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As filed with the Securities and Exchange Commission on May 29, 1996
File No. 33-9645
File No. 811-4881
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 36
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 38
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NORWEST ADVANTAGE FUNDS
(Formerly "Norwest Funds" and prior thereto "Prime Value Funds, Inc.")
(Exact Name of Registrant as Specified in its Charter)
Two Portland Square
Portland, Maine 04101
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (207) 879-1900
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David I. Goldstein, Esq.
Forum Financial Services, Inc.
Two Portland Square, Portland, Maine 04101
(Name and Address of Agent for Service)
Copies of Communications to:
Anthony C.J. Nuland, Esq.
Seward & Kissel
1200 G Street, N.W.
Washington, D.C. 20005
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It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485, paragraph (b)
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on [ ] pursuant to Rule 485, paragraph (b)
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60 days after filing pursuant to Rule 485, paragraph (a)(i)
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on [ ] pursuant to Rule 485, paragraph (a)(i)
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X 75 days after filing pursuant to Rule 485, paragraph (a)(ii)
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on [ ] pursuant to Rule 485, paragraph (a)(ii)
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this post-effective amendment designates a new effective date for a
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Registrant has registered an indefinite number of shares of beneficial interest
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Accordingly, no fee is payable herewith. Registrant filed
a Rule 24f-2 notice its various portfolios with an October 31 fiscal year end on
November 15, 1995 and an amendment thereto on December 8, 1995.
SMALL CAP OPPORTUNITIES FUND OF REGISTRANT WILL BE STRUCTURED AS A MASTER-
FEEDER FUND. A SUBSEQUENT AMENDMENT TO BE FILED PRIOR TO EFFECTIVENESS WILL
INCLUDE A MANUALLY EXECUTED SIGNATURE PAGE FOR THE MASTER FUND.
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART A
(Prospectus offering A Shares and B Shares of Small Cap Opportunities Fund)
Form N-1A
Item No. (Caption) Location in Prospectus (Caption)
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Item 1. Cover Page Cover Page
Item 2. Synopsis Prospectus Summary
Item 3. Condensed Financial Information Not Applicable
Item 4. General Description of
Registrant Prospectus Summary; Investment
Objective and Policies; Additional
Investment Policies and Risk
Considerations; and Other
Information - The Trust and its
Shares
Item 5. Management of the Fund Prospectus Summary; Management
Item 5A. Management's Discussion of
Fund Performance Not Applicable
Item 6. Capital Stock and
Other Securities Cover; Dividends and Tax Matters;
Other Information - The Trust and
its Shares
Item 7. Purchase of Securities Being
Offered How to Buy Shares; Management -
Management and Distribution
Services
Item 8. Redemption or Repurchase How to Sell Shares
Item 9. Pending Legal Proceedings Not Applicable
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART A
(Prospectus offering I Shares of Small Cap Opportunities Fund)
Form N-1A
Item No. (Caption) Location in Prospectus (Caption)
- --------- --------- --------------------------------
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary
Item 3. Condensed Financial Information Not Applicable
Item 4. General Description of
Registrant Summary; Investment Objective,
Policies and Risk Considerations;
Additional Investment Policies and
Risk Considerations; and Other
Information - The Trust and its
Shares
Item 5. Management of the Fund Summary; Management
Item 5A. Management's Discussion of
Fund Performance Not Applicable
Item 6. Capital Stock and
Other Securities Cover; Dividends, Distributions and
Tax Matters; Other Information -
The Trust and its Shares
Item 7. Purchase of Securities Being
Offered Purchases and Redemptions of
Shares; Management - Administration
and Distribution Services
Item 8. Redemption or Repurchase Purchases and Redemptions of Shares
Item 9. Pending Legal Proceedings Not Applicable
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART B
(SAI offering A Shares, B Shares and I Shares of Small Cap Opportunities Fund)
Form N-1A Location in Statement of
Item No (Caption) Additional Information (Caption)
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Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information and History Prospectus
Item 13. Investment Objectives and Policies Investment Policies; Investment
Restrictions
Item 14. Management of the Fund Management; Additional Information
about the Trust and the
Shareholders of the Fund
Item 15. Control Persons and Principal
Holders of Securities Ownership of Fund Shares and
Additional Information about the
Trust
Item 16. Investment Advisory and Other
Services Management
Item 17. Brokerage Allocation and Other
Practices Portfolio Transactions
Item 18. Capital Stock and Other
Securities Ownership of Fund Shares and
Additional Information about the
Trust
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered Additional Purchase and Redemption
Information
Item 20. Tax Status Taxation
Item 21. Underwriters Management - Administration and
Distribution
Item 22. Calculation of Performance Data Performance Data and Advertising
Item 23 Financial Statements Not Applicable
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART A
(All other Prospectuses)
Not Applicable in this Filing
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 404(c))
PART B
(All other SAIs)
Not Applicable in this Filing
<PAGE>
SMALL CAP OPPORTUNITIES FUND
A SHARES
B SHARES
Account Information and
Shareholder Servicing:
Norwest Bank Minnesota, N.A.
Transfer Agent
733 Marquette Avenue
Minneapolis, Minnesota 55479-0040
612-667-8833 or 800-338-1348
PROSPECTUS
August __, 1996
This Prospectus offers A Shares and B Shares of Small Cap Opportunities Fund
(the "Fund"). The Fund is a separate diversified equity portfolio of Norwest
Advantage Funds (the "Trust"), which is a registered open-end management
investment company.
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF
ITS INVESTMENT ASSETS IN U.S. SMALLER COMPANIES FUND (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.
This Prospectus sets forth concisely the information concerning the Trust and
the Fund that a prospective investor should know before investing. The Trust
has filed with the Securities and Exchange Commission (the "SEC") a Statement of
Additional Information ("SAI") with respect to the Fund dated the same date as
the Prospectus for the Fund and as may be further amended from time to time,
which contains more detailed information about the Trust and the Fund and is
incorporated into this Prospectus by reference. An investor may obtain a copy
of the SAI without charge by contacting the Trust's distributor, Forum Financial
Services, Inc., at Two Portland Square, Portland, Maine 04101 or by calling 207-
879-1900. Investors should read this Prospectus and retain it for future
reference.
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.
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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. PROSPECTUS SUMMARY
HIGHLIGHTS OF THE FUND
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is capital appreciation through investment in a
diversified portfolio which under normal conditions will have at least 65% of
its total assets invested in equity securities of companies having market
capitalizations under $1 billion. Current income will be incidental to the
objective of capital appreciation. Currently, the Fund seeks to achieve its
investment objective by investing exclusively in the Portfolio, a series of
Schroder Capital Funds ("Core Trust"), itself a registered open-end management
investment company. The Portfolio has substantially the same investment
objective and policies as the Fund. Accordingly, the investment experience of
the Fund will correspond directly with the investment experience of the
Portfolio. Investments in smaller capitalization companies involve greater
risks than those risks associated with investments in larger capitalization
companies. The Fund currently offers three separate classes of shares: A
Shares, B Shares and I Shares. Only A Shares and B Shares are offered through
this Prospectus and are sometimes referred to herein as the "Shares."
INVESTMENT ADVISERS
The Fund's investment adviser (the "Adviser") is Norwest Investment Management,
a part of Norwest Bank Minnesota, N.A. ("Norwest"). The Adviser provides
investment advice to various institutions, pension plans and other accounts and,
as of December 31, 1995, managed assets totaling approximately $23 billion. See
"Management - Investment Advisory Services." Norwest serves as the Trust's
transfer agent, dividend disbursing agent and custodian. See "Management -
Shareholder Servicing and Custody."
As the Fund invests all of its assets in the Portfolio, the Fund does not
actively employ the Adviser to manage an investment portfolio. Rather, all
investment advisory services are conducted for the Fund by Schroder Capital
Management International Inc. ("Schroder"), the Portfolio's investment adviser,
a registered investment adviser under the Investment Advisers Act of 1940. See
"Management - Investment Advisory Services." Schroder and the Adviser are
sometimes referred to collectively as the "Advisers."
FUND MANAGEMENT
The manager of the Trust and distributor of its shares is Forum Financial
Services, Inc. ("Forum"), a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. Norwest provides certain administrative
services to the Fund. Schroder Fund Advisors ("Schroder Advisors") serves as
administrator of Core Trust, for which Forum also
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provides certain administrative services. See "Management - Management and
Distribution Services."
SHARES OF THE FUND
The Fund currently offers three separate classes of shares: A class ("A
Shares"), B class ("B Shares") and I class ("I Shares"). A Shares and B Shares
are sold through this Prospectus and are collectively referred to as the
"Shares."
A SHARES. A Shares are offered at a price equal to their net asset value plus a
sales charge imposed at the time of purchase or, in some cases, a contingent
deferred sales charge imposed on redemptions made within two years of purchase.
B SHARES. B Shares are offered at a price equal to their net asset value plus a
contingent deferred sales charge imposed on most redemptions made within six
years of purchase. B Shares pay a distribution services fee at an annual rate
of up to 0.75%, and a maintenance fee in an amount equal to 0.25%, of the B
Shares' average daily net assets. B Shares automatically convert to A Shares of
the Fund seven years after the end of the calendar month in which the B Shares
were originally purchased.
The choice of A Shares or B Shares permits each investor to purchase those
shares that the investor believes to be most beneficial given the amount
purchased, the length of time the investor expects to hold the shares and other
circumstances. A Shares will normally be more beneficial to the investor who
qualifies for reduced initial sales charges as described below. See "How to Buy
Shares - Alternative Distribution Arrangements."
I Shares are offered by a separate prospectus to fiduciary, agency and custodial
clients of bank trust departments, trust companies and their affiliates. Shares
of each class of the 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."
HOW TO BUY AND SELL SHARES
Shares may be purchased or redeemed by mail, by bank wire and through an
investor's broker-dealer or other financial institution. The minimum initial
investment in Shares is $1,000. The minimum subsequent investment is $100. See
"How to Buy Shares" and "How to Sell Shares."
EXCHANGES
Shareholders may exchange A Shares and B Shares for A Shares and B Shares,
respectively, of certain other funds of the Trust. In addition, A Shares may be
exchanged for investor class shares of certain money market funds of the Trust
and B Shares may be exchanged for exchange class shares of Ready Cash Investment
Fund of the Trust. See "Other Shareholder Services - Exchanges."
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SHAREHOLDER FEATURES
The Fund offers an Automatic Investment Plan, Automatic Withdrawal Plan and
Directed Dividend Option. Purchases of A Shares may be subject to Rights of
Accumulation, Cumulative Quantity Discounts or a Reinstatement Privilege. See
"Other Shareholder Services" and "How to Buy Shares - Alternative Distribution
Arrangements."
