:

<TABLE>
<CAPTION>
DEALERS'
AS A % OF AS A % OF REALLOWANCE
OFFERING NET ASSET AS A % OF
PRICE VALUE OFFERING
AMOUNT OF TRANSACTION PER SHARE PER SHARE PRICE
- -------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Less than $50,000....................................... 4.50% 4.71% 4.00%
$50,000 but less than $100,000.......................... 3.50 3.63 3.00
$100,000 but less than $250,000......................... 2.50 2.56 2.00
$250,000 but less than $500,000......................... 1.50 1.52 1.00
$500,000 but less than $1,000,000....................... 1.00 1.01 0.50
$1,000,000 and over..................................... 0.50 0.50 0.40
</TABLE>

17
<PAGE> 74

The Distributor will pay the appropriate Dealers' Reallowance to
broker-dealer organizations which have entered into an agreement with the
Distributor. The Dealers' Reallowance may be changed from time to time. Upon
notice to the Fund's shareholders, the Distributor, at its sole discretion, may
reallow up to the full applicable sales charge as shown on the above schedule
during periods specified in such notice. Dealers who receive 90% or more of a
sales load may be deemed to be "underwriters" under the Securities Act of 1933,
as amended.

No sales charge is assessed on purchases of Investor A Shares of the
Portfolio by: (a) directors and officers of the Fund and the immediate family
members of such individuals; (b) directors, current and retired employees and
participants in employee benefit/retirement plans (future and current
annuitants) of Mercantile Bancorporation Inc. or any of its affiliates or the
Distributor or its affiliates and the immediate family members of such
individuals; (c) brokers, dealers, and agents who have a sales agreement with
the Distributor, and their employees (and the immediate family members of such
individuals); (d) customers who purchase pursuant to a wrap fee program offered
by any broker-dealer or other financial institution or financial planning
organization; (e) individuals who purchase Investor A Shares with the proceeds
of Trust Shares or Institutional Shares redeemed in connection with a rollover
of benefits paid by a qualified retirement or employee benefit plan or
distribution on behalf of any other qualified account administered by Mercantile
or its affiliates or correspondent banks, within 60 days of receipt of such
payment; (f) investors who purchase Investor A Shares through a payroll
deduction program; (g) employees of any sub-adviser to the Fund; (h) former
holders of Southwestern Bell Visa cards that had been issued by Mercantile Bank
of Illinois, N.A. and who participated in the Automatic Investment Program
(credit cards may not be used for the purchase of Fund Shares); (i) investors
exchanging Trust Shares of a Portfolio received from the distribution of assets
held in a qualified trust, agency or custodian account with the trust department
of Mercantile or any of its affiliated or correspondent banks; or (j) other
investment companies distributed by the Distributor or its affiliates. Investors
who believe that they may qualify under any of the exemptions listed above
should contact the Fund at 1-800-452-ARCH (2724) prior to making a purchase.

REDUCED SALES CHARGES -- INVESTOR A SHARES

The sales charge on purchases of Investor A Shares of the Portfolio may be
reduced through:

- rights of accumulation

- quantity discounts

- letter of intent

- reinvestment privilege

To qualify for a reduced sales load, an investor must so notify his or her
investment representative, who in turn will notify the Distributor at the time
of purchase.

RIGHTS OF ACCUMULATION -- INVESTOR A SHARES. An investor who has previously
purchased Investor A Shares of the Portfolio and has paid a sales charge
("load") may be eligible for reduced sales charges when purchasing additional
Investor A Shares of the Portfolio or any other portfolio of the Fund sold with
a sales charge. An investor's aggregate investment in Shares of such load
portfolios is the total value (based on the higher of current net asset value or
the public offering price originally paid) of: (a) current purchases, and (b)
Shares that are already beneficially owned

18
<PAGE> 75

by the investor on which a sales charge has already been paid. If, for example,
an investor beneficially owns Investor A Shares of the Portfolio having an
aggregate current value of $240,000 and subsequently purchases additional
Investor A Shares of another portfolio with a maximum 4.50% sales load having a
current value of $10,000, the sales charge applicable to the subsequent purchase
would be reduced to 1.50% of the offering price.

QUANTITY DISCOUNTS -- INVESTOR A SHARES. As shown in the table under
"Applicable Sales Charges -- Investor A Shares," larger purchases reduce the
sales charge paid. The Fund will combine purchases made in the Portfolio on the
same day by the investor and immediate family members when calculating the
applicable sales charge.

LETTER OF INTENT -- INVESTOR A SHARES. By checking the Letter of Intent box
on the account application, a shareholder becomes eligible for reduced sales
charges applicable to the total amount invested in Investor A Shares in the
Portfolio over a 13-month period (beginning up to 90 days prior to the date
indicated on the account application). The Transfer Agent will hold in escrow 5%
of the amount indicated for payment of a higher sales load if a shareholder does
not purchase the full amount indicated on the account application. Upon
completion of the total minimum investment specified on the account application,
the escrow will be released, and an adjustment will be made to reflect any
reduced sales charge applicable to Shares purchased during the 90-day period
prior to submission of the account application. Additionally, if total purchases
within the 13-month period exceed the amount specified, an adjustment will be
made to reflect further reduced sales charges applicable to such purchases. All
such adjustments will be made at the conclusion of the 13-month period and in
the form of additional Shares credited to the shareholder's account at the then
current public offering price applicable to a single purchase of the total
amount of the total purchases. If total purchases are less than the amount
specified, escrowed Shares may be involuntarily redeemed to pay the additional
sales charge. Checking a Letter of Intent box does not bind an investor to
purchase, or the Fund to sell, the full amount indicated at the sales load in
effect at the time of signing, but an investor must complete the intended
purchase to obtain the reduced sales load.

REINVESTMENT PRIVILEGE -- INVESTOR A SHARES. Upon redemption of Investor A
Shares on which a sales charge was paid, a shareholder has a one-time right, to
be exercised within 60 days, to reinvest the redemption proceeds at the next
determined net asset value without paying any additional sales charge. The
shareholder must notify his or her investment representative or the Distributor
in writing of the reinvestment and provide a receipt or other evidence of the
redemption in order to eliminate a sales charge.

MISCELLANEOUS -- INVESTOR A SHARES. Reduced sales charges may be modified
or terminated at any time and are subject to confirmation of an investor's
holdings. For more information about reduced sales charges, an investor should
contact his or her investment representative or the Distributor.

APPLICABLE SALES CHARGES -- INVESTOR B SHARES

Investor B Shares of the Portfolio are sold at their net asset value next
determined after a purchase order is received in good form by the Fund's
Distributor. Although investors pay no front-end sales charge on purchases of
Investor B Shares, such Shares are subject to a contingent deferred sales charge
at the rates set forth in the chart below if they are redeemed within six years

19
<PAGE> 76

of purchase. Service Organizations will receive commissions from the Distributor
in connection with sales of Investor B Shares. These commissions may be
different than the reallowances or placement fees, if any, paid to dealers in
connection with sales of Investor A Shares.

The contingent deferred sales charge on Investor B Shares is based on the
lesser of the net asset value of the Shares on the redemption date or the
original cost of the Shares being redeemed. As a result, no sales charge is
charged on any increase in the principal value of an investor's Shares. In
addition, a contingent deferred sales charge will not be assessed on Investor B
Shares purchased through reinvestment of dividends or capital gains
distributions.

The amount of any contingent deferred sales charge an investor must pay on
Investor B Shares depends on the number of years that elapse between the
purchase date and the date such Investor B Shares are redeemed. Solely for
purposes of determining the number of years from the time of payment for an
investor's Share purchase, all payments during a month will be aggregated and
deemed to have been made on the first day of the month.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE
(AS A PERCENTAGE
NUMBER OF YEARS OF DOLLAR AMOUNT
ELAPSED SINCE PURCHASE SUBJECT TO THE CHARGE)
---------------------------------------------------------- ----------------------
<S> <C>
One or less............................................... 5.0%
More than one, but less than two.......................... 4.0%
Two, but less than three.................................. 3.0%
Three, but less than four................................. 3.0%
Four, but less than five.................................. 2.0%
Five, and up to and including six......................... 1.0%
After six years........................................... None
</TABLE>

When an investor redeems his or her Investor B Shares, the redemption order
is processed to minimize the amount of the contingent deferred sales charge that
will be charged. Investor B Shares are redeemed first from those Investor B
Shares that are not subject to the deferred sales load (i.e., Investor B Shares
that were acquired through reinvestment of dividends or capital gain
distributions) and after that from the Investor B Shares that have been held the
longest.

For example, assume an investor purchased 100 Investor B Shares at $10 a
Share (for a total cost of $1,000), three years later the Shares have a net
asset value of $12 per Share and during that time the investor acquired 10
additional Shares through dividend reinvestment. If the investor then makes one
redemption of 50 Shares (resulting in proceeds of $600, 50 Shares x $12 per
share), the first 10 Shares redeemed will not be subject to the contingent
deferred sales charge because they were acquired through reinvestment of
dividends. With respect to the remaining 40 Shares redeemed, the contingent
deferred sales charge is charged at $10 per Share (because the original purchase
price of $10 per Share is lower than the current net asset value of $12 per
share). Therefore, only $400 of the $600 such investor received from selling his
or her Shares will be subject to the contingent deferred sales charge, at a rate
of 3.0% (the applicable rate in the third year after purchase). The proceeds
from the contingent deferred sales charge that the investor may pay upon

20
<PAGE> 77

redemption go to the Distributor, which may use such amounts to defray the
expenses associated with the distribution-related services involved in selling
Investor B Shares. The contingent deferred sales charge, along with ongoing
distribution fees paid with respect to Investor B Shares, enables those Shares
to be purchased without the imposition of a front-end sales charge.

EXEMPTIONS FROM THE CONTINGENT DEFERRED SALES CHARGE. The following types
of redemptions qualify for an exemption from the contingent deferred sales
charge: (i) exchanges described under "Exchange Privileges" below; (ii)
redemptions in connection with required (or, in some cases, discretionary)
distributions to participants or beneficiaries of an employee pension,
profit-sharing or other trust or qualified retirement or Keogh plan, individual
retirement account or custodial account maintained pursuant to Section 403(b)(7)
of the Internal Revenue Code due to death, disability or the attainment of a
specified age; (iii) redemptions effected pursuant to a Portfolio's right to
liquidate a shareholder's account if the aggregate net asset value of Shares
held in the account is less than the minimum account size; (iv) redemptions in
connection with the death or disability of a shareholder; or (v) redemptions
resulting from a tax-free return of an excess contribution pursuant to Section
408(d)(4) or (5) of the Internal Revenue Code.

CHARACTERISTICS OF INVESTOR A SHARES AND INVESTOR B SHARES

The primary difference between Investor A Shares and Investor B Shares lies
in their sales charge structures and distribution arrangements. An investor
should understand that the purpose and function of the sales charge structures
and distribution arrangements for both Investor A Shares and Investor B Shares
are the same.

Investor A Shares are sold at their net asset value plus a front-end sales
charge of up to 4.50%. This front-end sales charge may be reduced or waived in
some cases. See "Applicable Sales Charges -- Investor A Shares." Investor A
Shares are subject to ongoing distribution and service fees at an annual rate of
up to 0.30% of the Portfolio's average daily net assets attributable to its
Investor A Shares.

Investor B Shares are sold at net asset value without an initial sales
charge. Normally, however, a deferred sales charge is paid if the Shares are
redeemed within six years of investment. See "Applicable Sales
Charges -- Investor B Shares." Investor B Shares are subject to ongoing
distribution and service fees at an annual rate of up to 1.00% of the
Portfolio's average daily net assets attributable to its Investor B Shares.
These ongoing fees, which are higher than those charged on Investor A Shares,
will cause Investor B Shares to have a higher expense ratio and pay lower
dividends than Investor A Shares.

Eight years after purchase, Investor B Shares will convert automatically to
Investor A Shares. The purpose of the conversion is to relieve a holder of
Investor B Shares of the higher ongoing expenses charged to those Shares, after
enough time has passed to allow the Distributor to recover approximately the
amount it would have received if a front-end sales charge had been charged. The
conversion from Investor B Shares to Investor A Shares takes place at net asset
value, as a result of which an investor receives dollar-for-dollar the same
value of Investor A Shares as he or she had of Investor B Shares. The conversion
occurs eight years after the beginning of the calendar month in which the Shares
are purchased. As a result of the conversion, the converted Shares are relieved
of

21
<PAGE> 78

the distribution and service fees borne by Investor B Shares, although they are
subject to the distribution and service fees borne by Investor A Shares.

Investor B Shares acquired through a reinvestment of dividends or
distributions are also converted at the earlier of two dates -- eight years
after the beginning of the calendar month in which the reinvestment occurred or
the date of conversion of the most recently purchased Investor B Shares that
were not acquired through reinvestment of dividends or distributions. For
example, if an investor makes a one-time purchase of Investor B Shares of the
Portfolio, and subsequently acquires additional Investor B Shares of the
Portfolio only through reinvestment of dividends and/or distributions, all of
such investor's Investor B Shares in the Portfolio, including those acquired
through reinvestment, will convert to Investor A Shares of the Portfolio on the
same date.

FACTORS TO CONSIDER WHEN SELECTING INVESTOR A SHARES OR INVESTOR B SHARES

Before purchasing Shares of the Portfolio, investors should consider
whether, during the anticipated life of their investment in the Portfolio, the
accumulated distribution fees and potential contingent deferred sales charges on
Investor B Shares prior to conversion would be less than the initial sales
charge and accumulated distribution fees on Investor A Shares purchased at the
same time, and to what extent such differential would be offset by the higher
yield of Investor A Shares. In this regard, to the extent that the sales charge
for Investor A Shares is waived or reduced by one of the methods described
above, investments in Investor A Shares become more desirable. The Fund will
refuse all purchase orders for Investor B Shares of over $100,000.

Although Investor A Shares are subject to a distribution and service fee,
they are not subject to the higher distribution and service fee applicable to
Investor B Shares. For this reason, Investor A Shares can be expected to pay
correspondingly higher dividends per Share. However, because initial sales
charges are deducted at the time of purchase, purchasers of Investor A Shares
that do not qualify for waivers of or reductions in the initial sales charge
would have less of their purchase price initially invested in the Portfolio than
purchasers of Investor B Shares of the Portfolio.

As described above, purchasers of Investor B Shares will have more of their
initial purchase price invested. Any positive investment return on this
additional invested amount would partially or wholly offset the expected higher
annual expenses borne by Investor B Shares. Because the Portfolio's future
returns cannot be predicted, there can be no assurance that this will be the
case. Holders of Investor B Shares would, however, own Shares that are subject
to higher annual expenses and, for a six-year period, such Shares would be
subject to a contingent deferred sales charge of up to 5.00% upon redemption,
depending upon the year of redemption. Investors expecting to redeem during this
six-year period should compare the cost of the contingent deferred sales charge
plus the aggregate annual Investor B Shares' distribution and service fees to
the cost of the initial sales charge and distribution and service fees on the
Investor A Shares. Over time, the expense of the annual distribution and service
fees on the Investor B Shares may equal or exceed the initial sales charge, if
any, and annual distribution and service fees applicable to Investor A Shares.
For example, if net asset value remains constant, the aggregate distribution and
service fees with respect to Investor B Shares of the Portfolio would equal or
exceed the initial sales charge and aggregate distribution fees of Investor A
Shares of the Portfolio approximately eight years after the purchase. In order
to reduce such fees of investors that hold Investor B Shares for more than

22
<PAGE> 79

eight years, Investor B Shares will be automatically converted to Investor A
Shares as described above at the end of such eight-year period.

EXCHANGE PRIVILEGES

The exchange privilege enables shareholders to exchange (i) Investor A
Shares of the Portfolio for Investor A Shares of another portfolio offered by
the Fund or, under certain circumstances described below, for Trust Shares or
Institutional Shares of the Portfolio, and (ii) Investor B Shares of the
Portfolio for Investor B Shares of another portfolio offered by the Fund. The
exchange privilege may be exercised only in those states where the class of
shares of such other portfolios may be legally sold.

EXCHANGES -- INVESTOR A SHARES. Shareholders who have purchased Investor A
Shares of the Portfolio and who have paid any applicable sales charge ("load")
(including Shares acquired through reinvestment of dividends or distributions on
such Shares) may exchange those Shares for Investor A Shares of another
portfolio offered by the Fund without paying an additional sales load.

In addition, shareholders who have a qualified trust, agency or custodian
account with the trust department of Mercantile or any of its affiliated or
correspondent banks, and whose Shares are to be held in that account, may also
exchange Investor A Shares of the Portfolio for Trust Shares or Institutional
Shares in the Portfolio.

EXCHANGES -- INVESTOR B SHARES. Shareholders who have purchased Investor B
Shares of the Portfolio (including Shares acquired through reinvestment of
dividends or distributions on such Shares) may exchange those Shares for
Investor B Shares of another portfolio offered by the Fund without the payment
of any contingent deferred sales charge at the time the exchange is made. In
determining the holding period for calculating the contingent deferred sales
charge payable on redemptions of Investor B Shares, the holding period of the
Investor B Shares originally held will be added to the holding period of the
Investor B Shares acquired through the exchange. No exchange fee is imposed by
the Fund.

OTHER INFORMATION CONCERNING EXCHANGES. The Shares exchanged must have a
current value at least equal to the minimum initial or subsequent investment
required by the particular portfolio into which the exchange is being made. The
Fund reserves the right to reject any exchange request. The exchange privilege
may be modified or terminated at any time upon 60 days' written notice to
shareholders. An investor may telephone an exchange request by calling his or
her investment representative, which is responsible for transmitting such
exchange request to the Fund. See "Other Exchange or Redemption Information"
below. Investors who want to telephone an exchange request directly to the Fund
and have elected this privilege on the account application may follow the
procedures described below under "Redemption by Telephone." An investor should
consult his or her investment representative or the Fund for further information
regarding procedures for exchanging Shares.

