NORWEST ADVANTAGE FUNDS, 497, 1996-05-30

NORWEST ADVANTAGE FUNDS
497, 1996-05-30

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[NORWEST LOGO]

PROSPECTUS - FIXED INCOME FUNDS, TAX-FREE FIXED
INCOME FUNDS, BALANCED FUNDS and EQUITY FUNDS

March 1, 1996, as amended May 17, 1996
I Shares - Stable Income Fund, Intermediate Government Income Fund, Diversified
Bond Fund, Income Fund, Conservative Balanced Fund, Moderate Balanced Fund,
Growth Balanced Fund, Income Equity Fund, Index Fund, Diversified Equity Fund,
Growth Equity Fund, Large Company Growth Fund, International Fund.

October 1, 1995, as amended May 17, 1996
I Shares - Total Return Bond Fund, Tax-Free Income Fund, Colorado Tax-Free Fund,
Minnesota Tax-Free Fund, ValuGrowthSM Stock Fund, Small Company Stock Fund and
Contrarian Stock Fund.

This Prospectus offers I Shares (the "Shares") of twenty separate portfolios
(each a "Fund" and collectively the "Funds") of Norwest Advantage Funds (the
"Trust"), an open-end, management investment company.

This Prospectus sets forth concisely the information concerning the Trust and
the Funds that a prospective investor should know before investing. The Trust
has filed with the Securities and Exchange Commission (the "SEC") Statements of
Additional Information (the "SAIs") that are dated with respect to each Fund as
of the date of this Prospectus. The SAIs contain more detailed information
about the Trust and each of the Funds, and as may be supplemented from time to
time, and are incorporated into this Prospectus by reference. An investor may
obtain a copy of the SAIs without charge by contacting the Trust. Investors
should read this Prospectus and retain it for future reference.

International Fund seeks to achieve its investment objective by investing all of
its investable assets in International Portfolio (the "Portfolio"), a separate
portfolio of a registered open-end management investment company with an
identical investment objective. Accordingly, the Fund's investment experience
will correspond directly with the Portfolio's investment experience. See
"Summary" and "Other Information - Core Trust Structure."

Shares of Colorado Tax-Free Fund and Minnesota Tax-Free Fund are offered solely
to residents of Colorado and Minnesota, respectively.

NORWEST ADVANTAGE FUNDS IS A FAMILY OF OPEN-END INVESTMENT COMPANIES COMMONLY
KNOWN AS MUTUAL FUNDS. THE SHARES OF MUTUAL FUNDS ARE NOT INSURED OR GUARANTEED
BY THE U.S. GOVERNMENT, THE FDIC, THE FEDERAL RESERVE SYSTEM OR ANY OTHER
GOVERNMENT AGENCY. THE SHARES ALSO ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS
OF, OR ENDORSED OR GUARANTEED BY NORWEST BANK MINNESOTA, N.A. OR ANY OTHER BANK
OR BANK AFFILIATE.

AN INVESTMENT IN SHARES OF ANY MUTUAL FUND IS SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

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

The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.

WHO SHOULD INVEST

I Shares are offered to fiduciary, agency and custodial clients of bank trust
departments, trust companies and their affiliates. See "Purchases and
Redemptions of Shares." While no single Fund is intended to provide a complete
or balanced investment program, each can serve as a component of an investor's
investment program.

THE FUNDS

Shares of twenty portfolios are offered by this Prospectus: (a) five Fixed
Income Funds - Stable Income Fund, Intermediate Government Income Fund,
Diversified Bond Fund, Income Fund and Total Return Bond Fund (the "Fixed Income
Funds"); (b) three Tax-Free Fixed Income Funds - Tax-Free Income Fund, Colorado
Tax-Free Fund and Minnesota Tax-Free Fund (the "Tax-Free Fixed Income Funds");
(c) three Balanced Funds - Conservative Balanced Fund, Moderate Balanced Fund
and Growth Balanced Fund (the "Balanced Funds"); and (d) nine Equity Funds -
Income Equity Fund, Index Fund, ValuGrowthSM Stock Fund, Diversified Equity
Fund, Growth Equity Fund, Large Company Growth Fund, Small Company Stock Fund,
Contrarian Stock Fund and International Fund (the "Equity Funds"). Only I
Shares (which were identified as Trust or Advantage Shares prior to October 1,
1995) are offered by this Prospectus. Other classes of shares of the Funds,
which are designed for retail investors and charge a sales load or incur
additional expenses, are offered by separate prospectuses that may be obtained
by contacting the Trust. Shares of each class of a Fund have identical
interests in the investment portfolio of the Fund and, with certain exceptions,
have the same rights. See "Other Information - The Trust and Its Shares."

Fixed Income Funds

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.
Intermediate Government Income 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
in structuring the maturities of its investment portfolio. Diversified
Bond Fund seeks to provide consistent fixed income returns by
investing primarily in a portfolio of intermediate maturity,
investment grade fixed income securities through investments in
several fixed income styles as indicated:

Total Return Bond Fund style 33 1/3%
Managed Fixed Income style 33 1/3%
Positive Return style 33 1/3%
Total Fund Assets 100%

Income Fund seeks current income and, secondarily, growth of capital. These
objectives are pursued by investing in a portfolio of fixed income securities
issued by domestic and foreign issuers. Total Return Bond Fund seeks total
return. This objective is pursued by investing in a portfolio of U.S.
Government and investment-grade corporate fixed income securities.

Tax-Free Fixed Income Funds

Tax-Free Income Fund seeks to produce current income exempt from
Federal income taxes by investing primarily in a portfolio of
investment-grade municipal securities, the interest on which is free
from Federal income tax. Colorado Tax-Free Fund seeks to provide
shareholders with a high level of current income exempt from both
Federal and Colorado state income taxes (including the alternative
minimum tax) con-

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sistent with preservation of capital. This objective is pursued by
investing primarily in a portfolio of investment-grade municipal
securities of Colorado issuers. Minnesota Tax-Free Fund seeks to
provide shareholders with a high level of current income exempt from
both Federal and Minnesota state income taxes (including the
alternative minimum tax) without assuming undue risk. This objective
is pursued by investing primarily in a portfolio of investment-grade
municipal securities of Minnesota
issuers.

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 through
investment in several equity and fixed income investment styles as
indicated:

Diversified Equity Fund style 25%
Total Return Bond Fund style 16 2/3%
Managed Fixed Income style 16 2/3%
Positive Return style 16 2/3%
Stable Income Fund style 15%
Short Maturity style 10%
Total Fund Assets 100%

Of the Balanced Funds, Conservative Balanced 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 through investment in several equity and
fixed income investment styles as indicated:

Diversified Equity Fund style 40%
Total Return Bond Fund style 15%
Managed Fixed Income style 15%
Positive Return style 15%
Stable Income Fund style 15%
Total Fund Assets 100%

Moderate Balanced Fund is 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 through investment in several equity and fixed income investment styles as
indicated:

Diversified Equity Fund style 65%
Total Return Bond Fund style 11 2/3%
Managed Fixed Income style 11 2/3%
Positive Return style 11 2/3%
Total Fund Assets 100%

Growth Balanced Fund has the largest equity component of the Balanced Funds.

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Equity Funds

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. ValuGrowth
Stock Fund seeks capital appreciation. This objective is pursued by
investing in a diversified portfolio of common stock and securities
convertible into common stock. The Fund invests primarily in medium
and large capitalization companies that, in the view of the Fund's
investment adviser, possess above average growth prospects and appear
to be undervalued.

Diversified Equity Fund seeks long-term capital appreciation while moderating
annual return volatility by diversifying its investments among five different
equity investment styles as indicated:

Index Fund style 25%
Income Equity Fund style 25%
Large Company Growth Fund style 25%
Small Company style 10%
International Fund style 15%
Total Fund Assets 100%

Growth Equity Fund seeks a high level of long-term capital appreciation while
moderating annual return volatility by diversifying its investments among three
different equity investment styles as indicated:

Large Company Growth Fund style 35%
Small Company style 35%
International Fund style 30%
Total Fund Assets 100%

Growth Equity Fund assumes a higher level of risk than Diversified Equity Fund
in order to seek increased returns.

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. Small Company Stock Fund seeks long-term capital
appreciation. This objective is pursued 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. Contrarian Stock Fund seeks capital
appreciation. This objective is pursued by investing primarily in common stocks
for which the Fund's investment adviser believes there is significant potential
for price appreciation. International Fund seeks long-term capital
appreciation. This objective is pursued by investing, directly or indirectly,
in high quality companies based outside the United States. The Fund currently
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a series of Core Trust (Delaware) ("Core Trust"),
itself a registered open-end management investment company. Accordingly, the
investment experience of the Fund will correspond directly with the investment
experience of the Portfolio. See "Other Information - Core Trust Structure."
The Portfolio has the same investment objective and policies as the Fund.

INVESTMENTS IN CORE TRUST

International Fund currently seeks to achieve its investment objective by
investing all of its investment assets in the Portfolio, a separate Portfolio of
Core Trust. In addition, the Trust has received an exemptive order from the SEC
under which Conservative Balanced Fund, Moderate Balanced Fund, Growth Balanced
Fund, Diversified Equity Fund and Growth Equity 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

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to achieve benefits that they could not achieve by investing directly in
securities. See "Other Information - Core Trust Structure."

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 in the
investment style of Small Company Stock Fund and small company growth and
"value" investment styles described below; in the future, this Portfolio may
invest its assets in accordance with additional small company investment styles.

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, which is a multi-bank holding company that
was incorporated under the laws of Delaware in 1929. As of December 31, 1995,
Norwest Corporation was the 11th largest bank holding company in the United
States in terms of assets. As of that date, the Adviser managed or provided
investment advice with respect to assets totaling approximately $23 billion.
Except for International Fund, the Adviser makes investment decisions for the
Funds and continuously reviews, supervises and administers each Fund's
investment program. Norwest serves as the Trust's transfer agent, dividend
disbursing agent and custodian and provides certain administrative services to
International Fund. Subject to the Adviser's general oversight, Crestone
Capital Management, Inc. ("Crestone"), an investment advisory subsidiary of
Norwest, serves as investment subadviser to Small Company Stock Fund. The
investment adviser to the Portfolio is Schroder Capital Management International
Inc. ("Schroder"). Schroder makes investment decisions for the Portfolio and
continuously reviews, supervises and administers the Portfolio's investment
program. 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" for information regarding Norwest,
Crestone, Schroder and Forum, including their fees.

PURCHASE AND REDEMPTION OF SHARES

Shares of each Fund may be purchased or redeemed without a sales or other
charge. The minimum initial investment in each Fund is $1,000. The minimum
subsequent investment in each Fund is $100. See "Purchases and Redemptions of
Shares."

CERTAIN RISK FACTORS

There can be no assurance that any Fund will achieve its investment objective,
and a Fund's net asset value and total return will fluctuate based upon changes
in the value of its portfolio securities. Upon redemption, an investment in a
Fund may be worth more or less than its original value. All investments made 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 and the potential use of leverage by certain Funds through
borrowings, margin transactions, short sales, securities lending and other
investment techniques. See "Investment Objectives and Policies," "Additional
Investment Policies and Risk Considerations" and "Appendix A: Investments,
Investment Strategies and Risk Considerations."

Normally, the values of the Fixed Income Funds' and the Tax-Exempt Fixed Income
Funds' investments vary inversely with changes in interest rates. The
securities in which the Fixed Income Funds and Tax-Exempt Fixed Income Funds
invest are subject to "credit risk" relating to the financial condition of the
issuers of the securities. Each Fund (other than Minnesota Tax-Free Fund),
however, invests only in investment grade securities (those rated in the top
four grades by a nationally recognized statistical rating organization ("NRSRO")
such as Standard & Poor's). Minnesota Tax-Free Fund may invest in non-
investment grade municipal securities, which may entail additional risks. See
"Investment Objectives and Policies - Tax-Free Fixed Income Funds - Minnesota
Tax-Free

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Fund - Non-Investment Grade Securities." In addition, with respect to the Fixed
Income Funds, the potential for appreciation in the event of a decline in
interest rates may be limited or negated by increased principal repayments on
certain mortgage-and asset-backed securities held by a Fund. The Fixed Income
Funds' use of these securities entails certain risks. See "Appendix A:
Investments, Investment Strategies and Risk Considerations - Mortgage-Backed
Securities" and "- Asset-Backed Securities."

Each of Colorado Tax-Free Fund and Minnesota Tax-Free Fund invests principally
in securities issued by the government of and municipalities in the State of
Colorado or Minnesota, respectively, and is therefore more susceptible to
factors adversely affecting issuers of those states than would be a comparable
municipal securities portfolio having a greater degree of geographic
concentration. Each of these Funds is non-diversified, which means they have
greater latitude than a diversified Fund to invest in fewer issuers and to
invest more of their assets in any one issuer. Non-diversified funds may
present greater risks than diversified funds. See "Investment Objectives and
Policies - Tax-Free Fixed Income Funds - Investment Considerations and Risk
Factors."

The policy of investing in small companies employed by Diversified Equity Fund,
Growth Equity Fund, Small Company Stock Fund and the Balanced Funds and
Contrarian Stock Fund's policy of investing in securities that may be out of
favor with many institutional investors entail certain risks in addition to
those normally associated with investments in equity securities. International
Fund's policy of investing directly or indirectly in foreign issuers also
entails risks in addition to those normally associated with investments in
equity securities. See "Investment Objectives and Policies - Equity Funds." By
investing solely in the Portfolio, International Fund may achieve certain
efficiencies and economies of scale. Nonetheless, this investment could also
have potential adverse effects on the Fund. Investors in the Fund should
consider these risks, as described under "Other Information - Core Trust
Structure."

EXPENSES OF INVESTING IN THE FUNDS

The purpose of the following table is to assist investors in understanding the
expenses that an investor in I Shares of a Fund will bear directly or
indirectly. There are no transaction charges in connection with purchases,
redemptions or exchanges of the I Shares of the Funds. No Fund has adopted a
Rule 12b-1 plan with respect to I Shares and, accordingly, no Fund incurs
distribution expenses with respect to I Shares.

Annual Operating Expenses
(As a percentage of average net assets after applicable fee waivers and expense
reimbursements)(1):

Investment Rule Total
Advisory 12b-1 Other Operating
Fees Fees Expenses(3) Expenses

Fixed Income Funds
Stable Income Fund 0.30% None 0.35% 0.65%
Intermediate Government
Income Fund 0.33% None 0.35% 0.68%
Diversified Bond Fund 0.32% None 0.35% 0.67%
Income Fund 0.37% None 0.38% 0.75%
Total Return Bond Fund 0.20% None 0.55% 0.75%
Tax-Free Fixed Income Funds
Tax-Free Income Fund 0.27% None 0.33% 0.60%
Colorado Tax-Free Fund 0.00% None 0.30% 0.30%
Minnesota Tax-Free Fund 0.00% None 0.48% 0.48%
Balanced Funds
Conservative Balanced Fund(2) 0.45% None 0.35% 0.80%
Moderate Balanced Fund(2) 0.53% None 0.35% 0.88%
Growth Balanced Fund(2) 0.58% None 0.35% 0.93%
Equity Funds
Income Equity Fund 0.50% None 0.35% 0.85%

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Index Fund 0.00% None 0.25% 0.25%
ValuGrowth Stock Fund 0.80% None 0.40% 1.20%
Diversified Equity Fund(2) 0.65% None 0.35% 1.00%
Growth Equity Fund(2) 0.90% None 0.35% 1.25%
Large Company Growth Fund 0.65% None 0.35% 1.00%
Small Company Stock Fund 0.68% None 0.52% 1.20%
Contrarian Stock Fund 0.64% None 0.56% 1.20%
International Fund(2) 0.45% None 1.05% 1.50%

(1) For a further description of the various expenses incurred in the operation
of the Funds, see "Management of the Funds." Expenses associated with A and B
Shares of the Funds differ from those of I Shares listed in the table. The
amounts of expenses for Income Fund, Total Return Bond Fund, Tax-Free Income
Fund, Colorado Tax-Free Fund, Minnesota Tax-Free Fund, ValuGrowth Stock Fund,
Small Company Stock Fund and Contrarian Stock Fund are based on amounts incurred
during the Funds' most recent fiscal year ended May 31, 1995, and for the other
Funds during their most recent fiscal year ended October 31, 1995. The expense
information for Total Return Bond Fund, Index Fund, Small Company Stock Fund and
Contrarian Stock Fund has been restated to reflect current expenses as if these
expenses had been in effect for each Fund's most recent fiscal year.