DIVIDENDS
Dividends of the Fund's net investment income are declared and paid at least
annually. The Fund's net capital gain, if any, is distributed annually. All
dividends and distributions are reinvested in additional Fund shares unless the
shareholder elects to have them paid in cash. See "Dividends and Tax Matters."
CERTAIN INVESTMENT CONSIDERATIONS AND RISK FACTORS
There can be no assurance that the Fund will achieve its investment objective,
and the 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 the Fund may be worth more or less than its original value.
All investments made by the Fund entail some risk. Certain investments and
investment techniques, however, entail additional risks, such as the potential
use of leverage through borrowings, securities lending and other investment
techniques. See "Investment Objective and Policies - Additional Investment
Policies and Risk Considerations."
The Fund's policy of investing in smaller companies entails certain risks in
addition to those normally associated with investments in equity securities.
See "Investment Objective and Policies - Additional Investment Policies and Risk
Considerations." By investing solely in the Portfolio, the Fund may achieve
certain efficiencies and economies of scale. Nonetheless, this investment could
also have adverse effects on the Fund. Investors in the Fund should consider
these risks, as described under "Other Information - Core Trust Structure."
EXPENSE INFORMATION
The purpose of the table below is to assist investors in understanding the
expenses that an investor in Shares of the Fund will bear directly or
indirectly.
Shareholder Transaction Expenses
(applicable to the Fund) A B
Shares(1) Shares(2)
Maximum sales charge imposed on purchases
(as a percentage of public offering price) 4.5% Zero
Maximum deferred sales charge
(as a percentage of the lesser of original purchase
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price or redemption proceeds) Zero 4.0%
Exchange Fee Zero Zero
Annual Operating Expenses(3)
(as a percentage of average daily net assets)
A B
Shares Shares
Investment Advisory Fee(4)
0.50% 0.50%
Rule 12b-1 Fees(5) None 0.75%
Other Expenses(6)
(after expense reimbursements and fee waivers) 0.75% 0.75%
Total Operating Expenses 1.25% 2.00%
(1) Sales charge waivers and reduced sales charge plans are available for A
Shares. If A Shares purchased without an initial sales charge (purchases of
$1,000,000 or more) are redeemed within two years after purchase, a contingent
deferred sales charge of up to 1.0% will be applied to the redemption. See "How
to Buy Shares - Alternative Distribution Arrangements."
(2) The maximum 4.0% contingent deferred sales charge on B Shares applies to
redemptions during the first year after purchase; the charge declines
thereafter, becoming 3.0% during the second and third years, 2.0% during the
fourth and fifth years, 1.0% during the sixth year and reaches zero the
following year. See "How to Buy Shares - Alternative Distribution
Arrangements."
(3) For a further description of the various expenses incurred in the operation
of the Fund, see "Management." Expenses associated with the I Shares of the
Fund differ from those of the Shares listed in the table shown above. The
Fund's expenses as listed above include the Fund's pro rata portion of all
operating expenses of the Portfolio, which will be borne indirectly by Fund
shareholders. The Trust's Board of Trustees believes that the aggregate per
share expenses of the Fund and the Portfolio will be approximately equal to the
expenses the Fund would incur if its assets were invested directly in equity
securities.
(4) Investment Advisory Fees are those incurred by the Portfolio; as long as
its assets are invested in the Portfolio, the Fund pays no investment advisory
fees directly. See "Investment Objective and Policies" and "Management -
Expenses of the Fund."
(5) Absent waivers, the Rule 12b-1 Fees would be 1.00% for B Shares of the
Fund. Long-term shareholders of B Shares may pay aggregate sales charges
totaling more than the economic equivalent of the maximum front-end sales
charges permitted by the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.
(6) Other expenses for the Fund are based on estimated amounts for the Fund's
first fiscal year of operations ending ___________ __, 1997. With respect to A
Shares, absent expense reimbursements and fee waivers (which are estimated), the
expenses of the Fund would be: Other Expenses, 1.08%, and Total Operating
Expenses, 1.58%. With respect to B Shares, absent expense reimbursements and
fee waivers (which are estimated), the expenses of the Fund would be: Other
Expenses, 1.08%; and Total Operating Expenses, 2.58%. Other Expenses include
transfer agency fees payable to Norwest at an annual rate of up to 0.25% of the
Fund's average daily net assets attributable to A Shares and B Shares. Fee
waivers are voluntary and may be reduced or eliminated at any time.
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Example
The following is a hypothetical example that indicates the dollar amount of
expenses that an investor would pay, assuming a $1,000 investment in the Fund's
Shares, a 5% annual return and reinvestment of all dividends and distributions.
1 Year 3 Years
A Shares 57 83
B Shares
Assuming redemption
at the end of the period 60 93
Assuming no redemption 20 63
The example is based on the expenses listed in the "Annual Operating Expenses"
table. The 5% annual return is not predictive of and does not represent the
Fund's projected returns; rather, it is required by government regulation. The
example assumes deduction of the maximum initial sales charge for A Shares,
deduction of the contingent deferred sales charge for B Shares applicable to a
redemption at the end of the period and the conversion of B Shares to A Shares
at the end of seven years. 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.
2. INVESTMENT OBJECTIVE AND POLICIES
The Fund is designed for the investment of that portion of an investor's funds
which can appropriately bear the special risks associated with investment in
smaller market capitalization companies with the aim of capital appreciation.
The Fund is not intended for investors whose objective is assured income or
preservation of capital.
INVESTMENT OBJECTIVE
The Fund's investment objective is capital appreciation through investment in a
diversified portfolio which under normal conditions will have at least 65% of
its total assets invested in equity securities of companies having market
capitalizations under $1 billion. Market capitalization means the market value
of a company's outstanding stock. Current income will be incidental to the
objective of capital appreciation. There can be no assurance that the Fund's
objective will be achieved.
The Fund's investment objective is fundamental and cannot be changed without
shareholder approval. The Fund currently seeks to achieve its investment
objective by investing all of its investment assets in the Portfolio, which has
substantially the same investment objective and policies as the Fund. The
following investment policies are those of the Fund and the Portfolio. As the
Fund has the same investment policies as the Portfolio and currently invests all
of its
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assets in the Portfolio, these policies are discussed with respect to the
Portfolio only. Unless otherwise indicated, all of the investment policies
described below are fundamental and cannot be changed without shareholder
approval. Additional information concerning the investment policies of the
Portfolio and the Fund, including additional fundamental policies, is contained
in the SAI.
INVESTMENT POLICIES
In its investment approach, Schroder will attempt to identify securities of
companies which it believes can generate above average earnings growth, selling
at favorable prices in relation to book values and earnings. As part of the
investment decision, Schroder's assessment of the competency of an issuer's
management will be an important consideration. These criteria are not rigid,
and other investments may be included in the Portfolio's portfolio if they may
help the Portfolio to attain its objective. These criteria can be changed by
the board of trustees of Core Trust.
The Portfolio will invest principally in equity securities (common stocks,
securities convertible into common stocks or, subject to special limitations,
rights or warrants to subscribe for or purchase common stocks). The Portfolio
may also invest to a limited degree in non-convertible debt securities and
preferred stocks when, in the opinion of Schroder, such investments are
warranted to achieve the Portfolio's investment objective. A convertible
security is a bond, debenture, note, preferred stock or other security that may
be converted into or exchanged for a prescribed amount of common stock of the
same or a different issuer within a particular period of time at a specified
price or formula. Investments in warrants or rights to subscribe for or
purchase common stocks will not be counted in determining the 65% of total
assets test set forth above but are subject to the limitations described below
in "Additional Investment Policies -- Warrants" in the SAI.
The Portfolio may invest in securities of small, unseasoned companies (which,
together with any predecessors, have been in operation for less than three
years), as well as in securities of more established companies. In view of the
volatility of price movements of the former, as a non-fundamental policy, the
Portfolio currently intends to invest no more than 10% of its total assets in
securities of small, unseasoned issuers, while reserving the right to invest up
to 20% of its total assets in such issuers.
Although there is no minimum rating for debt securities (convertible or non-
convertible) in which the Portfolio may invest, it is the present intention of
the Portfolio to invest no more than 5% of its net assets in debt securities
rated below Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by
Standard & Poor's Ratings Services ("S&P"), such securities being commonly known
as "high yield/high risk" securities or "junk bonds," and it will not invest in
debt securities which are in default. High yield/high risk securities are
predominantly speculative with respect to the capacity to pay interest and repay
principal and generally involve a greater volatility of price than securities in
higher rated categories. In the event the Portfolio intends in the future to
invest more than 5% of its net assets in junk bonds, appropriate
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disclosures will be made to existing and prospective shareholders. It should be
noted that even bonds rated Baa by Moody's or BBB by S&P are described by those
rating agencies as having speculative characteristics and that changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity of issuers of such bonds to make principal and interest payments than
is the case with higher grade bonds. The Portfolio is not obligated to dispose
of securities due to changes by the rating agencies. See the SAI for
information about the risks associated with investing in junk bonds.
For temporary defensive purposes, the Portfolio may invest without limitation in
(or enter into repurchase agreements maturing in seven days or less with U.S.
banks and broker-dealers with respect to) short-term debt securities, including
commercial paper, U.S. Treasury bills, other short-term U.S. Government
securities, certificates of deposit and bankers' acceptances of U.S. banks. The
Portfolio also may hold cash and time deposits in U.S. banks. See "Investment
Policies" in the SAI for further information about all these securities.
RISK CONSIDERATIONS
All investments involve certain risks. Investments in smaller capitalization
companies involve greater risks than those risks associated with investments in
larger capitalization companies. Smaller capitalization companies generally
experience higher growth rates and higher failure rates than do larger
capitalization companies. The trading volume of securities of smaller
capitalization companies is normally less than that of larger capitalization
companies and, consequently, generally have a disproportionate effect on their
market price, tending to make them rise more in response to buying demand and
fall more in response to selling pressure than is the case with larger
capitalization companies.
Investments in small, unseasoned issuers generally involve greater risk than is
customarily associated with larger, more seasoned companies. Such issuers often
have products and management personnel which have not been thoroughly tested by
time or the marketplace and their financial resources may not be as substantial
as those of more established companies. Their securities, which the Portfolio
may purchase when they are offered to the public for the first time, may have a
limited trading market, which may adversely affect their sale by the Portfolio
and can result in such securities being priced lower than otherwise might be the
case. If other institutional investors engage in trading this type of security,
the Portfolio may be forced to dispose of its holdings at prices lower than
might otherwise be obtained.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
ADDITIONAL INVESTMENT POLICIES
The investment objective and all investment policies of each of the Fund 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, as applicable. A majority of outstanding voting securities means
the lesser of (i) 67% of the shares present or represented at a shareholder
meeting at which the holders of more than 50% of the outstanding shares are
present
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or represented, or (ii) more than 50% of outstanding shares. Unless otherwise
indicated, all investment policies are not fundamental and may be changed by the
Board without approval by shareholders of the Fund. Likewise, nonfundamental
investment policies of the Portfolio may be changed by the board of trustees of
Core Trust without shareholder approval. For more information concerning
shareholder voting, see "Other Information - The Trust and Its Shares -
Shareholder Voting and Other Rights" and "- Core Trust Structure."