23
<PAGE> 80

In addition to the Growth Equity Portfolio described in this Prospectus,
the Fund currently offers Investor A Shares and/or Investor B Shares in the
following portfolios:

The ARCH Treasury Money Market Portfolio*
The ARCH Money Market Portfolio
The ARCH Tax-Exempt Money Market Portfolio*
The ARCH U.S. Government Securities Portfolio
The ARCH Intermediate Corporate Bond Portfolio
The ARCH Bond Index Portfolio*
The ARCH Government & Corporate Bond Portfolio
The ARCH Short-Intermediate Municipal Portfolio
The ARCH Missouri Tax-Exempt Bond Portfolio
The ARCH National Municipal Bond Portfolio
The ARCH Equity Income Portfolio
The ARCH Equity Index Portfolio*
The ARCH Growth & Income Equity Portfolio
The ARCH Small Cap Equity Portfolio
The ARCH Small Cap Equity Index Portfolio*
The ARCH International Equity Portfolio
The ARCH Balanced Portfolio

For more information concerning these portfolios, please call
1-800-452-ARCH (2724). Shareholders exercising the exchange privilege with any
of the other portfolios in the Fund should request and review the portfolio's
prospectus carefully prior to making an exchange.

AUTOMATIC EXCHANGE PROGRAM. The Automatic Exchange Program enables
shareholders to make regular, automatic withdrawals from an Investor A Share or
Investor B Share account in the Portfolio and use those proceeds to benefit from
Dollar Cost Averaging by automatically making purchases of the same class of
Shares in another portfolio offered by the Fund. With shareholder authorization,
the Fund's Transfer Agent will withdraw the amount specified (subject to the
applicable minimums) from the shareholder's account and will automatically
invest that amount in Shares of the Portfolio designated by the shareholder on
the date of such deduction.

In order to participate in the Automatic Exchange Program, shareholders
must make a minimum initial purchase of $5,000 and maintain a minimum account
balance of $1,000. Additionally, shareholders must complete the supplementary
authorization form which may be obtained from their investment representatives
or the Distributor. To change instructions with respect to the Automatic
Exchange Program or to discontinue this feature, shareholders must send a
written request to their investment representative or to the Fund. The Automatic
Exchange Program may be amended or terminated without notice at any time by the
Distributor.

REDEMPTION OF SHARES

Redemption orders should be placed with or through the same broker-dealer
organization that placed the original purchase order. Redemption orders are
effected at the Portfolio's net asset value

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

*Does not offer Investor B Shares.

24
<PAGE> 81

per Share next determined after receipt of the order by the Fund. Proceeds from
the redemptions of Investor B Shares will be reduced by the amount of any
applicable contingent deferred sales charge. The organization through which the
investor placed the order is responsible for transmitting redemption orders to
the Fund on a timely basis. No charge for sending redemption payments
electronically is currently imposed by the Fund, although a charge may be
imposed in the future. The Fund reserves the right to send redemption proceeds
electronically within seven days after receiving a redemption order if, in the
judgment of the Adviser, an earlier payment could adversely affect the
Portfolio.

REDEMPTION BY MAIL

A written redemption request must be accompanied by any Share certificates
which are properly endorsed for transfer. The Transfer Agent may require a
signature guarantee by an eligible guarantor institution. For purposes of this
policy, the term "eligible guarantor institution" shall include banks, brokers,
dealers, credit unions, securities exchanges and associations, clearing agencies
and savings associations as those terms are defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended. The Transfer Agent reserves the
right to reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine, (2) it has reason to believe that the transaction
would otherwise be improper, or (3) the guarantor institution is a broker or
dealer that is neither a member of a clearing corporation nor maintains net
capital of at least $100,000. The signature guarantee requirement will be waived
if all of the following conditions apply: (1) the redemption check is payable to
the shareholder(s) of record and (2) the redemption check is mailed to the
shareholder(s) at the address of record or the proceeds are either mailed or
sent electronically to a commercial bank account previously designated on the
account application. An investor with questions or needing assistance should
contact his or her investment representative or the Fund. Additional
documentation may be required if the redemption is requested by a corporation,
partnership, trust, fiduciary, executor, or administrator.

REDEMPTION BY TELEPHONE

Shares may be redeemed by telephone if the shareholder selected that option
on the account application. The shareholder may have the proceeds mailed to his
or her address or mailed or sent electronically to a bank account previously
designated on the account application. It is not necessary for shareholders to
confirm telephone redemption requests in writing. If a shareholder did not
originally select the telephone redemption privilege, the shareholder must
provide written instructions to the Transfer Agent to add this feature. Neither
the Fund nor its service contractors will be liable for any loss, damage,
expense or cost arising out of any telephone redemption effected in accordance
with the Fund's telephone redemption procedures, acting upon instructions
reasonably believed to be genuine. The Fund will employ procedures designed to
provide reasonable assurance that instructions by telephone are genuine; if
these procedures are not followed, the Fund or its service contractors may be
liable for any losses due to unauthorized or fraudulent instructions. If Share
certificates are outstanding with respect to an account, the telephone
redemption and telephone exchange privilege is not available. If, due to
temporary adverse conditions, investors are unable to effect telephone
transactions, investors are encouraged to follow the procedures described in
"Other Exchange or Redemption Information" below.

25
<PAGE> 82

Proceeds from redemptions of Investor A Shares and/or Investor B Shares
with respect to redemption orders received by the Fund before 4:00 p.m. (Eastern
time) on a Business Day normally are sent electronically or mailed by check to
the organization that placed the redemption order within three Business Days
after the Distributor's receipt of the order in good form.

AUTOMATIC WITHDRAWAL PLAN (AWP)

An Automatic Withdrawal Plan may be established by a new or existing
shareholder of the Portfolio if the value of his or her account (valued at the
net asset value at the time of the establishment of the AWP) equals $10,000 or
more. Shareholders who elect to establish an AWP may receive a monthly,
quarterly, semi-annual, or annual check in a stated amount of not less than $50
on or about the 25th day of the applicable month of withdrawal. Periodic
payments will be reduced by any applicable contingent deferred sales charge.
Portfolio Shares will be redeemed as necessary to meet withdrawal payments.
Withdrawals may reduce principal and eventually deplete the shareholder's
account. The maintenance of an AWP may be disadvantageous for holders of
Investor B Shares due to the effect of the contingent deferred sales charge. A
shareholder who desires to establish an AWP after opening an account should
complete the AWP form in the back of the Prospectus or contact his or her
investment representative or the Distributor for an AWP application. A signature
guarantee will be required. An AWP may be terminated by a shareholder on 30
days' written notice to his or her investment representative or to the Fund or
by the Fund at any time.

PURCHASE OF INVESTOR A SHARES AT NET ASSET VALUE

From time to time the Distributor may offer special concessions to enable
investors to purchase Investor A Shares of the Portfolio at net asset value
without payment of a front-end sales charge. To qualify for a net asset value
purchase, the investor must pay for such purchase with the proceeds from the
redemption of shares of a non-affiliated mutual fund on which a front-end sales
charge was paid. A qualifying purchase of Investor A Shares must occur within 30
days of the prior redemption and must be evidenced by a confirmation of the
redemption transaction. At the time of purchase, the investment representative
must notify the Distributor that the purchase qualifies for a purchase at net
asset value. Proceeds from the redemption of Shares on which no front-end sales
charge was paid do not qualify for a purchase at net asset value.

OTHER EXCHANGE OR REDEMPTION INFORMATION

WHEN REDEEMING SHARES IN THE PORTFOLIO, SHAREHOLDERS SHOULD INDICATE
WHETHER THEY ARE REDEEMING INVESTOR A SHARES OR INVESTOR B SHARES. In the event
a redeeming shareholder owns both Investor A Shares and Investor B Shares in the
Portfolio, the Investor A Shares will be redeemed first unless the shareholder
indicates otherwise.

During periods of substantial economic or market change or activity,
telephone redemptions or exchanges may be difficult to complete. In such event,
Shares may be redeemed or exchanged by mailing the request directly to the
organization through which the original Shares were purchased or directly to the
Fund at P.O. Box 78069, St. Louis, Missouri 63178.

26
<PAGE> 83

YIELDS AND TOTAL RETURNS

From time to time, performance information such as total return and yield
data for the Portfolio's Investor A Shares and Investor B Shares may be quoted
in advertisements, sales literature or in communications to shareholders. The
yield is computed based on the net income of a particular class of Shares in the
Portfolio during a 30-day (or one-month) period identified in connection with
the particular yield quotation. More specifically, the yield is computed by
dividing the Portfolio's net income per Share during a 30-day (or one-month)
period by the maximum public offering price per Share on the last day of the
period and annualizing the result.

The Portfolio's total return may be calculated on an average annual total
return basis, and may also be calculated on an aggregate total return basis, for
various periods. Average annual total returns with respect to a particular class
of Shares reflect the average annual percentage change in value of an investment
in such Shares over the particular measuring period. Aggregate total returns
reflect the cumulative percentage change in value over the measuring period.
Both methods of calculating total returns assume that dividends and capital gain
distributions made by the Portfolio during the period are reinvested in the same
class of Shares of the Portfolio and that the maximum sales load in effect
during the period has been charged by the Portfolio. The Portfolio's total
return figures may also be calculated without the deduction of the maximum sales
charge in effect during the period. The effect of not deducting the sales charge
will be to increase the total return reflected. When considering average annual
total return figures for periods longer than one year, it is important to note
that the Portfolio's annual total return for any one year in the period might
have been more or less than the average for the entire period.

27
<PAGE> 84

Performance data of the Portfolio's Investor A Shares and Investor B Shares
may be compared to the performance of other mutual funds with comparable
investment objectives and policies through various mutual fund or market indices
and data such as that provided by S&P, Lehman Brothers, Inc. or any of its
affiliates, Ibbotson Associates, Inc., Lipper Analytical Services, Inc. and
Mutual Fund Forecaster. References may also be made to indices or data published
in Money Magazine, Forbes, Barron's, The Wall Street Journal, The New York
Times, Business Week, American Banker, Institutional Investor, Pensions and
Investments, U.S.A. Today, Fortune, CDA/Wiesenberger, Morningstar, Inc. and
publications of a local or regional nature. In addition to performance
information, general information about the Portfolio that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to shareholders.

Performance quotations of a class of Shares in the Portfolio represent past
performance and should not be considered as representative of future results.
Any account fees charged by an investment representative will not be included in
the calculations of the Portfolio's yields and total returns. Such fees, if any,
will reduce the investor's net return on an investment in the Portfolio.
Investors may call 1-800-452-ARCH (2724) to obtain current yield and total
return information.

DIVIDENDS AND DISTRIBUTIONS

Dividends from net investment income of the Portfolio are declared and paid
monthly as a dividend to shareholders of record. Dividends on each Share of the
Portfolio are determined in the same manner and are paid in the same amounts,
irrespective of class, except that the Portfolio's Trust Shares and
Institutional Shares bear all expenses of the respective Administrative Services
Plans adopted for such Shares and the Portfolio's Investor A Shares and Investor
B Shares bear all expenses of the respective Distribution and Services Plans
adopted for such Shares. In addition, the Portfolio's Institutional Shares bear
the expense of certain sub-transfer agency fees. See "Management of the Fund"
and "Other Information Concerning the Fund and Its Shares" below.

Net realized capital gains of the Portfolio, if any, are distributed at
least annually. All dividends and distributions paid on the Portfolio's Shares
are automatically reinvested (without a sales load) in additional Shares of the
same class unless the investor has (i) otherwise indicated in the account
application, or (ii) redeemed all the Shares held in the Portfolio, in which
case a distribution will be paid in cash. Reinvested dividends and distributions
will be taxed in the same manner as those paid in cash.

TAXES

FEDERAL TAXES

28
<PAGE> 85

any) net of certain deductions for such year. In general, the Portfolio's
investment company taxable income will be its taxable income, including
dividends, interest and short-term capital gains (the excess of net short-term
capital gain over net long-term capital loss), subject to certain adjustments
and excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year. It is the policy of
the Portfolio to distribute as dividends substantially all of its investment
company taxable income and any net tax-exempt interest income each year. Such
dividends will be taxable as ordinary income to the Portfolio's shareholders who
are not currently exempt from federal income taxes, whether such income is
received in cash or reinvested in additional Shares. (Federal income taxes for
distributions to an IRA are deferred under the Code.) In the case of the
Portfolio, such dividends will qualify for the dividends received deduction for
corporations to the extent of the total qualifying dividends received by the
Portfolio from domestic corporations for the taxable year.

STATE AND LOCAL TAXES

29
<PAGE> 86

MISCELLANEOUS

MANAGEMENT OF THE FUND

The Fund is managed under the direction of its Board of Directors. The
Statement of Additional Information contains the names of and general background
information concerning each director.

INVESTMENT ADVISER

Mississippi Valley Advisors Inc. ("MVA") serves as the investment adviser
to the Portfolio. MVA's principal office is located at One Mercantile Center,
Seventh & Washington Streets, St. Louis, Missouri 63101. MVA is a wholly-owned
subsidiary of Mercantile. As of December 31, 1996, MVA had approximately $7.9
billion in assets under investment management, including the assets of the Fund,
which were approximately $2.5 billion. MVA also serves as investment adviser to
each of the Fund's other portfolios.

30
<PAGE> 87

ADMINISTRATOR

The Administrator generally assists in all aspects of the Portfolio's
administration and operation and also monitors and performs other services
pertaining to the Portfolio's arrangements with Service Organizations. See
"Service Organizations" below. For its services, the Administrator is entitled
to receive a fee, computed daily and payable monthly, at the annual rate of .20%
of the Portfolio's average daily net assets.

From time to time, the Administrator may voluntarily waive all or a portion
of the administration fees otherwise payable by the Portfolio in order to
increase the net income available for distribution to shareholders.

DISTRIBUTOR

Investor A Shares and Investor B Shares of the Portfolio are sold
continuously by the Distributor, BISYS Fund Services, an affiliate of the
Administrator. The Distributor also monitors the Fund's arrangements under the
Distribution and Services Plans described below. The Distributor is a registered
broker-dealer with principal offices at 3435 Stelzer Road, Columbus, Ohio 43219.
The Distributor also acts as the distributor to each of the Fund's other
portfolios.

The Distributor may, at its expense, provide compensation to dealers in
connection with sales of Shares of the Portfolio. Such compensation may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding one or more of the Fund's portfolios, and/or other dealer-
sponsored special events. In some instances, this compensation will be made
available only to certain dealers whose representatives have sold a significant
amount of such Shares. Compensation will include payment for travel expenses,
including lodging incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Compensation
will also include the following types of non-cash compensation offered through
sales contests: (1) business and vacation trips, including the provision of
travel arrangements and lodging at resorts, (2) tickets for entertainment events
(such as concerts, cruises and sporting events), and (3) merchandise (such as
clothing, trophies, clocks and pens). Dealers may not use sales of the
Portfolio's Shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. None of the aforementioned
compensation is paid for by the Portfolio or its shareholders.

31
<PAGE> 88

DISTRIBUTION AND SERVICES PLANS

The Fund has adopted separate Distribution and Services Plans pursuant to
Rule 12b-1 under the 1940 Act with respect to Investor A Shares and Investor B
Shares of the Portfolio. Under the Distribution and Services Plans, the Fund may
pay (i) the Distributor or another person for distribution services provided and
expenses assumed and (ii) Service Organizations for shareholder administrative
services provided pursuant to servicing agreements in connection with Investor A
Shares or Investor B Shares of the Portfolio. Payments to the Distributor are to
compensate it for distribution assistance and expenses assumed and activities
primarily intended to result in the sale of Investor A Shares or Investor B
Shares, including compensating dealers and other sales personnel (which may
include affiliates of the Fund's Adviser), direct advertising and marketing
expenses and expenses incurred in connection with preparing, printing, mailing
and distributing or publishing advertisements and sales literature, for printing
and mailing Prospectuses and Statements of Additional Information (except those
used for regulatory purposes or for distribution to existing shareholders), and
costs associated with implementing and operating the Distribution and Services
Plan. In addition, payments under the Distribution and Services Plan for
Investor B Shares will be used to pay for or finance sales commissions and other
fees payable to Service Organizations and other broker-dealers who sell Investor
B Shares. See "Management of the Fund -- Service Organizations" below for a
description of the servicing agreements and the services provided by Service
Organizations.

Under the Distribution and Services Plan for Investor A Shares, payments by
the Fund for distribution expenses may not exceed .10% (annualized) of the
average daily net asset value of the Portfolio's outstanding Investor A Shares
and payments for shareholder administrative servicing expenses may not exceed
.20% (annualized) of the average daily net asset value of the Portfolio's
outstanding Investor A Shares.

Under the Distribution and Services Plan for Investor B Shares, payments by
the Fund for distribution expenses may not exceed .75% (annualized) of the
average daily net asset value of the Portfolio's outstanding Investor B Shares
and payments for shareholder administrative servicing expenses may not exceed
.25% (annualized) of the average daily net asset value of the Portfolio's
outstanding Investor B Shares.

Actual distribution expenses paid by the Distributor with respect to
Investor B Shares for any given year may exceed the distribution fees and
contingent deferred sales charges received with respect to those Shares. These
excess expenses may be reimbursed by Investor B shareholders out of contingent
deferred sales charges and distribution payments in future years as long as the
Distribution and Services Plan for Investor B Shares is in effect.

SERVICE ORGANIZATIONS

The servicing agreements adopted under the Distribution and Services Plans
(the "Servicing Agreements") require the Service Organizations receiving such
compensation (which may include Mercantile and its affiliates) to perform
certain services, including providing administrative services with respect to
the beneficial owners of Investor A Shares or Investor B Shares of the
Portfolio, such as establishing and maintaining accounts and records for their
customers who invest in such

32
<PAGE> 89

Shares, assisting customers in processing purchase, exchange and redemption
requests, and responding to customer inquiries concerning their investments.

Under the Servicing Agreements and upon notice to the Fund, a Service
Organization may subcontract with one or more entities for the performance of
certain services provided under its Servicing Agreement with the Fund. Such
Service Organization shall be as fully responsible to the Fund for the acts or
omissions of any subcontractor as it would be for its own acts or omissions. The
fees payable to any sub-contractor are paid by the Service Organization out of
the fees it receives from the Fund.

