ARCH FUND INC, 485APOS, 1997-06-18

ARCH FUND INC
485APOS, 1997-06-18

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<PAGE> 1

As filed with the Securities and Exchange Commission on June 17, 1997
Registration No. 2-79285/811-3567

================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/

POST-EFFECTIVE AMENDMENT NO. 40

and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/

AMENDMENT NO. 41

THE ARCH FUND, INC.
(Exact Name of Registrant as Specified in Charter)

3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Offices)

Registrant's Telephone Number: (800) 551-3731

W. BRUCE MCCONNEL, III, Esq.
Drinker Biddle & Reath LLP
1100 Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)

Copy to:
Jon W. Bilstrom, Esq.
Mercantile Bank of St. Louis N.A.
One Mercantile Center
8th and Washington Streets
St. Louis, MO 63101

It is proposed that this filing will become effective (check appropriate box)

/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/x/ 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of shares under the Securities Act of 1933.
Registrant filed a Rule 24f-2 Notice for the fiscal year ended November 30, 1996
on January 28, 1997. Registrant continues its election to register an indefinite
number of shares of beneficial interest pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended.

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THIS POST-EFFECTIVE AMENDMENT IS BEING FILED SOLELY IN ORDER TO REGISTER
SHARES OF TWO NEW INVESTMENT PORTFOLIOS, I.E., THE SMALL CAP EQUITY INDEX
PORTFOLIO AND THE GROWTH EQUITY PORTFOLIO. ACCORDINGLY, THE PROSPECTUSES AND
STATEMENTS OF ADDITIONAL INFORMATION FOR THE TREASURY MONEY MARKET PORTFOLIO,
MONEY MARKET PORTFOLIO, TAX-EXEMPT MONEY MARKET PORTFOLIO, U.S. GOVERNMENT
SECURITIES PORTFOLIO, INTERMEDIATE CORPORATE BOND PORTFOLIO, BOND INDEX
PORTFOLIO, GOVERNMENT & CORPORATE BOND PORTFOLIO, SHORT-INTERMEDIATE MUNICIPAL
PORTFOLIO, MISSOURI TAX-EXEMPT BOND PORTFOLIO, NATIONAL MUNICIPAL BOND
PORTFOLIO, EQUITY INCOME PORTFOLIO, EQUITY INDEX PORTFOLIO, GROWTH & INCOME
EQUITY PORTFOLIO, SMALL CAP EQUITY PORTFOLIO, INTERNATIONAL EQUITY PORTFOLIO,
BALANCED PORTFOLIO AND KANSAS TAX-EXEMPT BOND PORTFOLIO ARE NOT INCLUDED IN THIS
FILING.

<PAGE> 3
CROSS REFERENCE SHEET
(Trust Shares)

The ARCH Small Cap Equity Index Portfolio

Form N-1A Part A Item
- ---------------------
Prospectus Caption
------------------

1. Cover Page................................. Cover Page

2. Synopsis................................... Expense Summary
for Trust Shares

3. Condensed Financial
Information.............................. Yields and Total
Returns

4. General Description
of Registrant............................ Highlights; Investment
Objectives, Policies and
Risk Considerations;
Other Information Concerning
the Fund and Its Shares

5. Management of the Fund..................... Management of the Fund

5A. Management's Discussion of
Fund Performance......................... Inapplicable

6. Capital Stock and
Other Securities......................... How to Purchase and
Redeem Shares; Dividends
and Distributions;
Taxes; Other Information
Concerning the Fund
and Its Shares

7. Purchase of Securities
Being Offered............................ How to Purchase and
Redeem Shares

8. Redemption or Repurchase................... How to Purchase and
Redeem Shares

9. Pending Legal Proceedings.................. Inapplicable

<PAGE> 4

THE ARCH FAMILY
OF MUTUAL FUNDS

TRUST SHARES

SMALL CAP EQUITY INDEX PORTFOLIO

PROSPECTUS DATED _______, 1997

<PAGE> 5

TABLE OF CONTENTS

PAGE

Highlights............................................................ 3
Certain Financial Information......................................... 5
Expense Summary for Trust Shares...................................... 6
Investment Objective, Policies and Risk
Considerations...................................................... 7
Investment Limitations................................................ 16
Pricing of Shares..................................................... 17
How to Purchase and Redeem Shares..................................... 18
Purchase of Shares.............................................. 18
Exchange Privilege.............................................. 19
Redemption of Shares............................................ 20
Other Exchange or Redemption Information........................ 21
Yields and Total Returns.............................................. 22
Dividends and Distributions........................................... 23
Taxes ................................................................ 24
Management of the Fund................................................ 26
Other Information Concerning the Fund and its Shares.................. 30
Miscellaneous................................................... 32

<PAGE> 6
THE ARCH FUND(R), INC.

THE ARCH SMALL CAP EQUITY INDEX PORTFOLIO

TRUST SHARES

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 SMALL CAP EQUITY INDEX PORTFOLIO (the
"Portfolio"). Trust Shares are offered to financial institutions acting on their
own behalf or on behalf of certain qualified accounts.

The Portfolio uses a strategy called "indexing," which means that it seeks
to provide investment results that, before deduction of operating expenses,
approximate the price and yield performance of a particular set of securities or
market segment. The Portfolio's market segment is U.S. common stocks with
smaller stock market capitalizations as represented by the Standard & Poor's
Small Capitalization Stock Index (the "S&P SmallCap 600").

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
_______________, 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.

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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.

_____________, 1997

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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 SMALL CAP EQUITY INDEX 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, Growth
Equity, Small Cap Equity, 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 Small Cap Equity Index Portfolio is designed for investors who are
willing to accept the risks associated with an investment in equity securities,
and who seek investment results that, before deduction for operating expenses,
approximate the price and yield performance of U.S. common stocks with smaller
stock market capitalizations, as represented by the S&P SmallCap 600.

Investors should note that the Portfolio may, subject to its investment
policies and limitations, enter into repurchase agreements and reverse
repurchase agreements, make securities loans, invest in options and futures and
index-based depository receipts, 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, 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.

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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. 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.

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

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CERTAIN FINANCIAL INFORMATION

Shares of the Portfolio have been classified into three classes of Shares --
Trust Shares, Institutional Shares and Investor A 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 and Investor A
Shares in the Portfolio can be expected, at any given time, to be different.

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EXPENSE SUMMARY FOR
TRUST SHARES

<TABLE>
<CAPTION>
SMALL CAP
EQUITY
INDEX
PORTFOLIO
---------
<S> <C>
ANNUAL PORTFOLIO OPERATING
EXPENSES
(as a percentage of average
net assets)
Investment Advisory Fees (net
of fee waivers)(1)................. .00%

12b-1 Fees.......................... .00%

Other Expenses (including
administration fees,
administrative services fees
and other expenses) (net
of fee waivers and expense
reimbursements)(2,3)............... .40%
-----
TOTAL PORTFOLIO OPERATING
EXPENSES (net of fee waivers
and expense reimbursements)3..... .40%
=====
</TABLE>

(1) Without fee waivers, advisory fees would be .40%.
(2) Administrative services fees are payable at an annual rate not to exceed
.30%. Without fee waivers, administration fees would be .20%.

(3) Without fee waivers and expense reimbursements, Other Expenses would be
.80% and Total Portfolio Operating Expenses would be 1.20%. Such fee
waivers and expense reimbursements are expected to continue during the
current fiscal year.

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<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:

Small Cap Equity Index Portfolio.. $4 $13
</TABLE>

- ----------

THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. THE PORTFOLIO IS NEW AND ACTUAL EXPENSES AND
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. Information about the
actual performance of the Portfolio will be contained in the Fund's future
Annual Reports to Shareholders, which may be obtained without charge when they
become available 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.

INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS

The Small Cap Equity Index Portfolio seeks to provide investment results
that, before deduction of operating expenses, approximate the price and yield
performance of U.S. common stocks with smaller stock market capitalizations as
represented by the S&P SmallCap 600.

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 be changed by the Fund's Board
of Directors without shareholder approval. However, shareholders will be given
at least 30 days' written notice before any such change occurs. Except as noted
below under "Investment Limitations," the

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Portfolio's investment policies also may be changed by the Fund's Board of
Directors without shareholder approval.

THE INDEXING APPROACH

The Portfolio is not managed in a traditional sense, that is, by making
discretionary judgments based on analysis of economic, financial and market
conditions. Instead, the Portfolio uses an investment strategy called
"indexing", whereby it seeks to approximate the investment performance of the
market segment comprised of U.S. common stocks with smaller stock market
capitalizations as represented by the S&P SmallCap 600, through the use of
sophisticated computer models to determine which stocks should be purchased or
sold, while keeping transaction and administrative costs to a minimum. The
Portfolio will invest substantially all but no less than 80% of its total assets
in securities listed on the S&P SmallCap 600. The Adviser generally selects
securities for the Portfolio on the basis of their weightings in the S&P
SmallCap 600. The Portfolio will only purchase a common stock that is included
in the S&P SmallCap 600 at the time of such purchase. With respect to the
remaining portion of its total assets, the Portfolio has the ability to hold
temporary cash balances which may be invested in U.S. Government obligations and
money market instruments. If appropriate, the Portfolio may use options, futures
contracts and depository receipts to hedge its positions or for other
permissible purposes. The Portfolio also may enter into repurchase and reverse
repurchase agreements and lend its portfolio securities.

While there can be no guarantee that the Portfolio's investment results
will precisely match the results of the S&P SmallCap 600, the Adviser believes
that, before deduction of operating expenses, there will be a very high
correlation between the returns generated by the Portfolio and the S&P SmallCap
600. The Portfolio will attempt to achieve a correlation between its performance
and the S&P SmallCap 600 of at least 0.95 before deduction of operating
expenses. A correlation of 1.00 would indicate a perfect correlation, which
would be achieved when the Portfolio's net asset value, including the value of
its dividend and capital gains distributions, increases or decreases in exact
proportion to changes in the S&P SmallCap 600. The Portfolio's ability to
correlate its performance with the S&P SmallCap 600, however, may be affected
by, among other things, transaction costs, changes in securities markets, the
manner in which Standard & Poor's Ratings Group ("S&P") calculates the S&P
SmallCap 600, and the timing of purchases and redemptions. The Adviser monitors
the correlation of the performance of the Portfolio in relation to the S&P
SmallCap 600 under the supervision of the Board of Directors. In the unlikely
event that a high correlation is not achieved, the Board of Directors

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<PAGE> 14

will take appropriate steps to address the reason for the lower correlation.

THE INCLUSION OF A COMMON STOCK IN THE S&P SMALLCAP 600 IN NO WAY IMPLIES
AN OPINION BY S&P AS TO ITS ATTRACTIVENESS AS AN INVESTMENT. S&P IS NOT A
SPONSOR OF, OR IN ANY WAY AFFILIATED WITH, THE PORTFOLIO.

The Adviser believes that the indexing approach should involve less
portfolio turnover, and thus lower brokerage costs, transfer taxes and operating
expenses, than in more traditionally managed funds, although there is no
assurance that this will be the case. Ordinarily, the Portfolio will buy or sell
common stocks only to reflect changes in the S&P SmallCap 600 (including mergers
or changes in the composition of the S&P SmallCap 600) or to accommodate cash
flows into and out of the Portfolio. The costs and other expenses incurred in
securities transactions, apart from any difference between the investment
results of the Portfolio and that of the S&P SmallCap 600, may cause the return
of the Portfolio to be lower than the return of the S&P SmallCap 600. The
Portfolio may invest in less than all of the common stocks included in the S&P
SmallCap 600, which may result in a return that does not correspond with that of
the S&P SmallCap 600, after taking expenses into account.

