ARCH FUND INC, 485BPOS, 1997-03-31

ARCH FUND INC
485BPOS, 1997-03-31

Previous: AMERICA WEST AIRLINES INC, 10-K405, 1997-03-31

Next: CHIRON CORP, 10-K, 1997-03-31

<PAGE> 1

As filed with the Securities and Exchange Commission on March 31, 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. 38

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]

AMENDMENT NO. 39

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
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)
[x] 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)
[ ] 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.

<PAGE> 2

CROSS REFERENCE SHEET
(Trust Shares)

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 International Equity Portfolio
The ARCH Balanced Portfolio

<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
<S> <C> <C>
1. Cover Page.................................................... Cover Page

2. Synopsis...................................................... Expense Summary
for Trust 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
</TABLE>

<PAGE> 3

Trust Shares

THE ARCH FUND(R), INC.

PROSPECTUS

MARCH 31, 1997

Money Market Portfolios
Treasury Money Market Portfolio
Money Market Portfolio
Tax-Exempt Money Market Portfolio

Taxable Bond Portfolios
U.S. Government Securities Portfolio
Intermediate Corporate Bond Portfolio
Bond Index Portfolio
Government & Corporate Bond Portfolio

Tax-Exempt Bond Portfolios
Short-Intermediate Municipal Portfolio
Missouri Tax-Exempt Bond Portfolio
National Municipal Bond Portfolio

Stock Portfolios
Equity Income Portfolio
Equity Index Portfolio
Growth & Income Equity Portfolio
Small Cap Equity Portfolio
International Equity Portfolio
Balanced Portfolio

[ARCH MUTUAL FUNDS LOGO]

The ARCH Funds
<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Highlights............................................................................ 3
Certain Financial Information......................................................... 5
Expense Summary for Trust Shares...................................................... 5
Financial Highlights.................................................................. 8
Investment Objectives, Policies and Risk Considerations............................... 19
Pricing of Shares..................................................................... 45
The Money Market Portfolios......................................................... 45
The Equity and Bond Portfolios...................................................... 46
How to Purchase and Redeem Shares..................................................... 46
Purchase of Shares.................................................................. 46
Purchase of Shares--The Money Market Portfolios..................................... 47
Purchase of Shares--The Equity and Bond Portfolios.................................. 47
Exchanges........................................................................... 47
Redemption of Shares................................................................ 47
Yields and Total Returns.............................................................. 49
Dividends and Distributions........................................................... 51
Taxes................................................................................. 52
Management of the Fund................................................................ 55
Other Information Concerning the Fund and its Shares.................................. 59
</TABLE>

<PAGE> 5

TRUST SHARES -- THE ARCH FUND(R), INC.

The ARCH Fund, Inc. is an open-end, management investment company that
currently offers Shares in sixteen investment portfolios. This Prospectus
describes the Trust Shares in each of those portfolios. Trust Shares are offered
to financial institutions acting on their own behalf or on behalf of certain
qualified accounts.

THE ARCH TREASURY MONEY MARKET PORTFOLIO'S investment objective is to seek a
high level of current income exempt from state income tax consistent with
liquidity and security of principal.

THE ARCH MONEY MARKET PORTFOLIO'S investment objective is to seek current
income with liquidity and stability of principal.

THE ARCH TAX-EXEMPT MONEY MARKET PORTFOLIO'S investment objective is to seek
as high a level of current interest income exempt from federal income tax as is
consistent with liquidity and stability of principal.

THE ARCH U.S. GOVERNMENT SECURITIES PORTFOLIO'S investment objective is to
seek a high rate of current income that is consistent with relative stability of
principal.

THE ARCH INTERMEDIATE CORPORATE BOND PORTFOLIO'S investment objective is to
seek as high a level of current income as is consistent with preservation of
capital.

THE ARCH BOND INDEX PORTFOLIO'S investment objective is to seek to provide
investment results that, before deduction of operating expenses, approximate the
price and yield performance of U.S. Government, mortgage-backed, asset-backed
and corporate debt securities, as represented by the Lehman Brothers Aggregate
Bond Index.

THE ARCH GOVERNMENT & CORPORATE BOND PORTFOLIO'S investment objective is to
seek the highest level of current income consistent with conservation of
capital.

THE ARCH SHORT-INTERMEDIATE MUNICIPAL PORTFOLIO'S investment objective is to
seek as high a level of current income, exempt from regular federal income tax,
as is consistent with preservation of capital.

THE ARCH MISSOURI TAX-EXEMPT BOND PORTFOLIO'S investment objective is to
seek as high a level of interest income exempt from federal income tax as is
consistent with conservation of capital. Under normal market conditions,
substantially all of the Portfolio's assets are expected to be invested in
municipal obligations that are also exempt from Missouri income tax.

THE ARCH NATIONAL MUNICIPAL BOND PORTFOLIO'S investment objective is to seek
as high a level of current income exempt from regular federal income tax as is
consistent with conservation of capital.

THE ARCH EQUITY INCOME PORTFOLIO'S investment objective is to seek to
provide an above-average level of income consistent with long-term capital
appreciation.

THE ARCH EQUITY INDEX PORTFOLIO'S investment objective is to seek to provide
investment results that, before deduction of operating expenses, approximate the
price and yield performance of U.S. publicly traded common stocks with large
stock market capitalizations, as represented by the Standard & Poor's 500
Composite Stock Price Index.

THE ARCH GROWTH & INCOME EQUITY PORTFOLIO'S investment objective is to
provide long-term capital growth, with income a secondary consideration.

THE ARCH SMALL CAP EQUITY PORTFOLIO'S investment objective is capital
appreciation. Current income is an incidental consideration in the selection of
portfolio securities. The Portfolio was formerly known as the ARCH Emerging
Growth Portfolio.

THE ARCH INTERNATIONAL EQUITY PORTFOLIO'S investment objective is to provide
capital growth consistent with reasonable investment risk by investing primarily
in foreign equity securities, most of which will be denominated in foreign
currencies.

THE ARCH BALANCED PORTFOLIO'S investment objective is to maximize total
return through a combination of growth of capital and current income consistent
with the preservation of capital.

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.

MARCH 31, 1997

<PAGE> 6

Mississippi Valley Advisors Inc. ("MVA" or the "Adviser"), a wholly-owned
subsidiary of Mercantile Bank National Association ("Mercantile"), acts as
investment adviser for the Portfolios. 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. In
addition, Clay Finlay Inc. ("Clay Finlay" or the "Sub-Adviser") serves as
sub-adviser for the International Equity Portfolio.

This Prospectus sets forth concisely certain information about the
Portfolios that prospective investors should know before investing. Investors
should read this Prospectus and retain it for future reference. Additional
information about the Portfolios, contained in a Statement of Additional
Information dated March 31, 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.

AN INVESTMENT IN THE TREASURY MONEY MARKET PORTFOLIO, MONEY MARKET PORTFOLIO
OR TAX-EXEMPT MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT ANY OF THESE PORTFOLIOS WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

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 Portfolios involves investment risk, including the possible loss of
principal.

2
<PAGE> 7

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 Fund offers investment opportunities in
sixteen investment portfolios: the ARCH TREASURY MONEY MARKET, MONEY MARKET and
TAX-EXEMPT MONEY MARKET PORTFOLIOS (the "Money Market Portfolios") and the ARCH
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, INTERNATIONAL EQUITY and BALANCED PORTFOLIOS (the "Equity and
Bond Portfolios" and, together with the Money Market Portfolios, the
"Portfolios"). Each Portfolio represents a separate pool of assets with
different investment objectives and policies (as described below under
"Investment Objectives, 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. In addition,
Clay Finlay serves as sub-adviser for the International Equity Portfolio. 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 Portfolios and their
investment objectives. There can be no assurance that the Portfolios will be
able to achieve their respective investment objectives.

The Money Market Portfolios each seek to maintain a net asset value of
$1.00 per Share. Each Money Market Portfolio's assets are invested in
dollar-denominated debt securities with remaining maturities of 397 days (13
months) or less as defined by the Securities and Exchange Commission, and each
Money Market Portfolio's dollar-weighted average portfolio maturity will not
exceed 90 days. All securities acquired by the Money Market Portfolios will be
determined by MVA, under guidelines approved by the Fund's Board of Directors,
to present minimal credit risks and to be rated in the highest category (or
deemed comparable in quality) at the time of purchase. There can be no assurance
that the Money Market Portfolios will be able to achieve a stable net asset
value on a continuous basis.

The U.S. Government Securities and Government & Corporate Bond Portfolios
are designed for investors who seek higher current income than is typically
offered by money market funds and who are willing to accept a variable Share
value to achieve that objective.

The Intermediate Corporate Bond Portfolio is designed for investors who
seek higher current income than is typically offered by money market funds with
less principal volatility than is normally associated with a long-term bond
fund.

The Bond Index Portfolio is designed for investors who are willing to
accept the risks associated with an investment in fixed income securities, and
who seek investment results that, before deduction of operating expenses,
approximate the price and yield performance of U.S. Government, mortgage-backed,
asset-backed and corporate debt securities, as represented by the Lehman
Brothers Aggregate Bond Index.

The Short-Intermediate Municipal Portfolio is designed for investors who
seek a yield that is higher than a municipal money market fund with less
principal volatility than is normally associated with a long-term municipal bond
fund.

The Missouri Tax-Exempt Bond Portfolio is designed for investors who seek a
higher rate of return than that typically offered by tax-exempt money market
funds and who are willing to accept a variable Share value to achieve that
objective.

The National Municipal Bond Portfolio is designed for investors who seek
current income that is exempt from regular federal income tax and relative
stability of principal.

The Equity Income Portfolio is designed for investors who seek an
above-average level of income consistent with long-term capital appreciation,
and who are prepared to accept the risks associated with an investment in equity
securities.

The 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

3
<PAGE> 8

deduction of operating expenses, approximate the price and yield performance of
U.S. publicly traded common stocks with large stock market capitalizations, as
represented by the Standard & Poor's 500 Composite Stock Price Index.

The Growth & Income Equity, Small Cap Equity and Balanced Portfolios are
designed for investors who seek capital growth, and who are prepared to accept
the risks associated with equity securities.

The International Equity Portfolio is designed for investors who seek
capital growth, wish to diversify their investments beyond the United States,
and are prepared to accept the risks entailed in such investments. These risks
may be greater than those associated with investments in the equity securities
of companies located in the United States.

The Tax-Exempt Money Market, Short-Intermediate Municipal, Missouri
Tax-Exempt Bond and National Municipal Bond Portfolios seek to provide income
exempt from federal tax. In addition, the Missouri Tax-Exempt Bond Portfolio
seeks to provide income that is also exempt from Missouri income tax.

Investors should note that one or more of the Portfolios may, subject to
their investment policies and limitations, purchase variable and floating rate
instruments, enter into repurchase agreements and reverse repurchase agreements,
make securities loans, invest in options, 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, the absence of a secondary
market for a particular variable or floating rate instrument could make it
difficult for a Portfolio to dispose of an instrument if the issuer were to
default on its payment obligation. 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 a 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. Investments in futures and
related options are subject to the ability of the Adviser to correctly predict
movements in the direction of the market and there is no assurance that a liquid
market will exist for a particular futures contract at any particular time.

The Equity and Bond Portfolios, other than the Bond Index and Equity Index
Portfolios, may engage in short-term trading, which may also involve greater
risk and increase such Portfolios' expenses. The International Equity Portfolio
will invest principally in foreign equity securities, most of which will be
denominated in foreign currencies. The other Portfolios do not invest in
instruments denominated in foreign currencies (except that the Growth & Income
Equity, Small Cap Equity, and Balanced Portfolios may invest in certain Canadian
securities and the Intermediate Corporate Bond Portfolio may invest in debt
securities issued by foreign corporations and governments). Foreign securities
entail certain inherent risks, such as future political and economic
developments and the adoption of foreign government restrictions, that might
adversely affect payment of dividends or principal and interest.

The Tax-Exempt Money Market, Short-Intermediate Municipal, Missouri
Tax-Exempt Bond and National Municipal Bond Portfolios may, under certain
conditions, make limited investments in securities the income from which may be
subject to federal income tax. See "Investment Objectives, Policies and Risk
Considerations" below and the Statement of Additional Information under
"Investment Objectives 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 Portfolios also offer the economic
advantages of block trading in securities and the availability of a family of
sixteen mutual funds should an investor's investment goals change.

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

4
<PAGE> 9

CERTAIN FINANCIAL INFORMATION

Shares of the Money Market, U.S. Government Securities, Government &
Corporate Bond, Equity Income, Growth & Income Equity, Small Cap Equity,
International Equity and Balanced Portfolios have been classified into four
classes of Shares--Trust Shares, Institutional Shares, Investor A Shares and
Investor B Shares. Shares of the Treasury Money Market, Intermediate Corporate
Bond, Bond Index and Equity Index Portfolios have been classified into three
classes of Shares--Trust Shares, Institutional Shares and Investor A Shares.
Shares of the Missouri Tax-Exempt Bond and National Municipal Bond Portfolios
have been classified into three classes of Shares--Trust Shares, Investor A
Shares and Investor B Shares. Shares of the Tax-Exempt Money Market and
Short-Intermediate Municipal Portfolios have been classified into two classes of
Shares-- Trust Shares and Investor A Shares. Shares of each class in a Portfolio
represent equal, pro rata interests in the investments held by that 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, Sub-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/or Investor B Shares in a Portfolio can be
expected, at any given time, to be different.

The Tax-Exempt Money Market Portfolio and Missouri Tax-Exempt Bond
Portfolio commenced operations on July 10, 1986 and July 15, 1988, respectively,
as separate investment portfolios (the "Predecessor Tax-Exempt Money Market
Portfolio" and "Predecessor Missouri Tax-Exempt Bond Portfolio," respectively)
of The ARCH Tax-Exempt Trust (the "Trust"), which was organized as a
Massachusetts business trust. On October 2, 1995, the Predecessor Tax-Exempt
Money Market Portfolio and the Predecessor Missouri Tax-Exempt Bond Portfolio
were reorganized as new portfolios of the Fund. Prior to the reorganization,
these Predecessor Portfolios offered and sold shares of beneficial interest that
were similar to the Fund's Trust Shares, Investor A Shares and Investor B
Shares.

EXPENSE SUMMARY FOR TRUST SHARES

<TABLE>
<CAPTION>
TREASURY TAX-EXEMPT U.S. INTERMEDIATE GOVERNMENT SHORT-
MONEY MONEY MONEY GOVERNMENT CORPORATE BOND & CORPORATE INTERMEDIATE
MARKET MARKET MARKET SECURITIES BOND INDEX BOND MUNICIPAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------- ---------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL PORTFOLIO OPERATING
EXPENSES (as a
percentage of average
net assets)
Investment Advisory Fees
(net of fee
waivers)1............. .35% .35% .35% .45% .00% .00% .45% .00%
12b-1 Fees.............. .00% .00% .00% .00% .00% .00% .00% .00%
Other Expenses
(including
administration fees,
administrative
services fees and
other expenses) (net
of fee waivers and
expense
reimbursements)2,3.... .26% .26% .18% .22% .23% .20% .20% .31%
--- --- --- --- --- --- --- ---
Total Portfolio
Operating Expenses
(net of fee waivers
and expense
reimbursements)3...... .61% .61% .53% .67% .23% .20% .65% .31%
=== === === === === === === ===
</TABLE>

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

1 Without fee waivers, investment advisory fees would be .40%, .40%, .40%, .45%,
.55%, .30%, .45% and .55% for the Treasury Money Market, Money Market,
Tax-Exempt Money Market, U.S. Government Securities, Intermediate Corporate
Bond, Bond Index, Government & Corporate Bond and Short-Intermediate Municipal
Portfolios, respectively.
2 Without fee waivers, administration fees would be .10% for the Tax-Exempt
Money Market Portfolio and .20% for each other Portfolio. Administrative
services fees are payable at an annual rate not to exceed .25% for the Money
Market Portfolios and .30% for the Equity and Bond Portfolios.

3 Without fee waivers and/or expense reimbursements, Other Expenses would be
.61%, .61%, .43%, .62%, .67%, .60%, .30% and .71% and Total Portfolio
Operating Expenses would be 1.01%, 1.01%, .83%, 1.07%, 1.22%, .90%, 1.05% and
1.26% for the Treasury Money Market, Money Market, Tax-Exempt Money Market,
U.S. Government Securities, Intermediate Corporate Bond, Bond Index,
Government & Corporate Bond and Short-Intermediate Municipal Portfolios,
respectively.

5
<PAGE> 10

<TABLE>
<CAPTION>
MISSOURI NATIONAL GROWTH &
TAX-EXEMPT MUNICIPAL EQUITY EQUITY INCOME SMALL CAP INTERNATIONAL
BOND BOND INCOME INDEX EQUITY EQUITY EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- --------- --------- --------- -------- --------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL PORTFOLIO OPERATING
EXPENSES (as a percentage of
average net assets)
Investment Advisory Fees (net
of fee waivers)1............. .45% .00% .00% .00% .55% .75% 1.00% .75%
12b-1 Fees..................... .00% .00% .00% .00% .00% .00% .00% .00%
Other Expenses (including
administration fees,
administrative services fees
and other expenses) (net of
fee waivers and expense
reimbursements)2,3........... .20% .12% .18% .28% .20% .21% .34% .22%
--- --- --- --- --- --- ---- ---
Total Portfolio Operating
Expenses (net of fee waivers
and expense
reimbursements)3............. .65% .12% .18% .28% .75% .96% 1.34% .97%
=== === === === === === ==== ===
</TABLE>

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

1 Without fee waivers, investment advisory fees would be .45%, .55%, .75%, .30%,
.55%, .75%, 1.00% and .75% for the Missouri Tax-Exempt Bond, National
Municipal Bond, Equity Income, Equity Index, Growth & Income Equity, Small Cap
Equity, International Equity and Balanced Portfolios, respectively.

2 Without fee waivers, administration fees would be .20% for each Portfolio.
Administrative services fees are payable at an annual rate not to exceed .25%
for the Money Market Portfolios and .30% for the Equity and Bond Portfolios.

3 Without fee waivers and/or expense reimbursements, Other Expenses would be
.60%. .57%, .62%, .68%, .55%, .61%, .74% and .62% and Total Portfolio
Operating Expenses would be 1.05%, 1.12%, 1.37%, .98%, 1.10%, 1.36%, 1.74% and
1.37% for the Missouri Tax-Exempt Bond, National Municipal Bond, Equity
Income, Equity Index, Growth & Income Equity, Small Cap Equity, International
Equity and Balanced Portfolios, respectively.

6
<PAGE> 11

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) a 5% annual return and (2)
redemption at the end of each period:

Treasury Money Market Portfolio.................... $ 6 $20 $34 $ 76
Money Market Portfolio............................. $ 6 $20 $34 $ 76
Tax-Exempt Money Market Portfolio.................. $ 5 $17 $30 $ 66
U.S. Government Securities Portfolio............... $ 7 $21 $37 $ 83
Intermediate Corporate Bond Portfolio.............. $ 2 $ 7 N/A N/A
Bond Index Portfolio............................... $ 2 $ 7 N/A N/A
Government & Corporate Bond Portfolio.............. $ 7 $21 $36 $ 81
Short-Intermediate Municipal Portfolio............. $ 3 $10 $17 $ 39
Missouri Tax-Exempt Bond Portfolio................. $ 7 $21 $36 $ 81
National Municipal Bond Portfolio.................. $ 1 $ 4 N/A N/A
Equity Income Portfolio............................ $ 2 $ 6 N/A N/A
Equity Index Portfolio............................. $ 3 $ 9 N/A N/A
Growth & Income Equity Portfolio................... $ 8 $24 $42 $ 93
Small Cap Equity Portfolio......................... $ 10 $31 $53 $118
International Equity Portfolio..................... $ 14 $42 $73 $161
Balanced Portfolio................................. $ 10 $31 $54 $119
</TABLE>

THE FOREGOING 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 all of the
Portfolios is contained in the Fund's Annual Report to Shareholders dated
November 30, 1996 which may be obtained without charge by contacting the Fund at
the address or telephone number provided on page 2 of this Prospectus.

The purpose of the foregoing tables is to assist in understanding the
various costs and expenses that an investor in a Portfolio's Trust Shares will
bear directly or indirectly. The information contained in such tables with
respect to the Treasury Money Market, Money Market, Tax-Exempt Money Market,
U.S. Government Securities, Government & Corporate Bond, Short-Intermediate
Municipal, Missouri Tax-Exempt Bond, Growth & Income Equity, Small Cap Equity,
International Equity and Balanced Portfolios is based on expenses incurred by
each of these Portfolios during the last fiscal year with respect to its Trust
Shares. Such information with respect to the National Municipal Bond Portfolio
is based on expenses incurred by such Portfolio during the last fiscal year,
restated to reflect the expenses that the Portfolio expects to incur during the
current fiscal year with respect to its Trust Shares. Such information with
respect to the Intermediate Corporate Bond, Bond Index, Equity Income and Equity
Index Portfolios is based on expenses each such Portfolio expects to incur
during the current fiscal year with respect to 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
Tables and Examples 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.