Absent actual (or, in the case of Total Return Bond Fund, Index Fund, Small
Company Stock Fund and Contrarian Stock Fund, estimated) expense reimbursements
and fee waivers, the Investment Advisory Fees of Diversified Bond Fund, Income
Fund, Total Return Bond Fund, Tax-Free Income Fund, Colorado Tax-Free Fund,
Minnesota Tax-Free Fund, Index Fund, ValuGrowth Stock Fund, Small Company Stock
Fund and Contrarian Stock Fund would be 0.35%, 0.50%, 0.50%, 0.50%, 0.50%,
0.50%, 0.15%, 0.80%, 1.00% and 0.80%, respectively. Absent actual (or, in the
case of Total Return Bond Fund, Index Fund, Small Company Stock Fund and
Contrarian Stock Fund, estimated) expense reimbursements and fee waivers, Other
Expenses and Total Operating Expenses of each Fund would be, respectively:
Stable Income Fund: 0.68% and 0.98%; Intermediate Government Income Fund: 0.60%
and 0.93%; Diversified Bond Fund: 0.47% and 0.82%; Income Fund: 0.56% and
1.06%; Total Return Bond Fund: 0.67% and 1.17%; Tax-Free Income Fund: 0.55% and
1.05%; Colorado Tax-Free Fund: 0.66% and 1.16%; Minnesota Tax-Free Fund: 1.08%
and 1.58%; Conservative Balanced Fund: 0.51% and 0.96%; Moderate Balanced Fund:
0.45% and 0.98%; Growth Balanced Fund: 0.45% and 1.03%; Income Equity Fund:
0.59% and 1.09%; Index Fund: 0.49% and 0.64%; ValuGrowth Stock Fund: 0.53% and
1.33%; Diversified Equity Fund: 0.43% and 1.08%; Growth Equity Fund: 0.44% and
1.34%; Large Company Growth Fund: 0.55% and 1.20%; Small Company Stock Fund:
0.81% and 1.81%; Contrarian Stock Fund: 0.77% and 1.57%; and International Fund:
1.21% and 1.66%. Reimbursements and waivers are voluntary and may be reduced or
eliminated at any time.

(2) International Fund's Other Expenses include the Fund's pro rata portion of
the operating expenses of International Portfolio, which are 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 bears 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. Pursuant to an exemptive order obtained from the SEC, Conservative
Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund, Diversified Equity
Fund and Growth Equity Fund invest portions of their assets in other portfolios
of Core Trust, each of which bears certain expenses not reflected in the table.
See "Summary - Investments in Core Trust," "Management of the Funds - Expenses
of the Funds" and "Other Information - Core Trust Structure."

(3) Other Expenses for the Funds include transfer agency fees payable to
Norwest at annual rates of 0.25% of each Fund's average daily net assets
attributable to I Shares. Other Expenses for Income Fund, Total Return Bond
Fund, Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota Tax-Free Fund,
ValuGrowth Stock Fund, Small Company Stock Fund and Contrarian Stock Fund also
include custodial fees payable to Norwest at an annual rate of up to 0.05% of
each Fund's average daily net assets; Norwest charges no custodian fees to the
other Funds, but they incur subcustodian fees. In addition, Other Expenses for
International Fund include administrative service fees payable to Norwest of
0.25%.

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Example

Following is a hypothetical example that indicates the dollar amount of expenses
that an investor would pay, assuming a $1,000 investment in I Shares of each
Fund, a 5% annual return, reinvestment of all dividends and distributions and
full redemption at the end of each period:

One Three Five Ten
Year Years Years Years
Fixed Income Funds
Stable Income Fund $7 $21 $36 $81
Intermediate Government
Income Fund 7 22 38 85
Diversified Bond Fund 7 21 37 83
Income Fund 8 24 41 93
Total Return Bond Fund 8 24 41 93
Tax-Free Fixed Income Funds
Tax-Free Income Fund 6 19 33 75
Colorado Tax-Free Fund 3 10 17 38
Minnesota Tax-Free Fund 5 15 27 61
Balanced Funds
Conservative Balanced Fund 8 26 44 99
Moderate Balanced Fund 9 28 49 108
Growth Balanced Fund 9 30 51 114
Equity Funds
Income Equity Fund 9 27 47 105
Index Fund 3 8 14 32
ValuGrowth Stock Fund 12 38 66 145
Diversified Equity Fund 10 32 55 122
Growth Equity Fund 13 40 69 152
Large Company Growth Fund 10 32 55 122
Small Company Stock Fund 12 38 66 145
Contrarian Stock Fund 12 38 66 145
International Fund 15 47 82 179

The example is based on the expenses listed in the "Annual Operating Expenses"
table above. The 5% annual return is not predictive 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.

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2. FINANCIAL HIGHLIGHTS

The following tables provide financial highlights for each Fund. This
information represents selected data for a single outstanding share of each Fund
for the periods shown. Information for the years ended May 31, 1994, May 31,
1995 and October 31, 1995, as applicable, was audited by KPMG Peat Marwick LLP,
independent auditors. The financial statements for each Fund's most recent
fiscal year and independent auditor's report thereon are contained in an annual
report of the Trust, and are incorporated by reference into the SAIs. Further
information about each Fund's performance is contained in an annual report which
may be obtained from the Trust without charge.
<TABLE>
<CAPTION>

Stable Intermediate Diversified
Income Government Bond
Fund Income Fund Fund Income Fund
Period Ended Period Ended Period Ended Year Ended Period Ended
October 31 October 31 October 31 May 31 May 31
1995(a) 1995(a) 1995(a) 1995 1994(a)
<S> <C> <C> <C> <C> <C>

Beginning Net Asset Value per Share $10.00 $55.55 $25.08 $9.51 $10.68
Net Investment Income (Loss) 0.50 4.67 1.65 0.65 0.58
Net Realized and Unrealized Gain
(Loss) on Investments,
Foreign Currency Transactions
and Futures Transactions 0.22 1.76 1.19 0.11 (0.91)
Dividends from Net
Investment Income -- -- -- (0.65) (0.58)
Distributions from Net Realized Gains -- -- -- -- (0.26)
Ending Net Asset Value Per Share $10.72 $61.98 $27.92 $9.62 $9.51
Ratios to Average Net Assets:
Expenses(b) 0.65%(c) 0.68%(c) 0.67%(c) 0.75% 0.61%(c)
Net Investment Income (Loss) 5.91%(c) 7.79%(c) 5.87%(c) 7.02% 6.75%(c)
Total Return 7.20% 11.58% 11.32% 8.49% (4.04%)(c)
Portfolio Turnover Rate 115.85% 240.90% 58.90% 98.83% 26.67%
Net Assets at End of
Year/Period (000s omitted) $48,087 $50,213 171,453 $109,994 $93,665

(a) Income Fund commenced the offering of I Shares (formerly Trust Shares) on August 2, 1993. Each other Fund commenced operations
and the offering of I Shares on November 11, 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: 0.98%(c) 0.93%(c) 0.82%(c) 1.06% 1.09%(c)

Total Return Tax-Free Colorado
Bond Income Tax-Free
Fund Fund Fund
Year Period Year Period Year Period
Ended Ended Ended Ended Ended Ended
May 31 May 31 May 31 May 31 May 31 May 31
1995 1994(a) 1995 1994(a) 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>

Beginning Net Asset Value per Share $9.54 $10.00 $9.60 $10.14 $9.69 $10.22
Net Investment Income (Loss) 0.67 0.27 0.55 0.47 0.48 0.39
Net Realized and Unrealized Gain
(Loss) on Investments,
Foreign Currency Transactions
and Futures Transactions 0.19 (0.46) 0.22 (0.47) 0.21 (0.52)
Dividends from Net
Investment Income (0.67) (0.27) (0.55) (0.47) (0.48) (0.39)
Distributions from Net
Realized Gains -- -- -- (0.07) -- (0.01)
Ending Net Asset Value per Share $9.73 $9.54 $9.82 $9.60 $9.90 $9.69
Ratios to Average Net Assets:
Expenses(b) 0.71% 0.46%(c) 0.60% 0.60%(c) 0.30% 0.11%(c)
Net Investment Income (Loss) 7.04% 6.81%(c) 5.84% 5.71%(c) 5.08% 5.03%(c)
Total Return 9.43% (4.62%)(c) 8.42% (0.21%)(c) 7.47% 0.90%(c)
Portfolio Turnover Rate 35.19% 37.50% 130.90% 116.54% 47.88% 40.92%
Net Assets at End of Year/Period
(000s omitted) $96,199 $11,694 $94,454 $102,084 $24,539 $15,153

(a) Total Return Bond Fund, Tax-Free Income Fund and Colorado Tax-Free Fund commenced the offering of I shares (formerly Trust
Shares) on December 31, 1993, August 2, 1993 and August 23, 1993, respectively.

(b) During the period, various fees and expenses were waived and reimbursed, respectively. Had those waivers and reimbursements
not occurred, the ratio of expenses to average net assets would have been:

Expenses: 1.17% 2.10%(c) 1.05% 1.10%(c) 1.16% 1.21%(c)

</TABLE>

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<PAGE>

Minnesota Conservative Moderate Growth
Tax-Free Balanced Balanced Balanced Income
Fund Fund Fund Fund Equity Fund
Year Period Period Period Period Period
Ended Ended Ended Ended Ended Ended
May 31 May 31 October 31 October 31 October 31 October 31
1995 1994(a) 1995(a) 1995(a) 1995(a) 1995(a)
<S> <C> <C> <C> <C> <C> <C>

Beginning Net Asset Value per Share $10.16 $10.74 $16.19 $17.25 $17.95 $18.90
Net Investment Income (Loss) 0.53 0.43 0.75 0.65 0.47 0.46
Net Realized and Unrealized Gain
(Loss) on Investments,
Foreign Currency Transactions
and Futures Transactions 0.29 (0.39) 1.27 1.94 2.83 4.66
Dividends from Net
Investment Income (0.53) (0.43) -- -- -- --
Distributions from Net
Realized Gains -- (0.19) -- -- -- --
Ending Net Asset Value per Share $10.45 $10.16 $18.21 $19.84 $21.25 $24.02
Ratios to Average Net Assets:
Expenses(b) 0.48% 0.61%(c) 0.80%(c)(d) 0.88%(c)(d) 0.93%(c)(d) 0.85%(c)
Net Investment Income (Loss) 5.29% 4.90%(c) 4.67%(c) 3.76%(c) 2.63%(c) 2.51%(c)
Total Return 8.44% 0.29%(c) 12.48% 15.01% 18.38% 27.09%
Portfolio Turnover Rate 139.33% 84.23% 65.53% 62.08 41.04% 7.03%
Net Assets at End of
Year/Period (000s omitted) $1,799 $ 872 $136,710 $373,998 $374,892 $49,000

(a) Minnesota Tax-Free Fund commenced the offering of I shares (formerly Trust Shares) on August 2, 1993. Each other Fund commenced
operations and the offering of I Shares on November 11, 1994.

(b) During the periods, various fees and expenses were waived and reimbursed, respectively. Had those waivers and reimbursements not
occurred, the ratio of expenses to average net assets would have been:

Expenses: 1.58% 1.54%(c) 0.96%(c)(d) 0.98%(c)(d) 1.03%(c)(d) 1.12%(c)

(d) Excludes expenses related to investment in Core Trust.

</TABLE>

Diversified Growth Large
Index ValuGrowth Equity Equity Company
Fund Stock Fund Fund Fund Growth Fund
Period Year Period Period Period Period
Ended Ended Ended Ended Ended Ended
October 31 May 31 May 31 October 31 October 31 October 31
1995(a) 1995 1994(a) 1995(a) 1995(a) 1995(a)
<S> <C> <C> <C> <C> <C> <C>

Beginning Net Asset Value per Share $21.80 $17.16 $16.91 $22.21 $22.28 $18.50
Net Investment Income (Loss) 0.45 0.18 0.13 0.22 (0.02) (0.05)
Net Realized and Unrealized Gain
(Loss) on Investments,
Foreign Currency Transactions
and Futures Transactions 5.42 1.64 0.46 5.10 4.71 5.14
Dividends from Net
Investment Income -- (0.18) (0.12) -- -- --
Distributions from Net
Realized Gains -- -- (0.22) -- -- --
Ending Net Asset Value per Share $27.67 $18.80 $17.16 $27.53 $26.97 $23.59
Ratios to Average Net Assets:
Expenses(b) 0.50%(c) 1.20% 1.20%(c) 1.00%(c)(d) 1.25%(c)(d) 1.00%(c)
Net Investment Income (Loss) 2.12%(c) 1.02% 0.92%(c) 1.01%(c) (0.11%)(c) (0.23%)(c)
Total Return 26.93% 10.67% 2.99%(c) 23.95% 21.10% 27.51%
Portfolio Turnover Rate 14.48% 63.82% 86.07% 10.33% 8.90% 31.60%
Net Assets at End of Year/
Period (000s omitted) $186,197 $136,589 $113,061 $711,111 $564,004 $63,567

(a) ValuGrowth Stock Fund commenced operations and the offering of I Shares (formerly Trust Shares) on August 2, 1993. Each other
Fund commenced operations and the offering of I shares on November 11, 1994.

(b) During the periods, various fees and expenses were waived and reimbursed, respectively. Had these waivers and reimbursements not
occurred, the ratio of expenses to average net assets would have been:

Expenses: 0.64%(c) 1.33% 1.39%(c) 1.08%(c)(d) 1.34%(c)(d) 1.20%(c)

(d) Excludes expenses related to investment in Core Trust.

</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
Small Contrarian
Company Stock International
Stock Fund Fund Fund
Year Period Year Period Period
Ended Ended Ended Ended Ended
May 31 May 31 May 31 May 31 October 31
1995 1994(a) 1995 1994(a) 1995(a)
<S> <C> <C> <C> <C> <C>

Beginning Net Asset Value per Share $9.80 $10.00 $9.71 $10.00 $17.28
Net Investment Income (Loss) 0.12 0.08 0.11 0.07 0.09
Net Realized and Unrealized Gain
(Loss) on Investments,
Foreign Currency Transactions
and Futures Transactions 0.87 (0.20) 1.19 (0.29) 0.62
Dividends from Net
Investment Income (0.12) (0.08) (0.11) (0.07) --
Distributions from Net
Realized Gains (0.08) -- (0.003) -- --
Ending Net Asset Value per Share $10.59 $9.80 $10.90 $9.71 $17.99
Ratios to Average Net Assets:
Expenses(b) 0.52% 0.20%(c) 1.12% 0.62%(c) 1.50%(c)(d)
Net Investment Income (Loss) 1.14% 2.03%(c) 0.91% 1.82%(c) 0.54%(c)
Total Return 10.13% (2.93%)(c) 13.52% (5.35%)(c) 4.11%
Portfolio Turnover Rate 68.09% 14.98% 30.32% 2.67% N/A
Net Assets at End of Year/
Period (000s omitted) $54,240 $9,251 $45,832 $4,548 $91,401

(a) Small Company Stock Fund and Contrarian Stock Fund commenced the offering of I Shares (formerly Trust Shares) on December 31,
1993. International Fund commenced operations and the offering of I Shares on November 11, 1994.

(b) During the period, 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: 1.82% 4.33%(c) 1.57% 3.52%(c) 1.66%(c)(d)

(d) Includes expenses allocated from International Portfolio of Core Trust of 0.80%, net of waivers of 0.10%.

</TABLE>

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<PAGE>

3. INVESTMENT OBJECTIVES AND POLICIES

The Funds offered through this Prospectus consist of twenty Funds, each with
distinct investment objectives and policies: eight Fixed Income Funds, nine
Equity Funds and three Balanced Funds. Most of the Funds invest their assets in
a single investment style that corresponds to the Fund's investment objective.
Of the Fixed Income Funds, Diversified Bond Fund invests its assets in three
different fixed-income investment styles through percentage allocations
consistent with the Fund's investment objective. Reliance on multiple
investment styles is intended to reduce the price and return volatility of the
Fund and provide more consistent fixed income returns. 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. Of the Equity Funds, two Funds - Diversified Equity Fund and Growth
Equity Fund - invest their assets in several different equity investment styles.
The use of multiple equity investment styles by each of these Funds - through
percentage allocations consistent with the Funds' investment objective - 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. Diversified Bond
Fund and the Balanced Funds rebalance their portfolios periodically and
Diversified Equity Fund and Growth Equity Fund 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 at any time by the Adviser in response to market or other
conditions.

The investment objective, policies and risk considerations of each Fund are
described below. For a further description of each Fund's investments and
investment techniques and additional risk considerations associated with those
investments and techniques, see "Additional Investment Policies and Risk
Considerations," "Appendix A: Investments, Investment Strategies and Risk
Considerations," and the SAIs.

FIXED INCOME FUNDS

The five Fixed Income Funds invest primarily in fixed income securities pursuant
to the investment policies described below. For a general description of fixed
income securities, see "Additional Investment Policies - Fixed Income
Investments and Their Characteristics" below. Each Fixed Income Fund, except
Intermediate Government Income Fund, may invest in foreign issuers. These
investments may involve certain risks. See "Investment Policies - Equity Funds
- - International Fund - Foreign Investment Risks and Considerations."

Stable Income Fund

Investment Objective. The investment objective of the Fund is to maintain
safety of principal while providing low-volatility total return. There can be
no assurance that the Fund will achieve its investment objective.

Investment Policies. The 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.

