<PAGE>
PROSPECTUS
[PICTURE]
NORWEST ADVANTAGE FUNDS
NOT FDIC INSURED
------------------------
NORWEST EMPLOYEE BENEFIT SERVICES
<PAGE>
- -------------------------------------------------------------------------------
NORWEST ADVANTAGE FUNDS
- -------------------------------------------------------------------------------
PROSPECTUS
- -------------------------------------------------------------------------------
Advantage Shares - Diversified Equity Fund, Growth Equity JUNE 1, 1995
Fund, Large Company Growth Fund, Small Company Growth Fund,
International Fund, Income Equity Fund, Index Fund,
Conservative Balanced Fund, Moderate Balanced Fund, Growth
Balanced Fund, Intermediate U.S. Government Fund, Managed
Fixed Income Fund and Stable Income Fund.
- -------------------------------------------------------------------------------
Trust Shares - Small Company Stock Fund, Contrarian Stock OCTOBER 1, 1994
Fund and Total Return Bond Fund and Institutional Shares - AS AMENDED
Ready Cash Investment Fund. JUNE 1, 1995
This Prospectus offers the above listed shares (the
"Shares") of seventeen separate portfolios (each a "Fund"
and collectively the "Funds" or the "Norwest Advantage
Funds") of Norwest Funds (the "Trust"), an open-end,
management investment company.
This Prospectus sets forth concisely the information
concerning the Trust and each Fund that a prospective investor
should know before investing. Investors should read this
Prospectus and retain it for future reference. The Trust has
filed with the Securities and Exchange Commission ("SEC") a
Statement of Additional Information (the "SAI") with respect
to each Fund dated the same date as the prospectus for the
Fund and as may be further amended from time to time, which
contains more detailed information about the Trust and the
Fund and which is incorporated into this Prospectus by
reference. The SAI is available without charge by contacting
the transfer agent at 733 Marquette Avenue, Minneapolis,
Minnesota, 55479-0040, (800) 338-1348. Investors should
read this Prospectus and retain it for future reference.
INTERNATIONAL FUND CURRENTLY SEEKS TO ACHIEVE ITS INVESTMENT
OBJECTIVE BY INVESTING ALL OF ITS INVESTMENT ASSETS IN
INTERNATIONAL PORTFOLIO, A SEPARATE PORTFOLIO OF CORE TRUST
(DELAWARE) ("CORE TRUST"), A REGISTERED INVESTMENT COMPANY.
INTERNATIONAL FUND AND INTERNATIONAL PORTFOLIO HAVE IDENTICAL
INVESTMENT OBJECTIVES.
- -------------------------------------------------------------------------------
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE SYSTEM OR
ANY OTHER FEDERAL AGENCY. SHARES OF THE FUNDS ARE NOT
OBLIGATIONS, DEPOSITS OR ACCOUNTS OF OR ENDORSED OR
GUARANTEED BY NORWEST BANK MINNESOTA, N.A. OR ANY OF ITS BANK
OR NON-BANK AFFILIATES.
AN INVESTMENT IN A FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO
ASSURANCE THAT READY CASH INVESTMENT FUND (WHICH IS A MONEY
MARKET FUND) WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
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.
page 1
<PAGE>
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
SHAREHOLDER Norwest Bank Minnesota, N.A.
INFORMATION 733 Marquette Avenue
(800) 338-1348 Minneapolis, Minnesota 55479-0040
----------------------------------------------------------
page 3 SUMMARY
page 8 FINANCIAL HIGHLIGHTS
page 12 INVESTMENT OBJECTIVES, POLICIES AND RISK
CONSIDERATIONS
Investment Objectives
Investments in Core Trust
Investment Policies - Equity Funds
Investment Policies - Balanced Funds
Investment Policies - Fixed Income Funds
Additional Investment Policies
page 33 MANAGEMENT OF THE FUNDS
Investment Advisory Services
Advisory Fees
Administrative and Other Services
Expenses of the Funds
page 40 PURCHASES AND REDEMPTIONS OF SHARES
Purchase and Redemption Procedures
General Information
page 45 DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
Dividends and Distributions
Tax Matters
Shareholder Tax Matters
page 47 OTHER INFORMATION
Fund Performance
Banking Law Matters
Portfolio Transactions
The Trust and its Shares
Core Trust Structure
page 52 APPENDIX A: INVESTMENTS, INVESTMENT STRATEGIES
AND RISK CONSIDERATIONS
page 2
<PAGE>
- -------------------------------------------------------------------------------
SUMMARY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE NORWEST ADVANTAGE FUNDS are offered through this WHO
prospectus to participants in certain qualified and SHOULD
nonqualified employee benefit plans ("Plans") and to related INVEST?
IRA and KEOGHS accounts. See "Purchases and Redemptions of
Shares." Only certain Funds may be available as investment
alternatives in a Plan; participants in a Plan that invests
in the Funds should consult with their employer or plan
sponsor to determine which Funds are offered through their
Plan. While no single Fund is intended to provide a complete
or balanced investment program, each can serve as a component
of an investor's long-term program to accumulate assets for
retirement or other major goals. Advantage Shares of a Fund
currently are offered exclusively to participants in Plans
and to IRA and KEOGH accounts. Trust Shares of a Fund are
offered more broadly to fiduciary, agency and custodial
clients of bank trust departments, trust companies and
their affiliates. Institutional Shares of Ready Cash
Investment Fund are offered to various investors who are
willing to invest at least $100,000.
- -------------------------------------------------------------------------------
Each of the Norwest Advantage Funds has distinct investment THE NORWEST
objectives and policies as described under "Investment ADVANTAGE
Objectives, Policies and Risk Considerations." There are FUNDS
nine equity funds (the "Equity Funds"): Diversified Equity
Fund and Growth Equity Fund, each of which invests specified
percentages of its assets using different equity investment
styles, and seven equity funds, each of which uses a
different equity investment style.
There are three balanced funds (the "Balanced Funds") and
five fixed income funds, including a money market fund (the
"Fixed Income Funds"). The Balanced Funds invest specified
percentages of their assets in accordance with the investment
styles of Diversified Equity Fund and three to five different
fixed income investment styles.
- -------------------------------------------------------------------------------
DIVERSIFIED EQUITY FUND seeks long-term capital appreciation EQUITY FUNDS
while moderating annual return volatility by diversifying its
investments in accordance with five different equity
investment styles.
GROWTH EQUITY FUND seeks a high level of long-term capital
appreciation while moderating annual return volatility by
diversifying its investments in accordance with three
different equity investment styles. The Fund assumes a higher
level of risk than Diversified Equity Fund in order to seek
increased returns.
CONTRARIAN STOCK FUND seeks capital appreciation by investing
primarily in common stocks for which the Fund's investment
adviser believes there is significant potential for price
appreciation. Investments are typically focused in
undervalued and out-of-favor companies.
SMALL COMPANY STOCK FUND seeks long-term capital appreciation
by investing primarily in the common stock of small and
medium size domestic companies that have a market
capitalization well below that of the average company in the
Standard & Poor's 500 Composite Stock Price Index.
SMALL COMPANY GROWTH FUND seeks long-term capital
appreciation by investing primarily in the common stock of
small and medium-sized domestic companies that are either
growing rapidly or completing a period of significant change.
THIS FUND CURRENTLY IS NOT OPEN TO NEW INVESTORS.
LARGE COMPANY GROWTH FUND seeks long-term capital
appreciation by investing in large, high-quality domestic
companies that the investment adviser believes have superior
growth potential.
INTERNATIONAL FUND seeks long-term capital appreciation by
investing directly or indirectly in high-quality companies
based outside the United States. Currently, the International
Fund invests exclusively in the International Portfolio
("International Portfolio") of Core Trust, itself a
registered open-end management investment company.
Accordingly, the
page 3
<PAGE>
investment experience of International Fund will correspond
directly with the investment experience of International
Portfolio. See "Other Information - Core Trust Structure."
International Portfolio has the same investment objective
and policies as International Fund and selects its
investments on the basis of their potential for capital
appreciation without regard to current income.
INCOME EQUITY FUND seeks long-term capital appreciation in
line with that of the overall equity securities markets and
to provide above average dividend income.
INDEX FUND seeks to duplicate the return of the Standard &
Poor's 500 Composite Stock Price Index.
- -------------------------------------------------------------------------------
BALANCED
FUNDS
CONSERVATIVE BALANCED FUND seeks a combination of current
income and capital appreciation by diversifying investment
of the Fund's assets among stocks, bonds and other fixed
income instruments. Of the Balanced Funds, the Fund most
emphasizes safety of principal through limited exposure to
equity securities.
MODERATE BALANCED FUND seeks a combination of current income
and capital appreciation by diversifying investment of the
Fund's assets among stocks, bonds and other fixed income
investments. The Fund provides a portfolio more evenly-
balanced between fixed income and equity securities than the
other Balanced Funds.
GROWTH BALANCED FUND seeks a combination of current income
and capital appreciation by diversifying investment of the
Fund's assets between stocks and bonds. The Fund holds more
equity securities than the other Balanced Funds.
- -------------------------------------------------------------------------------
FIXED INCOME
FUNDS
INTERMEDIATE U.S. GOVERNMENT FUND seeks income and safety of
principal by investing primarily in U.S. Government
Securities. The Fund seeks to moderate its volatility by
using a conservative approach to structuring the maturities
of its investment portfolio.
MANAGED FIXED INCOME FUND seeks to provide consistent fixed
income returns by investing primarily in a portfolio of
intermediate maturity, investment grade fixed income
securities.
TOTAL RETURN BOND FUND seeks total return by investing in a
portfolio of U.S. Government and high-quality corporate
fixed income securities.
STABLE INCOME FUND seeks to maintain safety of principal and
provide low volatility total return by investing primarily
in short and intermediate maturity, investment grade fixed
income securities.
READY CASH INVESTMENT FUND, a money market fund, seeks to
provide high current income to the extent consistent with
the preservation of capital and the maintenance of
liquidity.
- -------------------------------------------------------------------------------
MANAGEMENT OF
THE FUNDS
The investment adviser to each Fund (the "Adviser") is
Norwest Investment Management, a part of Norwest Bank
Minnesota, N.A. ("Norwest"). Norwest is a subsidiary of
Norwest Corporation, a bank holding company with operations
in 50 states and $59.3 billion in total assets. The Adviser
provides investment advice with respect to assets that
totaled approximately $10.7 billion as of December 31, 1994.
Except for International Fund, the Adviser makes investment
decisions for the Funds and continuously reviews, supervises
and administers each Fund's investment program.
Subject to the Adviser's general oversight, Crestone Capital
Management, Inc. ("Crestone"), a subsidiary of Norwest, acts
as investment subadviser to Small Company Stock Fund.
Subject to the Adviser's general oversight, Schroder Capital
Management International Inc. ("Schroder") acts as
investment subadviser to Diversified Equity Fund, Growth
Equity Fund and each
page 4
<PAGE>
Balanced Fund (Schroder, Crestone and the Adviser,
collectively, are sometimes referred to as the "Advisers").
Schroder also serves as International Portfolio's investment
adviser.
Norwest serves as the Trust's transfer agent, dividend
disbursing agent and custodian, and provides certain
administrative services to International Fund. The manager of
the Trust and distributor of its shares is Forum Financial
Services, Inc. ("Forum"). Forum also serves as administrator
of Core Trust. See "Management of the Funds - Investment
Advisory Services" and "Administrative and Other Services."
- -------------------------------------------------------------------------------
Shares of beneficial interest of each Fund are offered without PURCHASE AND
a sales charge and may be redeemed without charge. Norwest REDEMPTION OF
offers investors in the Funds various periodic investment and SHARES
redemption services. The minimum initial investment in each
Fund is $1,000, except that the minimum initial investment in
Ready Cash Investment Fund is $100,000. See "Purchases and
Redemptions of Shares."
- -------------------------------------------------------------------------------
Dividends of net investment income are declared annually by DIVIDENDS AND
each Fund, except that for Small Company Stock Fund and DISTRIBUTIONS
Contrarian Stock Fund they are declared and paid monthly and
for Total Return Bond Fund and Ready Cash Investment Fund
they are declared daily and paid monthly. Each Fund's net
capital gain, if any, is distributed at least annually. See
"Dividends, Distributions and Tax Matters."
- -------------------------------------------------------------------------------
There can be no assurance that any Fund will achieve its CERTAIN RISK
investment objective or that Ready Cash Investment Fund will FACTORS
maintain a stable net asset value. Except for Ready Cash
Investment Fund, each Fund's net asset value will fluctuate
based upon changes in the value of the Fund's portfolio
securities and, accordingly, upon redemption an investment
in a Fund may be worth more or less than its original value.
The Fixed Income Funds' net asset values will tend to vary
inversely with movements in interest rates and the potential
for appreciation in a Fixed Income Fund in the event of a
decline in interest rates may be limited or negated by
increased principal prepayments on certain mortgage-backed
securities held by the Fund. The policy of investing in
smaller companies employed by Small Company Stock Fund, Small
Company Growth Fund and the Equity Funds that invest in small
company securities entails certain risks in addition to those
normally associated with investments in equity securities.
Similarly, Contrarian Stock Fund's policy of investing in
securities that may be out- of-favor with many institutional
investors and International Fund's policy of investing
directly or indirectly in foreign securities entail certain
risks in addition to those normally associated with
investments in equity securities.
By investing solely in International Portfolio, International
Fund may achieve certain efficiencies and economies of scale.
Nonetheless, this investment could also have potential
adverse effects on International Fund. Investors in
International Fund should consider these risks, as described
under "Other Information - Core Trust Structure."
An investment in any Fund involves certain risks, depending
on the types of investments made and the types of investment
techniques employed. All investments by the Funds entail some
risk. Certain investments and investment techniques,
however, entail additional risks, such as investments in
foreign issuers, issuers with limited market capitalization,
mortgage or asset-backed securities, zero-coupon bonds and
options, futures contracts, forward contracts and swap
agreements. The use of leverage by certain Funds through
borrowings, margin transactions, short sales, reverse
repurchase agreements and other investment techniques
involves additional risks. For more details about each Fund,
their investments and their risks see "Investment
Objectives, Policies and Risk Considerations" and "Appendix
A: Investments, Investment Strategies and Risk
Considerations."
page 5
<PAGE>
- -------------------------------------------------------------------------------
EXPENSES OF The purpose of the following table is to assist investors in
INVESTING IN understanding the various expenses that an investor in
THE FUNDS the Funds will bear directly or indirectly. There are no
transaction charges in connection with purchases,
redemptions or exchanges of Shares. None of the Funds has
adopted a Rule 12b-1 plan with respect to the Shares and,
accordingly, no Fund incurs distribution expenses.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
As a percentage of average net assets
(after waivers and reimbursements as noted below)(1)
INVESTMENT
TOTAL
ADVISORY SHAREHOLDER OTHER OPERATING
FEE SERVICING EXPENSES(2) EXPENSES
<S> <C> <C> <C> <C>
Diversified Equity Fund (4) 0.65% 0.25% 0.10% 1.00%
- ------------------------------------------------------------------------------------
Growth Equity Fund (4) 0.90% 0.25% 0.10% 1.25%
- ------------------------------------------------------------------------------------
Contrarian Stock Fund (2) 0.80% 0.25% 0.15% 1.40%
- ------------------------------------------------------------------------------------
Small Company Stock Fund (2) 0.80% 0.25% 0.15% 1.20%
- ------------------------------------------------------------------------------------
Small Company Growth Fund 0.90% 0.25% 0.10% 1.25%
- ------------------------------------------------------------------------------------
Large Company Growth Fund 0.65% 0.25% 0.10% 1.00%
- ------------------------------------------------------------------------------------
International Fund (3) 0.45% 0.25% 0.80% 1.50%
- ------------------------------------------------------------------------------------
Income Equity Fund 0.50% 0.25% 0.10% 0.85%
- ------------------------------------------------------------------------------------
Index Fund 0.15% 0.25% 0.10% 0.50%
- ------------------------------------------------------------------------------------
Conservative Balanced Fund (4) 0.45% 0.25% 0.10% 0.80%
- ------------------------------------------------------------------------------------
Moderate Balanced Fund (4) 0.53% 0.25% 0.10% 0.88%
- ------------------------------------------------------------------------------------
Growth Balanced Fund (4) 0.58% 0.25% 0.10% 0.93%
- ------------------------------------------------------------------------------------
Intermediate U.S. Government Fund 0.33% 0.25% 0.10% 0.68%
- ------------------------------------------------------------------------------------
Managed Fixed Income Fund 0.35% 0.25% 0.10% 0.70%
- ------------------------------------------------------------------------------------
Total Return Bond Fund (2) 0.30% 0.25% 0.05% 0.60%
- ------------------------------------------------------------------------------------
Stable Income Fund 0.30% 0.25% 0.10% 0.65%
- ------------------------------------------------------------------------------------
Ready Cash Investment Fund (2) 0.28% 0.00% 0.15% 0.43%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
(1) The amounts of expenses are based on annualized estimated expenses for the
current fiscal year of each Fund ending October 31, 1995 and the current
fiscal year of Contrarian Stock Fund, Small Company Stock Fund and Total
Return Bond Fund ending May 31, 1995. For Ready Cash Investment Fund,
expenses are based on the amounts incurred during the Fund's most recent
fiscal year ended May 31, 1994.
(2) Absent estimated reimbursements for each Fund (other than Contrarian Stock
Fund, Small Company Stock Fund, Total Return Bond Fund and Ready Cash
Investment Fund) of approximately 0.05 percent of Other Expenses, each
Fund's Total Fund Operating Expenses would be 0.05 percent higher than
shown in the table. Absent estimated or actual (in the case of Ready Cash
Investment Fund) expense reimbursements and fee waivers, Investment
Advisory Fee, Shareholder Servicing, Other Expenses and Total Operating
Expenses would have been: Contrarian Stock Fund, 0.80%, 0.25%, 0.30% and
1.35%; Small Company Stock Fund, 1.00%, 0.25%, 0.30% and 1.55%; Total
Return Bond Fund, 0.50%, 0.25%, 0.25% and 1.00%; and Ready Cash Investment
Fund, 0.40%, 0.10%, 0.31% and 0.81%. Other Expenses includes custodian fees
payable to Norwest for Contrarian Stock Fund, Small Company Stock Fund,
Total Return Bond Fund and Ready Cash Investment Fund. Norwest charges no
custodian fees to the other Funds, but they incur subcustodian fees. It is
estimated that for the current fiscal year Norwest voluntarily will waive
its advisory fee with respect to Total Return Bond Fund from 0.50% to
0.30%. Until further notice, the Adviser has agreed to waive its advisory
fee with respect to Ready Cash Investment Fund to the extent that the fee
exceeds 0.30%. For a further description of the various expenses incurred
in the operation of the Funds, see "Management of the Funds."
page 6
<PAGE>
(3) International Fund's Other Expenses include the Fund's pro rata portion of
the operating expenses of International Portfolio, which will be borne
indirectly by International Fund shareholders. As long as its assets are
invested in International Portfolio, International Fund pays no investment
advisory fees directly. International Fund pays Forum a management fee, and
Core Trust pays Forum an administration fee for its services to
International Portfolio, of which International Fund will bear its pro rata
portion. The Board of Trustees of the Trust believes that the aggregate per
share expenses of International Fund and International Portfolio will be
approximately equal to the expenses International Fund would incur if its
assets were invested directly in foreign securities. See "Investment
Objectives, Policies and Risk Considerations - Investments in Core Trust"
and "Management of the Funds - Expenses of the Funds."
(4) Pursuant to several expense waiver undertakings, Diversified Equity Fund,
Growth Equity Fund, Conservative Balanced Fund, Moderate Balanced Fund and
Growth Balanced Fund invest portions of their assets in other portfolios of
Core Trust, each of which bears certain expenses not reflected in the
table.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
EXAMPLE OF EXPENSES
- ------------------------------------------------------------------
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
Diversified Equity Fund $10 $32 $55 $122
- ------------------------------------------------------------------
Growth Equity Fund 13 40 69 151
- ------------------------------------------------------------------
Contrarian Stock Fund 12 38 66 145
- ------------------------------------------------------------------
Small Company Stock Fund 15 45 78 171
- ------------------------------------------------------------------
Small Company Growth Fund 13 40 69 151
- ------------------------------------------------------------------
Large Company Growth Fund 10 32 55 122
- ------------------------------------------------------------------
International Fund 15 47 82 179
- ------------------------------------------------------------------
Income Equity Fund 9 27 47 105
- ------------------------------------------------------------------
Index Fund 5 16 28 63
- ------------------------------------------------------------------
Conservative Balanced Fund 8 26 44 99
- ------------------------------------------------------------------
Moderate Balanced Fund 9 28 49 108
- ------------------------------------------------------------------
Growth Balanced Fund 9 30 51 114
- ------------------------------------------------------------------
Intermediate U.S. Government
Fund 7 22 38 85
- ------------------------------------------------------------------
Managed Fixed Income Fund 7 22 39 87
- ------------------------------------------------------------------
Total Return Bond Fund 6 19 33 75
- ------------------------------------------------------------------
Stable Income Fund 7 21 36 81
- ------------------------------------------------------------------
Ready Cash Investment Fund 4 14 24 54
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
</TABLE>
The above table is a hypothetical example that indicates the
expenses an investor would pay assuming a $1,000 investment in
each Fund, a 5 percent annual return, reinvestment of all
dividends and distributions, and full redemption at the end
of each period. The example is based on the expenses listed
in the "Annual Fund Operating Expenses" table above. The 5
percent annual return is not a prediction of and does not
represent the Funds' projected returns; rather, it is
required by government regulation. THE EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR
RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS
THAN INDICATED.
page 7
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The information in the Financial Highlights section
represents selected data for a single outstanding Share of
each Fund for the periods shown. Information for the year
ended May 31, 1994 has been audited by KPMG Peat Marwick
LLP, independent auditors. Information for certain Funds for
the period from November 10, 1994 (commencement of
operation) to February 28, 1995 is not audited. The
financial statements of Small Company Stock Fund, Contrarian
Stock Fund, Total Return Bond Fund and Ready Cash Investment
Fund for the fiscal year ended May 31, 1994 and the
independent auditors' report thereon are contained in the
Annual Report of those Funds and are incorporated by
reference into the SAI. Further information about each of
these Fund's performance is contained in the Annual Report,
which may be obtained from the Trust without charge. The
financial statements of the other Funds for the interim
period ended February 28, 1995 also are incorporated by
reference into the SAI.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
DIVERSIFIED GROWTH CONTRARIAN SMALL COMPANY
EQUITY FUND EQUITY FUND STOCK FUND STOCK FUND
- --------------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28 FEBRUARY 28 MAY 31 MAY 31
1995(a) 1994(a) 1994(a) 1995(a)
<S> <C> <C> <C> <C>
Beginning Net Asset Value per Share $ 22.21 $ 22.28 $ 10.00 $ 10.00
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Net Investment Income (Deficit) 0.07 (0.03) 0.07 0.08
- --------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments, Foreign Currency
Transactions and Futures Transactions 0.57 0.17 (0.29) (0.20)
- --------------------------------------------------------------------------------------------------------------
Dividends from Net Investment Income -- -- (0.07) (0.08)
- --------------------------------------------------------------------------------------------------------------
Distributions from Net Realized Gains -- -- -- --
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Ending Net Asset Value per Share $ 22.85 $ 22.42 $ 9.71 $ 9.80
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- --------------------------------------------------------------------------------------------------------------
Expenses (b) 1.01%(c) 1.26%(c) 0.62%(c) 0.20%(c)
- --------------------------------------------------------------------------------------------------------------
Net Investment Income (Deficit) 1.18%(c) (0.73%)(c) 1.82%(c) 2.03%(c)
- --------------------------------------------------------------------------------------------------------------
Total Return 9.89%(c) 2.10%(c) (5.35%)(c) (2.93%)(c)
- --------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 3.53% 7.97% 2.67% 14.98%
- --------------------------------------------------------------------------------------------------------------
Net Assets at the End of
Period/Year (000's Omitted) $533,874 $400,043 $ 4,548 $ 9,251
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Contrarian Stock Fund and Small Company Stock Fund commenced the offering
of Trust Shares on December 31, 1993. Each other Fund commenced operations
and the offering of Advantage Shares on November 10, 1994.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratios
of expenses to average net assets would have been:
Expenses 1.03%(c) 1.29%(c) 4.33%(c) 3.52%(c)
(c) Annualized
page 8
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
LARGE COMPANY SMALL COMPANY INTERNATIONAL INCOME INDEX
GROWTH FUND GROWTH FUND FUND EQUITY FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
FEBRUARY 28 FEBRUARY 28 FEBRUARY 28 FEBRUARY 28 February 28
1995(a) 1995(a) 1995(a) 1995(a) 1995(a)
<S> <C> <C> <C> <C> <C>
Beginning Net Asset
Value per Share $ 18.50 $ 21.88 $ 17.28 $ 18.90 $ 21.80
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Net Investment
Income (Deficit) (0.01) (0.03) (0.03) 0.19 0.16
- ---------------------------------------------------------------------------------------------------------------------
Net Realized and
Unrealized Gain (Loss)
on Investments, Foreign
Currency Transactions
and Futures Transactions 0.39 1.58 (1.50) 1.03 1.05
- ---------------------------------------------------------------------------------------------------------------------
Dividends from Net
Investment Income -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Distributions from Net
Realized Gains -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Ending Net Asset
Value per Share $ 18.88 $ 23.43 $ 15.75 $ 20.12 $ 23.01
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ---------------------------------------------------------------------------------------------------------------------
Expenses (b) 1.01%(c) 1.26%(c) 1.50%(c) 0.86%(c) 0.50%(c)
- ---------------------------------------------------------------------------------------------------------------------
Net Investment
Income (Deficit) (0.24%)(c) (0.43%)(c) (0.69%)(c) 3.42%(c) 2.42%(c)
- ---------------------------------------------------------------------------------------------------------------------
Total Return 6.98%(c) 25.50%(c) (26.48%)(c) 13.07%(c) 19.63%(c)
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover
Rate 26.78% 35.53% 16.58% 8.50% 16.06%
- ---------------------------------------------------------------------------------------------------------------------
Net Assets at the End
of Period
(000's Omitted) $ 53,971 $204,395 $ 81,167 $ 33,975 $130,030
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Each Fund commenced operations and the offering of Advantage Shares on
November 10, 1994.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratios
of expenses to average net assets would have been:
Expenses 1.16%(c) 1.31%(c) 1.55%(c) 1.13%(c) 0.59%(c)
(c) Annualized
page 9
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
CONSERVATIVE MODERATE GROWTH
BALANCED FUND BALANCED FUND BALANCED FUND
- ---------------------------------------------------------------------------------------------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
FEBRUARY 28 FEBRUARY 28 FEBRUARY 28
1995(a) 1995(a) 1995(a)
<S> <C> <C> <C>
Beginning Net Asset Value per Share $ 16.19 $ 17.25 $ 17.95
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Net Investment Income (Deficit) 0.21 0.18 0.13
- ---------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments, Foreign Currency
Transactions and Futures Transactions 0.23 0.28 0.35
- ---------------------------------------------------------------------------------------------------
Dividends from Net Investment Income -- -- --
- ---------------------------------------------------------------------------------------------------
Distributions from Net Realized Gains -- -- --
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Ending Net Asset Value per Share $ 16.63 $ 17.71 $ 18.43
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ---------------------------------------------------------------------------------------------------
Expenses (b) 0.81%(c) 0.89%(c) 0.94%(c)
- ---------------------------------------------------------------------------------------------------
Net Investment Income (Deficit) 4.42%(c) 3.55%(c) 2.64%(c)
- ---------------------------------------------------------------------------------------------------
Total Return 9.31%(c) 9.13%(c) 9.15%(c)
- ---------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 5.68% 2.36% 7.98%
- ---------------------------------------------------------------------------------------------------
Net Assets at the End of Period
(000's Omitted) $121,788 $320,651 $313,305
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
(a) Each Fund commenced operations and the offering of Advantage Shares on
November 10, 1994.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratios
of expenses to average net assets would have been:
Expenses 0.89%(c) 0.92%(c) 0.97%(c)
(c) Annualized
page 10
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
INTERMEDIATE MANAGED READY CASH
TOTAL RETURN U.S. GOVERNMENT FIXED INCOME STABLE INCOME INVESTMENT
BOND FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED
MAY 31 FEBRUARY 28 FEBRUARY 28 FEBRUARY 28 MAY 31
1994(a) 1995(a) 1995(a) 1995(a) 1994(a)
<S> <C> <C> <C> <C>
Beginning Net Asset
Value per Share $ 10.00 $ 55.55 $ 25.08 $ 10.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------
Net Investment
Income (Deficit) 0.27 1.45 0.41 0.14 0.013
- -------------------------------------------------------------------------------------------------------------------
Net Realized and
Unrealized Gain (Loss)
on Investments, Foreign
Currency Transactions
and Futures Transactions (0.46) 0.62 0.37 0.06 --
- -------------------------------------------------------------------------------------------------------------------
Dividends from Net
Investment Income (0.27) -- -- -- (0.013)
- -------------------------------------------------------------------------------------------------------------------
Distributions from Net
Realized Gains -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Ending Net Asset
Value per Share $ 9.54 $ 57.62 $ 25.86 $ 10.20 $ 1.00
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- -------------------------------------------------------------------------------------------------------------------
Expenses (b) 0.46%(c) 0.69%(c) 0.71%(c) 0.66%(c) 0.43%(c)
- -------------------------------------------------------------------------------------------------------------------
Net Investment
Income (Deficit) 6.81%(c) 7.68%(c) 5.56%(c) 5.64%(c) 3.12%(c)
- -------------------------------------------------------------------------------------------------------------------
Total Return (4.62%)(c) 12.91%(c) 10.70%(c) 6.79%(c) 3.17%(c)
- -------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 37.50% 26.05% 2.12% 15.69% --
- -------------------------------------------------------------------------------------------------------------------
Net Assets at the End
of Period/Year
(000's Omitted) $ 11,694 $ 48,761 $177,572 $ 40,260 $333,464
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total Return Bond Fund commenced the offering of Trust Shares on December
31, 1993. Ready Cash Investment Fund commenced the offering of
Institutional Shares on January 4, 1994. Each other Fund commenced
operations and the offering of Advantage Shares on November 10, 1994.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the ratios
of expenses to average net assets would have been:
Expenses 2.10%(c) 0.85%(c) 0.76%(c) 1.01%(c) 0.81%(c)
(c) Annualized
page 11
<PAGE>
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES
AND RISK CONSIDERATIONS
- -------------------------------------------------------------------------------
THE NORWEST ADVANTAGE FUNDS consist of seventeen Funds, each
of which has distinct investment objectives and policies.