The Fund understands that Service Organizations providing such
administrative services may also charge fees to their customers beneficially
owning such Shares. These fees would be in addition to any amounts which may be
received by such a Service Organization under its Servicing Agreement with the
Fund. The Fund's Servicing Agreements require a Service Organization to disclose
to its customers any compensation payable to the Service Organization by the
Portfolio and any other compensation payable by its customers in connection with
their investment in such Shares. Customers of such a Service Organization
receiving servicing fees should read this Prospectus in light of the terms
governing their accounts with their Service Organization.

CUSTODIAN AND TRANSFER AGENT

REGULATORY MATTERS

Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any affiliate
thereof from sponsoring, organizing, or controlling the shares of a registered,
open-end investment company continuously engaged in the issuance of its shares,
and prohibit banks generally from issuing, underwriting, selling, or
distributing securities such as Shares of the Portfolio. Such banking laws and
regulations do not prohibit such a holding company or affiliate, or banks, from
acting as investment adviser, transfer agent, or custodian to such an investment
company, or from purchasing shares of such a company as agent for and upon the
order of customers. Mercantile, MVA, Service Organizations that are banks or
bank affiliates, and broker-dealers that are bank affiliates are subject to such
laws and regulations, but believe they may perform the services for the
Portfolio contemplated by their respective agreements, this Prospectus and the
Statement of Additional Information without violating applicable banking laws
and regulations. In addition, state securities laws on this issue may differ
from the interpretation of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.

33
<PAGE> 90

such companies and change its method of operation. It is not expected that
investors would suffer any adverse financial consequences as a result of any of
these occurrences.

Conflict of interest restrictions may apply to the receipt of compensation
paid pursuant to a Servicing Agreement by the Portfolio to a financial
intermediary in connection with the investment of fiduciary funds in the
Portfolio's Shares. Institutions, including banks regulated by the Comptroller
of the Currency and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult legal counsel before entering into Servicing
Agreements.

EXPENSES

Except as noted above and in the Statement of Additional Information under
"Investment Advisory and Administrative Contracts" and "Custodian and Transfer
Agent," the Fund's service contractors bear all of their own expenses in
connection with the performance of their services, except that the Distributor
is compensated pursuant to the Distribution and Services Plans as described
under "Distribution and Services Plans" above. The Portfolio's expenses are
deducted from the total income of the Portfolio before dividends and
distributions are paid. These expenses include, but are not limited to, fees
paid to the Adviser and Administrator, transfer agency fees, fees and expenses
of officers and directors who are not affiliated with the Adviser or the
Distributor, taxes, interest, legal fees, custodian fees, auditing fees, 12b-1
fees, servicing fees, certain fees and expenses in registering and qualifying
the Portfolio and its Shares for distribution under federal and state securities
laws, costs of preparing and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to existing
shareholders, the expense of reports to shareholders, shareholders' meetings and
proxy solicitations, fidelity bond and directors' and officers' liability
insurance premiums, the expense of using independent pricing services and other
expenses which are not expressly assumed by the Adviser, Distributor or
Administrator under their respective agreements with the Fund. The Fund also
pays for brokerage fees, commissions and other transaction charges, if any, in
connection with the purchase and sale of portfolio securities. Any general
expenses of the Fund that are not readily identifiable as belonging to a
particular portfolio will be allocated among all portfolios by or under the
direction of the Board of Directors in a manner the Board determines to be fair
and equitable. Any expenses relating only to a particular class of Shares within
a portfolio will be borne solely by such class. See "Certain Financial
Information" and "Management of the Fund" above for additional information
regarding expenses of the Portfolio.

34
<PAGE> 91

OTHER INFORMATION CONCERNING THE FUND AND ITS SHARES

DESCRIPTION OF SHARES

The Fund was organized on September 9, 1982 as a Maryland corporation, and
is a mutual fund of the type known as an "open-end management investment
company." The Fund's principal office is located at 3435 Stelzer Road, Columbus,
Ohio 43219.

The Fund's Charter authorizes the Board of Directors to issue up to seven
billion full and fractional Shares of common stock, and to classify and
reclassify any unauthorized and unissued Shares into one or more classes of
Shares. The Board of Directors may similarly classify or reclassify any class of
Shares into one or more series.

The Investor A Shares and Investor B Shares of the Portfolio are described
in this Prospectus. The Portfolio also offers Trust Shares and Institutional
Shares. Trust Shares, which are offered to financial institutions acting on
their own behalf or on behalf of certain qualified accounts, and Institutional
Shares, which are offered to financial institutions acting on behalf of accounts
for which they do not exercise investment discretion, are sold without a sales
charge. Trust, Institutional, Investor A and Investor B Shares bear their pro
rata portion of all operating expenses paid by the Portfolio, except that Trust
Shares and Institutional Shares bear all payments under the Portfolio's
respective Administrative Services Plan adopted for such Shares and Investor A
Shares and Investor B Shares bear all payments under the Portfolio's respective
Distribution and Services Plans adopted for such Shares. In addition,
Institutional Shares of the Portfolio bear the expense of certain sub-transfer
agency fees.

Payments under the Administrative Services Plans for Trust Shares and
Institutional Shares are made to Service Organizations for administrative
services provided to the Service Organizations' clients or account holders who
are the beneficial owners of Trust Shares or Institutional Shares. Payments
under the Administrative Services Plans may not exceed .30% (on an annual basis)
of the average daily net asset value of outstanding Trust Shares or
Institutional Shares of the Portfolio.

The Fund offers various services and privileges in connection with its
Investor A Shares and Investor B Shares that are not offered in connection with
its Trust Shares and Institutional Shares, including an automatic investment
program and automatic withdrawal plan. In addition, each class of Shares offers
different exchange privileges.

35
<PAGE> 92

Trust Shares, however, will vote on matters relating to the Administrative
Services Plan for Trust Shares and only holders of Institutional Shares will
vote on matters relating to the Administrative Services Plan for Institutional
Shares. Similarly, only holders of Investor A Shares will vote on matters
pertaining to the Distribution and Services Plan for Investor A Shares and only
holders of Investor B Shares will vote on matters pertaining to the Distribution
and Services Plan for Investor B Shares.

MISCELLANEOUS

As used in this Prospectus, a "vote of a majority of the outstanding
Shares" of the Portfolio or a particular class of Shares means, with respect to
the approval of an investment advisory agreement or distribution plan or a
change in an investment objective or fundamental investment policy, the
affirmative vote of the lesser of (a) more than 50% of the outstanding Shares of
the Portfolio or class of Shares, or (b) 67% or more of the Shares of the
Portfolio or class of Shares present at a meeting if more than 50% of the
outstanding Shares of the Portfolio or class of Shares are represented at the
meeting in person or by proxy.

Inquiries regarding the Portfolio may be directed to the Fund at
1-800-452-ARCH (2724).

36
<PAGE> 93

[This Page Intentionally Left Blank]
<PAGE> 94

[This Page Intentionally Left Blank]
<PAGE> 95

[This Page Intentionally Left Blank]
<PAGE> 96

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Highlights................................. 2
Certain Financial Information.............. 4
Expense Summary for Investor Shares........ 4
Financial Highlights....................... 5
Investment Objective, Policies and Risk
Considerations........................... 7
Investment Limitations..................... 14
Pricing of Shares.......................... 15
How to Purchase and Redeem Shares.......... 15
Purchase of Shares....................... 15
Automatic Investment Program (AIP)....... 17
Applicable Sales Charges -- Investor A
Shares................................. 17
Reduced Sales Charges -- Investor A
Shares................................. 18
Applicable Sales Charges -- Investor B
Shares................................. 19
Characteristics of Investor A Shares and
Investor B Shares...................... 21
Factors to Consider When Selecting
Investor A Shares or Investor B
Shares................................. 22
Exchange Privileges...................... 23
Redemption of Shares..................... 24
Redemption by Mail....................... 25
Redemption by Telephone.................. 25
Automatic Withdrawal Plan (AWP).......... 26
Purchase of Investor A Shares at Net
Asset Value............................ 26
Other Exchange or Redemption
Information............................ 26
Yields and Total Returns................... 27
Dividends and Distributions................ 28
Taxes...................................... 28
Management of the Fund..................... 30
Other Information Concerning the Fund and
its Shares............................... 35
Miscellaneous.............................. 36
</TABLE>

Investment Adviser:
Mississippi Valley Advisors Inc.
a wholly-owned subsidiary of
Mercantile Bank
National Association

Distributor:
BISYS Fund Services

THE ARCH FUND(R), INC.

GROWTH EQUITY PORTFOLIO

INVESTOR A SHARES
AND
INVESTOR B SHARES
LOGO

PROSPECTUS

SEPTEMBER 2, 1997
(AS REVISED NOVEMBER 21, 1997)
<PAGE> 97
THE ARCH FUND(R), INC.

THE ARCH GROWTH EQUITY PORTFOLIO

Statement of Additional Information

Part B

September 2, 1997
(as revised November 21, 1997)
<PAGE> 98
THE ARCH FUND, INC.

Statement of Additional Information

for

The ARCH Growth Equity Portfolio

September 2, 1997
(as revised November 21, 1997)

TABLE OF CONTENTS

Page

THE FUND ................................................................ 1
INVESTMENT OBJECTIVE AND POLICIES ....................................... 1
NET ASSET VALUE ......................................................... 13
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION .......................... 14
ADDITIONAL YIELD AND TOTAL RETURN INFORMATION ........................... 16
DESCRIPTION OF SHARES ................................................... 20
ADDITIONAL INFORMATION CONCERNING TAXES ................................. 22
MANAGEMENT OF THE FUND .................................................. 27
INDEPENDENT AUDITORS .................................................... 36
COUNSEL ................................................................. 36
MISCELLANEOUS ........................................................... 36
FINANCIAL STATEMENTS .................................................... 38
APPENDIX A .............................................................. A-1

This Statement of Additional Information, which provides supplemental
information applicable to the ARCH Growth Equity Portfolio, is not a prospectus.
It should be read only in conjunction with the Portfolio's Prospectuses dated
September 2, 1997 (as revised November 21, 1997) and is incorporated by
reference in its entirety into the Prospectuses. No investment in shares of the
Portfolio should be made without reading the relevant Prospectus. Copies of the
Prospectuses may be obtained by writing the Fund at P.O. Box 78069, St. Louis,
Missouri 63178 or by calling (800) 452-ARCH (2724). Capitalized terms used but
not defined herein have the same meanings as in each Prospectus.

-i-
<PAGE> 99
THE FUND

The ARCH Fund, Inc. (the "Fund") is an open-end, management investment
company currently offering Shares in eighteen investment portfolios.

The ARCH Growth Equity Portfolio (the "Portfolio") commenced operations on
January 4, 1993 as a separate investment portfolio (the "Predecessor Portfolio")
of Arrow Funds, which was organized as a Massachusetts business trust. On
November 21, 1997, the Predecessor Portfolio was reorganized as a new portfolio
of the Fund. Prior to the reorganization, the Predecessor Portfolio offered and
sold shares of beneficial interests that were similar to the Fund's Investor A
Shares.

INVESTMENT OBJECTIVE AND POLICIES

The following information supplements the description of the investment
objective and policies of the Portfolio described in the Prospectuses.

OTHER APPLICABLE INVESTMENT POLICIES

CONVERTIBLE SECURITIES. The Portfolio may invest in convertible securities.
The Portfolio will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock when, in the Adviser's
opinion, the investment characteristics of the underlying common stock will
assist the Portfolio in achieving its investment objective. Otherwise the
Portfolio may hold or trade convertible securities. In selecting convertible
securities for the Portfolio, the Adviser evaluates the investment
characteristics of the convertible security as a fixed income instrument, and
the investment potential of the underlying equity security for capital
appreciation. In evaluating these matters with respect to a particular
convertible security, the Adviser considers numerous factors, including the
economic and political outlook, the value of the security relative to other
investment alternatives, trends in the determinants of the issuer's profits, and
the issuer's management capability and practices.

WARRANTS. The Portfolio may invests in warrants. Warrants are basically
options to purchase common stock at a specific price (usually at a premium above
the market value of the optioned common stock at issuance) valid for a specific
period of time. Warrants may have a life ranging from less than a year to twenty
years or may be perpetual. However, most warrants have expiration dates after
which they are worthless. In addition, if the market price of the common stock
does not exceed the warrant's exercise price during the life of the warrant, the
warrant will expire as worthless. Warrants have no
<PAGE> 100
voting rights, pay no dividends, and have no rights with respect to the assets
of the corporation issuing them. The percentage increase or decrease in the
market price of the warrant may tend to be greater than the percentage increase
or decrease in the market price of the optioned common stock.

VARIABLE AND FLOATING RATE INSTRUMENTS. Subject to its investment policies
and limitations, the Portfolio may purchase variable and floating rate
obligations as described in the Prospectuses. The Adviser will consider the
earning power, cash flows and other liquidity ratios of the issuers and
guarantors of such obligations and, for obligations subject to a demand feature,
will monitor their financial status to meet payment on demand. In determining
average weighted portfolio maturity, an instrument issued or guaranteed by the
U.S. Government or an agency or instrumentality thereof, or a variable rate
instrument scheduled on its face to be paid in 397 days or less, will be deemed
to have a maturity equal to the period remaining until the next interest rate
adjustment. Other variable and floating rate obligations will be deemed to have
a maturity equal to the longer of the period remaining to the next interest rate
adjustment or the time the Portfolio can recover payment of principal as
specified in the instrument.

RESTRICTED AND ILLIQUID SECURITIES. The Securities and Exchange Commission
("SEC") has adopted Rule 144A which allows for a broader institutional trading
market for securities otherwise subject to restrictions on resale to the general
public. Rule 144A establishes a "safe harbor" from the registration requirements
of the Securities Act of 1933, as amended, for the resale of certain securities
to qualified institutional buyers. The purchase of securities which can be sold
under Rule 144A could have the effect of increasing the level of illiquidity in
the Portfolio to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing these restricted securities.

The Adviser monitors the liquidity of restricted securities in the
Portfolio under the supervision of the Board of Directors. In reaching liquidity
decisions, the Adviser may consider the following factors, although such factors
may not necessarily be determinative: (1) the unregistered nature of a security;
(2) the frequency of trades and quotes for the security; (3) the number of
dealers willing to purchase or sell the security and the number of other
potential purchasers; (4) the trading markets for the security; (5) dealer
undertakings to make a market in the security; and (6) the nature of the
security and the nature of the marketplace trades (including the time needed to
dispose of the security, methods of soliciting offers, and mechanics of
transfer).

-2-
<PAGE> 101
SECURITIES LENDING. When the Portfolio lends its securities, it continues
to receive interest or dividends on the securities loaned and may simultaneously
earn interest on the investment of the cash collateral which will be invested in
readily marketable, high quality, short-term obligations. The Portfolio may pay
reasonable administrative and custodial fees in connection with such loans and
may pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. Loans are subject to termination
at the option of the Portfolio or the borrower. Although voting rights, or
rights to consent, attendant to securities on loan pass to the borrower, such
loans may be called at any time and will be called so that the securities may be
voted by the Portfolio if a material event affecting the investment is to occur.

SECURITIES OF OTHER INVESTMENT COMPANIES. As described in the Prospectuses,
the Portfolio intends to limit investments in securities issued by other
investment companies within the limits prescribed by the 1940 Act. The Portfolio
currently intends to limit its investments so that, as determined immediately
after a securities purchase is made: (a) not more than 5% of the value of its
total assets will be invested in the securities of any one investment company;
(b) not more than 10% of the value of its total assets will be invested in the
aggregate in securities of investment companies as a group; (c) not more than 3%
of the outstanding voting stock of any one investment company will be owned by
the Portfolio; and (d) not more than 10% of the outstanding voting stock of any
one investment company will be owned in the aggregate by the Portfolio and other
investment companies advised by the Adviser.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. When-issued and delayed
delivery transactions are made to secure what is considered to be an
advantageous price or yield for the Portfolio. No fees or other expenses, other
than normal transaction costs, are incurred. However, cash or liquid securities
of the Portfolio sufficient to make payment for the securities to be purchased
are segregated on the Portfolio's records at the trade date. These assets are
marked to market daily and are maintained until the transaction has been
settled. The Portfolio does not intend to engage in when-issued and delayed
delivery transactions to an extent that would cause the segregation of more than
20% of the total value of its assets.

FUTURES AND OPTIONS TRANSACTIONS. The Portfolio may engage in futures and
options transactions as described below.

As a means of reducing fluctuations in the net asset value of its Shares,
the Portfolio may attempt to hedge all or a portion of its portfolio through the
purchase of put options on portfolio securities and put options on financial
futures

-3-
<PAGE> 102
contracts for portfolio securities. The Portfolio may attempt to hedge all or a
portion of its portfolio by buying and selling financial futures contracts, and
writing call options on futures contracts. The Portfolio may also write covered
call options on portfolio securities to attempt to increase current income.

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

FUTURES CONTRACTS. The Portfolio may enter into futures contracts. A
futures contract is a firm commitment by two parties, i.e. the seller who agrees
to sell a specific type of security called for in the contract ("going short")
and the buyer who agrees to purchase the security ("going long") at a certain
time in the future.

Financial futures contracts call for the delivery of particular debt
instruments issued or guaranteed by the U.S. Treasury or by specified agencies
or instrumentalities of the U.S. Government at a certain time in the future.
Stock index futures contracts are similar to financial futures contracts, but
their price is based upon fluctuations in a particular index of stock prices
during a specified period, such as the S&P 500 Index. No physical delivery of
the underlying securities in the index is made.

The purpose of the acquisition or sale of a futures contract by the
Portfolio is to protect it from fluctuations in the value of securities caused
by unanticipated changes in interest rates or stock prices without necessarily
buying or selling securities. For example, 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 its
holdings of fixed income securities against a rise in market interest rates, the
Portfolio could enter into contracts to "go short" to protect itself against the
possibility that the prices of its fixed income securities may decline during
the Portfolio's anticipated holding period. The Portfolio would "go long" to
hedge against a decline in market interest rates.