-12-
<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 an NRSRO, such as Moody's Investors Service, Standard &
Poor's or Fitch Investors Services, L.P., or which are unrated and determined by
the Adviser to be of comparable quality. See "Additional Investment Policies
and Risk Considerations - Common Policies of the Funds - Rating Matters" below.

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.

Intermediate Government Income Fund

Investment Objective. The investment objective of the Fund is to provide income
and safety of principal by investing primarily in U.S. Government Securities.
There can be no assurance that the Fund will achieve its investment objective.

Investment Policies. The 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, such as
adjustable rate securities and swap agreements, to add to the Fund's return over
a complete economic or interest rate cycle.

The Fund invests in mortgage-backed 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 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 25
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 an NRSRO, such as Moody's
Investors Service, Standard & Poor's or Fitch Investors Services, L.P., or which
are unrated and determined by the Adviser to be of comparable quality. See
"Additional Investment Policies and Risk Considerations - Common Policies of the
Funds - Rating Matters" below.

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. Under normal circumstances, the

-13-
<PAGE>

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 security's average life that
reflects the present value of the security's 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.

Effective May 17, 1996, the Fund changed its name from Intermediate U.S.
Government Fund to Intermediate Government Income Fund.

Diversified Bond Fund

Investment Objective. The 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. There can be no assurance
that the Fund will achieve its investment objective.

The Fund follows a "multi-style" approach designed to reduce price and return
volatility and to provide more consistent returns. As indicated below, the Fund
invests equally in three fixed income investment styles - the Total Return Bond
Fund style, the Managed Fixed Income style, and the Positive Return style.

Diversified Total Return Bond Fund style 33 1/3%
Bond Fund Managed Fixed Income style 33 1/3%
Allocation Positive Return style 33 1/3%

TOTAL FUND ASSETS 100%

Investors should refer to the discussions of the Managed Fixed Income style and
the Positive Return style directly below. The Total Return Bond Fund style is
described below in the discussion of the investment objective and policies of
Total Return Bond Fund.

Investment Policies. In managing assets in accordance with the Managed Fixed
Income style, the Adviser seeks consistent fixed income returns by investing
primarily in investment grade intermediate-term obligations. The Adviser
invests assets allocated to this style 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 Adviser emphasizes the use of intermediate maturity securities to
lessen duration risk (as described below), while employing low risk yield
enhancement techniques to enhance return over a complete economic or interest
rate cycle. Intermediate-term obligations comprise securities with maturities
of between 2 and 20 years.

The Adviser invests in mortgage-backed securities and other asset-backed
securities, although these investments are limited to not more than 50 percent
and 25 percent, respectively, of the Fund's total assets invested in this style.
As part of its asset-backed securities investments, the Adviser may enter into
"dollar roll" transactions and may

-14-
<PAGE>

purchase stripped mortgage-backed securities. The Adviser may invest any amount
of the Fund's assets invested in this style in U.S. Government Securities, or in
the securities of financial institutions, corporations, and others. The Adviser
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 Adviser may not invest more than 30 percent of
the Fund's total assets invested in this style in the securities issued or
guaranteed by any single agency or instrumentality of the U.S. Government,
except the U.S. Treasury.

The Adviser may invest up to 10 percent of the Fund's total assets invested in
this style in participations purchased from financial institutions in loans or
securities in which the Fund may invest directly. The Adviser may also invest
up to 10 percent of the Fund's total assets invested in this style 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 Adviser 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 an NRSRO, such as Moody's Investors Service, Standard & Poor's or
Fitch Investors Services, L.P., or which are unrated and determined by the
Adviser to be of comparable quality. See "Additional Investment Policies and
Risk Considerations - Rating Matters" below.

The Adviser 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. Under normal circumstances, the Fund's
portfolio of securities invested in this style will have an average dollar-
weighted portfolio maturity of between 3 and 12 years and a duration of between
2 and 6 years. Duration is a measure of a debt security's average life that
reflects the present value of the security's 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 the Fund's exposure to different types of investments, the
Adviser may enter into interest rate and mortgage swap agreements and may
purchase and sell interest rate caps, floors and collars. The Adviser 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 Adviser's ability to use these strategies may be limited by
market considerations, regulatory limits and tax considerations. The Adviser
may on behalf of the Fund 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.

In managing assets in accordance with the Positive Return style, the Adviser
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 investments 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, increasing 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 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 percent of the net assets allocated to
this style will be U.S. Government Securities, including Treasury securities.
All securities allocated to this 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, Standard & Poor's and Fitch Investors Services, L.P. or (ii) unrated

-15-
<PAGE>

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.
The Positive Return style may not invest in convertible securities, mortgage
pass-through securities or private placement securities. Within these
constraints, the Adviser purchases securities that it believes have above-
average yields.

On April 1, 1996, the Fund changed its name from Managed Fixed Income Fund to
Diversified Bond Fund.

Income Fund

Investment Objective. The investment objective of the Fund is to seek current
income and, secondarily, growth of capital. The Fund pursues this objective by
investing in a portfolio of fixed income securities issued by domestic and
foreign issuers. There can be no assurance that the Fund will achieve its
investment objective.

Investment Policies. The Fund seeks to attain its investment objective by
investing in a diversified portfolio of fixed and variable rate U.S. dollar
denominated fixed income securities. These securities cover a broad spectrum of
United States issuers, including U.S. Government Securities, mortgage- and
asset- backed securities and the debt securities of financial institutions,
corporations, and others. The Adviser attempts to increase the Fund's
performance by applying various fixed income management techniques combined with
fundamental economic, credit and market analysis while at the same time
controlling total return volatility by targeting the Fund's duration within a
narrow band around the Lehman Brothers Aggregate Index, an unmanaged index of
fixed income securities.

The Fund may invest any amount of its assets, and normally will invest at least
50% of its total assets, in U.S. Government Securities. The fixed income
securities in which the Fund invests also include mortgage- backed and other
asset-backed securities, although the Fund limits these investments to not more
than 50% and 25%, respectively, of its total assets. The Fund may invest up to
30% of its total assets in corporate securities, such as bonds, debentures and
notes and fixed income securities that can be converted into or exchanged for
common stocks ("convertible securities") and may invest in guaranteed investment
contracts. 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").

To limit credit risk, the Fund will only purchase securities that are rated, at
the time of purchase, within the four highest rating categories assigned by an
NRSRO, such as Moody's Investors Service ("Moody's"), Standard & Poor's or Fitch
Investors Services, L.P., or which are unrated and determined by the Adviser to
be of comparable quality. Securities rated in these categories are generally
considered to be investment grade securities, although Moody's indicates that
securities rated Baa (the fourth highest category) have speculative
characteristics. A description of the rating categories of various NRSROs is
contained in the SAI of the Fund.

The Fund will invest primarily in securities 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 is anticipated that the Fund's
portfolio of securities will have an average dollar-weighted maturity of between
3 and 12 years. The Fund's portfolio of securities will normally have a
duration of between 75% and 125% of the duration of the Lehman Brothers
Aggregate Index. Duration is a measure of a debt security's average life that
reflects the present value of the security's 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.

The Fund may invest in debt securities registered and sold in the United States
by foreign issuers (Yankee Bonds) and debt securities sold outside the United
States by foreign or U.S. issuers (Euro-bonds). The Fund intends to restrict
its purchases of debt securities to issues denominated and payable in United
States dollars. For a description of the risks involved in investments in
foreign securities, see "Investment Objectives and Policies - Equity Funds -
International Fund - Investment Policies - Foreign Investment Considerations and
Risk Factors." The Fund may

-16-
<PAGE>

invest in guaranteed investment contracts ("GICs"). A GIC is an arrangement
with an insurance company under which the Fund contributes cash to the insurance
company's general account and the insurance company credits the contribution
with interest on a monthly basis. The interest rate is tied to a specified
market index and is guaranteed by the insurance company not to be less than a
certain minimum rate. The Fund will purchase a GIC only when the Adviser has
determined that the GIC presents minimal credit risks to the Fund and is of
comparable quality to instruments that the Fund may purchase.

Total Return Bond Fund

Investment Objective. The investment objective of the Fund is to seek total
return. The Fund pursues this objective by investing in a portfolio of U.S.
Government and investment grade corporate fixed income investments. There can
be no assurance that the Fund will achieve its investment objective.

Investment Policies. The Fund invests primarily in U.S. Government Securities,
including mortgage-backed securities and investment grade 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 an attempt 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 Fund's investment portfolio will be invested in securities with
short-term maturities in an effort to ride interest rates up while minimizing
the negative effect of falling bond prices. When the Adviser anticipates
interest rates to fall and bond prices 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 issues
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 also invest in preferred stocks and securities convertible into
common stock, but may not own the common stock into which a convertible security
converts. The Fund will only purchase securities (including convertible
securities) that are rated, at the time of purchase, within the four highest
rating categories assigned by an NRSRO, such as Moody's Investors Service
("Moody's"), Standard & Poor's or Fitch Investors Services, L.P., or which are
unrated and determined by the Adviser to be of comparable quality. Securities
rated in these categories are generally considered to be investment grade
securities, although Moody's indicates that securities rated Baa (the fourth
highest category) have speculative characteristics. A description of the rating
categories of various NRSROs is contained in the SAI of the Fund.

TAX-FREE FIXED INCOME FUNDS

For a detailed description of the fixed income investments, including municipal
securities and related investments in which the Tax-Free Fixed Income Funds
invest, see "Appendix A: Investments, Investment Strategies and Risk
Considerations" and "Additional Investment Policies and Risk Considerations -
Fixed Income Investments and Their Characteristics." Under certain
circumstances the Tax-Free Fixed Income Funds may invest in taxable investments.
See "Taxable Investments" below.

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Tax-Free Income Fund

Investment Objective. The investment objective of Tax-Free Income Fund is to
produce current income exempt from Federal income taxes. The Fund pursues this
objective by investing primarily in a portfolio of investment grade fixed income
securities the interest on which is free from Federal income tax. There can be
no assurance that the Fund will achieve its investment objective.

Investment Policies. Substantially all of the Fund's total assets normally will
be invested in municipal securities, which are debt obligations issued by or on
behalf of the states, territories or possessions of the United States, the
District of Columbia and their subdivisions, authorities, instrumentalities and
corporations the interest on which is exempt from Federal income tax and not
treated as a preference item for individuals for purposes of the Federal
alternative minimum tax ("municipal securities"). In order to respond to
business and financial conditions, the Fund may invest up to 20% of its assets
in instruments on which the interest is subject to Federal taxation. See
"Taxable Investments" below, and "Additional Investment Policies - Common
Policies of the Funds - Temporary Defensive Position" and "Dividends,
Distributions and Tax Matters." As a fundamental investment policy, except
during periods when the Fund assumes a temporary defensive position, the Fund
will invest at least 80% of its total assets in securities exempt from Federal
income taxes (including the Federal alternative minimum tax).

The average dollar-weighted maturity of the Fund's assets normally will be
between 10 and 20 years. Depending on market conditions, however, the average
dollar-weighted maturity could be higher or lower. In general, the longer the
maturity of a municipal security, the higher the rate of interest it pays.
However, a longer maturity is generally associated with a higher level of
volatility in the market value of a security. Since the Fund's objective is to
provide high current income, the Fund will invest in municipal securities with
an emphasis on income rather than stability of the Fund's net asset value, and
the average maturity of the Fund's portfolio will vary depending on anticipated
market conditions.

Substantially all of the Fund's assets will be invested in municipal securities
that are rated within the top four grades by an NRSRO at the time of purchase.
For example, for municipal bonds, these grades are Aaa, Aa, A and Baa in the
case of Moody's Investors Service ("Moody's") and AAA, AA, A and BBB in the case
of Standard & Poor's and Fitch Investors Services, L.P. These securities are
generally considered to be investment grade securities, although Moody's
indicates that municipal securities rated Baa have speculative characteristics.
The Fund also may invest in unrated securities that the Adviser believes are
comparable in quality to rated securities in which the Fund may invest. A
description of the rating categories of certain NRSROs is contained in the SAI
of the Fund.

Colorado Tax-Free Fund

Investment Objective. The investment objective of Colorado Tax-Free Fund is to
seek to provide shareholders with a high level of current income exempt from
both Federal and Colorado state income taxes (including the alternative minimum
tax) consistent with the preservation of capital. Shares of the Fund are
offered only to residents of the State of Colorado. There can be no assurance
that the Fund will achieve its investment objective.

Investment Policies. Substantially all the Fund's total assets normally will be
invested in investment grade municipal securities, which are debt obligations
issued by the state of Colorado and its political subdivisions, various
authorities, instrumentalities, public corporations and special districts
("municipal securities"). Municipal securities also include the securities
issued by the various territories and possessions of the United States, such as
Puerto Rico. In order to respond to business and financial conditions, the Fund
may invest up to 20% of its assets in instruments on which the interest is
subject to taxation. See "Taxable Investments" below, "Additional Investment
Policies and Risk Considerations - Common Policies of the Funds - Temporary
Defensive Position" and "Dividends, Distributions and Tax Matters." As a
fundamental policy, except during periods when the Fund assumes a temporary
defensive position, the Fund will invest at least 80% of its total assets in
securities exempt from both Federal and Colorado state income taxes (including
the alternative minimum tax).

The yields of Colorado municipal securities depend on, among other things,
conditions in the Colorado municipal bond market and fixed income markets
generally, the size of a particular offering, the maturity of the obligation and

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the rating of the issue. In some cases, Colorado issues may have yields that
are slightly less than the yields of municipal obligations of issuers located in
other states because of the favorable Colorado state tax exemption on Colorado
issues.

There are no restrictions on the Fund's average portfolio maturity, but the
average portfolio maturity is currently expected to be greater than 10 years.
Average portfolio maturity may reach or exceed 20 years in the future. In
general, the longer the maturity of a municipal security, the higher the rate of
interest it pays. However, a longer average maturity is generally associated
with a higher level of volatility in the market value of a security. Since the
Fund's objective is to provide high current income, the Fund will invest in
municipal securities with an emphasis on income rather than maintaining a stable
net asset value. However, the Fund attempts to limit net asset value
fluctuations.

Minnesota Tax-Free Fund

Investment Objective. The investment objective of Minnesota Tax-Free Fund is to
provide shareholders with a high level of current income exempt from both
Federal and Minnesota state income taxes (including the alternative minimum tax)
without assuming undue risk. Shares of the Fund are offered only to residents
of the State of Minnesota. There can be no assurance that the Fund will achieve
its investment objective.

Investment Policies. Substantially all the Fund's total assets normally will be
invested in investment grade municipal securities, which are debt obligations
issued by the state of Minnesota and its political subdivisions, duly
constituted authorities and corporations ("municipal securities"). Municipal
securities also include the securities issued by the various territories and
possessions of the United States, such as Puerto Rico. In order to respond to
business and financial conditions, the Fund may invest up to 20% of its assets
in instruments on which the interest is subject to taxation. See "Taxable
Investments" below, "Additional Investment Policies - Common Policies of the
Funds - Temporary Defensive Position" and "Dividends, Distributions and Tax
Matters." As a fundamental policy, except during periods when the Fund assumes a
temporary defensive position, the Fund will invest at least 80% of its total
assets in securities exempt from both Federal and Minnesota state income taxes
(including the alternative minimum tax).

The yields of Minnesota municipal securities depend on, among other things,
conditions in the Minnesota municipal bond market and fixed income markets
generally, the maturity of the obligation, the rating of the issue and the size
of a particular offering. In some cases, Minnesota issues may have yields that
are slightly less than the yields of municipal obligations of issuers located in
other states because of the favorable Minnesota state tax exemption on Minnesota
issues. See "Dividends, Distributions and Tax Matters - Tax- Exempt
Distributions - Minnesota Tax-Free Fund" for a description of certain tax
matters that may effect the Fund and its shareholders.

There are no restrictions on the Fund's average portfolio maturity, but the
average dollar-weighted maturity is currently expected to be greater than 10
years. Average portfolio maturity may reach or exceed 20 years in the future.
Depending on market conditions, however, the average dollar-weighted maturity
could be higher or lower. In general, the longer the maturity of a municipal
security, the higher the rate of interest it pays. However, a longer average
maturity is generally associated with a higher level of volatility in the market
value of a municipal security. Since the Fund's objective is to provide high
current income, the Fund will invest in municipal securities with an emphasis on
income rather than stability of the Fund's net asset value.

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Normally, at least 75% of the Fund's assets will be invested in municipal
securities that are rated within the top four grades by an NRSRO at the time of
purchase. For example, for municipal bonds, these grades are Aaa, Aa, A and Baa
in the case of Moody's Investors Service ("Moody's") and AAA, AA, A and BBB in
the case of Standard & Poor's ("S&P") and Fitch Investors Services, L.P.
("Fitch"). These securities are generally considered to be investment grade
securities, although Moody's indicates that municipal securities rated Baa have
speculative characteristics. The Fund also may invest in unrated securities
that the Adviser believes are comparable in quality to rated securities in which
the Fund may invest. A description of the rating categories of certain NRSROs
is contained in the SAI of the Fund.