INVESTMENT RESTRICTIONS
The following investment restrictions of the Portfolio are fundamental policies:
(1) The Portfolio cannot invest in securities (except those of the U.S.
Government or its agencies or instrumentalities) of any issuer if immediately
thereafter (a) more than 5% of the Portfolio's total assets would be invested in
securities of that issuer, or (b) the Portfolio would then own more than 10% of
that issuer's voting securities;
(2) The Portfolio cannot make short sales of securities except "short sales
against-the-box"; in such short sales, at all times during which a short
position is open, the Portfolio must own an equal amount of such securities, or
by virtue of ownership of securities have the right, without payment of further
consideration, to obtain an equal amount of the securities sold short; no more
than 15% of the Portfolio's net assets will be held as collateral for such short
sales at any one time;
(3) The Portfolio cannot concentrate investments in any particular industry;
therefore the Portfolio will not purchase the securities of companies in any one
industry if, thereafter, 25% or more of the Portfolio's total assets would
consist of securities of companies in that industry;
(4) The Portfolio cannot pledge, mortgage or hypothecate its assets to any
extent greater than 10% of the value of the total assets of the Portfolio;
(5) The Portfolio cannot deviate from the percentage requirements listed under
"Investment Objective and Policies" and "Additional Investment Policies and Risk
Considerations "; or
(6) The Portfolio cannot purchase securities of other investment companies,
except in connection with a merger, consolidation, acquisition or
reorganization, or by purchase of securities of closed-end investment companies
and only if immediately thereafter not more than (i) 3% of the total outstanding
voting stock of such company is owned by the Portfolio, (ii) 5% of the
Portfolio's total assets, taken at market value, would be invested in any one
such company, or (iii) 10% of the Portfolio's total assets, taken at market
value, would be invested in such securities. It should be noted that as a
shareholder in an investment company, the Portfolio would bear its ratable share
of that investment company's expenses, including its advisory and administration
fees. At the same time, the Portfolio would continue to pay its own management
and advisory fees and other expenses.
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The percentage restrictions described above and in the SAI apply only at the
time of investment and require no action by the Portfolio as a result of
subsequent changes in value of the investments or the size of the Portfolio. A
supplementary list of investment restrictions is contained in the SAI.
INVESTMENT TYPES
COMMON AND PREFERRED STOCK AND WARRANTS. The Portfolio may invest in common and
preferred stock. 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 the Portfolio may be
traded in the over-the counter market or on a securities exchange, but may not
be traded every day or in the volume typical of securities traded on a major
U.S. national securities exchange. As a result, disposition by the Portfolio of
a security to meet redemptions by interest holders or otherwise may require the
Portfolio 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 a lengthy 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. The Portfolio may also 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.
REPURCHASE AGREEMENTS. The Portfolio may invest in repurchase agreements. A
repurchase agreement is a means of investing monies for a short period. In a
repurchase agreement, a seller - a U.S. bank or recognized broker-dealer - sells
securities to the Portfolio and agrees to repurchase the securities at the
Portfolio's cost plus interest within a specified period (normally one day). In
these transactions, the values of the underlying securities purchased by the
Portfolio are monitored at all times by Schroder to insure that the total value
of the securities equals or exceeds the value of the repurchase agreement, and
the Portfolio's custodian bank holds the securities until they are repurchased.
In the event of default by the seller under the repurchase agreement, the
Portfolio may have difficulties in exercising its rights to the underlying
securities and may incur costs and experience time delays in disposing of them.
To evaluate potential risks, Schroder reviews the creditworthiness of those
banks and dealers with which the Portfolio enters into repurchase agreements.
ILLIQUID AND RESTRICTED SECURITIES. As a non-fundamental policy, the Portfolio
will not purchase or otherwise acquire any security if, as a result, more than
15% of its net assets (taken
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at current value) would be invested in securities that are illiquid by virtue of
the absence of a readily available market or because of legal or contractual
restrictions on resale ("restricted securities"). There may be undesirable
delays in selling illiquid securities at prices representing their fair value.
This policy includes over-the-counter options held by the Portfolio and the "in
the money" portion of the assets used to cover such options. As stated above,
this policy also includes assets which are subject to material legal
restrictions on repatriation. The limitation on investing in restricted
securities does not include securities that may not be resold to the general
public but may be resold to qualified institutional purchasers pursuant to Rule
144A under the Securities Act of 1933. If Schroder determines that a "Rule 144A
security" is liquid pursuant to guidelines adopted by the Core Trust's board of
trustees, it will not be deemed illiquid. These guidelines take into account
trading activity for 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, that security may become illiquid, which could
affect the Portfolio's liquidity. See "Investment Policies C Illiquid and
Restricted Securities" in the SAI for further details.
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend portfolio securities
(other than in repurchase transactions) to brokers, dealers and other financial
institutions meeting specified credit conditions, if the loan is collateralized
in accordance with applicable regulatory requirements and if, after any loan,
the value of the securities loaned does not exceed 25% of the value of the
Portfolio's total assets. By so doing, the Portfolio attempts to earn income
through the receipt of interest on the loan. In the event of the bankruptcy of
the other party to a securities loan, the Portfolio could experience delays in
recovering the securities it lent. To the extent that, in the meantime, the
value of the securities the Portfolio lent has increased, the Portfolio could
experience a loss.
The Portfolio may lend securities from its portfolio if liquid assets in an
amount at least equal to the current market value of the securities loaned
(including accrued interest thereon) plus the interest payable to the Portfolio
with respect to the loan is maintained as collateral by the Portfolio in a
segregated account. Any securities that the Portfolio may receive as collateral
will not become a part of its portfolio at the time of the loan, and, in the
event of a default by the borrower, the Portfolio will, if permitted by law,
dispose of such collateral except for such part thereof that is a security in
which the Portfolio is permitted to invest. During the time that the securities
are on loan, the borrower will pay the Portfolio any accrued income on those
securities, and the Portfolio may invest the cash collateral and earn income or
receive an agreed upon fee from a borrower that has delivered cash equivalent
collateral. Cash collateral received by the Portfolio will be invested in U.S.
Government securities and liquid high grade debt obligations. The value of
securities loaned will be marked to market daily. Portfolio securities
purchased with cash collateral are subject to possible depreciation. Loans of
securities by the Portfolio will be subject to termination at the Portfolio's or
the borrower's option. The Portfolio may pay reasonable negotiated fees in
connection with loaned securities, so long as such fees are set forth in a
written contract and approved by the Core Trust's board of trustees.
OPTIONS AND FUTURES TRANSACTIONS. While the Portfolio does not presently intend
to do so, it may write covered call options and purchase certain put and call
options, stock index futures, and options on stock index futures and broadly-
based stock indices, all of which are referred to as
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"Hedging Instruments." In general, the Portfolio may use Hedging Instruments:
(1) to attempt to protect against declines in the market value of the
Portfolio's portfolio securities or stock index futures, and thus protect the
Portfolio's net asset value per share against downward market trends, or (2)
to establish a position in the equities markets as a temporary substitute for
purchasing particular equity securities. The Portfolio will not use Hedging
Instruments for speculation. The Hedging Instruments which the Portfolio is
authorized to use have certain risks associated with them. Principal among such
risks are: (a) the possible failure of such instruments as hedging techniques
in cases where the price movements of the securities underlying the options or
futures do not follow the price movements of the portfolio securities subject to
the hedge; (b) potentially unlimited loss associated with futures transactions
and the possible lack of a liquid secondary market for closing out a futures
position; and (c) possible losses resulting from the inability of the
Portfolio's investment adviser to correctly predict the direction of stock
prices, interests rates and other economic factors. The Hedging Instruments the
Portfolio may use and the risks associated with them are described in greater
detail under "Options and Futures Transactions" in the SAI.
SHORT SALES AGAINST-THE-BOX. The Portfolio may not sell securities short except
in "short sales against-the-box." For Federal income tax purposes, short sales
against-the-box may be made to defer recognition of gain or loss on the sale of
securities "in the box" and no income can result and no gain can be realized
from securities sold short against-the-box until the short position is closed
out. Such short sales are subject to the limits described under "Investment
Restrictions" above. See "Short Sales Against-the-Box" in the SAI for further
details.
3. MANAGEMENT
The business of the Trust is managed under the direction of its Board of
Trustees (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 Fund and meets periodically to review the results of the Fund,
monitor investment activities and practices and discuss other matters affecting
the Fund and the Trust. The SAI contains general background information about
the Trustees and Officers of the Trust and of Core Trust. The Trust Board
consists of seven persons.
INVESTMENT ADVISORY SERVICES
NORWEST INVESTMENT MANAGEMENT. Subject to the general supervision of the Board,
Norwest Investment Management continuously reviews, supervises and administers
the 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, 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.
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The Fund currently invests all of its assets in the Portfolio. The Fund began
pursuing its investment objective through investment in the Portfolio on
____________ __, 1996. The Fund may withdraw its investment from the Portfolio,
for which Schroder serves as investment adviser, at any time if the Board
determines that it is in the best interests of the Fund and its shareholders to
do so. See "Other Information -- Certain Risks of Investing in the Portfolio."
Accordingly, the Fund has retained the Adviser as its investment adviser and
Schroder as its investment subadviser to manage the Fund's assets in the event
the Fund so withdraws its investment. Neither the Adviser or Schroder will
receive and advisory or subadvisory fees with respect to the Fund as long as the
Fund remains completely invested in the Portfolio or any other investment
company.
SCHRODER CAPITAL MANAGEMENT INC. Schroder acts as investment adviser to the
Portfolio pursuant to an advisory agreement with Core Trust. Subject to the
general control of Core Trust's board of trustees, Schroder manages the
investment and reinvestment of the assets included in the Portfolio's investment
portfolio and continuously reviews, supervises and administers the Portfolio's
investments. In this regard, it is the responsibility of Schroder to make
decisions relating to the Portfolio's investments and to place purchase and sale
orders regarding such investments with brokers or dealers selected by it in its
discretion. Schroder also assists the Adviser in carrying out the Adviser's
obligations under the investment advisory agreement pursuant to an investment
subadvisory agreement among the Trust, Norwest and Schroder. The investment
advisory agreement between Schroder and Core Trust with respect to the Portfolio
is the same in all material respects as the Fund's investment subadvisory
agreement except as to the parties, and the circumstances under which fees will
be paid.