7
<PAGE> 12

FINANCIAL HIGHLIGHTS

The Financial Highlights in the following tables supplement the Fund's
financial statements, which are contained in the Fund's Annual Report to
Shareholders dated November 30, 1996 and incorporated by reference into the
Statement of Additional Information. The Financial Highlights set forth certain
historic results for Trust Shares of each Portfolio other than the Intermediate
Corporate Bond, Bond Index, Equity Income and Equity Index Portfolios which had
not commenced investment operations as of November 30, 1996. The data for the
years ended November 30, 1989 through 1996, and with respect to the Tax-Exempt
Money Market and Missouri Tax-Exempt Bond Portfolios (and their Predecessor
Portfolios), for the year ended November 30, 1996, the six-month period ended
November 30, 1995 and each of the years or periods ended May 31, 1990 through
1995, has been audited by KPMG Peat Marwick LLP, independent auditors, whose
unqualified report insofar as it relates to each of the years or periods in the
five-year period ended November 30, 1996 (the year ended November 30, 1996, the
six-month period ended November 30, 1995 and each of the years or periods in the
four-year period ended May 31, 1995 with respect to the Tax-Exempt Money Market
and Missouri Tax-Exempt Bond Portfolios (and their Predecessor Portfolios)) on
the financial statements containing such information is incorporated by
reference into the Statement of Additional Information. The data for the years
ended November 30, 1987 and 1988 and with respect to the Predecessor Tax-Exempt
Money Market and Predecessor Missouri Tax-Exempt Bond Portfolios, for the years
ended May 31, 1989 and 1988 and the period ended May 31, 1987, were derived from
financial statements audited by the Fund's and the Trust's prior auditors.
Further information about the performance of the Portfolios is available in the
Fund's Annual Report. Both the Statement of Additional Information and the
Annual Report may be obtained free of charge by contacting the Fund at the
address or telephone number provided on page 2 of this Prospectus.

TREASURY MONEY MARKET PORTFOLIO
(For a Share(b) outstanding throughout each period)

<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------
DECEMBER 2, 1991
1996 1995 1994 1993 TO NOVEMBER 30,
-------- -------- -------- -------- 1992(a)(b)
TRUST TRUST TRUST TRUST ----------------
SHARES SHARES SHARES SHARES TRUST SHARES
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Investment Activities
Net investment income.................... 0.045 0.050 0.033 0.026 0.034
-------- -------- -------- -------- --------
Total from Investment Activities....... 0.045 0.050 0.033 0.026 0.034
-------- -------- -------- -------- --------
Distributions
Net investment income.................... (0.045) (0.050) (0.033) (0.026) (0.034)
-------- -------- -------- -------- --------
Total Distributions.................... (0.045) (0.050) (0.033) (0.026) (0.034)
-------- -------- -------- -------- --------
Net Asset Value, End of Period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return............................... 4.64% 5.12% 3.38% 2.67% 3.16%(c)
Ratios/Supplemental Data:
Net Assets at end of period (000)........ $131,322 $252,780 $242,099 $256,503 $229,288
Ratio of expenses to average net assets
(including waivers).................... 0.61% 0.60% 0.49% 0.41% 0.28%(d)
Ratio of net investment income to average
net assets (including waivers)......... 4.55% 5.01% 3.26% 2.64% 3.35%(d)
Ratio of expenses to average net assets
(before waivers)*...................... 0.76% 0.75% 0.94% 0.85% 0.72%(d)
Ratio of net investment income to average
net assets (before waivers)*........... 4.40% 4.86% 2.82% 2.21% 2.91%(d)
</TABLE>

- ---------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) On December 2, 1991, the Portfolio issued a series of Shares which were
designated as "Trust" Shares. In addition, on April 20, 1992, the Portfolio
issued a second series of Shares which were designated as "Investor" Shares.
On September 27, 1994, the Portfolio redesignated Investor Shares as
"Investor A" Shares.
(c) Not Annualized.
(d) Annualized.

8
<PAGE> 13

MONEY MARKET PORTFOLIO
(For a Share(a) outstanding throughout each period)

<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------------------
1996 1995 1994 1993 1992 1991(a)
-------- -------- -------- -------- -------- --------
TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Investment Activities
Net investment income........................... 0.049 0.054 0.035 0.026 0.034 0.058
-------- -------- -------- -------- -------- --------
Total from Investment Activities.............. 0.049 0.054 0.035 0.026 0.034 0.058
-------- -------- -------- -------- -------- --------
Distributions
Net investment income........................... (0.049) (0.054) (0.035) (0.026) (0.034) (0.058)
-------- -------- -------- -------- -------- --------
Total Distributions........................... (0.049) (0.054) (0.035) (0.026) (0.034) (0.058)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total Return...................................... 4.99% 5.52% 3.55% 2.72% 3.44% 5.95%
Ratios/Supplemental Data:
Net Assets at end of period (000)............... $717,265 $698,131 $544,952 $621,717 $574,941 $700,474
Ratio of expenses to average net assets
(including waivers)........................... 0.61% 0.59% 0.61% 0.59% 0.57% 0.59%
Ratio of net investment income to average net
assets (including waivers).................... 4.88% 5.38% 3.45% 2.70% 3.44% 5.81%
Ratio of expenses to average net assets (before
waivers)*..................................... 0.76% 0.74% 0.93% 0.80% 0.71% 0.67%
Ratio of net investment income to average net
assets (before waivers)*...................... 4.73% 5.23% 3.13% 2.49% 3.30% 5.73%

<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------
1990 1989 1988 1987
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Investment Activities
Net investment income........................... 0.078 0.088 0.071 0.062
-------- -------- -------- --------
Total from Investment Activities.............. 0.078 0.088 0.071 0.062
-------- -------- -------- --------
Distributions
Net investment income........................... (0.078) (0.088) (0.071) (0.062)
-------- -------- -------- --------
Total Distributions........................... (0.078) (0.088) (0.071) (0.062)
-------- -------- -------- --------
Net Asset Value, End of Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Return...................................... 8.08% 9.21% 7.33%(b) 6.40%(b)
Ratios/Supplemental Data:
Net Assets at end of period (000)............... $896,903 $661,145 $289,764 $220,944
Ratio of expenses to average net assets
(including waivers)........................... 0.55% 0.45% 0.45% 0.45%
Ratio of net investment income to average net
assets (including waivers).................... 7.77% 8.82% 7.12% 6.22%
Ratio of expenses to average net assets (before
waivers)*..................................... 0.60% 0.60% 0.58% 0.68%
Ratio of net investment income to average net
assets (before waivers)*...................... 7.72% 8.67% 6.99% 5.99%
</TABLE>

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

9
<PAGE> 14

TAX-EXEMPT MONEY MARKET PORTFOLIO(a)
(For a Share(b) outstanding throughout each period)

<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED MAY 31,
YEAR ENDED ENDED -------------------------------------------------------
NOVEMBER 30, NOVEMBER 30,
1996 1995(f) 1995 1994 1993 1992 1991(b)
------------ ------------ ------- -------- -------- -------- --------
TRUST TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------------ ------------ ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------- -------- -------- --------
Investment Activities
Net investment income............. 0.030 0.016 0.029 0.020 0.021 0.034 0.031
------- ------- ------- -------- -------- -------- --------
Total from Investment
Activities.................... 0.030 0.016 0.029 0.020 0.021 0.034 0.031
------- ------- ------- -------- -------- -------- --------
Distributions
Net investment income............. (0.030) (0.016) (0.029) (0.020) (0.021) (0.034) (0.031)
------- ------- ------- -------- -------- -------- --------
Total Distributions............. (0.030) (0.016) (0.029) (0.020) (0.021) (0.034) (0.031)
------- ------- ------- -------- -------- -------- --------
Net Asset Value, End of Period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======== ======== ======== ========
Total Return........................ 3.06% 1.57%(d) 2.93% 1.97% 2.16% 3.44% 2.25%
Ratios/Supplemental Data:
Net Assets at end of period
(000)........................... $ 95,726 $ 78,031 $85,324 $112,594 137,602 $126,079 $137,847
Ratio of expenses to average net
assets (including waivers)...... 0.53% 0.70%(e) 0.61% 0.52% 0.52% 0.59% 0.58%
Ratio of net investment income to
average net assets (including
waivers)........................ 3.01% 3.10%(e) 2.87% 1.95% 2.13% 3.38% 4.65%
Ratio of expenses to average net
assets (before waivers)*........ 0.58% 0.75%(e) 0.70% 0.86% 0.62% 0.69% 0.68%
Ratio of net investment income to
average net assets (before
waivers)*....................... 2.96% 3.05%(e) 2.78% 1.61% 2.03% 3.28% 4.55%

<CAPTION>
PERIOD
ENDED
MAY 31,
1990(b) 1989(b) 1988(b) 1987(a)(b)
-------- ------- ------- ---------
TRUST TRUST TRUST PORTFOLIO
SHARES SHARES SHARES SHARES
-------- ------- ------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- -------
Investment Activities
Net investment income............. 0.056 0.056 0.043 0.036
-------- ------- ------- -------
Total from Investment
Activities.................... 0.056 0.056 0.043 0.036
-------- ------- ------- -------
Distributions
Net investment income............. (0.056) (0.056) (0.043) (0.036)
-------- ------- ------- -------
Total Distributions............. (0.056) (0.056) (0.043) (0.036)
-------- ------- ------- -------
Net Asset Value, End of Period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= =======
Total Return........................ 5.71% 5.74% 4.35% 3.80%(d)
Ratios/Supplemental Data:
Net Assets at end of period
(000)........................... $132,407 $70,153 $72,120 $ 147,799
Ratio of expenses to average net
assets (including waivers)...... 0.51% 0.45% 0.45% 0.37%(c)(e)
Ratio of net investment income to
average net assets (including
waivers)........................ 5.57% 5.59% 4.27% 4.02%(c)(e)
Ratio of expenses to average net
assets (before waivers)*........ 0.61% 0.63% 0.60% 0.62%(c)(e)
Ratio of net investment income to
average net assets (before
waivers)*....................... 5.47% 5.41% 4.12% 3.77%(c)(e)
</TABLE>

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

* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) The Portfolio commenced operations on July 10, 1986 as a portfolio of The
ARCH Tax-Exempt Trust. On October 2, 1995, it was reorganized as a new
portfolio of the Fund.
(b) "Trust" Shares were originally issued as "Money" Shares. As of September 28,
1990, the Portfolio issued a second series of Shares which were designated
as "Trust" Shares. The financial highlights presented for periods prior to
September 28, 1990 are the financial highlights applicable to Money Shares.
(c) Includes waiver of sub-advisory fees for the period ended May 31, 1987.
(d) Not Annualized.
(e) Annualized.
(f) Upon its reorganization as a portfolio of the Fund, the Portfolio changed
its fiscal year-end from May 31 to November 30.

10
<PAGE> 15

U.S. GOVERNMENT SECURITIES PORTFOLIO
(For a Share(a)outstanding throughout each period)

<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------------------------------------------------
1996 1995 1994 1993 1992 1991(a)
------- ------- ------- ------- ------- -------
TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 10.85 $ 10.05 $ 11.20 $ 10.80 $ 10.68 $ 10.42
------- ------- ------- ------- ------- -------
Investment Activities
Net investment income..................................... 0.66 0.67 0.66 0.62 0.66 0.64
Net realized and unrealized gains (losses) from
investments............................................. (0.15) 0.80 (0.97) 0.47 0.13 0.26
------- ------- ------- ------- ------- -------
Total from Investment Activities........................ 0.51 1.47 (0.31) 1.09 0.79 0.90
------- ------- ------- ------- ------- -------
Distributions
Net investment income..................................... (0.66) (0.67) (0.66) (0.62) (0.66) (0.64)
Net realized gains........................................ -- -- -- (0.07) (0.01) --
In excess of net realized gains........................... (0.03) -- (0.18) -- -- --
------- ------- ------- ------- ------- -------
Total Distributions..................................... (0.69) (0.67) (0.84) (0.69) (0.67) (0.64)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.............................. $ 10.67 $ 10.85 $ 10.05 $ 11.20 $ 10.80 $ 10.68
======= ======= ======= ======= ======= =======
Total Return................................................ 4.88% 15.00% (2.85%) 10.36% 7.52% 12.62%
Ratios/Supplemental Data:
Net Assets at end of period (000)......................... $60,079 $45,513 $33,166 $35,121 $31,106 $21,484
Ratio of expenses to average net assets................... 0.67% 0.67% 0.66% 0.67% 0.65% 0.56%
Ratio of net investment income to average net assets...... 6.10% 6.36% 6.25% 5.57% 6.02% 7.26%
Ratio of expenses to average net assets (before
waivers)*............................................... 0.77% 0.77% 1.06% 0.91% 0.79% 1.11%
Ratio of net investment income to average net assets
(before waivers)*....................................... 6.00% 6.26% 5.85% 5.33% 5.88% 6.71%
Portfolio turnover........................................ 53.76% 93.76% 50% 24% 74% 36%

JUNE 2,
1988 TO
NOVEMBER 30,
1990 1989 1988(b)
------ ------ ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $10.06 $ 9.94 $10.00
------ ------ ------
Investment Activities
Net investment income..................................... 0.76 0.85 0.36
Net realized and unrealized gains (losses) from
investments............................................. 0.16 0.11 (0.06)
------ ------ ------
Total from Investment Activities........................ 0.92 0.96 0.30
------ ------ ------
Distributions
Net investment income..................................... (0.77) (0.84) (0.36)
Net realized gains........................................ -- -- --
In excess of net realized gains........................... -- -- --
------ ------ ------
Total Distributions..................................... (0.77) (0.84) (0.36)
------ ------ ------
Net Asset Value, End of Period.............................. $10.21 $10.06 $ 9.94
====== ====== ======
Total Return................................................ 9.66% 10.04% 3.05%(c)(d)
Ratios/Supplemental Data:
Net Assets at end of period (000)......................... $6,856 $5,954 $4,335
Ratio of expenses to average net assets................... 0.73% 0.74% 0.79%(e)
Ratio of net investment income to average net assets...... 7.80% 8.50% 7.26%(e)
Ratio of expenses to average net assets (before
waivers)*............................................... 1.28% 1.29% 1.40%(e)
Ratio of net investment income to average net assets
(before waivers)*....................................... 7.25% 7.95% 6.65%(e)
Portfolio turnover........................................ 53% 84% 215%
</TABLE>

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

* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) As of December 1, 1990, the Portfolio designated the existing series of
Shares as "Investor" Shares. In addition, on February 1, 1991, the Portfolio
issued a second series of Shares which were designated as "Trust" Shares.
The financial highlights presented for the periods prior to February 1, 1991
are the financial highlights applicable to Investor Shares. On September 27,
1994, the Portfolio redesignated the Investor Shares as "Investor A" Shares.
(b) Period from commencement of operations.
(c) Unaudited.
(d) Not Annualized.
(e) Annualized.

11
<PAGE> 16

GOVERNMENT & CORPORATE BOND PORTFOLIO
(For a Share(a) outstanding throughout each period)

<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------------------------------------------------
1996 1995 1994 1993 1992 1991(a)
-------- -------- -------- -------- -------- -------
TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....................... $ 10.53 $ 9.64 $ 10.65 $ 10.26 $ 10.15 $ 9.84
-------- -------- -------- -------- -------- -------
Investment Activities
Net investment income.................................... 0.67 0.64 0.63 0.68 0.70 0.64
Net realized and unrealized gains (losses) from
investments............................................ (0.19) 0.89 (0.94) 0.39 0.11 0.31
-------- -------- -------- -------- -------- -------
Total from Investment Activities....................... 0.48 1.53 (0.31) 1.07 0.81 0.95
-------- -------- -------- -------- -------- -------
Distributions
Net investment income.................................... (0.67) (0.64) (0.63) (0.68) (0.70) (0.64)
In excess of net realized gains.......................... -- -- (0.07) -- -- --
-------- -------- -------- -------- -------- -------
Total Distributions.................................... (0.67) (0.64) (0.70) (0.68) (0.70) (0.64)
-------- -------- -------- -------- -------- -------
Net Asset Value, End of Period............................. $ 10.34 $ 10.53 $ 9.64 $ 10.65 $ 10.26 $ 10.15
======== ======== ======== ======== ======== =======
Total Return............................................... 4.82% 16.31% (3.03)% 10.55% 8.14% 13.04%
Ratios/Supplemental Data:
Net Assets at end of period (000)........................ $141,440 $127,741 $132,577 $149,674 $135,404 $89,975
Ratio of expenses to average net assets (including
waivers)............................................... 0.65% 0.65% 0.65% 0.65% 0.63% 0.36%
Ratio of net investment income to average net assets
(including waivers).................................... 6.36% 6.32% 6.25% 6.32% 6.73% 7.51%
Ratio of expenses to average net assets (before
waivers)*.............................................. 0.75% 0.75% 1.05% 0.88% 0.76% 0.91%
Ratio of net investment income to average net assets
(before waivers)*...................................... 6.26% 6.22% 5.85% 6.09% 6.60% 6.96%
Portfolio turnover....................................... 149.20% 59.32% 50% 31% 52% 105%

JUNE 15,
1988 TO
NOVEMBER 30,
1990 1989 1988(b)
------- ------- ------------
<S> <<C> <C> <C>
Net Asset Value, Beginning of Period....................... $ 10.12 $ 9.91 $ 10.00
------- ------- ------
Investment Activities
Net investment income.................................... 0.84 0.89 0.39
Net realized and unrealized gains (losses) from
investments............................................ (0.41) 0.22 (0.13)
------- ------- ------
Total from Investment Activities....................... 0.43 1.11 0.26
------- ------- ------
Distributions
Net investment income.................................... (0.84) (0.90) (0.35)
In excess of net realized gains.......................... -- -- --
------- ------- ------
Total Distributions.................................... (0.84) (0.90) (0.35)
------- ------- ------
Net Asset Value, End of Period............................. $ 9.71 $ 10.12 $ 9.91
======= ======= ======
Total Return............................................... 4.96% 11.79% 2.66%(c)(d)
Ratios/Supplemental Data:
Net Assets at end of period (000)........................ $11,005 $10,327 $ 7,483
Ratio of expenses to average net assets (including
waivers)............................................... 0.53% 0.44% 0.56%(e)
Ratio of net investment income to average net assets
(including waivers).................................... 8.69% 8.97% 8.47%(e)
Ratio of expenses to average net assets (before
waivers)*.............................................. 1.08% 0.99% 1.17%(e)
Ratio of net investment income to average net assets
(before waivers)*...................................... 8.14% 8.42% 7.86%(e)
Portfolio turnover....................................... 75% 148% 22%
</TABLE>

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

* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) As of December 1, 1990, the Portfolio designated the existing series of
Shares as "Investor" Shares. In addition, on February 1, 1991, the Portfolio
issued a second series of Shares which were designated as "Trust" Shares.
The financial highlights presented for periods prior to February 1, 1991 are
the financial highlights applicable to Investor Shares. On September 27,
1994 the Portfolio redesignated the Investor Shares as "Investor A" Shares.
(b) Period from commencement of operations.
(c) Unaudited.
(d) Not Annualized.
(e) Annualized.