Non-Investment Grade Securities. Minnesota Tax-Free Fund may invest up to 25%
of its total assets in municipal bonds rated in the fifth highest rating
category of an NRSRO (Ba by Moody's or BB by S&P or Fitch), or which are unrated
and judged by the Adviser to be of comparable quality to securities rated in the
fifth highest category. Such securities (commonly referred to as "junk bonds")
are not considered to be investment grade and have speculative or predominantly
speculative characteristics. Non-investment grade, high risk securities provide
poor protection for payment of principal and interest but may have greater
potential for capital appreciation than do higher quality securities. These
lower rated securities involve greater risk of default or price changes due to
changes in the issuers' creditworthiness than do higher quality securities. The
market for these securities may be thinner and less active than that for higher
quality securities, which may affect the price at which the lower rated
securities can be sold. In addition, the market prices of lower rated
securities may fluctuate more than the market prices of higher quality
securities and may decline significantly in periods of general economic
difficulty or rising interest rates.

During its most recent fiscal year ended May 31, 1995, the Fund had 93.0% of its
average annual assets in municipal securities rated by Moody's or S&P and 7.0%
of its average annual assets in unrated investments, including cash and short-
term cash equivalents which are typically unrated. During that year, the Fund
had the following percentages of its average annual net assets invested in rated
securities: Aaa/AAA-37.0%, Aa/AA-26.0%, A/A-24.0%, Baa/BBB-6.0% and Ba/BB and
below-0.0%. For this purpose, securities with varying NRSRO ratings were
assigned the higher rating. This information reflects the average composition
of the Fund's assets for the Fund's last fiscal year and is not necessarily
representative of the Fund as of the current fiscal year or any other time.

Taxable Investments

Apart from temporary defensive purposes, each Fund may invest up to 20% of the
value of its total assets in cash equivalents the interest on which is not
exempt from Federal income tax or is treated as a preference item for purposes
of the Federal alternative minimum tax. For more information regarding the
alternative minimum tax, see "Dividends, Distributions and Tax Matters." In
addition, the Funds may hold a portion of their assets in cash and cash-
equivalents pending investment in municipal securities, to meet requests for
redemptions or to assume a temporary defensive position. With respect to Tax-
Free Income Fund, these securities include debt securities of corporate issuers
meeting the Fund's investment quality standards described above and bonds or
notes issued by or on behalf of a municipality, the interest on which is an item
of tax preference for purposes of the Federal alternative minimum tax on
individuals.

Investment Considerations and Risk Factors

Geographic Concentration. Because Colorado Tax-Free Fund and Minnesota Tax-Free
Fund invest principally in municipal securities issued by issuers within a
particular state and the state's political subdivisions, those Funds are more
susceptible to factors adversely affecting issuers of those municipal securities
than would be a comparable municipal securities portfolio having a lesser degree
of geographic concentration. In addition, to the extent it may concentrate its
investments in a particular jurisdiction, Tax- Free Income Fund will be subject
to similar risks. These risks arise from the financial condition of the state
and its political subdivisions. To the extent state or local governmental
entities are unable to meet their financial obligations, the income derived by a
Fund, its ability to preserve or realize appreciation of its portfolio assets or
its liquidity could be impaired.

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To the extent a Fund's investments are primarily concentrated in issuers located
in a particular state, the value of the Fund's shares may be especially affected
by factors pertaining to that state's economy and other factors specifically
affecting the ability of issuers of that state to meet their obligations. As a
result, the value of the Fund's assets may fluctuate more widely than the value
of shares of a portfolio investing in securities relating to a number of
different states. The ability of state, county or local governments and quasi-
government agencies to meet their obligations will depend primarily on the
availability of tax and other revenues to those governments and on their fiscal
conditions generally. The amounts of tax and other revenues available to
governmental issuers may be affected from time to time by economic, political
and demographic conditions within their state. In addition, constitutional or
statutory restrictions may limit a government's power to raise revenues or
increase taxes. The availability of Federal, state and local aid to
governmental issuers may also affect their ability to meet obligations.
Payments of principal of and interest on private activity securities will depend
on the economic condition of the facility or specific revenue source from whose
revenues the payments will be made, which in turn could be affected by economic,
political or demographic conditions in the state.

The Colorado constitution restricts the ability of the state and local
governments to increase taxes, revenues, debt and spending. Prior voter
approval is required to impose any new tax or tax rate increase or to issue any
multiple-fiscal year debt. The future impact on the financial operations and
obligations of the state and local governments cannot be determined at this
time. The Adviser will continue to monitor the situation closely and will, if
necessary, seek the advice of counsel concerning its effect on instruments being
considered for purchase by the Fund. A further discussion of potential risks of
investment in Colorado municipal securities is contained in the SAI of the Fund.

Related Issuers. Some municipal securities are related in such a way that an
economic, business or political development affecting one municipal security
would have a similar effect on another municipal security. For example, the
repayment of different obligations may depend on similar types of projects or on
projects located in the same state. Except as otherwise noted, each Fund will
not invest more than 25% of its total assets in securities that are so related
or invest more than 25% of its total assets in a single type of revenue bond
(e.g. electric revenue, housing revenue, etc.).

Diversification Matters. Each of Colorado Tax-Free Fund and Minnesota Tax-Free
Fund is non-diversified, which means that they each have greater latitude than a
diversified fund with respect to the investment of their assets in the
securities of relatively few municipal issuers. As non-diversified portfolios,
these Funds may present greater risks than a diversified fund. However, each
Fund intends to comply with applicable diversification requirements of the
Internal Revenue Code. These requirements provide that, as of the last day of
each fiscal quarter, with respect to 50% of its assets, a Fund may not (i) own
the securities of a single issuer, other than a U.S. Government security, with a
value of more than 5% of the Fund's total assets or (ii) own more than 10% of
the outstanding voting securities of a single issuer.

Except for investment in U.S. Government Securities, no more than 25% of the
total assets of Colorado Tax-Free Fund, and no more than 20% of the total assets
of Minnesota Tax-Free Fund, may be invested in securities of any one issuer.
These limitations do not apply to securities of an issuer payable solely from
the proceeds of escrowed U.S. Government Securities.

BALANCED FUNDS

Conservative Balanced Fund, Moderate Balanced Fund and Growth Balanced Fund each
invest in a balanced portfolio of fixed income and equity securities.
Conservative Balanced Fund has the smallest equity securities component of the
three Funds and is the most conservative Balanced Fund. Growth Balanced Fund
has the largest equity securities component of the three Balanced Funds and is
the most aggressive of these Funds. 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 - Income Equity Fund, Index Fund, Large Company
Growth Fund and International Fund - with investment in a small company
investment style (the "Small Company style") in order to reduce the risk of
relying on a single equity investment style. See "Investment Objectives and
Policies - Equity Funds - Diversified Equity Fund." The

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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 fixed income investment styles - the investment styles of Stable Income
Fund and Total Return Bond Fund (the "Stable Income Fund style" and the "Total
Return Bond Fund style," respectively), a managed fixed income style (the
"Managed Fixed Income style"), a positive return investment style (the "Positive
Return style") and a short maturity investment style (the "Short Maturity
style"). Moderate Balanced Fund uses four fixed income investment styles - the
Stable Income Fund style, the Total Return Bond Fund style, the Managed Fixed
Income style and the Positive Return style. Growth Balanced Fund uses three
fixed income investment styles - the Total Return Bond Fund style, the Managed
Fixed Income style and the Positive Return 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 base allocation among investment styles for each Balanced Fund is set forth
below. As market values of the Fund's 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 Growth Balanced Fund. For example, the Total Return
Bond Fund style, the Managed Fixed Income style and the Positive Return style of
Growth Balanced Fund, each of which is used currently with respect to 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 percent 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

Investment Objective. The investment objective of the Fund 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 emphasizes safety of principal through limited exposure
to equity securities. The Fund has the smallest equity securities position of
the three Balanced Funds. There can be no assurance that the Fund will achieve
its investment objective.

Investment Policies. The Fund is designed for investors seeking to invest in
fixed income securities with limited exposure to equity securities. The fixed
income portion of the Fund's portfolio uses the Total Return Bond Fund style,
the Stable Income Fund style, the Managed Fixed Income style, the Positive
Return style and the Short Maturity style, in order to reduce the risk of
relying on a single fixed income investment style.

The Fund generally invests the following percentages of its total assets in
accordance with the indicated investment styles (as noted under "Investment
Objectives and Policies - Equity Funds - Diversified Equity Fund" below,
Diversified Equity Fund generally invests its assets using five different equity
investment styles):

Conservative Diversified Equity Fund style 25%
Balanced Fund Index Fund style 25%, Income Equity Fund style 25%,
Allocation Large Company Growth Fund style 25%,
Small Company style 10%, International Fund style 15%
Managed Fixed Income style 16 2/3%

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Total Return Bond Fund style 16 2/3%
Positive Return style 16 2/3%
Stable Income Fund style 15%
Short Maturity style 10%
TOTAL FUND ASSETS 100%

Investors should refer to the descriptions of Diversified Equity Fund (and the
five investment styles used by that Fund), Stable 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 which relate to the
portions of Conservative Balanced Fund that are invested using similar
investment styles. Investors should refer to the description of Diversified
Bond Fund for a discussion of the Managed Fixed Income style and the Positive
Return Style. The investment policies related to the Short Maturity 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,
Total Return Bond Fund and Stable Income Fund and the portfolio managers who
manage assets allocated to the Managed Fixed Income style, the Positive Return
style and the Short Maturity style. The percentage of a Fund's assets invested
using a particular investment style may be changed at any time by the Adviser in
response to market or other conditions.

Moderate Balanced Fund

Investment Objective. The investment objective of the Fund 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. There can be no
assurance that the Fund will achieve its investment objective.

Investment Policies. The 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 Managed Fixed Income
style, the Total Return Bond Fund style, the Stable Income Fund style and the
Positive Return style in order to reduce the risk of relying on a single fixed
income investment style.

Moderate Diversified Equity Fund style 25%
Balanced Fund Index Fund style 25%, Income Equity Fund style 25%,
Allocation Large Company Growth Fund style 25%,
Small Company style 10%, International Fund style 15%
Total Return Bond Fund style 15%
Managed Fixed Income style 15%
Positive Return style 15%
Stable Income Fund style 15%
TOTAL FUND ASSETS 100%

Investors should refer to the descriptions of Diversified Equity Fund (and the
five investment styles used by that 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 their investment
styles. Investors should refer to the description of Diversified Bond Fund for
discussions of the Managed Fixed Income style and the Positive Return style.
The management of the Fund's assets is divided among the Fund's eleven portfolio
managers - the portfolio managers of Diversified Equity Fund, Total Return Bond
Fund, Stable Income Fund and the portfolio manager who manages assets allocated
to the Managed Fixed Income style and the Positive Return style. The percentage
of a Fund's assets invested using a particular investment style may be changed
at any time by the Adviser in response to market or other conditions.

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Growth Balanced Fund

Investment Objective. The investment objective of the Fund 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. There can be no
assurance that the Fund will achieve its investment objective.

Investment Policies. The 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 the Total Return Bond Fund
style, Managed Fixed Income style and the Positive Return style in order to
reduce the risk of relying on a single fixed income investment style.

The Fund generally invests the following percentages of its total assets in
accordance with the indicated investment styles (as noted under "Investment
Policies - Equity Funds - Diversified Equity Fund" below, Diversified Equity
Fund generally invests its assets using five different equity investment
styles):

Growth Diversified Equity Fund style 25%
Balanced Fund Index Fund style 25%, Income Equity Fund style 25%,
Allocation Large Company Growth Fund style 25%,
Small Company style 10%, International Fund style 15%
Total Return Bond Fund style 11 2/3%
Managed Fixed Income style 11 2/3%
Positive Return style 11 2/3%
TOTAL FUND ASSETS 100%

Investors should refer to the descriptions of Diversified Equity Fund (and the
five investment styles used by that 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 which relate to the portions of Growth
Balanced Fund that are invested using their investment styles. Investors should
refer to the description of Diversified Bond Fund for discussions of the Managed
Fixed Income style and the Positive Return syle. Management of the Fund's
assets is divided among the Fund's ten portfolio managers - the portfolio
managers of Diversified Equity Fund and Total Return Bond Fund and the portfolio
manager who manages assets allocated to the Managed Fixed Income style and the
Positive Return style. The percentage of a Fund's assets invested using a
particular investment style may be changed at any time by the Adviser in
response to market or other conditions.

The Short Maturity style seeks to provide a higher total return than is
generally available from money market funds. The assets allocated to the Short
Maturity style will be invested in a portfolio of high-quality fixed and
variable rate fixed income securities. This investment style 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 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 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.

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All securities allocated to the Short Maturity style will be, at the time of
purchase, (i) rated in one of the two highest short-term rating categories by
two 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, when
investing in this style the Adviser may enter into interest rate, currency and
mortgage swap agreements and may purchase and sell interest rate caps, floors
and collars. With respect to assets invested in this style, the Adviser 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
Adviser's ability to use these strategies with respect to this style may be
limited by market considerations, regulatory limits and tax considerations. In
investing in accordance with this style, the Adviser 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 respective 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."

When the assets and revenues of an issuing agency, authority, instrumentality or
other political subdivision are separate from those of the government creating
the issuing entity and a security is backed only by the assets and revenues of
the entity, the entity will be deemed to be the sole issuer of the security.
Similarly, in the case of a security issued by or on behalf of public
authorities to finance various privately operated facilities, such as an
industrial development bond, that is backed only by the assets and revenues of
the non-governmental user, the non-governmental user will be viewed as the sole
issuer of the bond.

EQUITY FUNDS

To achieve their investment objectives, the Equity Funds invest primarily in
common stocks and other equity securities. International Fund currently
invests exclusively in the 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 circumstances, each of the Equity Funds will invest substantially all of
its assets, but not less than 65 percent of its total assets, in equity
securities.

Income Equity Fund

Investment Objective. The investment objective of the Fund is to provide both
long-term capital appreciation in line with that of the overall equity
securities markets and above-average dividend income. There can be no assurance
that the Fund will achieve its investment objective.

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Investment Policies. The Fund invests primarily in the common stock of large,
high-quality domestic companies that 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 capitalizations are 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 Objectives and 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

Investment Objective. The investment objective of the Fund is to duplicate the
return of the Standard & Poor's 500 Composite Stock Price Index. There can be
no assurance that the Fund will achieve its investment objective.

Investment Policies. The 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 Fund may utilize index futures contracts to a limited extent. 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 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 may be used for several reasons: to simulate full investment in the
underlying index while retaining a cash balance for fund management purposes, to
facilitate trading or to reduce transaction costs. For a description of futures
contracts and their risks, see "Appendix A: Investments, Investment Strategies
and Risk Considerations - Futures Contracts and Options."

The Index tracks the total return performance of 500 common stocks which are
chosen for inclusion in the Index by Standard & Poor's ("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.

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.

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ValuGrowth Stock Fund

Investment Objective. The investment objective of the Fund is to seek capital
appreciation by investing in a diversified portfolio of common stock and
securities convertible into common stock which may be rated or unrated. There
can be no assurance that the Fund will achieve its investment objective.

Investment Policies. The Fund invests primarily in medium- and large-
capitalization companies (companies with a market capitalization of greater than
$500 million) that, in the view of the Adviser, possess above average growth
characteristics and appear to be undervalued. Stock market capitalizations are
calculated by multiplying the total number of common shares outstanding by the
market price per share of the stock.

The Fund seeks to identify and invest in companies whose earnings and dividends
the Adviser believes will grow both faster than inflation and faster than the
economy in general and whose growth the Adviser believes has not yet been fully
reflected in the market price of the companies' shares. In seeking these
investments, the Adviser relies primarily on a company by company analysis
(rather than on a broader analysis of industry or economic sector trends) and
considers such matters as the quality of a company's management, the existence
of a leading or dominant position in a major product line or market, the
soundness of the company's financial position, and the maintenance of a
relatively high rate of return on invested capital and shareholder's equity.
Once companies are identified as possible investments, the Adviser applies a
number of valuation measures to determine the relative attractiveness of each
company and selects those companies whose shares are most attractively priced.

The Fund may also invest in selected companies that the Adviser regards as
special situations. Special situation companies often have the potential for
significant future earnings growth but have not performed well in the recent
past. These situations may include management turnarounds, corporate or asset
restructurings, or significantly undervalued assets. Such investments are the
exception, not the rule, and must satisfy the Adviser's valuation parameters.

The Fund may invest up to 20 percent of its assets in securities of foreign
issuers and in sponsored and unsponsored American Depositary Receipts. For a
description of the investment considerations and risk factors of investing in
foreign securities, see "Investment Objectives and Policies - Equity Funds -
International Fund - Foreign Investment Considerations and Risk Factors" below.
The Fund also may invest in convertible securities, including convertible debt
and convertible preferred stock, that may be rated in any category by an NRSRO
or may be unrated.