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 as of October 31, 1995, had assets under management in excess of
$100 billion.
Schroder receives an advisory fee from Core Trust with respect to the Portfolio
at an annual rate of 0.50% of the Portfolio's average daily net assets. The
investment advisory agreement for the Fund provides for an investment advisory
fee payable to Norwest by the Trust at an annual rate of 0.65% of the average
daily net assets of the Fund in the event that the Fund is not completely
invested in the Portfolio or another investment company. Pursuant to the Fund's
investment subadvisory agreement with Schroder, the Adviser (and not the Trust)
pays Schroder 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.
PORTFOLIO MANAGERS. The Fund invests all of its assets in the Portfolio and,
accordingly, there is currently no portfolio manager for the Fund. Fariba
Talebi, a Vice President of the Trust and a First Vice President of Schroder,
with the assistance of an investment committee, is primarily responsible for the
day-to-day management of the Portfolio's investment portfolio, and has so
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managed the Portfolio since its inception. Ms. Talebi has been employed by
Schroder in the investment research and portfolio management areas since 1987.
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 the date of this Prospectus, 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 member 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. For its services and facilities, Forum receives from the Fund a
management fee at an annual rate of 0.10% of the average daily net assets
attributable to each class of the Fund. From its own resources, Forum may pay a
fee to broker-dealers or other persons for distribution or other services
related to the Fund.
In addition, pursuant to a separate services agreement, Norwest receives a fee
at an annual rate of 0.25% of the average annual daily net assets of the Fund.
Under this agreement, Norwest is responsible for compiling data for and
preparing communications between the Fund and its shareholders, maintaining
requisite information flows between the Fund and the investment adviser to 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 this service agreement in the event that the Fund is not
completely invested in the Portfolio or another investment company.
Schroder Advisors, a wholly-owned subsidiary of Schroder, serves as
administrator of Core Trust. For these services, Schroder is compensated by
Core Trust with respect to the Portfolio at an annual rate of 0.10% of the
average daily net assets of the Portfolio. Forum also performs administrative
services to Core Trust, providing certain administrative services necessary for
the Portfolio's operations other than the administrative services provided to
the Portfolio by Schroder Advisors. For these services, Forum is compensated by
Core Trust with respect to the Portfolio at an annual rate of 0.075% of the
average daily net assets of the Portfolio.
Forum may subcontract any or all of its duties with respect to the Fund 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.
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Forum also acts as the distributor of the Shares pursuant to a distribution
services agreement with the Trust and in accordance therewith receives and may
reallow the initial sales charge assessed on purchases of A Shares of the Fund.
As authorized by a distribution plan with respect to B Shares of the Fund and
pursuant to the distribution services agreement, Forum receives a distribution
services fee as compensation for its distribution expenses with respect to B
Shares and a maintenance fee for its or certain broker-dealer's shareholder
services with respect to B Shares. For further information about the
distribution services agreement and the distribution plan, including the fees
payable thereunder, see "How to Buy Shares - Alternative Distribution
Arrangements." Pursuant to separate agreements, Forum also provides portfolio
accounting services to the Fund and to the Portfolio.
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 its or Forum's affiliates, who agree to comply
with the terms of the Transfer Agent's agreement with the Trust. Sub-transfer
agents and processing agents may be "Processing Organizations" as described
under "How to Buy Shares - Purchase Procedures." The Transfer Agent is
permitted to compensate those agents for their services; however, no such
compensation may increase the aggregate amount of payments by the Trust to the
Transfer Agent. For its services, the Transfer Agent receives from the Fund a
fee at an annual rate of 0.25% of the average daily net assets attributable to
each class of the Fund and may be reimbursed for certain expenses related to its
transfer agency services.
Norwest also serves as the Trust's custodian and may appoint subcustodians for
the foreign securities and other assets held in foreign countries. Norwest
currently receives no additional compensation for its custodial services with
respect to the Fund, but the Fund will incur the expenses and costs of any
subcustodian. In addition, the 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 is paid a fee by Core Trust for its services.
EXPENSES OF THE FUND
Subject to the obligation of Norwest to reimburse the Trust for certain expenses
of the Fund, the Trust has confirmed its obligation to pay all the Trust's
expenses. The Fund's expenses include Trust expenses attributable to the Fund,
which are allocated to the Fund, and expenses not specifically attributable to
the Fund, which are allocated among the Fund and all other funds of the Trust in
proportion to their average net assets. Norwest, Forum and the Transfer Agent
may each elect to waive (or continue to waive) all or a portion of their fees,
which are accrued daily and paid monthly. Any such waivers will have the effect
of increasing the Fund's performance
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for the period during which the waiver is in effect. No fee waivers may be
recouped at a later date. Fee waivers are voluntary and may be reduced or
eliminated at any time.
Norwest and Forum and their agents and affiliates also may act in various
capacities for, and receive compensation from, their customers who are
shareholders of the Fund. Under agreements with those customers, Norwest and
Forum 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 Fund.
Subject to the obligation of Norwest to reimburse the Trust for certain excess
expenses, under the Investment Advisory Agreements, the Trust has confirmed its
obligation to pay all the Trust's expenses, including: interest charges, taxes,
brokerage fees and commissions; certain insurance premiums; fees, interest
charges and expenses of the Trust's custodian, transfer agent and dividend
disbursing agent and providers of pricing, credit analysis and dividend
services; telecommunications expenses; auditing, legal and compliance expenses;
costs of maintaining corporate existence; costs of preparing and printing the
Fund's prospectus, SAI, account application forms and shareholder reports and
delivering them to existing shareholders; costs of maintaining books of original
entry for portfolio and fund accounting and other required books and accounts
and of calculating the net asset value of shares of the Fund; costs of
reproduction, stationery and supplies; compensation of trustees, officers and
employees of the Fund or Trust who are not employees of Norwest, Forum or their
affiliates and costs of other personnel performing services for the Fund; costs
of meetings of the Trust; SEC registration fees and related expenses; state
securities laws registration fees and expenses; fees and out of pocket expenses
payable to Norwest, Schroder and Forum; and fees and expenses paid by the Fund
pursuant to the distribution plan.
The Fund's expenses include the Fund's pro rata share of the operating expenses
of the Portfolio, which are borne indirectly by the Fund's shareholders.
4. HOW TO BUY SHARES
MINIMUM INVESTMENT
There is a $1,000 minimum for initial purchases and a $100 minimum for
subsequent purchases of Shares of the Fund. The Fund may in its discretion
waive the investment minimums. Shareholders who elect electronic share purchase
privileges such as the Automatic Investment Plan or the Directed Dividend Option
are not subject to the initial investment minimum. See "Other Shareholder
Services - Automatic Investment Plan" and "Dividends and Tax Matters."
Except as set forth below with respect to purchases through Processing
Organizations, an investor's order will not be accepted or invested by the Fund
during the period before the Fund's receipt of Federal funds. Fund Shares
become entitled to receive dividends and distributions on the next Fund Business
Day after the order is accepted.
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The Fund reserves the right to reject any subscription for the purchase of its
shares. Share certificates are issued only to shareholders of record upon their
written request and no certificates are issued for fractional shares.
PURCHASE PROCEDURES
INITIAL PURCHASES
There are three ways to purchase shares INITIALLY.
1. 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 under
"Account Application" on page __. 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.
2. BY BANK WIRE. Investors may make an initial investment in the Fund using
the wire system for transmittal of money among banks. The 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: SMALL CAP OPPORTUNITIES FUND
[DESIGNATE A SHARES OR B SHARES]
ACCOUNT NO.:
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.
3. THROUGH FINANCIAL INSTITUTIONS. Shares may be purchased and redeemed
through certain broker-dealers, banks and other financial institutions
("Processing Organizations"). The Transfer Agent, Forum and their affiliates
may be Processing Organizations. Processing Organizations may receive as a
broker-dealer's reallowance a portion of the sales charge paid by their
customers who purchase A Shares of the Fund, may receive payments from Forum
with respect to sales of B Shares and may receive payments as a processing agent
from the Transfer Agent. In addition, 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 Fund.
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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 the 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 the 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 also may 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 Fund to be purchased and redeemed only through registered broker-dealers,
including the Fund's distributor.
SUBSEQUENT PURCHASES
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.
ACCOUNT APPLICATION
Investors may obtain the account application form necessary to open an account
by writing the Trust at the following address:
NORWEST ADVANTAGE FUNDS
SMALL CAP OPPORTUNITIES 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
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privilege and participation in any program may be terminated by the shareholder
at any time by writing to the Trust.
GENERAL INFORMATION
Fund shares are continuously sold on every weekday except customary national
business holidays and Good Friday ("Fund Business Day"). The purchase price for
Fund shares equals their net asset value next-determined after acceptance of an
order plus, in the case of the A Shares, any applicable sales charge imposed at
the time of purchase.
Investments in the Fund may be made either through certain financial
institutions or by an investor directly. An investor who invests in the Fund
directly will be the shareholder of record. All transactions in Fund 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.
ALTERNATIVE DISTRIBUTION ARRANGEMENTS
Investors should compare sales charges and fees before selecting a particular
class of shares. Investors should consider whether, during the anticipated life
of their investment in the Fund, the accumulated distribution services fee and
maintenance fee and contingent deferred sales charges on B Shares prior to
conversion would be less than the initial sales charge on A Shares purchased at
the same time and whether that differential would be offset by the higher yield
of A Shares. A summary of the charges applicable to shares of the Fund is
listed under "Prospectus Summary - Expense Information." Sales personnel of
selected broker-dealers distributing the Fund's shares may receive differing
compensation for selling A Shares and B Shares.
Because initial sales charges are deducted at the time of purchase, investors
purchasing the Fund's A Shares receive fewer shares than if the sales charge
were not deducted and, accordingly, do not have the entire purchase price
invested. Investors not qualifying for reduced initial sales charges who expect
to maintain their investment for an extended period of time should consider
whether, in light of the initial sales charge and its effect on the amount of
the purchase price invested, purchases of A Shares are more or less advantageous
than purchases of B Shares with their associated accumulated continuing
distribution and maintenance charges. For example, based on estimated current
fees and expenses, an investor purchasing A Shares, which are subject to a 4.5%
initial sales charge, who elects to reinvest all dividends and distributions
would have to hold the A Shares approximately six years for the B Shares'
distribution services fee and maintenance fee to exceed the initial sales charge
imposed when purchasing A Shares. The foregoing example does not take into
account the time value of money, fluctuations in net asset value or the effects
of different performance assumptions.