THE S&P SMALLCAP 600

The S&P SmallCap 600 is composed of approximately 600 common stocks. These
companies are chosen to be a part of the S&P SmallCap 600 based upon their
market size, liquidity and industry group representation. As of January 31,
1997, stocks in the S&P SmallCap 600 had a market capitalization of between
$45.5 million and $2.7 billion. To be included in the S&P SmallCap 600, stock
selections are also screened by S&P for trading volume, ownership concentration,
share price and bid/ask spreads. Normally, the Portfolio will hold all 600
stocks in the S&P SmallCap 600 and will hold each stock in approximately the
same percentage as that stock represents in the S&P SmallCap 600. Under certain
circumstances, the Portfolio may not hold all 600 stocks in the S&P SmallCap
600, for example because of changes in the S&P SmallCap 600, or as a result of
shareholder activity in the Portfolio. The Portfolio will rebalance its holdings
periodically to reflect changes in the S&P SmallCap 600. "Market capitalization"
for a company is the market price per share of stock multiplied by the number of
shares outstanding. The Adviser believes that the S&P SmallCap 600 is an
appropriate benchmark for the Portfolio because it represents a diversified
array of small capitalization companies, it is familiar to many investors and it
is widely accepted as a reference for small capitalization common stock
investments.

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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 OBLIGATIONS. 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. Examples of the types of U.S.
Government obligations that may be held by the Portfolio include, in addition to
U.S. Treasury bonds, notes and bills, the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export- Import Bank of the United
States, Small Business Administration, Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA"), Federal Home Loan
Mortgage Corporation, General Services Administration, Student Loan Marketing
Association, Central Bank for Cooperatives, Federal Intermediate Credit Banks,
Resolution Trust Corporation, and Maritime Administration. Obligations of
certain agencies and instrumentalities of the U.S. Government, such as those of
GNMA, are supported by the full faith and credit of the U.S. Treasury; others,
such as the Export-Import Bank of the United States, are supported by the right
of the issuer to borrow from the Treasury; others, such as those of FNMA, are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; still others such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. There is
no assurance that the U.S. Government would provide financial support to U.S.
Government-sponsored instrumentalities if it is not obligated to do so by law.

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 one of the two highest rating
categories assigned by S&P, Moody's Investors Service, Inc. or another
nationally recognized statistical rating organization (each a "Rating Agency")
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.

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<PAGE> 16

Bank obligations include bankers' acceptances, negotiable certificates of
deposit and non-negotiable time deposits of U.S. or foreign banks, having total
assets at the time of purchase in excess of $1 billion. 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.

REPURCHASE AGREEMENTS. The Portfolio may agree to purchase U.S. Government
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 the investment limitations set
forth below, 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.

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<PAGE> 17

SECURITIES LENDING. To increase return or offset expenses, the Portfolio
may, from time to time, lend portfolio securities 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 liquid 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 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
liquid securities are used as collateral. In accordance with current Securities
and Exchange Commission ("SEC") policies, the Portfolio is currently limiting
its securities lending to 33-1/3% of its aggregate net assets. Loans are subject
to termination by the Portfolio or the borrower at any time.

OPTIONS. The Portfolio may purchase put and call options listed on a
national securities exchange and issued by the Options Clearing Corporation in
an amount not exceeding 10% of its net assets. Such options may relate to
particular securities or to various stock indexes (which, in the case of the
Portfolio, would be limited to the S&P SmallCap 600). Purchasing options is a
specialized investment technique which entails a substantial risk of a complete
loss of the amounts paid as premiums to the option writer. Such transactions
will be entered into only as a hedge against fluctuations in the value of
securities which the Portfolio holds or intends to purchase.

The Portfolio may also write covered call options. A covered call option
provides the holder with an option to acquire a security that a Portfolio owns
or has the right to acquire during the option period. Such options will be
listed on a national securities exchange and issued by the Options Clearing
Corporation.

The aggregate value of the securities subject to covered call options
written by the Portfolio will not exceed 25% of the value of its net assets. In
order to close out an option position, the Portfolio may enter into a "closing
purchase transaction" -- the purchase of a covered call option on the same
security with the same exercise price and expiration date as the option which
the Portfolio previously wrote. By writing a covered call option, the Portfolio
forgoes the opportunity to profit from an increase in the market price of the
underlying security above the exercise price except insofar as the premium
represents such a profit and it is not able to sell the underlying security
until the option expires, is exercised, or the Portfolio effects a closing
purchase transaction by

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<PAGE> 18

purchasing an option of the same series. The use of covered call options will
not be a primary investment technique of the Portfolio. For additional
information relating to option trading practices, including particular risks,
see the Statement of Additional Information.

FUTURES CONTRACTS AND RELATED OPTIONS. The Portfolio may invest in futures
contracts and options on futures contracts. Such transactions, including stock
index futures contracts, or options thereon, can be used to simulate full
investment in the S&P SmallCap 600 while retaining a cash balance for Portfolio
management purposes, or act as a hedge to protect the Portfolio from
fluctuations in the value of its securities caused by anticipated changes in
interest rates or market conditions without necessarily buying or selling the
securities. Hedging is a specialized investment technique that entails skills
different from other investment management. The Adviser may also consider such
transactions to be economically appropriate for the reduction of risk inherent
in the ongoing management of the Portfolio. A stock index futures contract is an
agreement in which one party agrees to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the index
value (which assigns relative values to the common stock included in the index)
at the close of the last trading day of the contract and the price at which the
agreement is originally made. No physical delivery of the underlying stock in
the index is contemplated.

The purchase and sale of futures contracts or related options will not be
a primary investment technique of the Portfolio. The Portfolio will not purchase
or sell futures contracts (or related options thereon) for hedging purposes if,
immediately after purchase, the aggregate initial margin deposits and premiums
paid by the Portfolio on its open futures and options positions exceeds 5% of
the liquidation value of the Portfolio, after taking into account any unrealized
profits and unrealized losses on any such futures or related options contracts
into which it has entered. For a more detailed description of futures contracts
and related options, see the Statement of Additional Information.

DEPOSITORY RECEIPTS. The Portfolio may invest in receipts that are issued
by banks or brokerage firms and are created by depositing securities listed on
the S&P SmallCap 600 into a special account at a custodian bank. The custodian
holds such securities for the benefit of the registered owners of the
certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register. The
Portfolio may invest in index-based depository receipts in lieu of investment in
the actual securities that are listed on the index.

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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.

SECURITIES OF OTHER INVESTMENT COMPANIES. The Portfolio may invest in
securities issued by other investment companies which determine their net asset
value per share based on the amortized cost or penny-rounding method. The
Portfolio may invest in securities of 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. See the Statement of Additional
Information under "Investment Objective and Policies -- Securities of Other
Investment Companies."

WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. The Portfolio may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis. These transactions involve a commitment by the
Portfolio to purchase or sell securities at a stated price and yield with
settlement beyond the normal settlement date. Such transactions permit the
Portfolio to lock-in a price or yield on a security, regardless of future
changes in interest rates. The Portfolio expects that these transactions will
not exceed 25% of the value of its total assets (at the time of purchase) under
normal market conditions. The Portfolio does not intend to engage in such
transactions for speculative purposes but only for the purpose of acquiring
portfolio securities.

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<PAGE> 20

established by the Fund's Board of Directors, determines that a liquid market
exists). The Adviser expects that less than 5% of the Portfolio's net assets
will be invested in Rule 144A securities during the current year.

INVESTMENT RISKS AND OTHER CONSIDERATIONS. The Portfolio's ability to
correlate its performance with the S&P SmallCap 600 may be affected by, among
other things, changes in the securities markets, the manner in which the S&P
SmallCap 600 is calculated and the timing of purchases and redemptions of the
Portfolio's shares. The Fund expects the investments of the Portfolio to decline
in value whenever the market, as represented by the securities in the S&P
SmallCap 600, declines. The Portfolio should exhibit price volatility similar to
that of the S&P SmallCap 600. It is impossible to eliminate risk from
investments in common stocks. Although the S&P SmallCap 600 was first published
in 1994, S&P has reconstructed its performance for earlier years. The average
annual total return of the S&P SmallCap 600 from 1987 to 1996, with dividends
reinvested, was 15.56%. Returns in individual calendar years ranged from a low
of -13.50% (in 1987) to a high of 48.49% (in 1991). The past performance of the
S&P SmallCap 600 should not be considered representative of the S&P SmallCap
600's or the Portfolio's future performance.

The S&P SmallCap 600 Index has above-average risk and may fluctuate more
than S&P 500 Stock Price Index, which invests in stocks of larger, more
established companies. Small capitalization companies may be subject to more
abrupt or erratic price movements than the stocks of larger, established
companies or the stock market as a whole. Among the reasons for this greater
price volatility are the less than certain growth prospects of smaller
companies, the lower degree of liquidity in the markets for such stocks and the
greater exposure of small capitalization companies to changing economic
conditions. In addition, such companies often have limited product lines,
smaller markets or fewer financial resources.

Because of the risks associated with investing in the small companies that
comprise the S&P SmallCap 600, you should consider your investment in the
Portfolio to be long-term. This Portfolio is not designed to provide you with a
means to speculate on short-term movements in the stock market.

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

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<PAGE> 21

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."

The Portfolio may not:

1. Purchase securities of any one issuer (other than obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) if, immediately after and as a result of such
investments, more than 5% of the Portfolio's total assets would be
invested in the securities of such issuer, or more than 10% of the
issuer's outstanding voting securities would be owned by the Portfolio or
the Fund, except that up to 25% of the Portfolio's total assets may be
invested without regard to such limitations.

2. Purchase any securities which would cause 25% or more of the
Portfolio's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that, however, (a) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, and repurchase agreements
secured by obligations of the U.S. Government, its agencies or
instrumentalities; (b) wholly-owned finance companies will be considered
to be in the industries of their parents if their activities are primarily
related to financing the activities of their parents; and (c) utilities
will be divided according to their services (for example, gas, gas
transmission, electric and gas, electric, and telephone will each be
considered a separate industry).

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<PAGE> 22

related options (including the margin posted by the Portfolio in
connection with such transactions), and securities held in escrow or
separate accounts in connection with the Portfolio's investment practices
described in this Prospectus or the Statement of Additional Information
are not subject to this limitation.

4. Make loans, except that the Portfolio may purchase or hold debt
instruments, lend portfolio securities and make other investments in
accordance with its investment objective and policies, and enter into
repurchase agreements.

5. Purchase securities on margin, make short sales of securities or
maintain a short position, except that (a) this investment limitation
shall not apply to the Portfolio's transactions in options, and futures
contracts and related options, and (b) the Portfolio may obtain short-term
credits as may be necessary for the clearance of purchases and sales of
portfolio securities.

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).

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

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<PAGE> 23

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.

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.

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.

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<PAGE> 24

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 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 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 legally be 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 Small Cap Equity Index 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

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<PAGE> 25

- The ARCH Growth & Income Equity Portfolio
- The ARCH Growth Equity Portfolio
- The ARCH Small Cap Equity 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, in writing or by phone, 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

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<PAGE> 26

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. 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.

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 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.

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YIELDS AND TOTAL RETURNS

Yield and total return quotations are computed separately for Trust
Shares, Institutional Shares and Investor A 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

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<PAGE> 28

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 the
Portfolio's 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 quarterly not later than five Business Days after the end of each quarter.
Shares of the Portfolio earn dividends from the day after the purchase order is
received by the Fund through the day the redemption order for such Shares is
received. 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 bear all expenses of the Distribution and Services
Plan 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

The Portfolio intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"), for the current
taxable year. It is intended that the

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Portfolio will continue to so qualify 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.) 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.

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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

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

Mississippi Valley Advisors Inc. ("MVA") serves as the investment adviser
to the Portfolio. MVA's principal office is

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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 .40% 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.