Diversified Equity Fund

Investment Objective. The investment objective of the Fund is to provide long
term capital appreciation while moderating annual return volatility by
diversifying its investments in accordance with different equity investment
styles. There can be no assurance that the Fund will achieve its investment
objective.

Investment Policies. The Fund follows a "multi-style" approach 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 (the "Small Company
style") that in turn utilizes the investment style of Small Company Stock Fund
(the "Small Company Stock Fund style") and small company growth and value
investment styles (the "Small Company Growth style" and the "Small Company Value
style," respectively). The Fund utilizes different equity investment styles in
order to reduce the risk of price and return volatility associated with reliance
on a single investment style. 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 generally invests the following percentages of its
total assets in the indicated investment styles:

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Diversified Index Fund style 25%
Equity Fund Income Equity Fund style 25%
Allocation Large Company Growth Fund style 25%
Small Company style 10%
International Fund style 15%
TOTAL FUND ASSETS 100%

Investors should refer to the descriptions below of each of the foregoing Equity
Funds and Small Company style 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 eight
portfolio managers, including five who are also the portfolio managers for
corresponding Equity Funds. Three portfolio managers jointly co-manage the
assets allocated to the Small Company style. The percentage of a Fund's assets
invested using a particular investment style may be changed at any time by the
Adviser in response to market or other conditions.

Growth Equity Fund

Investment Objective. The investment objective of the Fund 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. There can be no
assurance that the Fund will achieve its investment objective.

Investment Policies. The Fund follows a "multi-style" approach 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 (the "Small Company style") that in turn utilizes the
investment style of Small Company Stock Fund (the "Small Company Stock Fund
style") and small company growth and value investment styles (the "Small Company
Growth style" and the "Small Company Value style," respectively). The Fund
utilizes different equity investment styles in order to reduce the risk of price
and return volatility associated with reliance on a single investment style. 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 generally invests the following percentages of its
total assets in the indicated investment styles:

Growth Large Company Growth Fund style 35%
Equity Fund Small Company style 35%
Allocation International Fund style 30%
TOTAL FUND ASSETS 100%

Investors should refer to the descriptions below of each of the foregoing Equity
Funds and the Small Company style 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, including three who are also the portfolio managers for
corresponding Equity Funds. Three portfolio managers jointly co-manage the
assets allocated to the Small Company style. The percentage of a Fund's assets
invested using a particular investment style may be changed at any time by the
Adviser in response to market or other conditions.

Large Company Growth Fund

Investment Objective. The investment objective of the Fund 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.
There can be no assurance that the Fund will achieve its investment objective.

Investment Policies. The Fund invests primarily in the common stock of large,
high-quality domestic companies that have superior growth potential. Large
companies are those whose market capitalizations are at least $500

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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 forward contracts. See
"Investment Objectives and 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.

Small Company Stock Fund and the Small Company style

Investment Objectives. Small Company Stock Fund's investment objective is long-
term capital appreciation. The Fund pursues this objective by investing
primarily in the common stock of small and medium size domestic companies that
have market capitalizations well below that of the average company in the
Standard & Poor's 500 Composite Stock Price Index. There can be no assurance
that the Fund will achieve its investment objective. The Small Company style
also seeks long-term capital appreciation by investing primarily in small and
medium size domestic companies.

Investment Policies. Small Company Stock Fund and the Small Company style
invest primarily in the common stock of small and medium size domestic
companies that have market capitalizations well below that of the average
company in the Standard & Poor's 500 Composite Stock Price Index. Market
capitalization refers to the total market value of a company's outstanding
shares of common stock. Small Company Stock Fund considers small and medium
size 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
will be primarily in companies with capitalizations of less than $750 million.
Under normal circumstances, Small Company Stock Fund and the components of the
other Funds that invest in the Small Company style will invest at least 65
percent of their total assets in common stock issued by small and medium size
companies.

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.

Small Company Stock 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 Objectives and 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 an NRSRO, such
as Moody's Investors Service, Standard & Poor's and Fitch Investors Services,
L.P., 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 and Risk Considerations - Fixed
Income Investments and Their Characteristics." The convertible securities may
be rated in any category by an NRSRO or may be unrated.

In selecting securities allocated to the Small Company style component of Growth
Equity Fund, Diversified Equity Fund and the Balanced Funds, the Adviser
invests in accordance with the Small Company Stock Fund style, the Small
Company Growth style and the Small Company Value style, currently allocating 1/3
of its assets to each style.

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In selecting securities for the Small Company Growth style, 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 Adviser may invest up to
10 percent of the total assets allocated to this style in foreign securities and
in American Depository Receipts and other similar securities of foreign issuers.
See "Investment Objectives and Policies - Equity Funds - International Fund -
Foreign Investment Risks and Considerations." The Adviser may not invest more
than 10 percent of the total assets allocated to this style in the securities of
a single issuer. In investing assets in accordance with this style, the Adviser
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 for the Small Company Growth style, the Adviser consider small and
medium size companies to be those whose market capitalizations are less than
$750 million at the time the securities of the company are purchased.

In selecting portfolio investments, the Small Company Value style focuses on
small and medium size companies whose securities are conservatively valued in
the marketplace relative to their underlying fundamentals. Value investing
provides investors with a less aggressive way to take advantage of growth
opportunities of small companies. In investing in accordance with this style,
the Adviser will seek to invest in stocks priced low relative to the stock of
comparable companies, determined by price/earnings ratios, cash flows or other
measures. Value investing therefore may reduce downside risk while offering
potential for capital appreciation as a stock gains favor among other investors
and its stock price rises. In selecting securities for the Small Company Value
style, the Adviser considers small and medium size companies to be those whose
market capitalizations are less than $1 billion at the time the securities of
the company are purchased.

Prior to December 11, 1995, the Small Company style did not allocate any assets
to the Small Company Value style. The allocation of 1/3 of assets invested in
the Small Company style to the Small Company Value style is expected to be
complete by June 1, 1996. The Small Company style may in the future allocate
its assets to additional investment styles.

Small Company Investment Risks and Considerations. The companies in which Small
Company Stock Fund and the Small Company 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 a Fund will be successful in
identifying companies whose securities will appreciate.

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Contrarian Stock Fund

Investment Objective. The investment objective of the Fund is to seek capital
appreciation by investing primarily in common stocks for which the Adviser
believes there is significant potential for price appreciation. There can be no
assurance that the Fund will achieve its investment objective.

Investment Policies. The basic premise of the Adviser's "contrarian" investment
approach is to purchase stocks whose prices are temporarily depressed, either
because they are out-of-favor with, or simply ignored by, the investment
community. The Adviser believes that security prices change more than
fundamental investment values, as 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, stocks that the Adviser
considers for purchase will tend to have significantly depressed prices and
relatively low price/book value ratios.

The Fund may invest up to 20% of its assets in securities of foreign issuers and
in sponsored and unsponsored American Depositary Receipts. For a description of
the investment considerations and risk factors of investing in foreign
securities, see "Investment Objectives and Policies - Equity Funds -
International Fund - Foreign Investment Considerations and Risk Factors" below.
The Fund may also invest in convertible securities, including convertible debt
and convertible preferred stock, that may be rated in any category by an NRSRO
or may be unrated.

The Fund also may invest in corporate debt obligations and U.S. Government
Securities. These instruments may have fixed, floating or variable rates of
interest. These debt securities must be rated in one of the three highest
rating categories by an NRSRO or, if unrated by any NRSRO, judged by the Adviser
to be of comparable quality. See "Additional Investment Policies and Risk
Considerations - Fixed Income Investments and Their Characteristics."

Additional Investment Considerations and Risk Factors. 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.

International Fund

The 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 and not as a
complete investment program. The following investment objective and policies
are those of the Fund and of the Portfolio. As the Fund has the same investment
policies as the Portfolio and currently invests all of its assets in the
Portfolio, investment policies are discussed with respect to the Portfolio only.

Investment Objective. The investment objective of the Fund is to provide long-
term capital appreciation by investing directly or indirectly in high quality
companies based outside the United States. The Fund currently pursues its
investment objective by investing all of its investable assets in the Portfolio,
which has the same investment objective. There can be no assurance that the
Fund or the Portfolio will achieve its investment objective.

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<PAGE>

Investment Policies. Under normal circumstances, the Portfolio will invest
substantially all of its assets, but not less than 65% of its net assets, in
equity securities of companies domiciled outside the United States. The
Portfolio selects its investments on the basis of their potential for capital
appreciation without regard to current income. The Portfolio may also invest in
the securities of domestic 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. The Portfolio's investments 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, the Portfolio will invest only in
securities of companies and governments in countries that Schroder, in its
judgment, considers both politically and economically stable. The Portfolio has
no limit on the amount of its assets which may be invested in any one type of
foreign instrument or in any foreign country; however, to the extent the
Portfolio concentrates its assets in a foreign country, it will incur greater
risks.

The Portfolio may purchase preferred stock and convertible debt securities,
including convertible preferred stock, and may purchase sponsored and
unsponsored American Depository Receipts, European Depository Receipts or other
similar securities of foreign issuers. The 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 the Portfolio from adverse movements in
currency values, the contracts also limit possible gains from favorable
movements.

Foreign Exchange Contracts. Changes in foreign currency exchange rates will
affect the U.S. dollar values of securities denominated in currencies other than
the U.S. dollar. The rate of exchange between the U.S. dollar and other
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, the
Portfolio usually effects currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign exchange market. The Portfolio
incurs foreign exchange expenses in converting assets from one currency to
another.

The Portfolio 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 the Portfolio has investments may suffer a decline against the
U.S. dollar. 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 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 Portfolio
does not intend to maintain a net exposure to such contracts where the
fulfillment of the Portfolio's obligations under such contracts would obligate
the Portfolio to deliver an amount of foreign currency in excess of the value of
the Portfolio's portfolio securities or other assets denominated in the
currency. The Portfolio 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 Schroder fails to predict currency values
correctly. The Portfolio has no present intention to enter into currency
futures or options contracts but may do so in the future.

Foreign Investment Considerations and Risk Factors. 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.

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Moreover, dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income available for distribution to the
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 U.S. securities.

Changes in foreign exchange rates will also affect the value in U.S. dollars of
all foreign currency-denominated securities held by the 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 the 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 occurring after the Portfolio's income has been
earned and computed in U.S. dollars may require the Portfolio to liquidate
portfolio securities to acquire sufficient U.S. dollars to make a distribution.
Similarly, if the exchange rate declines between the time the Portfolio incurs
expenses in U.S. dollars and the time such expenses are paid, the Portfolio may
be required to liquidate additional foreign securities to purchase the U.S.
dollars required to meet such expenses.

4. ADDITIONAL INVESTMENT POLICIES AND
RISK CONSIDERATIONS

GENERAL POLICY INFORMATION

Each Fund's (and the Portfolio's) investment objective and all investment
policies of the Funds (and the Portfolio) that are designated as fundamental may
not be changed without approval of the holders of a majority of the outstanding
voting securities of the Fund (or the Portfolio). A majority of outstanding
voting securities means the lesser of 67% of the shares present or represented
at a shareholders meeting at which the holders of more than 50% of the
outstanding shares are present or represented, or more than 50% of the
outstanding shares. Except as otherwise indicated, investment policies of the
Funds are not deemed to be fundamental and may be changed by the Trust's Board
of Trustees (the "Board") without shareholder approval. Likewise, non-
fundamental investment policies of the Portfolio may be changed by Core Trust's
board of trustees without shareholder approval. Unless otherwise indicated
below, the discussion below of the investment policies of the Funds refers, in
the case of International Fund, to the investment policies of the Portfolio (and
reference to the Portfolio refers to International Fund). For more information
concerning shareholder voting, see "Other Information - The Trust and Its Shares
- - Shareholder Voting and Other Rights" and "Other Information - Core Trust
Structure." A further description of the Funds' investment policies, including
additional fundamental policies, is contained in the SAIs.

Each investment adviser monitors the creditworthiness of counterparties to the
Funds' transactions and intends to enter into a transaction only when it
believes that the counterparty presents minimal credit risks and the benefits
from the transaction justify the attendant risks. As used herein, the term U.S.
Government Securities means obligations issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or instrumentalities.

Each Fund, except for Income Fund, Tax-Free Income Fund, Colorado Tax-Free Fund,
Minnesota Tax-Free Fund and ValuGrowth Stock Fund reserves the right to invest -
through a structure similar to that of International Fund - all or a portion of
its assets in shares of a diversified, open-end, management investment company
with an investment objective and investment policies substantially similar to
its own.

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 SAIs.

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COMMON POLICIES OF THE FUNDS

Borrowing

As a fundamental policy, each Fund (other than the Portfolio) may borrow money
from banks or by entering into reverse repurchase agreements and will limit
borrowings to amounts not in excess of 33 1/3% of the value of the Fund's total
assets. As a fundamental policy, the Portfolio may borrow money for temporary
or emergency purposes, including the meeting of redemption requests, and will
limit borrowings to amounts not in excess of 33 1/3% of the value of the
Portfolio's total assets. Borrowing for other than temporary or emergency
purposes or meeting redemption requests may not exceed 5% of the value of each
Fund's total assets except in the case of Intermediate Government Income Fund,
Diversified Bond Fund and, with respect to their assets invested in Managed
Fixed Income style, the Balanced Funds. Each Fund may enter reverse repurchase
agreements (which are considered borrowings by each Fund but not the Portfolio),
transactions in which a 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. 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 Government Income 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 Fund's 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.

Diversification and Concentration

Each Fund (other than Colorado Tax-Free Fund and Minnesota Tax-Free Fund) is
diversified as that term is defined in the Investment Company Act of 1940 (the
"1940 Act"). As a fundamental policy, with respect to 75% of its assets, none
of the Funds that are diversified may purchase a security (other than a U.S.
Government Security or shares of investment companies) if, as a result, (i) more
than 5% 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% of the outstanding voting
securities of any single issuer. Each Fund 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% 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 or repurchase agreements covering U.S. Government
Securities.

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 of the Fund's net assets
taken at current value would be invested in securities which are not readily
marketable. Illiquid securities are securities that cannot be disposed of
within seven days in the ordinary course of business at approximately the amount
at which the Fund has valued the securities and include, among other things,
repurchase agreements not entitling the holder to payment within seven days and
restricted securities (other than those determined to be liquid pursuant to
guidelines established by the Board or, in the case of the Portfolio, Core
Trust's board of trustees).

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Repurchase Agreements and Lending of Portfolio Securities

Each Fund may seek additional income by entering into repurchase agreements or
by lending securities from its portfolio to brokers, dealers and other financial
institutions. These investments may entail certain risks not associated with
direct investments in securities. For instance, in the event that bankruptcy or
similar proceedings were commenced against a counterparty in these transactions
or a counterparty defaulted on its obligations, a Fund might suffer a loss.

Repurchase agreements are 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 one to seven days later. The
resale price reflects a market rate of interest that is not related to the
coupon rate or maturity of the purchased security. When a Fund lends a
security, it receives interest from the borrower or from investing cash
collateral. The Trust maintains possession of the purchased securities and any
underlying collateral in these transactions, the total market value of which on
a continuous basis is at least equal to the repurchase price or value of
securities loaned, plus accrued interest. The Funds may pay fees to arrange
securities loans and each Fund will, as a fundamental policy, limit securities
lending to not more than 33 1/3% of the value of its total assets.

Fixed Income Investments and Their Characteristics

Although each Fund (other than Minnesota Tax-Free 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. 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 specified by
their investment policies. All fixed income securities, including U.S.
Government Securities, can change in value when there is a change in interest
rates or the issuers actual or perceived creditworthiness or ability to meet its
obligations.

The market value of the interest-bearing debt securities held by the Funds,
including municipal securities, 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 (and duration) 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 markets' perception of an issuer's creditworthiness will
also affect the market value of the debt securities of that issuer. Obligations
of issuers of debt securities, including municipal issuers, are also subject to
the provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors which may restrict the ability of any issuer to pay, when
due, the principal of and interest on its debt securities. The possibility
exists that, the ability of any issuer to pay, when due, the principal of and
interest on its debt securities may become impaired.

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 Funds'
investment objective.

Variable and Floating Rate Securities. The securities in which the Funds invest
(including mortgage-related securities) may have variable or floating rates of
interest. 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. Similar 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

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<PAGE>

of interest or index. Certain variable rate securities (including mortgage-
related securities) pay interest at a rate that varies inversely to prevailing
short-term interest rates (sometimes referred to as "inverse floaters"). For
instance, upon reset the interest rate payable on a security may go down when
the underlying index has risen. During times when short-term interest rates are
relatively low as compared to long-term interest rates a Fund may attempt to
enhance its yield by purchasing inverse floaters. Certain inverse floaters may
have an interest rate reset mechanism that multiplies the effects of changes in
the underlying index. This form of leverage may have the effect of increasing
the volatility of the security's market value while increasing the security's,
and thus the Fund's, yield. Total Return Bond Fund limits its investment in
variable and floating rate securities to 5% of its assets.