There are nine Equity Funds - Diversified Equity Fund and
Growth Equity Fund, each of which invests specified
percentages of its assets in accordance with different
equity investment styles, and seven equity funds each of
which uses a different equity investment approach. The use
of different equity investment styles is intended to reduce
the risk associated with the use of a single style, which
may move in and out-of-favor during the course of a market
cycle. The Norwest Advantage Funds also include three
Balanced Funds and five Fixed Income Funds. The Balanced
Funds invest specified percentages of their assets in
accordance with the investment styles of Diversified Equity
Fund and three to five different fixed income investment
styles. The Balanced Funds rebalance their portfolios
periodically and Diversified Equity and Growth Equity Funds
rebalance their portfolios daily to maintain specified
percentages of assets invested in particular investment
styles. The percentage of a Fund's assets invested using a
specified investment style may be changed by the Adviser in
response to market or other conditions.
For a further description of each Fund's investments and
investment techniques and additional risk considerations
associated with those investments and techniques, see the
discussion below, "Investment Objectives, Investment
Policies and Risk Considerations - Additional Investment
Policies," "Appendix A: Investments, Investment Strategies
and Risk Considerations" and the SAI.
- -------------------------------------------------------------------------------
INVESTMENT Each of the Funds has its own distinct investment objective
OBJECTIVES which may not be changed without approval of the Fund's
shareholders. There can be no assurance that any Fund will
achieve its investment objective.
- -------------------------------------------------------------------------------
EQUITY FUNDS DIVERSIFIED EQUITY FUND'S investment objective is to provide
long-term capital appreciation while moderating annual
return volatility by diversifying its investments in
accordance with different equity investment styles.
GROWTH EQUITY FUND'S investment objective is to provide a
high level of long-term capital appreciation while
moderating annual return volatility by diversifying its
investments in accordance with different equity investment
styles. Because the Fund seeks increased returns, it is
subject to correspondingly greater risks than Diversified
Equity Fund.
CONTRARIAN STOCK FUND'S investment objective is to seek
capital appreciation by investing primarily in common stocks
for which the Adviser believes there is significant
potential for price appreciation.
SMALL COMPANY STOCK FUND'S investment objective is long-term
capital appreciation.
SMALL COMPANY GROWTH FUND'S investment objective is to
provide long-term capital appreciation by investing
primarily in small and medium-sized domestic companies that
are either growing rapidly or completing a period of
significant change.
INTERNATIONAL FUND'S investment objective is to provide
long-term capital appreciation by investing directly or
indirectly in high-quality companies based outside the
United States. International Portfolio, in which
International Fund invests all of its assets, has the same
investment objective.
LARGE COMPANY GROWTH FUND'S investment objective is to
provide long-term capital appreciation by investing
primarily in large, high-quality domestic companies that the
investment adviser believes have superior growth potential.
page 12
<PAGE>
INCOME EQUITY FUND'S investment objective is to provide both
long-term capital appreciation in line with that of the
overall equity securities markets and above average dividend
income.
INDEX FUND'S investment objective is to duplicate the return
of the Standard & Poor's 500 Composite Stock Price Index.
- -------------------------------------------------------------------------------
CONSERVATIVE BALANCED FUND'S investment objective is to BALANCED FUNDS
provide a combination of current income and capital
appreciation by diversifying investment of the Fund's assets
among stocks, bonds and other fixed income investments. The
Fund emphasizes safety of principal through limited exposure
to equity securities. The Fund has the smallest equity
securities position of the three Balanced Funds.
MODERATE BALANCED FUND'S investment objective is to provide a
combination of current income and capital appreciation by
diversifying investment of the Fund's assets among stocks,
bonds and other fixed income investments. The Fund provides a
portfolio more evenly-balanced between fixed income and equity
securities than the other Balanced Funds.
GROWTH BALANCED FUND'S investment objective is to provide a
combination of current income and capital appreciation by
diversifying investment of the Fund's assets between stocks
and bonds. The Fund has the largest equity securities
position of the Balanced Funds.
- -------------------------------------------------------------------------------
INTERMEDIATE U.S. GOVERNMENT FUND'S investment objective is FIXED INCOME
to provide income and safety of principal by investing FUNDS
primarily in U.S. Government Securities. Managed Fixed
Income Fund's investment objective is to provide consistent
fixed income returns by investing primarily in a portfolio of
intermediate maturity, investment grade fixed income
securities.
TOTAL RETURN BOND FUND'S investment objective is to seek total
return by investing in a portfolio of U.S. Government and
high-quality corporate fixed income investments.
STABLE INCOME FUND'S investment objective is to maintain
safety of principal while providing low-volatility total return.
READY CASH INVESTMENT FUND'S investment objective is to
provide consistent current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
- -------------------------------------------------------------------------------
INTERNATIONAL FUND currently seeks to achieve its investment INVESTMENTS
objective by investing all of its investment assets in IN CORE TRUST
International Portfolio, a separate Portfolio of Core Trust.
In addition, the Trust has received an exemptive order from
the SEC under which DIVERSIFIED EQUITY FUND, GROWTH EQUITY
FUND, CONSERVATIVE BALANCED FUND, MODERATE BALANCED FUND and
GROWTH BALANCED FUND (collectively the "Blended Funds")
currently invest the portions of their assets that are
managed in a small company, an index and an international
investment style, respectively, in Small Company Portfolio,
Index Portfolio, and International Portfolio II (the "Blended
Portfolios"). These Portfolios are each separate portfolios of
Core Trust. By pooling their assets in the Blended
Portfolios, the Blended Funds may be able to achieve benefits
that they could not achieve by investing directly in
securities. See "Other Information - Core Trust Structure."
page 13
<PAGE>
The investment objectives and policies and investment risk
considerations for International Portfolio II and Index
Portfolio are identical to the investment objectives and
policies and investment risk considerations of International
Fund and Index Fund. The investment objective of Small
Company Portfolio is to provide long-term capital
appreciation by investing primarily in small and medium-
sized domestic companies that are either growing rapidly or
completing a period of significant change. This Portfolio
invests its assets partially in the style of Small Company
Stock Fund and partially in the style of Small Company
Growth Fund and, in the future, may invest its assets in
accordance with additional small company investment styles.
- -------------------------------------------------------------------------------
INVESTMENT To achieve their investment objectives, the Equity Funds
POLICIES invest primarily in common stocks and other equity
securities. International Fund currently invests
EQUITY FUNDS exclusively in International Portfolio which invests
primarily in common stocks and other equity securities of
foreign issuers. See "Other Information - Core Trust
Structure." The domestic securities in which an Equity Fund
invests are generally listed on a securities exchange or
included in the National Association of Securities Dealers
Automated Quotation (NASDAQ) National Market System but may
be traded in the over-the-counter securities market. Under
normal circumstanc es, each of the Equity Funds will invest
substantially all of its assets, but not less than 65
percent of its net assets, in equity securities.
DIVERSIFIED EQUITY FUND is designed to minimize the
volatility and risk of investing in equity securities. The
Fund's portfolio combines five different equity investment
styles, those of four of the Equity Funds - Large Company
Growth Fund, International Fund, Income Equity Fund and
Index Fund - and a small company investment style ("Small
Company investment style"), which reflects a mix of the
investment styles of both Small Company Stock Fund and Small
Company Growth Fund. The Fund utilizes different equity
investment styles in order to reduce the risk of relying on
a single investment style. Reliance on multiple equity
investment styles is intended to reduce the price and return
volatility of the Fund. Because Diversified Equity Fund
blends five equity investment styles, it is anticipated that
its price and return volatility will be less than that of
Growth Equity Fund, which blends three equity investment
styles. The Fund will generally invest the following
percentages of its total assets in accordance with the
indicated investment styles:
<TABLE>
<CAPTION>
- ---------------------------------------------
- ---------------------------------------------
DIVERSIFIED EQUITY FUND ALLOCATION
<S> <C>
Index Fund style 25%
Income Equity Fund style 25%
Large Company Growth Fund style 25%
Small Company investment style 10%
International Fund style 15%
- ---------------------------------------
TOTAL FUND ASSETS 100%
- ---------------------------------------------
- ---------------------------------------------
</TABLE>
Investors should refer to the descriptions of each of the
foregoing Equity Funds and Small Company investment styles
below for a discussion of the objectives, policies and risks
involved in the investments and investment techniques of
those styles and, accordingly, of the portions of
Diversified Equity Fund invested in those styles. The
management of the Fund's assets is divided among the Fund's
six portfolio managers, four of whom are also the portfolio
manager for a corresponding Equity Fund and two of whom
jointly co-manage the assets allocated to Small Company
investment style.
page 14
<PAGE>
GROWTH EQUITY FUND is designed to reduce the volatility and
risk of investing in equity securities. The Fund's portfolio
combines three different equity investment styles, those of
two of the Equity Funds - Large Company Growth Fund and
International Fund - and a small company investment style
("Small Company investment style"), which reflects a mix of
the investment styles of both Small Company Stock Fund and
Small Company Growth Fund. The Fund utilizes different equity
investment styles in order to reduce the risk of relying on a
single equity investment style. Reliance on multiple equity
investment styles is intended to reduce the price and return
volatility of the Fund. Although Growth Equity Fund blends
three equity investment styles, it is anticipated that the
Fund's price and return volatility will be somewhat greater
than those of Diversified Equity Fund, which blends five
equity investment styles. The Fund will generally invest the
following percentages of its total assets in accordance with
the indicated investment styles:
<TABLE>
<CAPTION>
- --------------------------------------------------------
- --------------------------------------------------------
GROWTH EQUITY FUND ALLOCATION
- --------------------------------------------------------
<S> <C>
Large Company Growth Fund style 35%
Small Company investment style 35%
International Fund style 30%
- -----------------------------------------------
TOTAL FUND ASSETS 100%
</TABLE>
Investors should refer to the descriptions of each of the
foregoing Equity Funds and Small Company investment styles
for a discussion of the objectives, policies and risks
involved in the investments and investment techniques of
those styles and, accordingly, of the portions of Growth
Equity Fund invested using those styles. The management of
the Fund's assets is divided among the Fund's four portfolio
managers, two of whom are also the portfolio manager for a
corresponding Equity Fund and two of whom jointly co-manage
the assets allocated to Small Company investment style.
CONTRARIAN STOCK FUND invests using the basic premise of the
Adviser's "contrarian" investment approach, which is that
security prices change more than fundamental investment
values. The Adviser believes that consensus thinking often
results in severe undervaluation of securities whose
immediate problems are obvious and whose longer term
prospects are, therefore, viewed too negatively. This
consensus pessimism can create investment opportunity.
The basis of the Adviser's contrarian investment approach is
the comparison of the value and the price of a security. The
Adviser generally analyzes a security's value in terms of
recovery earnings and potential share price over a three-year
investment time horizon. Typically, securities that the
Adviser considers for purchase are either out-of-favor with,
or simply ignored by, the investment community. The common
stocks purchased by the Fund will tend to have significantly
depressed prices and relatively low price/book value ratios.
The Fund's policy of investing in securities that may be
temporarily out-of-favor differs from the investment approach
followed by many other mutual funds with a similar investment
objective. Such mutual funds typically do not invest in
securities that have declined sharply in price, are not widely
followed, or are issued by companies that may have reported
poor earnings or that may have suffered a cyclical downturn
in business. The Adviser believes, however, that purchasing
securities depressed by temporary factors may provide
investment returns superior to those obtained when premium
prices are paid for issues currently in favor.
page 15
<PAGE>
The Fund may invest in preferred stock and securities
convertible into common stock and may invest up to 20
percent of its total assets in foreign securities and in
American Depository Receipts, European Depository Receipts
and other similar securities of foreign issuers. See
"Investment Policies - Equity Funds - International Fund -
Foreign Investment Risks and Considerations." In addition,
the Fund may invest in fixed income securities that are
rated, at the time of purchase, within the three highest
rating categories assigned by a Nationally Recognized
Statistical Rating Organization such as Moody's Investors
Service, Inc., Standard & Poor's Corporation and Fitch
Investors Services, Inc., or which are unrated and
determined by the Adviser to be of comparable quality. These
instruments may have fixed, floating or variable rates of
interest. See "Additional Investment Policies - Fixed Income
Securities and Their Characteristics."
SMALL COMPANY STOCK FUND, SMALL COMPANY GROWTH FUND AND THE
SMALL COMPANY INVESTMENT STYLE component of other Funds
invest primarily in the common stock of small and medium
size domestic companies which have a market capitalization
well below that of the average company in the Standard &
Poor's 500 Composite Stock Price Index. Small Company Stock
fund considers small and medium companies to be those whose
market capitalizations are less than $1 billion at the time
of the Fund's purchase, although it is anticipated that
investments primarily will be in companies with
capitalizations of less than $750 million. Small Company
Growth Fund considers small and medium companies to be those
whose market capitalizations are less than $750 million at
the time of the Fund's purchase. Market capitalization
refers to the total market value of a company's outstanding
shares of common stock.
In selecting securities for SMALL COMPANY STOCK FUND, the
Adviser seeks securities with significant price appreciation
potential and attempts to identify companies that show above
average growth, as compared to long term overall market
growth. The Fund may invest in preferred stock and
securities convertible into common stock and may invest up
to 20 percent of its total assets in foreign securities and
in American Depository Receipts, European Depository
Receipts and other similar securities of foreign issuers.
See "Investment Policies - Equity Funds - International Fund
- Foreign Investment Risks and Considerations." In
addition, the Fund may invest in fixed income securities of
small companies that are rated, at the time of purchase,
within the three highest rating categories assigned by a
Nationally Recognized Statistical Rating Organizations such
as Moody's Investors Service, Inc., Standard & Poor's
Corporation and Fitch Investors Services, Inc., or which are
unrated and determined by the Adviser to be of comparable
quality. These instruments may have fixed, floating or
variable rates of interest. See "Additional Investment
Policies - Fixed Income Securities and Their
Characteristics."
In selecting securities for SMALL COMPANY GROWTH FUND, the
Adviser seeks to identify companies that are rapidly growing
(usually with relatively short operating histories) or that
are emerging from a period of investor neglect by undergoing
a dramatic change. These changes may involve a sharp
increase in earnings, the hiring of new management or
measures taken to close the gap between its share price and
takeover/asset value. The Fund may invest up to 10 percent
of its total assets in foreign securities and in American
Depository Receipts, European Depository Receipts and other
similar securities of foreign issuers. See "Investment
Policies - Equity Funds - International Fund - Foreign
Investment Risks and Considerations." The Fund may not
invest more than 10% of its total assets in the securities
of a single issuer. The Fund does not currently invest in
preferred stock and securities convertible into common stock
but reserves the right to do so in the future.
In selecting securities allocated to the SMALL COMPANY
INVESTMENT STYLE component of Growth Equity Fund,
Diversified Equity Fund and the Balanced Funds, the Adviser
uses the investment style of both Small Company Stock Fund
and Small Company Growth Fund.
page 16
<PAGE>
The Adviser's reliance on either style may vary from one-
third to two-thirds of the Small Company investment style
components of a Fund. Currently, assets comprising this
component are invested 2/3 in small company growth, 1/3 in
small company stock. Small Company investment style may in
the future invest its assets in accordance with additional
investment styles. PRIOR TO JUNE 1, 1995, THE ASSETS
ALLOCATED TO THE SMALL COMPANY INVESTMENT STYLE WERE MANAGED
100% IN THE INVESTMENT STYLE OF SMALL COMPANY GROWTH FUND.
SMALL COMPANY INVESTMENT RISKS AND CONSIDERATIONS. The
companies in which Small Company Stock Fund, Small Company
Growth Fund and the Small Company investment style components
of the other Funds invest may be in a relatively early stage
of development or may produce goods and services which have
favorable prospects for growth due to increasing demand or
developing markets. Frequently, such companies have a small
management group and single product or product line
expertise. These characteristics may result in an enhanced
entrepreneurial spirit and greater focus which may make those
companies successful. The Adviser believes that such
companies may develop into significant business enterprises
and that an investment in such companies offers a greater
opportunity for capital appreciation than an investment in
larger more established entities. Small companies frequently
retain a large part of their earnings for research,
development and investment in capital assets, however, so
that the prospects for immediate dividend income are
limited.
Investments in smaller companies generally involve greater
risks than investments in larger companies due to the small
size of the issuer and the fact that the issuer may have
limited product lines, access to financial markets and
management depth. In addition, many of the securities of
smaller companies trade less frequently and in lower volumes
than securities issued by larger firms. The result is that
the short-term price volatility of small company securities
is greater than the short-term price volatility of the
securities of larger, more established companies that are
widely held. The securities of small companies may also be
more sensitive to market changes generally than the
securities of large companies. In addition, securities that
are traded in the over-the-counter market or on a regional
securities exchange may not be traded every day or in the
volume typical of securities traded on a national securities
exchange. As a result, disposition of a portfolio security,
to meet redemptions by shareholders or otherwise, may require
a Fund to sell the security at a discount from market prices,
to sell during periods when disposition is not desirable, or
to make many small sales over an extended period.
While securities issued by smaller companies historically
have experienced greater market appreciation than the
securities of larger entities, there is no assurance that
they will continue to do so or that the Fund will be
successful in identifying companies whose securities will
appreciate.
LARGE COMPANY GROWTH FUND invests primarily in the common
stock of large, high-quality domestic companies that have
superior growth potential. Large companies are those whose
market capitalization is at least $500 million at the time of
the Fund's purchase and whose equity trading volume would
permit the sale or purchase of a large position in the
securities of the company in 2 or 3 trading days. Market
capitalization refers to the total market value of a
company's outstanding shares of common stock. In selecting
securities for the Fund, the Adviser seeks issuers whose
stock is attractively valued and whose fundamental
characteristics both are significantly better than the market
average and which support internal earnings growth capability.
The Fund's holdings may include the securities of companies
whose growth potential is, in the Adviser's opinion,
generally unrecognized or misperceived by the market. In
addition, the Fund may invest up to 20 percent of its total
assets in American Depository Receipts, European Depository
Receipts and other similar securities of large foreign
issuers and may attempt to reduce the overall risk of its
foreign investments by using foreign currency
page 17
<PAGE>
forward contracts. See "Investment Policies - Equity Funds -
International Fund - Foreign Investment Risks and
Considerations." Under normal circumstances, the Fund will
not invest more than 10 percent of its total assets in the
securities of a single issuer. The Fund does not currently
invest in preferred stock or securities convertible into
common stock but reserves the right to do so in the future.
INTERNATIONAL FUND is designed for investors who desire to
achieve international diversification of their investments
by participating in foreign securities markets. Because
international investments generally involve risks in
addition to those risks associated with investments in the
United States, the Fund should be considered only as a
vehicle for international diversification.
As the Fund has the same investment policies as
International Portfolio and currently invests all of its
assets in International Portfolio, the following investment
policies are discussed with respect to International
Portfolio only. International Portfolio normally will invest
substantially all of its assets in equity securities of
companies domiciled outside the United States. International
Portfolio selects its investments on the basis of their
potential for capital appreciation without regard to current
income. International Portfolio may also invest in the
securities of closed-end investment companies investing
primarily in foreign securities and may invest in debt
obligations of foreign governments or their political
subdivisions, agencies or instrumentalities, of
supranational organizations and of foreign corporations.
Investment will be diversified among securities of issuers
in foreign countries including, but not limited to, Japan,
Germany, the United Kingdom, France, the Netherlands, Hong
Kong, Singapore and Australia. In general, International
Portfolio will invest only in securities of companies and
governments in countries that Schroder, in its judgment,
considers both politically and economically stable.
International Portfolio has no limit on the amount of its
foreign assets which may be invested in any one type of
foreign instrument or in any foreign country; however, to
the extent International Portfolio concentrates its assets
in a foreign country, it will incur greater risks.
International Portfolio may purchase preferred stock and
securities convertible into common stock, and may purchase
American Depository Receipts, European Depository Receipts
or other similar securities of foreign issuers.
International Portfolio may also enter into foreign exchange
contracts, including forward contracts to purchase or sell
foreign currencies, in anticipation of its currency
requirements and to protect against possible adverse
movements in foreign exchange rates. Although such contracts
may reduce the risk of loss to International Portfolio from
adverse movements in currency values, the contracts also
limit possible gains from favorable movements.
FOREIGN INVESTMENT RISKS AND CONSIDERATIONS. All
investments, domestic and foreign, involve certain risks.
Investments in the securities of foreign issuers may involve
risks in addition to those normally associated with
investments in the securities of U.S. issuers. All foreign
investments are subject to risks of foreign political and
economic instability, adverse movements in foreign exchange
rates, the imposition or tightening of exchange controls or
other limitations on repatriation of foreign capital, and
changes in foreign governmental attitudes towards private
investment, possibly leading to nationalization, increased
taxation or confiscation of foreign investors' assets.
Moreover, dividends payable on foreign securities may be
subject to foreign withholding taxes, thereby reducing the
income available for distribution to International
Portfolio's shareholders; commission rates payable on
foreign transactions are generally higher than in the United
States; foreign accounting, auditing and financial reporting
standards differ from those in the United States and,
accordingly, less information may be available about foreign
companies than is available about issuers of comparable
securities in the United States; and foreign securities may
trade less frequently and with lower volume and may exhibit
greater price volatility than United States securities.
page 18
<PAGE>
Changes in foreign exchange rates will also affect the value
in U.S. dollars of all foreign currency-denominated
securities held by International Portfolio. Exchange rates
are influenced generally by the forces of supply and demand
in the foreign currency markets and by numerous other
political and economic events occurring outside the United
States, many of which may be difficult, if not impossible, to
predict.
Income from foreign securities will be received and realized
in foreign currencies, and International Portfolio is
required to compute and distribute income in U.S. dollars.
Accordingly, a decline in the value of a particular foreign
currency against the U.S. dollar will reduce the dollars
available to make a distribution. Similarly, if the exchange
rate declines between the time after International
Portfolio's income has been earned and computed in U.S.
dollars and the time it is paid may require International
Portfolio to liquidate portfolio securities to acquire
sufficient U.S. dollars to make a distribution. Similarly, if
the exchange rate declines between the time International
Portfolio incurs expenses in U.S. dollars and the time such
expenses are paid, International Portfolio may be required to
liquidate additional foreign securities to purchase the U.S.
dollars required to meet such expenses.
INCOME EQUITY FUND invests primarily in the common stock of
large, high-quality domestic companies which have above-
average return potential based on current market valuations.
Primary emphasis is placed on investing in securities of
companies with above-average dividend income. In selecting
securities for the Fund, the Adviser uses various valuation
measures, including above-average dividend yields and below
industry average price to earnings, price to book and price
to sales ratios. The Fund considers large companies to be
those whose market capitalization is at least $600 million at
the time of the Fund's purchase. Market capitalization refers
to the total market value of a company's outstanding shares
of common stock. The Fund may also invest in preferred stock
and securities convertible into common stock and may purchase
American Depository Receipts, European Depository Receipts
and other similar securities of foreign issuers. See
"Investment Policies - Equity Funds - International Fund -
Foreign Investment Risks and Considerations." Under normal
circumstances, the Fund will not invest more than 10 percent
of its total assets in the securities of a single issuer.
INDEX FUND is designed to duplicate the return of the
Standard & Poor's 500 Composite Stock Index (the "Index")
with minimum tracking error, while also minimizing
transaction costs. Under normal circumstances, the Fund will
hold stocks representing 96 percent or more of the
capitalization-weighted market values of the Index. Portfolio
transactions for the Fund generally are executed only to
duplicate the composition of the Index, to invest cash
received from portfolio security dividends or shareholder
investments in the Fund, and to raise cash to fund Share
redemptions. The Fund may hold cash or cash equivalents for
the purpose of facilitating payment of the Fund's expenses
or Share redemptions. For these and other reasons, the Fund's
performance can be expected to approximate but not be equal
to that of the Index.
The Index tracks the total return performance of 500 common
stocks which are chosen for inclusion in the Index by
Standard & Poor's Corporation ("S&P") on a statistical basis.
The inclusion of a stock in the Index in no way implies that
S&P believes the stock to be an attractive investment. The 500
securities, most of which trade on the New York Stock
Exchange, represent approximately 70 percent of the total
market value of all U.S. common stocks. Each stock in the
Index is weighted by its market value. Because of the market-
value weighting, the 50 largest companies in the Index
currently account for approximately 45 percent of its value.
The Index emphasizes large-capitalizations and, typically,
companies included in the Index are the largest and most
dominant firms in their respective industries.
page 19
<PAGE>
The Fund is not sponsored, endorsed, sold or promoted by
S&P, nor does S&P make any representation or warranty,
implied or express, to the purchasers of the Fund or any
member of the public regarding the advisability of investing
in index funds or the ability of the Index to track general
stock market performance. S&P does not guarantee the
accuracy and/or the completeness of the Index or any data
included therein.
S&P makes no warranty, express or implied, as to the results
to be obtained by the Fund, owners of the Fund, any person
or any entity from the use of the Index or any data included
therein. S&P makes no express or implied warranties and
hereby expressly disclaims all such warranties of
merchantability or fitness for a particular purpose for use
with respect to the Index or any data included therein.