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.

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 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.

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<PAGE> 32

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 its receives from the Fund.

The Fund understands that Service Organizations providing such
administrative services may also charge fees to their

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<PAGE> 33

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 Fund'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.

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<PAGE> 34

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 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 Plan (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

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<PAGE> 35

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 under the 1940 Act: 50
million Trust Shares, 25 million Institutional Shares and 25 million Investor A
Shares. Institutional and Investor A 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 and Investor A 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 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 2.5% front-end sales charge.
Trust, Institutional and Investor A Shares bear their pro rata portion of all
operating expenses paid by the Portfolio, except that

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<PAGE> 36

Trust Shares and Institutional Shares bear all payments under the Portfolio's
respective Administrative Services Plans adopted for such Shares and Investor A
Shares bear all payments under the Portfolio's Distribution and Services Plan
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 Plan for Investor A 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. 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. Distribution payments made under the Distribution and
Services Plan 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 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.

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.

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<PAGE> 37

The Fund is not required, and currently does not intend, to hold annual
meetings 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 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 January 1, 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.

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

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.

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<PAGE> 38
CROSS REFERENCE SHEET
(Institutional Shares)

The ARCH Small Cap Equity Index Portfolio

Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------

1. Cover Page................................. Cover Page

2. Synopsis................................... Expense Summary
for Institutional Shares

3. Condensed Financial
Information.............................. Yields and Total Returns

4. General Description
of Registrant............................ Highlights; Investment
Objectives, Policies and
Risk Considerations;
Other Information Concerning
the Fund and Its Shares

5. Management of the Fund..................... Management of the Fund

5A. Management's Discussion of
Fund Performance......................... Inapplicable

6. Capital Stock and
Other Securities......................... How to Purchase and
Redeem Shares; Dividends
and Distributions;
Taxes; Other Information
Concerning the Fund
and Its Shares

7. Purchase of Securities
Being Offered............................ How to Purchase and
Redeem Shares

8. Redemption or Repurchase................... How to Purchase and
Redeem Shares

9. Pending Legal Proceedings.................. Inapplicable

<PAGE> 39

THE ARCH FAMILY
OF MUTUAL FUNDS

INSTITUTIONAL SHARES

SMALL CAP EQUITY INDEX PORTFOLIO

PROSPECTUS DATED ________, 1997

<PAGE> 40

TABLE OF CONTENTS

PAGE

Highlights....................................................... 3
Certain Financial Information.................................... 5
Expense Summary For Institutional Shares......................... 6
Investment Objective, Policies and
Risk Considerations............................................ 8
Pricing Of Shares................................................ 17
How To Purchase And Redeem Shares................................ 18
Purchase of Shares......................................... 18
Exchange Privilege......................................... 19
Redemption of Shares....................................... 20
Other Exchange or Redemption Information................... 21
Yields and Total Returns......................................... 22
Dividends and Distributions...................................... 23
Taxes ........................................................... 23
Management of the Fund........................................... 25
Other Information Concerning
the Fund and Its Shares.......................................... 30
Miscellaneous.............................................. 32

<PAGE> 41

THE ARCH FUND(R), INC.

THE ARCH SMALL CAP EQUITY INDEX PORTFOLIO

INSTITUTIONAL SHARES

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 SMALL CAP EQUITY INDEX PORTFOLIO
(the "Portfolio"). Institutional Shares are offered to financial institutions
acting on behalf of accounts for which they do not exercise investment
discretion.

THE ARCH SMALL CAP EQUITY INDEX PORTFOLIO - U.S. common stocks with smaller
stock market capitalizations as represented by the Standard & Poor's Small
Capitalization Stock Index (the "S&P SmallCap 600").

<PAGE> 42

Portfolio involves investment risk, including possible loss of principal.

_____________, 1997

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<PAGE> 43

HIGHLIGHTS

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 Small Cap Equity Index Portfolio is designed for investors who are
willing to accept the risks associated with an investment in equity securities,
and who seek investment results that, before deduction of operating expenses,
approximate the price and yield performance of U.S. common stocks with smaller
stock market capitalizations, as represented by the S&P SmallCap 600.

-3-

<PAGE> 44

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.

-4-

<PAGE> 45

CERTAIN FINANCIAL INFORMATION

Shares of the Portfolio have been classified into three classes of Shares --
Trust Shares, Institutional Shares and Investor A 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 and Investor A Shares in the Portfolio can be expected, at
any given time, to be different.

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<PAGE> 46

EXPENSE SUMMARY FOR
INSTITUTIONAL SHARES

12b-1 Fees.............................. 0.00%

Other Expenses (including
administration fees,
administrative services fees
and other expenses) (net of fee
waivers and expense
reimbursements)(2,3)................. .70%
-----
TOTAL PORTFOLIO OPERATING
EXPENSES (net of fee waivers
and expense reimbursements)(3)....... .70%
=====
</TABLE>

(1) Without fee waivers, advisory fees would be .40%.

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

-6-

<PAGE> 47

Small Cap Equity Index Portfolio.. $7 $22
</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.

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<PAGE> 48

INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS

THE INDEXING APPROACH

The Portfolio is not managed in a traditional sense, that is, by making
discretionary judgments based on analysis of economic, financial and market
conditions. Instead, the Portfolio uses an investment strategy called
"indexing", whereby it seeks to approximate the investment performance of the
market segment comprised of U.S. common stocks with smaller stock market
capitalizations as represented by the S&P SmallCap 600, through the use of
sophisticated computer models to determine which stocks should be purchased or
sold, while keeping transaction and administrative costs to a minimum. The
Portfolio will invest substantially all but no less than 80% of its total assets
in securities listed on the S&P SmallCap 600. The Adviser generally selects
securities for the Portfolio on the basis of their weightings in the S&P
SmallCap 600. The Portfolio will only purchase a security that is included in
the S&P SmallCap 600 at the time of such purchase. With respect to the remaining
portion of its total assets, the Portfolio has the ability to hold temporary
cash balances which may be invested in U.S. Government obligations and money
market instruments. If appropriate, the Portfolio may use options, futures
contracts and depository receipts to hedge its positions or for other
permissible purposes. The Portfolio also may enter into repurchase and reverse
repurchase agreements and lend its portfolio securities.

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<PAGE> 49

indicate a perfect correlation, which would be achieved when the Portfolio's net
asset value, including the value of its dividend and capital gains
distributions, increases or decreases in exact proportion to changes in the S&P
SmallCap 600. The Portfolio's ability to correlate its performance with the S&P
SmallCap 600, however, may be affected by, among other things, transaction
costs, changes in securities markets, the manner in which Standard & Poor's
Ratings Group ("S&P") calculates the S&P SmallCap 600, and the timing of
purchases and redemptions. The Adviser monitors the correlation of the
performance of the Portfolio in relation to the S&P SmallCap 600 under the
supervision of the Board of Directors. In the unlikely event that a high
correlation is not achieved, the Board of Directors will take appropriate steps
to correct the reason for the lower correlation.

THE INCLUSION OF A SECURITY IN THE S&P SMALLCAP 600 IN NO WAY IMPLIES AN
OPINION BY S&P AS TO ITS ATTRACTIVENESS AS AN INVESTMENT. S&P IS NOT A SPONSOR
OF, OR IN ANY WAY AFFILIATED WITH, THE PORTFOLIO.

The Adviser believes that the indexing approach should involve less
portfolio turnover, and thus lower brokerage costs, transfer taxes and operating
expenses, than in more traditionally managed funds, although there is no
assurance that this will be the case. Ordinarily, the Portfolio will buy or sell
securities only to reflect changes in the S&P SmallCap 600 (including mergers or
changes in the composition of the S&P SmallCap 600) or to accommodate cash flows
into and out of the Portfolio. The costs and other expenses incurred in
securities transactions, apart from any difference between the investment
results of the Portfolio and that of the S&P SmallCap 600, may cause the return
of the Portfolio to be lower than the return of the S&P SmallCap 600. The
Portfolio may invest in less than all of the securities included in the S&P
SmallCap 600, which may result in a return that does not correspond with that of
the S&P SmallCap 600, after taking expenses into account.

THE S&P SMALLCAP 600

-9-

<PAGE> 50

stocks in the S&P SmallCap 600, for example because of changes in the S&P
SmallCap 600, or as a result of shareholder activity in the Portfolio. The
Portfolio will rebalance its holdings periodically to reflect changes in the S&P
SmallCap 600. "Market capitalization" for a company is the market price per
share of stock multiplied by the number of shares outstanding. The Adviser
believes that the S&P SmallCap 600 is an appropriate benchmark for the Portfolio
because it represents a diversified array of small capitalization companies, it
is familiar to many investors and it is widely accepted as a reference for small
capitalization common stock investments.

OTHER APPLICABLE POLICIES

-10-

<PAGE> 51

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

-11-

<PAGE> 52

OPTIONS. The Portfolio may purchase put and call options listed on a
national securities exchange and issued by the Options Clearing Corporation in
an amount not exceeding 10% of its net assets. Such options may relate to
particular securities or to various stock indexes. Purchasing options is a
specialized investment technique which entails a substantial risk of a complete
loss of the amounts paid as premiums to the option writer. Such transactions
will be entered into only as a hedge against fluctuations in the value of
securities which the Portfolio holds or intends to purchase.

The Portfolio may also write covered call options. A covered call option
is an option to acquire a security that a Portfolio owns or has the right to
acquire during the option period. Such options will be listed on a national
securities exchange and issued by the Options Clearing Corporation.

The aggregate value of the securities subject to covered call options
written by the Portfolio will not exceed 25% of the value of its net assets. In
order to close out an option

-12-

<PAGE> 53

position, the Portfolio may enter into a "closing purchase transaction" -- the
purchase of a covered call option on the same security with the same exercise
price and expiration date as the option which the Portfolio previously wrote. By
writing a covered call option, the Portfolio forgoes the opportunity to profit
from an increase in the market price of the underlying security above the
exercise price except insofar as the premium represents such a profit and it is
not able to sell the underlying security until the option expires, is exercised,
or the Portfolio effects a closing purchase transaction by purchasing an option
of the same series. The use of covered call options will not be a primary
investment technique of the Portfolio. For additional information relating to
option trading practices, including particular risks, see the Statement of
Additional Information.

-13-

<PAGE> 54

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<PAGE> 55

transactions for speculative purposes but only for the purpose of acquiring
portfolio securities.

ILLIQUID SECURITIES. The Portfolio will not invest more than 15% of the
value of its net assets in illiquid securities. Repurchase agreements that do
not provide for settlement within seven days, time deposits maturing in more
than seven days, and securities that are not registered under the Securities Act
of 1933, as amended (the "1933 Act"), but that may be purchased by institutional
buyers pursuant to SEC Rule 144A are subject to this 15% limit (unless the
Adviser, pursuant to guidelines established by the Fund's Board of Directors,
determines that a liquid market exists). The Adviser expects that less than 5%
of the Portfolio's net assets will be invested in Rule 144A securities during
the current year.

Because of the risks associated with investing in the small companies that
comprise the S&P SmallCap 600, you should consider your investment in the
Portfolio to be long-term. This Portfolio

-15-

<PAGE> 56

is not designed to provide you with a means to speculate on short-term movements
in the stock market.

INVESTMENT LIMITATIONS

The Portfolio may not:

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<PAGE> 57

3. Borrow money or issue senior securities, except that the
Portfolio may borrow from banks and may enter into reverse repurchase
agreements for temporary defensive purposes in amounts not in excess of
10% of the Portfolio's total assets at the time of such borrowing; or
mortgage, pledge, or hypothecate any assets, except in connection with any
such borrowing and in amounts not in excess of the lesser of the dollar
amounts borrowed or 10% of the Portfolio's total assets at the time of
such borrowing; or purchase securities while its borrowings exceed 5% of
its total assets. The Portfolio's transactions in futures and related
options (including the margin posted by the Portfolio in connection with
such transactions), and securities held in escrow or separate accounts in
connection with the Portfolio's investment practices described in this
Prospectus or the Statement of Additional Information are not subject to
this limitation.