There may not be an active secondary market for certain floating or variable
rate instruments (particularly inverse floaters and similar instruments) which
could make it difficult for a Fund to dispose of the instrument during periods
that the Fund is not entitled to exercise any demand rights (such as puts) it
may have. A Fund could, for this or other reasons, suffer a loss with respect
to an instrument. The Adviser monitors the liquidity of each Fund's investment
in variable and floating rate instruments, but there can be no guarantee that an
active secondary market will exist.

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.

Rating Matters

The Funds' investments are subject to credit risk relating to the financial
condition of the issuers of the securities that each Fund holds. To limit
credit risk, each Fund (other than Minnesota Tax-Free Fund) will generally buy
debt securities that are rated in the top four long-term rating categories by an
NRSRO or in the top two short-term rating categories by an NRSRO, although
certain Funds have greater restrictions. Accordingly, the lowest permissible
long-term investment grades for corporate bonds, including convertible bonds,
are Baa in the case of Moody's Investor Service ("Moody's") and BBB in the case
of Standard & Poor's ("S&P") and Fitch Investors Services, L.P. ("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.

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 determines
that retaining the security is in the best interests of the Fund. Because a
downgrade often results in a reduction in the market price of the security, sale
of a downgraded security may result in a loss.

Temporary Defensive Position

When business or financial conditions warrant, each Fund may assume a temporary
defensive position and invest without limit in cash or prime quality cash
equivalents, including (i) short-term U.S. Government Securities, (ii)
certificates of deposit, bankers acceptances and interest-bearing savings
deposits of commercial banks doing business in the United States, (iii)
commercial paper, (iv) repurchase agreements and (v) shares of money market
funds registered under the 1940 Act within the limits specified therein. During
periods when and to the extent that a Fund has assumed a temporary defensive
position, it may not be pursuing its investment objective. Prime quality
instruments are those that are rated in one of the two highest short-term rating
categories by an NRSRO or, if not

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<PAGE>

rated, determined by the investment adviser to be of comparable quality. Apart
from temporary defensive purposes, a Fund may at any time invest a portion of
its assets in cash and cash equivalents as described above. Except during
periods when the Fund assumes a temporary defensive position, each Equity Fund
will have at least 65% of its total assets invested in common stock. The
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.

When a Tax-Exempt Fixed Income Fund assumes a temporary defensive position, it
is likely that its shareholders will be subject to Federal and applicable state
income taxes on a greater portion of their income dividends received from the
Fund.

Portfolio Transactions

The investment advisers place orders for the purchase and sale of assets they
manage with brokers and dealers selected by and in the discretion of the
respective adviser. The investment advisers seek "best execution" for all
portfolio transactions, but a Fund may pay higher than the lowest available
commission rates when an investment adviser believes it is reasonable to do so
in light of the value of the brokerage and research 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 a Fund that
invests in foreign securities than would be the case for comparable transactions
effected on U.S. securities exchanges.

Subject to the Funds' policy of obtaining "best execution," each investment
adviser and, in the case of Small Company Stock Fund, Crestone, may employ
broker-dealer affiliates of the investment 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 Portfolio, 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 the investment adviser directing the transaction receive
brokerage transactions in recognition of research services provided to the
adviser. The investment advisers may effect transactions for the Funds (or the
portfolio) through brokers who sell Fund shares. The Funds have no obligation to
deal with any specific broker or dealer in the execution of portfolio
transactions.

The frequency of portfolio transactions of a Fund (the portfolio turnover rate)
will vary from year to year depending on many factors. From time to time a Fixed
Income Fund or Tax-Exempt Fixed Income Fund may engage in active short-term
trading to take advantage of price movements affecting individual issues, groups
of issues or markets. The Funds' portfolio turnover is reported under Financial
Highlights. Schroder anticipates that the annual portfolio turnover rate in the
Portfolio will be less than 100%. An annual portfolio turnover rate of 100%
would occur if all of the securities in the Portfolio were replaced once in a
period of one year. Higher portfolio turnover rates may result in increased
brokerage costs to a Fund or the Portfolio and a possible increase in short-term
capital gains or losses. Tax rules applicable to short-term trading may effect
the timing of a Fund's portfolio transactions or its ability to realize short-
term trading profits or establish short-term positions.

5. MANAGEMENT OF THE FUNDS

The business of the Trust is managed under the direction of the Board and the
business of Core Trust is managed under the direction of Core Trust's board of
trustees. The Board formulates the general policies of the Funds and meets
periodically 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 Board consists of
seven members and the board of trustees of the Core Trust consists of four
members. The SAIs contain general background information about the Trustees and
Officers of the Trust and of Core Trust.

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INVESTMENT ADVISORY SERVICES

Norwest Investment Management

Subject to the general supervision of the Board, Norwest Investment Management
makes investment decisions for the Funds (except International 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, a subsidiary of Norwest
Corporation since 1929, which is a multi-bank holding company that was
incorporated under the laws of Delaware in 1929. As of December 31, 1995,
Norwest Corporation was the 11th largest bank holding company in the United
States in terms of assets. As of that date, the Adviser managed or provided
investment advice with respect to assets totaling approximately $23 billion.

Crestone Capital Management, Inc.

To assist Norwest in carrying out its obligations 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 capitalizations to
various clients, including institutional investors. As of October 1, 1995,
Crestone managed assets with a value of approximately $300 million.

Pursuant to the investment subadvisory agreement, Crestone makes investment
decisions for the 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. This compensation does not increase the amount paid by the
Trust to the Adviser pursuant to the Adviser's investment advisory agreement.

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,
Conservative Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund,
Diversified Equity Fund and Growth Equity 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 the Portfolio, Schroder manages the entire portfolio
of International Fund.

Schroder, whose principal business address is 787 Seventh Avenue, New York, New
York 10019, 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"), with 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 $100 billion.

Core Trust Blended Portfolios. As noted under "Summary - Investments in Core
Trust," the five Blended Funds invest their assets that 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

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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 staffs of the Adviser, Crestone and Schroder
contribute to the investment services provided to the Funds, the 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 and, unless otherwise noted, have been since inception of the Funds:

Stable Income Fund - Karl P. Tourville, Vice President of Norwest since 1989.
Mr. Tourville has been associated with Norwest since 1986.

Intermediate U.S. Government Income Fund - Marjorie H. Grace, Vice President of
Norwest since 1992. 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.

Diversified Bond Fund - There are two portfolio managers of Diversified Bond
Fund: Mr. Kinney is responsible for the Fund's assets invested in accordance
with the Total Return Bond Fund style, and Mr. Giese is responsible for the
Fund's assets invested in accordance with the Managed Fixed Income style and the
Positive Return style. Cash balances of the Fund are managed by Mr. Sylvester
and Ms. White, Index Fund's portfolio managers. The backgrounds of these
portfolio managers are listed below under the descriptions relating to that Fund
and those styles.

Income Fund - Ms. Marjorie H. Grace. Ms. Grace, a Vice President of Norwest
since 1992, has served as a portfolio manager for the Fund since May 25, 1995.
For a description of Ms. Grace, see "Intermediate Government Income Fund" above.

Total Return Bond Fund - Mr. David B. Kinney. Mr. Kinney, a Vice President and
Senior Portfolio Manager at Norwest, has been associated with Norwest since
1981.

Tax-Free Income Fund - Mr. William T. Jackson. Mr. Jackson, a Vice President of
Norwest since 1993, has served as portfolio manager of the Fund since 1993.
Prior thereto, Mr. Jackson was a Senior Vice President and Institutional Sales
Manager with Norwest Investment Services from 1992-1993; a Vice President and
Municipal Bond Trading Manager from 1991-1992; and a Vice President and
Municipal Bond Trader with Kemper Securities, Inc., from 1984-1991.

Colorado Tax-Free Fund - Mr. William T. Jackson. Mr. Jackson, a Vice President
of Norwest since 1993, has served as portfolio manager of the Fund since July
1995. For a description of Mr. Jackson, see "Tax-Free Income Fund" above.

Minnesota Tax-Free Fund - Ms. Patricia D. Hovanetz, CFA. Ms. Hovanetz, a Vice
President of Norwest where she has been a municipal bond fund portfolio manager
since 1988, has served as portfolio manager of the Fund since 1991. Ms. Hovanetz
has been associated with Norwest for more than 25 years in various capacities
related to municipal bond investments.

The Blended Funds - The day-to-day management of the portfolios of Conservative
Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund, Diversified Equity
Fund and Growth Equity Fund is performed by the portfolio managers listed above
with respect to the portion of the Fund's portfolio that is invested using a
particular investment style. In addition, the portfolio managers responsible for
the management of the assets of a Blended Fund that are allocated to the Small
Company style, Positive Return style, Managed Fixed Income style and Short
Maturity style are listed below.

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As an example, there are five portfolio managers of Growth Equity Fund: Mr.
McCown, Mr. Mersky and Mr. Forester are responsible for the Fund's assets
invested in accordance with the Small Company style, Mr. Dale is responsible for
the Fund's assets invested in accordance with the Large Company Growth Fund
style and Ms. Luckyn-Malone of Schroder is responsible for the Fund's assets
invested in accordance with the International Fund style. Cash balances of each
Fund are managed by Mr. Sylvester and Ms. White, who manage several money market
portfolios of the Trust.

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 - 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
securities portfolios. Ms. White has been a Vice President and Senior Portfolio
Manger of Norwest since 1991; from 1989 to 1991, she was a Portfolio Manager at
Richfield Bank and Trust. Mr. Sylvester and Ms. White began serving as portfolio
managers of the Fund on January 1, 1996.

ValuGrowth Stock Fund - Mr. David A. Beeck, CFA and Ms. Anne C. Whitin, CFA. Mr.
Beeck, a Vice President of Norwest since 1981, has served as portfolio manager
of the Fund since its inception. Ms. Whitin, a Vice President of Norwest since
1990, has served as portfolio manager of the Fund since 1990. From 1987-1989,
Ms. Whitin was a Vice President and portfolio manager with Delafield, Harvey,
Tabell, Inc.

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.

Small Company Stock Fund - Kirk McCown, CFA. Mr. McCown, founder, President and
a Director of Crestone, which was incorporated in 1990.

Contrarian Stock Fund - Mr. W. Lon Schreur, CFA. Mr. Schreur, a Vice President
of Norwest since 1993, is also President of United Capital Management, a part of
Norwest Bank Colorado, N.A., a position that he has held for sixteen years.

International Fund/International Portfolio - International Fund invests all of
its assets in International Portfolio and, accordingly, there is currently no
portfolio manager for the Fund. Laura Luckyn-Malone, a Managing Director of
Schroder since October 1995 and a Senior Vice President and Director of Schroder
since 1990, however, is primarily responsible for managing the day-to-day
operations of International Portfolio. Prior to joining the Schroder Group, Ms.
Luckyn-Malone was a Principal of Scudder, Stevens & Clark, Inc. Ms. Luckyn-
Malone has served as portfolio manager of International Portfolio since February
1995 and also serves as portfolio manager of International Portfolio II.

Small Company style and Small Company Portfolio - Robert B. Mersky, Kirk McCown
and Thomas H. Forester. For descriptions of Mr. McCown and Mr. Mersky, see
"Small Company Stock Fund" above and "Small Company Growth style" below. Mr.
Forester is an officer of Norwest and Senior Vice President of Peregrine Capital
Management, Inc. Mr. Forester joined Peregrine in 1995. From 1992 to 1995 he
was Vice President of Lord Asset Management, an investment adviser, and prior
thereto was an analyst with the Deerpath Group. Mr. McCown commenced serving as
a portfolio manager of each Blended Fund in June 1995. Mr. Forester commenced
serving as a portfolio manager of each Blended Fund in December 1995.

Small Company Growth style - 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.

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<PAGE>

Managed Fixed Income style - 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.

Positive Return style - William D. Giese, Senior Portfolio Manager and an
officer of Norwest and Senior Vice President of Peregrine Capital Management,
Inc. For more information regarding Mr. Giese, see "Managed Fixed Income style"
above. Mr. Giese commenced serving as a portfolio manager of each Blended Fund
on June 1, 1995.

Short Maturity style - David D. Sylvester and Laurie R. White. For descriptions
of Mr. Sylvester and Ms. White, see "Index Fund" above.

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 the Portfolio)
are based on the average daily net assets of the respective Fund (or the
Portfolio) at the following annual rates:

Advisory Stable Income Fund 0.30%
Fee Rates Intermediate Government Income Fund 0.33%
Diversified Bond Fund 0.35%
Income Fund 0.50%
Total Return Bond Fund 0.50%
Tax-Free Income Fund 0.50%

Colorado Tax-Free Fund and 0.50% (first $300 million of assets)
Minnesota Tax-Free Fund 0.46% (next $400 million of assets)
0.42% (remaining assets)

Conservative Balanced Fund 0.45%
Moderate Balanced Fund 0.53%
Growth Balanced Fund 0.58%
Income Equity Fund 0.50%
Index Fund 0.15%

ValuGrowth Stock Fund and 0.80% (first $300 million of assets)
Contrarian Stock Fund 0.76% (next $400 million of assets)
0.72% (remaining assets)

Diversified Equity Fund 0.65%
Growth Equity Fund 0.90%
Large Company Growth Fund 0.65%

Small Company Stock Fund 1.00% (first $300 million of assets)
0.96% (next $400 million of assets)
0.92% (remaining assets)

International Fund 0.45%

</TABLE>

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 the Portfolio
or another investment company. As International Fund currently invests all of
its assets in the Portfolio, no fees are payable under that agreement. Pursuant
to the investment subadvisory agreements, the Adviser (and not the Trust) pays
Schroder a fee for its 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.

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With respect to the Portfolio, for services under its advisory agreement,
Schroder receives from Core Trust an advisory fee of 0.45 percent of the
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
ValuGrowth Stock Fund, Growth Equity Fund, Small Company Stock Fund and
Contrarian Stock 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.

MANAGEMENT AND DISTRIBUTION SERVICES

Forum supervises the overall management of the Trust (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. Those officers, as well as certain other officers and Trustees of the
Trust, may be directors, officers or employees of (and persons providing
services to the Trust may include) Forum, its affiliates or certain non-banking
affiliates of Norwest. As of March 1, 1996, Forum provided management and
administrative services to registered investment companies and collective
investment funds with assets of approximately $15.5 billion. Forum is a
registered broker-dealer and investment adviser and is a mem55ber of the
National Association of Securities Dealers, Inc. As of the date of this
Prospectus, Forum is controlled by John Y. Keffer, President and Chairman of the
Trust and Core Trust.

For its services and facilities, Forum receives a management fee at an annual
rate of 0.10% of the average daily net assets attributable to each class of
Stable Income Fund, Intermediate Government Income Fund, Diversified Bond Fund,
Conservative Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund, Income
Equity Fund, Index Fund, Diversified Equity Fund, Growth Equity Fund and Large
Company Growth Fund and 0.20% of the average daily net assets attributable to
each class of Income Fund, Total Return Bond Fund, Tax-Free Income Fund,
Colorado Tax-Free Fund, Minnesota Tax-Free Fund, ValuGrowth Stock Fund, Small
Company Stock Fund and Contrarian Fund. From its own resources, Forum may pay a
fee to broker-dealers or other persons for distribution or other services
related to the Funds.

Forum also serves as administrator of Core Trust and provides administrative
services for the Portfolio and each Blended Portfolio that are similar to those
provided to the Fund. For its administrative services Forum is compensated by
Core Trust with respect to the Portfolio at an annual rate of 0.15% of the
average daily net assets of the Portfolio and at an annual rate of 0.10% of the
average daily net assets of each Blended 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% of the average daily net assets of the International
Fund. Under this agreement, Norwest is responsible for compiling data and
preparing communications between the Fund and its shareholders, maintaining
requisite information flows between the Fund and Schroder, the investment
adviser to the Portfolio, monitoring and reporting to the Board on the
performance of the Portfolio and reimbursing the Fund for certain excess
expenses. No fees are payable under

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this service agreement in the event that the Fund is not completely invested in
the Portfolio or another investment company. The International Fund incurs
total management and administrative fees at a higher rate than many other mutual
funds, including other funds of the Trust, due in part to the nature of the
Fund's structure and the Fund's investment policies.

Forum may subcontract any or all of its duties to one or more qualified
subadministrators who agree to comply with the terms of Forum's management
agreement. Forum may compensate those agents for their services; however, no
such compensation may increase the aggregate amount of payments by the Trust to
Forum pursuant to the management agreement.

Pursuant to a separate distribution agreement with the Trust, Forum acts as the
agent of the Trust in connection with the offering of shares of the Funds.
Forum receives no payments for its services as distributor. In addition, none
of the Funds has adopted a Rule 12b-1 Plan applicable to the I Shares and,
accordingly, no Fund incurs any distribution expenses with respect to those
Shares. Pursuant to a separate agreement with the Trust, Forum also provides
portfolio accounting services to the each Fund and the Portfolios.