12
<PAGE> 17

SHORT-INTERMEDIATE MUNICIPAL PORTFOLIO
(For a Share outstanding throughout each period)

<TABLE>
<CAPTION>
JULY 10, 1995
YEAR ENDED TO NOVEMBER 30,
NOVEMBER 30, 1996 1995(a)
----------------- ---------------
TRUST SHARES TRUST SHARES
----------------- ---------------
<S> <C> <C>
Net Asset Value, Beginning of Period............................. $ 10.07 $ 10.00
------- -------
Investment Activities Net investment income (loss)............... 0.41 0.14
Net realized and unrealized gains (losses) from investments.... -- 0.07
------- -------
Total from Investment Activities............................. 0.41 0.21
------- -------
Distributions
Net investment income.......................................... (0.41) (0.14)
------- -------
Total Distributions.......................................... (0.41) (0.14)
------- -------
Net Asset Value, End of Period................................... $ 10.07 $ 10.07
======= =======
Total Return..................................................... 4.15% 2.15%(b)
Ratios/Supplemental Data:
Net Assets at end of period (000).............................. $29,472 $23,754
Ratio of expenses to average net assets (including waivers).... 0.31% 0.47%(c)
Ratio of net investment income to average net assets (including
waivers)..................................................... 4.07% 3.81%
Ratio of expenses to average net assets (before waivers)*...... 0.96% 1.12%(c)
Ratio of net investment income to average net assets (before
waivers)*.................................................... 3.42% 3.16%(c)
Portfolio turnover............................................. 0.00% 0.00%
</TABLE>

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

13
<PAGE> 18

MISSOURI TAX-EXEMPT BOND PORTFOLIO(a)
(For a Share(b) outstanding throughout each period)

<TABLE>
<CAPTION>
YEAR SIX MONTHS YEAR ENDED MAY 31, PERIOD
ENDED ENDED ----------------------------------------------------------------- ENDED
NOVEMBER 30, NOVEMBER 30, MAY 31,
1996 1995(c) 1995 1994 1993 1992 1991(b) 1990(b) 1989(a)(b)
------------ ------------ ------- ------- ------- ------ --------- --------- ----------
TRUST TRUST TRUST TRUST TRUST TRUST PORTFOLIO PORTFOLIO PORTFOLIO
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------------ ------------ ------- ------- ------- ------ --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............... $ 11.74 $ 11.52 $11.13 $11.54 $10.97 $10.62 $ 10.50 $ 10.56 $10.00
------- ------- ------- ------- ------- ------ ------ ------ ------
Investment Activities:
Net investment
income............. 0.57 0.28 0.57 0.58 0.60 0.64 0.67 0.68 0.58
Net realized and
unrealized gains
(losses) on
investments........ (0.05) 0.22 0.40 (0.37) 0.64 0.43 0.24 (0.09) 0.58
------- ------- ------- ------- ------- ------ ------ ------ ------
Total from Investment
Activities......... 0.52 0.50 0.97 0.21 1.24 1.07 0.91 0.59 1.16
------- ------- ------- ------- ------- ------ ------ ------ ------
Distributions
Net investment
income............. (0.57) (0.28) (0.57) (0.58) (0.60) (0.64) (0.70) (0.65) (0.60)
Net realized gains... -- -- (0.01) (0.04) (0.07) (0.08) (0.09) 0.00 0.00
------- ------- ------- ------- ------- ------ ------ ------ ------
Total
Distributions...... (0.57) (0.28) (0.58) (0.62) (0.67) (0.72) (0.79) (0.65) 0.00
------- ------- ------- ------- ------- ------ ------ ------ ------
Net Asset Value, End
of Period............ $ 11.69 $ 11.74 $11.52 $11.13 $11.54 $10.97 $ 10.62 $ 10.50 $10.56
======= ======= ======= ======= ======= ====== ====== ====== ======
Total Return.......... 4.62% 4.41%(d) 9.12% 1.73% 11.70% 10.37% 9.08% 5.50% 12.08%(d)
Ratios/Supplemental Data:
Net Assets at end of
period (000)....... $ 55,905 $ 47,773 $44,336 $47,743 $32,777 $6,609 $ 4,735 $ 4,568 $4,053
Ratio of expenses to
average net assets
(including
waivers)........... 0.65% 0.78%(e) 0.64% 0.45% 0.43% 0.73% 0.70%(e) 0.70% 0.81%(e)
Ratio of net
investment income
to average net
assets (including
waivers)........... 4.95% 4.83%(e) 5.22% 4.96% 5.30% 5.87% 6.37%(e) 6.38% 6.36%(e)
Ratio of expenses to
average net assets
(before
waivers)*.......... 0.75% 0.88%(e) 1.16% 1.13% 0.98% 1.38% 1.66% 1.70% 1.38%(e)
Ratio of net
investment income
to average net
assets (before
waivers)*.......... 4.85% 4.73%(e) 4.70% 4.28% 4.75% 5.22% 5.41% 5.38% 5.79%(e)
Portfolio turnover
rate............... 3.66% 1.55% -- 20% 15% 21% 71% 41% 73%
</TABLE>

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

* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) The Portfolio (formerly, the Long-Term Tax-Exempt Portfolio) commenced
operations on July 15, 1988 as a portfolio of The ARCH Tax-Exempt Trust. On
October 2, 1995, it was reorganized as a new portfolio of the Fund.
(b) The Portfolio had one class of Shares outstanding ("Portfolio Shares")
through September 27, 1990. As of September 28, 1990 the Portfolio issued a
second class of Shares and designated such Shares as "Trust" Shares. The
financial highlights presented for periods prior to September 28, 1990
represent the financial highlights applicable to Portfolio Shares.
(c) Upon its reorganization as a portfolio of the Fund, the Portfolio changed
its fiscal-year end from May 31 to November 30.
(d) Not Annualized.
(e) Annualized.

14
<PAGE> 19

NATIONAL MUNICIPAL BOND PORTFOLIO
(For a Share outstanding throughout each period)

<TABLE>
<CAPTION>
NOVEMBER 18, 1996
TO
NOVEMBER 30,
1996(a)
-------------------
TRUST SHARES
-------------------
<S> <C>
Net Asset Value, Beginning of Period..................................... $ 10.00
--------
Investment Activities
Net Investment income (loss)........................................... 0.02
Net realized and unrealized gains (losses) from investments............ 0.05
--------
Total from Investment Activities......................................... 0.07
--------
Distributions
Net investment income.................................................. (0.02)
--------
Total Distributions.................................................... (0.02)
--------
Net Asset Value, End of Period........................................... $ 10.05
========
Total Return............................................................. 0.74%(b)
Ratios/Supplemental Data:
Net Assets at end of period (000)...................................... $ 310,413
Ratio of expenses to average net assets (including waivers)............ 0.12%(c)
Ratio of net investment income to average net assets (including
waivers)............................................................ 5.77%(c)
Ratio of expenses to average net assets (before waivers)*.............. 0.82%(c)
Ratio of net investment income to average net assets (before
waivers)*........................................................... 5.07%(c)
Portfolio turnover..................................................... 0.0%
</TABLE>

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

15
<PAGE> 20

GROWTH & INCOME EQUITY PORTFOLIO
(For a Share(a) outstanding throughout each period)

JUNE 2,
YEAR ENDED NOVEMBER 30, 1988 TO
------------------------------------------------------------------------------------------- NOVEMBER 30,
1996 1995 1994 1993 1992 1991(a) 1990 1989 1988(b)
-------- -------- -------- -------- -------- -------- ------- ------- ------------
TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 16.32 $ 12.72 $ 14.74 $ 14.49 $ 12.33 $ 12.24 $ 12.41 $ 10.25 $ 10.00
-------- -------- -------- -------- -------- -------- ------- ------- -------
Investment Activities
Net investment
income............... 0.24 0.27 0.22 0.25 0.24 0.22 0.39 0.41 0.28
Net realized and
unrealized gains
(losses) from
investments.......... 3.34 3.74 (0.17) 1.06 2.25 0.03 (0.56) 2.29 0.06
-------- -------- -------- -------- -------- -------- ------- ------- -------
Total from Investment
Activities........... 3.58 4.01 0.05 1.31 2.49 0.25 (0.17) 2.70 0.34
-------- -------- -------- -------- -------- -------- ------- ------- -------
Distributions
Net investment
income............... (0.24) (0.27) (0.21) (0.25) (0.26) (0.16) (0.39) (0.51) (0.09)
In excess of net
investment income...... (0.01) -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- ------- ------- -------
Net realized gains...... (0.94) (0.14) (0.18) (0.81) (0.07) (0.63) (0.03)
In excess of net
realized gains....... -- -- (1.68) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- ------- ------- -------
Total
Distributions...... (1.19) (0.41) (2.07) (1.06) (0.33) (0.16) (1.02) (0.54) (0.09)
-------- -------- -------- -------- -------- -------- ------- ------- -------
Net Asset Value, End of
Period................. $ 18.71 $ 16.32 $ 12.72 $ 14.74 $ 14.49 $ 12.33 $ 11.22 $ 12.41 $ 10.25
======== ======== ======== ======== ======== ======== ======= ======= =======
Total Return............ 23.45% 32.27% 0.36% 9.65% 20.59% 17.39% (1.36)% 27.11% 3.45%(c)(d)
Ratios/Supplemental Data:
Net Assets at end of
period (000)......... $348,183 $286,546 $235,955 $238,771 $232,967 $139,021 $20,116 $17,892 $ 10,890
Ratio of expenses to
average net assets... 0.75% 0.75% 0.75% 0.74% 0.71% 0.27% 0.35% 0.42% 0.41%(e)
Ratio of net investment
income to average net
assets............... 1.50% 1.89% 1.72% 1.74% 1.94% 2.56% 3.42% 3.69% 5.62%(e)
Ratio of expenses to
average net assets
(before waivers)*.... 0.85% 0.85% 1.15% 0.96% 0.85% 0.91% 1.00% 1.07% 1.12%(e)
Ratio of net investment
income to average net
assets (before
waivers)*............ 1.40% 1.79% 1.32% 1.52% 1.80% 1.92% 2.77% 3.04% 4.91%(e)
Portfolio turnover..... 63.90% 58.50% 65% 41% 79% 78% 227% 133% 30%
Average commission rate
paid (f)............... $ 0.0598 -- -- -- -- -- -- -- --
</TABLE>

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

* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) As of December 1, 1990, the Portfolio designated the existing series of
Shares as "Investor" Shares. In addition, on April 1, 1991, the Portfolio
issued a second series of Shares which were designated as "Trust" Shares.
The financial highlights presented for the periods prior to December 1, 1990
are the financial highlights applicable to Investor Shares. On September 27,
1994, the Portfolio redesignated the Investor Shares as "Investor A" Shares.
(b) Period from commencement of operations.
(c) Unaudited.
(d) Not Annualized.
(e) Annualized.
(f) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and sold
for which commissions were charged.

16
<PAGE> 21

FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD

<TABLE>
<CAPTION>
SMALL CAP EQUITY PORTFOLIO(a) INTERNATIONAL EQUITY PORTFOLIO
------------------------------------------------------------ -------------------------------------
YEAR YEAR YEAR YEAR MAY 1, 1992 YEAR YEAR APRIL 4, 1994
ENDED ENDED ENDED ENDED TO ENDED ENDED TO
NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1996 1995 1994 1993 1992(b) 1996 1995 1994(b)
-------- -------- -------- -------- ------------ -------- -------- -------------
TRUST TRUST TRUST TRUST TRUST TRUST TRUST TRUST
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
-------- -------- -------- -------- ------------ -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $ 13.49 $ 12.01 $ 13.14 $ 11.23 $ 10.00 $ 10.79 $ 9.92 $ 10.00
-------- -------- ------- ------- ------- ------- ------- -------
Investment Activities
Net investment income
(loss).............. 0.02 0.03 (0.01) 0.03 0.04 0.06 0.03 0.01
Net realized and
unrealized gains
(losses) from
investments and
foreign currency.... 1.05 2.36 0.89 2.14 1.21 1.27 0.86 (0.09)
-------- -------- ------- ------- ------- ------- ------- -------
Total from Investment
Activities.......... 1.07 2.39 0.88 2.17 1.25 1.33 (0.89) (0.08)
-------- -------- ------- ------- ------- ------- ------- -------
Distributions
Net investment
income.............. (0.02) -- -- (0.05) (0.02) -- -- --
Net realized gains.... (1.05) (0.91) (1.78) (0.21) -- -- (0.01) --
In excess of realized
gains............... -- -- (0.23) -- -- -- (0.01) --
-------- -------- ------- ------- ------- ------- ------- -------
Total
Distributions..... (1.07) (0.91) (2.01) (0.26) (0.02) -- (0.02) --
-------- -------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period................ $ 13.49 $ 13.49 $ 12.01 $ 13.14 $ 11.23 $ 12.12 $ 10.79 $ 9.92
======== ======== ======= ======= ======= ======= ======= =======
Total Return............ 8.72% 21.70% 7.56% 19.75% 12.55%(c) 12.33% 8.97% (0.80%)(c)
Ratios/Supplemental Data:
Net Assets at end of
period (000)........ $171,295 $139,681 $77,690 $47,473 $ 26,829 $52,181 $36,096 $23,746
Ratio of expenses to
average net assets
(including
waivers)............ 0.96% 0.96% 0.95% 0.61% 0.30%(d) 1.14% 1.16% 1.23%(d)
Ratio of net
investment income to
average net assets
(including
waivers)............ 0.17% 0.18% (0.16)% 0.19% 0.78%(d) 0.51% 0.39% 0.23%(d)
Ratio of expenses to
average net assets
(before waivers)*... 1.06% 1.06% 1.36% 1.23% 1.12%(d) 1.45% 1.46% 1.95%(d)
Ratio of net
investment income to
average net assets
(before waivers)*... 0.07% 0.08% (0.56)% (0.43)% (0.04)%(d) 0.20% 0.09% (0.49%)(d)
Portfolio turnover.... 65.85% 83.13% 85% 65% 56% 77.63% 62.78% 21%
Average commission
rate paid(e)........ $ 0.0582 -- -- -- -- $0.0251 -- --
</TABLE>

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

17
<PAGE> 22

BALANCED PORTFOLIO
(For a Share outstanding throughout each period)

<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED APRIL 1, 1993
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, TO NOVEMBER 30,
1996 1995 1994 1993(a)
------------ ------------ ------------ ---------------
TRUST SHARES TRUST SHARES TRUST SHARES TRUST SHARES
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................ $ 11.64 $ 9.62 $ 10.22 $ 10.00
------- ------- ------- -------
Investment Activities
Net Investment income (loss).. 0.37 0.34 0.29 0.23
Net realized and unrealized
gains (losses) from
investments................ 1.34 2.02 (0.47) 0.15
------- ------- ------- -------
Total from Investment
Activities................. 1.71 2.36 (0.18) 0.38
------- ------- ------- -------
Distributions
Net investment income......... (0.35) (0.34) (0.29) (0.16)
Net realized gains............ (0.42) -- -- --
In excess of realized gains... -- -- (0.13) --
------- ------- ------- -------
Total Distributions........... (0.77) (0.34) (0.42) (0.16)
------- ------- ------- -------
Net Asset Value, End of
Period........................ $ 12.58 $ 11.64 $ 9.62 $ 10.22
======= ======= ======= =======
Total Return.................... 15.56% 24.97% (1.81%) 3.86%(b)
Ratios/Supplemental Data:
Net Assets at end of period
(000)...................... $ 61,821 $ 72,669 $ 65,288 $69,720
Ratio of expenses to average
net assets (including
waivers)................... 0.97% 0.98% 0.97% 0.56%(c)
Ratio of net investment income
to average net assets
(including waivers)........ 3.08% 3.29% 3.04% 3.42%(c)
Ratio of expenses to average
net assets (before
waivers)*.................. 1.07% 1.08% 1.39% 1.21%(c)
Ratio of net investment income
to average net assets
(before waivers)*.......... 2.98% 3.19% 2.63% 2.77%(c)
Portfolio turnover............ 85.16% 58.16% 49% 26%
Average commission rate
paid(d).................... $ 0.0599 -- -- --
</TABLE>

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

* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.

(a) Period from commencement of operations.

(b) Not annualized.

(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and sold
for which commissions were charged.

18
<PAGE> 23

INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS

Although management will use its best efforts to achieve the investment
objective of each Portfolio, there can be no assurance that it will be able to
do so. The investment objective of each Portfolio may be changed only with the
affirmative vote of a majority of the outstanding Shares of the Portfolio,
except that the investment objectives of the Bond Index and Equity Index
Portfolios may be changed by the Fund's Board of Directors without shareholder
approval. Shareholders of the latter Portfolios will be given at least 30 days'
written notice before any such change occurs. The Treasury Money Market, Money
Market and Tax-Exempt Money Market Portfolios are "money market" funds that
invest in instruments with remaining maturities of 397 days or less (with
certain exceptions) and with dollar-weighted average portfolio maturities of 90
days or less, subject to the quality, diversification and other requirements of
Rule 2a-7 under the Investment Company Act of 1940, as amended, (the "1940 Act")
and other rules of the Securities and Exchange Commission (the "SEC").

THE TREASURY MONEY MARKET PORTFOLIO

The Treasury Money Market Portfolio's investment objective is to seek a
high level of current income exempt from state income tax consistent with
liquidity and security of principal. In pursuing its investment objective, the
Portfolio invests in selected money market obligations issued by the U.S.
Government (or its agencies and instrumentalities) that are guaranteed as to
principal and interest by the U.S. Government, the interest on which is
generally exempt from state income tax. Securities that are generally eligible
for this exemption include those issued by the U.S. Treasury (bills,
certificates of indebtedness, notes and certain bonds) and certain U.S.
Government agencies and instrumentalities, including the General Services
Administration and Small Business Administration. Each investor should consult
his or her tax advisor to determine whether distributions from the Portfolio are
exempt from state income tax in the investor's home state. Under normal market
conditions, the Portfolio intends to invest substantially all (but not less than
65%) of its total assets in securities with the above characteristics and
(except to the extent discussed below) will not enter into repurchase agreements
or purchase any U.S. Government security that the Adviser believes is subject to
state income tax.

Under extraordinary circumstances, such as when appropriate exempt
securities are unavailable or pending investment, the Treasury Money Market
Portfolio may temporarily hold cash or invest in repurchase agreements
collateralized by U.S. Government securities, other U.S. Government agency or
instrumentality securities, securities of other investment companies that invest
in securities in which the Portfolio is permitted to invest, or cash
equivalents.

THE MONEY MARKET PORTFOLIO

The Money Market Portfolio's investment objective is to seek current income
with liquidity and stability of principal. In pursuing its investment objective,
the Portfolio invests substantially all of its assets in a broad range of money
market instruments. These instruments include obligations of the U.S.
Government, U.S. dollar-denominated foreign securities, obligations of U.S. and
foreign banks and savings and loan institutions and commercial obligations that
meet the applicable quality requirements described below.

The Money Market Portfolio will purchase only "First Tier Eligible
Securities" (as defined by the SEC) that present minimal credit risks as
determined by the Adviser pursuant to guidelines approved by the Fund's Board of
Directors. First Tier Eligible Securities consist of (i) securities that either
(a) have short-term debt ratings at the time of purchase in the highest rating
category by at least two unaffiliated nationally recognized statistical rating
organizations ("Rating Agencies") (or one Rating Agency if the security was
rated by only one Rating Agency), or (b) are issued by issuers with such
ratings, and (ii) certain securities that are unrated (including securities of
issuers that have long-term but not short-term ratings) but are of comparable
quality as determined in

19
<PAGE> 24

accordance with guidelines approved by the Board of Directors. The applicable
ratings by Rating Agencies are described in Appendix A to the Statement of
Additional Information. The following descriptions illustrate the types of
instruments in which the Portfolio invests.

Banking Obligations. The Money Market Portfolio may purchase obligations
of issuers in the banking industry, such as certificates of deposit, letters of
credit, bankers' acceptances and time deposits, including U.S.
dollar-denominated instruments issued or supported by the credit of U.S. or
foreign banks or savings institutions having total assets at the time of
purchase in excess of $1 billion. The Portfolio may invest in obligations of
foreign banks or foreign branches of U.S. banks in amounts not in excess of 25%
of its assets where the Adviser deems the instrument to present minimal credit
risks. (See "Risk Factors -- Risks Associated with Foreign Securities and
Currencies" below.) The Portfolio may also make interest-bearing savings
deposits in commercial and savings banks in amounts not in excess of 5% of the
value of its total assets.

Commercial Paper and Variable and Floating Rate Instruments. The Portfolio
may invest in commercial paper, including asset-backed commercial paper
representing interests in a pool of corporate receivables, dollar-denominated
obligations issued by domestic and foreign bank holding companies, and corporate
bonds that meet the quality and maturity requirements described above. The
Portfolio may also invest in variable or floating rate notes that may have a
stated maturity in excess of thirteen months but will, in any event, permit the
Portfolio to demand payment of the principal of the instrument at least once
every thirteen months upon no more than 30 days' notice (unless the instrument
is guaranteed by the U.S. Government or an agency or instrumentality thereof).
Such instruments may include variable amount master demand notes, which are
unsecured instruments that permit the indebtedness thereunder to vary in
addition to providing for periodic adjustments in the interest rate. Unrated
variable and floating rate instruments will be determined by the Adviser (under
the supervision of the Board of Directors) to be of comparable quality at the
time of purchase to First Tier Eligible Securities. There may be no active
secondary market in the instruments, which could make it difficult for the
Portfolio to dispose of an instrument in the event the issuer were to default on
its payment obligation or during periods that the Portfolio could not exercise
its demand rights. The Portfolio could, for these or other reasons, suffer a
loss with respect to such instruments. Variable and floating rate instruments
held by the Portfolio will be subject to the Portfolio's 10% limitation on
illiquid investments when the Portfolio may not demand payment of the principal
amount within seven days and a liquid trading market is absent.