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A Shares
The public offering price of the Fund's A Shares is their next-determined net
asset value plus an initial sales charge assessed as follows (no sales charge is
assessed on the reinvestment of dividends or distributions):
Broker-Dealers'
Sales Charge As a Percentage of Reallowance As a
----------------------------------- Percentage of
Amount of Purchase Offering Price Net Asset Value* Offering Price
- --------------------------------------------------------------------------------
Less than $50,000 4.50% 4.71% 4.05%
$50,000 to $99,999 3.50 3.63 3.15
$100,000 to $499,000 2.50 2.56 2.25
$500,000 to $999,000 2.00 2.04 1.80
$1,000,000 and over None None None
* Rounded to the nearest one-hundredth percent
Forum may pay a broker-dealers' reallowance to selected broker-dealers
purchasing shares as principal or agent, which may include banks, bank
affiliates and Processing Organizations. Normally, Forum will reallow discounts
to selected broker-dealers in the amounts indicated in the table above. In
addition, Forum may elect to reallow the entire sales charge to selected broker-
dealers for all sales with respect to which orders are placed with Forum. The
broker-dealers' reallowance may be changed from time to time. Forum may make
additional payments (out of its own resources) to selected broker-dealers of up
to 1.00% of the value of Fund shares purchased at net asset value.
In addition, from time to time and at its own expense, Forum may provide
compensation, including financial assistance, to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns or other dealer-sponsored special events.
Compensation may include: (i) the provision of travel arrangements and lodging,
(ii) tickets for entertainment events and (iii) merchandise.
No sales charge is assessed on purchases by: (a) any bank, trust company or
other institution acting on behalf of its fiduciary customer accounts or any
other account maintained by its trust department (including a pension, profit
sharing or other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Internal Revenue Code of 1986, as amended) and (b)
trustees and officers of the Trust; directors, officers and full-time employees
of Forum, of Norwest Corporation or of any of their affiliates; the spouse,
direct ancestor or direct descendant (collectively, "relatives") of any such
person; any trust or individual retirement account or self-employed retirement
plan for the benefit of any such person or relative; or the estate of any such
person or relative. These shares may not be resold except to the Fund and share
purchases under clause (b) must be made for investment purposes.
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In addition, no sales charge is assessed on purchases (a) by any registered
investment adviser with whom Forum has entered into a Share purchase agreement
and which is acting on behalf of its fiduciary customer accounts, or (b) of A
Shares of the Fund made through the Directed Dividend Option from a fund that
charges a front-end sales charge. See "Dividends and Tax Matters."
REINSTATEMENT PRIVILEGE. An investor who has redeemed A Shares of the Fund may,
within 60 days following the redemption, purchase without a sales charge A
Shares in an amount up to the amount of the redemption. Investors who desire to
exercise this "Reinstatement Privilege" should contact the Trust for further
information.
INVESTORS IN OTHER FUND FAMILIES. No sales charge is assessed on purchases of A
Shares of the Fund with the proceeds of a redemption at net asset value, within
the preceding 60 days, of shares of a mutual fund that does not impose on the
redeemed shares at the time of their purchase a sales charge equal to or greater
than that applicable to the A Shares of that Fund. Investors should contact the
Trust for further information and to obtain the necessary forms.
REDUCED INITIAL SALES CHARGES. To qualify for a reduced sales charge, an
investor or the investor's Processing Organization must notify the Transfer
Agent at the time of purchase of the investor's intention to qualify and must
provide the Transfer Agent with sufficient information to verify that the
purchase qualifies for the reduced sales charge. Reduced sales charges may be
modified or terminated at any time and are subject to confirmation of an
investor's holdings. Further information about reduced sales charges is
contained in the SAI.
SELF-DIRECTED 401(k) PROGRAMS. Purchases of A Shares of the Fund through self-
directed 401(k) programs and other qualified retirement plans offered by
Norwest, Forum or their affiliates in accumulated amounts of less than $100,000
are subject to a reduced sales charge applicable to a single purchase of
$100,000.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). An investor's purchase of
additional A Shares of the Fund may qualify for rights of accumulation ("ROA")
under which the applicable sales charge will be based on the total of the
investor's current purchase and the net asset value (at the end of the previous
Fund Business Day) of all A Shares of that Fund held by the investor. For
example, if an investor owned A Shares of the Fund worth $500,000 at the then
current net asset value and purchased A Shares of that Fund worth an additional
$50,000, the sales charge for the $50,000 purchase would be at the 2.0% rate
applicable to a $550,000 purchase, rather than at the 3.5% rate applicable to a
$50,000 purchase.
In addition, an investor in the Fund that has previously purchased A Shares of
any other fund of the Trust that is sold with a sales charge equal to or greater
than the sales charge imposed on the A Shares of the Fund ("Eligible Fund") also
may qualify for ROA and may aggregate existing investments in A Shares of
Eligible Funds with current purchases of A Shares of the Fund to determine the
applicable sales charge. In addition, purchases of A Shares of the Fund by an
investor and the investor's spouse, direct ancestor or direct descendant may be
combined for purposes of ROA.
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<PAGE>
STATEMENT OF INTENTION. A Shares investors also may obtain reduced sales
charges based on cumulative purchases by means of a written Statement of
Intention, expressing the investor's intention to invest $50,000 or more in A
Shares of the Fund within a period of 13 months. Each purchase of shares under
a Statement of Intention will be made at net asset value plus the sales charge
applicable at the time of the purchase to a single transaction of the dollar
amount indicated in the Statement.
Investors wishing to enter into a Statement of Intention in conjunction with
their initial investment in shares of the Fund should complete the appropriate
portion to the account application form. Current Fund shareholders can obtain a
Statement of Intention form by contacting the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. A Shares of the Fund on which no initial
sales charge was assessed due to the amount purchased in a single transaction or
pursuant to the Cumulative Quantity Discount or a Statement of Intention and
that are redeemed (including certain redemptions in connection with an exchange)
within specified periods after the purchase date of the shares will be subject
to contingent deferred sales charges equal to the percentages set forth below of
the dollar amount subject to the charge. The charge will be assessed on an
amount equal to the lesser of the cost of the shares being redeemed and their
net asset value at the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial purchase price. In
addition, no charge will be assessed on shares derived from the reinvestment of
dividends and distributions.
Contingent Deferred Sales
Charge as a % of Dollar
Amount of Purchase Period Shares Held Amount Subject to Charge
$1,000,000 to $2,499,999 Less than one year 1.00%
One to two years 0.75%
$2,500,000 to $4,999,999 Less than one year 0.50%
Over $5,000,000 Less than one year 0.25%
No contingent deferred sales charge is charged on redemptions to the same extent
as described under "B Shares - Contingent Deferred Sales Charge" below. The
contingent deferred sales charge on shares purchased through an exchange from
another fund of the Trust is based upon the original purchase date and price of
the other Fund's shares. For A shareholders with a Statement of Intention that
do not purchase $1,000,000 of the Fund's A Shares pursuant to their Statement,
no contingent deferred sales charge is imposed. The Statement of Intention
provides for a contingent deferred sales charge in certain other cases. Further
information about the contingent deferred sales charge is contained in the SAI.
B SHARES
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DISTRIBUTION PLAN. B Shares of the Fund are sold at their net asset value per
share without the imposition of a sales charge at the time of purchase. With
respect to B Shares, the Fund has adopted a distribution plan pursuant to Rule
12b-1 under the 1940 Act (the "Plan") providing for distribution payments, at an
annual rate of up to 0.75% of the average daily net assets of the Fund
attributable to the B Shares (the "distribution services fee"), by the Fund to
Forum, to compensate Forum for its distribution activities. The distribution
payments due to Forum from the Fund comprise (i) sales commissions at levels set
from time to time by the Board ("sales commissions") and (ii) an interest fee
calculated by applying the rate of 1% over the prime rate to the outstanding
balance of uncovered distribution charges (as described below). The current
sales commission rate is 4.0% and Forum currently expects to pay sales
commissions to each broker-dealer at the time of sale of up to 4.0% of the
purchase price of B Shares of the Fund sold by the broker-dealer.
Under the distribution services agreement between Forum and the Trust, Forum
will receive, in addition to the distribution services fee, all contingent
deferred sales charges due upon redemptions of B Shares. The combined
contingent deferred sales charge and distribution services fee on B Shares are
intended to finance the distribution of those shares by permitting an investor
to purchase shares through broker-dealers without the assessment of an initial
sales charge and, at the same time, permitting Forum to compensate broker-
dealers in connection with the sales of the shares. Proceeds from the
contingent deferred sales charge with respect to the Fund are paid to Forum to
defray the expenses related to providing distribution-related services in
connection with the sales of B Shares, such as the payment of compensation to
broker-dealers selling B Shares. Forum may spend the distribution services fees
it receives as it deems appropriate on any activities primarily intended to
result in the sale of B Shares.
Under the Plan, the Fund will make distribution services fee payments to Forum
only for periods during which there are outstanding uncovered distribution
charges attributable to the Fund. Uncovered distribution charges are equivalent
to all sales commissions previously due (plus interest), less amounts received
pursuant to the Plan and all contingent deferred sales charges previously paid
to Forum.
The amount of distribution services fees and contingent deferred sales charge
payments received by Forum with respect to the Fund is not related directly to
the amount of expenses incurred by Forum in connection with providing
distribution services to the B Shares and may be higher or lower than those
expenses. Forum may be considered to have realized a profit under the Plan if,
at any time, the aggregate amounts of all distribution services fees and
contingent deferred sales charge payments previously made to Forum exceed the
total expenses incurred by Forum in distributing B Shares.
Pursuant to the Plan, the Fund has agreed also to pay Forum a maintenance fee in
an amount equal to 0.25% of the average daily net assets of the Fund
attributable to B Shares for providing personal services to shareholder
accounts. The maintenance fee may be paid by Forum to broker-dealers in an
amount not to exceed 0.25% of the value of the B Shares held by the customers of
the broker-dealers. The distribution services fee and the maintenance fee are
each accrued daily and paid monthly and will cause the Fund's B Shares to have a
higher expense
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<PAGE>
ratio and to pay lower dividends than A Shares of that Fund. Notwithstanding
the discontinuation of distribution services fees with respect to the Fund, the
Fund may continue to pay maintenance fees.
The distribution services fees payable to Forum by the Fund each day are accrued
on that day as a liability of the Fund with respect to the B Shares and, as a
result, reduce the net assets of the B Shares. However, the Fund does not
accrue future distribution services fees as a liability of the Fund with respect
to the B Shares or reduce the Fund's current net assets in respect of
distribution services fees that may become payable under the Plan in the future.