STOCK INDEX OPTIONS. The Portfolio may purchase put options on stock
indexes listed on national securities exchanges or traded in the
over-the-counter market. A stock index fluctuates with changes in the market
value of the stock included in the index.

The effectiveness of purchasing stock index options will depend upon the
extent to which price movements in the

-4-
<PAGE> 103
Portfolio's portfolio securities correlate with price movements of the stock
index selected. Because the value of an index option depends upon movements in
the level of the index rather than the price of a particular stock, whether the
Portfolio will realize a gain or loss from the purchase of options on an index
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indexes, in an industry or market segment,
rather than movements in the price of a particular stock. Accordingly,
successful use by the Portfolio of options on stock indexes will be subject to
the ability of the Adviser to predict correctly movements in the direction of
the stock market or of a particular industry. This requires different skills and
techniques than predicting changes in the price of individual stocks.

PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS. The Portfolio may purchase and
write listed put options on financial futures contracts. The Portfolio would use
these options only to protect portfolio securities against decreases in value
resulting from market factors such as anticipated increases in interest rates.

Unlike entering directly into a future 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 specific price. 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, the Portfolio will normally close out its option by selling an identical
option. If the hedge is successful, the proceeds received by the Portfolio upon
the sale of the second option will be large enough to offset both the premium
paid by the Portfolio for the original option plus the realized decrease in
value of the hedged securities.

Alternatively, the Portfolio may exercise its put option 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 Portfolio would then deliver the futures
contract in return for payment of the strike price. If the Portfolio 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.

CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS. In addition to purchasing put
options on futures, the Portfolio may write listed call options on financial
futures contracts or over-

-5-
<PAGE> 104
the-counter call options on futures contracts, to hedge its portfolio against an
increase in market interest rates. When the Portfolio 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 and cause the price of futures to decrease, the Portfolio's
obligation under a call option on a future (to sell a futures contract) costs
less to fulfill, causing the value of the Portfolio's call option position to
increase.

In other words, as the underlying future's price goes down below the strike
price, the buyer of the option has no reason to exercise the call, so that the
Portfolio keeps the premium received from the option. This premium can help to
substantially offset the drop in value of the Portfolio's portfolio securities.

Prior to the expiration of a call written by the Portfolio, or exercise of
it by the buyer, the Portfolio 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 Portfolio for the initial option. The net
premium income of the Portfolio will then substantially offset the realized
decrease in value of the hedged securities.

The Portfolio will not maintain open positions in futures contracts it has
sold or call options it has written on financial futures if, in the aggregate,
the value of the open positions (marked to market) exceeds the current market
value of its securities 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, the Portfolio 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, the Portfolio does not pay or receive money upon the purchase or sale
of a futures contract. Rather, the Portfolio 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
a futures contract's initial margin does not involve the borrowing by the
Portfolio 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
Portfolio upon termination of the futures

-6-
<PAGE> 105
contract, assuming all contractual obligations have been satisfied.

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

The Portfolio is also required to deposit and maintain margin when it
writes call options on futures contracts.

PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES. The Portfolio may purchase
put options on portfolio securities to protect against price movements in
particular securities in its portfolio. A put option gives the Portfolio, 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.

WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES. The Portfolio may
also write covered call options to generate income. As the writer of a call
option, the Portfolio has the obligation, upon exercise of the option during the
option period, to deliver the underlying security upon payment of the exercise
price. The Portfolio may sell 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 securities for which it has segregated cash in the
amount of any additional consideration).

OVER-THE-COUNTER OPTIONS. The Portfolio may purchase and write
over-the-counter options on portfolio securities in negotiated transactions with
the buyers or writers of the options for those options on portfolio securities
held by the Portfolio and not traded on an exchange.

MONEY MARKET INSTRUMENTS. As stated in the Prospectuses and subject to its
investment policies, the Portfolio may invest in the following money market
instruments for temporary defensive or other purposes: commercial paper and
instruments of domestic and foreign banks and savings and loan associations
(collectively, "banks"), such as bankers' acceptances, certificates of deposit
and time deposits.

Commercial paper represents short-term unsecured promissory notes issued in
bearer form by banks or bank holding

-7-
<PAGE> 106
companies, corporations and finance companies. Certificates of deposit are
negotiable certificates issued against funds deposited in a commercial bank for
a definite period of time and earning a specified return. Bankers' acceptances
are negotiable drafts or bills of exchange, normally drawn by an importer or
exporter to pay for specific merchandise, which are "accepted" by a bank,
meaning, in effect, that the bank unconditionally agrees to pay the face value
of the instrument on maturity. Fixed time deposits are bank obligations payable
at a stated maturity date and bearing interest at a fixed rate. Fixed time
deposits may be withdrawn on demand by the investor but may be subject to early
withdrawal penalties that vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits.

For purposes of its investment policies and limitations, the Portfolio
considers certificates of deposit and demand and time deposits 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".

REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements
with respect to its securities. Under the terms of a repurchase agreement, the
Portfolio purchases securities from financial institutions such as banks and
broker-dealers that are deemed to be creditworthy by the Adviser under
guidelines approved by the Board of Directors, subject to the seller's agreement
to repurchase them at a mutually agreed-upon date and price. Securities subject
to repurchase agreements are held by the Portfolio's Custodian or in the Federal
Reserve/Treasury book-entry system. During the term of any repurchase agreement,
the Adviser will continue to monitor the creditworthiness of the seller. The
repurchase price generally equals 102% of the price paid by the Portfolio plus
interest negotiated on the basis of current short-term rates (which may be more
or less than the rate on the underlying portfolio securities). Under a
repurchase agreement, the seller is required to maintain the value of the
securities subject to the agreement at not less than the repurchase price, and
securities subject to repurchase agreements are maintained by the Portfolio's
Custodian in segregated accounts in accordance with the 1940 Act. Default by the
seller could, however, expose the Portfolio to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
securities. Repurchase agreements are considered to be loans by the Portfolio
under the 1940 Act.

REVERSE REPURCHASE AGREEMENTS. As described in the Prospectuses, the
Portfolio may enter into reverse repurchase agreements (agreements under which
the Portfolio sells portfolio

-8-
<PAGE> 107
securities and agrees to repurchase them at an agreed-upon date and price). At
the time the Portfolio enters into such an arrangement, it will place, in a
segregated custodial account, liquid assets having a value at least equal to the
repurchase price (including accrued interest) and will subsequently monitor the
account to ensure that such equivalent value is maintained.

Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Portfolio may decline below the price of the securities
that it is obligated to repurchase. Reverse repurchase agreements are considered
to be borrowings under the 1940 Act. The Portfolio intends to limit its
borrowings (including reverse repurchase agreements) during the current fiscal
year to not more than 5% of its net assets.

PORTFOLIO TURNOVER AND TRANSACTIONS

Subject to the general control of the Fund's Board of Directors, the
Adviser is responsible for, makes decisions with respect to, and places orders
for all purchases and sales of portfolio securities for the Portfolio.

The Portfolio's rate of portfolio turnover may vary greatly from year to
year as well as within a particular year. Portfolio turnover may also be
affected by cash requirements for redemptions of shares and by requirements
which enable a Portfolio to receive certain favorable tax treatment. Portfolio
turnover will not be a limiting factor in making investment decisions.

At November 30, 1996, the Fund did not hold any securities of its regular
brokers or dealers or their parents.

Transactions on United States stock exchanges involve the payment of
negotiated brokerage commissions. On the exchanges on which commissions are
negotiated, the cost of transactions may vary among different brokers. For the
fiscal years ended September 30, 1996, 1995 and 1994, the Predecessor Portfolio
paid $71,770, $42,563 and $111,324, respectively, in brokerage commissions on
brokerage transactions.

Securities purchased and sold by the Portfolio which are traded in the
over-the-counter market are generally done so on a net basis (i.e. without
commission) through dealers, or otherwise involve transactions directly with the
issuer of an instrument. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price of those
securities includes an undisclosed commission or mark-up. The cost of securities
purchased from underwriters includes an underwriter's commission or concession,
and the prices at which securities are purchased from and sold to dealers
include a dealer's mark-up or mark-down.

-9-
<PAGE> 108
The Portfolio may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Portfolio will engage in this practice, however, only when the Adviser, in
its sole discretion, believes such practice to be otherwise in the Portfolio's
interests.

While the Adviser generally seeks competitive spreads or commissions, it
may not necessarily allocate each transaction to the underwriter or dealer
charging the lowest spread or commission available on the transaction.
Allocation of transactions, including their frequency, to various dealers is
determined by the Adviser in its best judgment and in a manner deemed fair and
reasonable to shareholders. The primary consideration is prompt execution of
orders in an effective manner at the most favorable price.

Subject to this consideration, dealers who provide supplemental investment
research to the Adviser may receive orders for transactions by the Portfolio.
Information so received is in addition to and not in lieu of services required
to be performed by the Adviser and does not reduce the advisory fees payable to
it by the Portfolio. Such information may be useful to the Adviser in serving
both the Portfolio and other clients, and conversely, supplemental information
obtained by the placement of business of other clients may be useful to the
Adviser in carrying out its obligations to the Portfolio. Portfolio securities
will not be purchased from or sold to the Adviser, the Distributor, the
Administrator or any "affiliated person" (as such term is defined under the 1940
Act) or any of them acting as principal, except to the extent permitted by the
SEC. In addition, the Portfolio will not give preference to the Adviser's
correspondents with respect to any transactions.

Investment decisions for the Portfolio are made independently from those
for other investment companies and accounts advised or managed by the Adviser.
Such other investment companies and accounts may also invest in the same
securities as the Portfolio. When a purchase or sale of the same security is
made at substantially the same time on behalf of the Portfolio and another
investment company or account, the transaction will be averaged as to price, and
available investments allocated as to amount, in a manner which the Adviser
believes to be equitable to the Portfolio and such other investment company or
account. In some instances, this investment procedure may adversely affect the
price paid or received by the Portfolio or the size of the position obtained by
the Portfolio. To the extent permitted by law, the Adviser may aggregate the
securities to be sold or purchased for the Portfolio with those to be sold or
purchased for other investment companies or accounts in order to obtain best
execution.

-10-
<PAGE> 109
INVESTMENT LIMITATIONS

The following investment limitations may be changed with respect to the
Portfolio only by an affirmative vote of a majority of the outstanding shares of
the Portfolio (as defined under "Other Information Concerning the Fund and Its
Shares--Miscellaneous" in the Portfolio's Prospectuses). These investment
limitations supplement those that appear in the Prospectuses.

1. The Portfolio will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits as are necessary
for clearance of purchases and sales of securities. The deposit or payment by
the Portfolio of initial or variation margin in connection with financial
futures contracts or related options transactions is not considered the purchase
of a security on margin.

2. The Portfolio will not purchase or sell commodities, commodity
contracts, or commodity futures contracts except to the extent that the
Portfolio may engage in transactions involving financial futures contracts or
options on financial futures contracts.

3. The Portfolio will not purchase or sell real estate, including limited
partnership interests, although the Portfolio may invest in securities of
issuers whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or which represent interests in real
estate.

4. The Portfolio will not underwrite any issue of securities, except as the
Portfolio may be deemed to be an underwriter under the Securities Act of 1933,
as amended, in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.

The following limitations may be changed by the Fund's Board of Directors
without shareholder approval, although shareholders will be notified before any
material change in these limitations becomes effective:

5. The Portfolio will not mortgage, pledge, or hypothecate any assets,
except to secure permitted borrowings. In these cases, the Portfolio may pledge
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of its total assets at the time of the pledge. The
purchase of securities on a when-issued basis will not be deemed to be a pledge
of the Portfolio's assets. For purposes of this limitation the following will
not be deemed to be pledges of the Portfolio's assets: (a) the deposit of assets
in escrow in connection with the writing of covered put or call options and,

-11-
<PAGE> 110
(b) collateral arrangements with respect to (i) the purchase and sale of stock
options (and options on stock indexes) and (ii) initial or variation margin for
futures contracts.

6. The Portfolio will not invest more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements providing for
settlement more than seven days after notice, over-the-counter options, certain
restricted securities not determined by the Fund's Board of Directors to be
liquid, and non-negotiable time deposits with maturities over seven days.

7. The Portfolio will limit its investment in other investment companies to
no more than 3% of the total outstanding voting stock of any investment company,
invest no more than 5% of its total assets in any one investment company, and
invest no more than 10% of its total assets in investment companies in general.
The Portfolio will purchase securities of closed-end investment companies only
in open market transactions involving only customary broker's commissions.
However, these limitations are not applicable if the securities are acquired in
a merger, consolidation, reorganization, or acquisition of assets. It should be
noted that investment companies incur certain expenses such as management fees
and, therefore, any investment by the Portfolio in shares of another investment
company would be subject to such duplicate expenses.

8. The Portfolio will not purchase put options on securities, unless the
securities are held in its portfolio and not more than 5% of the value of the
Portfolio's total assets would be invested in premiums on open put option
positions.

9. The Portfolio will not write call options on securities unless the
securities are held in its portfolio or unless the Portfolio is entitled to them
in deliverable form without further payment or after segregating cash in the
amount of any further payment.

10. The Portfolio will not purchase securities of a company for the purpose
of exercising control or management.

11. The Portfolio will not invest more than 5% of its net assets in
warrants. No more than 2% of the Portfolio's net assets, to be included within
the overall 5% limit on investments in warrants, may be warrants which are not
listed on the New York Stock Exchange or the American Stock Exchange. For
purposes of this investment restriction, warrants will be valued at the lower of
cost or market, except that warrants acquired by the Portfolio in units with or
attached to securities may be deemed to be without value.

-12-
<PAGE> 111
NET ASSET VALUE

As stated in the applicable Prospectus, the net asset value per Share of
each class of the Portfolio is calculated by adding the value of all of the
portfolio securities and other assets of the Portfolio attributable to such
class, subtracting the liabilities charged to such class, and dividing the
result by the number of outstanding Shares of such class. "Assets belonging to"
each class of the Portfolio consist of the consideration received upon the
issuance of Shares of each class of the Portfolio together with all income,
earnings, profits, and proceeds derived from the investment thereof, including
any proceeds from the sale, exchange, or liquidation of such investments, any
funds or payments derived from any reinvestment of such proceeds, and a portion
of any general assets of the Fund not belonging to a particular portfolio.
Assets belonging to each class of the Portfolio are charged with the direct
liabilities of each class of the Portfolio and with a share of the general
liabilities of the Fund allocated in proportion to the relative net assets of
the Portfolio and the Fund's other portfolios. The determinations by the Board
of Directors as to the direct and allocable liabilities, and the allocable
portion of general assets, with respect to a particular class of the Portfolio
are conclusive.

Securities which are traded on a recognized stock exchange are valued at
the last sale price on the securities exchange on which such securities are
primarily traded or at the last sale price on the national securities market.
Securities traded on only over-the-counter markets are valued on the basis of
closing over-the-counter bid prices. Securities for which there were no
transactions are valued at the average of the current bid and asked prices.
Restricted securities and other assets for which market quotations are not
readily available are valued at fair value as determined in accordance with
guidelines approved by the Fund's Board of Directors. In computing net asset
value, the current value of the Portfolio's open futures contracts and related
options will be "marked-to-market."

Among the factors that ordinarily will be considered in valuing portfolio
securities are the existence of restrictions upon the sale of the security by
the Portfolio, the existence and extent of a market for the security, the extent
of any discount in acquiring the security, the estimated time during which the
security will not be freely marketable, the expenses of registering or otherwise
qualifying the security for public sale, underwriting commissions if
underwriting would be required to effect a sale, the current yields on
comparable securities for debt obligations traded independently of any equity
equivalent, changes in the financial condition and prospects of the issuer, and
any other factors affecting fair value. In making valuations, opinions of
counsel to the issuer may be relied upon

-13-
<PAGE> 112
as to whether or not securities are restricted securities and as to the legal
requirements for public sale.

Additionally, the Administrator may use a pricing service to value certain
portfolio securities where the prices provided are believed to reflect the fair
market value of such securities. The methods of valuation used by the pricing
service will be reviewed by the Administrator under the general supervision of
the Fund's Board of Directors. Several pricing services are available, one or
more of which may be used by the Administrator from time to time. In valuing the
Portfolio's securities, the pricing service would normally take into
consideration such factors as yield, risk, quality, maturity, type of issue,
trading characteristics, special circumstances, and other factors which are
deemed relevant in determining valuations for normal institutionalized trading
units of debt securities and would not rely exclusively on quoted prices.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares in the Portfolio are sold on a continuous basis by the Distributor.
As described in the applicable Prospectuses, Trust Shares and Institutional
Shares of the Portfolio are sold to certain qualified customers at their net
asset value without a sales charge. Investor A Shares of the Portfolio are sold
to retail customers at the public offering price based on the Portfolio's net
asset value plus a front-end load or sales charge as described in the applicable
Prospectus. Investor B Shares of the Portfolio are sold to retail customers at
net asset value but are subject to a contingent deferred sales charge which is
payable upon redemption of such Shares as described in the applicable
Prospectus.

The Fund may redeem Shares involuntarily if the net income with respect to
the Portfolio's Shares is negative or such redemption otherwise appears
appropriate in light of the Fund's responsibilities under the 1940 Act.

An illustration of the computation of the public offering price per share
of shares of beneficial interest of the Predecessor Portfolio, based on the
value of the Predecessor Portfolio's net assets and the number of outstanding
shares at the close of business on March 31, 1997 and the maximum front-end 3.5%
sales charge applicable on such date, is as follows:

-14-
<PAGE> 113
TABLE

Net Assets $58,554,898

Outstanding Shares 3,862,138

Net Asset Value Per
Share $15.16

Sales Charge (3.50% of
offering price, 3.63%
of net asset value
per share) $ 0.55

Offering to Public $15.71

Under the 1940 Act, the Portfolio may suspend the right of redemption or
postpone the date of payment for Shares during any period when (a) trading on
the Exchange is restricted by applicable rules and regulations of the SEC; (b)
the Exchange is closed for other than customary weekend and holiday closing; (c)
the SEC has by order permitted such suspension; or (d) an emergency exists as
determined by the SEC. The Portfolio may also suspend or postpone the
recordation of the transfer of its Shares upon the occurrence of any of the
foregoing conditions.