PRICING OF SHARES

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<PAGE> 58

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.

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.

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<PAGE> 59

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
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 legally be 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 Small Cap Equity Index Portfolio described in this
Prospectus, the Fund currently offers Institutional Shares in the following
portfolios:

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<PAGE> 60

- 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
- The ARCH Growth Equity Portfolio
- The ARCH Small Cap Equity Portfolio
- The ARCH International Equity Portfolio
- The ARCH Balanced Portfolio

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. 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.

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<PAGE> 61

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. 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.

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 Share
certificates are outstanding with respect to an account, the telephone
redemption and exchange privilege is not available.

OTHER EXCHANGE OR REDEMPTION INFORMATION

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<PAGE> 62

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 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 such Shares
reflect the average annual percentage change in value of an investment in such
Shares of the particular Portfolio 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 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.

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<PAGE> 63

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 represents
the Portfolio's 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 quarterly as a
dividend to shareholders of record. Shares of the Portfolio earn dividends from
the day after the purchase order is received by the Fund through the day the
redemption order for such Shares is received. 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 bear all
expenses of the Distribution and Services Plan adopted for such Shares. See
"Management of the Fund" and "Other Information Concerning the Fund and Its
Shares."

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<PAGE> 64

distributions will be taxed in the same manner as those paid in cash.

TAXES

FEDERAL TAXES

The Portfolio intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"), for the current
taxable year. It is intended that the Portfolio will continue to so qualify 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.

An investor considering purchasing Shares of the Portfolio on or just
before the record date of any dividend or capital

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<PAGE> 65
gains distribution should be aware that the amount of the forthcoming
distribution, although in effect a return of capital, will be taxable.

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

MISCELLANEOUS

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<PAGE> 66

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.

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

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<PAGE> 67

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.

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.

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

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<PAGE> 68

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.

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, 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

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<PAGE> 69

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.

EXPENSES

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<PAGE> 70

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

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<PAGE> 71

25 million Institutional Shares and 25 million Investor A Shares. Investor A
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 and Investor A 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 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 2.5% front-end sales charge. Trust Shares,
Institutional Shares and Investor A 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 bear
all payments under the Portfolio's Distribution and Services Plan 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 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 Plans 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 Plan for Investor A 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. 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. Distribution payments made under
the Distribution and Services Plan 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 of the Portfolio that are not offered in connection with its
Trust Shares or Institutional

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<PAGE> 72
Shares, including an automatic investment program and an automatic withdrawal
plan. In addition, each class of Shares offers different exchange privileges.

MISCELLANEOUS

As of January 1, 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

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<PAGE> 73

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.

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

NO PERSON HAS BEEN AUTHORIZE 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 INDEX PORTFOLIO 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.

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<PAGE> 74
CROSS REFERENCE SHEET
(Investor A Shares)

The ARCH Small Cap Equity Index Portfolio

Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------

1. Cover Page................................. Cover Page

2. Synopsis................................... Expense Summary
for Investor A Shares

3. Condensed Financial
Information.............................. Yields and Total Returns

4. General Description
of Registrant............................ Highlights; Investment
Objective, Policies and
Risk Considerations;
Other Information Concerning
the Fund and Its Shares

5. Management of the Fund..................... Management of the Fund

5A. Management's Discussion of
Fund Performance......................... Inapplicable

6. Capital Stock and
Other Securities......................... How to Purchase and
Redeem Shares; Dividends
and Distributions;
Taxes; Other Information
Concerning the Fund
and Its Shares

7. Purchase of Securities
Being Offered............................ How to Purchase and
Redeem Shares

8. Redemption or Repurchase................... How to Purchase and
Redeem Shares

9. Pending Legal Proceedings.................. Inapplicable

<PAGE> 75
THE ARCH FAMILY
OF MUTUAL FUNDS

INVESTOR SHARES

SMALL CAP EQUITY INDEX PORTFOLIO

PROSPECTUS DATED ___________, 1997
<PAGE> 76
TABLE OF CONTENTS

PAGE

Highlights ........................................................... 3
Certain Financial Information ........................................ 5
Expense Summary for Investor A Shares ................................ 6
Investment Objective, Policies and Risk
Considerations ..................................................... 8
Investment Limitations ............................................... 16
Pricing of Shares .................................................... 17
How to Purchase and Redeem Shares .................................... 18
Purchase of Shares ............................................. 18
Automatic Investment Program (AIP) ............................. 20
Applicable Sales Charges ....................................... 20
Reduced Sales Charges .......................................... 22
Exchange Privilege ............................................. 23
Redemption of Shares ........................................... 25
Redemption by Mail ............................................. 25
Redemption by Telephone ........................................ 26
Automatic Withdrawal Plan (AWP) ................................ 26
Purchase of Shares at Net Asset Value .......................... 27
Other Exchange or Redemption Information ....................... 27
Yields and Total Returns ............................................. 28
Dividends and Distributions .......................................... 29
Taxes ................................................................ 30
Management of the Fund ............................................... 32
Other Information Concerning the Fund and its Shares ................. 37
Miscellaneous .................................................. 39
<PAGE> 77
THE ARCH FUND(R), INC.

THE ARCH SMALL CAP EQUITY INDEX PORTFOLIO

INVESTOR A SHARES

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

THE ARCH SMALL CAP EQUITY INDEX PORTFOLIO - U.S. common stocks with
smaller stock market capitalizations as represented by the Standard & Poor's
Small Capitalization Stock Index (the "S&P SmallCap 600").

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 _______________, 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-ARCH (2724).

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.
<PAGE> 78
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.

_____________, 1997

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<PAGE> 79
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 SMALL CAP EQUITY INDEX 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, Growth
Equity, Small Cap Equity, 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.

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<PAGE> 80
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. See "Investment Objective, Policies and Risk
Considerations" below and the Statement of Additional Information under
"Investment Objective and Policies."

This Prospectus describes the Investor A Shares of the Portfolio.
Investor A Shares are sold with a front-end sales charge. For information on
purchasing, exchanging or redeeming Investor A Shares of the Portfolio, please
see "How to Purchase and Redeem Shares" below.

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<PAGE> 81
CERTAIN FINANCIAL INFORMATION

Shares of the Portfolio have been classified into three classes of
Shares -- Trust Shares, Institutional Shares and Investor A 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 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 and Investor A Shares in the Portfolio can be
expected, at any given time, to be different.

-5-
<PAGE> 82
EXPENSE SUMMARY FOR
INVESTOR A SHARES

<TABLE>
<CAPTION>
SMALL CAP
EQUITY
INDEX
PORTFOLIO
---------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Front-End Sales Load Imposed on
Purchases (as a percentage of
offering price)(1) ....................................... 2.5%

ANNUAL PORTFOLIO OPERATING
EXPENSES
(as a percentage of average
net assets)
Investment Advisory Fees (net
of fee waivers)(2) ...................................... 0.00%

12b-1 Fees ................................................ 0.30%

Other Expenses (including
administration fees
and other expenses) (net
of fee waivers and expense
reimbursements)(3,4) .................................... .40%
----
TOTAL PORTFOLIO OPERATING
EXPENSES (net of fee waivers
and expense reimbursements)(4) .......................... .70%
====
</TABLE>

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

(1) Reduced sales charges may be available. See "How to Purchase and Redeem
Shares."
(2) Without fee waivers, advisory fees would be .40%.
(3) Without fee waivers, administration fees would be .20%.

(4) Without fee waivers and expense reimbursements, Other Expenses would be
.50% and Total Portfolio Operating Expenses would be 1.20%. Such fee
waivers and expense reimbursements are expected to continue during the
current fiscal year.

-6-
<PAGE> 83

<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
------ -------
<S> <C> <C>

You would pay the following
expenses on a $1,000 investment,
assuming (1) deduction at the time of
purchase of the maximum applicable
front-end sales charge, (2) a 5%
annual return and (3) redemption at
the end of each period:

Small Cap Equity Index Portfolio $32 $47
</TABLE>

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

THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES OR RATES OF RETURN. THE PORTFOLIO IS NEW AND ACTUAL EXPENSES
AND RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. Information about the
actual performance of the Portfolio will be contained in the Fund's future
Annual Reports to Shareholders, which may be obtained without charge when they
become available 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 Investor A Shares
will bear directly or indirectly. The table reflects the expenses which the
Portfolio expects to incur during the next twelve months on its Investor A
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 Plan as shown in the above table, long-term
shareholders of Investor A 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.

-7-
<PAGE> 84
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS

The Small Cap Equity Index Portfolio seeks to provide investment
results that, before deduction of operating expenses, approximate the price and
yield performance of U.S. common stocks with smaller stock market
capitalizations as represented by the S&P SmallCap 600.

THE INDEXING APPROACH

The Portfolio is not managed in a traditional sense, that is, by making
discretionary judgments based on analysis of economic, financial and market
conditions. Instead, the Portfolio uses an investment strategy called
"indexing", whereby it seeks to approximate the investment performance of the
market segment comprised of U.S. common stocks with smaller stock market
capitalizations as represented by the S&P SmallCap 600, through the use of
sophisticated computer models to determine which stocks should be purchased or
sold, while keeping transaction and administrative costs to a minimum. The
Portfolio will invest substantially all but no less than 80% of its total assets
in securities listed on the S&P SmallCap 600. The Adviser generally selects
securities for the Portfolio on the basis of their weightings in the S&P
SmallCap 600. The Portfolio will only purchase a security that is included in
the S&P SmallCap 600 at the time of such purchase. With respect to the remaining
portion of its total assets, the Portfolio has the ability to hold temporary
cash balances which may be invested in U.S. Government obligations and money
market instruments. If appropriate, the Portfolio may use options, futures
contracts and depository receipts to hedge its positions or for other
permissible purposes. The Portfolio also may enter into repurchase and reverse
repurchase agreements and lend its portfolio securities.

-8-
<PAGE> 85
indicate a perfect correlation, which would be achieved when the Portfolio's net
asset value, including the value of its dividend and capital gains
distributions, increases or decreases in exact proportion to changes in the S&P
SmallCap 600. The Portfolio's ability to correlate its performance with the S&P
SmallCap 600, however, may be affected by, among other things, transaction
costs, changes in securities markets, the manner in which Standard & Poor's
Ratings Group ("S&P") calculates the S&P SmallCap 600, and the timing of
purchases and redemptions. The Adviser monitors the correlation of the
performance of the Portfolio in relation to the S&P SmallCap 600 under the
supervision of the Board of Directors. In the unlikely event that a high
correlation is not achieved, the Board of Directors will take appropriate steps
to correct the reason for the lower correlation.

THE INCLUSION OF A SECURITY IN THE S&P SMALLCAP 600 IN NO WAY IMPLIES
AN OPINION BY S&P AS TO ITS ATTRACTIVENESS AS AN INVESTMENT. S&P IS NOT A
SPONSOR OF, OR IN ANY WAY AFFILIATED WITH, THE PORTFOLIO.

The Adviser believes that the indexing approach should involve less
portfolio turnover, and thus lower brokerage costs, transfer taxes and operating
expenses, than in more traditionally managed funds, although there is no
assurance that this will be the case. Ordinarily, the Portfolio will buy or sell
securities only to reflect changes in the S&P SmallCap 600 (including mergers or
changes in the composition of the S&P SmallCap 600) or to accommodate cash flows
into and out of the Portfolio. The costs and other expenses incurred in
securities transactions, apart from any difference between the investment
results of the Portfolio and that of the S&P SmallCap 600, may cause the return
of the Portfolio to be lower than the return of the S&P SmallCap 600. The
Portfolio may invest in less than all of the securities included in the S&P
SmallCap 600, which may result in a return that does not correspond with that of
the S&P SmallCap 600, after taking expenses into account.