SHAREHOLDER SERVICING AND CUSTODY

Norwest serves as transfer agent and dividend disbursing agent for the Trust (in
this capacity, the Transfer Agent) pursuant to a Transfer Agency Agreement with
the Trust. 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 functions 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 affiliates of the Transfer Agent or Forum, who agree to comply with
the terms of the Transfer Agency Agreement. Sub-transfer agents and processing
agents may be Processing Organizations as described under "Purchases and
Redemptions of Shares - Purchase Procedures." The Transfer Agent is permitted
to compensate those agents for their services; however, that compensation may
not increase the aggregate amount of payments by the Trust to the Transfer
Agent. For its transfer agency services, the Transfer Agent receives from each
Fund a fee at an annual rate of 0.25% of the average daily net assets
attributable to I Shares.

Norwest also serves as the Trust's custodian and may appoint subcustodians for
the foreign securities and other assets held in foreign countries. For its
custodial services, Norwest is compensated at an annual rate of up to 0.05% of
the average daily net assets of Income Fund, Total Return Bond Fund, Tax-Free
Income Fund, Colorado Tax-Free Fund, Minnesota Tax-Free Fund, ValuGrowth Stock
Fund, Small Company Stock Fund and Contrarian Fund. Norwest currently receives
no fee for its custodial services provided to Stable Income Fund, Intermediate
Government Income Fund, Diversified Bond Fund, Conservative Balanced Fund,
Moderate Balanced Fund, Growth Balanced Fund, Income Equity Fund, Index Fund,
Diversified Equity Fund, Growth Equity Fund, Large Company Growth Fund and
International Fund, but the Funds will incur the expenses and costs of any
subcustodian. In addition, International Fund and, to the extent they invest in
the International Fund 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 the 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.

EXPENSES OF THE FUNDS

Each Fund (as well as each Portfolio of Core Trust) is obligated to pay for all
of its expenses, although Norwest 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 more
information about Fund expenses, see "Summary - Expenses of Investing in the
Funds." These expenses include but are not limited to: 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
and the Transfer Agent; fees of pricing, interest, dividend, credit and other
reporting services; costs of membership in trade associations; auditing, legal
and

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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 the Portfolio, which are borne
indirectly by International Fund's shareholders. Although the Blended Portfolios
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. Expenses of each Blended
Portfolio for the period ended October 31, 1995, as a percentage of average net
assets, were: Small Company Portfolio, 0.15%, Index Portfolio, 0.17% and
International Portfolio II, 0.25%. Each Blended Fund incurs 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, the 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. Fee waivers are voluntary
and may be reduced or eliminated at any time.

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.

6. PURCHASES AND REDEMPTIONS OF SHARES

I Shares are offered to fiduciary, agency and custodial clients of bank trust
departments, trust companies and their affiliates. Shares are continuously sold
and redeemed at a price equal to their net asset value next-determined after
acceptance of an order on every weekday except customary national holidays and
Good Friday ("Fund Business Day"). 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.

General Purchase Information

Investments in the Funds may be made either through certain financial
institutions or by an investor directly. An investor who invests in a Fund
directly will be the shareholder of record. All transactions in the Fund's
shares are effected through the Transfer Agent, which accepts orders for
redemptions and for subsequent purchases only from shareholders of record.
Shareholders of record will receive from the Trust periodic statements listing
all account activity during the statement period.

Shares of each Fund are offered without a sales charge and may be redeemed
without charge. The minimum investment in I Shares is $1,000; the minimum
subsequent investment in I Shares is $100. Shareholders who elect to purchase I
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 - Shareholder
Services - Automatic Investment Plan" and "Dividends, Distributions and Tax
Matters."

Except as set forth below with respect to purchases through financial
institutions, an investor's order will not be accepted or invested by a Fund
during the period before the Fund's receipt of immediately available funds.
Shares of the Funds become entitled to receive dividends and distributions on
the next Fund Business Day after the order is

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accepted. The Funds reserve the right to reject any subscription for the
purchase of their shares. Share certificates are issued only to shareholders of
record upon their written request and no certificates are issued for fractional
shares.

Purchase Procedures

Investors may obtain the account application form necessary to open an account
by writing the Trust at the following address:

Norwest Advantage Funds
[Name of Fund]
Norwest Bank Minnesota, N.A.
Transfer Agent
733 Marquette Avenue
Minneapolis, MN 55479-0040

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 above. 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.

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 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 Advantage Funds 0844-131
Re: [Name of Fund], I 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.

Through Financial Institutions

Shares may be purchased and redeemed through certain broker-dealers, banks and
other financial institutions ("Processing Organizations"). The Transfer Agent,
Forum or their affiliates may be Processing Organizations. Financial
institutions, including 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.

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Investors who purchase shares through a Processing Organization will be subject
to the procedures of their Processing Organization, which may include charges,
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 institution's
procedures and should read this Prospectus in conjunction with any materials and
information provided by their institution. Customers who purchase a Fund's
shares through a Processing Organization may or may not be the shareholder of
record and, subject to their institution's and the Fund's procedures, may have
Fund shares transferred into their name. There is typically a three-day
settlement period for purchases and redemptions through broker- dealers. Certain
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 confirmations and periodic statements. The Trust is not
responsible for the failure of any Processing Organization to carry out its
obligations to its customer. Certain states, such as Texas, permit shares of the
Funds to be purchased and redeemed only through registered broker-dealers,
including the Fund's distributor.

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.

GENERAL REDEMPTION INFORMATION

Fund shares may be redeemed at their net asset value on any Fund Business Day.
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). Redeemed shares are not entitled to receive dividends after the day
on which the redemption is effective.

Normally, redemption proceeds are paid immediately, but in no event later than
seven days, following acceptance of a redemption order. Proceeds of redemption
requests (and exchanges), however, will not be paid unless any check to purchase
the shares being redeemed has been cleared by the shareholder's bank, which may
take up to 15 days. This delay may be avoided by paying for shares through wire
transfers. 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 seven days after
the tender of the shares to the Fund 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, for any period during which an emergency
exists as a result of which disposal by the Fund of its portfolio securities or
determination by the Fund of the value of its net assets is not reasonably
practicable and for such other periods as the SEC may permit.

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 exchange option election or any other
option election in connection with the shareholder's account. Signature
guarantees may be provided by any bank, broker-dealer, national securities
exchange, credit union, savings association or other eligible institution that
is authorized to guarantee signatures, and is acceptable to the Transfer Agent.
Whenever a signature guarantee is required, the signature of each person
required to sign for the account must be guaranteed.

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Shareholders who wish to accomplish redemptions or exchanges by telephone must
elect those privileges. The Trust will employ reasonable procedures in order to
verify that telephone requests are genuine, including recording telephone
instructions and causing written confirmations of the resulting transactions to
be sent to shareholders. If the Trust did not employ such procedures, it could
be liable for losses arising from unauthorized or fraudulent telephone
instructions. Shareholders should verify the accuracy of telephone instructions
immediately upon receipt of confirmation statements. During times of drastic
economic or market changes, telephone redemption and exchange privileges may be
difficult to implement. In the event that a shareholder is unable to reach the
Transfer Agent by telephone, requests may be mailed or hand-delivered to the
Transfer Agent.

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 whose aggregate net asset value is less than $1,000 immediately
following any redemption.

REDEMPTION PROCEDURES

Shareholders who have invested directly in a Fund may redeem their shares as
described below. Shareholders who have invested through a Processing
Organization may redeem their shares through the Processing Organization as
described above. 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
Redemption 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 Redemption 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
Transfer Agent.

EXCHANGES

Shareholders of I Shares may exchange their shares for I Shares of the other
Funds and for Institutional Shares of the other funds of the Trust that offer
Institutional Shares and for shares of U.S. Government Fund and Treasury Fund,
money market portfolios of the Trust. It is anticipated that the Trust may in
the future create additional funds that will offer I Shares, Institutional
Shares, or other shares which will be exchangeable with I Shares of the Funds.

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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 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.

The Funds and Federal tax law treat an exchange as a redemption and a purchase.
Accordingly, a shareholder may realize a capital gain or loss depending on
whether the value of the shares redeemed is more or less than the shareholder's
basis in the shares at the time of the exchange transaction. 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 SAIs.

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 Redemption Information."

SHAREHOLDER SERVICES

Automatic Investment Plan

Under the Automatic Investment Plan which is available to shareholders that
invest in I 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 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 shareholders account totals $1,000, the Trust reserves the right to close
the account in accordance with the procedures described under "General
Redemption Information."

Individual Retirement Accounts

Except for the Tax-Exempt Fixed Income Funds, the Funds may be a suitable
investment vehicle for part or all of the assets held in individual retirement
accounts ("IRAs"). An IRA account application form may be obtained by
contacting the Trust at 800-338-1348 or 612-667-8833. 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.

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Automatic Withdrawal Plan

A shareholder of a Fund whose shares in a single account total $1,000 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

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,
provided that the information on the account application form on file with the
Trust is still applicable.

7. Dividends, Distributions
and Tax Matters

DIVIDENDS AND DISTRIBUTIONS

Shares become entitled to receive dividends on the next Fund Business Day after
acceptance of an order and are not entitled to receive dividends declared after
the day on which their redemption becomes effective. Dividends of net investment
income currently are declared and paid at least annually by each Fund in
accordance with the Fund's dividend policy. Dividends of net investment income
of each Fixed Income Fund, Tax Exempt Fixed Income Fund and Balanced Fund
currently are declared daily and paid monthly. Dividends of net investment
income are declared and paid monthly, in the case of ValuGrowth Stock Fund,
Small Company Stock Fund and Contrarian Stock Fund, quarterly, in the case of
Income Equity Fund, and annually, in the case of International Fund, Diversified
Equity Fund, Growth Equity Fund, Large Company Growth Fund and Index Fund. 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.

TAX MATTERS

Each Fund intends to continue to qualify for each fiscal year to be taxed as a
"regulated investment company" under the Internal Revenue Code of 1986 (the
"Code"). As such, the Funds will not be liable for Federal income and excise
taxes on the net investment income and capital gain distributed to their
shareholders. Because each Fund

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intends to distribute all of its net investment income and net capital gain each
year, each Fund should thereby avoid all Federal income and excise taxes.

Dividends paid by a Fund out of its net investment income (including realized
net short-term capital gain) are taxable to shareholders of the Fund as ordinary
income notwithstanding that the dividends are reinvested in additional shares of
the Fund.

Distributions of net long-term capital gain, if any, realized by a Fund are
taxable to shareholders of the Fund 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 a shareholder holds shares for six months or less and during
that period receives a distribution taxable to the shareholder as long-term
capital gain, any loss realized on the sale of the shares during that six-month
period would be a long-term capital loss to the extent of the distribution.

Similarly, any dividend or distribution received by a shareholder on shares of
an Equity Fund will have the effect of reducing the net asset value of the
shares by the amount of the dividend or distribution. Furthermore, a dividend
(with respect to an Equity Fund) or distribution (for any Fund) 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 the dividends to shareholders of
each Equity Fund, except International Fund, and a portion of each Balanced
Fund's dividends to shareholders will qualify for the dividends received
deduction for corporations. The amount of such dividends eligible for the
dividends received deduction is limited to the amount of dividends from
domestic corporations received during a Fund's fiscal year. To the extent
International Fund invests in the securities of domestic issuers, the dividends
to shareholders of the Fund may qualify for the dividends received deduction for
corporations.

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.

International Fund - International Portfolio

The 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 income
tax purposes. All interest, dividends and gains and losses of the Portfolio are
deemed to have been passed through to the Fund in proportion to its holdings of
the Portfolio, regardless of whether such interest, dividends or gains have been
distributed by the Portfolio or losses have been realized by the Portfolio.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income or other taxes. The 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 the Portfolio. Shareholders of the
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.

Tax Exempt Distributions

Dividends paid by a Tax-Exempt Fixed Income Fund out of tax-exempt interest
income earned by the Fund ("exempt-interest dividends") generally will not be
subject to Federal income tax in the hands of the Fund's shareholders. However,
persons who are substantial users or related persons thereof of facilities
financed by private activity bonds held by a Fund may be subject to Federal
income tax on their pro rata share of the interest income from such bonds and
should consult their tax advisers before purchasing shares of such Fund.

Interest on indebtedness incurred by shareholders to purchase or carry shares of
a Fund generally is not deductible for Federal income tax purposes. Under rules
of the Internal Revenue Service for determining when borrowed funds are used for
purchasing or carrying particular assets, shares of a Fund may be considered to
have been purchased or

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carried with borrowed funds even though those funds are not directly linked to
the shares. Substantially all of the dividends paid by each Tax-Exempt Fixed
Income Fund are anticipated to be exempt from Federal income taxes.

Tax-Free Income Fund. Shareholders of the Fund may be exempt from state and
local taxes on distributions of tax-exempt interest income derived from
obligations of the state and/or municipalities of the state in which they reside
but may be subject to tax on income derived from the municipal securities of
other jurisdictions. Shareholders are advised to consult with their tax advisers
concerning the application of state and local taxes to investments in the Fund
which may differ from the Federal income tax consequences described above.

Colorado Tax-Free Fund. It is anticipated that substantially all of the
dividends paid by the Fund to individuals will be exempt from Colorado personal
income tax. Dividends and distributions made by the Fund to Colorado
individuals, trusts, estates and corporations subject to the Colorado income tax
generally will be treated for Colorado income tax purposes in the same manner as
they are treated under the Code for Federal income tax purposes. Some
differences may arise for taxpayers subject to the alternative minimum tax,
because interest on Colorado private activity bonds is not a preference item for
Colorado income tax purposes. Further, Colorado has no corporate alternative
minimum tax. Because the Fund may, except as indicated, purchase only Colorado
municipal securities, none of the exempt interest dividends paid by the Fund
will be subject to Colorado income tax.

Minnesota Tax-Free Fund. It is anticipated that substantially all of the
dividends paid by the Fund to individuals will be exempt from Minnesota personal
income tax. Interest earned on Minnesota municipal securities is generally
excluded from gross income for Minnesota state income tax purposes, while
interest earned on bonds issued by municipal issuers from other states is not
excluded. At least 95% of the exempt-interest dividends paid by the Fund must be
derived from Minnesota municipal securities in order for any portion of the
exempt-interest dividends paid by the Fund to be exempt from the Minnesota
personal income tax. Exempt-interest dividends paid by the Fund to shareholders
that are corporations are subject to Minnesota franchise tax.

Under Minnesota law, if the difference in state income tax treatment between
Minnesota municipal securities and the municipal securities of issuers in other
states should be judicially determined to discriminate against interstate
commerce, the Minnesota legislature has expressed its intention that the
discrimination be remedied by adding interest on Minnesota municipal securities
to the taxable income of Minnesota residents. Such treatment would begin with
the taxable years that begin during the calendar year in which the court's
decision is final. If the interest on Minnesota municipal securities is
determined in general to be taxable income for Minnesota income tax, the Fund
will consider what actions are to be taken, in light of its current investment
objectives and investment policies.

The Minnesota alternative minimum tax on resident individuals is based in part
on their Federal alternative minimum taxable income. Accordingly, individual
shareholders of the Fund may be subject to the Minnesota alternative minimum tax
on exempt-interest dividends paid by the Fund which are attributable to interest
received by the Fund on certain private activity bonds issued after August 7,
1986, even though such dividends are exempt from the regular Minnesota personal
income tax.

Miscellaneous

Each Fund is required by Federal law to withhold 31% of reportable payments
(which may include dividends, capital gain distributions and redemptions) paid
to a shareholder who fails to provide the Fund with a correct taxpayer
identification number or to make required certifications, or who is subject to
backup withholding.

Reports containing appropriate information with respect to the Federal income
tax status of dividends and distributions paid during the year by each Fund will
be mailed to shareholders. Shortly after the close of each calendar year, a
statement is sent to each shareholder of each Fund advising the shareholder of
the total dividends paid into the shareholder's account for the year and the
portion of such total derived form municipal or other securities that may be
exempt is exempt from Federal and state income taxes. These portions are
determined by the ratio of the income derived from a particular instrument to
the total income realized by each Fund for the entire year or month and, thus,
is an annual or monthly average, rather than a day-by-day determination for each
shareholder.

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8. OTHER INFORMATION

BANKING LAW MATTERS

Federal banking laws and regulations generally permit a bank or bank affiliate
to act as investment adviser, transfer 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.

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 each 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 or, in their absence, at fair value as determined
by the Board. The Trust does not determine net asset value on the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.

International Fund's 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 Fund's net asset value
is not calculated. Calculation of the net asset value per share of the 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 the International Fund denominated in foreign
currencies are converted into 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 conversion.

PERFORMANCE INFORMATION

A Fund's performance may be quoted in advertising in terms of yield or total
return. All performance information is based on historical results and is not
intended to indicate future performance. A Fund's yield is a way of showing the
rate of income the Fund earns on its investments as a percentage of the Fund's
share price. To calculate standardized yield, a Fund takes the interest income
it earned from its investments for a 30-day period (net of expenses), divides it
by the average number of shares entitled to receive dividends, and expresses the
result as an annualized percentage rate based on the Fund's share price at the
end of the 30-day period. The Tax-Exempt Fixed Income Funds may also quote tax-
equivalent yields, which show the taxable yields a shareholder would have to

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earn to equal the Fund's tax-free yield after taxes. A tax equivalent yield is
calculated by dividing the Fund's tax-free yield by one minus a stated Federal,
state or combined Federal and state tax rate.