In the event that the Plan is terminated or not continued with respect to the
Fund, the Fund may, under certain circumstances, continue to pay distribution
services fees to Forum (but only with respect to sales that occurred prior to
the termination or discontinuance of the Plan). Those circumstances are
described in detail in the SAI. In deciding whether to purchase B Shares of the
Fund, investors should consider that payments of distribution services fees
could continue until such time as there are no uncovered distribution charges
under the Plan attributable to the Fund. In approving the Plan, the Board
determined that there was a reasonable likelihood that the Plan would benefit
the Fund and its B shareholders.
Periods with a high level of sales of B Shares of the Fund accompanied by a low
level of redemptions of those shares that are subject to contingent deferred
sales charges will tend to increase uncovered distribution charges. Conversely,
periods with a low level of sales of B Shares of the Fund accompanied by a high
level of redemptions of those shares that are subject to contingent deferred
sales charges will tend to reduce uncovered distribution charges. A high level
of sales of B Shares during the first few years of operations, coupled with the
limitation on the amount of distribution services fees payable by the Fund with
respect to B Shares during any fiscal year, would cause a large portion of the
distribution services fees attributable to a sale of the B Shares to be accrued
and paid by the Fund to Forum with respect to those shares in fiscal years
subsequent to the years in which those shares were sold. The payment delay
would in turn result in the incurrence and payment of increased interest fees
under the Plan.
CONTINGENT DEFERRED SALES CHARGE. B Shares of the Fund that are redeemed within
six years of purchase will be subject to contingent deferred sales charges equal
to the percentages set forth on the next page of the dollar amount subject to
the charge. The amount of the contingent deferred sales charge, if any, will
vary depending on the number of years between the payment for the purchase of B
Shares of the Fund and their redemption.
The contingent deferred sales charge will be assessed on an amount equal to the
lesser of the cost of the B Shares being redeemed and their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
charge will be assessed on B Shares derived from the reinvestment of dividends
and distributions.
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<PAGE>
Contingent Deferred Sales
Charge as a % of Dollar
Year Since Purchase Amount Subject to Charge
- ------------------- ------------------------
First 4.0%
Second 3.0%
Third 3.0%
Fourth 2.0%
Fifth 2.0%
Sixth 1.0%
Seventh None
Redemptions of Shares will be effected in the manner that results in the
imposition of the lowest deferred sales charge. Redemptions with respect to a
shareholder's investment in the Fund will automatically be made first from any A
Shares in the Fund, second from B Shares of the Fund acquired pursuant to
reinvestment of dividends and distributions, third from B Shares of the Fund
held for over six years and fourth from the longest outstanding B Shares of the
Fund held for less than six years.
No contingent deferred sales charge is imposed on (i) redemptions of Shares
acquired through the reinvestment of dividends and distributions, (ii)
involuntary redemptions by the Fund of shareholder accounts with low account
balances, (iii) redemptions of Shares following the death or disability of a
shareholder if the Fund is notified within one year of the shareholder's death
or disability and (iv) redemptions to effect a distribution (other than a lump
sum distribution) from an IRA, Keogh plan or Section 403(b) custodial account or
from a qualified retirement plan. See the SAI for further information.
CONVERSION FEATURE. After seven years from the end of the calendar month in
which the shareholder's purchase order for B shares was accepted, the B Shares
will automatically convert to A Shares of the Fund. The conversion will be on
the basis of the relative net asset values of the Shares, without the imposition
of any sales load, fee or other charge. For purposes of conversion, B Shares of
the Fund purchased by a shareholder through the reinvestment of dividends and
distributions will be considered to be held in a separate sub-account. Each
time any B Shares in the shareholder's account (other than those in the sub-
account) convert, a corresponding pro rata portion of those shares in the sub-
account will also convert. The conversion of B Shares to A Shares is subject to
the continuing availability of certain opinions of counsel and the conversion of
the Fund's B Shares to A Shares may be suspended if such an opinion is no longer
available at the time the conversion is to occur. In that event, no further
conversions of the Fund's B Shares would occur, and shares might continue to be
subject to a distribution services and maintenance fee for an indefinite period.
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<PAGE>
5. HOW TO SELL SHARES
GENERAL INFORMATION
Fund Shares may be sold (redeemed) at their net asset value on any Fund Business
Day subject to a contingent deferred sales charge imposed, in the case of A
Shares, on some redemptions made within two years of purchase and, in the case
of B Shares, on most redemptions made within six years of purchase. 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 that the Transfer Agent may
require). Redeemed shares are not entitled to receive dividends declared after
the day the redemption becomes 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 used 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 date 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.
REDEMPTION PROCEDURES
Shareholders who have invested directly in the 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 who 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.
1. 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 "How to Sell Shares - Other
Redemption Matters."
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<PAGE>
2. 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 his 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 "How to Sell Shares - Other Redemption Matters."
3. BY BANK WIRE. For redemptions of more than $5,000, a shareholder who has
elected wire redemption privileges may request the 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.
OTHER REDEMPTION MATTERS
SIGNATURE GUARANTEE. A signature guarantee is required for the following: 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.
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.
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<PAGE>
6. OTHER SHAREHOLDER SERVICES
EXCHANGES
Shareholders of A Shares and B Shares may exchange their shares for A Shares and
B Shares, respectively, of the other funds of the Trust that offer those shares.
As of the date of this Prospectus, the funds of the Trust that offer A Shares
and B Shares, which are offered through separate prospectuses, are Stable Income
Fund, Intermediate U.S. Government Fund, Income Fund, Total Return Bond Fund,
Tax-Free Income Fund, Colorado Tax-Free Fund, Minnesota Tax-Free Fund, Income
Equity Fund, ValuGrowthSM Stock Fund, Diversified Equity Fund, Growth Equity
Fund, Small Company Stock Fund, Contrarian Stock Fund and International Fund.
It is anticipated that the Trust may in the future create additional funds that
will offer shares that will be exchangeable with the Fund's Shares. In
addition, A Shares may be exchanged for Investor Shares of Ready Cash Investment
Fund and Municipal Money Market Fund of the Trust. B Shares may be exchanged
for Exchange Shares of Ready Cash Investment Fund. Prospectuses for the shares
of the funds listed above, as well as a current list of the funds of the Trust
that offer shares exchangeable with the Shares of the Fund, can be obtained
through Forum by contacting the Transfer Agent.
The Fund does not charge for exchanges, and there is currently no limit on the
number of exchanges a shareholder may make. The Fund reserves the right,
however, to limit excessive exchanges by any shareholder. Exchanges are subject
to the fees (other than contingent deferred sales charges) 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.
Under Federal tax law, the Fund treats 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. Exchange
procedures may be amended materially or terminated by the Trust at any time upon
60 days' notice to shareholders. See "Additional Purchase and Redemption
Information" in the SAI.
SALES CHARGES. The exchange of A Shares may result in additional sales charges.
If an exchange of A Shares is made into a fund that imposes an initial sales
charge, the shareholder is required to pay an amount equal to any excess of that
Fund's initial sales charge attributable to the number of shares being acquired
in the exchange over any initial sales charge paid by the shareholder for the A
Shares being exchanged. For example, if a shareholder paid a 2% initial sales
charge in connection with a purchase of shares and then exchanged those shares
into A
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<PAGE>
Shares of another fund with a 3% initial sales charge, the shareholder would pay
an additional 1% sales charge on the exchange. A Shares acquired through the
reinvestment of dividends or distributions are deemed to have been acquired with
a sales charge rate equal to that applicable to the shares on which the
dividends or distributions were paid.
Shares of the Fund ("Original Shares") may be exchanged without the payment of
any contingent deferred sales charge. A and B Shares acquired as a result of
such exchange ("New Shares") and subsequently redeemed will nonetheless be
subject to the contingent deferred sales charge applicable to the Original
Shares as if those shares were being redeemed at that time. For purposes of
computing both the contingent deferred sales charge payable upon redemption of
the New Shares and, in the case of B Shares, the time remaining before the New B
Shares convert to A Shares of that Fund, the deferred sales charge and the time
remaining applicable to the Original Shares will apply to the New Shares rather
than the deferred sales charge and time remaining that would otherwise apply.
The deferred sales charge and time remaining applicable to Shares first
purchased by a shareholder will apply to New Shares resulting from both an
initial and any subsequent exchanges.
1. EXCHANGES 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 "How to Sell Shares - Other
Redemption Matters."
2. EXCHANGES BY TELEPHONE. A shareholder who has elected telephone exchange
privileges may make a telephone exchange 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 shareholder's shares are registered and the
shareholder's social security or taxpayer identification number. See "How to
Sell Shares - Other Redemption Matters."
AUTOMATIC INVESTMENT PLAN
Under the Fund's Automatic Investment Plan, 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 either A or B Shares of the 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 shareholder's account totals $1,000,
the Trust reserves the right to close the account in accordance with the
procedures described under "How to Sell Shares - Other Redemption Matters."
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<PAGE>
INDIVIDUAL RETIREMENT ACCOUNTS
The Fund 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.
AUTOMATIC WITHDRAWAL PLAN
A shareholder 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 $1,000 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 AND TAX MATTERS
DIVIDENDS
Dividends of the Fund's net investment income are declared and paid at least
annually. Distributions of net capital gain, if any, realized by the Fund are
distributed annually. Currently, dividends of net investment income are
declared and paid monthly by the Fund. Dividends paid by the Fund with respect
to each class of shares of the Fund will be calculated in the same manner at the
same time on the same day. The per share dividends on the Fund's B Shares will
be lower than the per share dividends on A Shares as a result of the
distribution services fees and maintenance fees applicable to B Shares.
Shareholders may choose to have dividends and distributions of the Fund
reinvested in shares of the 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"). All dividends and distributions are treated in the
same
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<PAGE>
manner for Federal income tax purposes whether received in cash or reinvested in
shares of the Fund.
Under the Reinvestment Option, all dividends and distributions of the Fund are
automatically invested in additional shares of the Fund. All dividends and
distributions are reinvested at the 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 the Fund whose shares in a single
account of the 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.
TAXES
The Fund intends 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 Fund will not be liable for Federal income and excise taxes on the net
investment income and capital gain distributed to its shareholders. Because the
Fund intends to distribute all of its net investment income and net capital gain
each year, the Fund should thereby avoid all Federal income and excise taxes.
Dividends paid by the 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 the 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.
Any dividend or distribution received by a shareholder on shares of the 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 or distribution made
shortly after the purchase of shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to the
shareholder as described above.
It is expected that a portion of the Fund's dividends from net investment income
will be eligible 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
the Fund's fiscal year. To the extent the Fund invests in the securities of
domestic issuers, the dividends to shareholders of the Fund may qualify for the
dividends received deduction for corporations.
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<PAGE>
The 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 the Fund will
be mailed to shareholders shortly after the close of each year.