THE S&P SMALLCAP 600

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<PAGE> 86
S&P SmallCap 600, for example because of changes in the S&P SmallCap 600, or as
a result of shareholder activity in the Portfolio. The Portfolio will rebalance
its holdings periodically to reflect changes in the S&P SmallCap 600. "Market
capitalization" for a company is the market price per share of stock multiplied
by the number of shares outstanding. The Adviser believes that the S&P SmallCap
600 is an appropriate benchmark for the Portfolio because it represents a
diversified array of small capitalization companies, it is familiar to many
investors and it is widely accepted as a reference for small capitalization
common stock investments.

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 OBLIGATIONS. 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. Examples of the
types of U.S. Government obligations that may be held by the Portfolio include,
in addition to U.S. Treasury bonds, notes and bills, the obligations of Federal
Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association ("GNMA"), Federal National Mortgage Association ("FNMA"), Federal
Home Loan Mortgage Corporation, General Services Administration, Student Loan
Marketing Association, Central Bank for Cooperatives, Federal Intermediate
Credit Banks, Resolution Trust Corporation, and Maritime Administration.
Obligations of certain agencies and instrumentalities of the U.S. Government,
such as those of GNMA, are supported by the full faith and credit of the U.S.
Treasury; others, such as the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of FNMA, are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others such as those of
the Student Loan Marketing Association, are supported only by the credit of the
instrumentality. There is no assurance that the U.S. Government would provide
financial support to U.S. Government-sponsored instrumentalities if it is not
obligated to do so by law.

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

Bank obligations include bankers' acceptances, negotiable certificates
of deposit and non-negotiable time deposits of U.S. or foreign banks, having
total assets at the time of purchase in excess of $1 billion. 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.

REPURCHASE AGREEMENTS. The Portfolio may agree to purchase U.S.
Government 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.

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<PAGE> 88
REVERSE REPURCHASE AGREEMENTS. Subject to the investment limitations
set forth below, 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 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 liquid 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 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
liquid securities are used as collateral. In accordance with current Securities
and Exchange Commission ("SEC") policies, the Portfolio is currently limiting
its securities lending to 33-1/3% of its aggregate net assets. Loans are subject
to termination by the Portfolio or the borrower at any time.

OPTIONS. The Portfolio may purchase put and call options listed on a
national securities exchange and issued by the Options Clearing Corporation in
an amount not exceeding 10% of its net assets. Such options may relate to
particular securities or to various stock indexes. Purchasing options is a
specialized investment technique which entails a substantial risk of a complete
loss of the amounts paid as premiums to the option writer. Such transactions
will be entered into only as a hedge against fluctuations in the value of
securities which the Portfolio holds or intends to purchase.

The Portfolio may also write covered call options. A covered call
option is an option to acquire a security that a Portfolio owns or has the right
to acquire during the option period. Such options will be listed on a national
securities exchange and issued by the Options Clearing Corporation.

The aggregate value of the securities subject to covered call options
written by the Portfolio will not exceed 25% of the value of its net assets. In
order to close out an option

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position, the Portfolio may enter into a "closing purchase transaction" -- the
purchase of a covered call option on the same security with the same exercise
price and expiration date as the option which the Portfolio previously wrote. By
writing a covered call option, the Portfolio forgoes the opportunity to profit
from an increase in the market price of the underlying security above the
exercise price except insofar as the premium represents such a profit and it is
not able to sell the underlying security until the option expires, is exercised,
or the Portfolio effects a closing purchase transaction by purchasing an option
of the same series. The use of covered call options will not be a primary
investment technique of the Portfolio. For additional information relating to
option trading practices, including particular risks, see the Statement of
Additional Information.

FUTURES CONTRACTS AND RELATED OPTIONS. The Portfolio may invest in
futures contracts and options on futures contracts. Such transactions, including
stock index futures contracts, or options thereon, can be used to simulate full
investment in the S&P SmallCap 600 while retaining a cash balance for Portfolio
management purposes, or act as a hedge to protect the Portfolio from
fluctuations in the value of its securities caused by anticipated changes in
interest rates or market conditions without necessarily buying or selling the
securities. Hedging is a specialized investment technique that entails skills
different from other investment management. The Adviser may also consider such
transactions to be economically appropriate for the reduction of risk inherent
in the ongoing management of the Portfolio. A stock index futures contract is an
agreement in which one party agrees to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the index
value (which assigns relative values to the common stock included in the index)
at the close of the last trading day of the contract and the price at which the
agreement is originally made. No physical delivery of the underlying stock in
the index is contemplated.

The purchase and sale of futures contracts or related options will not
be a primary investment technique of the Portfolio. The Portfolio will not
purchase or sell futures contracts (or related options thereon) for hedging
purposes if, immediately after purchase, the aggregate initial margin deposits
and premiums paid by the Portfolio on its open futures and options positions
exceeds 5% of the liquidation value of the Portfolio, after taking into account
any unrealized profits and unrealized losses on any such futures or related
options contracts into which it has entered. For a more detailed description of
futures contracts and related options, see the Statement of Additional
Information.

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<PAGE> 90
DEPOSITORY RECEIPTS. The Portfolio may invest in receipts that are
issued by banks or brokerage firms and are created by depositing securities
listed on the S&P SmallCap 600 into a special account at a custodian bank. The
custodian holds such securities for the benefit of the registered owners of the
certificates or receipts. The custodian arranges for the issuance of the
certificates or receipts evidencing ownership and maintains the register. The
Portfolio may invest in index-based depository receipts in lieu of investment in
the actual securities that are listed on the index.

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.

WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. The Portfolio may
purchase securities on a "when-issued" basis and may purchase or sell securities
on a "forward commitment" basis. These transactions involve a commitment by the
Portfolio to purchase or sell securities at a stated price and yield with
settlement beyond the normal settlement date. Such transactions permit the
Portfolio to lock-in a price or yield on a security, regardless of future
changes in interest rates. The Portfolio expects that these transactions will
not exceed 25% of the value of its total assets (at the time of purchase) under
normal market conditions. The Portfolio does not intend to engage in such

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transactions for speculative purposes but only for the purpose of acquiring
portfolio securities.

The S&P SmallCap 600 Index has above-average risk and may fluctuate
more than S&P 500 Stock Price Index, which invests in stocks of larger, more
established companies. Small capitalization companies may be subject to more
abrupt or erratic price movements than the stocks of larger, established
companies or the stock market as a whole. Among the reasons for this greater
price volatility are the less than certain growth prospects of smaller
companies, the lower degree of liquidity in the markets for such stocks and the
greater exposure of small capitalization companies to changing economic
conditions. In addition, such companies often have limited product lines,
smaller markets or fewer financial resources.

Because of the risks associated with investing in the small companies
that comprise the S&P SmallCap 600, you should consider your investment in the
Portfolio to be long-term. This Portfolio

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<PAGE> 92
is not designed to provide you with a means to speculate on short-term movements
in the stock market.

INVESTMENT LIMITATIONS

The Portfolio may not:

1. Purchase securities of any one issuer (other than
obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities) if, immediately after and as a result of such
investments, more than 5% of the Portfolio's total assets would be
invested in the securities of such issuer, or more than 10% of the
issuer's outstanding voting securities would be owned by the Portfolio
or the Fund, except that up to 25% of the Portfolio's total assets may
be invested without regard to such limitations.

2. Purchase any securities which would cause 25% or more of
the Portfolio's total assets at the time of purchase to be invested in
the securities of one or more issuers conducting their principal
business activities in the same industry, provided that, however, (a)
there is no limitation with respect to obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, and
repurchase agreements secured by obligations of the U.S. Government,
its agencies or instrumentalities; (b) wholly-owned finance companies
will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their
parents; and (c) utilities will be divided according to their services
(for example, gas, gas transmission, electric and gas, electric, and
telephone will each be considered a separate industry).

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<PAGE> 93
3. Borrow money or issue senior securities, except that the
Portfolio may borrow from banks and may enter into reverse repurchase
agreements for temporary defensive purposes in amounts not in excess of
10% of the Portfolio's total assets at the time of such borrowing; or
mortgage, pledge, or hypothecate any assets, except in connection with
any such borrowing and in amounts not in excess of the lesser of the
dollar amounts borrowed or 10% of the Portfolio's total assets at the
time of such borrowing; or purchase securities while its borrowings
exceed 5% of its total assets. The Portfolio's transactions in futures
and related options (including the margin posted by the Portfolio in
connection with such transactions), and securities held in escrow or
separate accounts in connection with the Portfolio's investment
practices described in this Prospectus or the Statement of Additional
Information are not subject to this limitation.

4. Make loans, except that the Portfolio may purchase or hold
debt instruments, lend portfolio securities and make other investments
in accordance with its investment objective and policies, and enter
into repurchase agreements.

5. Purchase securities on margin, make short sales of
securities or maintain a short position, except that (a) this
investment limitation shall not apply to the Portfolio's transactions
in options, and futures contracts and related options, and (b) the
Portfolio may obtain short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities.

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

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<PAGE> 94
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.

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 A Shares are sold through broker-dealers or other
organizations acting on behalf of their customers. Generally, investors purchase
Investor A 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. The
organization is responsible for transmitting purchase orders directly to the
Fund.

In general, the minimum initial investment in the Portfolio is $1,000
and the minimum 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
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

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<PAGE> 95
Privileges -- Automatic Exchange Program" below for additional requirements.

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. 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. Subsequent purchases of Shares
of the Portfolio may be made at any time in at least the subsequent minimum
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 responsible for transmitting
purchase, exchange, and redemption orders to the Fund on a timely basis,
recording all

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<PAGE> 96
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 day) 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 Shares 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 regular 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

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 charges are assessed as follows:

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<TABLE>
<CAPTION>
DEALERS'
AS A % OF AS A % OF REALLOWANCE
OFFERING NET ASSET AS A % OF
AMOUNT OF PRICE VALUE OFFERING
TRANSACTION PER SHARE PER SHARE PRICE
- ----------- --------- --------- -----------
<S> <C> <C> <C>
Less than $250,000 ................... 2.50% 2.56% 2.00%
$250,000 but less than $500,000 ...... 1.50 1.52 1.30
$500,000 but less than $1,000,000 .... 1.00 1.01 0.85
$1,000,000 and over .................. 0.50 0.50 0.40
</TABLE>

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 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. who
participated in the AIP (credit cards may not be used for the purchase of Fund
shares); (i) investors exchanging Trust Shares of the 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

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<PAGE> 98
above should contact the Fund at 1-800-452-ARCH (2724) prior to making a
purchase.

REDUCED SALES CHARGES

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. 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 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 2.50%
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. As shown in the table under "Applicable Sales
Charges," 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. 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

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<PAGE> 99
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. 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. 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.

EXCHANGE PRIVILEGE

The exchange privilege enables shareholders to exchange 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. The exchange privilege may be exercised
only in those states where the class of Shares of such other portfolios may
legally be sold.

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, provided, however, that an additional
sales load may be charged when exchanging Investor A Shares of the Portfolio for
Investor A Shares of another portfolio offered by the Fund with a higher sales
load.

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<PAGE> 100
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 in a Portfolio for Trust Shares or
Institutional Shares in the same Portfolio.

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.

In addition to the Small Cap Equity Index Portfolio described in this
Prospectus, the Fund currently offers Investor A Shares in the following
Portfolios:

For 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.