- -------------------------------------------------------------------------------
INVESTMENT Conservative Balanced Fund, Moderate Balanced Fund and
POLICIES Growth Balanced Fund each invest in a balanced portfolio of
fixed income and equity securities. Conservative Balanced
Fund has the smallest equity securities position of the
BALANCED FUNDS three Funds and is the most conservative Balanced Fund.
Growth Balanced Fund has the largest equity securities
position of the three Funds and is the most aggressive
Balanced Fund. The equity portion of each Balanced Fund's
portfolio uses the five different equity investment styles
of Diversified Equity Fund. Diversified Equity Fund combines
the different equity investment styles of four of the Equity
Funds - Large Company Growth Fund, International Fund,
Income Equity Fund and Index Fund - and investment in a
small company investment style ("Small Company investment
style") in order to reduce the risk of relying on a single
equity investment style. The blending of different equity
investment styles is intended to reduce the price and return
volatility of the equity portion of the Balanced Funds.
The fixed income portion of each Balanced Fund's portfolio
uses from three to five different fixed income investment
styles. Conservative Balanced Fund uses five investment
styles - the investment styles of Managed Fixed Income
Fund, Total Return Bond Fund and Stable Income Fund, a
"positive return" investment style ("Positive Return
investment style") and a short maturity investment style
("Short Maturity investment style"). Moderate Balanced Fund
uses four investment styles - the investment styles of
Managed Fixed Income Fund, Total Return Bond Fund and Stable
Income Fund and Positive Return investment style. Growth
Balanced Fund uses three investment styles - the investment
styles of Managed Fixed Income Fund and Total Return Bond
Fund and Positive Return investment style. The blending of
different fixed income investment styles is intended to
reduce the risk associated with relying on a single fixed
income investment style.
The Funds do not currently allocate any assets to the Total
Return Bond Fund and Positive Return investment styles. The
portions listed as allocated to those styles are currently
allocated to the Managed Fixed Income fund investment style
(for example, currently 50 percent of Conservative Balanced
Fund is allocated to this style.) On June 1, 1995, the
Adviser will start to invest assets allocated to the two new
styles in accordance with those styles. The Funds'
investments are expected to be allocated completely as
described below by July 1, 1995. This reallocation is not
expected to have any material detrimental effects to the
Funds.
The base allocation among investment styles for each
Balanced Fund is set forth below. As market values of the
Funds' assets change, the percentage of Fund assets invested
in any style may temporarily deviate from the base
allocations. In response thereto, the Adviser will
periodically effect transactions for the Balanced Funds to
reestablish their base allocations. In addition, as the
securities markets change, the Adviser may attempt to
enhance the returns of any of the Balanced Funds by
changing, within certain limits, the percentage of Fund
assets invested in fixed-income and equity securities. The
Adviser may, in its discretion, increase or decrease the
fixed income and equity percentages by up to 5 percent for
Conservative Balanced Fund, 10 percent for Moderate Balanced
Fund and 15 percent for
page 20
<PAGE>
Growth Balanced Fund. For example, the Managed Fixed Income
Fund investment style, Total Return Bond Fund investment
style and Positive Return investment style of Growth Balanced
Fund, each of which currently is used for 11 2/3 percent of
that Fund's assets (a total of 35 percent), may each be
increased to 16 2/3 percent (a total of 50 percent) or
decreased to 6 2/3 percent (a total of 20 percent) of that
Fund's assets. In making these changes, each Balanced Fund is
required to limit its redemptions to no more than 1% of a
Blended Portfolio's net assets during any period of less than
thirty days. Absent unstable market conditions, the Adviser
does not anticipate making a substantial number of percentage
changes. When the Adviser believes a change in the base
allocation percentages is desirable, it will sell and
purchase securities to effect the change. When the Adviser
believes that a change will be temporary (generally, 3 years
or less), it may choose to effect the change by using futures
contract strategies as described below in "Temporary
Allocations."
CONSERVATIVE BALANCED FUND is designed for investors seeking
exposure primarily to fixed income securities with limited
exposure to equity securities. The fixed income portion of
the Fund's portfolio uses the investment styles of Managed
Fixed Income Fund, Total Return Bond Fund and Stable Income
Fund, Positive Return investment style and Short Maturity
investment style, in order to reduce the risk of relying on a
single fixed income investment style.
The Fund will generally invest the following percentages of
its total assets in accordance with the indicated investment
styles (as noted under "Investment Policies - Equity Funds -
Diversified Equity Fund" above, Diversified Equity Fund
generally invests its assets using five different equity
investment styles):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
CONSERVATIVE BALANCED FUND ALLOCATION
- ------------------------------------------------------------------------------
<S> <C>
Diversified Equity Fund style 25%
INDEX FUND STYLE 25%, INCOME EQUITY FUND STYLE 25%, LARGE
COMPANY GROWTH FUND STYLE 25%, SMALL COMPANY INVESTMENT
STYLE 10%, INTERNATIONAL FUND STYLE 15%
Managed Fixed Income Fund style 16 2/3%
Total Return Bond Fund style 16 2/3%
Positive Return investment style 16 2/3%
Stable Income Fund style 15%
Short Maturity investment style 10%
- ----------------------------------------------------------------------------
TOTAL FUND ASSETS 100%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
Investors should refer to the descriptions of Diversified
Equity Fund (and the five investment styles used by
Diversified Equity Fund), Managed Fixed Income Fund, Total
Return Bond Fund and Stable Income Fund for a discussion of
the objectives, policies and risks involved in the
investments and investment techniques of those Funds and,
accordingly, of the portions of Conservative Balanced Fund
that are invested using similar investment styles. The
investment policies related to Positive Return investment
style and Short Maturity investment style are listed below.
The management of the Fund's assets is divided among the
Fund's eleven portfolio managers - the portfolio managers of
Diversified Equity Fund, the portfolio managers of Managed
Fixed Income Fund, Total Return Bond Fund and Stable Income
Fund and the portfolio managers who manage the assets
allocated to the Positive Return investment style and Short
Maturity investment style.
MODERATE BALANCED FUND is designed for investors seeking
roughly equivalent exposures to fixed income securities and
equity securities. The fixed income portion of the Fund's
portfolio uses the investment styles of Managed Fixed Income
Fund, Total Return Bond Fund, Stable Income Fund and Positive
Return investment style in order to reduce the risk of
relying on a single fixed income investment style.
page 21
<PAGE>
The Fund will generally invest the following percentages of
its total assets in accordance with the indicated investment
styles (as noted under "Investment Policies - Equity Funds -
Diversified Equity Fund" above, Diversified Equity Fund
generally invests its assets using five different equity
investment styles):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
MODERATE BALANCED FUND ALLOCATION
- ------------------------------------------------------------------------------
<S> <C>
Diversified Equity Fund style 40%
INDEX FUND STYLE 25%, INCOME EQUITY FUND STYLE 25%, LARGE
COMPANY GROWTH FUND STYLE 25%, SMALL COMPANY INVESTMENT
STYLE 10%, INTERNATIONAL FUND STYLE 15%
Managed Fixed Income Fund style 15%
Total Return Bond Fund style 15%
Positive Return investment style 15%
Stable Income Fund style 15%
- ---------------------------------------------------------------------------
TOTAL FUND ASSETS 100%
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
Investors should refer to the descriptions of Diversified
Equity Fund (and the five investment styles used by
Diversified Equity Fund), Managed Fixed Income Fund, Total
Return Bond Fund and Stable Income Fund for a discussion of
the objectives, policies and risks involved in the
investments and investment techniques of those Funds and,
accordingly, of the portions of Moderate Balanced Fund that
are invested using similar investment styles. The investment
policies related to Positive Return investment style are
listed below. The management of the Fund's assets is divided
among the Fund's tenportfolio managers - the portfolio
managers of Diversified Equity Fund, the portfolio managers
of Managed Fixed Income Fund, Total Return Bond Fund and
Stable Income fund and the portfolio manager who manages the
assets allocated to the Positive Return investment style.
GROWTH BALANCED FUND is designed for investors seeking long-
term capital appreciation in the equity securities market in
a balanced fund. The fixed income portion of the Fund's
portfolio uses the investment styles of Managed Fixed Income
Fund, Total Return Bond Fund and Positive Return investment
style in order to reduce the risk of relying on a single
fixed income investment style.
The Fund will generally invest the following percentages of
its total assets in accordance with the indicated investment
styles (as noted under "Investment Policies - Equity Funds -
Diversified Equity Fund" above, Diversified Equity Fund
generally invests its assets using five different equity
investment styles):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
GROWTH BALANCED FUND ALLOCATION
- ------------------------------------------------------------------------------
<S> <C>
Diversified Equity Fund style 65%
INDEX FUND STYLE 25%, INCOME EQUITY FUND STYLE 25%, LARGE
COMPANY GROWTH FUND STYLE 25%, SMALL COMPANY INVESTMENT STYLE
10%, INTERNATIONAL FUND STYLE 15%
Managed Fixed Income Fund style 11 2/3%
Total Return Bond Fund style 11 2/3%
Positive Return investment style 11 2/3%
TOTAL FUND ASSETS 100%
</TABLE>
page 22
<PAGE>
Investors should refer to the descriptions of Diversified
Equity Fund (and the five investment styles used by
Diversified Equity Fund), Managed Fixed Income Fund and Total
Return Bond Fund for a discussion of the objectives, policies
and risks involved in the investments and investment
techniques of those Funds and, accordingly, of the portions
of Growth Balanced Fund that are invested using similar
investment styles. The investment policies related to
Positive Return investment style are listed below. Management
of the Fund's assets is divided among the Fund's nine
portfolio managers - the portfolio managers of Diversified
Equity Fund, the portfolio managers of Managed Fixed Income
Fund and Total Return Bond Fund and the portfolio manager who
manages the assets allocated to the Positive Return
investment style.
POSITIVE RETURN INVESTMENT STYLE Seeks positive total return
each calendar year regardless of the bond market by investing
in a portfolio of U.S. Government and corporate fixed income
investments. The Adviser's investment with respect to assets
invested in this investment style are divided into two
components, short bonds with maturities of 2 years or less and
long bonds with maturities of 25 years or more. Shifts
between short bonds and long bonds are made based on movement
in the prices of bonds rather than on the Adviser's forecast
of interest rates. During periods of falling prices
(generally decreasing interest rate environments) long bonds
are sold to protect capital and limit losses. Conversely,
when bond prices rise, long bonds are purchased. Accordingly,
the average maturity of the portfolio of securities invested
in the Positive Return investment style will vary. It is
anticipated that under normal circumstances the portfolio of
securities invested in this investment style will have an
average dollar-weighted maturity of between 1 and 30 years.
Under normal circumstances, at least 50% of the net assets
allocated to this style will be U.S. Government Securities,
including Treasury securities. All securities allocated to
Positive Return investment style will be, at the time of
purchase, (i) rated in one of the two highest long-term
rating categories assigned by a Nationally Recognized
Statistical Rating Organization such as Moody's Investors
Service, Inc., Standard & Poor's Corporation and Fitch
Investors Services, Inc. or (ii) unrated and determined by
the Adviser to be of comparable quality. No more than 25
percent may be in the second highest rating category.
Investments may include zero-coupon securities, securities
with variable or floating rates of interest and asset-backed
securities, but only 25 percent of the net assets allocated
to this investment style, in the aggregate, may be invested
in these securities. Positive Return investment style may
not invest in convertible securities, mortgage pass-through
securities or private placement securities. Within these
constraints, the Adviser purchases securities which it
believes have above average yields.
SHORT MATURITY INVESTMENT STYLE seeks to provide a higher
total return than is generally available from money market
funds. The assets allocated to Short Maturity investment
style will be invested in a portfolio of high-quality fixed
and variable rate fixed income securities. This portion of
Conservative Balanced Fund's assets is managed to increase
income and preserve or enhance total return by actively
managing average portfolio maturity in light of market
conditions and trends. Investments may include a broad
spectrum of short-term instruments of United States and
foreign issuers, including U.S. Government Securities, and
the debt securities of financial institutions, corporations,
foreign governments, municipal governments, supranational
organizations and others. Investments are limited to
instruments with a remaining maturity of 5 years or less.
With respect to assets allocated to this investment style,
the Fund will maintain a dollar-weighted average portfolio
maturity of 1 year or less and, under normal circumstances,
will maintain 50 percent of the assets in instruments with a
maturity of under 1 year. Up to 25 percent of the assets may
be non-U.S. dollar denominated and, with respect to those
assets, the Adviser will attempt to hedge currency
fluctuation risk. Investments may include mortgage-backed
securities and other asset-backed securities, limited to not
more than 50 percent and 25 percent, respectively, of the
assets allocated to this investment style. The Fund may enter
into "dollar roll" transactions related
page 23
<PAGE>
to these investments and may purchase stripped mortgage-
backed securities. The Fund may invest up to 10 percent of
its assets allocated to the style in guaranteed investment
contracts issued by insurance companies. The securities
allocated to the style may have variable or floating rates
of interest or principal and may include participation
interests and Municipal Securities. Municipal Securities
include obligations of the states, territories or
possessions of the United States and their subdivisions,
authorities and corporations.
All securities allocated to Short Maturity investment style
will be, at the time of purchase, (i) rated in one of the
two highest short-term rating categories by two Nationally
Recognized Statistical Rating Organizations ("NRSROs") (or,
if only one NRSRO has issued a rating, by that NRSRO), (ii)
rated in one of the three highest long-term rating
categories by two NRSROs (or, if only one NRSRO has issued a
rating, by that NRSRO), or (iii) unrated and determined by
the Adviser to be of comparable quality. Of the securities
allocated to this style, no more than 5 percent may be in
any of the lowest permissible rating categories.
In order to manage its exposure to different types of
investments, Conservative Balanced Fund may enter into
interest rate, currency and mortgage swap agreements
invested in the Short Maturity investment style and may
purchase and sell interest rate caps, floors and collars.
The Fund may also engage in certain strategies involving
options (both exchange-traded and over-the-counter) to
attempt to enhance the return on assets invested in this
style and may attempt to reduce the overall risk of those
assets or limit the uncertainty in the level of future
foreign exchange rates (hedge) by using options and futures
contracts and foreign currency forward contracts. The Fund's
ability to use these strategies may be limited by market
considerations, regulatory limits and tax considerations. In
pursuing its Short Maturity investment style strategies, the
Fund may write covered call and put options, buy put and
call options, buy and sell interest rate and foreign
currency futures contracts and buy options and write covered
options on those futures contracts. An option is covered if,
so long as the Fund is obligated under the option, it owns
an offsetting position in the underlying security or futures
contract or maintains a segregated account of liquid, high-
grade debt instruments with a value at all times sufficient
to cover the Fund's obligations under the option.
TEMPORARY ALLOCATIONS. In its discretion, the Adviser may
increase or decrease the percentage of assets of each
Balanced Fund that are invested in fixed income and equity
securities. When the Adviser believes that a percentage
reallocation will be of short duration (generally, up to 3
years), the Adviser may determine to achieve the economic
equivalent of a reallocation without incurring securities
transaction costs by using futures contracts rather than
selling and purchasing securities. Under this strategy, to
the extent of the percentage asset allocation change, the
Fund would not be invested in nor subject to the risks
related to the types of individual securities purchased in
accordance with the various investment styles used by the
Fund. Rather, the Fund would be invested in and subject to
the risks related to futures contracts. For a description of
futures contracts and their risks see "Appendix A:
Investments, Investment Strategies and Risk Considerations -
Futures Contracts and Options."
- -------------------------------------------------------------------------------
INVESTMENT The five Fixed Income Funds invest primarily in fixed
POLICIES income securities pursuant to the investment policies
described below. For a general description of fixed
income securities, see "Additional Investment
FIXED INCOME Policies - Fixed Income Securities and Their
FUNDS Characteristics" below. Each Fixed Income Fund except
Intermediate U.S. Government Fund may invest in foreign
issuers. These investments may involve certain risks. See
"Investment Policies - Equity Funds - International Fund -
Foreign Investment Risks and Considerations."
page 24
<PAGE>
INTERMEDIATE U.S. GOVERNMENT FUND seeks to attain its
investment objective by investing primarily in fixed and
variable rate U.S. Government Securities. Under normal
circumstances, the Fund intends to invest at least 65 percent
of its assets in U.S. Government Securities and may invest up
to 35 percent of its assets in fixed income securities that
are not U.S. Government Securities. The Fund emphasizes the
use of intermediate maturity securities to lessen interest
rate risk, while employing low risk yield enhancement
techniques to add to the Fund's return over a complete
economic or interest rate cycle.
The securities in which the Fund invests will include
mortgage-backed and other asset-backed securities, although
the Fund will limit these investments to not more than 50
percent and 25 percent, respectively, of its total assets. As
part of its mortgage-backed securities investments, the Fund
may enter into "dollar roll" transactions. Certain fixed
income securities are "zero-coupon" securities and the Fund
will limit its investment in these securities, except those
issued through the U.S. Treasury's STRIPS program, to not
more than 10 percent of the Fund's total assets. The Fund may
also invest in securities that are restricted as to
disposition under the Federal securities laws (sometimes
referred to as "private placements" or "restricted
securities"). In addition, the Fund may not invest more than
5 percent of its total assets in securities issued or
guaranteed by any single agency or instrumentality of the
U.S. Government, except the U.S. Treasury. The Fund may make
short sales and may purchase securities on margin (borrow
money in order to purchase securities), which are considered
speculative investment techniques. See "Appendix A:
Investments, Investment Strategies and Risk Considerations -
Short Sales" and "- Purchasing Securities on Margin."
The Fund will only purchase securities that are rated, at the
time of purchase, within the two highest rating categories
assigned by a Nationally Recognized Statistical Rating
Organization, such as Moody's Investors Service, Inc.,
Standard & Poor's Corporation or Fitch Investors Services,
Inc., or which are unrated and determined by the Adviser to
be of comparable quality.
The Fund primarily will invest in debt obligations with
maturities (or average life in the case of mortgage-backed
and similar securities) ranging from short-term (including
overnight) to 12 years, and it is anticipated that the Fund's
portfolio of securities will have an average dollar-weighted
maturity of between 3 and 7 years. Under normal
circumstances, the Fund's portfolio of securities will have a
duration of between 75 percent and 125 percent of the
duration of the Lehman Intermediate Government Bond Index,
which is used as the Fund's benchmark index as described
under "Other Information - Fund Performance." Duration is a
measure of a debt securities average life that reflects the
present value of the securities cash flow and, accordingly,
is a measure of price sensitivity to interest rate changes
("duration risk"). Because earlier payments on a debt
security have a higher present value, duration of a security,
except a zero-coupon security, will be less than the
security's stated maturity.
In order to manage its exposure to different types of
investments, the Fund may enter into interest rate and
mortgage swap agreements and may purchase and sell interest
rate caps, floors and collars. The Fund may also engage in
certain strategies involving options (both exchange-traded
and over-the-counter) to attempt to enhance the Fund's return
and may attempt to reduce the overall risk of its investments
("hedge") by using options and futures contracts. The Fund's
ability to use these strategies may be limited by market
considerations, regulatory limits and tax considerations. The
Fund may write covered call and put options, buy put and call
options, buy and sell interest rate futures contracts, and buy
options and write covered options on those futures contracts.
An option is covered if, so long as the Fund is obligated
under the option, it owns an offsetting position in the
underlying security or futures contract or maintains a
segregated account of liquid, high-grade debt instruments
with a value at all times sufficient to cover the Fund's
obligations under the option.
page 25
<PAGE>
MANAGED FIXED INCOME FUND seeks to attain its investment
objective by investing primarily in investment grade
intermediate term obligations. The Fund invests in a
diversified portfolio of fixed and variable rate U.S. dollar
denominated fixed income securities of a broad spectrum of
United States and foreign issuers, including U.S.
Government Securities and the debt securities of financial
institutions, corporations, and others. The Fund emphasizes
the use of intermediate maturity securities to lessen
duration risk (as described below), while employing low risk
yield enhancement techniques to add to the Fund's return
over a complete economic or interest rate cycle.
The securities in which the Fund invests include mortgage-
backed securities and other asset-backed securities,
although the Fund limits these investments to not more than
50 percent and 25 percent, respectively, of its total
assets. As part of its asset-backed securities investments,
the Fund may enter into "dollar roll" transactions and may
purchase stripped mortgage-backed securities. The Fund may
invest any amount of its assets in U.S. Government
Securities, or in the securities of financial institutions,
corporations, and others. The Fund may invest in securities
that are restricted as to disposition under the Federal
securities laws (sometimes referred to as "private
placement" or "restricted securities"). In addition, the
Fund may not invest more than 30 percent of its total assets
in the securities issued or guaranteed by any single agency
or instrumentality of the U.S. Government, except the U.S.
Treasury.
The Fund may invest up to 10 percent of its total assets in
participations purchased from financial institutions in
loans or securities in which the Fund may invest directly.
The Fund may also invest up to 10 percent of its total
assets in each of (i) obligations issued or guaranteed by
the governments of countries which the Adviser believes do
not present undue risk or by those countries' political
subdivisions, agencies or instrumentalities, (ii)
obligations of supranational organizations and (iii)
obligations of the states, territories or possessions of the
United States and their subdivisions, authorities and
corporations ("municipal securities").
The Fund only purchases securities that are rated, at the
time of purchase, within the four highest long-term or two
highest short-term rating categories assigned by a
Nationally Recognized Statistical Rating Organization, such
as Moody's Investors Service, Inc., Standard & Poor's
Corporation or Fitch Investors Services, Inc., or which are
unrated and determined by the Adviser to be of comparable
quality.
The Fund invests in debt obligations with maturities (or
average life in the case of mortgage-backed and similar
securities) ranging from short-term (including overnight) to
30 years and it seeks to maintain an average dollar-weighted
portfolio maturity of between 3 and 7 years. Under normal
circumstances, the Fund's portfolio of securities will have
a duration within one-half year of the duration of the
Shearson Lehman Intermediate Government/Corporate Bond
Index, which is used as the Fund's benchmark index and
described under "Other Information - Fund Performance."
Duration is a measure of a debt securities average life that
reflects the present value of the securities cash flow and,
accordingly, is a measure of price sensitivity to interest
rate changes ("duration risk"). Because earlier payments on
a debt security have a higher present value, duration of a
security, except a zero-coupon security, is less than the
security's stated maturity.
In order to manage its exposure to different types of
investments, the Fund may enter into interest rate and
mortgage swap agreements and may purchase and sell interest
rate caps, floors and collars. The Fund may also engage in
certain strategies involving options (both exchange-traded
and over-the-counter) to attempt to enhance the Fund's
return and may attempt to reduce the overall risk of its
investments ("hedge") by using options and futures
contracts. The Fund's ability to use these strategies may be
limited by market considerations, regulatory limits and tax
considerations. The Fund may write covered call and put
options, buy put and call options, buy and sell interest
rate futures contracts and buy options and write covered
options on those futures contracts. An option is covered if,
so long as the
page 26
<PAGE>
Fund is obligated under the option, it owns an offsetting
position in the underlying security or futures contract or
maintains a segregated account of liquid, high-grade debt
instruments with a value at all times sufficient to cover the
Fund's obligations under the option.
TOTAL RETURN BOND FUND invests primarily in U.S. Government
Securities, including mortgage-backed securities, and high-
quality corporate fixed income securities. The Adviser's
investment decisions are based on its analysis of major
changes in the direction of interest rates rather than on
attempts by the Adviser to predict short-term interest rate
fluctuations. The Adviser also applies a contrarian
perspective by looking for undervalued segments of the fixed
income market which the Adviser believes offer opportunities
for increased returns.
In making its investment decisions for the Fund, the Adviser
focuses on the maturity structure and quality structure of
the Fund's portfolio. When the Adviser's outlook is for
rising interest rates and falling bond values, the majority
of the Funds portfolio will be invested in securities with
short-term maturities in an effort to take advantage of
rising interest rates while minimizing the negative effect of
falling bond prices. When the Adviser anticipates interest
rates to fall and bond prices to increase, the Fund generally
will be invested in securities with long-term maturities in
an attempt to lock in high interest rates and capitalize on
bond price appreciation. Accordingly, the average maturity of
the Fund's portfolio will vary from 1 to 30 years.
The Fund may invest an unlimited amount of its assets in
either corporate securities, including corporate bonds,
debentures and notes, or U.S. Government Securities. The Fund
will be invested to a greater degree in corporate securities,
however, as the spread between corporate and U.S. Government
Securities offers potential for incremental returns. The Fund
limits its investments in variable or floating rate
securities to 5 percent of its net assets. The Fund does not
currently invest in mortgage-backed securities or enter
"dollar roll" transactions, but reserves the right to do so
in the future.
The Fund may invest in preferred stocks and securities
convertible into common stock, but may not own the common
stock underlying a convertible security. The Fund will only
purchase securities (including convertible securities) that
are rated, at the time of purchase, within the four highest
long term or two highest short-term rating categories
assigned by a Nationally Recognized Statistical Rating
Organization, such as Moody's Investors Service, Inc.,
Standard & Poor's Corporation and Fitch Investors Services,
Inc., or which are unrated and determined by the Adviser to
be of comparable quality.
STABLE INCOME FUND seeks to maintain safety of principal
while providing low volatility total return by investing
primarily in investment grade short-term obligations. The
Fund invests in a diversified portfolio of fixed and variable
rate U.S. dollar denominated fixed income securities of a
broad spectrum of United States and foreign issuers,
including U.S. Government Securities and the debt securities
of financial institutions, corporations, and others.
The securities in which the Fund invests include mortgage-
backed and other asset-backed securities, although the Fund
limits these investments to not more than 60 percent and 25
percent, respectively, of its total assets. In addition, the
Fund limits its holdings of mortgage-backed securities that
are not U.S. Government Securities to 25 percent of its total
assets. The Fund may invest any amount of its assets in U.S.
Government Securities, but under normal circumstances less
than 50 percent of the Fund's total assets are so invested.
The Fund may invest in securities that are restricted as to
disposition under the Federal securities laws (sometimes
referred to as "private placements" or "restricted
securities"). In addition, the Fund may not invest more than
25 percent of its total assets in the securities issued or
guaranteed by any single agency or instrumentality of the
U.S. Government, except the U.S. Treasury, and may not invest
more than 10 percent of its total assets in the securities of
any other issuer.
page 27
<PAGE>
The Fund only purchases those securities that are rated, at
the time of purchase, within the three highest long-term or
two highest short-term rating categories assigned by a
Nationally Recognized Statistical Rating Organization, such
as Moody's Investors Service, Inc., Standard & Poor's
Corporation or Fitch Investors Services, Inc., or which are
unrated and determined by the Adviser to be of comparable
quality.
The Fund invests in debt obligations with maturities (or
average life in the case of mortgage-backed and similar
securities) ranging from short-term (including overnight) to
12 years and seeks to maintain an average dollar-weighted
portfolio maturity of between 2 and 5 years.
In order to manage its exposure to different types of
investments, the Fund may enter into interest rate and
mortgage swap agreements and may purchase and sell interest
rate caps, floors and collars. The Fund may also engage in
certain strategies involving options (both exchange-traded
and over-the-counter) to attempt to enhance the Fund's
income and may attempt to reduce the overall risk of its
investments or limit the uncertainty in the level of future
foreign exchange rates (hedge) by using options and futures
contracts and foreign currency forward contracts. The Fund's
ability to use these strategies may be limited by market
considerations, regulatory limits and tax considerations.
The Fund may write covered call and put options, buy put and
call options, buy and sell interest rate and foreign
currency futures contracts and buy options and write covered
options on those futures contracts. An option is covered if,
so long as the Fund is obligated under the option, it owns
an offsetting position in the underlying security or futures
contract or maintains a segregated account of liquid, high-
grade debt instruments with a value at all times sufficient
to cover the Fund's obligations under the option.