Government Obligations. The Money Market Portfolio may invest in
obligations issued or guaranteed by the U.S. Government, its agencies and
instrumentalities. In addition, the Portfolio may, when deemed appropriate by
the Adviser, invest in short-term obligations issued by state and local
governmental issuers that meet the quality requirements described above and, as
a result of the Tax Reform Act of 1986, carry yields that are competitive with
those of other types of money market instruments of comparable quality.

THE TAX-EXEMPT MONEY MARKET PORTFOLIO

The Tax-Exempt Money Market Portfolio's investment objective is to seek as
high a level of current interest income exempt from federal income tax as is
consistent with liquidity and stability of principal. The Portfolio seeks to
achieve its objective by investing substantially all of its assets in short-term
obligations issued by or on behalf of states, territories and possessions of the
United States, the District of Columbia and their respective political
subdivisions, agencies, instrumentalities and authorities the interest on which,
in the opinion of bond counsel or counsel to the issuer, is exempt from regular
federal income tax (collectively, "Municipal Obligations"). The Portfolio my
also hold tax-exempt derivative securities such as tender option bonds,
participations, beneficial interests in trusts and partnership interests.

The Tax-Exempt Money Market Portfolio will purchase only "First Tier
Eligible Securities" (as defined by the SEC) that present minimal credit risks
as determined by the Adviser pursuant to

20
<PAGE> 25

guidelines approved by the Board of Directors. See "The Money Market Portfolio"
above for a description of "First Tier Eligible Securities."

Dividends paid by the Tax-Exempt Money Market Portfolio that are derived
from interest attributable to tax-exempt obligations of a particular state and
its political subdivisions as well as of certain other governmental issuers
including Puerto Rico, Guam and the Virgin Islands may be exempt from federal
and state income tax. Dividends derived from interest on obligations of other
governmental issuers are exempt from federal income tax but may be subject to
state income tax.

As a matter of fundamental policy, under normal market conditions or when
the Adviser deems suitable tax-exempt Municipal Obligations to be available, at
least 80% of the Tax-Exempt Money Market Portfolio's total assets will be
invested in Municipal Obligations. The Portfolio may hold uninvested cash
reserves pending investment during temporary defensive periods or if, in the
opinion of the Adviser, suitable Municipal Obligations are unavailable. There is
no percentage limitation on the amount of assets which may be held uninvested
during temporary defensive periods.

In addition, during temporary defensive periods or if, in the opinion of
the Adviser, suitable Municipal Obligations are unavailable and subject to the
quality standards described above, the Tax-Exempt Money Market Portfolio may
invest up to 20% of its assets in money market instruments, the income from
which is subject to federal income tax. Such instruments may include obligations
of the U.S. Government, its agencies or instrumentalities; debt securities
(including commercial paper) of issuers having, at the time of purchase, a
quality rating within the highest rating category by a Rating Agency;
certificates of deposit or bankers' acceptances of domestic branches of U.S.
banks with total assets at the time of purchase of $1 billion or more; or
repurchase agreements with respect to such obligations.

THE U.S. GOVERNMENT SECURITIES PORTFOLIO

The U.S. Government Securities Portfolio's investment objective is to seek
a high rate of current income that is consistent with relative stability of
principal. In pursuing its investment objective, the Portfolio invests in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities normally having remaining maturities of 1 to 30 years and
repurchase agreements relating to such obligations. (For further information,
see "Other Applicable Policies -- U.S. Government Obligations" below.)

Consistent with its investment policies, the U.S. Government Securities
Portfolio may invest in mortgage-backed securities, including those representing
an undivided ownership interest in a pool of mortgage loans, such as
certificates issued by the Government National Mortgage Association ("GNMA"),
the Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC") and collateralized mortgage obligations ("CMOs").
For further information regarding these instruments, see "Other Applicable
Policies -- Asset-Backed Securities" below.

THE INTERMEDIATE CORPORATE BOND PORTFOLIO

The Intermediate Corporate Bond Portfolio's investment objective is to seek
as high a level of current income as is consistent with preservation of capital.
In pursuing its investment objective, the Portfolio will invest, under normal
market and economic conditions, at least 65% of its total assets in
non-convertible corporate debt obligations, which shall mean obligations of (i)
domestic or foreign business corporations, or (ii) agencies, instrumentalities
or authorities which are organized in corporate form by one or more states or
political subdivisions in the United States or one or more foreign governments.
The Portfolio may also invest in obligations issued or guaranteed by the U.S. or
foreign governments, their agencies or instrumentalities, and asset-backed
securities, including various collateralized mortgage obligations and other
mortgage-related securities. For further information regarding these
instruments, see "Other Applicable Policies -- Asset-Backed

21
<PAGE> 26

Securities" below. In making investment decisions, the Adviser will consider a
number of factors including current yield, maturity, yield to maturity,
anticipated changes in interest rates, and the overall quality of the
investment. The Portfolio seeks to provide a current yield greater than that
generally available from money market instruments.

The Portfolio may purchase debt securities which are rated at the time of
purchase in one of the four highest rating categories assigned by one or more
Rating Agencies or in unrated debt securities deemed by the Adviser to be of
comparable quality. Under normal market and economic conditions, however, the
Portfolio intends to invest at least 65% of its total assets in debt obligations
rated in one of the three highest rating categories assigned by one or more
Rating Agencies (or unrated debt obligations determined to be of comparable
quality). Securities that are rated in the lowest of the four highest rating
categories have speculative characteristics, even though they are of investment
grade quality, and such securities will be purchased (and retained) only if the
Adviser believes that the issuers have an adequate capacity to pay interest and
repay principal. Unrated debt securities will be purchased only if they are
considered by the Adviser to be at least comparable in quality at the time of
purchase to instruments within the rating categories listed above. Debt
securities purchased by the Portfolio whose ratings are subsequently downgraded
below the four highest rating categories of a Rating Agency will be disposed of
in an orderly manner, normally within 30 to 60 days. The applicable ratings
issued by the Rating Agencies are described in the Appendix to the Statement of
Additional Information.

The Portfolio reserves the right to hold as a temporary defensive measure
up to 100% of its total assets in cash and short-term obligations (having
remaining maturities of 13 months or less) at such times and in such proportions
as, in the opinion of the Adviser, prevailing market or economic conditions
warrant. Short-term obligations in which the Portfolio may invest include (i)
money market instruments, such as commercial paper, including variable and
floating rate instruments, rated at the time of purchase in one of the two
highest rating categories assigned by a Rating Agency or, if unrated, deemed to
be of comparable quality by the Adviser at the time of purchase, and bank
obligations, including bankers' acceptances, negotiable certificates of deposit
and non-negotiable time deposits of U.S. and foreign banks having total assets
at the time of purchase in excess of $1 billion, (ii) obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, and (iii)
repurchase agreements. For further information regarding variable and floating
rate instruments, see "The Money Market Portfolio -- Commercial Paper and
Variable and Floating Rate Instruments" above. Although the Portfolio will
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. See "Risk Factors -- Risks
Associated with Foreign Securities and Currencies" below. 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.

The Portfolio's average weighted maturity will be between three and ten
years and will vary in light of current market and economic conditions, the
comparative yields on instruments with different maturities, and other factors.

THE BOND INDEX PORTFOLIO

The Bond Index Portfolio seeks to provide investment results that, before
deduction of operating expenses, approximate the price and yield performance of
U.S. Government, mortgage-backed, asset-backed and corporate debt securities as
represented by the Lehman Brothers Aggregate Bond Index (the "Lehman
Aggregate").

22
<PAGE> 27

corporate debt securities, as represented by the Lehman Aggregate, through the
use of sophisticated computer models to determine which securities should be
purchased or sold, while keeping transaction and administrative costs to a
minimum. The Portfolio will invest substantially all of its total assets in
securities listed in the Lehman Aggregate, including without limitation, asset-
backed securities. For further information regarding asset-backed securities see
"Other Applicable Policies -- Asset-Backed Securities" below. The Adviser
generally selects securities for the Portfolio on the basis of their weightings
in the Lehman Aggregate and will only purchase a security for the Portfolio that
is included in the Lehman Aggregate at the time of such purchase. The Portfolio
should exhibit price and yield volatility similar to that of the Lehman
Aggregate. For further information, see "Other Investment Policies -- The
Indexing Approach" below and the Statement of Additional Information under
"Investment Objectives and Policies -- The Indexing Approach."

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. See "The Intermediate
Corporate Bond Portfolio" above for a description of the types of money market
instruments in which the Portfolio may invest and the applicable limitations
with respect to such investments. 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 reverse repurchase
agreements and lend its portfolio securities.

The Lehman Aggregate. The Lehman Aggregate is composed of U.S. Government,
mortgage-backed, asset-backed and non-convertible corporate debt securities that
meet the following criteria: the securities have at least $100 million par
amount outstanding; the securities are rated investment grade (at least Baa or
BBB) by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings
Group ("S&P") (if not rated by Moody's); have at least one year until maturity;
and have coupons with fixed rates. The Lehman Aggregate excludes collateralized
mortgage obligations ("CMOs"), adjustable rate mortgages, manufactured homes,
non-agency bonds, buydowns, graduated equity mortgages, project loans and
non-conforming (i.e., "jumbo") mortgages. As of December 31, 1996, over 5,727
issues were included in the Lehman Aggregate, representing approximately $4.5
trillion in market value. U.S. Treasury and agency securities represented
approximately 51.6% of the total market value, asset-backed and mortgage-backed
securities represented approximately 30.6% of the total market value, with
corporate debt securities representing the balance of approximately 17.82%. The
average maturity of the Lehman Aggregate was approximately 8.7 years. The
Adviser believes that the Lehman Aggregate is an appropriate benchmark for the
Portfolio because it is diversified, it is familiar to investors, and it is
widely accepted as a reference for bonds and other fixed income investments.

Because of the large number of issues included in the Lehman Aggregate, the
Portfolio cannot invest in all such issues. Instead, the Portfolio will hold a
representative sample of approximately 100 of the securities in the Lehman
Aggregate, selecting one or two issues to represent an entire "class" or type of
securities in the Lehman Aggregate. At a minimum, the Portfolio seeks to hold
securities which reflect the major asset classes in the Lehman Aggregate -- U.S.
Treasury and agency issues, mortgage-backed securities, asset-backed securities
and non-convertible corporate debt securities. As the Portfolio's assets
increase, these classes will be further delineated along the lines of sector,
term-to-maturity, coupon and credit ratings. This sampling technique is expected
to be an effective means of substantially duplicating the price and performance
provided by the securities comprising the Lehman Aggregate.

Securities rated Baa by Moody's or BBB by S&P have speculative
characteristics even though they are of investment-grade quality, and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with
higher-grade securities.

23
<PAGE> 28

THE GOVERNMENT & CORPORATE BOND PORTFOLIO

The Government & Corporate Bond Portfolio's investment objective is to seek
the highest level of current income consistent with conservation of capital. In
pursuing its investment objective, the Portfolio intends to invest at least 65%
of its assets in fixed-income and related debt securities rated in one of the
three highest rating categories assigned by a Rating Agency at the time of
purchase or in unrated investments deemed by the Adviser to be of comparable
quality pursuant to guidelines approved by the Fund's Board of Directors. Debt
securities may include a broad range of fixed and variable rate bonds,
debentures, notes, and securities convertible into or exchangeable for common
stock; dollar-denominated debt obligations of foreign issuers, including foreign
corporations and governments; and first mortgage loans, income participation
loans, participation certificates in pools of mortgages, including mortgages
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
CMOs and other mortgage-related securities, and other asset-backed securities.
For further information regarding asset-backed securities, see "Other Applicable
Policies -- Asset-Backed Securities" below. The Portfolio may invest up to 10%
of its total assets at the time of purchase in dollar-denominated debt
obligations of foreign issuers, either directly or through American Depository
Receipts ("ADRs") and European Depository Receipts ("EDRs"), and up to 25% of
its total assets at the time of purchase in non-mortgage asset-backed
securities, respectively. See "Other Applicable Policies -- Foreign Securities"
below and the Statement of Additional Information under "Investment Objectives
and Policies -- ADRs and EDRs."

The Government & Corporate Bond Portfolio may purchase debt securities
which are rated at the time of purchase within the four highest rating
categories assigned by Rating Agencies or unrated debt securities (including
convertible securities) which the Adviser believes present attractive
opportunities and are of at least comparable quality to instruments so rated.
The Portfolio's dollar-weighted average portfolio quality is expected to be at
least "A" or higher. Securities rated in the lowest of the above four rating
categories have speculative characteristics, even though they are of
investment-grade quality, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade securities. Such
securities will be purchased (and retained) only when the Adviser believes the
issuers have an adequate capacity to pay interest and repay principal. (For a
description of the rating categories of Rating Agencies, see Appendix A to the
Statement of Additional Information.) In making investment decisions, the
Adviser will consider a number of factors including current yield, maturity,
yield to maturity, anticipated changes in interest rates, and the overall
quality of the investment. The Portfolio seeks to provide a current yield
greater than that generally available from money market instruments.

The Government & Corporate Bond Portfolio reserves the right to hold as a
temporary defensive measure up to 100% of its total assets in cash and
short-term obligations (having remaining maturities of 12 months or less) at
such times and in such proportions as, in the opinion of the Adviser, prevailing
market or economic conditions warrant. Short-term obligations include, but are
not limited to, commercial paper, bankers' acceptances, certificates of deposit,
demand and time deposits of domestic and foreign banks and savings and loan
associations, repurchase agreements and obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.

THE SHORT-INTERMEDIATE MUNICIPAL PORTFOLIO

The Short-Intermediate Municipal Portfolio's investment objective is to
seek as high a level of current income, exempt from regular federal income tax,
as is consistent with preservation of capital. The Portfolio seeks to achieve
its objective by investing substantially all of its assets in investment grade
Municipal Obligations. As a matter of fundamental policy, under normal market
conditions at least 80% of the Portfolio's total assets will be invested in
Municipal Obligations, primarily bonds (at least 65% under normal market
conditions).

24
<PAGE> 29

The Short-Intermediate Municipal Portfolio invests in Municipal Obligations
that are rated at the time of purchase within the four highest rating categories
assigned by a Rating Agency. The Portfolio may also invest in short-term
Municipal Obligations such as municipal notes, tax-exempt commercial paper, and
variable and floating rate demand obligations that are rated at the time of
purchase within the two highest rating categories assigned by a Rating Agency.
Municipal Obligations rated in the lowest of the four highest rating categories
for bonds are considered to have speculative characteristics, even though they
are of investment grade quality. Such bonds will be purchased only if the
Adviser believes they have an adequate capacity to pay interest and repay
principal. Unrated obligations will be purchased only if they are considered by
the Adviser to be at least comparable in quality at the time of purchase to
instruments within the rating categories listed above. Municipal Obligations
purchased by the Portfolio whose ratings are subsequently downgraded below the
four highest rating categories of a Rating Agency will be disposed of in an
orderly manner, normally within 30-60 days. The applicable ratings issued by the
Rating Agencies are described in the Appendix to the Statement of Additional
Information.

In addition, the Short-Intermediate Municipal Portfolio may from time to
time during temporary defensive periods, invest in taxable obligations in such
proportions as, in the opinion of the Adviser, prevailing market or economic
conditions warrant. Such instruments may include obligations of the U.S.
Government, its agencies or instrumentalities; debt securities (including
commercial paper) of issuers having, at the time of purchase, a quality rating
within the two highest rating categories assigned by a Rating Agency; or
repurchase agreements with respect to such obligations.

During temporary defensive periods or if, in the opinion of the Adviser,
suitable tax-exempt obligations are unavailable, the Short-Intermediate
Municipal Portfolio may also hold uninvested cash reserves which do not earn
income pending investment. There is no percentage limitation on the amount of
assets that may be held uninvested during these temporary defensive periods.

The Short-Intermediate Municipal Portfolio's average dollar-weighted
maturity will be between two and five years and will vary in light of current
market and economic conditions, the comparative yields on instruments with
different maturities, and other factors.

THE MISSOURI TAX-EXEMPT BOND PORTFOLIO

The Missouri Tax-Exempt Bond Portfolio's investment objective is to seek as
high a level of interest income exempt from federal income tax as is consistent
with conservation of capital. In pursuing its investment objective, the
Portfolio invests substantially all of its assets in investment-grade Missouri
Municipal Obligations (which, to the extent possible, are also exempt from
Missouri income tax).

Dividends paid by the Missouri Tax-Exempt Bond Portfolio that are derived
from interest attributable to tax-exempt obligations of the State of Missouri
and its political subdivisions as well as of certain other governmental issuers
including Puerto Rico, Guam and the Virgin Islands ("Missouri Municipal
Obligations") are exempt from federal and Missouri income tax. Dividends derived
from interest on obligations of other governmental issuers are exempt from
federal income tax but may be subject to Missouri income tax.

As a matter of fundamental policy, under normal market conditions, at least
65% of the Missouri Tax-Exempt Bond Portfolio's total assets will be invested in
Missouri Municipal Obligations. The Portfolio will seek to maximize the
proportion of its dividends which are exempt from both federal and Missouri
income tax and presently expects to invest substantially all of its total assets
in Missouri Municipal Obligations.

The Missouri Tax-Exempt Bond Portfolio invests in Municipal Obligations
that are rated at the time of purchase within the four highest rating categories
assigned by a Rating Agency. The Portfolio may also invest in short-term
Municipal Obligations such as municipal notes, tax-exempt commercial paper and
variable or floating rate demand obligations that are rated at the time of

25
<PAGE> 30

purchase within the two highest rating categories assigned by a Rating Agency.
Municipal Obligations rated in the lowest of the four highest rating categories
for bonds are considered to have speculative characteristics, even though they
are of investment grade quality. Such bonds will be purchased only if the
Adviser believes the issuers have an adequate capacity to pay interest and repay
principal. Unrated obligations will be purchased only if they are considered by
the Adviser to be at least comparable in quality at the time of purchase to
instruments within the rating categories listed above. The applicable Municipal
Obligation ratings are described in the Appendix to the Statement of Additional
Information.

As a matter of fundamental policy, under normal market conditions or when
the Adviser deems suitable tax-exempt Municipal Obligations to be available, at
least 80% of the Missouri Tax-Exempt Bond Portfolio's total assets will be
invested in Municipal Obligations. The Portfolio may hold uninvested cash
reserves pending investment during temporary defensive periods or if, in the
opinion of the Adviser, suitable Municipal Obligations are unavailable. There is
no percentage limitation on the amount of assets which may be held uninvested
during temporary defensive periods.

The Missouri Tax-Exempt Bond Portfolio's average weighted maturity will
vary in light of market and economic conditions, the comparative yields on
instruments with different maturities, and other factors.

THE NATIONAL MUNICIPAL BOND PORTFOLIO

The National Municipal Bond Portfolio's investment objective is to seek as
high a level of current income exempt from regular federal income tax as is
consistent with conservation of capital. In pursuing its investment objective,
the Portfolio intends to invest, under normal market and economic conditions,
substantially all of its assets in investment grade Municipal Obligations. As a
matter of fundamental policy, under normal market and economic conditions at
least 80% of the Portfolio's total assets will be invested in Municipal
Obligations, primarily, bonds (at least 65% under normal market conditions).

The Portfolio may purchase Municipal Obligations that are rated at the time
of purchase in one of the four highest rating categories assigned by one or more
Rating Agencies or in unrated Municipal Obligations deemed by the Adviser to be
of comparable quality. Under normal market and economic conditions, however, the
Portfolio intends to invest at least 65% of its assets in Municipal Obligations
rated at the time of purchase in one of the three highest rating categories
assigned by one or more Rating Agencies (or unrated Municipal Obligations
determined to be of comparable quality). Securities that are rated in the lowest
of the four highest rating categories are considered to have speculative
characteristics, even though they are of investment grade quality, and will be
purchased (and retained) only if the Adviser believes that the issuers have an
adequate capacity to pay interest and repay principal. Unrated obligations will
be purchased only if they are considered by the Adviser to be at least
comparable in quality at the time of purchase to instruments within the rating
categories listed above. Municipal Obligations purchased by the Portfolio whose
ratings are subsequently downgraded below the four highest rating categories of
a Rating Agency will be disposed of in an orderly manner, normally within 30 to
60 days. The applicable ratings issued by the Rating Agencies are described in
the Appendix to the Statement of Additional Information.

In addition, the Portfolio may from time to time during temporary defensive
periods, invest in taxable obligations in such proportions as, in the opinion of
the Adviser, prevailing market or

26
<PAGE> 31

economic conditions warrant. Such instruments may include obligations of the
U.S. Government, its agencies or instrumentalities and debt securities
(including commercial paper) of issuers having, at the time of purchase, a
quality rating within the two highest rating categories of a Rating Agency. The
Portfolio does not intend to invest in taxable obligations under normal market
conditions.