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<PAGE> 101
AUTOMATIC EXCHANGE PROGRAM. The Automatic Exchange Program enables
shareholders to make regular, automatic withdrawals from an Investor A 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 representatives 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 per Share next determined
after receipt of the order by the Fund. The organization through which the
investor placed the order is responsible for transmitting redemption orders to
the Fund on a timely basis. Proceeds from redemptions of Investor A 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 or mailed by check to the organization that placed the redemption
order within five Business Days 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.

REDEMPTION BY MAIL

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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, 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 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.

AUTOMATIC WITHDRAWAL PLAN (AWP)

An Automatic Withdrawal Plan may be established by a new or existing
shareholder of any Portfolio if the value of his or her account (valued at the
net asset value at the time of the

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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. Portfolio Shares will be redeemed as necessary
to meet withdrawal payments. Withdrawals may reduce principal and eventually
deplete the shareholder's account. 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 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 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

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.

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

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<PAGE> 104
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 Investor A 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 maximum public offering price 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
Investor A 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 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

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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 Investor A 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., 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
the Portfolio's 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

Net investment income for the Portfolio is declared and paid quarterly
as a dividend to shareholders of record. Shares of the Portfolio earn dividends
from the day after the purchase order is received by the Fund through the day
the redemption order for such Shares is received. 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 bear all
expenses of the Distribution and Services Plan 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."

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<PAGE> 106
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

The Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"), for the
current taxable year. It is intended that the Portfolio will continue to so
qualify 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.

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.

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<PAGE> 107
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.

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

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<PAGE> 108
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 .40% of the Portfolio's average daily
net assets.

ADMINISTRATOR

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<PAGE> 109
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

Investor A Shares of the Portfolio are sold continuously by the
Distributor, BISYS Fund Services ("BISYS"), an affiliate of the Administrator.
The Distributor also monitors the Fund's arrangements under the Distribution and
Services Plan described below. 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.

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 the Portfolio, 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.

DISTRIBUTION AND SERVICES PLAN

The Fund has adopted a Distribution and Services Plan pursuant to Rule
12b-1 under the 1940 Act with respect to Investor A Shares of the Portfolio.
Under the Distribution and Services Plan, the Fund may pay (i) the Distributor
or another

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<PAGE> 110
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 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, 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. 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, payment
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.

SERVICE ORGANIZATIONS

The servicing agreements adopted under the Distribution and Services
Plan (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 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 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

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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

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.

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<PAGE> 112
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 Plan (as
described under "Distribution and Services Plan" 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

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<PAGE> 113
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 under the 1940 Act: 50
million Trust Shares, 25 million Institutional Shares and 25 million Investor A
Shares. Institutional 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 Investor A 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 and Investor A Shares bear their pro rata portion
of all operating expenses paid by the Portfolio, except that Trust Shares and
Institutional

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<PAGE> 114
Shares bear all payments under the Portfolio's respective Administrative
Services Plans adopted for such Shares and Investor A Shares bear all payments
under the Portfolio's Distribution and Services Plan 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 the Portfolio's outstanding Trust Shares
or Institutional Shares.

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<PAGE> 115
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 such Portfolio or class of Shares are represented at the
meeting in person or by proxy.

As of January 1, 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-ARCH (2724).

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<PAGE> 116
CROSS REFERENCE SHEET

The ARCH Small Cap Equity Index Portfolio

Heading in Statement of
Form N-1A Part B Item Additional Information
- --------------------- -----------------------

10. Cover Page...................................... Cover Page

11. Table of Contents............................... Table of Contents

12. General Information and History................. The Fund

13. Investment Objective and Policies............... Investment
Objective and Policies

14. Management of the Fund.......................... Management of the Fund

15. Control Persons and Principal................... Miscellaneous
Holders of Securities

16. Investment Advisory and Other................... Management of the Fund;
Services Independent Auditors;
Counsel

17. Brokerage Allocation and Other.................. Investment Objectives
Practices and Policies

18. Capital Stock and Other......................... Description of Shares
Securities

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

20. Tax Status...................................... Additional Information
Concerning Taxes

21. Underwriters.................................... Management of the Fund

22. Calculation of Performance Data................. Additional Yield and
Total Return
Information; Net Asset
Value

23. Financial Statements............................ Inapplicable

<PAGE> 117
THE ARCH FUND(R), INC.

THE ARCH SMALL CAP EQUITY INDEX PORTFOLIO

Statement of Additional Information

Part B

__________, 1997
<PAGE> 118
THE ARCH FUND, INC.

Statement of Additional Information

for

The ARCH Small Cap Equity Index Portfolio

________ __, 1997

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----

<S> <C>
THE FUND ............................................................. 1
INVESTMENT OBJECTIVE AND POLICIES .................................... 1
NET ASSET VALUE ...................................................... 12
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ....................... 13
ADDITIONAL YIELD AND TOTAL RETURN INFORMATION ........................ 15
DESCRIPTION OF SHARES ................................................ 19
ADDITIONAL INFORMATION CONCERNING TAXES .............................. 21
MANAGEMENT OF THE FUND ............................................... 25
INDEPENDENT AUDITORS ................................................. 33
COUNSEL .............................................................. 33
MISCELLANEOUS ........................................................ 33
APPENDIX A ........................................................... A-1
</TABLE>

This Statement of Additional Information, which provides supplemental
information applicable to the ARCH Small Cap Equity Index Portfolio, is not a
prospectus. It should be read only in conjunction with the Portfolio's
Prospectuses dated __________, 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. A copy of the applicable
Prospectus 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.
<PAGE> 119
THE FUND

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

INVESTMENT OBJECTIVE AND POLICIES

The following information supplements the description of the investment
objective and policies of the Small Cap Equity Index Portfolio (the "Portfolio")
described in the Prospectuses.

THE INDEXING APPROACH

As stated in the Prospectuses, the investment objective of the
Portfolio is to provide investment results that, before deduction of operating
expenses, approximate the price and yield performance of U.S. common stocks with
smaller stock market capitalizations as represented by the Standard & Poor's
Small Capitalization Stock Index (the "S&P SmallCap 600").

In using sophisticated computer models to select securities, the
Portfolio will only purchase a common stock that is included in the S&P SmallCap
600 at the time of such purchase. A Portfolio may, however, temporarily continue
to hold a common stock that has been deleted from the S&P SmallCap 600 pending
the rebalancing of the Portfolio's holdings.

OTHER APPLICABLE INVESTMENT POLICIES

RIGHTS AND WARRANTS. The Portfolio may participate in rights offerings
and purchase warrants, which are privileges issued by corporations enabling the
owners to subscribe to and purchase a specified number of Shares of the
corporation at a specified price during a specified period of time. Subscription
rights normally have a short life span to expiration. The purchase of rights or
warrants involves the risk that the Portfolio could lose the purchase value of a
right or warrant if the right to subscribe to additional Shares is not exercised
prior to the rights' or warrants' expiration. Also, the purchase of rights or
warrants involves the risk that the effective price paid for the right or
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security. The Portfolio will not invest
more than 5% of its net assets, taken at market value, in rights or warrants, or
more than 2% of its net assets, taken at market value, in rights or warrants not
listed on the New York, American or Canadian Stock Exchanges. Warrants acquired
by the Portfolio in units or attached to other securities are not subject to
this restriction.
<PAGE> 120
VARIABLE AND FLOATING RATE INSTRUMENTS. Subject to its investment
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 SECURITIES. The 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 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).

SECURITIES LENDING. While the Portfolio would not have the right to
vote securities on loan, the Portfolio intends to terminate the loan and regain
the right to vote should this be considered important with respect to the
investment. 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

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invested in readily marketable, high quality, short-term obligations. 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
applicable 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 PURCHASES AND FORWARD COMMITMENTS. When the Portfolio
agrees to purchase securities on a when-issued or forward commitment basis, the
Custodian will maintain in a segregated account cash or liquid portfolio
securities having a value (determined daily) at least equal to the amount of the
Portfolio's commitments. In the case of a forward commitment to sell portfolio
securities, the Custodian will hold the portfolio securities themselves in a
segregated account while the commitment is outstanding. These procedures are
designed to ensure that the Portfolio will maintain sufficient assets at all
times to cover its obligations under when-issued purchases and forward
commitments.

The Portfolio will make commitments to purchase securities on a
when-issued basis or to purchase or sell securities on a forward commitment
basis only with the intention of completing the transaction and actually
purchasing or selling the securities. If deemed advisable as a matter of
investment strategy, however, the Portfolio may dispose of or renegotiate a
commitment after it is entered into and may sell securities it has committed to
purchase before those securities are delivered to the Portfolio on the
settlement date. In these cases, the Portfolio may realize a capital gain or
loss.

When the Portfolio engages in when-issued and forward commitment
transactions, it relies on the other party to consummate the trade. Failure of
such party to do so may result

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in the Portfolio's incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.

The value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their value, is taken into account when determining the Portfolio's net asset
value starting on the day the Portfolio agrees to purchase the securities. The
Portfolio does not earn interest on the securities it has committed to purchase
until they are paid for and delivered on the settlement date. When the Portfolio
makes a forward commitment to sell securities it owns, the proceeds to be
received upon settlement are included in the Portfolio's assets, and
fluctuations in the value of the underlying securities are not reflected in the
Portfolio's net asset value as long as the commitment remains in effect.

OPTIONS TRADING. As described in the Prospectuses, the Portfolio may
purchase put and call options listed on a national securities exchange and
issued by the Options Clearing Corporation in an amount not exceeding 10% of the
Portfolio's total net assets. Options trading is a specialized activity which
entails greater than ordinary investment risks. Regardless of how much the
market price of the underlying security or index increases or decreases, the
option buyer's risk is limited to the amount of the original investment for the
purchase of the option. However, options may be more volatile than the
underlying securities, and therefore, on a percentage basis, an investment in
options may be subject to greater fluctuation than an investment in the
underlying securities. A listed call option gives the purchaser of the option
the right to buy from a clearing corporation, and a writer has the obligation to
sell to the clearing corporation, the underlying security at the stated exercise
price at any time prior to the expiration of the option, regardless of the
market price of the security. The premium paid to the writer is in consideration
for undertaking the obligations under the option contract. A listed put option
gives the purchaser the right to sell to a clearing corporation the underlying
security at the stated exercise price at any time prior to the expiration date
of the option, regardless of the market price of the security. In contrast to an
option on a particular security, an option on a stock index provides the holder
with the right to make or receive a cash settlement upon the exercise of the
option. The amount of this settlement will be equal to the difference between
the closing price of the index at the time of exercise and the exercise price of
the option expressed in dollars, times a specified multiple.

The Portfolio's obligation to sell a security subject to a covered call
option written by it may be terminated prior to the expiration date of the
option by the Portfolio's executing a

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<PAGE> 123
closing purchase transaction, which is effected by purchasing on an exchange an
option of the same series (i.e., same underlying security, exercise price and
expiration date) as the option previously written. Such a purchase does not
result in the ownership of an option. A closing purchase transaction will
ordinarily be effected to realize a profit on an outstanding option, to prevent
an underlying security from being called, to permit the sale of the underlying
security or to permit the writing of a new option containing different terms on
such underlying security. The cost of such a liquidation purchase plus
transaction costs may be greater than the premium received upon the original
option, in which event the Portfolio will have incurred a loss in the
transaction. An option position may be closed out only on an exchange which
provides a secondary market for an option of the same series. There is no
assurance that a liquid secondary market on an exchange will exist for any
particular option. A covered call option writer, unable to effect a closing
purchase transaction, would not be able to sell the underlying security until
the option expires or the underlying security is delivered upon exercise with
the result that the writer in such circumstances will be subject to the risk of
market decline in the underlying security during such period. The Portfolio will
write an option on a particular security only if the Adviser believes that a
liquid secondary market will exist on an exchange for options of the same series
which will permit the Portfolio to make a closing purchase transaction in order
to close out its position.