In addition to the situations described in the Prospectuses under "How to
Purchase and Redeem Shares," the Portfolio may redeem Shares involuntarily to
reimburse the Portfolio for any loss sustained by reason of the failure of a
shareholder to make full payment for Shares purchased by the shareholder or to
collect any charge relating to a transaction effected for the benefit of a
shareholder which is applicable to Portfolio Shares as provided in the
applicable Prospectuses from time to time.

EXCHANGE PRIVILEGE

Shareholders may exchange all or part of their Shares in the Portfolio as
so described in the applicable Prospectus. Any rights an investor may have to
reduce (or have waived) the sales load applicable to an exchange, as may be
provided in a Prospectus, will apply in connection with any such exchange.

By use of the exchange privilege, the investor authorizes his or her
selected dealer, Service Organization or the Distributor to act on telephonic
instructions from any person representing himself or herself to be the investor
and believed by the selected dealer, Service Organization or the Distributor to
be genuine. The investor, selected dealer, Service Organization or the
Distributor must notify the Transfer Agent of

-15-
<PAGE> 114
the investor's prior ownership of Portfolio Shares and account number. The
Transfer Agent's records of such instructions are binding. The exchange
privilege may be modified or terminated at any time upon 60 days' written notice
to shareholders.

ADDITIONAL YIELD AND TOTAL RETURN INFORMATION

From time to time the yields and total returns of Trust Shares,
Institutional Shares, Investor A Shares and Investor B Shares (computed
separately) of the Portfolio may be quoted in advertisements, shareholder
reports or other communications to Shareholders.

The Portfolio's 30-day "yield" described in the Prospectuses is calculated
separately for Trust Shares, Institutional Shares, Investor A Shares and
Investor B Shares by dividing the Portfolio's net investment income per share
earned during a 30-day period by the maximum offering price per share (the
"maximum offering price") with respect to Investor A Shares and the net asset
value per share with respect to Trust Shares, Institutional Shares and Investor
B Shares on the last day of the period and annualizing the result on a
semi-annual basis by adding one to the quotient, raising the sum to the power of
six, subtracting one from the result and then doubling the difference. The
Portfolio's net investment income per share (irrespective of class) earned
during the period is based on the average daily number of Shares outstanding
during the period entitled to receive dividends and includes income dividends
and interest earned during the period minus expenses accrued for the period, net
of reimbursements. This calculation can be expressed as follows:

a-b (6)
Yield = 2 [(-------) - 1]
cd + 1

Where: a = dividends and interest earned
during the period.

b = expenses accrued for the period (net of
reimbursements).

c = the average daily number of Shares outstanding
that were entitled to receive dividends.

d = the maximum offering price per Share on the
last day of the period.

-16-
<PAGE> 115
For the purpose of determining interest earned during the period (variable
"a" in the formula), dividend income on equity securities held by the Portfolio
is recognized by accruing 1/360 of the stated dividend rate of the security each
day that the security is in the Portfolio. The Portfolio calculates interest
earned on any debt obligation held in its portfolio by computing the yield to
maturity of each obligation held by it based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last business day of each 30-day period, or, with respect to obligations
purchased during the 30-day period, the purchase price (plus actual accrued
interest) and dividing the result by 360 and multiplying the quotient by the
market value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
30-day period that the obligation is in the portfolio. The maturity of an
obligation with a call provision is the next call date on which the obligation
reasonably may be expected to be called or, if none, the maturity date. With
respect to debt obligations purchased at a discount or premium, the formula
generally calls for amortization of the discount or premium. The amortization
schedule will be adjusted monthly to reflect changes in the market values of
such debt obligations.

Expenses accrued for the period (variable "b" in the formula) include all
recurring fees charged by the Portfolio to all shareholder accounts in
proportion to the length of the base period and the Portfolio's mean (or median)
account size. Investor A Shares, Investor B Shares, Institutional Shares and
Trust Shares each bear separate fees applicable to the particular class of
shares. Undeclared earned income will not be subtracted from the maximum
offering price per Share (variable "d" in the formula). Undeclared earned income
is net investment income which, at the end of the base period, has not been
declared and paid as a dividend, but is reasonably expected to be and is
declared and paid as a dividend shortly thereafter.

For the 30-day period ended March 31, 1997, the yield of shares of the
Predecessor Portfolio was .50%.

Total Return Calculations. The Portfolio computes its "average annual total
return" for each class of Shares by determining the average annual compounded
rate of return during specified periods that would equate the initial amount
invested in a particular class of Shares to the ending redeemable value of such
investment in the class of Shares by dividing the ending redeemable value of a
hypothetical $1,000 payment by $1,000 (representing a hypothetical initial
payment) and raising the quotient to a power equal to one divided by the number
of years (or fractional portion thereof) covered by the computation and
subtracting one from the result. This calculation can be expressed as follows:

-17-
<PAGE> 116
ERV 1/n
T = [(-------) - 1]
P

Where: T = average annual total return.

ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
1, 5 or 10 year (or other) periods at the end
of the 1, 5 or 10 year (or other) periods (or
a fractional portion thereof).

P = hypothetical initial payment of $1,000.

n = period covered by the computation, expressed
in terms of years.

The Portfolio computes its aggregate total returns separately for each
class of Shares by determining the aggregate compounded rates of return during
specified periods that likewise equate the initial amount invested in a
particular class of Shares to the ending redeemable value of such investment in
the class of Shares. The formula for calculating aggregate total return is as
follows:

ERV
Aggregate Total Return = [(------)- 1]
P

The calculations of average annual total return and aggregate total return
assume reinvestment of all income dividends and capital gain distributions on
the reinvestment dates during the period and include all recurring fees charged
to all Shareholder accounts, assuming an account size equal to the Portfolio's
mean or median account size for any fees that vary with the size of the account.
The ending redeemable value (variable "ERV" in each quotation) is determined by
assuming complete redemption of the hypothetical investment and the deduction of
all non-recurring charges at the end of the period covered by the computation.
In addition, the Portfolio's average annual total return and aggregate total
return quotations reflect the deduction of the maximum front-end sales charge in
connection with the purchase of Investor A Shares and the deduction of any
applicable contingent deferred sales charge with respect to Investor B Shares.

Based on the foregoing calculations, (i) the average annual total returns
of shares of the Predecessor Portfolio for the 12-month period ended March 31,
1997 and for the period from January 4, 1993 (commencement of operations)
through March 31, 1997 were 7.78% and 12.12%, respectively, and (ii) the
aggregate

-18-
<PAGE> 117
total return of shares of the Predecessor Portfolio for the period from January
4, 1993 (commencement of operations) through March 31, 1997 was 62.51%.

As stated in the Prospectus relating to Investor A Shares and Investor B
Shares, the Portfolio may also calculate total return figures without deducting
the maximum sales charge imposed on purchases or redemptions. The effect of not
deducting the sales charge will be to increase the total return reflected.

IN GENERAL

Investors may judge the performance of the Portfolio by comparing it to the
performance of other mutual funds or mutual fund portfolios with comparable
investment objectives and policies. Such comparisons may be made by referring to
market indices such as those prepared by Dow Jones & Co., Inc., Salomon
Brothers, Inc., Standard & Poor's Ratings Group or any of their affiliates, the
Consumer Price Index, the NASDAQ Composite, or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. Such comparisons may also be made by referring
to data prepared by Lipper Analytical Services, Inc. (a widely recognized
independent service which monitors the performance of mutual funds), Indata,
Frank Russell, CDA, and the Bank Rate Monitor (which reports average yields for
money market accounts offered by the 50 leading banks and thrift institutions in
the top five standard metropolitan statistical areas). Other similar yield data,
including comparisons to the performance of Mercantile repurchase agreements, or
the average yield data for similar asset classes including but not limited to
Treasury bills, notes and bonds, may also be used for comparison purposes.
Comparisons may also be made to indices or data published in the following
national financial publications: MorningStar, CDA/Wiesenberger, Money Magazine,
Forbes, Fortune, Barron's, The Wall Street Journal, The New York Times, Business
Week, American Banker, Fortune, Institutional Investor, U.S.A. Today and
publications of Ibbotson Associates, Inc. and other publications of a local or
regional nature. In addition to performance information, general information
about the Portfolio that appears in a publication such as those mentioned above
may be included in advertisements and in reports to Shareholders.

From time to time, the Fund may include the following types of information
in advertisements, supplemental sales literature and reports to Shareholders:
(1) discussions of general economic or financial principles (such as the effects
of inflation, the power of compounding and the benefits of dollar-cost
averaging); (2) discussions of general economic trends; (3) presentations of
statistical data to supplement such discussions; (4) descriptions of past or
anticipated portfolio holdings for one or more of the portfolios offered by the
Fund; (5)

-19-
<PAGE> 118
descriptions of investment strategies for one or more of such portfolios; (6)
descriptions or comparisons of various investment products, which may or may not
include the Portfolio; (7) comparisons of investment products (including the
Portfolio) with relevant market or industry indices or other appropriate
benchmarks; and (8) discussions of rankings or ratings by recognized rating
organizations.

Such data are for illustrative purposes only and are not intended to
indicate past or future performance results of the Portfolio. Actual performance
of the Portfolio may be more or less than that noted in the hypothetical
illustrations.

Since performance will fluctuate, performance data for the Portfolio cannot
necessarily be used to compare an investment in the Portfolio's Shares with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed or guaranteed fixed yield for a stated period of time.
Shareholders should remember that performance is generally a function of the
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses, and market conditions. The current yield and performance of
the Portfolio may be obtained by calling the Fund at: INVESTOR A OR INVESTOR B
SHARES - (800) 452-ARCH (2724); OR TRUST OR INSTITUTIONAL SHARES - (800)
452-4015.

DESCRIPTION OF SHARES

The Fund's Articles of Incorporation authorize the Board of Directors to
issue up to seven billion full and fractional shares of capital stock, and to
classify or reclassify any unissued shares of the Fund into one or more
additional classes or by setting or changing in any one or more respects, their
respective preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption. Pursuant to such authority, the Fund's Board of Directors has
authorized the issuance of sixty-four classes of Shares representing interests
in eighteen investment Portfolios: the Treasury Money Market, Money Market,
Tax-Exempt Money Market, U.S. Government Securities, Intermediate Corporate
Bond, Bond Index, Government & Corporate Bond, Short-Intermediate Municipal,
Missouri Tax-Exempt Bond, National Municipal Bond, Equity Income, Equity Index,
Growth & Income Equity, Growth Equity, Small Cap Equity, Small Cap Equity Index,
International Equity and Balanced Portfolios. Trust Shares, Institutional
Shares, Investor A Shares and/or Investor B Shares in each portfolio are offered
through separate prospectuses to different categories of investors. Portfolio
Shares have no preemptive rights and only such conversion or exchange rights as
the Board may grant in its discretion. When issued for payment as described in
the applicable prospectuses,

-20-
<PAGE> 119
the Shares of the Fund's portfolios will be fully paid and nonassessable.

Except as noted in the Prospectuses with respect to certain sub-transfer
agency expenses borne by Institutional Shares and below with respect to the
Administrative Services Plans for Trust Shares and Institutional Shares and the
Distribution and Services Plans for Investor A Shares and Investor B Shares,
Shares of each class of the Portfolio bear the same types of ongoing expenses.
In addition, Investor A Shares are subject to a front-end sales charge and
Investor B Shares are subject to a contingent deferred sales charge as described
in the Prospectuses. Each class of Shares also has different exchange
privileges.

In the event of a liquidation or dissolution of the Fund, Shares of the
Portfolio are entitled to receive the assets available for distribution
belonging to the Portfolio, and a proportionate distribution, based upon the
relative asset value of the Portfolio, of any general assets not belonging to
any particular portfolio of the Fund which are available for distribution.
Shareholders of the Portfolio are entitled to participate equally in the net
distributable assets of the Portfolio on liquidation, except that Trust Shares
of the Portfolio will be solely responsible for the Portfolio's payments
pursuant to the Administrative Services Plan for those Shares, Institutional
Shares of the Portfolio will be solely responsible for the Portfolio's payments
pursuant to the Administrative Service Plan for those Shares, Investor A Shares
of the Portfolio will be solely responsible for the Portfolio's payments
pursuant to the Distribution and Services Plan for those Shares and Investor B
Shares of the Portfolio will be solely responsible for the Portfolio's payments
pursuant to the Distribution and Services Plan for those Shares. In addition,
Institutional Shares will be solely responsible for the payment of certain
sub-transfer agency fees attributable to those Shares.

Holders of all outstanding Shares of the Portfolio will vote together in
the aggregate and not by class, except that only Trust Shares of the Portfolio
will be entitled to vote on matters submitted to a vote of shareholders
pertaining to the Portfolio's Administrative Services Plan for Trust Shares,
only Institutional Shares of the Portfolio will be entitled to vote on matters
submitted to a vote of shareholders pertaining to the Portfolio's Administrative
Services Plan for Institutional Shares, only Investor A Shares of the Portfolio
will be entitled to vote on matters submitted to a vote of shareholders
pertaining to the Portfolio's Distribution and Services Plan for Investor A
Shares, and only Investor B Shares of the Portfolio will be entitled to vote on
matters submitted to a vote of shareholders pertaining to the Portfolio's
Distribution and Services Plan for Investor B Shares. Further, shareholders of
all of the Fund's portfolios,

-21-
<PAGE> 120
irrespective of series, will vote in the aggregate and not separately on a
portfolio-by-portfolio basis, except as otherwise required by law or when the
Board of Directors determines that the matter to be voted upon affects only the
interests of the shareholders of a particular portfolio or class of Shares. Rule
18f-2 under the 1940 Act provides that any matter required to be submitted to
the holders of the outstanding voting securities of a "series" investment
company such as the Fund shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding Shares of each
series (portfolio) affected by the matter. A portfolio is considered to be
affected by a matter unless it is clear that the interests of each portfolio in
the matter are identical or that the matter does not affect any interest of the
particular portfolio. Under the Rule, the approval of an investment advisory
agreement or any change in investment policy would be effectively acted upon
with respect to a portfolio only if approved by a majority of the outstanding
Shares of the portfolio. However, the Rule also provides that the ratification
of the appointment of independent auditors, the approval of principal
underwriting contracts, and the election of directors may be effectively acted
upon by shareholders of the Fund's portfolios voting without regard to portfolio
or class.

Shares in the Portfolio will be issued without certificates.

ADDITIONAL INFORMATION CONCERNING TAXES

The following summarizes certain additional tax considerations generally
affecting the Portfolio and its shareholders that are not described in the
Prospectuses. No attempt is made to present a detailed explanation of the tax
treatment of the Portfolio or its shareholders, and the discussion here and in
the Prospectuses is not intended as a substitute for careful tax planning.
Potential investors should consult their tax advisors with specific reference to
their own tax situations.

The Portfolio is treated as a separate corporate entity under the Internal
Revenue Code of 1986, as amended (the "Code"). The Portfolio intends to qualify
each year as a regulated investment company. In order to so qualify for a
taxable year under the Code, the Portfolio must satisfy, in addition to the
distribution requirements described in the Prospectuses, certain other
requirements set forth below.

At least 90% of the gross income for a taxable year of the Portfolio must
be derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities or foreign
currencies, and other

-22-
<PAGE> 121
income (including, but not limited to, gains from options, futures or forward
contracts) derived with respect to the Portfolio's business of investing in such
stock, securities or currencies (the "90% gross income test").

The Portfolio also must derive less than 30% of its gross income for a
taxable year from gains realized on the sale or other disposition of securities
and certain other investments held for less than three months (the "30% test").
Interest (including original issue discount and accrued market discount)
received by the Portfolio upon maturity or disposition of a security held for
less than three months will not be treated as gross income derived from the sale
or other disposition of such security within the meaning of this requirement.
However, any income that is attributable to real market appreciation will be
treated as gross income from the sale or other disposition of securities for
this purpose. With respect to covered call options, if the call is exercised by
the holder, the premium and the price received on exercise constitute the
proceeds of sale, and the difference between the proceeds and the cost of the
securities subject to the call is capital gain or loss. Premiums from expired
call options written by the Portfolio and net gains from closing purchase
transactions are treated as short-term capital gains for federal income tax
purposes, and losses on closing purchase transactions are short-term capital
losses. With respect to forward contracts, futures contracts, options on futures
contracts, and other financial instruments subject to the mark-to-market rules
described below under "Taxation of Certain Financial Instruments," the Internal
Revenue Service has ruled in private letter rulings that a gain realized from
such a contract, option or financial instrument will be treated as being derived
from a security held for three months or more (regardless of the actual period
for which the contract, option or instrument is held) if the gain arises as a
result of a constructive sale under the mark-to-market rules, and will be
treated as being derived from a security held for less than three months only if
the contract, option or instrument is terminated (or transferred) during the
taxable year (other than by reason of mark-to-market) and less than three months
have elapsed between the date the contract, option or instrument is acquired and
the termination date. Increases and decreases in the value of the Portfolio's
forward contracts, futures contracts, options on futures contracts and other
investments that qualify as part of a "designated hedge," as defined in Section
851(g) of the Code, may be netted for purposes of determining whether the 30%
test is met.

Finally, at the close of each quarter of its taxable year, at least 50% of
the value of the Portfolio's assets must consist of cash and cash items, U.S.
Government securities, securities of other regulated investment companies, and
securities of other issuers (as to which the Portfolio has not

-23-
<PAGE> 122
invested more than 5% of the value of its total assets in securities of such
issuer and as to which the Portfolio does not hold more than 10% of the
outstanding voting securities of such issuer) and no more than 25% of the value
of the Portfolio's total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which the Portfolio controls
and which are engaged in the same or similar trades or businesses.