During temporary defensive periods or if, in the opinion of the Adviser,
suitable tax-exempt obligations are unavailable, the Portfolio may also hold
uninvested cash reserves which do not earn income pending investment. There is
no percentage limitation on the amount of assets that may be held uninvested
during these temporary defensive periods. The Portfolio does not intend to hold
uninvested cash reserves under normal market conditions.

The Portfolio's average dollar-weighted maturity will vary in light of
current market and economic conditions, the comparative yields on instruments
with different maturities, and other factors.

THE EQUITY INCOME PORTFOLIO

The Equity Income Portfolio's investment objective is to seek to provide an
above-average level of income consistent with long-term capital appreciation. In
pursuing its investment objective, the Portfolio intends to invest, under normal
market and economic conditions, substantially all of its assets in common stock,
preferred stock, rights, warrants, and securities convertible into common stock.
The Adviser will select stocks based on a number of quantitative factors,
including dividend yield, current and future earnings potential compared to
stock prices, total return potential and other measures of value, such as cash
flow, asset value or book value, if appropriate. Stocks purchased for the
Portfolio generally will be listed on a national securities exchange or will be
unlisted securities with an established over-the-counter market. A convertible
security may be purchased for the Portfolio when, in the Adviser's opinion, the
price and yield of the convertible security is favorable as compared to the
price and yield of the common stock. The stocks or securities in which the
Portfolio invests may be expected to produce an above average level of income
(as measured by the Standard & Poor's 500 Composite Stock Price Index). Under
normal market and economic conditions, at least 65% of the Portfolio's total
assets will be invested in income-producing equity securities.

The Portfolio may indirectly invest in foreign securities through the
purchase of ADRs and EDRs, but will not do so if, immediately after and as a
result of the purchase, the value of ADRs and EDRs would exceed 15% of the
Portfolio's total assets. For further information, see "Other Applicable
Policies -- Foreign Securities" below and the Statement of Additional
Information under "Investment Objectives and Policies -- ADRs and EDRs."

The Portfolio reserves the right to hold as a temporary defensive measure
during abnormal market or economic conditions up to 100% of its total assets in
cash and short-term obligations (having remaining maturities of 13 months or
less) at such times and in such proportions as, in the opinion of the Adviser,
such abnormal market or economic conditions warrant. See "The Intermediate
Corporate Bond Portfolio" above for a description of the types of short-term
obligations in which the Portfolio may invest and the applicable limitations
with respect to such investments.

THE EQUITY INDEX PORTFOLIO

The Equity Index Portfolio, which is expected to commence operations in
1997, seeks to provide investment results that, before deduction of operating
expenses, approximate the price and yield performance of U.S. publicly traded
common stocks with large stock market capitalizations as represented by the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500").

Like the Bond Index Portfolio, the Equity Index Portfolio is not managed in
a traditional sense, that is, by making discretionary judgments based on
analysis of economic, financial and market

27
<PAGE> 32

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. publicly traded common stocks with large stock market
capitalizations, as represented by the S&P 500, through the use of sophisticated
computer models to determine which securities should be purchased or sold, while
keeping transaction and administrative costs to a minimum. The Portfolio will
invest substantially all of its total assets in securities listed in the S&P
500. The Adviser generally selects securities for the Portfolio on the basis of
their weightings in the S&P 500 and will only purchase a security for the
Portfolio that is included in the S&P 500 at the time of such purchase. The
Portfolio should exhibit price volatility similar to that of the S&P 500. For
further information, see "Other Investment Policies -- The Indexing Approach"
below and the Statement of Additional Information under "Investment Objectives
and Policies -- The Indexing Approach."

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. See "The Intermediate
Corporate Bond Portfolio" above for a description of the money market
instruments in which the Portfolio may invest and the applicable limitations
with respect to such investments. 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 reverse repurchase
agreements and lend its portfolio securities.

The S&P 500. The S&P 500 is composed of approximately 500 common stocks,
most of which are listed on the New York Stock Exchange. S&P chooses the stocks
for the S&P 500 on a statistical basis. As of December 31, 1996 the stocks in
the S&P 500 have an average market capitalization of $5.6 trillion and account
for approximately 69% of the total market value of all U.S. common stocks.
Normally, the Equity Index Portfolio will hold all 500 stocks in the S&P 500 and
will hold each stock approximately the same percentage as that stock represents
in the S&P 500. Under certain circumstances, the Portfolio may not hold all 500
stocks in the S&P 500, for example because of changes in the S&P 500, or as a
result of shareholder activity in the Portfolio. The Portfolio will rebalance
its holdings monthly to reflect changes in the S&P 500. "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 500 is an appropriate
benchmark for the Portfolio because it is diversified, it is familiar to many
investors and it is widely accepted as a reference for common stock investments.

THE GROWTH & INCOME EQUITY PORTFOLIO

The Growth & Income Equity Portfolio's investment objective is to provide
long-term capital growth, with income a secondary consideration. In pursuing its
investment objective, the Portfolio normally invests substantially all of its
assets in common stock, preferred stock, rights, warrants and securities
convertible into common stock. The Adviser selects stocks based on a number of
factors, including historical and projected earnings, growth and asset value,
earnings compared to stock prices generally (as measured by the S&P 500, and
consistency of earnings growth and earnings quality. Stocks purchased for the
Portfolio generally will be listed on a national securities exchange or will be
unlisted securities with an established over-the-counter market. A convertible
security may be purchased for the Portfolio when, in the Adviser's opinion, the
price and yield of the convertible security is favorable compared to the price
and yield of the common stock. The stocks or securities in which the Portfolio
invests may be expected to produce some income but income is not a major
criterion in their selection.

The Growth & Income Equity Portfolio may indirectly invest in foreign
securities through the purchase of ADRs and EDRs but will not do so if,
immediately after and as a result of the purchase, the value of ADRs and EDRs
would exceed 15% of the Portfolio's total assets. For further information, see
"Other Applicable Policies -- Foreign Securities" below and the Statement of
Additional Information under "Investment Objectives and Policies -- ADRs and
EDRs." The Portfolio may also invest in Canadian securities listed on a national
securities exchange.

28
<PAGE> 33

The Growth & Income Equity Portfolio reserves the right to hold as a
temporary defensive measure up to 100% of its total assets in cash and
short-term obligations (having remaining maturities of 12 months or less) at
such times and in such proportions as, in the opinion of the Adviser, prevailing
market or economic conditions warrant. See "The Government & Corporate Bond
Portfolio" above for a description of the types of short-term obligations in
which the Portfolio may invest.

THE SMALL CAP EQUITY PORTFOLIO

The Small Cap Equity Portfolio's investment objective is capital
appreciation. Current income is an incidental consideration in the selection of
portfolio securities. In pursuing its investment objective, the Portfolio (which
was formerly known as the Emerging Growth Portfolio) normally invests at least
65% of its total assets in common stock of emerging or established small- to
medium-sized companies with above-average potential for price appreciation. The
market capitalization of the issuers of securities purchased by the Portfolio
will normally range from $100 million to $2 billion at the time of purchase. The
Portfolio may invest in preferred stock, rights, warrants, and securities
convertible into common stock. It may invest a portion of its assets in
established larger companies that, in the opinion of the Adviser, offer improved
growth possibilities because of rejuvenated management, product changes, or
other developments that might stimulate earnings or asset growth, or in
companies that seem undervalued relative to their underlying assets. The
Portfolio does not intend to invest more than 5% of the value of its total
assets in the securities of unseasoned companies, that is, companies (or their
predecessors) with less than three years' continuous operation.

The Small Cap Equity Portfolio may also invest a portion of its assets in
smaller companies that have limited specialized-product lines, markets or
financial resources, or are dependent upon one-person management. The securities
of such smaller companies may have limited marketability, may be subject to more
abrupt or erratic market movements than securities of larger companies or the
market averages in general, and may involve greater risk than is customarily
associated with more established companies. To qualify for investment by the
Portfolio, however, a company will be expected to have, in the opinion of the
Adviser, above-average possibilities for capital appreciation (when compared
with the average appreciation of companies whose securities are included in the
S&P 500).

The Small Cap Equity Portfolio uses a research intensive approach and
valuation techniques that emphasize earnings and asset growth. The Adviser
selects stocks based on a number of factors, including historical and projected
earnings, asset value, potential for price appreciation and earnings growth, and
quality of products manufactured and/or services offered. Stocks purchased for
the Portfolio may be listed on a national securities exchange or may be unlisted
securities with or without an established over-the-counter market. The Portfolio
may also invest in initial public offerings of new companies that demonstrate
the potential for price appreciation. A convertible security may be purchased
for the Portfolio when, in the Adviser's opinion, the price of the convertible
security is favorable compared to the price of the common stock. In general, the
Portfolio's stocks and other securities will be diversified over a number of
industry groups in an effort to reduce the risks inherent in such investments.

The Small Cap Equity Portfolio may indirectly invest in foreign securities
through the purchase of such obligations as ADRs and EDRs but will not do so if,
immediately after and as a result of the purchase, the value of ADRs and EDRs
would exceed 25% of the Portfolio's total assets. For further information, see
"Other Applicable Policies -- Foreign Securities" below, and the Statement of
Additional Information under "Investment Objectives and Policies -- ADRs and
EDRs." The Portfolio may also invest in securities issued by Canadian
corporations and Canadian counterparts of U.S. corporations, which may or may
not be listed on a national securities exchange or traded in over-the-counter
markets.

29
<PAGE> 34

The Small Cap Equity Portfolio reserves the right to hold as a temporary
defensive measure up to 100% of its total assets in cash and short-term
obligations (having remaining maturities of 12 months or less) at such times and
in such proportions as, in the opinion of the Adviser, prevailing market or
economic conditions warrant. See "The Government & Corporate Bond Portfolio"
above for a description of the types of short-term obligations in which the
Portfolio may invest.

THE INTERNATIONAL EQUITY PORTFOLIO

The International Equity Portfolio's investment objective is to provide
capital growth consistent with reasonable investment risk. The Portfolio seeks
to achieve this objective by investing principally in foreign equity securities,
most of which will be denominated in foreign currencies. During normal market
conditions, the Portfolio will invest substantially all of its assets in
securities of companies which derive more than 50% of their gross revenues from,
or have more than 50% of their assets outside, the United States. Additionally,
under normal market conditions, the Portfolio will invest in equity securities
from at least three different countries (excluding the United States). However,
the Portfolio may invest all its assets in a single country during temporary
defensive periods.

The International Equity Portfolio expects to invest at least half of its
assets in securities of companies located either in developed countries in
Western Europe or in Japan, although it may also purchase securities of
companies located in other developed countries and developing countries. For
further information, see "Risk Factors -- Risks Associated with Foreign
Securities and Currencies" below.

By investing in foreign securities, the International Equity Portfolio will
attempt to take advantage of differences between economic trends and the
performance of securities markets in various countries, regions and geographic
areas. The Portfolio will achieve diversification by investing in securities
from various countries and geographic areas that offer different investment
opportunities and are affected by different economic trends. The multinational
character of the Portfolio's investments should reduce the effect that events in
any one country or geographic area will have on its investment holdings. Of
course, negative movement by one of the Portfolio's investments in one foreign
market may offset gains from the Portfolio's investments in another market.

Equity securities in which the International Equity Portfolio may invest
include common stock, preferred stock, rights, warrants and securities
convertible into common stock. A convertible security may be purchased for the
Portfolio when, in the Adviser's or Sub-Adviser's opinion, the price and yield
of the convertible security is favorable compared to the price and yield of the
common stock.

During temporary defensive periods, when deemed necessary by the Adviser or
Sub-Adviser, the International Equity Portfolio may invest up to 100% of its
assets in U.S. Government obligations or debt obligations of companies
incorporated and having their principal business activities in the United
States. The Portfolio does not intend to invest in such securities for the
purpose of meeting its investment objective.

The International Equity Portfolio may also invest, without limitation, in
foreign securities through the purchase of ADRs and EDRs. For further
information, see "Risk Factors -- Risks Associated with Foreign Securities and
Currencies" below and the Statement of Additional Information under "Investment
Objectives and Policies -- ADRs and EDRs."

The International Equity Portfolio reserves the right to hold as a
temporary defensive measure up to 100% of its total assets in cash and
short-term obligations (having remaining maturities of 12 months or less) at
such times and in such proportions as, in the opinion of the Adviser or Sub-
Adviser, prevailing market or economic conditions warrant. See "The Government &
Corporate Bond Portfolio" above for a description of the types of short-term
obligations in which the Portfolio may invest.

30
<PAGE> 35

Although investing in any mutual fund has certain inherent risks, an
investment in the International Equity Portfolio may have even greater risks
than investments in most other types of mutual funds. The Portfolio is not a
complete investment program, and it may not be appropriate for investors who
cannot financially bear the loss of at least a significant portion of their
investment. The Portfolio's net asset value per Share is subject to rapid and
substantial changes because greater risk is assumed in seeking the Portfolio's
objective. See "Risk Factors -- Risks Associated with Foreign Securities and
Currencies" below.

THE BALANCED PORTFOLIO

The Balanced Portfolio's investment objective is to maximize total return
through a combination of growth of capital and current income consistent with
the preservation of capital. The Portfolio seeks to achieve its objective by
using a disciplined approach of allocating assets primarily among three major
asset groups, i.e. equity securities, fixed income securities and cash
equivalents. In pursuing the Portfolio's investment objective, the Adviser
allocates the Portfolio's assets based upon its evaluation of the relative
attractiveness of the major asset groups. In an effort to better quantify the
relative attractiveness of the major asset groups over a one- to three-year
period of time, the Adviser has incorporated into its asset allocation
decision-making process several dynamic computer models which it has created.
The purpose of these models is to show the statistical impact of the Adviser's
economic outlook upon the future returns of each asset group. The models are
especially sensitive to the forecasts for inflation, interest rates and
long-term corporate earnings growth. Investment returns are normally heavily
impacted by such variables and their expected changes over time. Therefore, the
Adviser's method attempts to take advantage of changing economic conditions by
increasing or decreasing the ratio of stocks to bonds in the Portfolio. For
example, if the Adviser expected more rapid economic growth leading to better
corporate earnings, it would increase the Portfolio's holdings of equity
securities and reduce its holdings of fixed income securities and cash
equivalents.

Under normal market conditions, the Balanced Portfolio's policy is
generally to invest at least 25% of the value of its total assets in fixed
income securities and no more than 75% in equity securities. The actual
percentage of assets invested in equity securities, fixed income securities and
cash equivalents will vary from time to time, depending on the judgment of the
Adviser as to general market and economic conditions, trends and yields,
interest rates and fiscal and monetary developments.

The equity securities in which the Balanced Portfolio normally invests
include common stock, preferred stock, rights, warrants and securities
convertible into common or preferred stock. For further information regarding
these instruments, see "The Equity Income Portfolio" and "The Growth & Income
Equity Portfolio" above.

The fixed income securities in which the Balanced Portfolio invests include
U.S. Government securities or other fixed income and related debt securities
rated in one of the four highest rating categories assigned by a Rating Agency
at the time of purchase or in unrated investments deemed by the Adviser to be of
comparable quality pursuant to guidelines approved by the Fund's Board of
Directors. For further information regarding these instruments, see "The
Government & Corporate Bond Portfolio" above.

The Balanced Portfolio may purchase asset-backed securities. For further
information regarding these instruments, see "Other Applicable
Policies -- Asset-Backed Securities" below.

The Balanced Portfolio reserves the right to hold as a temporary defensive
measure up to 100% of its total assets in cash and short-term obligations
(having remaining maturities of 12 months or less) at such times and in such
proportions as, in the opinion of the Adviser, prevailing market or economic
conditions warrant. See "The Government & Corporate Bond Portfolio" above for a
description of the types of short-term obligations in which the Portfolio may
invest.

31
<PAGE> 36

RISK FACTORS

MARKET RISK. The Equity Income, Equity Index, Growth & Income Equity,
Small Cap Equity and International Equity Portfolios invest primarily, and the
Balanced Portfolio invests to a significant degree, in equity securities. As
with other mutual funds that invest primarily or to a significant degree in
equity securities, these Portfolios are 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, including Municipal Obligations, held by the Treasury Money Market,
Money Market, Tax-Exempt Money Market, U.S. Government Securities, Intermediate
Corporate Bond, Bond Index, Government & Corporate Bond, Short-Intermediate
Municipal, Missouri Tax-Exempt Bond, National Municipal Bond and Balanced
Portfolios 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 a Portfolio's
net asset value.

RISKS ASSOCIATED WITH FOREIGN SECURITIES AND CURRENCIES. 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 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.

Certain of the risks associated with international investments are
heightened with respect to investments in developing countries. The risks of
expropriation, nationalization and social, political and economic instability
are greater in those countries than in more developed capital markets. In
addition, developing countries may have economies based on only a few industries
and small securities markets with a low volume of trading. Certain countries may
also impose substantial restrictions on investments in their capital markets by
foreign entities, including restrictions on investments in issuers of industries
deemed sensitive to relevant national interests. These factors may limit the
investment opportunities available to the International Equity Portfolio and
result in a lack of liquidity and a high price volatility with respect to
securities of issuers from developing countries.

32
<PAGE> 37

Certain countries may also impose restrictions on the International Equity
Portfolio's ability to repatriate investment income or capital. Even when there
is no outright restriction on repatriation of investment income or capital, the
mechanics of repatriation may affect certain aspects of the operations of the
International Equity Portfolio.

Governments of many developing countries exercise substantial influence
over many aspects of the private sector. In some countries, the government may
own or control many companies, including the largest company or companies. As
such, government actions in the future could have a significant effect on
economic conditions in these countries, affecting private sector companies, the
International Equity Portfolio and the value of its portfolio securities.

Since the International Equity Portfolio will invest substantially in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates will affect the value of securities
in the International Equity Portfolio and the unrealized appreciation or
depreciation of investments so far as U.S. investors are concerned. Foreign
currency exchange rates are determined by forces of supply and demand on the
foreign exchange markets and the regulatory control of the exchanges on which
the currencies trade. These forces are themselves affected by the international
balance of payments and other economic and financial conditions, government
intervention, speculation and other factors. Costs are incurred in connection
with conversions between various currencies.

The expense ratio of the International Equity Portfolio can be expected to
be higher than that of funds investing in domestic securities. The costs
attributable to investing abroad are usually higher for several reasons, such as
the higher cost of investment research, higher cost of custody of foreign
securities, higher commissions paid on comparable transactions on foreign
markets and additional costs arising from delays in settlements of transactions
involving foreign securities.

Interest and dividends payable on the International Equity Portfolio's
foreign portfolio securities may be subject to foreign withholding taxes. To the
extent such taxes are not offset by credits or deductions allowed to investors
under U.S. federal income tax provisions, they may reduce the net return to the
Portfolio's shareholders. For further information, see "Taxes."

In addition to the International Equity Portfolio, other Portfolios may be
subject to certain of the risks described above in connection with investment in
foreign securities.

MUNICIPAL OBLIGATIONS. The ability of the Tax-Exempt Money Market,
Short-Intermediate Municipal, Missouri Tax-Exempt Bond and National Municipal
Bond Portfolios (collectively, the "Tax-Exempt Portfolios") to achieve their
respective investment objectives are dependent upon the ability of issuers of
Municipal Obligations to meet their continuing obligations for the payment of
principal and interest. There are additional risks associated with investment in
the Missouri Tax-Exempt Bond Portfolio because it invests its assets
predominantly in Missouri Municipal Obligations. Investors in the Missouri
Tax-Exempt Bond Portfolio should be aware that certain provisions of, and
amendments to, the Missouri Constitution limit tax increases which could result
in certain adverse consequences affecting Missouri Municipal Obligations. Some
of the significant financial considerations relating to the Missouri Tax-Exempt
Bond Portfolio's investments in Missouri Municipal Obligations are summarized in
the Statement of Additional Information.

ADDITIONAL RISKS AND OTHER CONSIDERATIONS. Although the Tax-Exempt Money
Market, Short-Intermediate Municipal and National Municipal Bond Portfolios may
invest 25% or more of their respective net assets in (i) Municipal Obligations
whose issuers are in the same state, (ii) Municipal Obligations the interest on
which is paid solely from revenues of similar projects, and (iii) private
activity bonds, no Portfolio presently intends to do so unless in the opinion of
the Adviser the investment is warranted. Although the Missouri Tax-Exempt Bond
Portfolio does not presently intend to do so on a regular basis, it may invest
more than 25% of its assets in industrial development bonds issued before August
7, 1986, the interest on which is not treated as a specific tax preference item
under the federal alternative minimum tax, and in Municipal Obligations, the

33
<PAGE> 38

interest on which is paid solely from revenues of similar projects, if such
investments are deemed necessary or appropriate by the Adviser. To the extent
that a Portfolio's assets are invested in Municipal Obligations the issuers of
which are in the same state or that are payable from the revenues of similar
projects or in private activity bonds, a Portfolio will be subject to the
peculiar risks presented by the laws and economic conditions relating to such
projects and bonds to a greater extent that it would be if its assets were not
so invested. See "Investment Objectives and Policies -- Municipal Obligations"
in the Statement on Additional Information.