THE 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.
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, or custodian to an investment
company and to purchase shares of the investment company as agent for and upon
the order of a customer and, in connection therewith, to retain a sales charge
or similar payment. Counsel to the Trust believe that Norwest and any other
bank or bank affiliate that may serve as a Processing Organization or 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 a
bank or bank affiliate were prohibited from so acting, changes in the operation
of the Trust could occur and a shareholder serviced by a bank or bank affiliate
may no longer be able to avail itself of those services. It is not expected
that shareholders would suffer any adverse financial consequences as a result of
any of these occurrences.
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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 the Fund or the Portfolio 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 or the Core Trust board of trustees or
pursuant to procedures approved by the Board or the Core Trust board of
trustees, as applicable. 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.
The per share net asset values of each class of shares of the Fund are expected
to be substantially the same. Under certain circumstances, however, the per
share net asset value of each class may vary. Due to the higher expenses of B
Shares, the net asset value of B Shares will generally be lower than the net
asset value of the other classes. The per share net asset value of each class
of the Fund eventually will tend to converge immediately after the payment of
dividends, which will differ by approximately the amount of the expense accrual
differential among the classes.
PERFORMANCE INFORMATION
The 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. The 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, the 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 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 the 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, the 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 the 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 Fund's 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. The comparative material
found in the Fund's advertisements, sales
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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 the Fund is calculated on a class
basis. In addition, the Fund may use a benchmark securities index as a measure
of the Fund's performance. This index is not used in the management of the Fund
but rather is a standard by which the Adviser and shareholders may compare the
performance of the Fund to an unmanaged composite of securities with similar,
but not identical, characteristics as the Fund. The Fund may from time to time
advertise a comparison of its performance against this 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 under 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 Fund) and may divide
portfolios or series into classes of shares (such as A and B Shares), and the
costs of doing so will be borne by the Trust. Currently the authorized shares
of the Trust are divided into thirty-two separate series.
OTHER CLASSES OF SHARES. In addition to the Shares, each Fund may create and
issue shares of other classes of securities. Each Fund currently offers three
classes of shares: A Shares; B Shares; and I Shares. I Shares are offered to
fiduciary, agency and custodial clients of bank trust departments, trust
companies and their affiliates without any sales charges or distribution service
or maintenance fees. Each class of the Fund may have a different expense ratio
and different sales charges (including distribution fees) and each class'
performance will be affected by its expenses and sales charges. For more
information on any other class of shares of the Fund investors may contact the
Transfer Agent at 612-667-8833 or 800-338-1348. Investors also may contact
their Norwest sales representative or the Fund's distributor to obtain
information about the other classes. Sales personnel of broker-dealers and
other financial institutions selling the Fund's shares may receive differing
compensation for selling A, B and I Shares of the Fund.
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 Rule 12b-1 plan which pertain to the class and other matters
for which separate class voting is appropriate under applicable law. Generally,
shares will be voted in the aggregate without reference to a particular
portfolio or class, except if the matter affects only one portfolio or class or
voting by portfolio or class is required by law, in which case shares will be
voted separately by portfolio or class, as appropriate. Delaware law does not
require the Trust to hold annual meetings of shareholders, and it is anticipated
that shareholder meetings will be held only when specifically required by
Federal or state law. Shareholders have available certain procedures for
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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.
From time to time, certain shareholders may own a large percentage of the shares
of the Fund. Accordingly, those shareholders may be able to greatly affect (if
not determine) the outcome of a shareholder vote.
CORE TRUST STRUCTURE
The Fund seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, which has substantially the same investment
objective and policies as the Fund. Accordingly, the Portfolio directly
acquires its own securities and the Fund acquires an indirect interest in those
securities. The Portfolio is a separate series of Core Trust, a business trust
organized under the laws of the State of Delaware in September 1995. Core Trust
is registered under the Act as an open-end management investment company and
currently has four 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
the Fund and the Portfolio can be changed only with shareholder approval. See
"Investment Objective and Policies," and "Management" for a complete description
of the Portfolio's investment objective, policies, restrictions, management, and
expenses.
The Fund's investment in the Portfolio is in the form of a non-transferable
beneficial interest. 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. As of the date of this Prospectus, the
Portfolio has one other institutional investor.
The Portfolio normally will not hold meetings of investors except as required by
the Act. Each Investor in the Portfolio 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 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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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, and 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 Forum Financial Corp. at (207) 879-8903.
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 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 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.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND THE FUND'S OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUND'S SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
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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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SMALL CAP OPPORTUNITIES FUND
I SHARES
Account Information and
Shareholder Servicing:
Norwest Bank Minnesota, N.A.
Transfer Agent
733 Marquette Avenue
Minneapolis, Minnesota 55479-0040
612-667-8833 or 800-338-1348
PROSPECTUS
August ___, 1996
This Prospectus offers I Shares of Small Cap Opportunities Fund (the "Fund").
The Fund is a separate diversified equity portfolio of Norwest Advantage Funds
(the "Trust"), an open-end management investment company (a mutual fund).
THE FUND CURRENTLY SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF
ITS INVESTMENT ASSETS IN U.S. SMALLER COMPANIES FUND (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.
This Prospectus sets forth concisely the information concerning the Trust and
the Fund that a prospective investor should know before investing. The Trust has
filed with the Securities and Exchange Commission (the "SEC") a Statement of
Additional Information ("SAI") with respect to the Fund dated the same date as
the Prospectus for the Fund and as may be further amended from time to time,
which contains more detailed information about the Trust and the Fund and is
incorporated into this Prospectus by reference. An investor may obtain a copy of
the SAI without charge by contacting the Trust's distributor, Forum Financial
Services, Inc., at Two Portland Square, Portland, Maine 04101 or by calling 207-
879-1900. Investors should read this Prospectus and retain it for future
reference.
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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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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 of the Fund are offered through this Prospectus to fiduciary, agency
and custodial clients of bank trust departments, trust companies and their
affiliates, including participants in certain qualified and nonqualified
employee benefit plans ("Plans") and to related IRA and KEOGH accounts. See
"Purchases and Redemptions of Shares." Participants in a Plan should consult
with their employer or plan sponsor to determine if the Fund is offered through
their Plan. While the Fund is not intended to provide a complete or balanced
investment program, it can serve as a component of an investor's long-term
program to accumulate assets for retirement or other major goals.
THE FUND
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is capital appreciation through investment in a
diversified portfolio which under normal conditions will have at least 65% of
its total assets invested in equity securities of companies having market
capitalizations under $1 billion. Current income will be incidental to the
objective of capital appreciation. Currently, the Fund seeks to achieve its
investment objective by investing exclusively in the Portfolio, a series of
Schroder Capital Funds ("Core Trust"), itself a registered open-end management
investment company. The Portfolio has substantially the same investment
objective and policies as the Fund. Accordingly, the investment experience of
the Fund will correspond directly with the investment experience of the
Portfolio. Investments in smaller capitalization companies involve greater
risks than those risks associated with investments in larger capitalization
companies. The Fund currently offers three separate classes of shares: A Shares,
B Shares and I Shares. Only I Shares are offered through this Prospectus and are
sometimes referred to herein as the "Shares."
MANAGEMENT OF THE FUND
The Fund's investment adviser (the "Adviser") is Norwest Investment Management,
a part of Norwest Bank Minnesota, N.A. ("Norwest"). The Adviser provides
investment advice to various institutions, pension plans and other accounts and,
as of December 31, 1995, managed assets totaling approximately $23 billion. See
"Management - Investment Advisory Services." Norwest serves as the Trust's
transfer agent, dividend disbursing agent and custodian. See "Management -
Shareholder Servicing and Custody."
As Small Cap Opportunities Fund invests all of its assets in the Portfolio, the
Fund does not actively employ the Adviser to manage an investment portfolio.
Rather, all investment advisory
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services are conducted for Small Cap Opportunities Fund by Schroder Capital
Management International Inc. ("Schroder"), the Portfolio's investment adviser,
a registered investment adviser under the Investment Advisers Act of 1940. See
"Management - Investment Advisory Services." Schroder and the Adviser are
sometimes referred to collectively as the "Advisers."
The manager of the Trust and distributor of its shares is Forum Financial
Services, Inc. ("Forum"), a registered broker-dealer and member of the National
Association of Securities Dealers, Inc. Norwest provides certain administrative
services to the Fund. Schroder Fund Advisors ("Schroder Advisors") serves as
administrator of Core Trust, for which Forum also provides certain
administrative services. See "Management - Administration and Distribution
Services."
PURCHASE AND REDEMPTION OF SHARES
Shares of beneficial interest of the Fund are offered without a sales charge and
may be redeemed without charge. Shares may be purchased or redeemed by mail, by
bank wire and through certain broker-dealers, banks, trust companies, or other
financial institutions. The minimum initial investment in Shares is $1,000. The
minimum subsequent investment is $100. See "How to Buy Shares" and "How to Sell
Shares."
CERTAIN RISK FACTORS
There can be no assurance that the Fund will achieve its investment objective,
and the 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 the Fund may be worth more or less than its original value.
All investments made by the Fund entail some risk. Certain investments and
investment techniques, however, entail additional risks, such as the potential
use of leverage through borrowings, securities lending and other investment
techniques. See "Investment Objective, Policies and Risk Considerations - Risk
Considerations."
Small Cap Opportunities Fund's policy of investing in smaller companies entails
certain risks in addition to those normally associated with investments in
equity securities. See "Investment Objective, Policies and Risk Considerations -
Additional Investment Policies and Risk Considerations." By investing solely in
the Portfolio, the Fund may achieve certain efficiencies and economies of scale.
Nonetheless, this investment could also have 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 FUND
The purpose of the following table is to assist investors in understanding the
various expenses that an investor in the Fund will bear directly or indirectly.
There are no transaction charges in connection with purchases, redemptions or
exchanges of Fund shares. The Fund has not adopted
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a Rule 12b-1 plan with respect to the Shares and, accordingly, the Fund incurs
no distribution expenses with respect to the Shares.
Annual Operating Expenses(1)
(As a percentage of average daily net assets)
Investment Advisory Fee(2) 0.50%
Other Expenses
(after expense reimbursements and fee waivers)(3) 0.75%
Total Operating Expenses 1.25%
(1) For a further description of the various expenses incurred in the operation
of the Fund, see "Management." Expenses associated with the A Shares and B
Shares of the Fund differ from those of the Shares listed in the table shown
above. The Fund's expenses as listed above include the Fund's pro rata portion
of all operating expenses of the Portfolio, which will be borne indirectly by
Fund shareholders. The Fund pays Norwest and Forum for certain administrative
services, and Core Trust pays fees for administrative services rendered to the
Portfolio, of which the Fund bears its pro rata portion. The Trust's Board of
Trustees believes that the aggregate per share expenses of the Fund and the
Portfolio will be approximately equal to the expenses the Fund would incur if
its assets were invested directly in equity securities.