The Portfolio will designate any distribution of the excess of net
long-term capital gain over net short-term capital loss as a capital gain
dividend in a written notice mailed to Shareholders within 60 days after the
close of the Portfolio's taxable year. Such distributions, if any, will be
taxable to Shareholders who are not currently exempt from federal income tax as
long-term capital gains, no matter how long the Shareholder has held these
Shares. Shareholders should note that, upon the sale or exchange of Portfolio
Shares, if the Shareholder has not held such Shares for more than six months,
any loss on the sale or exchange of those Shares will be treated as long-term
capital loss to the extent of the capital gain dividends received with respect
to the Shares.

Ordinary income of individuals is taxable at a maximum nominal rate of
39.6%, but because of limitations on itemized deductions otherwise allowable and
the phase-out of personal exemptions, the maximum effective marginal rate of tax
for some taxpayers may be higher. An individual's long-term capital gains are
taxable at a maximum rate of 28%. For corporations, long-term capital gains and
ordinary income are both taxable at a maximum nominal rate of 35% (or at a
maximum marginal rate of 39% in the case of corporations having taxable income
between $100,000 and $335,000).

A 4% nondeductible excise tax is imposed on regulated investment companies
that fail to currently distribute specified percentages of their ordinary
taxable income and capital gain net income (excess of capital gains over capital
losses). The Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and any capital gain net income
each year to avoid liability for this excise tax.

If for any taxable year the Portfolio does not qualify for the special
federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to federal income tax at regular corporate rates
(without any deduction for distributions to its Shareholders). In such event,
dividend distributions would be taxable as ordinary income to Shareholders, to
the extent of the Portfolio's current and accumulated earnings and profits, and
would be eligible for the dividends received deduction allowed to corporations.

-24-
<PAGE> 123
The Portfolio will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or 31% of gross sale
proceeds paid to Shareholders who have failed to provide a correct tax
identification number in the manner required, or who are subject to withholding
by the Internal Revenue Service for failure to properly include on his or her
return payments of taxable interest or dividends.

In those states and localities which have income tax laws, the treatment of
the Portfolio and its Shareholders under such laws may differ from their
treatment under federal income tax laws. Under state or local law, distributions
of net income may be taxable to Shareholders as dividend income. Shareholders
are advised to consult their tax advisors concerning the application of state
and local taxes.

TAXATION OF CERTAIN FINANCIAL INSTRUMENTS

Special rules govern the federal income tax treatment of financial
instruments that may be held by the Portfolio. These rules may have a particular
impact on the amount of income or gain that the Portfolio must distribute to
Shareholders to comply with the distribution requirement, on the income or gain
qualifying under the 90% gross income test, and on the Portfolio's ability to
comply with the 30% test described above.

Generally, futures contracts and options on futures contracts held by the
Portfolio at the close of its taxable year are treated for federal income tax
purposes as sold for their fair market value on the last business day of such
year, a process known as "mark-to-market." Forty percent of any gain or loss
resulting from such constructive sales are treated as short-term capital gain or
loss and 60% of such gain or loss are treated as long-term capital gain or loss
without regard to the period the Portfolio holds the futures contract or related
option (the "40%-60% rule"). The amount of any capital gain or loss actually
realized by the Portfolio in a subsequent sale or other disposition of those
futures contracts and related options is adjusted to reflect any capital gain or
loss taken into account by the Portfolio in a prior year as a result of the
constructive sale of the contracts and options. Losses with respect to futures
contracts to sell and related options, which are regarded as parts of a "mixed
straddle" because their values fluctuate inversely to the values of specific
securities held by the Portfolio, are subject to certain loss deferral rules
which limit the amount of loss currently deductible on either part of the
straddle to the amount thereof which exceeds the unrecognized gain (if any) with
respect to the other part of the straddle, and to certain wash sales
regulations. Under short sales rules, which are also applicable, the holding
period of the securities forming part of the straddle will (if they have not
been held for the long-term holding period) be deemed not to begin prior to

-25-
<PAGE> 124
termination of the straddle. With respect to certain futures contracts and
related options, deductions for interest and carrying charges may not be
allowed. Notwithstanding the rules described above, with respect to futures
contracts to sell and related options which are properly identified as such, the
Portfolio may make an election which will exempt (in whole or in part) those
identified futures contracts and options from being treated for federal income
tax purposes as sold on the last business day of the Portfolio's taxable year,
but gains and losses will be subject to such short sales, wash sales and loss
deferral rules and the requirement to capitalize interest and carrying charges.
Under Temporary Regulations, the Portfolio would be allowed (in lieu of the
foregoing) to elect either (1) to offset gains or losses from positions which
are part of a mixed straddle by separately identifying each mixed straddle to
which such treatment applies, or (2) to establish a mixed straddle account for
which gains and losses would be recognized and offset on a periodic basis during
the taxable year. Under either election, the 40%-60% rule will apply to the net
gain or loss attributable to the futures contracts and options, but in the case
of a mixed straddle account election, not more than 50% of any net gain may be
treated as long-term and no more than 40% of any net loss may be treated as
short-term.

Some of the non-U.S. dollar denominated investments that the Portfolio may
make, such as non-U.S. dollar-denominated debt securities and preferred stock,
may be subject to the provisions of Subpart J of the Code, which govern the
federal income tax treatment of certain transactions denominated in terms of a
currency other than the U.S. dollar or determined by reference to the value of
one or more currencies other than the U.S dollar. The types of transactions
covered by these provisions include the following: (1) the acquisition of, or
becoming the obligor under, a bond or other debt instrument (including, to the
extent provided in Treasury regulations, preferred stock); (2) the accruing of
certain trade receivables and payables; and (3) the entering into or acquisition
of any forward contract, futures contract, option and similar financial
instrument. The disposition of a currency other than the U.S. dollar by a U.S.
taxpayer also is treated as a transaction subject to the special currency rules.
However, foreign currency-related regulated futures contracts and non-equity
options generally are not subject to the special currency rules if they are or
would be treated as sold for their fair market value at year-end under the
mark-to-market rules, unless an election is made to have such currency rules
apply. With respect to transactions covered by the special rules, foreign
currency gain or loss is calculated separately from any gain or loss on the
underlying transaction and normally is taxable as ordinary gain or loss. The
Portfolio may elect to treat as capital gain or loss foreign currency gain or
loss arising from certain identified forward contracts, futures contracts and
options that

-26-
<PAGE> 125
are capital assets in the hands of the Portfolio and which are not part of a
straddle. In accordance with Treasury Regulations, certain transactions subject
to the special currency rules that are part of a "Section 988 hedging
transaction" (as defined in the Code and Treasury regulations) will be
integrated and treated as a single transaction or otherwise treated consistently
for purposes of the Code. "Section 988 hedging transactions" are not subject to
the mark-to-market or loss deferral rules under the Code. Gain or loss
attributable to the foreign currency component of transactions engaged in by the
Portfolio which are not subject to the special currency rules (such as foreign
equity investments other than certain preferred stocks) is treated as capital
gain or loss and is not segregated from the gain or loss on the underlying
transaction.

CONCLUSIONS

The foregoing discussion is based on federal tax laws and regulations which
are in effect on the date of this Statement of Additional Information. Such laws
and regulations may be changed by legislative or administrative action.
Shareholders are advised to consult their tax advisors concerning the
application of state and local taxes.

MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS

The directors and executive officers of the Fund, their addresses, ages,
principal occupations during the past five years, and other affiliations are as
follows:

<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 years
Name and Address the Fund and other affiliations
- ---------------- -------- ----------------------
<S> <C> <C>
Jerry V. Woodham* Chairman of Treasurer, St. Louis
St. Louis University the Board; University, August 1996
3500 Lindell President and to present; Treasurer,
Fitzgerald Hall Director Washington University,
St. Louis, MO 63131 1981 to 1995
Age: 53

Robert M. Cox, Jr. Director Senior Vice President and
Emerson Electric Co. Advisory Director, Emerson
8000 W. Florissant Ave. Electric Co. since November
P.O. Box 4100 1990.
St. Louis, MO 63136-8506
Age: 51
</TABLE>

-27-
<PAGE> 126

<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 years
Name and Address the Fund and other affiliations
- ---------------- -------- ----------------------
<S> <C> <C>
Joseph J. Hunt Director General Vice-President
Iron Workers District International Association of
Council Bridge, Structural and Orna-
3544 Watson Road mental Iron Workers (Interna-
St. Louis, MO 63139 tional Labor Union), January 1994
Age: 54 to present; General Organizer,
International Association of
Bridge, Structural and Ornamental
Iron Workers, September 1983 to
December 1993.

James C. Jacobsen Director Director, Kellwood Company,
Kellwood Company (manufacturer of wearing
600 Kellwood Parkway apparel and camping softgoods)
Chesterfield, MO 63017 since 1975; Vice Chairman,
Age: 61 Kellwood Company since May
1989.

Lyle L. Meyer Director Vice President, The Jefferson
Jefferson Smurfit Smurfit Corporation (manu-
Corporation facturer of paperboard and
8182 Maryland Avenue packaging materials), April
St. Louis, MO 63105 1989 to present; President,
Age: 60 Smurfit Pension & Insurance Services
Company, November 1982 to December
1992.

Ronald D. Winney* Director and Treasurer, Ralston
Ralston Purina Company Treasurer Purina Company
Checkerboard Square since 1985.
St. Louis, MO 63164
Age: 54

W. Bruce McConnel, III Secretary Partner of the law
Suite 1100 firm of Drinker Biddle &
1345 Chestnut Street Reath LLP, Philadelphia,
Philadelphia, PA 19107 Pennsylvania since 1977.
Age: 54

Walter B. Grimm* Vice From June, 1992 to present,
3435 Stelzer Road President and employee of BISYS Fund
Columbus, OH 43219 Assistant Services; From 1989 to June, 1992
Age: 51 Treasurer President of Leigh Investments
Consulting/Investments (investment
firm).

David Bunstine* Assistant From December, 1987 to present,
3435 Stelzer Road Secretary employee of BISYS Fund Services.
Columbus, OH 43219
Age: 31
</TABLE>

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

* Messrs. Woodham, Winney, Grimm and Bunstine are "interested persons" of the
Fund as defined in the 1940 Act.

-28-
<PAGE> 127
Each Director receives an annual fee of $10,000 plus reimbursement of
expenses incurred as a Director. The Chairman of the Board and President of the
Fund receives an additional annual fee of $5,000 for his services in these
capacities. For the fiscal year ended November 30, 1996, the Fund paid or
accrued for the account of its directors as a group, for services in all
capacities, a total of $76,082.90. Drinker Biddle & Reath LLP, of which Mr.
McConnel is a partner, receives legal fees as counsel to the Fund. As of the
date of this Statement of Additional Information, the directors and officers of
the Fund, as a group, owned less than 1% of the outstanding Shares of the Fund.

The following chart provides certain information about the fees received by
the Fund's directors for their services as members of the Board of Directors and
committees thereof for the fiscal year ended November 30, 1996:

<TABLE>
<CAPTION>
=============================================================================================================
PENSION OR TOTAL
AGGREGATE RETIREMENT BENEFITS COMPENSATION
COMPENSATION ACCRUED AS PART OF FROM THE FUND AND
NAME OF DIRECTOR FROM THE FUND FUND EXPENSE FUND COMPLEX*
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Jerry V. Woodham $15,000 N/A $15,000.00
- -------------------------------------------------------------------------------------------------------------
Robert M. Cox, Jr. $10,166.35 N/A $10,166.35
- -------------------------------------------------------------------------------------------------------------
Joseph J. Hunt $10,000.00 N/A $10,000.00
- -------------------------------------------------------------------------------------------------------------
James C. Jacobsen $10,266.60 N/A $10,266.60
- -------------------------------------------------------------------------------------------------------------
Donald E. Kiernan** $10,101.55 N/A $10,101.55
- -------------------------------------------------------------------------------------------------------------
Lyle L. Meyer $10,287.60 N/A $10,287.60
- -------------------------------------------------------------------------------------------------------------
Ronald D. Winney $10,260.60 N/A $10,260.60
=============================================================================================================
</TABLE>

* The "Fund Complex" consists solely of the Fund.

** Mr. Kiernan resigned as a director of the Fund on April 3, 1997.

INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS

MVA serves as investment adviser to the Portfolio. Pursuant to the advisory
agreement, MVA has agreed to provide investment advisory services as described
in the Portfolio's Prospectuses. MVA has agreed to pay all expenses incurred by
it in connection with its activities under the agreement other than the cost of
securities, including brokerage commissions, if any, purchased for the
Portfolio.

-29-
<PAGE> 128
The investment advisory agreement provides that MVA shall not be liable for
any error of judgment or mistake of law or for any loss suffered in connection
with the performance of its agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties or from reckless disregard by it of its duties and
obligations thereunder.

For the fiscal years ended September 30, 1996, 1995 and 1994, Mark Twain
Bank, the former adviser of the Predecessor Portfolio, earned advisory fees of
$368,254, $253,371 and $234,468, respectively, of which $13,853, $15,785 and
$9,037, respectively, were waived.

Under its administration agreement with the Fund, BISYS Fund Services Ohio,
Inc. (the "Administrator") serves as administrator. The Administrator has agreed
to maintain office facilities for the Portfolio, furnish the Portfolio with
statistical and research data, clerical, accounting, and certain bookkeeping
services, stationery and office supplies, and certain other services required by
the Portfolio, and to compute the net asset value and net income of the
Portfolio. The Administrator prepares annual and semi-annual reports to the SEC
on Form N-SAR, compiles data for and prepares federal and state tax returns and
required tax filings other than those required to be made by the Fund's
Custodian and Transfer Agent, prepares the Fund's compliance filings with state
securities commissions, maintains the registration or qualification of Shares
for sale under the securities laws of any state in which the Fund's Shares shall
be registered, assists in the preparation of annual and semi-annual reports to
Shareholders of record, participates in the periodic updating of the Fund's
Registration Statement, prepares and assists in the timely filing of notices to
the SEC required pursuant to Rule 24f-2 under the 1940 Act, arranges for and
bears the cost of processing Share purchase, exchange and redemption orders,
keeps and maintains the Portfolio's financial accounts and records including
calculation of daily expense accruals, monitors compliance procedures for the
Portfolio with the Portfolio's investment objective, policies and limitations,
tax matters, and applicable laws and regulations, and generally assists in all
aspects of the Portfolio's operations. The Administrator bears all expenses in
connection with the performance of its services, except that the Portfolio bears
any expenses incurred in connection with any use of a pricing service to value
portfolio securities. See "Net Asset Value" above.

For the fiscal years ended September 30, 1996, 1995 and 1994, Federated
Administrative Services, the former administrator of the Predecessor Portfolio,
earned administrative fees of $71,420, $52,746 and $50,000, respectively.

-30-
<PAGE> 129
From time to time, MVA and the Administrator may voluntarily waive a
portion or all of their respective fees otherwise payable to them with respect
to the Portfolio in order to increase the net income available for distribution
to Shareholders.

CUSTODIAN AND TRANSFER AGENT

Mercantile is Custodian of the Portfolio's assets pursuant to a Custodian
Agreement. Under the Custodian Agreement, Mercantile has agreed to (i) maintain
a separate account or accounts in the name of the Portfolio; (ii) receive and
disburse money on behalf of the Portfolio; (iii) collect and receive all income
and other payments and distributions on account of the Portfolio's portfolio
securities; (iv) respond to correspondence relating to its duties; and (v) make
periodic reports to the Fund's Board of Directors concerning the operations of
the Portfolio. Mercantile may, at its own expense, open and maintain a custody
account or accounts on behalf of the Portfolio with other banks or trust
companies, provided that Mercantile shall remain liable for the performance of
all of its custodial duties under the Custodian Agreement, notwithstanding any
delegation. Mercantile is authorized to select one or more banks or trust
companies to serve as sub-custodian on behalf of the Portfolio, provided that
Mercantile shall remain responsible for the performance of all of its duties
under the Custodian Agreement and shall hold the Fund harmless from the acts and
omissions of any bank or trust company serving as sub-custodian.

In the opinion of the staff of the SEC, since the Custodian is an affiliate
of the Adviser, the Fund and the Custodian are subject to the requirements of
Rule 17f-2 under the 1940 Act. Accordingly the Fund and the Custodian intend to
comply with the requirements of such Rule.

Pursuant to the Custodian Agreement with the Fund, the Portfolio pays
Mercantile an annual fee. This fee, which is paid monthly, is calculated as the
greater of $6,000 or $.30 for each $1,000 of the Portfolio's average daily net
assets, plus $15.00 for each purchase, sale or delivery of a security upon its
maturity date, $50.00 for each interest collection or claim item, $20.00 for
each transaction involving GNMA, tax-free or other non-depository registered
items with monthly dividends or interest, $30.00 for each purchase, sale or
expiration of an option contract, $50.00 for each purchase, sale or expiration
of a futures contract, and $15.00 for each repurchase trade with an institution
other than Mercantile. In addition, the Portfolio pays Mercantile's incremental
costs in providing foreign custody services for any foreign-denominated and
foreign-held securities and reimburses Mercantile for out-of-pocket expenses
related to such services.

-31-
<PAGE> 130
BISYS Fund Services Ohio, Inc. also serves as the Fund's transfer agent and
dividend disbursing agent (in those capacities, the "Transfer Agent") pursuant
to a Transfer Agency Agreement. Under the Agreement, the Transfer Agent has
agreed to (i) process Shareholder purchase and redemption orders; (ii) maintain
Shareholder records for the Portfolio's Shareholders; (iii) process transfers
and exchanges of Shares of the Portfolio; (iv) issue periodic statements for the
Portfolio's Shareholders; (v) process dividend payments and reinvestments; (vi)
assist in the mailing of Shareholder reports and proxy solicitation materials;
and (vii) make periodic reports to the Fund's Board of Directors concerning the
operations of the Portfolio.