READY CASH INVESTMENT FUND invests in a broad spectrum of
high-quality, short-term money market instruments of United
States and foreign issuers that are determined by the
Adviser, pursuant to procedures adopted by the Board, to be
eligible for purchase and to present minimal credit risks.
These instruments may be U.S. Government Securities or the
securities of financial institutions, corporations, foreign
governments, municipal governments, supranational
organizations and others. The Fund may invest only in U.S.
dollar-denominated instruments that have a remaining
maturity of 397 days or less (as calculated pursuant to Rule
2a-7 under the Investment Company Act of 1940) and will
maintain a dollar-weighted average portfolio maturity of 90
days or less. The Fund may purchase securities with ultimate
maturities of greater than 397 days only in accordance with
Rule 2a-7. Under that Rule, only those long-term instruments
that have demand features which comply with certain
requirements and certain variable rate U.S. Government
Securities may be purchased.
The securities in which the Fund invests will include
mortgage-related securities, asset-backed securities and
participation interests and may have variable or floating
rates of interest or principal. Except to the limited extent
permitted by Rule 2a-7 and except for U.S. Government
Securities, the Fund will not invest more than 5 percent of
its total assets in the securities of any one issuer. In
addition, to ensure adequate liquidity, the Fund may not
invest more than 10 percent of its net assets in illiquid
securities. Under the supervision of the Board, the Adviser
determines and monitors the liquidity of portfolio
securities.
High-quality instruments include those that (i) are rated
(or, if unrated, are issued by an issuer with comparable
outstanding short-term debt that is rated) in one of the two
highest rating categories by two Nationally Recognized
Statistical Rating Organizations ("NRSROs") or, if only one
NRSRO has issued a rating, by that NRSRO or (ii) are
otherwise unrated and determined by the Adviser to be of
comparable quality. The Fund will invest at least 95 percent
of its total assets in securities in the highest rating
category (as determined pursuant to Rule 2a-7).
page 28
<PAGE>
- -------------------------------------------------------------------------------
All investment policies of a Fund that are designated as ADDITIONAL
fundamental, and each Fund's investment objective, may not be INVESTMENT
changed without approval of the holders of a majority of POLICIES
the Fund's outstanding voting securities. A majority of a
Fund's outstanding voting securities means the lesser of 67
percent of the shares of the Fund present or represented at a
shareholders' meeting at which the holders of more than 50
percent of the shares are present or represented, or more
than 50 percent of the outstanding shares of the Fund.
Except as otherwise indicated, investment policies of the
Funds are not fundamental and may be changed by the Board
without shareholder approval.
INVESTMENT LIMITATIONS. The Funds have adopted the investment
limitations listed below, each of which is a nonfundamental
policy except as noted. These policies relate to each Fund
and, unless otherwise noted, not to a portion of a Fund
invested in a particular investment style. Other investment
limitations, including additional provisions with respect to
the limitations listed below, are described in the SAI.
DIVERSIFICATION. Each Fund is a "diversified" portfolio
as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"). As a fundamental policy, with respect to 75
percent of its assets, no Fund may purchase a security (other
than a U.S. Government Security) if, as a result, (i) more
than 5 percent of the Fund's total assets would be invested
in the securities of a single issuer or (ii) the Fund would
own more than 10 percent of the outstanding voting securities
of any single issuer. International Fund may invest up to 100
percent of its investment assets in the International
Portfolio and each other Fund (except Ready Cash Investment
Fund) reserves the right to invest all or a portion of its
assets in another diversified, open-end investment company
with substantially the same investment objective and policies
as the Fund.
CONCENTRATION. Except as noted below, each of the Funds
is prohibited from concentrating its assets in the securities
of issuers in any industry. As a fundamental policy, no Fund
may purchase securities if, immediately after the purchase,
more than 25 percent of the value of the Fund's total assets
would be invested in the securities of issuers conducting
their principal business activities in the same industry.
This limit does not apply to investments in U.S. Government
Securities, foreign government securities, repurchase
agreements covering U.S. Government Securities or investment
company securities. Under normal circumstances, Ready Cash
Investment Fund will invest more than 25 percent of its total
assets in the obligations of domestic and foreign financial
institutions and their holding companies. This concentration
may result in increased exposure to risks pertaining to the
financial institution industry. These risks include a
sustained increase in interest rates, which can adversely
affect the availability and cost of a bank's lending
activities; exposure to credit losses during times of
economic decline; concentration of loan portfolios in
certain industries; regulatory developments; and competition
among financial institutions.
ILLIQUID SECURITIES. Each of the Funds limits its
purchase of illiquid securities. No Fund may knowingly
acquire securities or invest in repurchase agreements with
respect to any securities if, as a result, more than 15
percent (10 percent for Ready Cash Investment Fund) of the
Fund's net assets taken at current value would be invested in
securities which are not readily marketable. Illiquid
investments include securities that are illiquid by virtue of
legal or contractual restrictions on the sale of such
securities and repurchase agreements not entitling the holder
to principal within 7 days. Under the supervision of the
Board, the Advisers determine and monitor the liquidity of
portfolio securities.
BORROWING AND LENDING. As a fundamental policy, each
Fund may borrow money for temporary or emergency purposes,
including the meeting of redemption requests, but not in
excess of 33 1/3 percent of the value of the Fund's total
assets as computed immediately after the borrowing.
Borrowing for other than temporary or emergency purposes or
meeting redemption requests is limited to 5 percent of the
value of each Fund's total assets except in the case of
Intermediate U.S. Government Fund, Managed Fixed Income Fund
and, with respect
page 29
<PAGE>
to their assets invested in the Managed Fixed Income Fund
investment style, the Balanced Funds. When a Fund
establishes a segregated account to limit the amount of
leveraging of the Fund with respect to certain investment
techniques, the Fund does not treat those techniques as
involving borrowings (although they may have characteristics
and risks similar to borrowings and result in the Fund's
assets being leveraged). See "Appendix A: Investments,
Investment Strategies and Risk Considerations - Borrowing"
and "Techniques Involving Leverage." As a fundamental
policy, no Fund may make loans except for loans of portfolio
securities, through the use of repurchase agreements, and
through the purchase of debt securities that are otherwise
permitted investments for the Fund.
MARGIN AND SHORT SALES. Except for Intermediate U.S.
Government Fund, no Fund may purchase securities on margin
or make short sales of securities, except short sales
against the box. These prohibitions do not restrict the
Funds' ability to use short-term credits necessary for the
clearance of portfolio transactions and to make margin
deposits in connection with permitted transactions in
options and futures contracts.
TEMPORARY DEFENSIVE POSITION. When business or financial
conditions warrant, each Fund may assume a temporary
defensive position and invest all or any portion of their
assets in cash or in cash equivalents, including (i) short-
term U.S. Government Securities, (ii) prime quality short-
term instruments of commercial banks, (iii) prime quality
commercial paper, (iv) repurchase agreements with banks and
broker-dealers covering any of the securities in which the
Fund may invest directly and (v) shares of money market
mutual funds. During periods when and to the extent that a
Fund has assumed a temporary defensive position, it may not
be pursuing its investment objective. The Funds may from
time to time maintain investments in cash and cash
equivalents pending investment in securities. The
International Portfolio and, with respect to the portion of
their assets managed by Schroder, Diversified Equity Fund,
Growth Equity Fund and each Balanced Fund, may hold cash and
bank instruments denominated in any major foreign currency.
Prime quality refers to the two highest short-term ratings
of a Nationally Recognized Statistical Rating Organization.
COMMON INVESTMENT TECHNIQUES. Each of the Funds may enter
into repurchase agreements (for reasons other than temporary
defensive purposes) and reverse repurchase agreements, may
lend their portfolio securities and may purchase portfolio
securities on a when-issued or forward commitment basis. It
is currently anticipated that the Equity Funds will not
enter into reverse repurchase agreements or purchase
portfolio securities on a when-issued or forward commitment
basis to any material extent.
FIXED INCOME SECURITIES AND THEIR CHARACTERISTICS. Although
each Fund only invests in investment grade fixed income
securities, including money market instruments, an
investment in a Fund is subject to risk even if all fixed
income securities in the Fund's portfolio are paid in full
at maturity. All fixed income securities, including U.S.
Government Securities, can change in value when there is a
change in interest rates or the issuer's actual or perceived
creditworthiness or ability to meet its obligations.
The market value of the interest-bearing debt securities
held by the Funds will be affected by changes in interest
rates. There is normally an inverse relationship between the
market value of securities sensitive to prevailing interest
rates and actual changes in interest rates. In other words,
an increase in interest rates produces a decrease in market
value. Moreover, the longer the remaining maturity of a
security, the greater will be the effect of interest rate
changes on the market value of that security. Changes in the
ability of an issuer to make payments of interest and
principal and in the market's perception of an issuer's
creditworthiness will also affect the market value of the
debt securities of that issuer. The possibility exists,
therefore, that, the ability of any issuer to pay, when due,
the principal of and interest on its debt securities may
become impaired.
page 30
<PAGE>
Fixed income securities include those issued by the
governments of foreign countries or by those countries'
political subdivisions, agencies or instrumentalities as well
as by supranational organizations such as the International
Bank for Reconstruction and Development. To the extent
otherwise permitted, the Funds may invest in these securities
if the Adviser or Schroder believes that the securities do
not present risks inconsistent with a Fund's investment
objective.
RATING MATTERS. The Fixed Income Funds and, with respect
to their assets invested in fixed income investment styles,
the Balanced Funds, will invest in securities rated in the
categories described in "Investment Objectives, Policies and
Risk Considerations - Investment Policies - Fixed Income
Funds." The Funds also may purchase unrated securities if the
Adviser determines the security to be of comparable quality
to a rated security that the Fund may purchase. Unrated
securities may not be as actively traded as rated securities.
Each Fund may retain a security whose rating has been lowered
below the Fund's lowest permissible rating category (or that
are unrated and determined by the Adviser to be of comparable
quality to securities whose rating has been lowered below the
Fund's lowest permissible rating category) if the Adviser or
Schroder determines that retaining the security is in the
best interests of the Fund.
The Fund's investments are subject to "credit risk" relating
to the financial condition of the issuers of the securities
that the Funds hold. To limit credit risks, the Funds (other
than Ready Cash Investment Fund) may only invest in
securities that are investment grade - rated in the top four
long-term investment grades by a Nationally Recognized
Statistical Rating Organization ("NRSRO") or in the top two
short-term investment grades by an NRSRO. Accordingly, the
lowest permissible long-term investment grades for corporate
bonds, including convertible bonds, are Baa in the case of
Moody's Investor Services, Inc. ("Moody's") and BBB in the
case of Standard & Poor's Corporation ("S&P") and Fitch
Investors Service, Inc. ("Fitch"); the lowest permissible
long-term investment grades for preferred stock are Baa in
the case of Moody's and BBB in the case of S&P and Fitch; and
the lowest permissible short-term investment grades for
short-term debt, including commercial paper, are Prime-2
(P-2) in the case of Moody's, A-2 in the case of S&P and F-2
in the case of Fitch. A further description of the rating
categories of certain NRSROs is contained in the SAI. All
these ratings are generally considered to be investment grade
ratings, although Moody's indicates that securities with
long-term ratings of Baa have speculative characteristics.
VARIABLE AND FLOATING RATE SECURITIES. The securities in
which the Funds invest may have variable or floating rates of
interest and, under certain limited circumstances, may have
varying principal amounts. These securities pay interest at
rates that are adjusted periodically according to a specified
formula, usually with reference to some interest rate index
or market interest rate (the "underlying index"). The
interest paid on these securities is a function primarily of
the underlying index upon which the interest rate adjustments
are based. Such adjustments minimize changes in the market
value of the obligation and, accordingly, enhance the ability
of the Fund to maintain a stable net asset value. Similarly
to fixed rate debt instruments, variable and floating rate
instruments are subject to changes in value based on changes
in market interest rates or changes in the issuer's
creditworthiness. The rate of interest on securities
purchased by a Fund may be tied to Treasury or other
government securities or indices on those securities as well
as any other rate of interest or index. Certain variable rate
securities (including mortgage-backed securities) pay
interest at a rate that varies inversely to prevailing
short-term interest rates (sometimes referred to as inverse
floaters). For example, upon reset the interest rate payable
on a security may go down when the underlying index has
risen. During periods when short-term interest rates are
relatively low as compared to long-term interest rates, a
Fund may attempt to enhance its yield by
page 31
<PAGE>
purchasing inverse floaters. Certain inverse floaters may
have an interest rate reset mechanism that multiplies the
effects of changes in the underlying index. While this form
of leverage may increase the security's, and thus the
Fund's, yield, it may also increase the volatility of the
security's market value.
There may not be an active secondary market for any
particular floating or variable rate instrument; this could
make it difficult for a Fund to dispose of the instrument
during periods of market volatility or economic uncertainty
or if the issuer's credit became impaired at a time when the
Fund was not entitled to exercise any demand rights it might
have. A Fund could, for this or other reasons, suffer a loss
with respect to the instrument. The Advisers monitor the
liquidity of the Funds' investments in variable and floating
rate instruments, but there can be no guarantee that an
active secondary market will exist at any time. Ready Cash
Investment Fund also may purchase variable and floating rate
demand notes which are unsecured obligations redeemable upon
not more than 30 days' notice. These obligations include
master demand notes that permit investment of fluctuating
amounts at varying rates of interest pursuant to direct
arrangement with the issuer of the instrument. The issuer
of these obligations often has the right, after a given
period, to prepay their outstanding principal amount of the
obligations upon a specified number of days' notice. These
obligations generally are not traded, nor generally is there
an established secondary market for these obligations. To
the extent a demand note does not have a seven day or
shorter demand feature and there is no readily available
market for the obligation, it is treated as an illiquid
security.
Certain securities may have an initial principal amount that
varies over time based on an interest rate index, and,
accordingly, a Fund might be entitled to less than the
initial principal amount of the security upon the security's
maturity. The Funds intend to purchase these securities only
when the Adviser believes the interest income from the
instrument justifies any principal risks associated with the
instrument. The Advisers may attempt to limit any potential
loss of principal by purchasing similar instruments that are
intended to provide an offsetting increase in principal.
There can be no assurance that an Adviser will be able to
limit the effects of principal fluctuations and,
accordingly, a Fund may incur losses on those securities
even if held to maturity without issuer default.
page 32
<PAGE>
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- -------------------------------------------------------------------------------
The business of the Trust is managed under the direction of
the Board of Trustees. The Board formulates the general
policies of the Funds and generally meets quarterly to review
the results of the Funds, monitor investment activities and
practices and discuss other matters affecting the Funds and
the Trust. In order to minimize potential conflicts of
interest, only one trustee of Core Trust, John Y. Keffer, is
also a trustee of the Trust. The SAI contains general
background information about the trustees and officers of the
Trust and Core Trust. The Board consists of five members:
John Y. Keffer, Chairman: President and Director of Forum
Financial Services, Inc.
James C. Harris: President and sole Director of James C.
Harris & Co., Inc., a financial consulting firm.
Richard M. Leach: Chief Executive Officer of Tee Box Company,
a golf equipment manufacturer, and President of Richard M.
Leach Associates, a financial consulting firm.
Robert C. Brown: Director of Federal Farm Credit Banks
Funding Corporation and Farm Credit System Financial
Assistance Corp.
Donald H. Burkhardt: Principal of The Burkhardt Law Firm.
- -------------------------------------------------------------------------------
NORWEST INVESTMENT MANAGEMENT. The Adviser serves as INVESTMENT
investment adviser of each Fund pursuant to investment ADVISORY
advisory agreements between Norwest and the Trust. Subject SERVICES
to the general supervision of the Board, the Adviser makes
investment decisions for each Fund and continuously reviews,
supervises and administers each Fund's investment program or
oversees the investment decisions of the investment
subadviser, as applicable. The Adviser is a part of Norwest,
which is a subsidiary of Norwest Corporation, a multi-bank
holding company incorporated under the laws of Delaware in
1929. As of December 31, 1994, Norwest Corporation was the
15th largest bank holding company in the United States in
terms of assets. Norwest became a subsidiary of Norwest
Corporation in 1929 and, as of December 31, 1994, the Adviser
managed or provided investment advice with respect to assets
totaling approximately $10.7 billion. Except for the fees
paid to Norwest, each investment advisory agreement is the
same in all material respects.
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL INC. Subject to the
Adviser's general oversight, Schroder, through its London,
England branch, acts as investment subadviser to
International Fund, Diversified Equity Fund, Growth Equity
Fund, Conservative Balanced Fund, Moderate Balanced Fund and
Growth Balanced Fund pursuant to investment subadvisory
agreements among the Trust, Norwest and Schroder. Under these
agreements, Schroder makes investment decisions for each Fund
and continuously reviews, supervises and administers each
Fund's investment program with respect to that portion, if
any, of the respective Fund's portfolio that the Adviser
believes should be invested using International Fund's
investment philosophy. Each investment subadvisory
agreement is the same in all material respects. Through its
management of International Portfolio, Schroder manages the
entire portfolio of International Fund.
Schroder, whose principal business address is 787 Seventh
Avenue, New York, New York 10019, is registered with the SEC
as an investment adviser and is a wholly-owned U.S.
subsidiary of Schroders Incorporated, the wholly-owned U.S.
holding company subsidiary of Schroders plc. Schroders plc is
the holding company parent of a large worldwide group of
banks and financial services companies (referred to as the
"Schroder Group") and has associated companies and branch
and representative offices located in seventeen countries
worldwide. The Schroder Group specializes in providing
investment management services and has assets under
management currently in excess of $75 billion.
page 33
<PAGE>
CRESTONE CAPITAL MANAGEMENT, INC. To assist Norwest in
carrying out its obligations under the investment advisory
agreement with respect to Small Company Stock Fund, Norwest
has entered into an investment subadvisory agreement among
the Trust, Norwest and Crestone. Crestone, which is located
at 7720 East Belleview Avenue, Suite 220, Englewood,
Colorado 80111, is a subsidiary of Norwest and is registered
with the SEC as an investment adviser. Crestone provides
investment advice regarding companies with small
capitalization to various clients, including institutional
investors. As of October 1, 1994, Crestone managed assets
with a value of approximately $100 million.
Pursuant to its agreement, Crestone makes investment
decisions for Small Company Stock Fund and continuously
reviews, supervises and administers the Fund's investment
program with respect to that portion, if any, of the Fund's
portfolio that Norwest believes should be invested using
Crestone as investment subadviser. Currently, Crestone
manages the entire portfolio of the Fund and has since the
Fund's inception. The Adviser supervises the performance of
Crestone, including Crestone's adherence to the Fund's
investment objective and policies and pays Crestone a fee
for its investment subadvisory services.
INTERNATIONAL FUND. International Fund may withdraw its
investment from International Portfolio, for which Schroder
serves as investment adviser, at any time if the Board
determines that it is in the best interests of International
Fund and its shareholders to do so. See "Other Information -
Core Trust Structure." Accordingly, International Fund has
retained the Adviser as its investment adviser and Schroder
as its investment subadviser to manage the Fund's assets in
the event International Fund so withdraws its investment.
Neither the Adviser or Schroder will receive any advisory or
subadvisory fees with respect to International Fund as long
as International Fund remains completely invested in
International Portfolio or any other investment company.
Schroder acts as investment adviser to International
Portfolio pursuant to an advisory agreement with Core Trust.
Subject to the general supervision of Core Trust's board of
trustees, Schroder makes investment decisions for
International Portfolio and continuously reviews, supervises
and administers International Portfolio's investment
program. The investment advisory agreement between Schroder
and Core Trust with respect to International Portfolio is
the same in all material respects as the Funds' investment
subadvisory agreements except as to the parties, the
circumstances under which fees will be paid and the
jurisdiction whose laws govern the agreement.
CORE TRUST BLENDED PORTFOLIOS. As noted under "Investment
Policies - Investment in Core Trust," the five Blended Funds
invest their assets which are managed in a small company,
index and international investment style in three Blended
Portfolios of Core Trust - Small Company Portfolio, Index
Portfolio and International Portfolio II. Each Blended Fund
may withdraw its investment from a Blended Portfolio at any
time that the Board determines it is in the best interests
of the Blended Fund and its shareholders to do so. See
"Other Information - Core Trust Structure." Norwest serves
as investment adviser to Small Company Portfolio and Index
Portfolio and Schroder serves as investment adviser to
International Portfolio II pursuant to separate advisory
agreements with Core Trust. Subject to the general
supervision of Core Trust's board of trustees, Norwest and
Schroder perform services for the Blended Portfolios similar
to those performed for the Trust under its investment
advisory agreements.
PORTFOLIO MANAGERS. Many persons on the advisory staff of
each of the Adviser, Crestone and Schroder contribute to the
investment advisory services provided to the Funds,
International Portfolio and the three Blended Portfolios of
Core Trust, as applicable. The following persons, however,
are primarily responsible for the day-to-day management of
the Funds' investment portfolios and, unless otherwise
noted, have been since inception of the Funds:
page 34
<PAGE>
CONTRARIAN STOCK FUND - W. Lon Schreur, CFA, Vice
President of Norwest since 1993. Mr. Schreur is also
President of United Capital Management, a part of Norwest
Bank Colorado, N.A., a position which he has held for 16
years.
SMALL COMPANY STOCK FUND - Mr. Kirk McCown, CFA,
founder, President and a Director of Crestone, which was
incorporated in 1990. Prior thereto, Mr. McCown was Senior
Vice President of Reich & Tang, L.P.
SMALL COMPANY GROWTH FUND - Robert B. Mersky, Senior
Portfolio Manager and an Officer of Norwest and President of
Peregrine Capital Management, Inc. Mr. Mersky has held
various investment management positions with Norwest or its
affiliates, including Peregrine, since 1977. From 1980 to
1984 he was head of investments for Norwest.
LARGE COMPANY GROWTH FUND - John S. Dale, Senior
Portfolio Manager and an Officer of Norwest and Senior Vice
President of Peregrine Capital Management, Inc. Mr. Dale has
held various investment management positions with Norwest or
its affiliates, including Peregrine, since 1968. From 1984 to
1987 he was a Senior Vice President and Manager of Equity
Advisors for Norwest.
INTERNATIONAL FUND - International Fund invests all of
its assets in the International Portfolio and, accordingly,
there is currently no portfolio manager for this Fund. Mr.
Mark J. Smith, First Vice President and Director of Schroder
since April 1993, however, is responsible for the day-to-day
management of the International Portfolio's investment
portfolio. Mr. Smith has been associated with Schroder or its
affiliates since 1983 in various positions, including
portfolio manager of other mutual funds and pooled investment
vehicles that invest in international securities. Mr. Smith
also serves as portfolio manager of International Portfolio II.
INCOME EQUITY FUND - David L. Roberts, Senior Vice
President of Norwest since 1991. Mr. Roberts has been
associated with Norwest for 20 years in various investment
related capacities.
INDEX FUND - No single person at the Adviser acts as
portfolio manager of the Fund.
INTERMEDIATE U.S. GOVERNMENT FUND - Karl P. Tourville,
Vice President of Norwest since 1989. Mr. Tourville has been
associated with Norwest since 1986. As of December 31, 1994,
Mr. Tourville was responsible for the management of over $1.3
billion in pooled fixed income assets.
MANAGED FIXED INCOME FUND - William D. Giese, Senior
Portfolio Manager and an officer of Norwest and Senior Vice
President of Peregrine Capital Management, Inc. Mr. Giese has
been a portfolio manager with Peregrine for 10 years and has
approximately 20 years experience in the fixed income
securities management business.
TOTAL RETURN BOND FUND - Mr. David B. Kinney, Vice
President and Senior Portfolio Manager of Norwest, has been
associated with Norwest since 1981. Mr. Kinney has been
portfolio manager of the Fund since its inception and
commenced serving as a portfolio manager of each Blended
Fund on June 1, 1995.
STABLE INCOME FUND - Karl P. Tourville, Vice President
of Norwest since 1989. Mr. Tourville has been associated with
Norwest since 1986. As of December 31, 1994, Mr. Tourville
was responsible for the management of over $1.3 billion in
pooled fixed income assets.
READY CASH INVESTMENT FUND - David D. Sylvester and
Laurie R. White. Mr. Sylvester has been associated with
Norwest for 15 years, the last 7 years as a Vice President
and Senior Portfolio Manager. He has over 20 years experience
in managing fixed income securities portfolios. Ms. White has
been a Vice President and Senior Portfolio Manager of
Norwest since 1991; from 1989 to 1991 she was a Portfolio
Manager at Richfield Bank and Trust. As of December 31, 1994,
Mr. Sylvester and Ms. White were responsible for the
management of over $5.0 billion of short and intermediate-
term fixed income securities.
page 35
<PAGE>
SHORT MATURITY INVESTMENT STYLE - David D. Sylvester
and Laurie R. White. For a description of Mr. Sylvester and
Ms. White, see "Ready Cash Investment Fund" above.
SMALL COMPANY INVESTMENT STYLE AND SMALL COMPANY
PORTFOLIO - Kirk McCown and Robert B. Mersky. For a
description of Mr. McCown and Mr. Mersky, see "Small Company
Stock Fund" and "Small Company Growth Fund" above. Mr.
McCown commenced serving as a portfolio manager of each
Blended Fund and Small Company Portfolio on June 1, 1995.
POSITIVE RETURN INVESTMENT STYLE - William D. Giese,
Senior Portfolio Manager and an officer of Norwest and
Senior Vice President of Peregrine Capital Management, Inc.
For a description of Mr. Giese see "Managed Fixed Income
Fund" above. Mr. Giese commenced serving as a portfolio
manager of each Blended Fund on June 1, 1995.
The day-to-day management of the portfolios of Diversified
Equity Fund, Growth Equity Fund, Conservative Balanced Fund,
Moderate Balanced Fund and Growth Balanced Fund is performed
by the portfolio managers listed above with respect to the
portion of the Fund's portfolio that is invested using the
investment style of another Fund. In addition, the portfolio
managers responsible for the management of a Blended Funds'
assets allocated to the Small Company investment style,
Positive Return investment style and Short Maturity
investment style are listed above:
As an example, there are 4 portfolio managers of Growth
Equity Fund: Mr. McCown and Mr. Mersky are responsible for
the Fund's assets invested in accordance with Small Company
investment style, Mr. Dale is responsible for the Fund's
assets invested in accordance with Large Company Growth Fund
investment style and Mr. Smith of Schroder is responsible
for the Fund's assets invested in accordance with
International Fund's investment style. Cash balances of each
Fund, except International Fund, are managed by Mr.
Sylvester and Ms. White, the portfolio managers for Ready
Cash Investment Fund.
- -------------------------------------------------------------------------------
ADVISORY FEES The investment advisory fees payable to Norwest by the Trust
with respect to each Fund (and payable to Schroder by Core
Trust with respect to International Portfolio) are based on
the average daily net assets of the respective Fund (or
International Portfolio) at the following annual rates:
<TABLE>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
ADVISORY FEE RATE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Diversified Equity Fund. . . . . . 0.65% Conservative Balanced Fund . . . . . . . .0.45%
Growth Equity Fund . . . . . . . . 0.90% Moderate Balanced Fund . . . . . . . . . .0.53%
Large Company Growth Fund. . . . . 0.65% Growth Balanced Fund . . . . . . . . . . .0.58%
Small Company Growth Fund. . . . . 0.90% Intermediate U.S. Government Fund. . . . .0.33%
International Fund . . . . . . . . 0.45% Total Return Bond Fund . . . . . . . . . .0.50%
Income Equity Fund . . . . . . . . 0.50% Managed Fixed Income Fund. . . . . . . . .0.35%
Index Fund . . . . . . . . . . . . 0.15% Stable Income Fund . . . . . . . . . . . .0.30%
</TABLE>
<TABLE>
<CAPTION>
First $300 million Next $400 million Remaining
of assets of assets assets
<S> <C> <C> <C>
Contrarian Stock Fund 0.80% 0.76% 0.72%
Small Company Stock Fund 1.00% 0.96% 0.92%
Ready Cash Investment Fund 0.40% 0.36% 0.32%
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
* Until further notice, Norwest has agreed to waive its advisory fee with
respect to Ready Cash Investment Fund to the extent the fee exceeds 0.30 percent
of the Fund's average annual daily net assets.
page 36
<PAGE>
The advisory agreement for International Fund provides for an
advisory fee payable to the Adviser of 0.85 percent of the
average annual daily net assets of the Fund in the event that
the Fund is not completely invested in International
Portfolio or another investment company. As International
Fund currently invests all of its assets in International
Portfolio, no fees are payable under that agreement. Pursuant
to the investment subadvisory agreements, the Adviser (and
not the Trust) pays Schroder and Crestone a fee for their
investment subadvisory services; however, that compensation
does not increase the amount paid by the Trust to the Adviser
pursuant to the Adviser's investment advisory agreements.