When the Portfolio writes a covered call option, an amount equal to the
net premium (the premium less the commission) received by the Portfolio is
included in the liability section of the Portfolio's statement of assets and
liabilities as a deferred credit. The amount of the deferred credit is
subsequently marked-to-market to reflect the current value of the option
written. The current value of the traded option is the last sale price or, in
the absence of a sale, the average of the closing bid and asked prices. If an
option expires on the stipulated expiration date or if the Portfolio enters into
a closing purchase transaction, it will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the net premium received when the option is
sold) and the deferred credit related to such option will be eliminated. Any
gain on a covered call option may be offset by a decline in the market price of
the underlying security during the option period. If a covered call option is
exercised, the Portfolio may deliver the underlying security held by it or
purchase the underlying security in the open market. In either event, the
proceeds of the sale will be increased by the net premium originally received,
and the Portfolio will realize a gain or loss. Premiums from expired options
written by the Portfolio and net gains from closing purchase transactions are
treated as short-term capital gains for

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<PAGE> 124
federal income tax purposes, and losses on closing purchase transactions are
short-term capital losses.

As noted previously, there are several risks associated with
transactions in options on securities and indices. For example, there are
significant differences between the securities and options markets that could
result in an imperfect correlation between these markets, causing a given
transaction not to achieve its objectives. In addition, a liquid secondary
market for particular options, even when traded on a national securities
exchange ("Exchange"), may be absent for reasons which include the following:
there may be insufficient trading interest in certain options; restrictions may
be imposed by an Exchange on opening transactions or closing transactions or
both; trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities;
unusual or unforeseen circumstances may interrupt normal operations on an
Exchange; the facilities of an Exchange or the Options Clearing Corporation may
not at all times be adequate to handle current trading volume; or one or more
Exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that Exchange (or in
that class or series of options) would cease to exist, although outstanding
options that had been issued by the Options Clearing Corporation as a result of
trades on that Exchange would continue to be exercisable in accordance with
their terms.

A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.

FUTURES CONTRACTS. As discussed in the Prospectuses, the Portfolio may
invest in futures contracts and options thereon (stock index futures contracts
or options) to hedge or manage risks associated with the Portfolio's securities
investments.

To enter into a futures contract, an amount of cash and liquid
securities, equal to the market value of the futures contracts, is deposited in
a segregated account with the Fund's Custodian and/or in a margin account with a
broker to collateralize the position and thereby insure that the use of such
futures is unleveraged. Positions in futures contracts may be closed out only on
an exchange which provides a secondary market for such futures. However, there
can be no assurance that a liquid secondary market will exist for any particular
futures contract at any specific time. Thus, it may not be possible to close a
futures position. In the event of adverse price movements, the Portfolio would
continue to be required to make

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<PAGE> 125
daily cash payments to maintain its required margin. In such situations, if the
Portfolio had insufficient cash, it might have to sell portfolio securities to
meet daily margin requirements at a time when it would be disadvantageous to do
so. In addition, the Portfolio might be required to make delivery of the
instruments underlying futures contracts that it holds. The inability to close
options and futures positions also could have an adverse impact on the
Portfolio's ability to hedge effectively.

There is an imperfect correlation between movements in the price of
futures and movements in the price of the securities which are the subject of
the hedge. As a result, the use of futures may not serve the objective of an
index fund.

The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit, before any deduction for the
transaction costs, if the contract were closed out. Thus, a purchase or sale of
a futures contract may result in losses in excess of the amount invested in the
contract.

Utilization of futures transactions by the Portfolio involves the risk
of loss by the Portfolio of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in a futures contract or related
option.

Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond the limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures

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<PAGE> 126
positions and subjecting some futures traders to substantial losses.

The trading of futures contracts is also subject to the risk of trading
halts, suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions or to recover excess variation
margin payments.

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,
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 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.

REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase
agreements with respect to its portfolio 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

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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 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, cash or liquid
securities 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. The
portfolio turnover rate for the Portfolio is not expected to exceed 25% during
the current fiscal year. Portfolio turnover will not be a limiting factor in
making investment decisions. The Portfolio follows an index strategy and,
therefore, any variation in turnover rate should be related to the turnover of
securities listed in the Portfolio's respective index.

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

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<PAGE> 128
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. 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.

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.

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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.

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.

THE PORTFOLIO MAY NOT:

1. Make investments for the purpose of exercising control or
management.

2. Purchase or sell real estate, provided that the Portfolio may
invest in securities secured by real estate or interests therein or issued by
companies or investment trusts which invest in real estate or interests therein.

3. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as the Portfolio might be deemed to be an
underwriter upon disposition of portfolio securities acquired within the
limitation on purchases of restricted securities and except to the extent that
the purchase of obligations directly from the issuer thereof in accordance with
the Portfolio's investment objective, policies and limitations may be deemed to
be underwriting.

4. Purchase or sell commodity contracts, or invest in oil, gas or
mineral exploration or development programs, provided that the Portfolio may, to
the extent appropriate to its investment objective, purchase publicly traded
securities of companies engaging in whole or in part in such activities, and
provided further that the Portfolio may invest in futures contracts and related
options in accordance with its investment activities and policies.

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5. Purchase securities on margin, make short sales of securities or
maintain a short position, except that (a) this investment limitation shall not
apply to transactions by the Portfolio in options, and futures contracts and
related options, and (b) the Portfolio may obtain short-term credits as may be
necessary for the clearance of purchases and sales of portfolio securities.

NET ASSET VALUE

As stated in the applicable Prospectus, the net asset value per share
of each class of a Portfolio is calculated by adding the value of all of the
portfolio securities and other assets belonging to the Portfolio, 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 a
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 the 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

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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 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

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.

A hypothetical illustration of the computation of the public offering
price per Share of Investor A Shares of the Portfolio, based on the projected
value of the Portfolio's estimated net assets and projected number of
outstanding Investor A Shares on the date such Shares are first offered for sale
to

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public investors and the maximum front-end 2.5% sales charge currently
applicable, is as follows:

TABLE

<TABLE>
<S> <C>
Net Assets $ 10.00

Outstanding Shares 1

Net Asset Value Per
Share $ 10.00

Sales Charge, (2.50%
of offering price,
2.60% of net asset
value per share) $ 0.26

Offering to Public $ 10.26
=====
</TABLE>

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

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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 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 and Investor A 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 and Investor A
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 and Institutional 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.

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<PAGE> 134
d = the maximum offering price per Share on the
last day of the period.

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, 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.

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

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<PAGE> 135
subtracting one from the result. This calculation can be expressed as follows:

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.

As stated in the Prospectus relating to Investor A Shares, the
Portfolio may also calculate total return figures for the Portfolio without
deducting the maximum sales charge imposed

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<PAGE> 136
on purchases. 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., Russell, 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) 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

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<PAGE> 137
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 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, 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, the Shares of the Fund's portfolios will be fully
paid and nonassessable.

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<PAGE> 138
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 Plan for Investor A 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 as described
in the applicable Prospectus. 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, and 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. 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, and 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. Further, Shareholders of all of the Fund's
portfolios, 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

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<PAGE> 139
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 a
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 are 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 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

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<PAGE> 140
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 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

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<PAGE> 141
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.

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

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<PAGE> 142
Internal Revenue Service for failure to properly include on his 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
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

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<PAGE> 143
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.

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
</TABLE>

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<PAGE> 144
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 years
Name and Address the Fund and other affiliations
- ---------------- ------------- ----------------------

<S> <C> <C>
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

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

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<PAGE> 145

<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 years
Name and Address the Fund and other affiliations
- ---------------- ------------- ----------------------

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

</TABLE>

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

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

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
RETIREMENT TOTAL
AGGREGATE BENEFITS ACCRUED COMPENSATION
COMPENSATION AS PART OF FUND FROM THE FUND AND
NAME OF DIRECTOR FROM THE 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.

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<PAGE> 146
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.

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.

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.

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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, if any, and reimburses Mercantile for out-of-pocket
expenses related to such services.

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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. In addition, under the Distribution and Services Plans for Investor A
Shares described below, the Distributor is entitled to a distribution fee at the
annual rate of .10% for distribution services. For information regarding the
distribution services provided and distribution fees payable thereunder, see
"Distribution and Services Plan" under "Management of the Fund" in the
Prospectuses and "The Plans" below.

THE PLANS

DISTRIBUTION AND SERVICES PLAN. As described in the Prospectuses, the
Fund has adopted a Distribution and Services Plan with respect to Investor A
Shares of the Portfolio pursuant to the 1940 Act and Rule 12b-1 thereunder. Any
material amendment to the Plan 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 Directors") and by a majority of the
Investor A Shares of the Portfolio. Pursuant to the Plan, the Fund may enter
into Servicing Agreements with broker-dealers and other organizations
("Servicing Agreements")

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that purchase Investor A 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. Services provided pursuant to the
Servicing Agreements may include such services as providing information
periodically to customers showing their positions in Investor A Shares and
monitoring services for their customers who have invested in Investor A Shares,
including the operation of telephone lines for daily quotations of return
information.

ADMINISTRATIVE SERVICES PLANS. As described in the 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 Plan 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 or Investor A
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 or Investor A 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 or Investor A 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 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 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

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connection with such facilities, provide on-site management personnel and
monitoring services for their customers who have invested in Investor A Shares,
including the operation of telephone lines for daily quotations of return
information.

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 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 or Investor A 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 Plan, 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, Securities and Exchange Commission 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, charges of the Custodian and
Transfer Agent, Service Organization fees, certain insurance premiums, outside
auditing and legal expenses, costs of

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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.

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;

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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.

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

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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%).

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

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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 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

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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, 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

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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
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.

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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-

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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.

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<PAGE> 159
"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-

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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.

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"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

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<PAGE> 162
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

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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.

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<PAGE> 164
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+."

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<PAGE> 165
"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,

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<PAGE> 166
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.

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<PAGE> 167
"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.

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<PAGE> 168
CROSS REFERENCE SHEET
(Trust Shares)

The ARCH Growth Equity Portfolio

Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------

1. Cover Page................................. Cover Page

2. Synopsis................................... Expense Summary
for Trust Shares

3. Condensed Financial
Information.............................. Certain Financial
Information; Yields and Total
Returns

4. General Description
of Registrant............................ Highlights; Investment
Objectives, Policies and
Risk Considerations;
Other Information Concerning
the Fund and Its Shares

5. Management of the Fund..................... Management of the Fund

5A. Management's Discussion of
Fund Performance......................... Inapplicable

6. Capital Stock and
Other Securities......................... How to Purchase and
Redeem Shares; Dividends
and Distributions;
Taxes; Other Information
Concerning the Fund
and Its Shares

7. Purchase of Securities
Being Offered............................ How to Purchase and
Redeem Shares

8. Redemption or Repurchase................... How to Purchase and
Redeem Shares

9. Pending Legal Proceedings.................. Inapplicable

<PAGE> 169
THE ARCH FAMILY
OF MUTUAL FUNDS

TRUST SHARES

GROWTH EQUITY PORTFOLIO

PROSPECTUS DATED _______, 1997

<PAGE> 170
TABLE OF CONTENTS

PAGE
----

Highlights................................................................. 3
Certain Financial Information.............................................. 4
Expense Summary for Trust Shares........................................... 5
Investment Objective, Policies and Risk
Considerations........................................................... 6
Investment Limitations..................................................... 15
Pricing of Shares.......................................................... 17
How to Purchase and Redeem Shares.......................................... 17
Purchase of Shares................................................ 17
Exchange Privilege................................................ 18
Redemption of Shares.............................................. 19
Other Exchange or Redemption Information.......................... 21
Yields and Total Returns................................................... 21
Dividends and Distributions................................................ 23
Taxes...................................................................... 23
Management of the Fund..................................................... 25
Other Information Concerning the Fund and its Shares....................... 30
Miscellaneous..................................................... 32
<PAGE> 171
THE ARCH FUND(R), INC.