DISTRIBUTOR AND SERVICE ORGANIZATIONS

BISYS Fund Services (the "Distributor"), an affiliate of the Administrator,
serves as the distributor of the Portfolio's Shares pursuant to a Distribution
Agreement. Under the Distribution Agreement, the Distributor, as agent, sells
Shares of the Portfolio on a continuous basis. The Distributor has agreed to use
appropriate efforts to solicit orders for the sale of Shares. With respect to
the Portfolio's Trust Shares and Institutional Shares, no compensation is
payable by the Fund to the Distributor for distribution services. With respect
to the Portfolio's Investor A Shares, the Distributor is entitled to receive a
portion of the front-end sales charge imposed on such Shares. The Distributor is
also entitled to the payment of contingent deferred sales charges upon the
redemption of Investor B Shares of the Portfolio. In addition, under the
Distribution and Services Plan for Investor A Shares described below, the
Distributor is entitled to a distribution fee at the annual rate of .10% for
distribution services and under the Distribution and Services Plan for Investor
B Shares described below, the Distributor is entitled to a distribution fee at
the annual rate of .75% for distribution services. For information regarding the
distribution services provided thereunder, see "Distribution and Services Plans"
under "Management of the Fund" in the Prospectuses and "The Plans" below.

THE PLANS

DISTRIBUTION AND SERVICES PLANS. As described in the Prospectuses, the Fund
has adopted separate Distribution and Services Plans with respect to Investor A
Shares and Investor B Shares of the Portfolio pursuant to the 1940 Act and Rule
12b-1 thereunder. Any material amendment to the Plans or arrangements with the
Distributor or Service Organizations (which may include selected dealers and
affiliates of the Fund's Adviser) must be approved by a majority of the Board of
Directors, including a majority of the directors who are not "interested
persons" of the Fund as defined in the 1940 Act and have no direct or indirect
financial interest in such arrangements (the "Disinterested

-32-
<PAGE> 131
Directors") and by a majority of the Investor A Shares and Investor B Shares,
respectively, of the Portfolio. Pursuant to the Plans, the Fund may enter into
Servicing Agreements with broker-dealers and other organizations ("Servicing
Agreements") that purchase Investor A Shares or Investor B Shares of the
Portfolio. The Servicing Agreements provide that the Servicing Organizations
will render certain shareholder administrative support services to their
customers who are the record or beneficial owners of Investor A Shares or
Investor B Shares. Services provided pursuant to the Servicing Agreements may
include such services as providing information periodically to customers showing
their positions in Investor A Shares or Investor B Shares and monitoring
services for their customers who have invested in Investor A Shares or Investor
B Shares, including the operation of telephone lines for daily quotations of
return information.

Service Organizations and other broker/dealers receive commissions from the
Distributor for selling Investor B Shares, which are paid at the time of the
sale. These commissions approximate the commissions payable with respect to
sales of Investor A Shares. The distribution fees payable under the Distribution
and Services Plan for Investor B Shares are intended to cover the expense to the
Distributor of paying such up-front commissions, and the contingent deferred
sales charge is calculated to charge the investor with any shortfall that would
occur if Investor B Shares are redeemed prior to the expiration of the eight
year period after which Investor B Shares automatically convert to Investor A
Shares. To provide funds for the payment of up-front sales commissions, the
Distributor has entered into an agreement with MVA pursuant to which MVA
provides funds for the payment of commissions and other fees payable to Service
Organizations and broker/dealers who sell Investor B Shares. Under the terms of
that agreement, the Distributor has assigned to MVA the fees which may be
payable from time to time to the Distributor under the Distribution and Services
Plan for Investor B Shares and the contingent deferred sales charges payable to
the Distributor with respect to Investor B Shares.

Shares of the Predecessor Portfolio were subject to a Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act. The Plan provided for payment
of fees to Federated Securities Corp., the former distributor of the Predecessor
Portfolio, at an annual rate of .25% of the Predecessor Portfolio's average
daily net assets, to finance activity which was primarily intended to result in
the sale of the Predecessor Portfolio's shares subject to the Plan. Pursuant to
the Plan, Federated Securities Corp. was permitted to pay fees to brokers for
distribution and administrative services and to administrators (i.e. financial
institutions) for administrative services provided to the Predecessor Portfolio
and its shareholders. For the fiscal years ended September 30, 1996,

-33-
<PAGE> 132
1995 and 1994, brokers and administrators earned fees on behalf of the
Predecessor Portfolio of $122,734, $84,456 and $78,171, respectively, all of
which was voluntarily waived for each year.

ADMINISTRATIVE SERVICES PLANS. As described in the applicable Prospectuses,
separate Administrative Services Plans have been adopted with respect to Trust
Shares and Institutional Shares of the Portfolio. Pursuant to each Plan and the
Distribution and Services Plans described above, the Fund may enter into
Servicing Agreements with banks, trust departments, and other financial
institutions and with broker-dealers and other organizations ("Service
Organizations") that purchase Trust Shares, Institutional Shares, Investor A
Shares or Investor B Shares of the Portfolio, respectively. The Servicing
Agreements provide that the Service Organizations will render certain
shareholder administrative support services to their customers who are the
record or beneficial owners of Trust Shares, Institutional Shares, Investor A
Shares or Investor B Shares, respectively. Services provided pursuant to the
Servicing Agreements may include some or all of the following services: (i)
processing dividend and distribution payments from the Portfolio on behalf of
customers; (ii) providing information periodically to customers showing their
positions in Trust, Institutional, Investor A or Investor B Shares; (iii)
arranging for bank wires; (iv) responding to routine customer inquiries relating
to services performed by the particular Service Organization; (v) providing
sub-accounting with respect to Trust, Institutional, Investor A or Investor B
Shares owned of record or beneficially by customers or the information necessary
for sub-accounting; (vi) as required by law, forwarding Shareholder
communications (such as proxies, Shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to customers;
(vii) forwarding to customers proxy statements and proxies containing any
proposals regarding Servicing Agreements or the related Plan; (viii) aggregating
and processing purchase, redemption, and exchange requests from customers and
placing net purchase and redemption orders with the Fund's Distributor; (ix)
providing customers with a service that invests the assets of their accounts in
Trust, Institutional, Investor A or Investor B Shares pursuant to specific or
pre-authorized instructions; (x) maintaining records relating to each customer's
Share transactions; or (xi) other similar services if requested by the Fund and
permitted by law. In addition, Service Organizations may also provide dedicated
facilities and equipment in various local locations to serve the needs of
investors, including walk-in facilities, 800 numbers, and communication systems
to handle shareholder inquiries, and in connection with such facilities, provide
on-site management personnel and monitoring services for their customers who
have invested in Investor A Shares or Investor B Shares, including the operation
of telephone lines for daily quotations of return information.

-34-
<PAGE> 133
OTHER PLAN INFORMATION. The Board of Directors has approved each Plan and
its respective arrangements with the Distributor, Service Organizations and
broker-dealers based on information provided by the Fund's service contractors
that there is a reasonable likelihood that these Plans and arrangements will
benefit the Portfolio and its shareholders. Pursuant to each Plan, the Board of
Directors reviews, at least quarterly, a written report of the amounts of
distribution fees and/or servicing fees expended pursuant to each Plan, the
Service Organizations to whom such fees were paid, and the purposes for which
the expenditures were made. So long as the Fund has one or more of the above
described Plans in effect, the selection and nomination of the members of the
Board of Directors who are not "interested persons" (as defined in the 1940 Act)
of the Fund will be committed to the discretion of such Disinterested Directors.

Depending upon the terms governing the particular customer accounts,
Service Organizations, selected dealers, and other institutions may also charge
their customers directly for cash management and other services provided in
connection with the accounts, including, for example, account maintenance fees,
compensating balance requirements, or fees based upon account transactions,
assets, or income. An investor should therefore read the Prospectuses and this
Statement of Additional Information in light of the terms of his or her account
with a Service Organization, selected dealer, or other institution before
purchasing Trust, Institutional, Investor A or Investor B Shares of the
Portfolio.

FUND EXPENSES. As discussed previously, the Portfolio's service contractors
bear all of their own expenses in connection with the performance of their
services, except that the Portfolio bears certain expenses incurred pursuant to
the Distribution and Services Plans, the Administration Services Plans and
certain sub-transfer agency fees (with respect to Institutional Shares). The
Portfolio also bears the expenses incurred in its operations. Fund expenses
include taxes, interest, fees and salaries of its directors and officers, SEC
fees, state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to Shareholders,
advisory and administration fees, distribution fees for distribution services
provided to and expenses assumed in connection with marketing Investor A Shares
and Investor B Shares, charges of the Custodian and Transfer Agent, Service
Organization fees, certain insurance premiums, outside auditing and legal
expenses, costs of any independent pricing service, costs of Shareholder reports
and meetings and any extraordinary expenses. The Portfolio also pays for
brokerage fees, commission and other transaction charges (if any) incurred in
connection with the purchase and sale of portfolio securities.

-35-
<PAGE> 134
INDEPENDENT AUDITORS

KPMG Peat Marwick LLP, certified public accountants, with offices at Two
Nationwide Plaza, Columbus, Ohio 43215, serves as independent auditors for the
Fund. KPMG Peat Marwick LLP performs an annual audit of the Fund's financial
statements. Reports of its activities are provided to the Fund's Board of
Directors.

COUNSEL

Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary of the Fund,
is a partner), Suite 1100, 1345 Chestnut Street, Philadelphia, Pennsylvania
19107-3496, is counsel to the Fund and will pass upon certain legal matters on
its behalf.

MISCELLANEOUS

As of June 3, 1997, Mercantile held of record 99.997% and 30.171% of the
outstanding Institutional and Trust shares, respectively, in the Treasury Money
Market Portfolio; 94.378% and 32.788% of the outstanding Institutional and Trust
shares, respectively, in the Money Market Portfolio; 78.265% of the outstanding
Trust shares in the Tax-Exempt Money Market Portfolio; 95.061% and 94.922% of
the outstanding Institutional and Trust shares, respectively, in the U.S.
Government Securities Portfolio; 99.999% of the outstanding Trust shares in the
Intermediate Corporate Bond Portfolio; 99.999% and 98.987% of the outstanding
Institutional and Trust shares, respectively, in the Government & Corporate Bond
Portfolio; 99.029% of the outstanding Trust Shares in the Bond Index Portfolio;
96.338% of the outstanding Trust shares in the Short-Intermediate Municipal
Portfolio; 99.232% of the outstanding Trust shares in the Missouri Tax-Exempt
Bond Portfolio; 99.926% of the outstanding Trust shares in the National
Municipal Bond Portfolio; 99.999% and 96.061% of the outstanding Institutional
and Trust shares, respectively, in the Growth & Income Equity Portfolio; 99.999%
and 48.974% of the outstanding Institutional and Trust shares, respectively, in
the Small Cap Equity Portfolio; 96.282% and 93.840% of the outstanding
Institutional and Trust shares, respectively, in the International Equity
Portfolio; 97.799% of the outstanding Trust shares in the Equity Income
Portfolio; 99.999% of the outstanding Trust shares in the Equity Index
Portfolio; and 99.999% and 99.849% of the outstanding Institutional and Trust
shares, respectively, in the Balanced Portfolio, as fiduciary or agent on behalf
of its customers. Mercantile is a wholly owned subsidiary of Mercantile
Bancorporation Inc., a Missouri corporation. Under the 1940 Act, Mercantile may
be deemed to be a controlling person of the Fund.

-36-
<PAGE> 135
As of the same date, the following institutions also owned of record 5% or
more of the Treasury Money Market Portfolio's outstanding shares as fiduciary or
agent on behalf of their customers: Trust Shares - Hawaiian Trust Company Ltd.,
783 Funds Accounting, P.O. Box 3170, Honolulu, HI 96802-3170 (12.388%); BISYS
Fund Services, FBO Mercantile EOD Sweep, Attn: Linda Zebre, First and Market
Building, Suite 300, Pittsburgh, PA 15222 (47.309%); Investor A Shares - BHC
Securities Inc., Attn: Cash Balance Sweep Dept., 1 Commerce Square, 11th Floor,
2005 Market Street, Philadelphia, PA 19103-0000 (51.657%); Mercantile Bank of
St. Louis, NA Custodian Richard E. Crippa, Rollover IRA, 2948 Castleford Dr.,
Florissant, MO 63033-0000 (8.938%); St. Louis Regional Medical Center, Attn:
Sharon Edison, 5535 Delmar Blvd., St. Louis, MO 63112 (34.508%).

As of the same date, the following institutions also owned of record 5% or
more of the Money Market Portfolio's outstanding shares as fiduciary or agent on
behalf of their customers: Trust Shares - Hawaiian Trust Company Ltd., 783 Funds
Accounting, P.O. Box 3170, Honolulu, HI 96802-3170 (14.282%); Investor A Shares
- - BHC Securities Inc., Attn: Cash Balance Sweep Dept., 1 Commerce Square, 11th
Floor, 2005 Market St., Philadelphia, PA 19103-0000 (84.033%); BISYS Fund
Services, FBO Mercantile EOD Sweep, Attn: Linda Zerbe, First and Market
Building, Suite 300, Pittsburgh, PA 15222 (35.324%); Mercantile Investment
Services Inc., Firm Capital Account, Attn: Judy Harbelt, P.O. Box 790121, St.
Louis, MO 63179-0121 (5.072%); Investor B Shares - Mercantile Bank of St. Louis,
NA Custodian Pheba A. Steinmeyer, IRA, HC 3 Box 1266, Rocky Mt., MO 65072-9042
(5.511%); Alberta Buenemann and Ernie W. Buenemann Trust, Alberta Buenemann
Revocable Living Trust, 1649 Sand Run Road, Troy, MO 63379 (7.405%); Mercantile
Bank of St. Louis, NA Custodian Wayne D. Matheis, Rollover IRA, RR 2 Box 142,
Russellville, MO 65074 (12.082%); Merlin R. Burke and Mary Alice Burke, 2516
Highland, Sedalia, MO 65301 (5.159%); Mercantile Bank of St. Louis, NA Custodian
Edwin C. Hogrebe, IRA, 5537 Goethe, St. Louis, MO 63109 (5.009%); Homer R.
Turner and Edna M. Turner Trust, Edna M. Turner Trust, 33409 E. Pink Hill Rd.,
Grain Valley, MO 64029 (7.869%).

As of the same date, the following institutions also owned of record 5% or
more of the Tax-Exempt Money Market Portfolio's outstanding shares as fiduciary
or agent on behalf of their customers: Trust Shares - Mark Twain Bank, Trust
Operations, P.O. Box 14259 A, St. Louis, MO 63178 (6.961%); BISYS Fund Services,
FBO Mercantile EOD Sweep, Attn: Linda Zerbe, First and Market Building, Suite
300, Pittsburgh, PA 15222 (5.133%); Investor A Shares - BHC Securities Inc.,
Attn: Cash Balance Sweep Dept., 1 Commerce Square, 11th Floor, 2005 Market St.,
Philadelphia, PA 19103-0000 (96.536%).

-37-
<PAGE> 136
As of the same date, the following institutions also owned of record 5% or
more of the U.S. Government Securities Portfolio's outstanding shares as
fiduciary or agent on behalf of their customers: Investor A Shares - BHC
Securities Inc., Trade House Account, Attn: Mutual Fund Dept., 1 Commerce
Square, 2005 Market St., Philadelphia, PA 19103-0000 (12.753%); Mercantile Bank
of St. Louis, NA Custodian Edmund C. Albrecht, Jr., IRA, 236 Carlyle Lake Dr.,
St. Louis, MO 63141 (6.076%); Mercantile Bank of St. Louis, NA Custodian William
J. Gaffney, IRA Rollover, 1424 Bupp Road, St. Louis, MO 63131 (5.105%); Investor
B Shares - BHC Securities Inc., FAO 24130191, Attn: Mutual Funds Dept., 1
Commerce Square, 2005 Market St., Suite 1200, Philadelphia, PA 19103 (12.515%);
BHC Securities Inc., FAO 24342961, Attn: Mutual Funds Dept., 1 Commerce Square,
2005 Market St., Suite 1200, Philadelphia, PA 19103 (8.052%); BHC Securities
Inc., FAO 24335526, Attn: Mutual Funds Dept., 1 Commerce Square, 2005 Market
St., Suite 1200, Philadelphia, PA 19103 (6.477%).

As of the same date, the following institutions also owned of record 5% or
more of the Intermediate Corporate Bond Portfolio's outstanding shares as
fiduciary or agent on behalf of their customers: Institutional Shares - BISYS
Fund Services OH Inc., Attn: Admin. & Regulatory Services, 3435 Stelzer Rd.,
Columbus, OH 43219 (100.00%); Investor A Shares - Gary E. Timmons, P.O. Box
3149, Laredo, TX 78044 (23.250%); Jill Larson, 27165 Punario, Mission Viejo, CA
92692-3204 (23.250%); George Gregory Timmons, 1332 E. Desert Cv., Phoenix, AZ
85020 (23.250%); Betty Jane Eckhart, Trust Betty Jane Eckhart Trust U/A, 28265
Beach Rd., Sarcoxie, MO 64862 (29.165%);

As of the same date, the following institutions also owned of record 5% or
more of the Bond Index Portfolio's outstanding shares as fiduciary or agent on
behalf of their customers: Institutional Shares - BISYS Fund Services OH Inc.,
Attn: Admin. & Regulatory Services, 3435 Stelzer Rd., Columbus, OH 43219
(100.00%); Investor A Shares - Mary Ann Butler and Pamela Butler Masson, 100
Choctaw Place, Mandeville, LA 70471-0000 (90.147%); Mary Helen Schaeffer, 5801
Quantrell Ave., No. L3, Alexandria, VA 22312 (7.677%).