A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and distributions are
reinvested. A cumulative total return reflects a Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same cumulative total
return if the Fund's performance had been constant over the entire period.
Because average annual returns tend to smooth out variations in the Fund's
returns, shareholders should recognize that they are not the same as actual
year-by-year results. To illustrate the components of overall performance, a
Fund may separate its cumulative and average annual returns into income results
and capital gain or loss. Published yield quotations are, and total return
figures may be, based on amounts actually invested in a Fund net of sales loads
that may be paid by an investor. A computation of yield or total return that
does not take into account the sales load paid by an investor will be higher
than a computation based on the public offering price of shares purchased that
take into account payment of the sales load.

The Funds' advertisements may reference ratings and rankings among similar
mutual funds by independent evaluators such as Morningstar, Inc., Lipper
Analytical Services, Inc. and IBC/Donoghue, Inc. In addition, the performance of
the Funds 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. All
performance information for a Fund is calculated on a class basis.

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 Bond Fund,
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.

THE TRUST AND ITS SHARES

The Trust was originally organized under the name Prime Value Funds, Inc. as a
Maryland corporation on August 29, 1986, and on July 30, 1993, was reorganized
as a Delaware business trust with the name Norwest Funds. On October 1, 1995,
the Trust changed its name to Norwest Advantage Funds. 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 I Shares), and the costs of
doing so will be borne by the Trust. Currently the authorized shares of the
Trust are divided into twenty-nine separate series.

Other Classes of Shares

In addition to the Shares, each Fund may create and issue shares of other
classes of securities. Stable Income Fund, Intermediate Government Income Fund,
Income Fund, Total Return Bond Fund, the Tax-Free Fixed Income Funds, Income
Equity Fund, ValuGrowth Stock Fund, Diversified Equity Fund, Growth Equity Fund,
Small Company Stock Fund, Contrarian Stock Fund and International Fund,
currently offers three classes of shares: A Shares; B Shares; and I Shares. A
Shares are each sold with a maximum sales charge of 4.5%, in the case of the
Equity Funds, and 3.75%, in the case of the Fixed Income Funds (1.50% in the
case of Stable Income Fund) and Tax-Exempt Fixed Income Funds imposed at the
time of purchase or, in some cases, a maximum contingent deferred sales charge
of 1.0% imposed on redemptions made within two years of purchase. B Shares are
sold with a maximum contingent deferred sales charge of 4.0%, in the case of the
Equity Funds, and 3.0%, in the case of the Fixed Income Funds (1.50% in the case
of Stable Income Fund) and Tax-Exempt Fixed Income Funds imposed on most

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redemptions made within a specified period after their purchase (two to six
years depending upon the Fund). Pursuant to a distribution plan, B Shares of
each Fund pay a distribution services fee at an annual rate not to exceed 0.75%
and a maintenance fee in an amount equal to 0.25% of the B Shares' average daily
net assets.

Each class of a Fund may have a different expense ratio and different sales
charges (including distribution fees) and the performance of each class will be
affected by its expenses and sales charges. For more information on other
classes 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 or the Funds' distributor to obtain information about the other
classes. Sales personnel of broker-dealers and other financial institutions
selling the Funds' shares may receive differing compensation for selling A
Shares, B Shares and I Shares of the Funds.

Shareholder Voting and Other Rights

Each share of each Fund 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
distribution 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 of May 1, 1996, Emseg & Co., a Norwest nominee through which various
customers of Norwest, including employee benefit plans, own shares of the Funds,
may be deemed to have controlled, for purposes of the 1940 Act, Stable Income
Fund, Intermediate Government Income Fund, Diversified Bond Fund, Conservative
Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund, Income Equity Fund,
Index Fund, Valugrowth Stock Fund, Diversified Equity Fund, Growth Equity Fund,
Large Company Growth Fund and International Fund. As of the same date, Stout &
Co., a nominee of Norwest Bank Colorado, N.A. through which some of its
customers own shares of the Funds, may be deemed to have controlled Colorado
Tax-Free Fund and Valugrowth Stock Fund. As of the same date, Norwest Income
Bond Fund and Norwest Tax-Exempt Bond Fund, Norwest-sponsored collective trust
funds that comprise assets of customers of Norwest, may be deemed to have
controlled Income Fund and Tax-Free Income Fund, respectively. From time to
time, these shareholders or other shareholders may own a large percentage of the
shares of a Fund and, accordingly, may be able to greatly affect (if not
determine) the outcome of a shareholder vote.

The Portfolio normally will not hold meetings of investors except as required by
the 1940 Act. Each investor in the Portfolio, such as International Fund, will
be entitled to vote in proportion to its relative beneficial interest in the
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 the Portfolio in
proportion to the votes cast by its shareholders. If there are other investors
in the 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 the Portfolio; indeed, if other investors hold a
majority interest in the Portfolio, they could hold have voting control of the
Portfolio.

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CORE TRUST STRUCTURE

International Fund invests all of its assets in the Portfolio, a separate series
of Core Trust, a business trust organized under the laws of the State of
Delaware in September 1994. Accordingly, the Portfolio directly acquires its
own investment securities and the Fund acquires an indirect interest in those
securities. Core Trust is registered under the 1940 Act as an open-end
management investment company and currently has seven separate portfolios. The
assets of the Portfolio, a diversified portfolio, belong only to, and the
liabilities of the Portfolio are borne solely by, the Portfolio and no other
portfolio of Core Trust.

The Portfolio

The investment objective and fundamental investment policies of International
Fund and the Portfolio can be changed only with shareholder approval. See
"Prospectus Summary," "Investment Objectives and Policies," "Management of the
Funds" and "Appendix A: Investments, Investment Strategies and Risk
Considerations" for a complete description of the Portfolio's investment
objective, policies, restrictions, management, and expenses.

International Fund's investment in the 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 the
Portfolio. The Portfolio may permit other investment companies or institutional
investors to invest in it. All investors in the Portfolio will invest on the
same terms and conditions as the Fund and will pay a proportionate share of the
Portfolio's expenses.

The Portfolio will not sell its shares directly to members of the general
public. Another investor in the Portfolio, such as an investment company, 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 the Fund, could have
different advisory and other fees and expenses than the Fund. Therefore, Fund
shareholders may have different returns than shareholders in another investment
company that invests exclusively in the 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 207-879-1900.

Certain Risks of Investing in the Portfolio

The Fund's investment in the Portfolio may be affected by the actions of other
large investors in the Portfolio, if any. For example, if the Portfolio had a
large investor other than the Fund that redeemed its interest in the Portfolio,
the Portfolio's remaining investors (including the Fund) might, as a result,
experience higher pro rata operating expenses, thereby producing lower returns.

The Fund may withdraw its entire investment from the Portfolio at any time, if
the Board determines that it is in the best interests of the Fund and its
shareholders to do so. The Fund might withdraw, for example, if there were
other investors in the 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 the 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 the 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 the Fund decided to
convert those securities to cash, it usually would incur brokerage fees or other
transaction costs. If the Fund withdrew its investment from the 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 the 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 the Portfolio, including the Fund, will be liable for all
obligations of the Portfolio, but not any other portfolio of Core Trust. The
risk to an investor in the Portfolio of incurring financial loss on account of
such

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liability, however, would be limited to circumstances in which the Portfolio was
unable to meet its obligations. Upon liquidation of the Portfolio, investors
would be entitled to share pro rata in the net assets of the 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 1 percent 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.

As each Blended Portfolio comprises investment components of several Blended
Funds, a Blended Fund may be affected by the actions of other Blended Funds with
respect to a particular Blended Portfolio. These risks are similar to those
associated with International Fund's investment in the Portfolio, as described
above. These risks include the possibility that another Blended Fund might
withdraw its investment from a Blended Portfolio, leading to increased expenses
for other Blended Funds that invest in the Blended Portfolio, or that a Blended
Portfolio's investment policies might be changed in a manner not suitable to a
Blended Fund.

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Appendix A

Investments, Investment Strategies
and Risk Considerations
Common Stock and Preferred Stock

Total Return Bond Fund, Balanced Funds, Equity Funds. Common stockholders are
the owners of the company 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 Securities

Income Fund, Total Return Bond Fund, Balanced Funds, Equity Funds. 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.

Warrants

Balanced Funds, Equity Funds. A Fund may invest in 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

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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).

ADRs and EDRs

Balanced Funds, Equity Funds (except Index Fund). 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 (other than Contrarian Stock Fund and Small Company Stock
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.

U.S. Government Securities

All Funds. As used in this Prospectus, the term U.S. Government Securities
means obligations issued or guaranteed as to principal and interest by the U.S.
Government, its 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.

Zero-Coupon Securities

Fixed Income Funds, Tax-Exempt Fixed Income Funds, Balanced Funds. A Fund may
invest in separately traded principal and interest components of 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 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.

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Corporate Debt Securities and Commercial Paper

Corporate Debt Securities - Fixed Income Funds, Balanced Funds, Small Company
Stock Fund, Contrarian Stock Fund. Commercial Paper - All Funds. The corporate
debt securities in which the Funds may invest include corporate bonds and notes
and short-term investments such as commercial paper and variable rate demand
notes. Commercial paper (short-term promissory notes) is issued by companies to
finance their or their affiliate's 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 a 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 Institution Obligations

All Funds. A Fund may invest in obligations of financial institutions,
including negotiable certificates 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
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.

Participation Interests

Diversified Bond Fund, Balanced Funds. A Fund may purchase participation
interests in loans or securities in 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 and Restricted Securities

Illiquid Securities - All Funds. Restricted Securities - Fixed Income Funds,
Balanced Funds, International Fund. Each Fund may invest up to 15 percent of
its net assets in securities that at the time of purchase are illiquid.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because

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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 security's 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 (or, in the case of the Portfolio, Core Trust's
board of trustees). 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.

Borrowing

All Funds. Each Fund may borrow money for temporary or 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
Intermediate Government Income Fund and, to the extent they invest in the Short
Maturity style, the Balanced Funds or Diversified Bond Fund, 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 Securities on Margin

Intermediate Government Income Fund. When the Fund purchases securities on
margin, it only pays part of the 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 Involving Leverage

All Funds. Utilization of leveraging involves special risks and may involve
speculative investment techniques. 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 Government Income Fund may purchase securities on margin

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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 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
account's 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.

Repurchase Agreements, Securities Lending, Reverse Repurchase
Agreements, When-Issued Securities, Forward Commitments
and Dollar Roll Transactions

A Fund's use of repurchase agreements, securities lending, reverse repurchase
agreements and forward commitments (including "dollar roll" transactions)
entails certain risks not associated with direct investments in securities. For
instance, in the event that bankruptcy or similar proceedings were commenced
against a counterparty while these transactions remained open or a counterparty
defaulted on its obligations, the Fund might suffer a loss. Failure by the
other party to deliver a security purchased by the Fund may result in a missed
opportunity to make an alternative investment. The Advisers monitor the
creditworthiness of counterparties to these transactions and intend to enter
into these transactions only when they believe the counterparties present
minimal credit risks and the income to be earned from the transaction justifies
the attendant risks. Counterparty insolvency risk with respect to repurchase
agreements is reduced by favorable insolvency laws that allow the Fund, among
other things, to liquidate

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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 of the types of securities in which the Fund may invest directly.
The Portfolio and, with respect to the portion of their assets managed in the
International Fund 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 - Fixed Income Funds, Balanced 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.

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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 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 Funds net asset value per share.

Dollar Roll Transactions - Fixed Income Funds, Balanced Funds. 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 Funds 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 Funds 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.

Swap Agreements

Stable Income Fund, Intermediate Government Income Fund, Diversified Bond Fund,
Balanced Funds. To manage its exposure 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 Funds 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.

Municipal Securities

Tax-Exempt Fixed Income Funds. The municipal securities in which the Tax-Exempt
Fixed Income Funds may invest include municipal bonds, notes and leases.
Municipal securities may be zero-coupon securities. Yields on municipal
securities are dependent on a variety of factors, including the general
conditions of the municipal security markets and the fixed income markets in
general, the size of a particular offering, the maturity of the obligation and
the rating of the issue. The achievement of a Fund's investment objective is
dependent in part on the continuing

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ability of the issuers of municipal securities in which the Fund invests to meet
their obligations for the payment of principal and interest when due.

Municipal Bonds. Municipal bonds can be classified as either "general
obligation" bonds or "revenue" bonds. General obligation bonds are secured by a
municipality's pledge of its full faith, credit and taxing power for the payment
of principal and interest. Revenue bonds are usually payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other tax, but not from general
tax revenues. Municipal bonds include industrial development bonds.

The Funds may invest in tax-exempt industrial development and private activity
bonds, which in most cases are revenue bonds and generally are not secured by a
pledge of the credit of the municipality. The payment of the principal and
interest on such bonds is dependent solely on the ability of an initial or
subsequent user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.

Municipal Notes and Leases. Municipal notes, which may be either general
obligation or revenue securities, are intended to fulfill the short-term
capital needs of the issuer and generally have original maturities not exceeding
one year. They include tax anticipation notes, revenue anticipation notes
(which generally are issued in anticipation of various seasonal revenues), bond
anticipation notes, construction loan notes and tax-exempt commercial paper.
Municipal leases, which may take the form of a lease or an installment purchase
or conditional sale contract, are issued by state and local governments and
authorities to acquire a wide variety of equipment and facilities such as fire
and sanitation vehicles, telecommunications equipment and other capital assets.

Participation Interests. The Funds may purchase participation interests in
municipal securities that are held by banks or other financial institutions.
Participation interests usually carry a demand feature backed by a letter of
credit or guarantee of the bank or other financial institution permitting the
holder to tender them back to the bank or other financial institution. Prior to
purchasing any participation interest, each Fund will obtain appropriate
assurances from counsel that the interest earned by the Fund from the
obligations in which it holds participation interests is exempt from Federal
and, in the case of Colorado Tax-Free Fund and Minnesota Tax-Free Fund,
applicable state income tax.

Stand-by Commitments. The Funds may purchase municipal securities together with
the right to resell them to the seller or a third party at an agreed-upon price
or yield within specified periods prior to their maturity dates. Such a right
to resell is commonly known as a stand-by commitment, and the aggregate price
which a Fund pays for securities with a stand-by commitment may be higher than
the price which otherwise would be paid. The primary purpose of this practice
is to permit a Fund to be as fully invested as practicable in municipal
securities while preserving the necessary flexibility and liquidity to meet
unanticipated redemptions. In this regard, a Fund acquires stand-by commitments
solely to facilitate portfolio liquidity and does not exercise its rights
thereunder for trading purposes. Stand-by commitments involve certain expenses
and risks, including the inability of the issuer of the commitment to pay for
the securities at the time the commitment is exercised, non-marketability of the
commitment, and differences between the maturity of the underlying security and
the maturity of the commitment. The Fund's policy is to enter into stand-by
commitment transactions only with municipal securities dealers which, in the
view of the Adviser, present minimal credit risks.

Puts on Municipal Securities. The Funds may acquire "puts" on municipal
securities they purchase. A put gives the Fund the right to sell the municipal
security at a specified price at any time on or before a specified date. The
Fund will acquire puts only to enhance liquidity, shorten the maturity of the
related municipal security or permit the Fund to invest its funds at more
favorable rates. Generally, the Fund will buy a municipal security that is
accompanied by a put only if the put is available at no extra cost. In some
cases, however, the Fund may pay an extra amount to acquire a put, either in
connection with the purchase of the related municipal security or separately
from the purchase of the security. Puts involve the same risks discussed above
with respect to stand-by commitments.

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Short Sales

Intermediate Government Income 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 SAIs.

Mortgage-Backed Securities

Fixed Income Funds, Balanced Funds. Mortgage-backed securities represent an
interest in a pool of mortgages 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 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

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other types of mortgages. 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 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 Corporation ("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
FHLMCs 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

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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 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.

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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.

Asset-Backed Securities

Intermediate Government Income Fund, Diversified Bond Fund, Income Fund,
Balanced Funds. 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 Exchange Contracts and Foreign Currency Forward Contracts

Diversified Bond Fund, Balanced Funds, Diversified Equity Fund, Growth Equity
Fund, Large Company Growth Fund, International Fund. Changes in foreign
currency exchange rates will affect the U.S. dollar values of securities
denominated in currencies other than the U.S. dollar. The rate of exchange
between the U.S. dollar and other 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

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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. No Fund intends 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.

Futures Contracts and Options

Stable Income Fund, Intermediate Government Income Fund, Diversified Bond Fund,
Balanced Funds, Index Fund. A Fund may seek to enhance its return through the
writing (selling) and 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

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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.

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 Indices. 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 securities comprising the index is made. Generally, these 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.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENTS OF
ADDITIONAL INFORMATION AND THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUNDS' 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.

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