With respect to International Portfolio, for services under
its advisory agreement, Schroder receives from Core Trust an
advisory fee of 0.45 percent of International Portfolio's
average annual daily net assets.
With respect to Small Company Portfolio and Index Portfolio
of Core Trust, for services under its investment advisory
agreements, Norwest receives from Core Trust advisory fees of
0.90 percent and 0.15 percent of the respective Portfolio's
average annual daily net assets. For its services under its
investment advisory agreement, with respect to International
Portfolio II of Core Trust, Schroder receives from Core Trust
an advisory fee of 0.45 percent of International Portfolio
II's average annual daily net assets. Norwest waives all of
the advisory fees payable by Small Company Portfolio and
Index Portfolio. Schroder does not receive a subadvisory fee
from any Blended Fund to the extent that such Fund's assets
are invested in International Portfolio II, and Norwest
reimburses International Portfolio II the amount of the
advisory fee the Portfolio pays to Schroder. Accordingly,
duplicative investment advisory fees are not incurred by any Fund.
Advisory fees are accrued daily and paid monthly. The advisory
fees for Growth Equity Fund, Contrarian Stock Fund, Small
Company Stock Fund and Small Company Growth Fund and the
combined advisory and administrative services fees for
International Fund are higher than those paid by most
investment companies of all types to their advisers, but the
Trust believes that the fees are appropriate for these Funds
considering their investment objectives and policies.
- -------------------------------------------------------------------------------
ADMINISTRATION AND DISTRIBUTION SERVICES. Subject to the ADMINISTRATIVE
supervision of the Board, Forum Financial Services, Inc. AND OTHER
("Forum") supervises the overall management of the Trust SERVICES
(other than portfolio management), including the Trust's
receipt of services for which the Trust is obligated to pay,
and provides the Trust with general office facilities
pursuant to a management agreement with the Trust. Forum
provides persons satisfactory to the Board to serve as
officers of the Trust. As of the date of this Prospectus,
Forum acted as manager and distributor of registered
investment companies and collective trust funds with assets
of approximately $9.0 billion. Forum, whose principal
business address is 61 Broadway, New York, New York 10006, is
a registered broker-dealer and investment adviser and is a
member of the National Association of Securities Dealers,
Inc. As of the date hereof, Forum is controlled by John Y.
Keffer, Chairman and President of the Trust.
For its management services and facilities, Forum receives a
fee at an annual rate of 0.10 percent of the average daily
net assets of each Fund (0.20 percent for Contrarian Stock
Fund, Small Company Stock Fund, Total Return Bond Fund and
Ready Cash Investment Fund). Forum also serves as
administrator of Core Trust and provides administrative
services for the International Portfolio and each Blended
Portfolio that are similar in nature to those provided to the
Funds. For its administrative services, Forum is compensated
by Core Trust at an annual rate of 0.15 percent of the
average daily net assets of International Portfolio and at an
annual rate of 0.10 percent of the average daily net assets
of each Blended
page 37
<PAGE>
Portfolio. Forum will waive the amount of its management fee
that it would otherwise be entitled to receive from a
Blended Fund for that portion of the assets of the Blended
Fund invested in a Blended Portfolio. Forum's management and
administration fees are accrued daily and paid monthly.
In addition, pursuant to a separate services agreement,
Norwest receives a fee at an annual rate of 0.25 percent of
the average annual daily net assets of International Fund.
Under this agreement, Norwest is responsible for compiling
data for and preparing communications between the Fund and
its shareholders, maintaining requisite information flows
between the Fund and the investment adviser to International
Portfolio, monitoring and reporting to the Board on the
performance of International Portfolio and reimbursing the
Fund for certain excess expenses. No fees are payable under
this service agreement in the event that the International
Fund is not completely invested in International Portfolio
or another investment company. International Fund incurs
total management and administrative fees at a higher rate
than the other Funds due in part to the nature of the Fund's
structure and the Fund's investment policies.
Pursuant to a separate distribution agreement with the
Trust, Forum acts as the agent of the Trust in connection
with the offering of the shares of the Funds. Forum receives
no payments for its services as distributor of the Shares.
In addition, no Fund and no Portfolio of Core Trust has
adopted a Rule 12b-1 Plan applicable to the Shares and,
accordingly, no Fund incurs any distribution expenses. Forum
also provides accounting services to the Funds and to Core
Trust.
SHAREHOLDER SERVICING AND CUSTODY. Norwest serves as
transfer agent and dividend disbursing agent for the Trust
(in this capacity, the "Transfer Agent"). The Transfer Agent
maintains an account for each shareholder of the Trust
(unless such accounts are maintained by sub-transfer agents
or processing agents), performs other transfer agency and
shareholder servicing functions for the Trust, and acts as
dividend disbursing agent for the Trust. The Transfer Agent
is permitted to subcontract any or all of its functions with
respect to all or any portion of the Trust's shareholders to
one or more qualified sub-transfer agents or processing
agents, which may be its or Forum's affiliates, who agree to
comply with the terms of the Transfer Agent's agreement with
the Trust. The Transfer Agent is permitted to compensate
those agents for their services; however, no such
compensation may increase the aggregate amount of payments
by the Trust to the Transfer Agent. For its services,
Norwest is compensated at the annual rate of 0.25 percent of
each Fund's average annual daily net assets attributable to
the Shares. In the case of Ready Cash Investment Fund,
Norwest is compensated at an annual rate of 0.10 percent of
the Fund's average annual daily net assets attributable to
Institutional Shares and may be reimbursed for certain
expenses related to its transfer agency services.
Norwest also serves as the Trust's custodian and may appoint
subcustodians for the foreign securities and other assets
held in foreign countries. Except as noted below, Norwest
currently receives no additional compensation for its
custodial services, but the Funds will incur the expenses
and costs of any subcustodian. International Fund and, to
the extent they invest in the International Fund investment
style, each Blended Fund indirectly incurs its pro rata
portion of the custodial fees of Core Trust. The Chase
Manhattan Bank, N.A. serves as custodian of International
Portfolio and International Portfolio II and is paid a fee
by Core Trust for its services. Norwest serves as custodian
of Small Company Portfolio and Index Portfolio and currently
receives no additional compensation for its custodial
services with respect to those Portfolios. Norwest is
compensated for providing custodian services to each of
Contrarian Stock Fund, Small Company Stock Fund, Total
Return Bond Fund and Ready Cash Investment Fund at a rate up
to 0.05 percent of the Fund's average annual daily net
assets.
page 38
<PAGE>
- -------------------------------------------------------------------------------
Each Fund, as well as each Portfolio of Core Trust, is EXPENSES OF
obligated to pay for all of its expenses, although Norwest THE FUNDS
has agreed to reimburse the Trust for certain of each Fund's
operating expenses which in any year exceed the limits
prescribed by any state in which the Fund's shares are
qualified for sale. For an estimate of each Fund's expenses
for the current fiscal year, see "Summary - Expenses of
Investing in the Funds." These expenses include: interest
charges; taxes; brokerage fees and commissions; certain
insurance premiums; applicable fees and expenses under the
Trust's or Core Trust's contracts with the Advisers, Forum,
the Transfer Agent and any custodian; fees of pricing,
interest, dividend, credit and other reporting services;
costs of membership in trade associations; auditing, legal
and compliance expenses; costs of preparing and printing the
Trust's prospectuses, statements of additional information
and shareholder reports and delivering them to existing
shareholders; compensation of certain of the Trust's or Core
Trust's trustees, officers and employees and other personnel
performing services for the Trust or Core Trust; and
registration fees and related expenses.
Each Fund's expenses comprise Trust expenses attributable to
the Fund and expenses not attributable to any particular
portfolio of the Trust, which are allocated among the Funds
and all other portfolios of the Trust in proportion to their
average net assets. International Fund's expenses include
the Fund's pro rata share of the operating expenses of
International Portfolio, which are borne indirectly by
International Fund's shareholders. Although the Blended
Portfolio's do not incur investment advisory fees, they do
incur other administrative and operating expenses. While the
Blended Portfolios expenses are not borne directly by the
Blended Funds, those expenses have the effect of reducing the
net investment income of the Blended Portfolios. The
estimated expenses of the Blended Portfolios for the current
fiscal year, as a percentage of average net assets, are Small
Company Portfolio, 0.17 percent, Index Portfolio, 0.16
percent and International Portfolio II, 0.25 percent. Each
Blended Fund will incur its pro rata share of the Blended
Portfolios' expenses, but only to the extent it invests in a
Blended Portfolio.
The Advisers, Forum, the Transfer Agent and any other service
provider to the Funds, International Portfolio or a Blended
Portfolio may elect to waive all or a portion of their fees.
Any such waivers will have the effect of increasing a Fund's
performance for the period during which the waiver was in
effect. No fee waivers may be recouped at a later date. Other
than investment advisory fees, any fee paid by the Trust or
Core Trust may be increased by the Board or the board of
trustees of Core Trust without shareholder approval.
Each service provider to the Trust or their agents or
affiliates may also act in various capacities for, and
receive compensation from, their customers who are
shareholders in a Fund. Under agreements with those
customers, these entities may elect to credit against the
fees payable to them by their customers or to rebate to
customers all or a portion of any fee received from the Trust
with respect to assets of those customers invested in the Funds.
page 39
<PAGE>
- -------------------------------------------------------------------------------
PURCHASES AND
REDEMPTIONS OF SHARES
- -------------------------------------------------------------------------------
Shares of each Fund are continuously sold and redeemed at a
price equal to their net asset value on each Fund Business
Day (as defined below) without charge. All transactions in
Fund Shares are effected through the Transfer Agent, which
accepts orders for purchases and redemptions only from
shareholders of record and new investors. Shareholders of
record receive periodic statements from the Trust listing
all account activity during the statement period. Trust
Shares of a Fund are offered exclusively to fiduciary,
agency and custodial clients of bank trust departments,
trust companies and their affiliates.
- -------------------------------------------------------------------------------
PURCHASE AND PURCHASES AND REDEMPTIONS THROUGH FINANCIAL INSTITUTIONS.
REDEMPTION Shares may be purchased and redeemed (and in the case of
PROCEDURES Plans, generally will be purchased and redeemed) through
certain banks, trust companies and their affiliates,
including Norwest and its affiliates ("Processing
Organizations"). Processing Organizations may charge their
customers a fee for their services and are responsible for
promptly transmitting purchase, redemption and other
requests to the Funds.
Investors who purchase shares through a Processing
Organization will be subject to the procedures of their
Processing Organization, which may include limitations,
investment minimums, cutoff times and restrictions in
addition to, or different from, those applicable to
shareholders who invest in a Fund directly. These investors
should acquaint themselves with their Processing
Organization procedures and should read this Prospectus in
conjunction with any materials and information provided by
their Processing Organization. Customers who purchase a
Fund's shares through a Processing Organization may or may
not be the shareholder of record and, subject to their
Processing Organization's and the Funds' procedures, may
have Fund shares transferred into their name. Under their
arrangements with the Trust, broker-dealer Processing
Organizations are not generally required to deliver payment
for purchase orders until several business days after a
purchase order has been received by a Fund. Certain other
Processing Organizations may also enter purchase orders with
payment to follow.
Certain shareholder services may not be available to
shareholders who have purchased shares through a Processing
Organization. These shareholders should contact their
Processing Organization for further information. The Trust
may confirm purchases and redemptions of a Processing
Organization's customers directly to the Processing
Organization, which in turn will provide its customers with
such confirmations and periodic statements as may be
required by law or agreed to between the Processing
Organization and its customers. The Trust is not responsible
for the failure of any Processing Organization to carry out
its obligations to its customer. Certain states permit
shares of the Funds to be purchased and redeemed only
through registered broker-dealers, including the Funds'
distributor.
INITIAL PURCHASES OF SHARES. Investors may obtain the
account application form necessary to open an account by
writing the Trust at the address listed on page 2 of the
Prospectus.
To participate in shareholder services not referenced on the
account application form and to change information on a
shareholder's account (such as addresses), investors or
existing shareholders should contact the Trust. The Trust
reserves the right in the future to modify, limit or
terminate any shareholder privilege upon appropriate notice
to shareholders and to charge a fee for certain shareholder
services, although no such fees are currently contemplated.
Any privilege and participation in any program may be
terminated by the shareholder at any time by writing to the
Trust.
BY MAIL. Investors may send a check made payable to the
Trust along with a completed account application form to the
Trust at the address listed below. Checks are accepted at
full value subject to collection. Payment by a check drawn
on any member of the Federal Reserve System can normally be
converted into Federal funds within two business days after
receipt of the check. Checks drawn on some non-member banks
may take longer.
page 40
<PAGE>
BY BANK WIRE. To make an initial investment in a Fund
using the wire system for transmittal of money among banks,
an investor should first telephone the Trust Transfer Agent
at 612-667-8833 or 800-338-1348 to obtain an account number.
The investor should then instruct a bank to wire the
investor's money immediately to:
Norwest Bank Minnesota, N.A.
ABA 091 000 019
For Credit to: Norwest Funds 0844-131
Re: [Name of Fund], [Advantage Shares/Trust Shares/
Institutional Shares]
Account Number:
Account Name:
The investor should then promptly complete and mail the
account application form. There may be a charge by the
investor's bank for transmitting the money by bank wire, and
there also may be a charge for the use of Federal funds. The
Trust does not charge investors for the receipt of wire
transfers. Payment by bank wire is treated as a Federal funds
payment when received.
SUBSEQUENT PURCHASES OF SHARES. Subsequent purchases may be
made by mailing a check, by sending a bank wire or through
the shareholder's Processing Organization as indicated above.
All payments should clearly indicate the shareholder's name
and account number.
REDEMPTIONS OF SHARES. Shareholders that wish to redeem
shares by telephone or receive redemption proceeds by bank
wire must elect these options by properly completing the
appropriate sections of their account application form. These
privileges may not be available until several weeks after a
shareholder's application is received. Shares for which
certificates have been issued may not be redeemed by telephone.
BY MAIL. Shareholders may redeem shares by sending a
written request to the Transfer Agent accompanied by any
share certificate that may have been issued to the
shareholder to evidence the shares being redeemed. All
written requests for redemption must be signed by the
shareholder with signature guaranteed, and all certificates
submitted for redemption must be endorsed by the shareholder
with signature guaranteed. See "Purchases and Redemptions of
Shares - General Information."
BY TELEPHONE. A shareholder who has elected telephone
redemption privileges may make a telephone redemption request
by calling the Transfer Agent at 800-338-1348 or 612-667-8833
and providing the shareholder's account number, the exact
name in which the shares are registered and the shareholder's
social security or taxpayer identification number. In
response to the telephone redemption instruction, the Trust
will mail a check to the shareholder's record address or, if
the shareholder has elected wire redemption privileges, wire
the proceeds. See "Purchases and Redemptions of Shares -
General Information."
BY BANK WIRE. For redemptions of more than $5,000, a
shareholder who has elected wire redemption privileges may
request a Fund to transmit the redemption proceeds by Federal
funds wire to a bank account designated in writing by the
shareholder. To request bank wire redemptions by telephone,
the shareholder also must have elected the telephone
redemption privilege. Redemption proceeds are transmitted by
wire on the day after a redemption request in proper form is
received by the Trust Transfer Agent.
EXCHANGES. Shareholders of Advantage Shares, Trust Shares and
Institutional Shares may exchange their Shares for Advantage,
Trust or Institutional Shares of the other Funds or certain
other portfolios of the Trust and for shares of U.S.
Government Fund and Treasury Fund of the Trust. The Trust may
in the future offer Advantage Shares, Trust Shares,
Institutional Shares, or other shares which will be
exchangeable with the Shares of the Funds.
The Funds do not charge for exchanges, and there is currently
no limit on the number of exchanges a shareholder may make;
the Funds reserve the right, however, to limit excessive
page 41
<PAGE>
exchanges by any shareholder. Exchanges are subject to the
fees charged by, and the limitations (including minimum
investment restrictions) of, the Fund into which a
shareholder is exchanging.
Exchanges may only be made between identically registered
accounts or to open a new account. A new account application
is required to open a new account through an exchange if the
new account will not have an identical registration and the
same shareholder privileges as the account from which the
exchange is being made. Shareholders may only exchange into
a fund if that fund's shares may legally be sold in the
shareholder's state of residence. For Federal tax purposes,
an exchange is treated as a redemption and a simultaneous
new purchase. Exchange procedures may be materially amended
or terminated by the Trust at any time upon 60 days' notice
to shareholders. See "Additional Purchase and Redemption
Information" in the SAI.
BY MAIL. Exchanges may be made by sending a written
request to the Transfer Agent accompanied by any share
certificates for the shares to be exchanged. All written
requests for exchanges must be signed by the shareholder,
and all certificates submitted for exchange must be endorsed
by the shareholder with signature guaranteed. See "Purchases
and Redemptions of Shares - General Redemption Information."
BY TELEPHONE. A shareholder who has elected telephone
exchange privileges may make a telephone exchange by calling
the Transfer Agent at 800-338-1348 or 612-667-8833 and
providing the shareholder's account number, the exact name
in which the shareholder's shares are registered and the
shareholder's social security or taxpayer identification
number. See "Purchases and Redemptions of Shares - General
Information."
- -------------------------------------------------------------------------------
GENERAL Purchasing Shares. Investments in the Funds may be made
INFORMATION either through certain financial institutions or by an
investor directly. An investor who invests in a Fund
directly will be the shareholder of record. Fund Shares are
issued immediately following the next determination of net
asset value made after acceptance of an investor's
subscription and funds. An investor's funds will not be
accepted or invested during the period before the Fund's
receipt of funds on deposit at a Federal Reserve Bank
("Federal Funds"). The Fund reserves the right to reject any
subscription for the purchase of its shares. Share
certificates are issued only to shareholders of record upon
their written request and are not issued for fractional
shares. With approval of the Trust and the Adviser, shares
may be purchased with portfolio securities in lieu of cash.
REDEEMING SHARES. There is no minimum period of investment
and no restriction on the frequency of redemptions. Fund
Shares are redeemed as of the next determination of the
Fund's net asset value following acceptance by the Transfer
Agent of the redemption order in proper form (and any
supporting documentation which the Transfer Agent may
require). Normally, redemption proceeds are paid
immediately, but in no event later than 7 days, following
acceptance of a redemption order. Proceeds of a redemption
request, however, will not be paid unless any check used for
investment has been cleared by the shareholder's bank, which
may take up to 15 days. Unless otherwise indicated,
redemption proceeds normally are paid by check mailed to
the shareholder's record address. The right of redemption
may not be suspended nor the payment dates postponed for
more than 7 days except when the New York Stock Exchange is
closed (or when trading thereon is restricted) for any
reason other than its customary weekend or holiday closings
or under any emergency or other circumstances as determined
by the SEC.
Shareholders who wish to accomplish redemptions or exchanges
by telephone must elect those privileges. The Trust, the
Transfer Agent and Forum are not responsible for the
authenticity of telephone instructions or losses, if any,
resulting from unauthorized telephone redemption or exchange
requests which reasonably are believed to be genuine. The
Trust
page 42
<PAGE>
employs reasonable procedures (including the recording of
certain telephone transactions) to insure that telephone
orders are genuine. Shareholders should verify the accuracy
of telephone instructions immediately upon receipt of
confirmation statements.
INVESTMENT MINIMUMS. Shares of each Fund are offered without
a sales charge and may be redeemed without charge. The
minimum investment in Advantage Shares and Trust Shares is
$1,000, and in Institutional Shares is $100,000. The minimum
subsequent investment is $100 except in the case of
Institutional Shares, where there is no minimum. Shareholders
who elect to purchase Trust Shares through electronic share
purchase privileges such as the Automatic Investment Plan or
the Directed Dividend Option are not subject to the initial
investment minimums. See "Purchases and Redemptions of
Shares - General Information - Automatic Investment Plan" and
"Dividends, Distributions and Tax Matters."
IRAS AND KEOGHS. Shares may be a suitable investment vehicle
for part or all of the assets held in certain IRAs or KEOGH
accounts. An appropriate account application form may be
obtained by contacting the Trust or, for accounts rolling
over from a Plan, the shareholder's employer. Under current
IRA rules, by directly rolling over a distribution from a
Plan, investors can avoid the 20 percent withholding tax
imposed on distributions from a Plan. Rollover IRA assets
must be held separately from other IRA assets if the investor
wishes to invest his Rollover IRA in another employer's plan
in the future. The amount of the deductible contribution to
an IRA will be reduced if the individual or, in the case of a
married individual filing jointly, either the individual or
the individual's spouse is an active participant in an
employer-sponsored retirement plan and has adjusted gross
income above certain levels.
Currently, individuals may make tax-deductible IRA
contributions of up to a maximum of $2,000 annually.
However, the deduction will be reduced if the individual or,
in the case of a married individual filing jointly, either
the individual or the individual's spouse is an active
participant in an employer-sponsored retirement plan and has
adjusted gross income above certain levels.
SIGNATURE GUARANTEES. A signature guarantee is required for
any endorsement on a share certificate and for instructions
to change a shareholder's record name or address, designated
bank account for wire redemptions, Automatic Investment or
Withdrawal Plan, dividend election, telephone redemption or
any other option election in connection with the
shareholder's account. Signature guarantees may be provided
by any eligible institution acceptable to the Transfer
Agent, including a bank, a broker, a dealer, a national
securities exchange, a credit union, or a savings
association that is authorized to guarantee signatures.
Whenever a signature guarantee is required, each person
required to sign for the account must have that person's
signature guaranteed.
OTHER REDEMPTION INFORMATION. Proceeds of redemptions
normally are paid in cash. However, payments may be made
wholly or partially in portfolio securities if the Board
determines that payment in cash would be detrimental to the
best interests of the Fund. The Company will only effect a
redemption in portfolio securities if the particular
shareholder is redeeming more than $250,000 or 1 percent of
the Fund's total net assets, whichever is less, during any
90-day period. Due to the cost to the Trust of maintaining
smaller accounts, the Trust reserves the right to redeem,
upon not less than 60 days written notice, all shares in any
Fund account with an aggregate net asset value of less than
$1,000. The Trust will not redeem accounts that fall below
that amount solely as a result of a reduction in net asset
value.
AUTOMATIC INVESTMENT PLAN. Under the Automatic Investment
Plan which is available to shareholders of Trust Shares of a
Fund, shareholders may authorize monthly amounts of $50 or
more to be withdrawn automatically from the shareholder's
designated bank account (other than passbook savings) and
sent to the Transfer Agent for investment in a Fund.
Shareholders wishing to use this plan must complete an
application which may be obtained
page 43
<PAGE>
by writing or calling the Transfer Agent. The Trust may
modify or terminate the Automatic Investment Plan with
respect to any shareholder in the event that the Trust is
unable to settle any transaction with the shareholder's
bank. If the Automatic Investment Plan is terminated before
the shareholder's account totals $1,000, the Trust reserves
the right to close the account in accordance with the
procedures described under "Other Redemption Information"
above.
AUTOMATIC WITHDRAWAL PLAN. A shareholder of Trust Shares of
a Fund whose shares in a single account total $1,000 or more
(or of Institutional Shares whose shares in a single account
total $10,000 or more) may establish a withdrawal plan to
provide for the preauthorized payment from the shareholder's
account of $250 or more on a monthly, quarterly, semi-annual
or annual basis. Under the withdrawal plan, sufficient
shares in the shareholder's account are redeemed to provide
the amount of the periodic payment and any taxable gain or
loss is recognized by the shareholder upon redemption of the
shares. Shareholders wishing to utilize the withdrawal plan
may do so by completing an application which may be obtained
by writing or calling the Transfer Agent. The Trust may
suspend a shareholder's withdrawal plan without notice if
the account contains insufficient funds to effect a
withdrawal or if the account balance is less than the
required minimum amount at any time.
REOPENING ACCOUNTS. Provided that the information on the
account application form on file with the Trust is still
applicable, a shareholder may reopen an account, without
filing a new account application form, at any time within
one year after the shareholder's account is closed.
DETERMINATION OF NET ASSET VALUE. The Trust determines the
net asset value per share of each Fund as of 4:00 P.M.,
Eastern time, on all weekdays, except New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving and Christmas ("Fund Business
Day") by dividing the value of the Fund's net assets (i.e.,
the value of its securities and other assets less its
liabilities) by the number of Shares outstanding at the time
the determination is made.
Securities owned by a Fund for which market quotations are
readily available are valued at current market value.
Securities for which market quotations are not readily
available are valued at fair value as determined by the
Board in accordance with procedures adopted by the Board.
Trading in securities on European, Far Eastern and other
international securities exchanges and over-the-counter
markets is normally completed well before the close of
business of each Fund Business Day. In addition, trading in
foreign securities generally or in a particular country or
countries may not take place on all Fund Business Days.
Trading does take place in various foreign markets, however,
on days on which the Funds' net asset value is not
calculated. Calculation of the net asset value per share of
a Fund may not occur contemporaneously with the
determination of the prices of the foreign securities used
in the calculation. Events affecting the values of foreign
securities that occur after the time their prices are
determined and before the Fund's determination of net asset
value will not be reflected in the Fund's calculation of net
asset value unless the Adviser or Schroder determines that
the particular event would materially affect net asset
value, in which case an adjustment will be made.
All assets and liabilities of a Fund denominated in foreign
currencies are valued in U.S. dollars at the mean of the bid
and asked prices of such currencies against the U.S. dollar
last quoted by a major bank prior to the time of the
valuation.
page 44
<PAGE>
- -------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
AND TAX MATTERS
- -------------------------------------------------------------------------------
Except with respect to Ready Cash Investment Fund, Shares DIVIDENDS AND
become entitled to receive dividends on the next Fund DISTRIBUTIONS
Business Day after acceptance of an order and are not
entitled to receive dividends declared after the day on which
their redemption becomes effective. Ready Cash Investment
Fund Shares become entitled to receive dividends on the day
of the acceptance of an order and are not entitled to receive
dividends declared on or after the day on which their
redemption becomes effective.
Dividends of net investment income currently are declared and
paid annually by each Fund, except that for Small Company
Stock Fund and Contrarian Stock Fund they are declared and
paid monthly and for Total Return Bond Fund and Ready Cash
Investment Fund they are declared daily and paid monthly.
Each Fund's net capital gain, if any, is distributed at least
annually, typically in December.
Shareholders may choose to have dividends and distributions
of a Fund reinvested in shares of that Fund (the
"Reinvestment Option"), to receive dividends and
distributions in cash (the "Cash Option") or to direct
dividends and distributions to be reinvested in shares of
another fund of the Trust (the "Directed Dividend Option").
Plan, IRA and KEOGH accounts are automatically assigned the
Reinvestment Option. All dividends and distributions are
treated in the same manner for Federal income tax purposes
whether received in cash or reinvested in shares of a fund.
Under the Reinvestment Option, all dividends and
distributions of a Fund are automatically invested in
additional Shares of that Fund. All dividends and
distributions are reinvested at a Fund's net asset value as
of the payment date of the dividend or distribution.