As of the same date, the following institutions also owned of record 5% or
more of the Government & Corporate Bond Portfolio's outstanding shares as
fiduciary or agent on behalf of their customers: Investor A Shares - BHC
Securities Inc., Attn: Mutual Fund Dept., 1 Commerce Square, 2005 Market St.,
Philadelphia, PA 19103-0000 (12.853%); Mercantile Bank of St. Louis, NA
Custodian Eugene F. Tucker, IRA Rollover, 70 Berkshire, St. Louis, MO 63117
(5.886%); Investor B Shares - Mercantile Bank of St. Louis, NA Custodian Gerald
C. Pasch, IRA, 2817 Duncan, St. Joseph, MO 64507 (5.561%); Mercantile Bank of
St. Louis, NA Custodian Wayne D. Matheis, Rollover IRA, RR 2 Box 142,
Russelville, MO 65074 (7.145%); BHC Securities Inc., FAO

-38-
<PAGE> 137
24297770, Attn: Mutual Funds Dept., 1 Commerce Square, 2005 Market St., Suite
1200, Philadelphia, PA 19103 (10.564%); BHC Securities Inc., FAO 24337035, Attn:
Mutual Funds Dept., 1 Commerce Square, 2005 Market St., Suite 1200,
Philadelphia, PA 19103 (5.767%).

As of the same date, the following institutions also owned of record 5% or
more of the Short-Intermediate Municipal Bond Portfolio's outstanding shares as
fiduciary or agent on behalf of their customers: Investor A Shares - James
Sutten, P.O. Box 2465, Inverness, FL 34451-2465 (6.486%); Lane P. Baker and
Madelynn A. Baker, P.O. Box 979, Essex, CT 06426-0000 (93.447%).

As of the same date, the following institutions also owned of record 5% or
more of the Missouri Tax-Exempt Bond Portfolio's outstanding shares as fiduciary
or agent on behalf of their customers: Investor A Shares - BHC Securities Inc.,
Trade House Account, Attn: Mutual Fund Dept., 1 Commerce Square, 2005 Market
St., Philadelphia, PA 19103-0000 (33.666%); Investor B Shares - BHC Securities
Inc., FAO 24293705, Attn: Mutual Funds Dept., 1 Commerce Square, 2005 Market
St., Philadelphia, PA 19103 (5.070%); BHC Securities Inc., FAO 2429054, Attn:
Mutual Funds Dept., 1 Commerce Square, 2005 Market St., Suite 1200,
Philadelphia, PA 19103 (10.823%); BHC Securities Inc., FAO 24286677, Attn:
Mutual Funds Dept., 1 Commerce Square, Suite 1200, Philadelphia, PA 19103
(6.510%); Corelink Financial, Inc., P.O. Box 4054, Concord, CA 94524 (33.272%).

As of the same date, the following institutions also owned of record 5% or
more of the National Municipal Bond Portfolio's outstanding shares as fiduciary
or agent on behalf of their customers: Investor A Shares - Lane P. Baker and
Madelynn A. Baker, P.O. Box 979, Essex, CT 06426-0000 (9.267%); Gail P. Ruga,
207 Aintree Road, Rolla, MO 65401-3760 (21.016%); Kim P. Wheeler, Stifel
Nicolaus & Co., Inc., 500 North Broadway, St. Louis, MO 63102 (21.016%); BHC
Securities Inc., Trade House Account, Attn: Mutual Funds Dept., 1 Commerce
Square, 2005 Market St., Suite 1200, Philadelphia, PA 19103 (22.779%); Merrill
Lynch Pierce Fenner & Smith, FBO James M. Jenkins A, Acct. No. 431- 12C46, Attn:
Stock Powers, 4800 Dear Lake Dr. East, 2nd Floor, Jacksonville, FL 32246
(20.084%); Charles O. Lewis, 1825 39th Avenue, Vero Beach, FL 32960 (5.026%);
Investor B Shares - BISYS Fund Services OH Inc., Seed Account, 3435 Stelzer Rd.,
Suite 1000, Columbus, OH 43219-0000 (100.00%).

As of the same date, the following institutions also owned of record 5% or
more of the Equity Income Portfolio's outstanding shares as fiduciary or agent
on behalf of their customers: Institutional Shares - BISYS Fund Services OH
Inc., Attn: Admin. & Regulatory Services, 3435 Stelzer Rd., Columbus, OH 43219
(100.00%); Investor A Shares - Mary Helen Schaeffer,

-39-
<PAGE> 138
5801 Quantrell Ave., No. L3, Alexandria, VA 22312 (9.050%); Mary Ann Butler and
Pamela Butler Masson, 100 Choctaw Place, Mandeville, LA 70471-0000 (55.739%);
Betty Jane Eckhart, Trust Betty Jane Eckhart Trust U/A, 28 265 Beech Road,
Sarcoxie, MO 64862 (33.569%); Investor B Shares - BISYS Fund Services OH, Inc.,
Attn: Admin. & Regulatory Services, 3435 Stelzer Rd., Columbus, OH 43219
(14.751%); Corelink Financial Inc., P.O. Box 4054, Concord, CA 94524 (85.248%).

As of the same date, the following institutions also owned of record 5% or
more of the Equity Index Portfolio's outstanding shares as fiduciary or agent on
behalf of their customers: Institutional Shares - BISYS Fund Services, Att:
Admin. & Regulatory Services, 3435 Stelzer Rd., Columbus, OH 43219 (100.000%);
Investor A Shares - Walter B. Grimm, 5425 Stockton Ct., Powell, OH 43065-0000
(50.000%); BISYS Fund Services, Attn: Admin. & Regulatory Services, 3435 Stelzer
Rd., Columbus, OH 43219 (50.000%).

As of the same date, the following institutions also owned of record 5% or
more of the Growth & Income Equity Portfolio's outstanding shares as fiduciary
or agent on behalf of their customers: Investor A Shares - BHC Securities Inc.,
Trade House Account, Attn: Mutual Fund Dept., 1 Commerce Square, 2005 Market
St., Philadelphia, PA 19103-0000 (36.117%).

As of the same date, the following institutions also owned of record 5% or
more of the Small Cap Equity Portfolio's outstanding shares as fiduciary or
agent on behalf of their customers: Trust Shares - State Street Bank & Trust
Co., Trust Pioneer Hi-Bred International Savings Plan Trust, 1 Enterprise Dr.,
Mail Stop D13, North Quincy, MA 02171 (16.914%); The Northern Trust Co., Trust
Carpenters Pension Trust Fund, Attn: Mutual Fund, P.O. Box 92956, Chicago, IL
60675-2956 (7.590%); American Bar Endowment, 750 N. Lake Shore Dr., Chicago, IL
60611 (7.078%); Investor A Shares - BHC Securities Inc., Trade House Account,
Attn: Mutual Fund Dept., 1 Commerce Square, 2005 Market St., Philadelphia, PA
19103-0000 (42.092%).

As of the same date, the following institutions also owned of record 5% or
more of the International Equity Portfolio's outstanding shares as fiduciary or
agent on behalf of their customers: Trust Shares - Boat & Co., P.O. Box 14737,
St. Louis, MO 63178-4737 (5.958%); Investor A Shares - BHC Securities Inc.,
Trade House Account, 2005 Market St., Philadelphia, PA 19103-0000 (43.822%);
Frances Dakers, 200 E. 89th St. 28D, New York, NY 10128 (11.982%).

As of the same date, the following institutions also owned of record 5% or
more of the Balanced Portfolio's outstanding share as fiduciary or agent on
behalf of their customers: Investor A Shares - BHC Securities Inc., Trade House

-40-
<PAGE> 139
Account, Attn: Mutual Fund Dept., 1 Commerce Square 2005 Market St.,
Philadelphia, PA 19103-0000 (19.088%); Mercantile Bank of St. Louis, NA
Custodian Robert W. Davis, Rollover IRA, 818 Broadway, Elsberry, MO 63343
(5.294%); Investor B Shares - Mercantile Bank of St. Louis, NA Custodian Edmund
Frances Codr, Rollover IRA, 2820 S. 42nd St., St. Joseph, MO 64503 (5.627%); BHC
Securities Inc., FAO 24176688, Attn: Mutual Funds Dept., 1 Commerce Square, 2005
Market St., Philadelphia, PA 19103 (10.530%); BHC Securities Inc., FAO 24273057,
Attn: Mutual Funds Dept., 1 Commerce Square, 2005 Market St., Philadelphia, PA
19103 (6.224%); Mercantile Bank of St. Louis, NA Custodian Richard Dell Woods,
SEP IRA, 3114 Pickett Rd., St. Joseph, MO 64503 (7.111%); Mercantile Bank of St.
Louis, NA Custodian Gerald C. Pasch, IRA, 2817 Duncan, St. Joseph, MO 64507
(5.904%).

On the basis of information received from these institutions, the Fund
believes that substantially all of the Shares owned of record were also
beneficially owned by these institutions because they possessed or shared voting
or investment power with respect to such Shares on behalf of their underlying
accounts.

FINANCIAL STATEMENTS

The financial statements of the Predecessor Portfolio for the fiscal year
ended September 30, 1996 and periods prior thereto, which have been incorporated
by reference into this Statement of Additional Information, and the information
included in the Financial Highlights table for the same periods, which appears
in the Prospectus for Investor A and Investor B Shares of the Portfolio, have
been audited by KPMG Peat Marwick LLP, independent accountants for the
Predecessor Portfolio, whose report thereon is incorporated by reference into
this Statement of Additional Information, and have been incorporated by
reference, or included, in reliance upon the report of said firm as independent
accountants given upon their authority as experts in accounting and auditing.
The financial statements of the Predecessor Portfolio for the six months ended
March 31, 1997, which are incorporated by reference into this Statement of
Additional Information, and the information included in the Financial Highlights
table for the same period which appears in the Prospectus for Investor A and
Investor B Shares of the Portfolio, are unaudited.

-41-
<PAGE> 140
APPENDIX A

COMMERCIAL PAPER RATINGS

A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the rating categories used by Standard and
Poor's for commercial paper:

"A-1" - Issue's degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics are denoted
"A-1+."

"A-2" - Issue's capacity for timely payment is satisfactory. However, the
relative degree of safety is not as high as for issues designated "A-1."

"A-3" - Issue has an adequate capacity for timely payment. It is, however,
somewhat more vulnerable to the adverse effects of changes and circumstances
than an obligation carrying a higher designation.

"B" - Issue has only a speculative capacity for timely payment.

"C" - Issue has a doubtful capacity for payment.

"D" - Issue is in payment default.

Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of 9 months. The following summarizes the rating categories used by
Moody's for commercial paper:

"Prime-1" - Issuer or related supporting institutions are considered to
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 structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternate liquidity.

"Prime-2" - Issuer or related supporting institutions are considered to
have a strong capacity for repayment of short-

A-1
<PAGE> 141
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 alternative liquidity is maintained.

"Prime-3" - Issuer or related supporting institutions have an acceptable
capacity for repayment of short-term promissory obligations. The effects of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

"Not Prime" - Issuer does not fall within any of the Prime rating
categories.

The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D- 1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:

"D-1+" - Debt possesses highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.

"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.

"D-1-" - Debt possesses high certainty of timely payment. Liquidity factors
are strong and supported by good fundamental protection factors. Risk factors
are very small.

"D-2" - Debt possesses good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.

"D-3" - Debt possesses satisfactory liquidity, and other protection factors
qualify issue as investment grade. Risk factors are larger and subject to more
variation. Nevertheless, timely payment is expected.

A-2
<PAGE> 142
"D-4" - Debt possesses speculative investment characteristics. Liquidity is
not sufficient to ensure against disruption in debt service. Operating factors
and market access may be subject to a high degree of variation.

"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.

Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years. The following
summarizes the rating categories used by Fitch for short-term obligations:

"F-1+" - Securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.

"F-1" - Securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree than
issues rated "F-1+."

"F-2" - Securities possess good credit quality. Issues assigned this rating
have a satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as the "F-1+" and "F-1" categories.

"F-3" - Securities possess fair credit quality. Issues assigned this rating
have characteristics suggesting that the degree of assurance for timely payment
is adequate; however, near-term adverse changes could cause these securities to
be rated below investment grade.

"F-S" - Securities possess weak credit quality. Issues assigned this rating
have characteristics suggesting a minimal degree of assurance for timely payment
and are vulnerable to near-term adverse changes in financial and economic
conditions.

"D" - Securities are in actual or imminent payment default.

Fitch may also use the symbol "LOC" with its short-term ratings to indicate
that the rating is based upon a letter of credit issued by a commercial bank.

Thomson BankWatch short-term ratings assess the likelihood of an untimely
or incomplete payment of principal or interest of unsubordinated instruments
having a maturity of one year or less which is issued by United States
commercial banks, thrifts and non-bank banks; non-United States banks; and
broker-

A-3
<PAGE> 143
dealers. The following summarizes the ratings used by Thomson BankWatch:

"TBW-1" - This designation represents Thomson BankWatch's highest rating
category and indicates a very high degree of likelihood that principal and
interest will be paid on a timely basis.

"TBW-2" - This designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."

"TBW-3" - This designation represents the lowest investment grade category
and indicates that while the debt is more susceptible to adverse developments
(both internal and external) than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is considered adequate.

"TBW-4" - This designation indicates that the debt is regarded as
non-investment grade and therefore speculative.

IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for short-term debt ratings:

"A1+" - Obligations supported by the highest capacity for timely repayment.

"A1" - Obligations are supported by a strong capacity for timely repayment.

"A2" - Obligations are supported by a satisfactory capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.

"A3" - Obligations are supported by a satisfactory capacity for timely
repayment. Such capacity is more susceptible to adverse changes in business,
economic or financial conditions than for obligations in higher categories.

"B" - Obligations for which the capacity for timely repayment is
susceptible to adverse changes in business, economic or financial conditions.

"C" - Obligations for which there is an inadequate capacity to ensure
timely repayment.

A-4
<PAGE> 144
"D" - Obligations which have a high risk of default or which are currently
in default.

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:

"AAA" - This designation represents the highest rating assigned by Standard
& Poor's to a debt obligation and indicates an extremely strong capacity to pay
interest and repay principal.

"AA" - Debt is considered to have a very strong capacity to pay interest
and repay principal and differs from AAA issues only in small degree.

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

"BBB" - Debt is regarded as having an adequate capacity to pay interest and
repay principal. Whereas such issues normally exhibit 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" and "C" - Debt 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 "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

"BB" - Debt has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.

"B" - Debt has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also

A-5
<PAGE> 145
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.

"CCC" - Debt has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.

"CC" - This rating is typically applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.

"C" - This rating is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

"CI" - This rating is reserved for income bonds on which no interest is
being paid.

"D" - Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes such payments
will be made during such grace period. "D" rating is also used upon the filing
of a bankruptcy petition if debt service payments are jeopardized.

PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.

"r" - This rating is attached to highlight derivative, hybrid, and certain
other obligations that S & P believes may experience high volatility or high
variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities.

The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:

"Aaa" - Bonds 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

A-6
<PAGE> 146
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

"Aa" - Bonds 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 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.

"Baa" - Bonds considered 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," "B," "Caa," "Ca," and "C" - Bonds that possess one of these ratings
provide questionable protection of interest and principal ("Ba" indicates some
speculative elements; "B" indicates a general lack of characteristics of
desirable investment; "Caa" represents a poor standing; "Ca" represents
obligations which are speculative in a high degree; and "C" represents the
lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in default.

Con. (---) - Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.

Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B" in its bond rating system. The modifier 1
indicates that the issuer ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issuer ranks at the lower end of its generic rating category.

A-7
<PAGE> 147
The following summarizes the long-term debt ratings used by Duff & Phelps
for corporate and municipal long-term debt:

"AAA" - Debt is considered to be of the highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

"AA" - Debt is considered of high credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because of
economic conditions.

"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.

"BBB" - Debt possesses below average protection factors but such protection
factors are still considered sufficient for prudent investment. Considerable
variability in risk is present during economic cycles.

"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these ratings
is considered to be below investment grade. Although below investment grade,
debt rated "BB" is deemed likely to meet obligations when due. Debt rated "B"
possesses the risk that obligations will not be met when due. Debt rated "CCC"
is well below investment grade and has considerable uncertainty as to timely
payment of principal, interest or preferred dividends. Debt rated "DD" is a
defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.

To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.

The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:

"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-8
<PAGE> 148
"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 an 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," "B," "CCC," "CC," "C," "DDD," "DD," and "D"-Bonds that possess one of
these ratings are considered by Fitch to be speculative investments. The ratings
"BB" to "C" represent Fitch's assessment of the likelihood of timely payment of
principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating "DDD" to "D" is an
assessment of the ultimate recovery value through reorganization or liquidation.

To provide more detailed indications of credit quality, the Fitch ratings
from and including "AA" to "C" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major rating categories.

IBCA assesses the investment quality of unsecured debt with an original
maturity of more than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for long-term debt ratings:

"AAA" - Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk substantially.

"AA" - Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business, economic or financial conditions may increase
investment risk albeit not very significantly.

"A" - Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business,

A-9
<PAGE> 149
economic or financial conditions may lead to increased investment risk.

"BBB" - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial conditions
are more likely to lead to increased investment risk than for obligations in
higher categories.

"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of these
ratings where it is considered that speculative characteristics are present.
"BB" represents the lowest degree of speculation and indicates a possibility of
investment risk developing. "C" represents the highest degree of speculation and
indicates that the obligations are currently in default.

IBCA may append a rating of plus (+) or minus (-) to a rating to denote
relative status within major rating categories.

Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings:

"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.

"AA" - This designation indicates a very strong ability to repay principal
and interest on a timely basis with limited incremental risk compared to issues
rated in the highest category.

"A" - This designation indicates that the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

"BBB" - This designation represents Thomson BankWatch's lowest investment
grade category and indicates an acceptable capacity to repay principal and
interest. Issues rated "BBB" are, however, more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.

A-10
<PAGE> 150
"BB," "B," "CCC," and "CC," - These designations are assigned by Thomson
BankWatch to non-investment grade long-term debt. Such issues are regarded as
having speculative characteristics regarding the likelihood of timely payment of
principal and interest. "BB" indicates the lowest degree of speculation and "CC"
the highest degree of speculation.

"D" - This designation indicates that the long-term debt is in default.

PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may include a
plus or minus sign designation which indicates where within the respective
category the issue is placed.

A-11