Each of the Tax-Exempt Money Market and Missouri Tax-Exempt Bond Portfolios
is classified as non-diversified under the 1940 Act. Investment return on a
non-diversified portfolio typically is dependent upon the performance of a
smaller number of securities relative to the number held in a diversified
portfolio. Consequently, the change in value of any one security may affect the
overall value of a non-diversified portfolio more than it would a diversified
portfolio. In addition, a non-diversified portfolio may be more susceptible to
economic, political, and regulatory developments than a diversified investment
portfolio with similar objectives. The value of a Portfolio's securities can be
expected to vary inversely with changes in prevailing interest rates.

Investors in the Missouri Tax-Exempt Bond Portfolio should consider the
risk inherent in such Portfolio's concentrations in Missouri Municipal
Obligations versus the safety that comes with a less geographically concentrated
investment portfolio, and should compare the yields and tax-equivalent yields
available on portfolios of Missouri Municipal Obligations with the yields and
tax-equivalent yields of more diversified portfolios with securities of
comparable quality, including non-Missouri securities, before making an
investment decision.

Municipal Obligations purchased by the Tax-Exempt Portfolios may be backed
by letters of credit or guarantees issued by domestic or foreign banks and other
financial institutions which are not subject to federal deposit insurance.
Adverse developments affecting the banking industry generally or a particular
bank or financial institution that has provided its credit or a guarantee with
respect to a Municipal Obligation held by a Tax-Exempt Portfolio could have an
adverse effect on the Portfolio's investment portfolio and the value of its
shares. Foreign letters of credit and guarantees involve certain risks in
addition to those of domestic obligations, including less stringent reserve
requirements and different accounting, auditing and recordkeeping requirements.

Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from federal income tax (and, with respect to
Missouri Municipal Obligations, to the exemption from Missouri income tax) are
rendered by bond counsel to the respective issuers at the time of issuance, and
opinions relating to the validity and the tax-exempt status of payments received
by a Portfolio from tax-exempt derivative securities are rendered by counsel to
the respective sponsors of such securities. The Tax-Exempt Portfolios and their
Adviser will rely on such opinions and will not review independently the
underlying proceedings relating to the issuance of Municipal Obligations, the
creation of any tax-exempt derivative security, or the bases for such opinions.

OTHER APPLICABLE POLICIES

The investment policies described in this Prospectus are among those which
one or more of the Portfolios have the ability to utilize. Some of these
policies may be employed on a regular basis; others may not be used at all.
Accordingly, reference to any particular policy, method or technique carries no
implication that it will be utilized or, if it is, that it will be successful.

34
<PAGE> 39

interest rates no less frequently than every thirteen months. Examples of the
types of U.S. Government obligations that may be held by the Portfolios, subject
to their respective investment objectives and policies, 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, GNMA, FNMA, FHLMC, 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.

STRIPPED GOVERNMENT SECURITIES. To the extent consistent with their
respective investment policies, each Portfolio may invest in bills, notes and
bonds (including zero coupon bonds) issued by the U.S. Treasury. In addition,
each Portfolio (except the Tax-Exempt Money Market, Short-Intermediate
Municipal, Missouri Tax-Exempt Bond and Equity Index Portfolios) may also invest
in "stripped" U.S. Treasury obligations offered under the Separate Trading of
Registered Interest and Principal Securities ("STRIPS") program or Coupon Under
Bank-Entry Safekeeping ("CUBES") program or other stripped securities issued
directly by agencies or instrumentalities of the U.S. Government (and, with
respect to the Treasury Money Market Portfolio only, that are also guaranteed as
to principal and interest by the U.S. Government). STRIPS and CUBES represent
either future interest or principal payments and are direct obligations of the
U.S. Government that clear through the Federal Reserve System. The Money Market,
Intermediate Corporate Bond, Bond Index, Government & Corporate Bond, Growth &
Income Equity, Small Cap Equity and Balanced Portfolios may also purchase U.S.
Treasury and agency securities that are stripped by brokerage firms and
custodian banks and sold under proprietary names. These stripped securities are
resold in custodial receipt programs with a number of different names (such as
TIGRs and CATS) and are not considered U.S. Government securities for purposes
of the 1940 Act.

Stripped securities are issued at a discount to their "face value" and may
exhibit greater price volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to investors. The
Adviser will consider the liquidity needs of a Portfolio when any investments in
zero coupon obligations or other principal-only obligations are made.

REPURCHASE AGREEMENTS. Under certain circumstances described above and
subject to their respective investment policies, each Portfolio (except the
National Municipal Bond 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"). A Portfolio will enter into repurchase
agreements only with financial institutions such as banks and broker-dealers
that the Adviser or Sub-Adviser believes to be creditworthy. During the term of
any repurchase agreement, the Adviser or Sub-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
a 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 no Portfolio presently intends to enter into
repurchase agreements providing for settlement in more than seven days, each
Portfolio does have the authority to do so subject to its limitation on the
purchase of illiquid securities described below. Repurchase agreements are

35
<PAGE> 40

considered to be loans under the 1940 Act. The income on repurchase agreements
is taxable. See "Taxes" below.

REVERSE REPURCHASE AGREEMENTS. Subject to their investment policies, each
Portfolio (except the Treasury Money Market Portfolio and the Tax-Exempt
Portfolios) may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with their respective investment limitations
below. Pursuant to such agreements, a 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 a Portfolio may
decline below the repurchase price which the Portfolio is obligated to pay.
Reverse repurchase agreements are considered to be borrowings by a Portfolio
under the 1940 Act.

SECURITIES LENDING. To increase return or offset expenses, each Portfolio
(except the Treasury Money Market, Money Market, Tax-Exempt Money Market and
Missouri Tax-Exempt Bond Portfolios) may, from time to time, lend its 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, securities of the U.S. Government,
or its agencies or instrumentalities, or an irrevocable letter of credit issued
by a bank that has at least $1.5 billion in total assets, or any combination
thereof. 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, a 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 U.S. Government
securities are used as collateral. In accordance with current SEC policies, each
Portfolio is currently limiting its securities lending to 33 1/3% of the
aggregate net assets of such Portfolio. Loans are subject to termination by a
Portfolio or a borrower at any time.

SECURITIES OF OTHER INVESTMENT COMPANIES. Under certain circumstances
described above and subject to their respective investment policies and
limitations, each 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 and which invest in securities in which the
Portfolio is permitted to invest. Each 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 a Portfolio investing
more than 10% of the value of its total assets in such securities. Investments
in other investment companies will cause a Portfolio (and, indirectly, the
Portfolio's shareholders) to bear proportionately the cost incurred in
connection with the operations of such other investment companies. In addition,
investment companies in which a Portfolio may invest may impose a sales or
distribution charge in connection with the purchase or redemption of their
shares as well as other types of commissions or charges (no sales charge will be
paid by the Missouri Tax-Exempt Bond Portfolios in connection with such
investments). Such charges will be payable by a Portfolio and, therefore, will
be borne indirectly by its shareholders. See the Statement of Additional
Information under "Investment Objectives and Policies -- Securities of Other
Investment Companies." The income on securities of other investment companies
may be taxable to investors at the state or local level. See "Taxes" below.

36
<PAGE> 41

forward commitments and delayed settlement transactions involve a risk of loss
if the value of the security to be purchased declines prior to the settlement
date, or if the value of the security to be sold increases prior to the
settlement date. Each 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. No Portfolio intends to engage in such transactions for
speculative purposes but only for the purpose of acquiring portfolio securities.

OPTIONS. Each of the Equity and Bond Portfolios (except the
Short-Intermediate Municipal, Missouri Tax-Exempt Bond and National Municipal
Bond Portfolios) 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 or bond indices. 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 a Portfolio holds or intends to purchase.

These Portfolios 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 International Equity Portfolio may write covered call options, buy put
options, buy call options and write secured put options for hedging (or
cross-hedging) purposes or for the purpose of earning additional income. Such
options may relate to particular securities, foreign or domestic stock or bond
indices, financial instruments or foreign currencies; may or may not be listed
on a domestic or foreign securities exchange; and may or may not be issued by
the Options Clearing Corporation. The International Equity Portfolio will invest
and trade in unlisted over-the-counter options only with firms deemed
creditworthy by the Adviser or Sub-Adviser. However, unlisted options are not
subject to the protections afforded purchasers of listed options by the Options
Clearing Corporation, which performs the obligations of its members which fail
to perform them in connection with the purchase or sale of options. The
International Equity Portfolio will not purchase put and call options in an
amount that exceeds 10% of its net assets at the time of purchase.

The aggregate value of the securities subject to covered call options
written by a Portfolio will not exceed 25% of the value of its net assets. In
order to close out an option position, a 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, a 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 any
Portfolio. For additional information relating to option trading practices,
including particular risks, see the Statement of Additional Information and
Appendix B thereof.

FOREIGN CURRENCY PUT OPTIONS. The International Equity Portfolio may
purchase foreign currency put options on U.S. exchanges or U.S. over-the-counter
markets. A put option gives the Portfolio, upon payment of a premium, the right
to sell a currency at the exercise price until the expiration of the option and
serves to insure against adverse currency price movements in the underlying
portfolio assets denominated in that currency.

UNLISTED CURRENCY OPTIONS. The International Equity Portfolio may purchase
unlisted currency options. A number of major investment firms trade unlisted
options which are more flexible than exchange listed options with respect to
strike price and maturity date. These unlisted options generally are available
on a wider range of currencies. Unlisted foreign currency options are generally
less liquid than listed options and involve the credit risk associated with the
individual

37
<PAGE> 42

issuer. They will be deemed to be illiquid for purposes of the limitation on
investments in illiquid securities.

WRITING FOREIGN CURRENCY CALL OPTIONS. A call option written by the
International Equity Portfolio gives the purchaser, upon payment of a premium,
the right to purchase from the International Equity Fund a currency at the
exercise price until the expiration of the option.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the International Equity
Portfolio may buy and sell securities denominated in currencies other than the
U.S. dollar, and receive interest, dividends and sale proceeds in currencies
other than the U.S. dollar, the Portfolio may from time to time enter into
foreign currency exchange transactions to convert to and from different foreign
currencies and to convert foreign currencies to and from the U.S. dollar. The
Portfolio may enter into currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market, or
use forward currency contracts to purchase or sell foreign currencies.

A forward foreign currency contract is an obligation by the International
Equity Portfolio to purchase or sell a specific currency at a future date at a
price set at the time of the contract. In this respect, forward currency
contracts are similar to foreign currency futures contracts described below;
however, unlike futures contracts, which are traded on recognized commodities
exchanges, forward currency contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. Also, forward currency contracts usually involve delivery of
the currency involved instead of cash payment as in the case of futures
contracts.

The International Equity Portfolio may use forward foreign currency
exchange contracts in order to protect against uncertainty in the level of
future foreign exchange rates. The use of such forward contracts is limited to
hedging against movements in the value of foreign currencies relative to the
U.S. dollar in connection with specific portfolio transactions or with respect
to portfolio positions. The purpose of transaction hedging is to "lock in" the
U.S. dollar equivalent price of such specific securities. Position hedging is
the sale of foreign currency with respect to portfolio security positions
denominated or quoted in that currency. The Portfolio will not speculate in
foreign currency exchange transactions. Transaction and position hedging will
not be limited to an overall percentage of the Portfolio's assets but will be
employed as necessary to correspond to particular transactions or positions. The
Portfolio may not hedge its currency positions to an extent greater than the
aggregate market value (at the time of entering into the forward contract) of
the securities held in its portfolio denominated in, quoted in, or currently
convertible into that particular currency. Neither spot transactions nor forward
foreign currency exchange contracts eliminate fluctuations in the prices of the
Portfolio's portfolio securities or in foreign exchange rates, or prevent loss
if the prices of these securities decline, but forward foreign currency exchange
contracts do allow the Portfolio to establish a rate of exchange for a future
point in time.

38
<PAGE> 43

management purposes. Hedging is a specialized investment technique that entails
skills different from other investment management. The Adviser (or Sub-Adviser)
may also consider such transactions to be economically appropriate for the
reduction of risk inherent in the ongoing management of a Portfolio. A stock or
bond 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 or bonds 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 or bond in the index is contemplated.
Similarly, it may be in the best interest of a Portfolio to purchase or sell
interest rate futures contracts, or options thereon, which provide for the
future delivery of specified fixed income securities.

The purchase and sale of futures contracts or related options will not be a
primary investment technique of any Portfolio. None of the Portfolios will
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 a 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 and Appendix B thereof.

ASSET-BACKED SECURITIES. The U.S. Government Securities, Intermediate
Corporate Bond, Bond Index, Government & Corporate Bond and Balanced Portfolios
may purchase asset-backed securities (i.e., securities backed by mortgages,
installment sale contracts, corporate receivables, credit card receivables or
other assets) that are issued by entities such as GNMA, FNMA and FHLMC and
private issuers such as commercial banks, financial companies, finance
subsidiaries of industrial companies, savings and loan associations, mortgage
banks, and investment banks. To the extent that a Portfolio invests in
asset-backed securities issued by companies that are investment companies under
the 1940 Act, such acquisitions will be subject to the percentage limitations
prescribed by the 1940 Act. See "Other Applicable Policies -- Securities of
Other Investment Companies" above.

Presently there are several types of mortgage-backed securities, including
guaranteed mortgage pass-through certificates, which provide the holder with a
pro rata interest in the underlying mortgages, and CMOs, which provide the
holder with a specified interest in the cash flow of a pool of underlying
mortgages or other mortgage-backed securities. CMOs are issued in multiple
classes, each with a specified fixed or floating interest rate and a final
distribution date. The relative payment rights of the various CMO classes may be
subject to greater volatility and interest-rate risk than other types of
mortgage-backed securities. The average life of asset-backed securities varies
with the underlying instruments or assets and market conditions, which in the
case of mortgages have maximum maturities of forty years. The average life of a
mortgage-backed instrument, in particular, is likely to be substantially less
than the original maturity of the mortgages underlying the securities as the
result of unscheduled principal payments and mortgage prepayments. The
relationship between mortgage prepayment and interest rates may give some
high-yielding mortgage-backed securities less potential for growth in value than
conventional bonds with comparable maturities. In addition, in periods of
falling interest rates, the rate of mortgage prepayments tends to increase.
During such periods, the reinvestment of prepayment proceeds by a Portfolio will
generally be at lower rates than the rates that were carried by the obligations
that have been prepaid. When interest rates rise, the value of an asset-backed
security generally will decline; however, when interest rates decline, the value
of an assetbacked security with prepayment features may not increase as much as
that of other fixed-income securities. Because of these and other reasons, an
asset-backed security's total return may be difficult to predict precisely.

In general, the collateral supporting non-mortgage assetbacked securities
is of shorter maturity than mortgage loans and is less likely to experience
substantial prepayments. Nonmortgage asset-

39
<PAGE> 44

backed securities involve certain risks that are not presented by
mortgage-backed securities arising primarily from the nature of the underlying
assets (i.e., credit card and automobile loan receivables as opposed to real
estate mortgages). For example, credit card receivables are generally unsecured
and the repossession of automobiles and other personal property upon the default
of the debtor may be difficult or impracticable in some cases.

TYPES OF MUNICIPAL OBLIGATIONS. The two principal classifications of
Municipal Obligations that may be held by the Tax-Exempt Portfolios are "general
obligation" securities and "revenue" securities. General obligation securities
are secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. Revenues securities are payable only
from the revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise tax or other specific
revenue source such as the user of the facility being financed. Revenue
securities include private activity bonds which are not payable from the
unrestricted revenues of the issuer. Consequently, the credit quality of private
activity bonds is usually directly related to the credit standing of the
corporate user of the facility involved. Municipal Obligations may also include
"moral obligation" bonds, which are normally issued by special purpose public
authorities. If the issuer of a moral obligation bond is unable to meet its debt
service obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality which created the issuer.

Municipal Obligations include debt obligations issued by governmental
entities to obtain funds for various public purposes, including the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses and the extension of loans to public
institutions and facilities. Private activity bonds issued by or on behalf of
public authorities to finance various privately operated facilities are
considered Municipal Obligations. Interest on private activity bonds, although
free of regular federal income tax, may be an item of tax preference for
purposes of the federal alternative minimum tax.

Each of the Tax-Exempt Portfolios may acquire zero coupon obligations,
which may have greater price volatility than coupon obligations and which will
not result in payment of interest until maturity. Also included within the
general category of Municipal Obligations are participation certificates in
leases, installment purchase contracts, or conditional sales contracts ("lease
obligations") entered into by state or political subdivisions to finance the
acquisition or construction of equipment, land, or facilities. Although lease
obligations do not constitute general obligations of the issuer for which the
lessee's unlimited taxing power is pledged, certain lease obligations are backed
by the lessee's covenant to appropriate money to make the lease obligation
payments. However, under certain lease obligations, the lessee has no obligation
to make these payments in future years unless money is appropriated on a yearly
basis. Although "non-appropriation" lease obligations are secured by the leased
property, disposition of the property in the event of foreclosure might prove
difficult. These securities represent a relatively new type of financing and may
not be as marketable as more conventional securities. To the extent these
securities are illiquid, they are subject to each Portfolio's applicable
limitation on illiquid securities described below.

VARIABLE AND FLOATING RATE MUNICIPAL OBLIGATIONS. Municipal Obligations
purchased by the Tax-Exempt Portfolios may include rated or unrated variable and
floating rate instruments, including 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 a 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 a Portfolio to dispose of an instrument if the
issuer were to default on its payment obligation. A Portfolio could, for these
or other reasons, suffer a loss with respect to such instruments.

STAND-BY COMMITMENTS. Each of the Tax-Exempt Portfolios may acquire
"stand-by commitments" with respect to Municipal Obligations held by it. Under a
stand-by commitment, a

40
<PAGE> 45

dealer agrees to purchase, at a Portfolio's option, specified Municipal
Obligations at a specified price. The Portfolios will acquire stand-by
commitments solely to facilitate portfolio liquidity and do not intend to
exercise their rights thereunder for trading purposes. The Portfolios expect
that stand-by commitments will generally be available without the payment of any
direct or indirect consideration. However, if necessary or advisable, a
Portfolio may pay for a stand-by commitment either separately in cash or by
paying a higher price for portfolio securities which are acquired subject to the
commitment (thus reducing the yield otherwise available for the same
securities). Stand-by commitments acquired by a Portfolio will be valued at zero
in determining the Portfolio's net asset value.

TAX-EXEMPT DERIVATIVES. Each of the Tax-Exempt Portfolios may hold
tax-exempt derivatives which may be in the form of tender option bonds,
participations, beneficial interests in a trust, partnership interests or other
forms. The Adviser expects that less than 5% of each Tax-Exempt Portfolio's
assets will be invested in such securities during the current year. See the
Statement of Additional Information under "Investment Objectives and
Policies -- Tax-Exempt Derivatives."

DEPOSITORY RECEIPTS. The Bond Index and Equity Index Portfolios may invest
in receipts issued by banks or brokerage firms that are created by depositing
securities listed in each Portfolio's respective index 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 Portfolios may invest in index-based depository receipts in
lieu of investment in the actual securities that are listed in the respective
indexes.

THE INDEXING APPROACH. The Bond Index and Equity Index Portfolios seek to
approximate the investment performance of their respective market segments, as
represented by their respective indexes, i.e. the Lehman Aggregate in the case
of the Bond Index Portfolio and the S&P 500 in the case of the Equity Index
Portfolio. While there can be no guarantee that a Portfolio's investment results
will precisely match the results of its corresponding index, the Adviser
believes that, before deduction of operating expenses, there will be a very high
correlation between the returns generated by the Portfolios and their respective
indexes. Each Portfolio will attempt to achieve a correlation between its
performance and its respective index 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 a Portfolio's net asset value, including the value
of its dividend and capital gains distributions, increases or decreases in exact
proportion to changes in its respective index. Each Portfolio's ability to
correlate its performance with its respective index, however, may be affected
by, among other things, transaction costs, changes in securities markets, the
manner in which S&P or Lehman Brothers, Inc. ("Lehman") calculate their
respective indexes, and the timing of purchases and redemptions. The Adviser
monitors the correlation of the performance of the Portfolios in relation to
their indexes 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 EITHER OF THE PORTFOLIOS' INDEXES IN NO WAY
IMPLIES AN OPINION BY S&P OR LEHMAN AS TO ITS ATTRACTIVENESS AS AN INVESTMENT.
S&P AND LEHMAN ARE NOT SPONSORS OF, OR IN ANY WAY AFFILIATED WITH, THE
PORTFOLIOS.