Shareholders are assigned this option unless one of the other
two options is selected. Under the Cash Option, all dividends
and distributions are paid to the shareholder in cash. Under
the Directed Dividend Option, shareholders of a Fund whose
shares in a single account of that Fund total $10,000 or more
may elect to have all dividends and distributions reinvested
in shares of another fund of the Trust, provided that those
shares are eligible for sale in the shareholder's state of
residence. For further information concerning the Directed
Dividend Option, shareholders should contact the Transfer Agent.
- -------------------------------------------------------------------------------
TAXATION OF THE FUNDS. Each Fund is treated as a separate TAX MATTERS
corporation for Federal tax purposes and intends to qualify
for each fiscal year as a regulated investment company under
the Internal Revenue Code of 1986, as amended. In addition,
each Fund intends to distribute all of its net investment
income and capital gain each year. Accordingly, it is
anticipated that the Funds will not be liable for Federal
income or excise taxes on their net investment income and
capital gain.
INTERNATIONAL FUND-INTERNATIONAL PORTFOLIO. International
Portfolio is not required to pay Federal income taxes on its
net investment income and capital gain, as it is treated as a
partnership for Federal tax purposes. All interest, dividends
and gains and losses of International Portfolio are deemed to
have been "passed through" to International Fund in
proportion to its holdings of International Portfolio,
regardless of whether such interest, dividends or gains have
been distributed by International Portfolio or losses have
been realized by the International Portfolio. Investment
income received by International Fund from sources within
foreign countries may be subject to foreign income or other
taxes. International Fund intends to elect, if eligible to do
so, to permit its shareholders to take a credit (or a
deduction) for foreign income and other taxes paid by
International Portfolio. Shareholders of International Fund
will be notified of their share of those taxes and will be
required to include that amount as income. In that event, the
shareholder may be entitled to claim a credit or deduction
for those taxes.
page 45
<PAGE>
- -------------------------------------------------------------------------------
SHAREHOLDER GENERAL. Dividends paid by a Fund out of its net
TAX MATTERS investment income (including any realized net short-term
capital gain) are taxable to shareholders as ordinary
income. Distributions by a Fund of realized net long-term
capital gain, if any, are taxable to shareholders as long-
term capital gain, regardless of the length of time the
shareholder may have held shares in the Fund at the time of
distribution. If Fund shares are sold at a loss after being
held for 6 months or less, the loss will be treated as long-
term capital loss to the extent of any long-term capital
gain distribution received on those shares.
All capital gain distributions paid by a Fund and all
dividends paid by a Fund (except Total Return Bond Fund and
Ready Cash Investment Fund) and received by a shareholder
reduce the net asset value of the shareholder's shares by
the amount of the distribution or dividend. Furthermore, a
dividend or distribution made shortly after the purchase of
shares by a shareholder, although in effect a return of
capital to that particular shareholder, would be taxable to
the shareholder as described above.
It is expected that a substantial portion of each Equity
Fund's dividends to shareholders and a portion of each
Balanced Fund's dividends to shareholders will qualify for
the dividends received deduction for corporations.
The Funds may be required by Federal law to withhold 31
percent of reportable payments (which may include taxable
dividends, capital gain distributions and redemption
proceeds) paid to individuals and certain other non-
corporate shareholders. Withholding is not required if a
shareholder certifies that the shareholder's social security
or tax identification number provided to the Trust is
correct and that the shareholder is not subject to backup
withholding for prior under-reporting to the Internal
Revenue Service.
Reports containing appropriate information with respect to
the Federal income tax status of dividends and distributions
paid during the year by the Funds will be mailed to
shareholders shortly after the close of each year.
TAX-DEFERRED ACCOUNTS. Dividends or distributions of
net long-term capital gain, if any, paid with respect to the
shares of a Fund held by a tax-deferred account will not be
taxable to that account. Currently, distributions from such
accounts will be taxable to individual participants under
applicable tax rules without regard to the character of the
income earned by the account.
page 46
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OTHER INFORMATION
- -------------------------------------------------------------------------------
Each Fund's performance may be quoted in advertising in FUND
terms of yield or total return. Both types are based on PERFORMANCE
historical results and are not intended to indicate future
performance. The Funds' advertisements may reference ratings
and rankings among similar funds by independent evaluators
such as Morningstar, Lipper Analytical Services, Inc. and
IBC/Donoghue, Inc. In addition, the performance of a Fund may
be compared to recognized indices of market performance. The
comparative material found in the Funds' advertisements, sales
literature or reports to shareholders may contain performance
ratings. This material is not to be considered representative
or indicative of future performance.
YIELD. A Fund's yield is a way of showing the rate of income
earned by the Fund as a percentage of the Fund's share price.
Yield is calculated by dividing the net investment income of
the Fund for the stated period by the average number of
shares entitled to receive dividends and expressing the
result as an annualized percentage rate based on the Fund's
share price at the end of the period. A Fund may also quote a
compounded annualized yield which assumes the reinvestment of
dividends paid by the Fund and therefore will be somewhat
higher than the annualized yield for the same period.
TOTAL RETURN. Total Return refers to the average annual
compounded rates of return over some representative period
that would equate an initial amount invested at the beginning
of a stated period to the ending redeemable value of the
investment, after giving effect to the reinvestment of all
dividends and distributions and deductions of expenses during
the period. Because average annual returns tend to smooth
out variations in a Fund's returns, shareholders should
recognize that they are not the same as actual year-by-year
results.
PERFORMANCE BENCHMARKS. Each of the Funds uses a benchmark
securities index as a measure of the Fund's performance.
These indices may be comprised of a composite of various
recognized securities indices to reflect the investment
policies of Diversified Equity Fund, Growth Equity Fund and
each Balanced Fund, which invest their assets using different
investment styles. These indices are not used in the
management of the Fund but rather are standards by which the
Advisers and shareholders may compare the performance of a
Fund to an unmanaged composite of securities with similar,
but not identical, characteristics as the Fund. For instance,
Index Fund's investment objective is to duplicate the return
of the Standard & Poor's 500 Composite Stock Price Index.
Accordingly, the Adviser generally uses that index as a
comparison to measure the performance of Index Fund. The
Funds may from time to time advertise a comparison of their
performance against any of these or other indices.
- -------------------------------------------------------------------------------
Federal banking laws and regulations generally permit a bank BANKING LAW
or bank affiliate to act as investment adviser, transfer MATTERS
agent and custodian to an investment company and to purchase
shares of the investment company as agent for and upon the
order of a customer. Forum believes that Norwest and any
other bank or bank affiliate that may perform sub-transfer
agent or similar services or purchase shares as agent for its
customers may perform the services described in this
Prospectus for the Trust and its shareholders without
violating applicable Federal banking laws or regulations.
Federal or state statutes or regulations and judicial or
administrative decisions or interpretations relating to the
activities of banks and their affiliates, however, could
prevent a bank or bank affiliate from continuing to perform
all or a part of the activities contemplated by this
Prospectus. If Norwest or another bank or bank affiliate were
prohibited from so acting, its shareholder customers would be
permitted to remain shareholders of the Trust and alternative
means for continuing the servicing of such shareholders would
be sought. In this event, changes in the operation of the
Trust might occur and shareholders serviced by the bank or
bank affiliate might no longer be able to avail themselves of
its services. It is not expected that shareholders would
suffer any adverse financial consequences as a result of any
of these occurrences.
page 47
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO The Advisers place orders for the purchase and sale
TRANSACTIONS of assets they manage with brokers and dealers selected by
and in the discretion of the respective Adviser. The
Advisers seek "best execution" for all portfolio
transactions, but a Fund may pay higher than the lowest
available commission rates when an Adviser believes it is
reasonable to do so in light of the value of the brokerage,
research and other services provided by the broker effecting
the transaction.
Commission rates for brokerage transactions are fixed on
many foreign securities exchanges, and this may cause higher
brokerage expenses to accrue to International Fund and each
other Fund that invests in foreign securities than would be
the case for comparable transactions effected on United
States securities exchanges.
Subject to the Funds' policy of obtaining the best price
consistent with quality of execution of transactions, each
Adviser may employ Norwest Investment Services, Inc.,
Wertheim Schroder & Company and other broker-dealer
affiliates of an Adviser (collectively "Affiliated Brokers")
to effect brokerage transactions for the Funds. The Fund's
payment of commissions to Affiliated Brokers is subject to
procedures adopted by the Board and, with respect to the
Portfolios of Core Trust, Core Trust's board of trustees, to
provide that the commissions will not exceed the usual and
customary broker's commissions charged by unaffiliated
brokers. No specific portion of a Fund's brokerage will be
directed to Affiliated Brokers and in no event will a broker
affiliated with an Adviser directing the transaction receive
brokerage transactions in recognition of research or other
services provided to the Adviser.
The Adviser anticipates that the annual turnover rate in
each Fund except Small Company Growth Fund will be less than
100 percent and that the annual turnover rate in Small
Company Growth Fund will be less than 125 percent. Schroder
anticipates that the annual turnover rate in International
Portfolio will be less than 100 percent. An annual turnover
rate of 100 percent would occur if all of the securities in
a Fund were replaced once in a period of 1 year. With
respect to Funds that invest in equity securities, higher
portfolio turnover rates may result in increased brokerage
costs to the Fund.
- -------------------------------------------------------------------------------
THE TRUST AND The Trust was originally organized under the name
ITS SHARES "Prime Value Funds, Inc." as a Maryland corporation on
August 29, 1986 and on July 30, 1993 was reorganized as a
Delaware business trust. The Trust has an unlimited number
of authorized shares of beneficial interest. The Board may,
without shareholder approval, divide the authorized shares
into an unlimited number of separate portfolios or series
(such as the Funds) and may divide portfolios or series into
classes of shares (such as Advantage or Trust Shares), and
the costs of doing so will be borne by the Trust. Currently
the authorized shares of the Trust are divided into 30
series.
OTHER CLASSES OF SHARES. Each Fund may issue shares of other
classes. Funds of the Trust (except money market funds)
currently may issue four classes of shares, Advantage
Shares, Trust Shares, Investor A Shares and Investor B
Shares, and may in the future create additional class types.
Advantage Shares of a Fund currently are offered exclusively
to participants in Plans and to IRA and KEOGH accounts.
Trust Shares are offered exclusively to fiduciary, agency
and custodial clients of bank trust departments, trust
companies and their affiliates without any sales charges.
Investor A Shares are sold with front-end sales charge or,
in some cases, a contingent deferred sales charge. Investor
B Shares are sold with a contingent deferred sales charge
and pay distribution fees. Ready Cash Investment Fund
currently has two classes of shares outstanding,
Institutional Shares and Investor Shares, and may in the
future create additional class types. Institutional Shares
are offered with a minimum investment of $100,000. Investor
Shares are offered with a minimum investment of $1,000 and
incur greater transfer agency and other expenses than
Institutional Shares. Each class
page 48
<PAGE>
of a Fund will have a different expense ratio and may have
different sales charges (including distribution fees). Each
class' performance is affected by its expenses and sales
charges. For more information on any other class of shares of
the Funds investors may contact the Transfer Agent at
612-667-8833 or 800-338-1348. Investors may also contact
their Norwest sales representative to obtain information on
the other classes. Sales personnel of broker-dealers and
other financial institutions selling the Fund's shares may
receive differing compensation for selling Advantage, Trust,
Investor A and Investor B Shares of the Funds.
SHAREHOLDER VOTING AND OTHER RIGHTS. Each share of each
portfolio of the Trust and each class of shares has equal
dividend, distribution, liquidation and voting rights, and
fractional shares have those rights proportionately, except
that expenses related to the distribution of the shares of
each class (and certain other expenses such as transfer
agency and administration expenses) are borne solely by those
shares and each class votes separately with respect to the
provisions of any Rule 12b-1 plan which pertain to the class
and other matters for which separate class voting is
appropriate under applicable law. Generally, shares will be
voted in the aggregate without reference to a particular
portfolio or class, except if the matter affects only one
portfolio or class or voting by portfolio or class is
required by law, in which case shares will be voted
separately by portfolio or class, as appropriate. Delaware
law does not require the Trust to hold annual meetings of
shareholders, and it is anticipated that shareholder meetings
will be held only when specifically required by Federal or
state law. Shareholders have available certain procedures for
the removal of Trustees. There are no conversion or
preemptive rights in connection with shares of the Trust.
All shares when issued in accordance with the terms of the
offering will be fully paid and nonassessable. Shares are
redeemable at net asset value, at the option of the
shareholders, subject to any contingent deferred sales charge
that may apply. A shareholder in a portfolio is entitled to
the shareholder's pro rata share of all dividends and
distributions arising from that portfolio's assets and, upon
redeeming shares, will receive the portion of the portfolio's
net assets represented by the redeemed shares.
As an investor in International Portfolio, International Fund
will be entitled to vote in proportion to its relative
beneficial interest in International Portfolio. On most
issues subject to a vote of investors, as required by the
1940 Act and other applicable law, the Fund will solicit
proxies from shareholders of the Fund and will vote its
interest in International Portfolio in proportion to the
votes cast by its shareholders. If there are other investors
in International Portfolio, there can be no assurance that
any issue that receives a majority of the votes cast by Fund
shareholders will receive a majority of votes cast by all
investors in International Portfolio; indeed, if other
investors hold a majority interest in International
Portfolio, they could hold have voting control of
International Portfolio.
As of September 15, 1994, Norwest Bank Colorado, N.A. owned
more than 50% of the outstanding Trust Shares of each of
Total Return Bond Fund and Contrarian Stock Fund (and more
than 50% of the outstanding shares of each of these Funds)
and more than 25% of the outstanding Trust Shares of Small
Company Stock Fund. Accordingly, as of that date that
shareholder may be deemed to have been a controlling person,
for purposes of the 1940 Act, of Total Return Bond Fund,
Contrarian Stock Fund and the Trust Shares class of Small
Company Stock Fund. From time to time, that shareholder or
other shareholders may own a large percentage of a Fund.
Accordingly, that shareholder or other shareholders may be
able to greatly affect (if not determine) the outcome of a
shareholder vote.
page 49
<PAGE>
- -------------------------------------------------------------------------------
CORE TRUST International Fund invests all of its assets in
STRUCTURE International Portfolio, a separate series of Core Trust, a
business trust organized under the laws of the State of
Delaware in September 1994. Core Trust is registered under
the 1940 Act as an open-end management investment company.
Pursuant to an exemptive order issued by the SEC, the
Blended Funds invest portions of their assets in Small
Company Portfolio, International Portfolio II and Index
Portfolio of Core Trust. Core Trust currently consists of
only these four diversified portfolios. The assets of each
Portfolio of Core Trust belong only to, and the liabilities
of each Portfolio are borne solely by, the respective
Portfolio and no other Portfolio of Core Trust.
INTERNATIONAL PORTFOLIO. International Fund seeks to achieve
its investment objective by investing all of its investable
assets in International Portfolio, which has the same
investment objective and policies as the Fund. Accordingly,
International Portfolio directly acquires its own securities
and the Fund acquires an indirect interest in those
securities. The investment objective and fundamental
investment policies of International Fund and International
Portfolio can be changed only with shareholder approval. See
"Summary," "Investment Objectives, Policies and Risk
Considerations," "Management of the Funds" and "Appendix A:
Investments, Investment Strategies and Risk Considerations"
for a complete description of International Portfolio's
investment objective, policies, restrictions, management,
and expenses.
International Fund's investment in International Portfolio
is in the form of a non-transferable beneficial interest. As
of the date of this Prospectus, the Fund is the only
institutional investor that has invested all of its assets
in International Portfolio. International Portfolio may
permit other investment companies or institutional investors
to invest in International Portfolio. All investors in
International Portfolio will invest on the same terms and
conditions as International Fund and will pay a
proportionate share of International Portfolio's expenses.
International Portfolio will not sell its shares directly to
members of the general public. Another institutional
investor in International Portfolio that might sell its
shares to members of the general public would not be
required to sell its shares at the same public offering
price as International Fund, could have different advisory
and other fees and expenses than International Fund, and
might charge a sales commission. Therefore, International
Fund shareholders may have different returns than
shareholders in another investment company that invests
exclusively in International Portfolio. There is currently
no such other investment company that offers its shares to
members of the general public. Information regarding any
such funds in the future will be available from Core Trust
by calling 212-363-3300.
CERTAIN RISKS OF INVESTING IN INTERNATIONAL PORTFOLIO.
International Fund's investment in International Portfolio
may be affected by the actions of other large investors in
International Portfolio, if any. For example, if
International Portfolio had a large investor other than
International Fund that redeemed its interest in
International Portfolio, International Portfolio's remaining
investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby
producing lower returns.
International Fund may withdraw its entire investment from
International Portfolio at any time, if the Board determines
that it is in the best interests of International Fund and
its shareholders to do so. International Fund might
withdraw, for example, if there were other investors in
International Portfolio with power to, and who did by a vote
of the shareholders of all investors (including the Fund),
change the investment objective or policies of
International Portfolio in a manner not acceptable to the
Board. A withdrawal could result in a distribution in kind
of portfolio securities (as opposed to a cash distribution)
by International Portfolio. That distribution could result
in a less diversified portfolio of investments for the Fund
and could affect adversely the liquidity of the Fund's
portfolio. If International Fund decided to convert those
securities to cash, it usually would incur brokerage fees or
other transaction costs. If International Fund withdrew its
investment from
page 50
<PAGE>
International Portfolio, the Board would consider what action
might be taken, including the management of the Fund's assets
in accordance with its investment objective and policies by
the Adviser and Schroder, the Fund's investment adviser and
subadviser, respectively, or the investment of all of the
Fund's investable assets in another pooled investment entity
having substantially the same investment objective as the
Fund. The inability of International Fund to find a suitable
replacement investment, in the event the Board decided not to
permit the Adviser and Schroder to manage the Fund's assets,
could have a significant impact on shareholders of the Fund.
Each investor in International Portfolio, including
International Fund, will be liable for all obligations of
International Portfolio but not for those of any other
portfolio of Core Trust. The risk to an investor in
International Portfolio of incurring financial loss on
account of such liability, however, would be limited to
circumstances in which International Portfolio was unable to
meet its obligations. Upon liquidation of International
Portfolio, investors would be entitled to share pro rata in
the net assets of International Portfolio available for
distribution to investors.
CORE TRUST BLENDED PORTFOLIOS. The Blended Funds are
permitted to invest a portion of their assets which are
managed by using the small company, index and international
investment styles in Small Company Portfolio, Index
Portfolio, and International Portfolio II pursuant to an
exemptive order obtained from the SEC. The conditions of the
Trust's exemptive order do not permit a Fund to invest all of
its assets in a Blended Portfolio. Accordingly, Index Fund
does not invest in Index Portfolio and International Fund
does not invest in International Portfolio II.
The Trust's exemptive order imposes several substantive
conditions. On behalf of each Blended Fund, the Board is
required to review at least annually reports identifying all
instances in which a Portfolio in which the Fund invests buys
a security at approximately the same time that another
Portfolio in which the Fund invests sells the same security.
The Board will consider whether the duplication of brokerage
costs resulting from these transactions is significant. If
the duplication of brokerage costs becomes significant, the
Board will adopt procedures designed to limit duplication.
Conservative Balanced Fund, Moderate Balanced Fund, and
Growth Balanced Fund will limit any redemptions resulting
from a reallocation in their respective equity and fixed
income security positions to no more than 1percent of a
Portfolio during any period of less than 30 days. The
Board will determine, at least annually, that investment in
the Portfolios is in the best interests of the shareholders
of each Blended Fund.
page 51
<PAGE>
- -------------------------------------------------------------------------------
APPENDIX A
INVESTMENTS, INVESTMENT STRATEGIES
AND RISK CONSIDERATIONS
- -------------------------------------------------------------------------------
COMMON STOCK EQUITY FUNDS, BALANCED FUNDS, TOTAL RETURN BOND
AND PREFERRED FUND. Common stockholders are the owners of the company
STOCK issuing the stock and, accordingly, vote on various
corporate governance matters such as mergers. They are not
creditors of the company, but rather, upon liquidation of
the company are entitled to their pro rata share of the
company's assets after creditors (including fixed income
security holders) and, if applicable, preferred stockholders
are paid. Preferred stock is a class of stock having a
preference over common stock as to dividends and, in the
alternative, as to the recovery of investment. A preferred
stockholder is a shareholder in the company and not a
creditor of the company as is a holder of the company's
fixed income securities. Dividends paid to common and
preferred stockholders are distributions of the earnings of
the company and not interest payments, which are expenses of
the company. Equity securities owned by a Fund may be traded
on national securities exchanges, in the over-the-counter
market or on a regional securities exchange and may not be
traded every day or in the volume typical of securities
traded on a major national securities exchange. As a result,
disposition by a Fund of a portfolio security to meet
redemptions by shareholders or otherwise may require the
Fund to sell these securities at a discount from market
prices, to sell during periods when disposition is not
desirable, or to make many small sales over an extended
period of time. The market value of all securities,
including equity securities, is based upon the market's
perception of value and not necessarily the book value of an
issuer or other objective measure of a company's worth.
- -------------------------------------------------------------------------------
CONVERTIBLE EQUITY FUNDS, BALANCED FUNDS, TOTAL RETURN BOND FUND.
SECURITIES Convertible securities, which include convertible debt,
convertible preferred stock and other securities
exchangeable under certain circumstances for shares of
common stock, are fixed income securities or preferred stock
which generally may be converted at a stated price within a
specific amount of time into a specified number of shares of
common stock. A convertible security entitles the holder to
receive interest paid or accrued on debt or the dividend
paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Before
conversion, convertible securities have characteristics
similar to nonconvertible debt securities in that they
ordinarily provide a stream of income with generally higher
yields than those of common stocks of the same or similar
issuers. These securities are usually senior to common stock
in a company's capital structure, but usually are
subordinated to non-convertible debt securities. In general,
the value of a convertible security is the higher of its
investment value (its value as a fixed income security) and
its conversion value (the value of the underlying shares of
common stock if the security is converted). As a fixed
income security, the value of a convertible security
generally increases when interest rates decline and
generally decreases when interest rates rise. The value of a
convertible security is, however, also influenced by the
value of the underlying common stock. Contrarian Stock Fund
and Small Company Stock Fund currently intend to limit their
investments in convertible securities, and the other Funds
may only invest in convertible securities, that are
investment grade.
A Fund may invest in equity-linked securities, including
Preferred Equity Redemption Cumulative Stock ("PERCS"),
Equity-Linked Securities ("ELKS"), and Liquid Yield Option
Notes ("LYONS"). Equity-Linked Securities are securities
that are convertible into or based upon the value of, equity
securities upon certain terms and conditions. The amount
received by an investor at maturity of these securities is
not fixed but is based on the price of the underlying common
stock which may rise or fall. In addition, it is not
possible to predict how equity-linked securities will trade
in the secondary market or whether the market for them will
be liquid or illiquid.
page 52
<PAGE>
- -------------------------------------------------------------------------------
EQUITY FUNDS, BALANCED FUNDS. A Fund may invest in warrants, WARRANTS
which are options to purchase an equity security at a
specified price (usually representing a premium over the
applicable market value of the underlying equity security at
the time of the warrant's issuance) and usually during a
specified period of time. Unlike convertible securities and
preferred stocks, warrants do not pay a fixed dividend.
Investments in warrants involve certain risks, including the
possible lack of a liquid market for the resale of the
warrants, potential price fluctuations as a result of
speculation or other factors and failure of the price of the
underlying security to reach a level at which the warrant can
be prudently exercised (in which case the warrant may expire
without being exercised, resulting in the loss of the Fund's
entire investment therein).
- -------------------------------------------------------------------------------
ALL EQUITY FUNDS (EXCEPT INDEX FUND AND SMALL COMPANY GROWTH ADRS AND EDRS
FUND), BALANCED FUNDS. A Fund may invest in sponsored and
unsponsored American Depository Receipts ("ADRs"), which are
receipts issued by an American bank or trust company
evidencing ownership of underlying securities issued by a
foreign issuer. ADRs, in registered form, are designed for
use in U.S. securities markets. Unsponsored ADRs may be
created without the participation of the foreign issuer.
Holders of these ADRs generally bear all the costs of the ADR
facility, whereas foreign issuers typically bear certain
costs in a sponsored ADR. The bank or trust company
depository of an unsponsored ADR may be under no obligation
to distribute shareholder communications received from the
foreign issuer or to pass through voting rights. A Fund may
also invest in European Depository Receipts ("EDRs"),
receipts issued by a European financial institution
evidencing an arrangement similar to that of ADRs, and in
other similar instruments representing securities of foreign
companies. EDRs, in bearer form, are designed for use in
European securities markets.
- -------------------------------------------------------------------------------
ALL FUNDS. As used in this Prospectus, the term U.S. U.S.
Government Securities means obligations issued or guaranteed GOVERNMENT
as to principal and interest by the U.S. Government, its SECURITIES
agencies or instrumentalities. The U.S. Government Securities
in which a Fund may invest include U.S. Treasury Securities
and obligations issued or guaranteed by U.S. Government
agencies and instrumentalities and backed by the full faith
and credit of the U.S. Government, such as those guaranteed
by the Small Business Administration or issued by the
Government National Mortgage Association. In addition, the
U.S. Government Securities in which the Funds may invest
include securities supported primarily or solely by the
creditworthiness of the issuer, such as securities of the
Federal National Mortgage Association, the Federal Home
Loan Mortgage Corporation and the Tennessee Valley
Authority. There is no guarantee that the U.S. Government
will support securities not backed by its full faith and
credit. Accordingly, although these securities have
historically involved little risk of loss of principal
if held to maturity, they may involve more risk than
securities backed by the U.S. Government's full faith
and credit.
- -------------------------------------------------------------------------------
FIXED INCOME FUNDS, BALANCED FUNDS. A Fund may invest in ZERO COUPON
separately traded principal and interest components of SECURITIES
securities issued or guaranteed by the U.S. Treasury. These
components are traded independently under the Treasury's
Separate Trading of Registered Interest and Principal of
Securities ("STRIPS") program or as Coupons Under Book Entry
Safekeeping ("CUBES"). The Funds may invest in other types of
related zero coupon securities. For instance, a number of
banks and brokerage firms separate the principal and
interest portions of U.S. Treasury securities and sell them
separately in the form of receipts or certificates
representing undivided interests in these instruments. These
instruments are generally held by a bank in a custodial or
trust account on behalf of the owners of the securities
page 53
<PAGE>
and are known by various names, including Treasury Receipts
("TRs"), Treasury Investment Growth Receipts ("TIGRs") and
Certificates of Accrual on Treasury Securities ("CATS").
Zero-coupon securities also may be issued by corporations
and municipalities.
Zero coupon securities are sold at original issue discount
and pay no interest to holders prior to maturity, but a Fund
holding a zero-coupon security must include a portion of the
original issue discount of the security as income. Because
of this, zero coupon securities may be subject to greater
fluctuation of market value than the other securities in
which the Funds may invest. The Funds distribute all of
their net investment income, and may have to sell portfolio
securities to distribute imputed income, which may occur at
a time when the Adviser or Schroder would not have chosen to
sell such securities and which may result in a taxable gain
or loss.
- -------------------------------------------------------------------------------
CORPORATE DEBT CORPORATE DEBT SECURITIES - BALANCED FUNDS, FIXED INCOME
SECURITIES FUNDS. COMMERCIAL PAPER - ALL FUNDS. The corporate debt
securities in which the Funds may invest include
COMMERCIAL corporate bonds and notes and short-term investments
PAPER such as commercial paper and variable rate demand notes.
Commercial paper (short-term promissory notes) is issued by
companies to finance their or their affiliates' current
obligations and is frequently unsecured. Variable and
floating rate demand notes are unsecured obligations
redeemable upon not more than 30 days' notice. These
obligations include master demand notes that permit
investment of fluctuating amounts at varying rates of
interest pursuant to direct arrangement with the issuer of
the instrument. The issuer of these obligations often has
the right, after a given period, to prepay the outstanding
principal amount of the obligations upon a specified number
of days' notice. These obligations generally are not traded,
nor generally is there an established secondary market for
these obligations. To the extent a demand note does not have
a 7 day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an
illiquid security.