THE ARCH GROWTH EQUITY PORTFOLIO

TRUST SHARES

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 _______________, 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.

________________________

_____________, 1997

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<PAGE> 173
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.

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

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<PAGE> 174
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 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.

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
_____________, 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.

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<PAGE> 175
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 (net
of fee waivers)..................................... .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%.

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.

-5-
<PAGE> 176

Growth Equity Portfolio............. $13 $41
</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.

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.

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<PAGE> 177
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
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 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 not, 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

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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 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

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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 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.

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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.

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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.

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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.

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.

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

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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 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 are 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

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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.

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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 in more than seven days after notice) to no
more than 15% of its net assets.

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.

INVESTMENT LIMITATIONS

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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.

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.

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.

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PRICING OF SHARES

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

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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.

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.

EXCHANGE PRIVILEGE

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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:

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.

REDEMPTION OF SHARES

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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.

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

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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

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

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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 quotations of a class of Shares in the Portfolio represent
the Portfolio's 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.

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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.

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, 1996. 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.

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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.) 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.

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.

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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

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.

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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.

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.

Carl C. Enloe is the person primarily responsible for the day-to-day
management of the Portfolio. Mr. Enloe, who joined MVA as a Senior Associate in
April 1997, served as head of investments at Mark Twain Bank since 1987. He
managed the Predecessor Portfolio since its inception.

ADMINISTRATOR

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.

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DISTRIBUTOR

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 Fund understands that Service Organizations providing such
administrative services may also charge fees to their

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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

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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 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

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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 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

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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.

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<PAGE> 202
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.

MISCELLANEOUS

As of January 1, 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.

______________________________

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE

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<PAGE> 203
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.

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<PAGE> 204
CROSS REFERENCE SHEET
(Institutional Shares)

The ARCH Growth Equity Portfolio

Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------

1. Cover Page................................ Cover Page

2. Synopsis.................................. Expense Summary
for Institutional Shares

3. Condensed Financial
Information............................. Certain Financial Information;
Financial Highlights; Yields
and Total Returns

4. General Description
of Registrant........................... Highlights; Investment
Objectives, Policies and
Risk Considerations;
Other Information Concerning
the Fund and Its Shares

5. Management of the Fund.................... Management of the Fund

5A. Management's Discussion of
Fund Performance........................ Inapplicable

6. Capital Stock and
Other Securities........................ How to Purchase and
Redeem Shares; Dividends
and Distributions;
Taxes; Other Information
Concerning the Fund
and Its Shares

7. Purchase of Securities
Being Offered........................... How to Purchase and
Redeem Shares

8. Redemption or Repurchase.................. How to Purchase and
Redeem Shares

9. Pending Legal Proceedings................. Inapplicable

<PAGE> 205
THE ARCH FAMILY
OF MUTUAL FUNDS

INSTITUTIONAL SHARES

GROWTH EQUITY PORTFOLIO

PROSPECTUS DATED ________, 1997
<PAGE> 206
TABLE OF CONTENTS

PAGE
----

THE ARCH GROWTH EQUITY PORTFOLIO

INSTITUTIONAL SHARES

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.

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 _______________, 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.

____________________________

_____________, 1997

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<PAGE> 209
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.

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

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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 enjoy 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.

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.

The Portfolio commenced operations in 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
__________, 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.

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<PAGE> 211
EXPENSE SUMMARY FOR
INSTITUTIONAL SHARES

12b-1 Fees............................................. .00%

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

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<PAGE> 212

Growth Equity Portfolio $13 $41
</TABLE>

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 charged 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 imitations becomes
effective.

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<PAGE> 213
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. Company earnings are the primary consideration in
selecting portfolio securities. The Portfolio may invest in 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
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 not, 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

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

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<PAGE> 215
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.

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

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<PAGE> 216
purchase. Commercial paper may include variable and floating rate instruments.
See "Other Applicable Policies -- Variable and Floating Rate Instruments" below.

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.

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<PAGE> 217
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.

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<PAGE> 218
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.

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<PAGE> 219
contract and the buyer agrees to take delivery of the instrument at the
specified future time.

When the Portfolio uses futures and options on futures as hedging
devices, there is a risk that the prices of the

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<PAGE> 220
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.

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<PAGE> 221
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 in more than seven days after notice) to no
more than 15% of its net assets.

INVESTMENT LIMITATIONS

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<PAGE> 222
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.

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<PAGE> 223
PRICING OF SHARES

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 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

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<PAGE> 224
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.

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.

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

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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
- 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.

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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. 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

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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 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.

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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 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.

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

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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, 1996. 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.

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.

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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.

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.

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.

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<PAGE> 231
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
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 0.75% of the Portfolio's average
daily net assets.

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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.

ADMINISTRATOR

DISTRIBUTOR

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<PAGE> 233
ADMINISTRATIVE SERVICES PLAN

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.

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<PAGE> 234
servicing fees should read this Prospectus in light of the terms governing their
accounts with their Service Organization.

CUSTODIAN, TRANSFER AGENT AND SUB-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

Should future legislative, judicial, or administrative action prohibit
or restrict the activities of such companies in

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<PAGE> 235
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.

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

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<PAGE> 236
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 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

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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.

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.

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<PAGE> 238
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.

MISCELLANEOUS

As of January 1, 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.

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

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<PAGE> 239
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.

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<PAGE> 240
CROSS REFERENCE SHEET
(Investor A and B Shares)

The ARCH Growth Equity Portfolio

Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------

1. Cover Page................................. Cover Page

2. Synopsis................................... Expense Summary
for Investor A Shares

3. Condensed Financial
Information.............................. Certain Financial
Information; Financial
Highlights; Yields and Total
Returns

4. General Description
of Registrant............................ Highlights; Investment
Objective, Policies and
Risk Considerations;
Other Information Concerning
the Fund and Its Shares

5. Management of the Fund..................... Management of the Fund

5A. Management's Discussion of
Fund Performance......................... Inapplicable

6. Capital Stock and
Other Securities......................... How to Purchase and
Redeem Shares; Dividends
and Distributions;
Taxes; Other Information
Concerning the Fund
and Its Shares

7. Purchase of Securities
Being Offered............................ How to Purchase and
Redeem Shares

8. Redemption or Repurchase................... How to Purchase and
Redeem Shares

9. Pending Legal Proceedings.................. Inapplicable

<PAGE> 241
THE ARCH FAMILY
OF MUTUAL FUNDS

INVESTOR SHARES

GROWTH EQUITY PORTFOLIO

PROSPECTUS DATED ___________, 1997
<PAGE> 242
TABLE OF CONTENTS

PAGE
----

Highlights.................................................................. 3
Certain Financial Information............................................... 4
Expense Summary for Investor Shares......................................... 6
Financial Highlights........................................................ 8
Investment Objective, Policies and Risk
Considerations............................................................ 10
Pricing of Shares........................................................... 20
How to Purchase and Redeem Shares........................................... 21
Purchase of Shares................................................. 21
Automatic Investment Program (AIP)................................. 23
Applicable Sales Charges -- Investor A Shares..................... 23
Reduced Sales Charges -- Investor A Shares........................ 25
Applicable Sales Charges -- Investor B Shares..................... 26
Characteristics of Investor A Shares and
Investor B Shares................................................ 28
Factors to Consider When Selecting Investor A
Shares or Investor B Shares..................................... 29
Exchange Privileges................................................ 30
Redemption of Shares............................................... 33
Redemption by Mail................................................. 33
Redemption by Telephone............................................ 33
Automatic Withdrawal Plan (AWP).................................... 34
Purchase of Investor A Shares at Net Asset Value................... 35
Other Exchange or Redemption Information........................... 35
Yields and Total Returns.................................................... 36
Dividends and Distributions................................................. 37
Taxes....................................................................... 38
Management of the Fund...................................................... 39
Other Information Concerning the Fund and its Shares........................ 46
Miscellaneous...................................................... 47
<PAGE> 243

THE ARCH FUND(R), INC.

THE ARCH GROWTH EQUITY PORTFOLIO

INVESTOR A SHARES AND INVESTOR B SHARES

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.

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 _______________, 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-ARCH (2724).

____________________________

_________, 1997

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<PAGE> 245
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 then 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.

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

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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 Portfolio also 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 __ and __, respectively.

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

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<PAGE> 247
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
________, 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.

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<PAGE> 248
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 (net
of fee waivers) ................ .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.

-6-
<PAGE> 249

<TABLE>
<CAPTION>
EXAMPLE
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
Investor B Shares
Assuming complete redemption
at end of period(2) $ 70 $ 93
Assuming no redemption $ 20 $ 63
</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

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<PAGE> 250
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 October 31, 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.

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.

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<PAGE> 251
PREDECESSOR GROWTH EQUITY FUND
(FOR A SHARE OUTSTANDING THROUGH EACH PERIOD)

<TABLE>
<CAPTION>
Six Months Year Ended September 30,
Ended -----------------------------------------------------------------
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.

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<PAGE> 252
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 becomes
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. Company earnings are the primary consideration in
selecting portfolio securities. The Portfolio may invest in 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
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 not, the security will be sold. The applicable
ratings categories are described in Appendix A to the Statement of Additional
Information.

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<PAGE> 253
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.

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

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<PAGE> 254
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 be will successful.

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

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<PAGE> 255
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 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.

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

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<PAGE> 256
default on its payment obligation. The Portfolio could, for these or other
reasons, suffer a loss with respect to such instruments.

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.

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<PAGE> 257
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.

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<PAGE> 258
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.

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<PAGE> 259
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 are 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.

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<PAGE> 260
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.

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 in more than seven days after notice) to no
more than 15% of its net assets.

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<PAGE> 261
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

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.

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<PAGE> 262
disadvantageous. The Portfolio will not purchase any securities while any
borrowings in excess of 5% of its total assets are outstanding.

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).

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.

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<PAGE> 263
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 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

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<PAGE> 264
Exchange Program is $5,000. See "How to Purchase and Redeem Shares -- Exchange
Privileges -- Automatic Exchange Program" below for additional requirements.

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.

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

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<PAGE> 265
Shares are held in the name of an organization, such organization 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).

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

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<PAGE> 266

<TABLE>
<CAPTION>
AS A % AS A % DEALERS'
OF 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 .50
$1,000,000 and over...................... .50 .50 .40
</TABLE>

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

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<PAGE> 267
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 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,

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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 deferred sales charge at the
rates set forth in the chart below if they are redeemed within six years 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 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

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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
NUMBER OF YEARS PERCENTAGE 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

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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 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."

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<PAGE> 271
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 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

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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 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

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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.

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:

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<PAGE> 274
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

- ----------

* Does not offer Investor B Shares.

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.

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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 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

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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.

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.

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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.

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net asset value. Share balances may also be redeemed pursuant to arrangements
between broker-dealer organizations 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 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.

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

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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 the
Portfolio's 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.

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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, 1996. 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.

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.

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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

MISCELLANEOUS

MANAGEMENT OF THE FUND

The Fund is managed under the direction of its Board of Directors. The
Statement of Additional Information contains the

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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.

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 Portfolios securities and other investments, and directs the
maintenance of the Portfolio's records relating to such purchases and sales.

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.

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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.

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

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.

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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.

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

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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 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.

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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 law 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 the 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.

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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 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.

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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.

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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.

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 relating to the
Administrative Services than 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

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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).

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CROSS REFERENCE SHEET