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, a Portfolio will buy or sell
securities only to reflect changes in an index (including mergers or changes in
the composition of an index) 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 a Portfolio and that
of its respective index, may cause the return of a Portfolio to be lower than
the return of its respective index. The Portfolios may invest in less than all
of the securities included in

41
<PAGE> 46

their respective indexes, which may result in a return that does not correspond
with that of the indexes, after taking expenses into account.

ILLIQUID SECURITIES. A Portfolio will not invest more than 15% (10% for
each of the Money Market Portfolios) 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 the applicable limit (unless the Adviser or Sub-Adviser, pursuant to
guidelines established by the Board of Directors, determines that a liquid
market exists). The purchase of securities which can be sold under Rule 144A
could have the effect of increasing the level of illiquidity in the Portfolios
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these restricted securities.

PORTFOLIO TURNOVER AND TRANSACTIONS. Although the Equity and Bond
Portfolios will not normally engage in short-term trading, each Portfolio
(except the Bond Index and Equity Index Portfolios) reserves the right to do so
if the Adviser (or Sub-Adviser) believes that selling a particular security is
appropriate in light of the Portfolio's investment objective. Investments may be
sold for a variety of reasons, such as a more favorable investment opportunity
or other circumstances bearing on the desirability of continuing to hold such
investments. A high rate of portfolio turnover involves correspondingly greater
brokerage commission expenses and other transaction costs, which must be borne
directly by the Portfolio involved and ultimately by its shareholders. High
portfolio turnover may result in the realization of substantial net capital
gains; distributions derived from such gains may be treated as ordinary income
for federal income tax purposes. See "Taxes" in this Prospectus and the
Statement of Additional Information.

Although the Intermediate Corporate Bond, Bond Index, Equity Income and
Equity Index Portfolios cannot accurately predict their respective annual
portfolio turnover rates, such rates are not expected to exceed 100%.

All orders for transactions in securities or options on behalf of the
Portfolios are placed by the Adviser (or Sub-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, a 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

Except as otherwise noted, each Portfolio's investment policies discussed
above are not fundamental and may be changed by the Fund's Board of Directors
without shareholder approval. However, each Portfolio also has in place certain
fundamental investment limitations, some of which are set forth below, which may
be changed only by a vote of a majority of the outstanding Shares of a
Portfolio. Other investment limitations that also cannot be changed without a
vote of shareholders are contained in the Statement of Additional Information
under "Investment Objectives and Policies."

THE TREASURY MONEY MARKET AND MONEY MARKET PORTFOLIOS

A Portfolio may not:

1. Make loans, except that a Portfolio may purchase or hold debt
instruments in accordance with its investment objective and policies and
may enter into repurchase agreements with respect to securities (together
with any cash collateral) that are consistent with the Portfolio's
permitted investments and that equal at all times at least 100% of the
value of the repurchase price.

42
<PAGE> 47

2. Borrow money or issue senior securities, except that a Portfolio
may borrow from banks and the Money Markert Portfolio may enter into
reverse repurchase agreements, for temporary purposes in amounts up to 10%
of the value of its 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 value of a Portfolio's total assets at the
time of such borrowing. A Portfolio will not purchase securities while its
borrowings (including reverse repurchase agreements) are outstanding.

3. With respect to the Treasury Money Market Portfolio, purchase
securities other than obligations of the U.S. Government, its agencies and
instrumentalities, some of which may be subject to repurchase agreements,
except that the Portfolio may purchase securities of other investment
companies that seek to maintain a constant net asset value per Share and
that are permitted themselves only to invest in securities which may be
acquired by the Portfolio.

4. With respect to the Money Market Portfolio, purchase any securities
which would cause 25% or more of the value 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 (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, domestic bank certificates of deposit, bankers'
acceptances and repurchase agreements secured by domestic bank instruments
or 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 the 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.

In accordance with current regulations of the SEC, the Money Market
Portfolio intends to limit investments in the securities of any single issuer
(other than securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities) to not more than 5% of the Portfolio's total assets at the
time of purchase, provided that the Portfolio may invest up to 25% of its total
assets in the securities of any one issuer for a period of up to three business
days. This intention is not, however, a fundamental policy of the Money Market
Portfolio. The Portfolio would have the ability to invest more than five percent
of its assets in any one issuer in accordance with its fundamental policy only
in the event that Rule 2a-7 of the 1940 Act is amended in the future.

THE U.S. GOVERNMENT SECURITIES, INTERMEDIATE CORPORATE BOND, BOND INDEX,
GOVERNMENT & CORPORATE BOND, SHORT-INTERMEDIATE MUNICIPAL, NATIONAL MUNICIPAL
BOND, EQUITY INCOME, EQUITY INDEX, GROWTH & INCOME EQUITY, SMALL CAP EQUITY,
INTERNATIONAL EQUITY AND BALANCED PORTFOLIOS

A 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.

43
<PAGE> 48

primarily related to financing the activities of their parents; and (iii)
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); and (b) with respect to the Short-
Intermediate Municipal and National Municipal Bond Portfolios, there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government, any state, territory or possession of the U.S. Government, the
District of Columbia, or any of their authorities, agencies,
instrumentalities or political subdivisions.

3. Borrow money or issue senior securities, except that each Portfolio
may borrow from banks and each Portfolio other than the National Municipal
Bond Portfolio 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. A
Portfolio's transactions in futures and related options (including the
margin posted by a Portfolio in connection with such transactions), and
securities held in escrow or separate accounts in connection with a
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 (a) each Portfolio may purchase or hold
debt instruments, lend portfolio securities and make other investments in
accordance with its investment objective and policies, and (b) each
Portfolio except the National Municipal Bond Portfolio may 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 a Portfolio's transactions in options, and futures contracts
and related options, and (b) a Portfolio may obtain short-term credits as
may be necessary for the clearance of purchases and sales of portfolio
securities.

THE TAX-EXEMPT MONEY MARKET AND MISSOURI TAX-EXEMPT BOND PORTFOLIOS

A Portfolio may not:

1. Purchase securities of any one issuer if, immediately after and as
a result of such purchase, more than 5% of the Portfolio's total assets
would be invested in the securities of such issuer, except that (a) up to
50% of the Portfolio's total assets may be invested without regard to this
5% limitation provided that no more than 25% of the Portfolio's total
assets are invested in the securities of any one issuer and (b) this 5%
limitation does not apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. For purposes of this
limitation, a security is considered to be issued by the governmental
entity (or entities) whose assets and revenues back the security, or, with
respect to an industrial development bond (in the case of the Tax-Exempt
Money Market Portfolio) or a private activity bond (in the case of the
Missouri Tax-Exempt Bond Portfolio) that is backed only by the assets and
revenues of a non-governmental user, a security is considered to be issued
by such non-governmental user. In certain circumstances, the guarantor of a
guaranteed security may also be considered to be an issuer in connection
with such guarantee, except that a guarantee of a security shall not be
deemed to be a security issued by the guarantor when the value of all
securities issued and guaranteed by the guarantor, and owned by the
Portfolio, does not exceed 10% of the Portfolio's total assets.

44
<PAGE> 49

amounts borrowed or 10% of its total assets at the time of such borrowing
(including any reverse repurchase agreements); or purchase securities while
borrowings exceed 5% of Tax-Exempt Money Market Portfolio's net assets or
5% of the Missouri Tax-Exempt Bond Portfolio's total assets. Securities
held in escrow or separate accounts in connection with the Portfolios'
investment practices described in this Prospectus or the Statement of
Additional Information are not subject to this limitation.

THE MISSOURI TAX-EXEMPT BOND PORTFOLIO

The Portfolio may not:

1. Purchase any securities, except securities issued (as defined in
Investment Limitation No. 1 above with respect to the Tax-Exempt Money
Market and Missouri Tax-Exempt Bond Portfolios) or guaranteed by the United
States, any state, territory or possession of the United States, the
District of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions, which would cause 25% or more
of the Portfolio's net assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the
same industry.

2. Make loans except that the Portfolio may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies.

In addition, under normal market conditions or when the Adviser deems that
suitable tax-exempt obligations are available, at least 80% of the Tax-Exempt
Money Market Portfolio's assets must be invested in obligations the interest on
which is exempt from federal income tax and stand-by commitments with respect to
such obligations.

Notwithstanding the Investment Limitation in the preceding paragraph, the
Tax-Exempt Money Market Portfolio may invest in securities of other investment
companies that (a) invest in securities that are substantially similar to those
the Portfolio may acquire, and (b) distribute income that is exempt from regular
federal income tax.

The following additional investment policies with respect to the Tax-Exempt
Money Market and Missouri Tax-Exempt Bond Portfolio are not fundamental and may
be changed by the Board of Directors without shareholder approval:

The Portfolios may not purchase securities which are not readily
marketable, enter into repurchase agreements providing for settlement in
more than seven days after notice, or purchase other illiquid securities
if, as a result of such purchase, illiquid securities would exceed 15% (10%
with respect to the Tax-Exempt Money Market Portfolio) of the Portfolios'
respective net assets.

The Tax-Exempt Money Market Portfolio has an operating policy to comply
with the requirements of Rule 2a-7 of the 1940 Act. To the extent that Rule 2a-7
is more restrictive than the Portfolio's fundamental limitations, the Portfolio
will operate in accordance with Rule 2a-7.

If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in value in the
Portfolio's securities will not constitute a violation of such limitation.

PRICING OF SHARES

THE MONEY MARKET PORTFOLIOS

45
<PAGE> 50

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).

Each Portfolio's assets are valued based upon the amortized cost method.
Although each Portfolio seeks to maintain its net asset value per Share at
$1.00, there can be no assurance that the net asset value per Share will not
vary. See the Statement of Additional Information under "Net Asset Value" for
further information.

THE EQUITY AND BOND PORTFOLIOS

The Equity and Bond Portfolios' respective net asset values per Share are
determined by the Administrator as of the close of regular trading hours on the
Exchange on each Business Day (currently 4:00 p.m. Eastern time).

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 (or
Sub-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.

OTHER INFORMATION

The public offering price for each class of Shares of a Portfolio is based
upon net asset value per Share plus, in the case of Investor A Shares of each
Portfolio except the Money Market Portfolios, a front-end sales charge. A class
will calculate its net asset value per Share by adding the value of a
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 a Portfolio which declares its net investment income
quarterly will generally be lower than the net asset value per Share of Trust,
Institutional or Investor A Shares of the same Portfolio.

HOW TO PURCHASE AND REDEEM SHARES

PURCHASE OF SHARES

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

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

46
<PAGE> 51

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.

PURCHASE OF SHARES -- THE MONEY MARKET PORTFOLIOS

A purchase order received and accepted by the Fund by 12:00 noon (Eastern
time) on a Business Day is effected at the net asset value per Share next
determined after receipt of the order in good form if the Fund's Custodian has
received payment in federal funds by 4:00 p.m. (Eastern time) that day. If such
funds are not available for investment by 4:00 p.m. (Eastern time), the order
will be cancelled. Purchase orders received after 12:00 noon (Eastern time) will
be placed the following business day.

PURCHASE OF SHARES -- THE EQUITY AND BOND PORTFOLIOS

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.

EXCHANGES

The exchange privilege enables shareholders to exchange Trust Shares of a
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 a Portfolio may also be
exchanged for Investor A Shares of the same 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 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 Portfolios 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 Distributor. See "Other Exchange or Redemption Information" below. An
investor should consult the financial institution or the Distributor for further
information regarding procedures for exchanging Shares.

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 a 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. 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

47
<PAGE> 52

after receiving a redemption order if, in the judgment of the Adviser, an
earlier payment could adversely affect a Portfolio.

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. 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.

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.

Proceeds from redemptions of Shares of the MONEY MARKET PORTFOLIOS with
respect to redemption orders received by the Fund before 12:00 noon (Eastern
time) on a Business Day normally are sent electronically the same day to the
financial institution that placed the redemption order in good form. Proceeds
for redemption orders that are received after 12:00 noon (Eastern time) or on a
non-Business Day normally are wired to the financial institution on the next
Business Day.

Proceeds from redemptions of Shares of the EQUITY AND BOND PORTFOLIOS with
respect to redemption orders received 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.

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

48
<PAGE> 53

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

YIELDS AND TOTAL RETURNS

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

THE MONEY MARKET PORTFOLIOS

From time to time, performance information such as total return, "yield"
and "effective yield" for the Money Market Portfolios' Trust Shares may be
quoted in advertisements or in communications to shareholders. The "yield"
quoted in advertisements refers to the income generated by an investment in such
Shares of a Portfolio over a specified period (such as a seven-day period)
identified in connection with the particular yield quotation. This income is
then "annualized." That is, the amount of income generated by the investment
during that period is assumed to be generated for each such period over a
52-week or one-year period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly but, when annualized, the income
earned by an investment in such Shares of a Portfolio is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment.

In addition, the Treasury Money Market Portfolio's "state tax-equivalent
yield" may also be quoted. The "state tax-equivalent yield" shows the level of
taxable yield needed to produce an after-tax yield that is equivalent to a
particular state's tax-exempt yield achieved by the Portfolio. The "state
tax-equivalent yield" refers to the portion of income that is derived from
interest income on direct obligations of the U.S. Government, its agencies or
instrumentalities that qualifies for exemption from state income tax. The yield
calculation assumes that 100% of the interest income is exempt from state income
tax. The "state tax-equivalent yield" is computed by dividing the tax-exempt
portion of the Portfolio's yield by a denominator consisting of one minus a
stated income tax rate.

The Tax-Exempt Money Market Portfolio may also quote its "tax-equivalent
yield" and "tax-equivalent effective yield", which demonstrate the level of
taxable yield needed to produce an after-tax yield that is equivalent to the
Portfolio's yield and effective yield. Each are calculated by increasing the
Portfolio's yield and effective yield by the amount necessary to reflect the
payment of federal (and/or state) tax at a stated tax rate. The "tax equivalent
yield" and "tax-equivalent effective yield" will always be higher than the
Portfolio's yield and effective yield, respectively. The Tax-Exempt Money Market
Portfolio may also compute its "tax-equivalent yield" and "taxequivalent
effective yield" with respect to certain states, which shows the level of
taxable yield and effective yield, respectively, needed to produce an after-tax
equivalent to the federal and state tax-exempt yield of the Portfolio's
particular class of Shares, assuming payment of federal income tax and state
personal income tax each at a stated rate and based upon a specified percentage
of the Portfolio's income which is exempt from state income tax as well as
federal income tax.

49
<PAGE> 54

THE EQUITY AND BOND PORTFOLIOS

From time to time, performance information such as total return and yield
data for the Equity and Bond Portfolios' Trust Shares may be quoted in
advertisements or in communications to shareholders. The yield is computed based
on the net income of such Shares in the particular 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 net asset value per Share
on the last day of the period and annualizing the result. The Short-Intermediate
Municipal, Missouri Tax-Exempt Bond and National Municipal Bond Portfolios' "tax
equivalent" yields, which show the level of taxable yield needed to produce an
after-tax equivalent to each Portfolio's tax-free yield may also be quoted from
time to time. This is done by increasing a Portfolio's yield (calculated as
above) by the amount necessary to reflect the payment of federal income tax at a
stated tax rate. The Missouri Tax-Exempt Bond Portfolio may also compute its
"Missouri tax-equivalent" yield which shows the level of taxable yield needed to
produce an after-tax equivalent to the federal and Missouri tax-exempt yield of
the Portfolio's Shares, assuming payment of federal income tax and Missouri
income tax each at a stated rate.

The Portfolios' 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 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 a 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 a 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.

INFORMATION APPLICABLE TO ALL PORTFOLIOS

Performance data of the Portfolios' 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 Lehman Brothers, Inc., or any of its affiliates, Ibbotson
Associates, Inc., Lipper Analytical Services, Inc., Mutual Fund Forecaster and
IBC/Donoghue's MONEY FUND REPORT(R) published by IBC/Donoghue. 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
Portfolios 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 a Portfolio represent that
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 a
Portfolio's yields and total returns. Such fees, if any, will reduce the
investor's net return on an investment in a Portfolio. Investors may call
1-800-452-4015 to obtain current yield and total return information.

50
<PAGE> 55

DIVIDENDS AND DISTRIBUTIONS

THE TREASURY MONEY MARKET, MONEY MARKET, TAX-EXEMPT MONEY MARKET, U.S.
GOVERNMENT SECURITIES, INTERMEDIATE CORPORATE BOND, BOND INDEX, GOVERNMENT &
CORPORATE BOND, SHORT-INTERMEDIATE MUNICIPAL, MISSOURI TAX-EXEMPT BOND AND
NATIONAL MUNICIPAL BOND PORTFOLIOS

Dividends from net investment income of the Treasury Money Market, Money
Market, Tax-Exempt Money Market, U.S. Government Securities, Intermediate
Corporate Bond, Bond Index, Government & Corporate Bond, Short-Intermediate
Municipal, Missouri Tax-Exempt Bond and National Municipal Bond Portfolios are
declared daily and paid monthly not later than five Business Days after the end
of each month. Trust Shares of the Treasury Money Market, Money Market and
Tax-Exempt Money Market Portfolios earn dividends from the day the purchase
order is received by the Transfer Agent through the day before the redemption
order for such Shares is received. Trust Shares of the U.S. Government
Securities, Intermediate Corporate Bond, Bond Index, Government & Corporate
Bond, Short-Intermediate Municipal, Missouri Tax-Exempt Bond and National
Municipal Bond Portfolios earn dividends from the day after the purchase order
is received by the Transfer Agent through the day the redemption order for such
Shares is received. Dividends on each Share of such Portfolios are determined in
the same manner and are paid in the same amounts irrespective of class, except
that a Portfolio's Trust Shares and Institutional Shares (other than the
Tax-Exempt Portfolios which do not offer Institutional Shares) bear all expenses
of the respective Administrative Services Plans adopted for such Shares and a
Portfolio's Investor A Shares and Investor B Shares (other than the Treasury
Money Market, Tax-Exempt Money Market, Intermediate Corporate Bond, Bond Index
and Short-Intermediate Municipal Portfolios which do not offer Investor B
Shares) bear all expenses of the respective Distribution and Services Plans
adopted for such Shares. In addition, a Portfolio's Institutional Shares bear
the expense of certain sub-transfer agency fees. See "Management of the
Fund -- Administrative Services Plan" and "Other Information Concerning the Fund
and Its Shares" below.

THE EQUITY INCOME, EQUITY INDEX, GROWTH & INCOME EQUITY AND BALANCED PORTFOLIOS

Net investment income for the Equity Income, Equity Index, Growth & Income
Equity and Balanced Portfolios is declared and paid monthly as a dividend to
shareholders of record. Dividends on each Share of each of these Portfolios are
determined in the same manner and are paid in the same amount, irrespective of
class, except that a Portfolio's Trust Shares and Institutional Shares bear all
expenses of the respective Administrative Services Plans adopted for such Shares
and a Portfolio's Investor A Shares and Investor B Shares (other than the Equity
Index Portfolio which does not offer Investor B Shares) bear all expenses of the
respective Distribution and Services Plans adopted for such Shares. In addition,
a Portfolio's Institutional Shares bear the expense of certain sub-transfer
agency fees. See "Management of the Fund -- Administrative Services Plan" and
"Other Information Concerning the Fund and Its Shares" below.

THE SMALL CAP EQUITY AND INTERNATIONAL EQUITY PORTFOLIOS

Net investment income for the Small Cap Equity and International Equity
Portfolios is declared and paid quarterly as a dividend to shareholders of
record. Dividends on each Share of each of these Portfolios are determined in
the same manner and are paid in the same amount, irrespective of class, except
that a Portfolio's Trust Shares and Institutional Shares bear all expenses of
the respective Administrative Services Plans adopted for such Shares and a
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,
a Portfolio's Institutional Shares bear the expense of certain subtransfer
agency fees. See "Management of the Fund -Administrative Services Plan" and
"Other Information Concerning the Fund and Its Shares" below.

51
<PAGE> 56

OTHER DIVIDEND AND DISTRIBUTION INFORMATION

The Money Market Portfolios do not expect to realize capital gains. Net
realized capital gains of a Portfolio, if any, are distributed at least
annually. All dividends and distributions paid on a Portfolio's Shares are
automatically reinvested 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 a 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

Each Portfolio of the Fund intends to qualify as a "regulated investment
company" for the current taxable year. It is intended that each Portfolio will
continue to so qualify as long as such qualification is in the best interests of
shareholders. A regulated investment company is generally exempt from federal
income tax on amounts distributed to shareholders.