- -------------------------------------------------------------------------------
FINANCIAL ALL FUNDS. A Fund may invest in obligations of financial
INSTITUTION institutions, including negotiable certificates
OBLIGATIONS of deposit, bankers' acceptances and time deposits of U.S.
banks (including savings banks and savings associations),
foreign branches of U.S. banks, foreign banks and their non-
U.S. branches (Eurodollars), U.S. branches and agencies of
foreign banks (Yankee dollars), and wholly-owned banking-
related subsidiaries of foreign banks. Short Maturity
investment style of Conservative Balanced Fund limits these
purchases to institutions which at the time of investment
have total assets in excess of 1 billion dollars, or the
equivalent in other currencies.
Certificates of deposit represent an institution's
obligation to repay funds deposited with it that earn a
specified interest rate over a given period. Bankers'
acceptances are negotiable obligations of a bank to pay a
draft which has been drawn by a customer and are usually
backed by goods in international trade. Time deposits are
non-negotiable deposits with a banking institution that earn
a specified interest rate over a given period. Certificates
of deposit and fixed time deposits, which are payable at the
stated maturity date and bear a fixed rate of interest,
generally may be withdrawn on demand but may be subject to
early withdrawal penalties which could reduce the Fund's
yield. Deposits subject to early withdrawal penalties or
that mature in more than 7 days are treated as illiquid
securities if there is no readily available market for the
securities. A Fund's investments in the obligations of
foreign banks and their branches, agencies or subsidiaries
may be obligations of the parent, of the issuing branch,
agency or subsidiary, or both. Investments in foreign bank
obligations are limited to banks and branches located in
countries which the Advisers believe do not present undue
risk.
page 54
<PAGE>
- -------------------------------------------------------------------------------
BALANCED FUNDS, MANAGED FIXED INCOME FUND. A Fund may PARTICIPATION
purchase participation interests in loans or securities in INTERESTS
which the Fund may invest directly that are owned by banks or
other financial institutions. A participation interest gives
the Fund an undivided interest in a loan or security in the
proportion that the Fund's interest bears to the total
principal amount of the security. Participation interests,
which may have fixed, floating or variable rates, may carry a
demand feature backed by a letter of credit or guarantee of
the bank or institution permitting the holder to tender them
back to the bank or other institution. For certain
participation interests the Fund will have the right to
demand payment, on not more than 7 days' notice, for all or a
part of the Fund's participation interest. A Fund will only
purchase participation interests from banks or other
financial institutions that the Adviser deems to be
creditworthy. A Fund will not invest more than 10 percent of
its total assets in participation interests in which the Fund
does not have demand rights.
- -------------------------------------------------------------------------------
ILLIQUID SECURITIES - ALL FUNDS. RESTRICTED SECURITIES - ILLIQUID
INTERNATIONAL FUND, BALANCED FUNDS, FIXED INCOME FUNDS SECURITIES
(EXCEPT TOTAL RETURN BOND FUND). Each Fund may invest up to
15 percent (10 percent in the case of Ready Cash Investment RESTRICTED
Fund) of its net assets in securities that at the time of SECURITIES
purchase are illiquid. Historically, illiquid securities have
included securities subject to contractual or legal
restrictions on resale because they have not been registered
under the Securities Act of 1933 ("restricted securities"),
securities which are otherwise not readily marketable, such
as over-the-counter options, and repurchase agreements not
entitling the holder to payment of principal in 7 days.
Limitations on resale may have an adverse effect on the
marketability of portfolio securities and a Fund might also
have to register restricted securities in order to dispose of
them, resulting in expense and delay. A Fund might not be able
to dispose of restricted or other securities promptly or at
reasonable prices and might thereby experience difficulty
satisfying redemptions. There can be no assurance that a
liquid market will exist for any security at any particular
time.
An institutional market has developed for certain securities
that are not registered under the Securities Act of 1933,
including repurchase agreements, commercial paper, foreign
securities and corporate bonds and notes. Institutional
investors depend on an efficient institutional market in
which the unregistered security can be readily resold or on
the issuer's ability to honor a demand for repayment of the
unregistered security. A securities contractual or legal
restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of the
security. If such securities are eligible for purchase by
institutional buyers in accordance with Rule 144A under the
Securities Act of 1933 or other exemptions, the Advisers may
determine that such securities are not illiquid securities,
under guidelines or other exemptions adopted by the Board.
These guidelines take into account trading activity in the
securities and the availability of reliable pricing
information, among other factors. If there is a lack of
trading interest in a particular Rule 144A security, a Fund's
holdings of that security may be illiquid.
- -------------------------------------------------------------------------------
ALL FUNDS. Each Fund may borrow money for temporary or BORROWING
emergency purposes, including the meeting of redemption
requests, in amounts up to 33 1/3 percent of the Fund's total
assets. Borrowing involves special risk considerations.
Interest costs on borrowings may fluctuate with changing
market rates of interest and may partially offset or exceed
the return earned on borrowed funds (or on the assets that
were retained rather than sold to meet the needs for which
funds were borrowed). Under adverse market conditions, a
Fund might have to sell portfolio securities to meet interest
or principal payments at a time when investment
considerations would not favor such sales. No Fund, other
than Managed Fixed Income
page 55
<PAGE>
Fund, Intermediate U.S. Government Fund and, to the extent
they invest in Managed Fixed Income Fund's investment style
or Short Maturity investment style, the Balanced Funds may
purchase securities for investment while any borrowing equal
to 5 percent or more of the Fund's total assets is
outstanding or borrow for purposes other than meeting
redemptions in an amount exceeding 5 percent of the value of
the Fund's total assets. A Fund's use of borrowed proceeds
to make investments would subject the Fund to the risks of
leveraging. Reverse repurchase agreements, short sales not
against the box, dollar roll transactions and other similar
investments that involve a form of leverage have
characteristics similar to borrowings but are not considered
borrowings if the Fund maintains a segregated account; the
use of these techniques in connection with a segregated
account may result in a Fund's assets being 100 percent
leveraged. See "Appendix A - Techniques Involving Leverage."
- -------------------------------------------------------------------------------
PURCHASING INTERMEDIATE U.S. GOVERNMENT FUND. When the Fund
SECURITIES ON purchases securities on margin, it only pays part of the
MARGIN purchase price and borrows the remainder, typically from the
Fund's broker. As a borrowing, a Fund's purchase of
securities on margin is subject to the limitations and risks
described in "Borrowing" above. In addition, if the value of
the securities purchased on margin decreases such that the
Fund's borrowing with respect to the security exceeds the
maximum permissible borrowing amount, the Fund will be
required to make margin payments (additional payments to the
broker to maintain the level of borrowing at permissible
levels). A Fund's obligation to satisfy margin calls may
require the Fund to sell securities at an inappropriate
time.
- -------------------------------------------------------------------------------
TECHNIQUES ALL FUNDS. Utilization of leveraging involves special
INVOLVING risks and may involve speculative investment techniques.
LEVERAGE The Funds may borrow for other than temporary or emergency
purposes, lend their securities, enter reverse repurchase
agreements, and purchase securities on a when issued or
forward commitment basis. In addition, certain funds may
engage in dollar roll transactions and Intermediate U.S.
Government Fund may purchase securities on margin and sell
securities short (other than against the box). Each of these
transactions involve the use of "leverage" when cash made
available to the Fund through the investment technique is
used to make additional portfolio investments. In addition,
the use of swap and related agreements may involve leverage.
The Funds use these investment techniques only when the
Adviser to a Fund believes that the leveraging and the
returns available to the Fund from investing the cash will
provide shareholders a potentially higher return.
Leverage exists when a Fund achieves the right to a return
on a capital base that exceeds the Fund's investment.
Leverage creates the risk of magnified capital losses which
occur when losses affect an asset base, enlarged by
borrowings or the creation of liabilities, that exceeds the
equity base of the Fund.
The risks of leverage include a higher volatility of the net
asset value of the Fund's shares and the relatively greater
effect on the net asset value of the shares caused by
favorable or adverse market movements or changes in the cost
of cash obtained by leveraging and the yield obtained from
investing the cash. So long as a Fund is able to realize a
net return on its investment portfolio that is higher than
interest expense incurred, if any, leverage will result in
higher current net investment income being realized by the
Fund than if the Fund were not leveraged. On the other hand,
interest rates change from time to time as does their
relationship to each other depending upon such factors as
supply and demand, monetary and tax policies and investor
expectations. Changes in such factors could cause the
relationship between the cost of leveraging and the yield to
change so that rates involved in the leveraging arrangement
may substantially increase relative to the yield on the
obligations in
page 56
<PAGE>
which the proceeds of the leveraging have been invested. To
the extent that the interest expense involved in leveraging
approaches the net return on the Fund's investment portfolio,
the benefit of leveraging will be reduced, and, if the
interest expense on borrowings were to exceed the net return
to shareholders, the Fund's use of leverage would result in a
lower rate of return than if the Fund were not leveraged.
Similarly, the effect of leverage in a declining market could
be a greater decrease in net asset value per share than if
the Fund were not leveraged. In an extreme case, if the
Fund's current investment income were not sufficient to meet
the interest expense of leveraging, it could be necessary for
the Fund to liquidate certain of its investments at an
inappropriate time. The use of leverage may be considered
speculative.
SEGREGATED ACCOUNT. In order to limit the risks involved in
various transactions involving leverage, the Trust's
custodian will set aside and maintain in a segregated account
cash, U.S. Government Securities and other liquid, high-grade
debt securities in accordance with SEC guidelines. The
accounts value, which is marked to market daily, will be at
least equal to the Fund's commitments under these
transactions. The Fund's commitments may include (i) the
Fund's obligations to repurchase securities under a reverse
repurchase agreement, settle when-issued and forward
commitment transactions and make payments under a cap or
floor (see "Appendix A - Swap Agreements") and (ii) the
greater of the market value of securities sold short or the
value of the securities at the time of the short sale
(reduced by any margin deposit). The net amount of the
excess, if any, of a Fund's obligations over its
entitlements with respect to each interest rate swap will be
calculated on a daily basis and an amount at least equal to
the accrued excess will be maintained in the segregated
account. If the Fund enters into an interest rate swap on
other than a net basis, the Fund will maintain the full
amount accrued on a daily basis of the Fund's obligations
with respect to the swap in their segregated account. The use
of a segregated account in connection with leveraged
transactions may result in a Fund's portfolio being 100
percent leveraged.
- -------------------------------------------------------------------------------
A Fund's use of repurchase agreements, securities lending, REPURCHASE
reverse repurchase agreements and forward commitments AGREEMENTS
(including dollar roll transactions) entails certain risks
not associated with direct investments in securities. For SECURITIES
instance, in the event that bankruptcy or similar LENDING
proceedings were commenced against a counterparty while these
transactions remained open or a counterparty defaulted on its REVERSE
obligations, the Fund might suffer a loss. Failure by the REPURCHASE
other party to deliver a security purchased by the Fund may AGREEMENTS
result in a missed opportunity to make an alternative
investment. The Advisers monitor the creditworthiness of WHEN-ISSUED
counterparties to these transactions and intend to enter into SECURITIES
these transactions only when they believe the counterparties AND FORWARD
present minimal credit risks and the income to be earned from COMMITMENTS
the transaction justifies the attendant risks. Counterparty
insolvency risk with respect to repurchase agreements is DOLLAR ROLL
reduced by favorable insolvency laws that allow the Fund, TRANSACTIONS
among other things, to liquidate the collateral held in the
event of the bankruptcy of the counterparty. Those laws do
not apply to securities lending and, accordingly, securities
lending involves more risk than does the use of repurchase
agreements. As a result of entering forward commitments and
reverse repurchase agreements, as well as lending its
securities, a Fund may be exposed to greater potential
fluctuations in the value of its assets and net asset value
per share. See "Appendix A - Techniques Involving Leverage."
REPURCHASE AGREEMENTS - ALL FUNDS. A Fund may enter into
repurchase agreements, transactions in which a Fund purchases
a security and simultaneously commits to resell that security
to the seller at an agreed-upon price on an agreed-upon future
date, normally 1 to 7 days later. The resale price of a
repurchase agreement reflects a market rate of interest that
is not related to the coupon rate or maturity of the
purchased security. The Trust's custodian maintains
possession of the collateral underlying a repurchase
agreement, which has a market value, determined daily, at
least equal to the repurchase price, and which consists
page 57
<PAGE>
of the types of securities in which the Fund may invest
directly. International Portfolio and, with respect to the
portion of their assets managed in the International Fund
investment style, Diversified Equity Fund, Growth Equity
Fund and each Balanced Fund, may enter into repurchase
agreements with foreign entities.
SECURITIES LENDING - ALL FUNDS. A Fund may lend securities
from its portfolios to brokers, dealers and other financial
institutions. Securities loans must be continuously secured
by cash or U.S. Government Securities with a market value,
determined daily, at least equal to the value of the Fund's
securities loaned, including accrued interest. A Fund
receives interest in respect of securities loans from the
borrower or from investing cash collateral. A Fund may pay
fees to arrange the loans. No Fund will lend portfolio
securities in excess of 33 1/3 percent of the value of the
Fund's total assets.
REVERSE REPURCHASE AGREEMENTS - BALANCED FUNDS, FIXED INCOME
FUNDS. A Fund may enter into reverse repurchase agreements,
transactions in which the Fund sells a security and
simultaneously commits to repurchase that security from the
buyer at an agreed upon price on an agreed upon future date.
The resale price in a reverse repurchase agreement reflects
a market rate of interest that is not related to the coupon
rate or maturity of the sold security. For certain demand
agreements, there is no agreed upon repurchase date and
interest payments are calculated daily, often based upon the
prevailing overnight repurchase rate. Because certain of the
incidents of ownership of the security are retained by the
Fund, reverse repurchase agreements may be viewed as a form
of borrowing by the Fund from the buyer, collateralized by
the security sold by the Fund. A Fund will use the proceeds
of reverse repurchase agreements to fund redemptions or to
make investments. In most cases these investments either
mature or have a demand feature to resell to the issuer on a
date not later than the expiration of the agreement.
Interest costs on the money received in a reverse repurchase
agreement may exceed the return received on the investments
made by the Fund with those monies. Any significant
commitment of a Fund's assets to the reverse repurchase
agreements will tend to increase the volatility of the
Fund's net asset value per share.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS - ALL FUNDS.
A Fund may purchase fixed income securities on a "when-
issued" or "forward commitment" basis. When these
transactions are negotiated, the price, which is generally
expressed in yield terms, is fixed at the time the
commitment is made, but delivery and payment for the
securities take place at a later date. Normally, the
settlement date occurs within 3 months after the
transaction. During the period between a commitment and
settlement, no payment is made for the securities purchased
and no interest on the security accrues to the purchaser. At
the time a Fund makes a commitment to purchase securities in
this manner, the Fund immediately assumes the risk of
ownership, including price fluctuation. Failure by the other
party to deliver a security purchased by a Fund may result
in a loss or a missed opportunity to make an alternative
investment.
The use of when-issued transactions and forward commitments
enables a Fund to hedge against anticipated changes in
interest rates and prices. If the Adviser or Schroder were
to forecast incorrectly the direction of interest rate
movements, however, a Fund might be required to complete
these transactions when the value of the security is lower
than the price paid by the Fund. Except for dollar-roll
transactions, a Fund will not purchase securities on a when-
issued or forward commitment basis if, as a result, more
than 15 percent (35 percent in the case of Total Return Bond
fund) of the value of the Fund's total assets would be
committed to such transactions.
When-issued securities and forward commitments may be sold
prior to the settlement date, but the Funds purchase
securities on a when-issued and forward commitment basis
only with the intention of actually receiving the
securities. When-issued securities may include
page 58
<PAGE>
bonds purchased on a "when, and if issued" basis under which
the issuance of the securities depends upon the occurrence of
a subsequent event. Commitment of a Fund's assets to the
purchase of securities on a when-issued or forward
commitment basis will tend to increase the volatility of the
Fund's net asset value per share.
DOLLAR ROLL TRANSACTIONS - BALANCED FUNDS, FIXED INCOME FUNDS
(EXCEPT READY CASH INVESTMENT FUND). A Fund may enter into
dollar roll transactions wherein the Fund sells fixed income
securities, typically mortgage-backed securities, and makes a
commitment to purchase similar, but not identical, securities
at a later date from the same party. Like a forward
commitment, during the roll period no payment is made for the
securities purchased and no interest or principal payments on
the security accrue to the purchaser, but the Fund assumes
the risk of ownership. A Fund is compensated for entering
into dollar roll transactions by the difference between the
current sales price and the forward price for the future
purchase, as well as by the interest earned on the cash
proceeds of the initial sale. Like other when-issued
securities or firm commitment agreements, dollar roll
transactions involve the risk that the market value of the
securities sold by the Fund may decline below the price at
which a Fund is committed to purchase similar securities. In
the event the buyer of securities under a dollar roll
transaction becomes insolvent, the Fund's use of the proceeds
of the transaction may be restricted pending a determination
by the other party, or its trustee or receiver, whether to
enforce the Fund's obligation to repurchase the securities.
The Funds will engage in roll transactions for the purpose of
acquiring securities for its portfolio and not for investment
leverage. Each Fund will limit its obligations on dollar roll
transactions to 35 percent of the Fund's net assets.
- -------------------------------------------------------------------------------
BALANCED FUNDS, INTERMEDIATE U.S. GOVERNMENT FUND, MANAGED SWAP
FIXED INCOME FUND, STABLE INCOME FUND. To manage its exposure AGREEMENTS
to different types of investments, a Fund may enter into
interest rate, currency and mortgage (or other asset) swap
agreements and may purchase and sell interest rate "caps,"
"floors" and "collars." In a typical interest rate swap
agreement, one party agrees to make regular payments equal to
a floating interest rate on a specified amount (the "notional
principal amount") in return for payments equal to a fixed
interest rate on the same amount for a specified period. If a
swap agreement provides for payment in different currencies,
the parties may also agree to exchange the notional principal
amount. Mortgage swap agreements are similar to interest rate
swap agreements, except that the notional principal amount is
tied to a reference pool of mortgages. In a cap or floor, one
party agrees, usually in return for a fee, to make payments
under particular circumstances. For example, the purchaser of
an interest rate cap has the right to receive payments to the
extent a specified interest rate exceeds an agreed upon level;
the purchaser of an interest rate floor has the right to
receive payments to the extent a specified interest rate
falls below an agreed upon level. A collar entitles the
purchaser to receive payments to the extent a specified
interest rate falls outside an agreed upon range.
Swap agreements may involve leverage and may be highly
volatile; depending on how they are used, they may have a
considerable impact on the Fund's performance. See "Appendix
A - Techniques Involving Leverage." Swap agreements involve
risks depending upon the counterparties creditworthiness and
ability to perform as well as the Fund's ability to terminate
its swap agreements or reduce its exposure through offsetting
transactions. The Adviser monitors the creditworthiness of
counterparties to these transactions and intends to enter
into these transactions only when they believe the
counterparties present minimal credit risks and the income
expected to be earned from the transaction justifies the
attendant risks.
page 59
<PAGE>
SHORT SALES INTERMEDIATE U.S. GOVERNMENT FUND. The Fund is authorized to
make short sales of securities it owns or has the right to
acquire at no added cost through conversion or exchange of
other securities it owns (referred to as short sales
"against the box") and to make short sales of securities
which it does not own or have the right to acquire. A short
sale that is not made "against the box" is a transaction in
which a Fund sells a security it does not own in
anticipation of a decline in the market price for the
security. When the Fund makes a short sale, the proceeds it
receives are retained by the broker until the Fund replaces
the borrowed security. In order to deliver the security to
the buyer, the Fund must arrange through a broker to borrow
the security and, in so doing, the Fund becomes obligated to
replace the security borrowed at its market price at the
time of replacement, whatever that price may be.
Short sales that are not made "against the box" create
opportunities to increase the Fund's return but, at the same
time, involve special risk considerations and may be
considered a speculative technique. Since the Fund in effect
profits from a decline in the price of the securities sold
short without the need to invest the full purchase price of
the securities on the date of the short sale, the Fund's net
asset value per share, will tend to increase more when the
securities it has sold short decrease in value, and to
decrease more when the securities it has sold short increase
in value, than would otherwise be the case if it had not
engaged in such short sales. Short sales theoretically
involve unlimited loss potential, as the market price of
securities sold short may continuously increase, although a
Fund may mitigate such losses by replacing the securities
sold short before the market price has increased
significantly. Under adverse market conditions a Fund might
have difficulty purchasing securities to meet its short sale
delivery obligations and might have to sell portfolio
securities to raise the capital necessary to meet its short
sale obligations at a time when fundamental investment
considerations would not favor those sales. See "Appendix A
-Techniques Involving Leverage."
If the Fund makes a short sale "against the box", the Fund
would not immediately deliver the securities sold and would
not receive the proceeds from the sale. The seller is said
to have a short position in the securities sold until it
delivers the securities sold, at which time it receives the
proceeds of the sale. The Fund's decision to make a short
sale "against the box" may be a technique to hedge against
market risks when the Adviser believes that the price of a
security may decline, causing a decline in the value of a
security owned by the Fund or a security convertible into or
exchangeable for such security. In such case, any future
losses in the Fund's long position would be reduced by an
offsetting future gain in the short position. The Fund's
ability to enter into short sales transactions is limited by
certain tax requirements. See "Dividends, Distributions and
Taxes" in the SAI.
- -------------------------------------------------------------------------------
MORTGAGE- FIXED INCOME FUNDS, BALANCED FUNDS. Mortgage-backed
BACKED securities represent an interest in a pool of mortgages
SECURITIES originated by lenders such as commercial banks, savings
associations and mortgage bankers and brokers. Mortgage-
backed securities may be issued by governmental or
government-related entities or by non-governmental entities
such as special purpose trusts created by banks, savings
associations, private mortgage insurance companies or
mortgage bankers.
Interests in mortgage-backed securities differ from other
forms of debt securities, which normally provide for
periodic payment of interest in fixed amounts with principal
payments at maturity or on specified call dates. In
contrast, mortgage-backed securities provide monthly
payments which consist of interest and, in most cases,
principal. In effect, these payments are a "pass-through" of
the monthly payments made by the individual borrowers on
their mortgage loans, net of any fees paid to the issuer or
guarantor of the securities or a
page 60
<PAGE>
mortgage loan servicer. Additional payments to holders of
these securities are caused by prepayments resulting from the
sale or foreclosure of the underlying property or refinancing
of the underlying loans.
UNDERLYING MORTGAGES. Pools of mortgages consist of
whole mortgage loans or participations in mortgage loans. The
majority of these loans are made to purchasers of 1-4 family
homes, but may be made to purchasers of mobile homes or other
real estate interests. The terms and characteristics of the
mortgage instruments are generally uniform within a pool but
may vary among pools. For example, in addition to fixed-rate,
fixed-term mortgages, the Fund may purchase pools of variable
rate mortgages, growing equity mortgages, graduated payment
mortgages and other types. Mortgage servicers impose
qualification standards for local lending institutions which
originate mortgages for the pools as well as credit standards
and underwriting criteria for individual mortgages included
in the pools. In addition, many mortgages included in pools
are insured through private mortgage insurance companies.
LIQUIDITY AND MARKETABILITY. The market for mortgage-
backed securities has expanded considerably in recent years.
The size of the primary issuance market and active
participation in the secondary market by securities dealers
and many types of investors make government and government-
related pass-through pools highly liquid. The recently
introduced private conventional pools of mortgages (pooled by
commercial banks, savings and loan institutions and others,
with no relationship with government and government-related
entities) have also achieved broad market acceptance and
consequently an active secondary market has emerged. However,
the market for conventional pools is smaller and less liquid
than the market for government and government-related
mortgage pools.
AVERAGE LIFE AND PREPAYMENTS. The average life of a
pass-through pool varies with the maturities of the
underlying mortgage instruments. In addition, a pool's terms
may be shortened by unscheduled or early payments of
principal and interest on the underlying mortgages.
Prepayments with respect to securities during times of
declining interest rates will tend to lower the return of a
Fund and may even result in losses to a Fund if the
securities were acquired at a premium. The occurrence of
mortgage prepayments is affected by various factors including
the level of interest rates, general economic conditions, the
location and age of the mortgage and other social and
demographic conditions.
As prepayment rates of individual pools vary widely, it is
not possible to accurately predict the average life of a
particular pool. For pools of fixed-rate 30-year mortgages,
common industry practice is to assume that prepayments will
result in a 12-year average life. Pools of mortgages with
other maturities or different characteristics will have
varying assumptions for average life. The assumed average
life of pools of mortgages having terms of less than 30 years
is less than 12 years, but typically not less than 5 years.
YIELD CALCULATIONS. Yields on pass-through securities
are typically quoted by investment dealers based on the
maturity of the underlying instruments and the associated
average life assumption. In periods of falling interest
rates, the rate of prepayment tends to increase, thereby
shortening the actual average life of a pool of mortgages.
Conversely, in periods of rising rates, the rate of
prepayment tends to decrease, thereby lengthening the actual
average life of the pool. Actual prepayment experience may
cause the yield to differ from the assumed average life
yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus
affecting the yield of a Fund.
GOVERNMENT AND GOVERNMENT-RELATED GUARANTORS. The
principal government guarantor of mortgage-backed securities
is the Government National Mortgage Association ("GNMA"), a
wholly-owned United States Government corporation within the
Department of Housing and Urban Development. GNMA is
authorized to guarantee, with the full faith and credit
page 61
<PAGE>
of the United States Government, the timely payment of
principal and interest on securities issued by institutions
approved by GNMA and backed by pools of FHA-insured or VA-
guaranteed mortgages.
The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private
stockholders that is subject to general regulation by the
Secretary of Housing and Urban Development. FNMA purchases
residential mortgages from a list of approved seller-
servicers. The Federal Home Loan Mortgage Association
("FHLMC") is a corporate instrumentality of the United
States Government that was created by Congress in 1970 for
the purpose of increasing the availability of mortgage
credit for residential housing. Its stock is owned by the
twelve Federal Home Loan Banks. FHLMC issues Participation
Certificates ("PCs") which represent interests in mortgages
from FHLMC's national portfolio. FNMA and FHLMC each
guarantee the payment of principal and interest on the
securities they issue. These securities, however, are not
backed by the full faith and credit of the United States
Government.
PRIVATELY ISSUED MORTGAGE-BACKED SECURITIES. Mortgage-
backed securities offered by private issuers include pass-
through securities comprised of pools of conventional
mortgage loans; mortgage-backed bonds which are considered
to be debt obligations of the institution issuing the bonds
and which are collateralized by mortgage loans; and
collateralized mortgage obligations.
Mortgage-backed securities issued by non-governmental
issuers may offer a higher rate of interest than securities
issued by government issuers because of the absence of
direct or indirect government guarantees of payment. Many
non-governmental issuers or servicers of mortgage-backed
securities, however, guarantee timely payment of interest
and principal on such securities. Timely payment of interest
and principal may also be supported by various forms of
insurance, including individual loan, title, pool and hazard
policies. There can be no assurance that the private issuers
or insurers will be able to meet their obligations under the
relevant guarantees and insurance policies.
ADJUSTABLE RATE MORTGAGE-BACKED SECURITIES. Adjustable
rate mortgage-backed securities ("ARMs") are securities that
have interest rates that are reset at periodic intervals,
usually by reference to some interest rate index or market
interest rate. Although the rate adjustment feature may act
as a buffer to reduce sharp changes in the value of
adjustable rate securities, these securities are still
subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness.
Because of the resetting of interest rates, adjustable rate
securities are less likely than non-adjustable rate
securities of comparable quality and maturity to increase
significantly in value when market interest rates fall.