Qualification as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code"), for a taxable year requires, among other
things, that each 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 net
exempt-interest income (if any). In general, a 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 over net short-term capital loss, if any, for
such taxable year. The Treasury Money Market, Money Market, U.S. Government
Securities, Intermediate Corporate Bond, Bond Index, Government & Corporate
Bond, Equity Income, Equity Index, Growth & Income Equity, Small Cap Equity,
International Equity and Balanced Portfolios intend to distribute as dividends
substantially all of their respective investment company taxable income and any
net tax-exempt interest income each year. Such dividends will be taxable as
ordinary income to a 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 Equity Income, Equity Index, Growth
& Income Equity, Small Cap Equity, International Equity and Balanced Portfolios,
such dividends will qualify for the dividends received deduction for
corporations to the extent of the total qualifying dividends received by the
Portfolios from domestic corporations for the taxable year. Because all of the
Treasury Money Market, Money Market, U.S. Government Securities, Intermediate
Corporate Bond, Bond Index and Government & Corporate Bond Portfolios' net
investment income is expected to be derived from earned interest, it is not
expected that any distributions from such Portfolios will be eligible for the
dividends received deduction.

It is the policy of each Tax-Exempt Portfolio to distribute as dividends
substantially all of its net tax-exempt interest income and any investment
company taxable income each year. Dividends derived from interest on Municipal
Obligations (known as exempt-interest dividends) may be treated by shareholders
as items of interest excludable from their gross income under Section 103(a) of
the Code, unless under the circumstances applicable to the particular
shareholder the exclusion would be disallowed. See the Statement of Additional
Information under "Additional Information Concerning Taxes." Distributions of
net income may be taxable to investors under state or local law as dividend
income even though a substantial portion of such distributions may be derived
from interest on tax-exempt obligations which, if realized directly, would be
exempt from such income tax.

If a Tax-Exempt Portfolio should hold certain private activity bonds issued
after August 7, 1986, shareholders must include, as an item of tax preference,
the portion of dividends paid by the

52
<PAGE> 57

Portfolio that is attributable to interest on such bonds in their federal
alternative minimum taxable income for purposes of determining liability (if
any) for the 26-28% alternative minimum tax applicable to individuals and the
20% alternative minimum tax and the environmental tax applicable to
corporations. Corporate shareholders also must take all exempt-interest
dividends into account in determining certain adjustments for federal
alternative minimum and environmental tax purposes. The environmental tax
applicable to corporations is imposed at the rate of .12% on the excess of the
corporation's modified federal alternative minimum taxable income over
$2,000,000.

Substantially all of each Portfolio's net realized long-term capital gains,
if any, will be distributed at least annually to its shareholders. A 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 gains are received in cash or
reinvested in additional Shares.

To the extent dividends paid to shareholders of a Tax-Exempt Portfolio are
derived from taxable income or from long-term or short-term capital gains, such
dividends will be subject to federal income tax, whether such dividends are paid
in the form of cash or additional Shares.

An investor considering purchasing Shares of a Money Market Portfolio on or
just before the record date of any capital gains distribution (or in the case of
the Equity and Bond Portfolios, 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 a 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 shareholders and paid by the Fund on December
31 of such year, if such dividends are actually paid during January of the
following year.

Each 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 properly to 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 of the Equity and Bond Portfolios, depending upon
the tax basis of such Shares 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.

Certain interest income and dividends earned by the International Equity
Portfolio from foreign securities is expected to be subject to foreign
withholding taxes or other taxes. So long as more than 50% of the value of the
Portfolio's total assets at the close of any taxable year consists of stock or
securities of foreign corporations, the Portfolio may elect, for U.S. federal
income tax purposes, to treat certain foreign taxes paid by it, including
generally any withholding taxes and other foreign income taxes, as paid by its
shareholders. The Portfolio may make this election. As a consequence, the amount
of these foreign taxes paid by the Portfolio will be included in its
shareholders' taxable income pro rata (in addition to taxable distributions
actually received by them), and each shareholder may elect either (a) to credit
his proportionate amount of such taxes against his U.S. federal income tax
liabilities (subject to certain limitations), or (b) if he itemizes his
deductions, to deduct such proportionate amounts from his U.S. taxable income.

53
<PAGE> 58

Missouri taxing jurisdiction (collectively, "Missouri Taxpayers") will not be
subject to Missouri income taxation on dividends distributed to them to the
extent that such dividends (a) qualify as exempt-interest dividends of a
regulated investment company under Code section 852(b)(5), (b) are the subject
of the written notice to shareholders required by 12 C.S.R. section 10-2.155(2),
(c) are attributable to interest on (1) obligations issued by the State of
Missouri or any of its political subdivisions or authorities, or (2) certain
obligations of the United States, any territory or possession of the United
States, or any authority, commission, or instrumentality of the United Sates, to
the extent exempted from Missouri income tax under Federal Law, and (d) are
properly reported on the Missouri income tax returns of the shareholder in the
respective Portfolio. In connection with these exclusions from Missouri taxable
income, the State also denies any deduction for interest on debt incurred to
carry the obligations or securities and any expenses incurred in the production
of the excluded interest or dividend income.

To the extent possible, the Missouri Tax-Exempt Bond Portfolio intends to
invest in obligations which will permit distributions attributable to interest
to be excludable by Missouri Taxpayers. Despite this intention, Missouri
Taxpayers generally will be subject to Missouri income tax on other types of
distributions received from the Missouri Tax-Exempt Bond Portfolio, including
distributions of interest on obligations of other issuers and all long-term and
short-term capital gains.

Except as noted above with respect to Missouri income taxation,
distributions from a Portfolio may be taxable to shareholders under other state
and local laws imposing taxes on or measured by net income, even though such
distribution were derived, in whole or in part, from interest on obligations
which, if realized directly by the shareholder, or by a shareholder of another
type, would be nontaxable.

The foregoing discussion of Missouri law does not apply to shareholders
that are subject to the Missouri bank tax or other comparable forms of
specialized Missouri taxation.

All shareholders of the Portfolios should consult with their tax advisors
with respect to the state and local tax consequences of the purchase, ownership,
and disposition of Shares in the Portfolios, the receipt of distributions from
the Portfolios, and the proper method in which to report Portfolio-related items
on a shareholder's Missouri tax returns.

STATE AND LOCAL TAXES

Shareholders should note that dividends paid by a 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.

The Treasury Money Market Portfolio is structured to provide investors, to
the extent permissible by federal and state law, with income that is exempt or
excluded from taxation at the state and local level. Shareholders should note
that many, but not all, states permit all or a portion of a regulated investment
company's dividends which are derived from interest on U.S. Treasury obligations
(and obligations of certain U.S. Government agencies)("Treasury Obligations") to
be exempt or excluded from state and local taxation. In addition, only certain
states allow dividends of a regulated investment company that are derived from
dividends of other regulated investment companies investing directly in Treasury
Obligations to be exempt or excluded from state and local taxation. Some states
reduce a shareholder's allowable deductions by interest on debt incurred to
carry obligations producing state tax-exempt interest and by other expenses
related to such obligations. Income earned by the Portfolio from repurchase
agreements generally is not exempt from state or local income tax. Shareholders
should consult their own tax advisors about the status of distributions from the
Treasury Money Market Portfolio under state and local law.

54
<PAGE> 59

MISCELLANEOUS

The foregoing summarizes some of the important federal and state tax
considerations generally affecting the Portfolios and their shareholders and is
not intended as a substitute for careful tax planning. Accordingly, potential
investors in the Portfolios should consult their tax advisers with specific
reference to their own tax situation. Shareholders will be advised at least
annually as to the federal and, for the Treasury Money Market Portfolio, the
state income tax consequences, and for the Missouri Tax-Exempt Bond Portfolio,
the Missouri state 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 AND SUB-ADVISER

Mississippi Valley Advisors Inc. ("MVA") serves as the investment adviser
to each 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 Funds' assets,
which were approximately $2.5 billion.

Subject to the general supervision of the Fund's Board of Directors and in
accordance with the Fund's investment policies, MVA manages the Portfolios,
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 each 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, with respect to the Treasury Money Market and Money Market Portfolios,
at the annual rates of .40% of the first $1.5 billion of each such Portfolio's
average daily net assets, .35% of the next $1.0 billion of net assets and .25%
of net assets in excess of $2.5 billion, and with respect to the 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, International Equity and Balanced Portfolios,
at the annual rates of .40%, .45%, .55%, .30%, .45%, .55%, .45%, .55%, .75%,
.30%, .55%, .75%, 1.00% and .75%, respectively, of the average daily net assets
of each Portfolio, respectively. For the fiscal year ended November 30, 1996,
MVA received advisory fees (net of waivers) at the effective annual rates of
.35%, .35%, .35%, .45%, .45%, .00%, .45%, .00%, .55%, .75%, .75%, 1.00% and .75%
of the respective average daily net assets of the Treasury Money Market, Money
Market, Tax-Exempt Money Market, U.S. Government Securities, Government &
Corporate Bond, Short-Intermediate Municipal, Missouri Tax-Exempt Bond, National
Municipal Bond, Growth & Income Equity, Small Cap Equity, International Equity
and Balanced Portfolios. The Intermediate Corporate Bond, Bond Index, Equity
Income and Equity Index Portfolios had not commenced operations as of November
30, 1996.

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

David A. Bethke, CFA, is the person primarily responsible for the
day-to-day management of the U.S. Government Securities, Intermediate Corporate
Bond and Government & Corporate Bond Portfolios and has managed each of these
Portfolios since inception. Mr. Bethke, Senior Associate, joined MVA in 1987 and
has seven years of prior investment experience.

55
<PAGE> 60

Peter Merzian, is the person primarily responsible for the day-to-day
management of the Short-Intermediate Municipal, Missouri Tax-Exempt Bond,
National Municipal Bond and Balanced Portfolios. Mr. Merzian, a Senior Associate
of MVA, has been with MVA since 1993 and prior thereto was employed as a
portfolio manager of another financial institution. Mr. Merzian has served as
portfolio manager of the Short-Intermediate Municipal and National Municipal
Bond Portfolios since their respective dates of inception and of the Balanced
Portfolio since May 1996. Mr. Merzian has served as portfolio manager of the
Missouri Tax-Exempt Bond Portfolio (including the Predecessor Missouri
Tax-Exempt Bond Portfolio) since 1993.

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

Timothy S. Engelbrecht, is the person primarily responsible for the
day-to-day management of the Growth & Income Equity Portfolio. Mr. Engelbrecht,
a Senior Associate, has been employed by MVA for the past sixteen years and has
had portfolio management and other responsibilities for MVA for the past fifteen
years. Mr. Engelbrecht has managed the Growth & Income Equity Portfolio since
May 1996.

Robert J. Anthony is the person primarily responsible for the day-to-day
management of the Small Cap Equity Portfolio. Mr. Anthony, Senior Associate, has
been with MVA for 21 years and has managed the Small Cap Equity Portfolio since
its inception.

MVA has entered into a sub-advisory agreement with Clay Finlay Inc.
Pursuant to the terms of such sub-investment advisory agreement, Clay Finlay has
been retained by MVA to manage the investment and reinvestment of the assets of
the International Equity Portfolio and to provide analytical and investment
research services to it, subject to the supervision of MVA and to the direction
and control of the Fund's Board of Directors.

Under this arrangement, Clay Finlay is responsible for the day-to-day
management of the International Equity Portfolio's assets. MVA reviews
investment performance policies and guidelines, maintains certain books and
records, is responsible for selecting and monitoring the performance of Clay
Finlay, and for reporting the activities of Clay Finlay in managing the
Portfolio to the Fund's Board of Directors.

Clay Finlay is registered as an investment adviser with the SEC and is a
wholly-owned subsidiary of United Asset Management Corporation, a financial
services holding company. Clay Finlay's principal office is located at 200 Park
Avenue, 56th Floor, New York, New York 10166. Clay Finlay, founded in 1982, has
extensive experience in international investments and as of December 31, 1996
had approximately $6.5 billion in assets under management.

Frances Dakers is the person primarily responsible for the day-to-day
management of the International Equity Portfolio's investments. Ms. Dakers, a
Principal and Senior Portfolio Manager of Clay Finlay, has been associated with
Clay Finlay since January, 1982 and has managed the International Equity
Portfolio since its inception.

For the services provided and expenses assumed pursuant to its sub-advisory
agreement with MVA, Clay Finlay receives from MVA a fee, computed daily and
payable monthly, at the annual rate of .75% of the first $50 million of the
International Equity Portfolio's average daily net assets, plus .50% of the next
$50 million of average daily net assets, plus .25% of average daily net assets
in excess of $100 million. Prior to August 29, 1996, Clay Finlay received from
MVA a fee, computed daily and paid monthly, at the annual rate of .75% of the
International Equity Portfolio's average daily net assets. For the fiscal year
ended November 30, 1996, Clay Finlay received sub-advisory fees at the effective
annual rate of .75% of the International Equity Portfolio's average daily net
assets. Clay Finlay bears all expenses incurred by it in connection with its
services under the sub-advisory agreement.

56
<PAGE> 61

ADMINISTRATOR

BISYS Fund Services Ohio, Inc. located at 3435 Stelzer Road, Columbus, Ohio
43219, acts as the 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 Fund's arrangements 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% (.10% for
the Tax-Exempt Money Market Portfolio) of each Portfolio's average daily net
assets. For the fiscal year ended November 30, 1996, the Administrator received
administration fees (net of waivers) at the effective annual rate of .10% (.05%
with respect to the National Municipal Bond Portfolio) of the average daily net
assets of each Portfolio other than the Intermediate Corporate Bond, Bond Index,
Equity Income and Equity Index Portfolios which had not commenced operations as
of November 30, 1996. From time to time, the Administrator may voluntarily waive
all or a portion of the administration fees otherwise payable by a Portfolio in
order to increase the net income available for distribution to shareholders.

DISTRIBUTOR

Trust Shares in each Portfolio are sold continuously by the Distributor,
BISYS Fund Services, an affiliate of the Administrator. The Distributor is a
registered broker-dealer with principal offices at 3435 Stelzer Road, Columbus,
Ohio 43219.

ADMINISTRATIVE SERVICES PLAN

The Fund has adopted an Administrative Services Plan with respect to the
Trust Shares of the Portfolios. 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 .25%, for the Money Market
Portfolios, and up to .30%, for the Equity and Bond Portfolios, respectively, of
the average daily net assets of a Portfolio's Trust Shares owned beneficially by
a Service Organization's customers.

SERVICE ORGANIZATIONS

The servicing agreements adopted under the Administrative 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 Trust Shares of a Portfolio, such as establishing and
maintaining accounts and records for their customers who invest in such Shares,
assisting customers in processing purchase, exchange and redemption requests,
and responding to customer inquiries concerning their investments.

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

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

57
<PAGE> 62

addition to any amounts which may be received by such 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 a 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, SUB-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 each Portfolio's assets. In addition,
Bankers Trust Company of New York, with principal offices at 16 Wall Street, New
York, New York 10005, serves as Sub-Custodian for the International Equity
Portfolio. 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 Portfolios. 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
Portfolios 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 Portfolios 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.

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 Portfolios. 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 Portfolios to a financial
intermediary in connection with the investment of fiduciary funds in a
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.

58
<PAGE> 63

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 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"). Expenses are deducted from the
total income of each 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 a 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 each Portfolio.

OTHER INFORMATION CONCERNING
THE FUND AND ITS SHARES

DESCRIPTION OF SHARES

The Fund was organized as a Maryland corporation on September 9, 1982 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.

59
<PAGE> 64

representing interests in the Government & Corporate Bond Portfolio; 25 million
Trust Shares and 25 million Investor A Shares, representing interests in the
Short-Intermediate Municipal Portfolio; 25 million Trust Shares, 25 million
Investor A Shares and 25 million Investor B Shares, representing interests in
the Missouri Tax-Exempt Bond Portfolio; 50 million Trust Shares, 25 million
Investor A Shares and 25 million Investor B Shares representing interests in the
National Municipal Bond Portfolio; 50 million Trust Shares, 25 million
Institutional Shares, 25 million Investor A Shares and 25 million Investor B
Shares representing interests in the Equity Income Portfolio; 25 million Trust
Shares, 25 million Institutional Shares and 25 million Investor A Shares
representing interests in the Equity Index Portfolio; 50 million Trust Shares,
20 million Institutional Shares, 5 million Investor A Shares and 50 million
Investor B Shares, representing interests in the Growth & Income Equity
Portfolio; 15 million Trust Shares, 20 million Institutional Shares, 5 million
Investor A Shares and 50 million Investor B Shares and 50 million Investor B
Shares, representing interests in the Small Cap Equity Portfolio; 10 million
Trust Shares, 10 million Institutional Shares, 10 million Investor A Shares and
50 million Investor B Shares, representing interests in the International Equity
Portfolio; and 15 million Trust Shares, 20 million Institutional Shares, 5
million Investor A Shares and 50 million Investor B Shares, representing
interests in the Balanced Portfolio. Institutional, Investor A and/or Investor B
Shares of the Portfolios are described in separate prospectuses which are
available from the Distributor at the telephone number on the cover of this
Prospectus. Shares in the Fund's Portfolios will be issued without Share
certificates.

The Trust Shares of the Portfolios are described in this Prospectus. The
Portfolios also offer Investor A Shares and, in addition, each Portfolio except
the Tax-Exempt Portfolios offers Institutional Shares and each Portfolio except
the Treasury Money Market, Tax-Exempt Money Market, Intermediate Corporate Bond,
Bond Index, Short-Intermediate Municipal and Equity Index Portfolios offers
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 (other
than Investor A Shares of the Money Market Portfolios which are sold without a
sales charge) are sold with a maximum 4.5% (2.5% with respect to the U.S.
Government Securities, Bond Index, Short-Intermediate Municipal and Equity Index
Portfolios) front-end sales charge, and Investor B Shares are sold with a
maximum 5.0% contingent deferred sales charge. Investor A Shares and Investor B
Shares are sold through selected broker/dealers and other financial
intermediaries to individual or institutional customers. Trust Shares,
Institutional Shares, Investor A Shares and/or Investor B Shares bear their pro
rata portion of all operating expenses paid by a 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 a Portfolio bear the expense of certain sub-transfer
agency fees.

Payments under the Administrative Services Plans 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 Plans may
not exceed .25% (on an annual basis) of the average daily net asset value of
outstanding Institutional Shares of the Money Market Portfolios or .30% (on an
annual basis) of the average daily net asset value of outstanding Institutional
Shares of the Equity and Bond Portfolios.

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 .25% (on an annual basis) of
the average daily net asset value of outstanding Investor A Shares of the Money
Market Portfolios or .30% (on an annual basis) of the average daily net asset
value of Investor A Shares of the Equity and Bond Portfolios. Payments under the
Distribution and Services Plan for Investor B Shares may not exceed 1.00% (on an
annual

60
<PAGE> 65

basis) of the average daily net asset value of outstanding Investor B Shares of
a 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 a Portfolio that are not offered in connection
with the Portfolio's Trust or Institutional Shares, including an automatic
investment program and an automatic withdrawal plan. Each class of shares also
offers different exchange privileges. Investor B Shares convert automatically
into Investor A Shares eight years after the beginning of the calendar month in
which the Shares were purchased.

Shareholders are entitled to one vote for each full Share held and
proportionate fractional votes for fractional Shares held. Shares of all
Portfolios 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 (or sub-advisory) agreement and investment
objective and fundamental policies. Only holders of Trust Shares, however, will
vote on matters relating to the Administrative Services Plan for Trust Shares
and only holders of Institutional Shares will vote on matters pertaining to the
Administrative Services Plan for Institutional Shares. Similarly, only holders
of Investor A Shares will vote on matters pertaining to the Distribution and
Services Plan for Investor A Shares and only holders of Investor B Shares will
vote on matters pertaining to the Distribution and Services Plan for Investor B
Shares.

The Fund is not required, and currently does not intend, to hold annual
meetings 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 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 a Portfolio means, with respect to the approval of an investment
advisory or sub-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 such Portfolio (irrespective of class), or
(b) 67% or more of the Shares of such Portfolio (irrespective of class) present
at a meeting if more than 50% of the outstanding Shares of such 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 Portfolios 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 PORTFOLIOS'
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 PORTFOLIOS, THE FUND, OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE PORTFOLIOS, THE FUND OR THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.

61
<PAGE> 66
INVESTMENT ADVISER
Mississippi Valley Advisors Inc.
One Mercantile Center
Seventh & Washington Streets
St. Louis, Missouri 63101

DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219-3035

LEGAL COUNSEL
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496

AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215

TRANSFER AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, OH 43219-3035

<PAGE> 67

CROSS REFERENCE SHEET
(Trust Shares)

The ARCH Treasury Money Market Portfolio
The ARCH Money Market Portfolio
The ARCH Tax-Exempt Money Market Portfolio