Also, most adjustable rate securities (or the underlying
mortgages) are subject to caps or floors. "Caps" limit the
maximum amount by which the interest rate paid by the
borrower may change at each reset date or over the life of
the loan and, accordingly, fluctuation in interest rates
above these levels could cause such mortgage securities to
"cap out" and to behave more like long-term, fixed-rate debt
securities.
ARMs may have less risk of a decline in value during periods
of rapidly rising rates, but they may also have less
potential for capital appreciation than other debt
securities of comparable maturities due to the periodic
adjustment of the interest rate on the underlying mortgages
and due to the likelihood of increased prepayments of
mortgages as interest rates decline. Furthermore, during
periods of declining interest rates, income to a Fund will
decrease as the coupon rate resets to reflect the decline in
interest rates. During periods of rising interest rates,
changes in the coupon rates of the mortgages underlying a
Fund's ARMs may lag
page 62
<PAGE>
behind changes in market interest rates. This may result in a
slightly lower net value until the interest rate resets to
market rates. Thus, investors could suffer some principal
loss if they sold Fund Shares before the interest rates on
the underlying mortgages were adjusted to reflect current
market rates.
COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized
Mortgage Obligations ("CMOs") are debt obligations that are
collateralized by mortgages or mortgage pass-through
securities issued by GNMA, FHLMC or FNMA or by pools of
conventional mortgages ("Mortgage Assets"). CMOs may be
privately issued or U.S. Government Securities. Payments of
principal and interest on the Mortgage Assets are passed
through to the holders of the CMOs on the same schedule as
they are received, although, certain classes (often referred
to as tranches) of CMOs have priority over other classes with
respect to the receipt of payments. Multi-class mortgage
pass-through securities are interests in trusts that hold
Mortgage Assets and that have multiple classes similar to
those of CMOs. Unless the context indicates otherwise,
references to CMOs include multi-class mortgage pass-through
securities. Payments of principal of and interest on the
underlying Mortgage Assets (and in the case of CMOs, any
reinvestment income thereon) provide funds to pay debt
service on the CMOs or to make scheduled distributions on the
multi-class mortgage pass-through securities. Parallel pay
CMOs are structured to provide payments of principal on each
payment date to more than one class. These simultaneous
payments are taken into account in calculating the stated
maturity date or final distribution date of each class,
which, as with other CMO structures, must be retired by its
stated maturity date or final distribution date but may be
retired earlier. Planned amortization class mortgage-based
securities ("PAC Bonds") are a form of parallel pay CMO. PAC
Bonds are designed to provide relatively predictable payments
of principal provided that, among other things, the actual
prepayment experience on the underlying mortgage loans falls
within a contemplated range. If the actual prepayment
experience on the underlying mortgage loans is at a rate
faster or slower than the contemplated range, or if
deviations from other assumptions occur, principal payments
on a PAC Bond may be greater or smaller than predicted. The
magnitude of the contemplated range varies from one PAC Bond
to another; a narrower range increases the risk that
prepayments will be greater or smaller than contemplated.
CMOs may have complicated structures and generally involve
more risks than simpler forms of mortgage-backed securities.
The final tranche of a CMO may be structured as an accrual
bond (sometimes referred to as a Z-tranche). Holders of
accrual bonds receive no cash payments for an extended period
of time. During the time that earlier tranches are
outstanding, accrual bonds receive accrued interest which is
a credit for periodic interest payments that increases the
face amount of the security at a compounded rate, but is not
paid to the bond holder. After all previous tranches are
retired, accrual bond holders start receiving cash payments
that include both principal and continuing interest. The
market value of accrual bonds can fluctuate widely and their
average life depends on the other aspects of the CMO
offering. Interest on accrual bonds is taxable when accrued
even though the holders receive no accrual payment. The Funds
distribute all of their net investment income, and may have
to sell portfolio securities to distribute imputed income,
which may occur at a time when the Adviser would not have
chosen to sell such securities and which may result in a
taxable gain or loss.
STRIPPED MORTGAGE-BACKED SECURITIES. Stripped mortgage-
backed securities are classes of mortgage-backed securities
that receive different proportions of the interest and
principal distributions from the underlying Mortgage Assets.
They may be may be privately issued or U.S. Government
Securities. In the most extreme case, one class will be
entitled to receive all or a portion of the interest but none
of the principal from the Mortgage Assets (the interest-only
or "IO" class) and one class will be entitled to receive all
or a portion of the principal, but none of the interest (the
"PO" class). Currently, no fund may purchase IOs or POs.
page 63
<PAGE>
- -------------------------------------------------------------------------------
ASSET-BACKED BALANCED FUNDS, INTERMEDIATE U.S. GOVERNMENT FUND,
SECURITIES MANAGED FIXED INCOME FUND. Asset-backed securities represent
direct or indirect participations in, or are secured by and
payable from, assets other than mortgage-backed assets such
as motor vehicle installment sales contracts, installment
loan contracts, leases of various types of real and personal
property and receivables from revolving credit (credit card)
agreements. No Fund may invest more than 10 percent of its
net assets in asset-backed securities that are backed by a
particular type of credit, for instance, credit card
receivables. Asset-backed securities, including adjustable
rate asset-backed securities, have yield characteristics
similar to those of mortgage-backed securities and,
accordingly, are subject to many of the same risks.
Assets are securitized through the use of trusts and special
purpose corporations that issue securities that are often
backed by a pool of assets representing the obligations of a
number of different parties. Payments of principal and
interest may be guaranteed up to certain amounts and for a
certain time period by a letter of credit issued by a
financial institution. Asset-backed securities do not always
have the benefit of a security interest in collateral
comparable to the security interests associated with
mortgage-backed securities. As a result, the risk that
recovery on repossessed collateral might be unavailable or
inadequate to support payments on asset-backed securities is
greater for asset-backed securities than for mortgage-backed
securities. In addition, because asset-backed securities are
relatively new, the market experience in these securities is
limited and the market's ability to sustain liquidity
through all phases of an interest rate or economic cycle has
not been tested.
- -------------------------------------------------------------------------------
FOREIGN SMALL COMPANY GROWTH FUND, LARGE COMPANY GROWTH FUND,
EXCHANGE INTERNATIONAL FUND, BALANCED FUNDS, MANAGED FIXED
CONTRACTS AND INCOME FUND. Changes in foreign currency exchange rates
FOREIGN will affect the U.S. dollar values of securities
CURRENCY denominated in currencies other than the U.S. dollar.
FORWARD The rate of exchange between the U.S. dollar and other
CONTRACTS currencies fluctuates in response to forces of supply and
demand in the foreign exchange markets. These forces are
affected by the international balance of payments and other
economic and financial conditions, government intervention,
speculation and other factors. When investing in foreign
securities a Fund usually effects currency exchange
transactions on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign exchange market. The Fund incurs
foreign exchange expenses in converting assets from one
currency to another.
A Fund may enter into foreign currency forward contracts or
currency futures or options contracts for the purchase or
sale of foreign currency to "lock in" the U.S. dollar price
of the securities denominated in a foreign currency or the
U.S. dollar value of interest and dividends to be paid on
such securities, or to hedge against the possibility that
the currency of a foreign country in which a Fund has
investments may suffer a decline against the U.S. dollar.
The Funds have no present intention to enter into currency
futures or options contracts but may do so in the future. A
forward currency contract is an obligation to purchase or
sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract agreed
upon by the parties, at a price set at the time of the
contract. This method of attempting to hedge the value of a
Fund's portfolio securities against a decline in the value
of a currency does not eliminate fluctuations in the
underlying prices of the securities. Although the strategy
of engaging in foreign currency transactions could reduce
the risk of loss due to a decline in the value of the hedged
currency, it could also limit the potential gain from an
increase in the value of the currency. The Funds do not
intend to maintain a net exposure to such contracts where
the fulfillment of the Fund's obligations under such
contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's
portfolio securities or other assets denominated in that
currency. A Fund will not enter into these contracts for
speculative purposes and will not enter into non-hedging
currency contracts. These contracts involve a risk of loss
if the Adviser fails to predict currency values correctly.
page 64
<PAGE>
- -------------------------------------------------------------------------------
BALANCED FUNDS, INTERMEDIATE U.S. GOVERNMENT FUND, MANAGED FUTURES
FIXED INCOME FUND, STABLE INCOME FUND. A Fund may seek to CONTRACTS AND
enhance its return through the writing (selling) and OPTIONS
purchasing of exchange-traded and over-the-counter options on
fixed income securities or indices. A Fund may also to
attempt to hedge against a decline in the value of securities
owned by it or an increase in the price of securities which
it plans to purchase through the use of those options and the
purchase and sale of interest rate futures contracts and
options on those futures contracts. A Fund may only write
options that are covered. An option is covered if, so long as
the Fund is obligated under the option, it owns an offsetting
position in the underlying security or futures contract or
maintains cash, U.S. Government Securities or other liquid,
high-grade debt securities in a segregated account with a
value at all times sufficient to cover the Fund's obligation
under the option. Certain futures strategies employed by a
Balanced Fund in making temporary allocations may not be
deemed to be for bona fide hedging purposes, as defined by
the Commodity Futures Trading Commission. A Fund may enter
into these futures contracts only if the aggregate of
initial margin deposits for open futures contract positions
does not exceed 5 percent of the Fund's total assets.
RISK CONSIDERATIONS. The Fund's use of options and
futures contracts subjects the Fund to certain investment
risks and transaction costs to which it might not otherwise
be subject. These risks include: (1) dependence on the
Adviser's ability to predict movements in the prices of
individual securities and fluctuations in the general
securities markets; (2) imperfect correlations between
movements in the prices of options or futures contracts and
movements in the price of the securities hedged or used for
cover which may cause a given hedge not to achieve its
objective; (3) the fact that the skills and techniques needed
to trade these instruments are different from those needed to
select the other securities in which the Fund invests; (4)
lack of assurance that a liquid secondary market will exist
for any particular instrument at any particular time, which,
among other things, may hinder a Fund's ability to limit
exposures by closing its positions; (5) the possible need to
defer closing out of certain options, futures contracts and
related options to avoid adverse tax consequences; and (6)
the potential for unlimited loss when investing in futures
contracts or writing options for which an offsetting position
is not held.
Other risks include the inability of the Fund, as the writer
of covered call options, to benefit from any appreciation of
the underlying securities above the exercise price and the
possible loss of the entire premium paid for options
purchased by the Fund. In addition, the futures exchanges may
limit the amount of fluctuation permitted in certain futures
contract prices during a single trading day. A Fund may be
forced, therefore, to liquidate or close out a futures
contract position at a disadvantageous price.
There can be no assurance that a liquid market will exist at
a time when a Fund seeks to close out a futures position or
that a counterparty in an over-the-counter option transaction
will be able to perform its obligations. There are a limited
number of options on interest rate futures contracts and
exchange traded options contracts on fixed income securities.
Accordingly, hedging transactions involving these instruments
may entail "cross-hedging." As an example, a Fund may wish to
hedge existing holdings of mortgage-backed securities, but no
listed options may exist on those securities. In that event,
the Adviser may attempt to hedge the Fund's securities by the
use of options with respect to similar fixed income
securities. The Fund may use various futures contracts that
are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an
active secondary market in those contracts will develop or
continue to exist.
page 65
<PAGE>
LIMITATIONS. Except for the futures contracts
strategies of the Balanced Funds used for making temporary
allocations among fixed-income and equity securities, the
Funds have no current intention of investing in futures
contracts and options thereon for purposes other than
hedging. No Fund may purchase any call or put option on a
futures contract if the premiums associated with all such
options held by the Fund would exceed 5 percent of the
Fund's total assets as of the date the option is purchased.
No Fund may sell a put option if the exercise value of all
put options written by the Fund would exceed 50 percent of
the Fund's total assets or sell a call option if the
exercise value of all call options written by the Fund would
exceed the value of the Fund's assets. In addition, the
current market value of all open futures positions held by a
Fund will not exceed 50 percent of its total assets.
OPTIONS ON SECURITIES. A call option is a contract
pursuant to which the purchaser of the call option, in
return for a premium paid, has the right to buy the security
underlying the option at a specified exercise price at any
time during the term of the option. The writer of the call
option, who receives the premium, has the obligation upon
exercise of the option to deliver the underlying security
against payment of the exercise price during the option
period. A put option gives its purchaser, in return for a
premium, the right to sell the underlying security at a
specified price during the term of the option. The writer of
the put, who receives the premium, has the obligation to buy
the underlying security, upon exercise at the exercise price
during the option period. The amount of premium received or
paid is based upon certain factors, including the market
price of the underlying security or index, the relationship
of the exercise price to the market price, the historical
price volatility of the underlying security or index, the
option period, supply and demand and interest rates.
OPTIONS ON STOCK INDEXES. A stock index assigns
relative values to the stock included in the index, and the
index fluctuates with changes in the market values of the
stocks included in the index. Stock index options operate in
the same way as the more traditional stock options except
that exercises of stock index options are effected with cash
payments and do not involve delivery of securities. Thus,
upon exercise of stock index options, the purchaser will
realize and the writer will pay an amount based on the
differences between the exercise price and the closing price
of the stock index.
INDEX FUTURES CONTRACTS. Bond and stock index futures
contracts are bilateral agreements pursuant to which two
parties agree to take or make delivery of an amount of cash
equal to a specified dollar amount times the difference
between the bond or stock index value at the close of
trading of the contract and the price at which the futures
contract is originally struck. No physical delivery of the
fixed income or equity securities comprising the index is
made. Generally, futures contracts are closed out prior to
the expiration date of the contract.
OPTIONS ON FUTURES CONTRACTS. Options on futures
contracts are similar to stock options except that an option
on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a
futures contract rather than to purchase or sell stock, at a
specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the
futures position to the holder of the option will be
accompanied by transfer to the holder of an accumulated
balance representing the amount by which the market price of
the futures contract exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the
option on the future.
page 66
<PAGE>
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, THE SAI AND THE FUNDS' OFFICIAL SALES LITERATURE
IN CONNECTION WITH THE OFFERING OF FUND SHARES, AND IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY
BE MADE.
page 67
<PAGE>
PROSPECTUS
NORWEST BANKS LOGO
NORWEST EMPLOYEE BENEFIT SERVICES
<PAGE>
NORWEST ADVANTAGE FUNDS
(FORMERLY NORWEST FUNDS)
Supplement Dated December 27, 1995 to the following Prospectuses:
Prospectus of Diversified Equity Fund, Growth Equity Fund, Large Company Growth
Fund, Small Company Growth Fund, International Fund, Income Equity Fund, Index
Fund, Conservative Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund,
Intermediate U.S. Government Fund, Managed Fixed Income Fund and Stable Income
Fund
Dated June 1, 1995
Prospectus of Small Company Stock Fund, Contrarian Stock Fund,
Total Return Bond Fund
and Ready Cash Investment Fund
Dated October 1, 1994, as amended June 1, 1995
1. ALL FUNDS
Effective October 1, 1995, Norwest Funds (the "Trust"), changed its name to
Norwest Advantage Funds and the name of each Fund's class of securities
formerly designated as advantage class ("Advantage Shares") or trust class
("Trust Shares") are redesignated as I class ("I Shares"). I shares are
offered solely to fiduciary, agency, and custodial clients of bank trust
departments, trust companies and their affiliates. Also effective October 1,
1995, the following individuals were elected Trustees: Donald C. Willeke,
Principal of the law firm of Willeke & Daniels, and Timothy J. Penny, Senior
Counselor to the public relations firm Himle-Horner.
2. SMALL COMPANY STOCK FUND, CONTRARIAN STOCK FUND, TOTAL RETURN BOND FUND AND
READY CASH INVESTMENT FUND - SUMMARY: EXPENSES OF INVESTING IN THE FUNDS
The purpose of the following table (which, with respect to these Funds, replaces
the "Annual Fund Operating Expenses" table on Page 6 of the Prospectus) is to
assist investors in understanding the expenses that an investor in shares of a
Fund will bear directly or indirectly. There are no transaction charges in
connection with purchases, redemptions and exchanges of shares of the Funds.
None of the Funds has adopted a Rule 12b-1 plan with respect to the Shares and,
accordingly, no Fund incurs distribution expenses with respect to the I Shares
or Institutional Shares.
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets after
applicable fee waivers and expense reimbursements) (1):
TOTAL
INVESTMENT SHAREHOLDER OTHER OPERATING
ADVISORY FEES SERVICING EXPENSES(2) EXPENSES
------------- --------- ----------- --------
Contrarian Stock Fund 0.40% 0.25% 0.47% 1.12%
Small Company Stock Fund 0.00% 0.25% 0.27% 0.52%
Total Return Bond Fund 0.10% 0.25% 0.36% 0.71%
Ready Cash Investment Fund 0.37% 0.10% 0.01% 0.48%
(1) For a further description of the various expenses incurred in the operation
of the Funds, see "Management of the Funds." Expenses associated with other
classes of shares of the Funds differ from those of I Shares or Institutional
Shares listed in the table. The amounts of expenses for each Fund are based on
amounts incurred during the Funds' most recent fiscal year ended May 31, 1995.
Absent expense reimbursements and fee waivers, the Investment Advisory Fees,
Other Expenses, and Total Operating Expenses of each Fund would be,
respectively: Contrarian Stock Fund: 0.80%, 0.52%, 1.57%; Small Company Stock
Fund: 1.00%, 0.56%, 1.81%; Total Return Bond Fund: 0.50%, 0.42%, and 1.17%; and
Ready Cash Investment Fund: 0.38%, 0.17%, and 0.65%.
(2) Other Expenses for all Funds include custodial fees payable to Norwest at
an annual rate of up to 0.05% of each Fund's average daily net assets
attributable to I Shares or Institutional Shares, as applicable.
1
<PAGE>
EXAMPLE OF EXPENSES
Following is a hypothetical example (which, with respect to these Funds,
replaces the "Example of Expenses" table on Page 7 of the Prospectus) that
indicates the dollar amount of expenses that an investor would pay assuming a
$1,000 investment, a 5% annual return, reinvestment of all dividends and
distributions, and full redemption at the end of each period:
One Year Three Years Five Years Ten Years
------- ----------- ---------- ---------
Contrarian Stock Fund 11 36 62 136
Small Company Stock Fund 5 17 29 65
Total Return Bond Fund 7 23 40 88
Ready Cash Investment Fund 5 15 27 60
The example is based on the expenses listed in the "Annual Fund Operating
Expenses" table above. The 5% annual return is not a prediction of and does not
represent the Fund's projected returns; rather, it is required by government
regulation. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS
THAN INDICATED.
3. SMALL COMPANY STOCK FUND, CONTRARIAN STOCK FUND, TOTAL RETURN BOND FUND AND
READY CASH INVESTMENT FUND - FINANCIAL HIGHLIGHTS
The following tables provide financial highlights for each Fund. This
information represents selected data for a single outstanding I Share or
Institutional Share, as applicable, of a Fund for the periods shown.
Information for the years ended May 31, 1994 and 1995 was audited by KPMG Peat
Marwick LLP, independent auditors. The Funds' (other than International Fund's)
financial statements for the fiscal year ended May 31, 1995 and independent
auditors' report thereon are contained in the Annual Report of the Funds and are
incorporated by reference into the SAI. Further information about each Fund's
performance is contained in the Annual Report, which may be obtained from the
Trust without charge. Information for the period ended April 30, 1995, for
International Fund is unaudited. International Fund's unaudited financial
statements for the semi-annual period ended April 30, 1995, are contained in the
Semi-Annual Report of International Fund and are incorporated by reference into
the SAI.
<TABLE>
<CAPTION>
CONTRARIAN STOCK FUND SMALL COMPANY STOCK FUND
--------------------- ------------------------
YEAR ENDED MAY 31 YEAR ENDED MAY 31
1995 1994(a) 1995 1994(a)
---- ------ ---- ------
<S> <C> <C> <C> <C>
Beginning Net Asset Value per Share $ 9.71 $ 10.00 $ 9.80 10.00
Net Investment Income 0.11 0.07 0.12 0.08
Net Realized and Unrealized Gain (Loss)
on Investments 1.19 (0.29) 0.87 (0.20)
Dividends from Net Investment Income (0.11) (0.07) (0.12) (0.08)
Distributions from Net Realized Gains (0.003) -- (0.08) --
-------- ------- -------- -------
Ending Net Asset Value per Share $ 10.90 $ 9.71 $ 10.59 $ 9.80
-------- ------- -------- -------
-------- ------- -------- -------
Ratios to Average Net Assets:
Expenses (b) 1.12% 0.62%(c) 0.52% 0.20%(c)
Net Investment Income 0.91% 1.82%(c) 1.14% 2.03%(c)
Total Return 13.52% (5.35%)(c) 10.13% (2.93%)(c)
Portfolio Turnover Rate 30.32% 2.67% 68.09% 14.98%
Net Assets at the End of Period (000's Omitted) $ 45,832 $ 4,548 $ 54,240 $ 9,251
(a) Contrarian Stock Fund and Small Company Stock Fund commenced the offering
of I Shares (formerly Trust Shares) on December 31, 1993.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the
ratios of expenses to average net assets would have been:
Expenses: 1.57% 3.52%(c) 1.82% 4.33%(c)
(c) Annualized
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL FUND TOTAL RETURN BOND FUND READY CASH
INVESTMENT FUND
PERIOD ENDED
APRIL 30 YEAR ENDED MAY 31 YEAR ENDED MAY 31
1995(a) 1995 1994(a) 1995 1994(a)
------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C>
Beginning Net Asset Value per Share $ 17.28 $ 9.54 $ 10.00 $ 1.00 $ 1.00
Net Investment Income 0.01 0.67 0.27 0.049 0.013
Net Realized and Unrealized Gain (Loss)
on Investments (0.15) 0.19 (0.46) -- --
Dividends from Net Investment Income -- (0.67) (0.27) (0.049) (0.013)
Distributions from Net Realized Gains -- -- -- -- --
------- ------- ------- ------- -------
Ending Net Asset Value per Share $ 17.14 $ 9.73 $ 9.54 $ 1.00 $ 1.00
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratios to Average Net Assets:
Expenses (b) 1.50%(c)(d) 0.71% 0.46%(c) 0.48% 0.43%(c)
Net Investment Income 0.08%(c) 7.04% 6.81%(c) 4.97% 3.12%(c)
Total Return (1.72%)(c) 9.43% (4.62%)(c) 4.98% 3.17%(c)
Portfolio Turnover Rate 21.25% 35.19% 37.50% -- --
Net Assets at the End of Period
(000's Omitted) $ 83,222 $ 96,199 $ 11,694 $ 506,243 $ 333,464
(a) International Fund commenced the offering of I Shares (formerly Advantage
Shares) on November 11, 1994. Total Return Bond Fund commenced the
offering of I Shares (formerly Trust Shares) on December 31, 1993. Ready
Cash Investment Fund commenced operations on January 20, 1988 and the
offering of Institutional Shares on January 4, 1994.
(b) During the periods, various fees and expenses were waived and reimbursed,
respectively. Had these waivers and reimbursements not occurred, the
ratios of expenses to average net assets would have been:
Expenses: 1.63%(c)(d) 1.17% 2.10%(c) 0.73% 0.81%(c)
(c) Annualized.
(d) Includes expenses allocated from International Portfolio of Core Trust
(Delaware) of 0.80%, net of waivers of 0.08%, and reflects International
Fund fee waivers of 0.05%.
</TABLE>
4. DIVERSIFIED EQUITY FUND, GROWTH EQUITY FUND, CONSERVATIVE BALANCED FUND,
MODERATE BALANCED FUND AND GROWTH BALANCED FUND
Diversified Equity Fund, Growth Equity Fund, Conservative Balanced Fund,
Moderate Balanced Fund and Growth Balanced Fund (each a "Blended Fund" and
collectively the "Blended Funds") currently invest the portion of their assets
that are managed in the Small Company investment style in Small Company
Portfolio, a series of Core Trust (Delaware). The percentage of the assets of
each Blended Fund that is invested in this investment style is listed on pages
14, 15, 21, and 22 of the Prospectus.
In selecting securities allocated to the Small Company investment style, the
Adviser currently uses two investment styles - those of Small Company Stock Fund
and Small Company Growth Fund - as described on pages 16 and 17 of the
Prospectus. Effective December 11, 1995, the Adviser also will use a "small
company value" investment style (the "Small Company Value investment style").
Upon complete implementation of this policy, assets allocated to the Small
Company investment style will be invested 1/3 in the Small Company Value
investment style, 1/3 in the Small Company Growth Fund style and 1/3 in the
Small Company Stock Fund style. The Small Company investment style is expected
to be allocated completely in this manner by June 1, 1996. Small Company
investment style may in the future allocate its assets to additional investment
styles.
In selecting portfolio investments, the Small Company Value investment style
focuses on securities that are conservatively valued in the marketplace relative
to their underlying fundamentals. These securities generally have lower price-
to-earning ratios, lower price-to-book ratios, and higher yields than the
average security in a universe of comparable companies. In following a policy
that utilizes the Small Company Value investment style as a third investment
style, the investment objective, other investment policies, and risk
considerations of Small Company investment style will not change. Risks
pertaining to investment in small companies are described on page 17 of the
Prospectus.
3
<PAGE>
5. INDEX FUND, DIVERSIFIED EQUITY FUND, CONSERVATIVE BALANCED FUND, MODERATE
BALANCED FUND AND GROWTH BALANCED FUND
Effective December 27, 1995, Index Fund may invest in index futures contracts in
pursuing its investment objective of duplicating the return of the Standard &
Poor's 500 Composite Stock Index (the "S&P 500 Index").
Index futures contracts are bilateral agreements pursuant to which two parties
agree to take or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the index value at the close of trading of
the contract and the price at which the futures contract is originally struck.
As no physical delivery of the fixed income or equity securities comprising the
index is made, a purchaser of index futures contracts may participate in the
performance of the securities contained in the index without the required
capital commitment. INDEX FUTURES CONTRACTS, ALONG WITH THEIR ATTENDANT RISKS,
ARE DESCRIBED ON PAGES 65 AND 66 OF THE PROSPECTUS.
In seeking to duplicate the return of the S&P 500 Index, Index Fund invests in
the common stocks contained in the S&P 500 Index in approximately the same
proportions as these securities are represented in that index. Although the
Fund seeks to invest in these securities to fullest extent practicable, the Fund
may hold cash or cash equivalents to reduce transaction costs and meet
shareholder redemption requests. Such a cash position may serve to hinder the
Fund's ability to duplicate the return of the index because that portion of the
Fund's investment portfolio remains uncommitted toward the Fund's investment
objective. The Fund's limited use of index futures is designed to nullify the
effect on return of the portfolio's cash position, allowing the portfolio to
simulate full investment in the index while retaining a cash balance for fund
management purposes.
Also effective December 27, 1995, Diversified Equity Fund, Conservative Balanced
Fund, Moderate Balanced Fund and Growth Balanced Fund may engage indirectly in
this investment practice to the extent each Fund invests a portion of its assets
in the Index Fund investment style through investment in Index Portfolio, a
series of Core Trust (Delaware). The percentage of the assets of each of these
Funds that is invested in the Index Fund investment style is listed on pages 14,
21, and 22 of the Prospectus.
6. INTERMEDIATE U.S. GOVERNMENT FUND
Effective October 1, 1995, Ms. Marjorie H. Grace assumed primary responsibility
for the day to day investment management of the Fund. Ms. Grace has been a Vice
President of Norwest Bank Minnesota, N.A. since 1992. Prior to assuming this
responsibility, Ms. Grace was a portfolio manager of Norwest Bank from 1992-
1993; an Institutional Salesperson with Norwest Investment Services, Inc. from
1991-1992; a portfolio manager with United Banks of Colorado from 1989-1991; and
Vice President and portfolio manager with Colombia Savings and Loan from 1987-
1989. Over the past few months, Ms. Grace has worked closely with her
predecessor to assure a smooth transition of management responsibilities.
4