(2) Investment Advisory Fees are those incurred by the Portfolio; as long as
its assets are invested in the Portfolio, the Fund pays no investment advisory
fees directly. See "Investment Objective and Policies" and "Management -
Expenses of the Fund."
(4) Other expenses for the Fund are based on estimated amounts for the Fund's
first fiscal year of operations ending ___________ __, 1997. Absent estimated
expense reimbursements and fee waivers the expenses of the Fund would be: Other
Expenses, 1.08%; and Total Operating Expenses, 1.58%. Other Expenses include
transfer agency fees payable to Norwest at an annual rate of up to 0.25% of the
Fund's average daily net assets attributable to I Shares. In addition, Other
Expenses for the Fund include administrative services fees payable to Norwest of
0.25%. Fee waivers are voluntary and may be reduced or eliminated at any time.
Example
The following is a hypothetical example that indicates the dollar amount of
expenses that an investor would pay, assuming a $1,000 investment in the Fund's
Shares, a 5% annual return and reinvestment of all dividends and distributions.
Hypothetical Expense Example
1 Year 3 Years
13 40
The example is based on the expenses listed in the "Annual Operating Expenses"
table. The 5% annual return is not predictive of and does not represent the
Fund's projected returns; rather, it is required by government regulation. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR
RETURN. ACTUAL EXPENSES AND RETURN MAY BE GREATER OR LESS THAN INDICATED.
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2. INVESTMENT OBJECTIVE, POLICIES,
AND RISK CONSIDERATIONS
The Fund's investment objective is capital appreciation through investment in a
diversified portfolio which under normal conditions will have at least 65% of
its total assets invested in equity securities of companies having market
capitalizations under $1 billion. Market capitalization means the market value
of a company's outstanding stock. Current income will be incidental to the
objective of capital appreciation. There can be no assurance that the Fund's
objective will be achieved.
The Fund's investment objective is fundamental and cannot be changed without
shareholder approval. The Fund currently seeks to achieve its investment
objective by investing all of its investment assets in the Portfolio, which has
substantially the same investment objective and policies as the Fund. The
following investment policies are those of the Fund and the Portfolio. As the
Fund has the same investment policies as the Portfolio and currently invests all
of its assets in the Portfolio, these policies are discussed with respect to the
Portfolio only. Unless otherwise indicated, all of the investment policies
described below are fundamental and cannot be changed without shareholder
approval. Additional information concerning the investment policies of the
Portfolio and the Fund, including additional fundamental policies, is contained
in the SAI.
INVESTMENT POLICIES
In its investment approach, Schroder will attempt to identify securities of
companies which it believes can generate above average earnings growth, selling
at favorable prices in relation to book values and earnings. As part of the
investment decision, Schroder's assessment of the competency of an issuer's
management will be an important consideration. These criteria are not rigid,
and other investments may be included in the Portfolio's portfolio if they may
help the Portfolio to attain its objective. These criteria can be changed by
the board of trustees of Core Trust.
The Portfolio will invest principally in equity securities (common stocks,
securities convertible into common stocks or, subject to special limitations,
rights or warrants to subscribe for or purchase common stocks). The Portfolio
may also invest to a limited degree in non-convertible debt securities and
preferred stocks when, in the opinion of Schroder, such investments are
warranted to achieve the Portfolio's investment objective. A convertible
security is a bond, debenture, note, preferred stock or other security that may
be converted into or exchanged for a prescribed amount of common stock of the
same or a different issuer within a particular period of time at a specified
price or formula. Investments in warrants or rights to subscribe for or
purchase common stocks will not be counted in determining the 65% of total
assets test set forth above but are subject to the limitations described below
in "Additional Investment Policies -- Warrants" in the SAI.
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The Portfolio may invest in securities of small, unseasoned companies (which,
together with any predecessors, have been in operation for less than three
years), as well as in securities of more established companies. In view of the
volatility of price movements of the former, as a non-fundamental policy, the
Portfolio currently intends to invest no more than 10% of its total assets in
securities of small, unseasoned issuers, while reserving the right to invest up
to 20% of its total assets in such issuers.
Although there is no minimum rating for debt securities (convertible or non-
convertible) in which the Portfolio may invest, it is the present intention of
the Portfolio to invest no more than 5% of its net assets in debt securities
rated below Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by
Standard & Poor's Ratings Services ("S&P"), such securities being commonly known
as "high yield/high risk" securities or "junk bonds," and it will not invest in
debt securities which are in default. High yield/high risk securities are
predominantly speculative with respect to the capacity to pay interest and repay
principal and generally involve a greater volatility of price than securities in
higher rated categories. In the event the Portfolio intends in the future to
invest more than 5% of its net assets in junk bonds, appropriate disclosures
will be made to existing and prospective shareholders. It should be noted that
even bonds rated Baa by Moody's or BBB by S&P are described by those rating
agencies as having speculative characteristics and that changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
of issuers of such bonds to make principal and interest payments than is the
case with higher grade bonds. The Portfolio is not obligated to dispose of
securities due to changes by the rating agencies. See the SAI for information
about the risks associated with investing in junk bonds.
For temporary defensive purposes, the Portfolio may invest without limitation in
(or enter into repurchase agreements maturing in seven days or less with U.S.
banks and broker-dealers with respect to) short-term debt securities, including
commercial paper, U.S. Treasury bills, other short-term U.S. Government
securities, certificates of deposit and bankers' acceptances of U.S. banks. The
Portfolio also may hold cash and time deposits in U.S. banks. See "Investment
Policies" in the SAI for further information about all these securities.
RISK CONSIDERATIONS
All investments involve certain risks. Investments in smaller capitalization
companies involve greater risks than those risks associated with investments in
larger capitalization companies. Smaller capitalization companies generally
experience higher growth rates and higher failure rates than do larger
capitalization companies. The trading volume of securities of smaller
capitalization companies is normally less than that of larger capitalization
companies and, consequently, generally have a disproportionate effect on their
market price, tending to make them rise more in response to buying demand and
fall more in response to selling pressure than is the case with larger
capitalization companies.
Investments in small, unseasoned issuers generally involve greater risk than is
customarily associated with larger, more seasoned companies. Such issuers often
have products and management personnel which have not been thoroughly tested by
time or the marketplace and
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their financial resources may not be as substantial as those of more established
companies. Their securities, which the Portfolio may purchase when they are
offered to the public for the first time, may have a limited trading market,
which may adversely affect their sale by the Portfolio and can result in such
securities being priced lower than otherwise might be the case. If other
institutional investors engage in trading this type of security, the Portfolio
may be forced to dispose of its holdings at prices lower than might otherwise be
obtained.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
ADDITIONAL INVESTMENT POLICIES
The investment objective and all investment policies of each of the Fund 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, as applicable. A majority of outstanding voting securities means
the lesser of (i) 67% of the shares present or represented at a shareholder
meeting at which the holders of more than 50% of the outstanding shares are
present or represented, or (ii) more than 50% of outstanding shares. Unless
otherwise indicated, all investment policies are not fundamental and may be
changed by the Board without approval by shareholders of the Fund. Likewise,
nonfundamental investment policies of the Portfolio may be changed by the board
of trustees of Core Trust without shareholder approval. For more information
concerning shareholder voting, see "Other Information - The Trust and Its Shares
- - Shareholder Voting and Other Rights" and "- Core Trust Structure."
INVESTMENT RESTRICTIONS
The following investment restrictions of the Portfolio are fundamental policies:
(1) The Portfolio cannot invest in securities (except those of the U.S.
Government or its agencies or instrumentalities) of any issuer if immediately
thereafter (a) more than 5% of the Portfolio's total assets would be invested in
securities of that issuer, or (b) the Portfolio would then own more than 10% of
that issuer's voting securities;
(2) The Portfolio cannot make short sales of securities except "short sales
against-the-box"; in such short sales, at all times during which a short
position is open, the Portfolio must own an equal amount of such securities, or
by virtue of ownership of securities have the right, without payment of further
consideration, to obtain an equal amount of the securities sold short; no more
than 15% of the Portfolio's net assets will be held as collateral for such short
sales at any one time;
(3) The Portfolio cannot concentrate investments in any particular industry;
therefore the Portfolio will not purchase the securities of companies in any one
industry if, thereafter, 25% or more of the Portfolio's total assets would
consist of securities of companies in that industry;
(4) The Portfolio cannot pledge, mortgage or hypothecate its assets to any
extent greater than 10% of the value of the total assets of the Portfolio;
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(5) The Portfolio cannot deviate from the percentage requirements listed under
"Investment Objective and Policies" and "Additional Investment Policies and Risk
Considerations "; or
(6) The Portfolio cannot purchase securities of other investment companies,
except in connection with a merger, consolidation, acquisition or
reorganization, or by purchase of securities of closed-end investment companies
and only if immediately thereafter not more than (i) 3% of the total outstanding
voting stock of such company is owned by the Portfolio, (ii) 5% of the
Portfolio's total assets, taken at market value, would be invested in any one
such company, or (iii) 10% of the Portfolio's total assets, taken at market
value, would be invested in such securities. It should be noted that as a
shareholder in an investment company, the Portfolio would bear its ratable share
of that investment company's expenses, including its advisory and administration
fees. At the same time, the Portfolio would continue to pay its own management
and advisory fees and other expenses.
The percentage restrictions described above and in the SAI apply only at the
time of investment and require no action by the Portfolio as a result of
subsequent changes in value of the investments or the size of the Portfolio. A
supplementary list of investment restrictions is contained in the SAI.
INVESTMENT TYPES
COMMON AND PREFERRED STOCK AND WARRANTS. The Portfolio may invest in common and
preferred stock. 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 the Portfolio may be
traded in the over-the counter market or on a securities exchange, but may not
be traded every day or in the volume typical of securities traded on a major
U.S. national securities exchange. As a result, disposition by the Portfolio of
a security to meet redemptions by interest holders or otherwise may require the
Portfolio 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 a lengthy 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. The Portfolio may also 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.
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REPURCHASE AGREEMENTS. The Portfolio may invest in repurchase agreements. A
repurchase agreement is a means of investing monies for a short period. In a
repurchase agreement, a seller - a U.S. bank or recognized broker-dealer - sells
securities to the Portfolio and agrees to repurchase the securities at the
Portfolio's cost plus interest within a specified period (normally one day). In
these transactions, the values of the underlying securities purchased by the
Portfolio are monitored at all times by Schroder to insure that the total value
of the securities equals or exceeds the value of the repurchase agreement, and
the Portfolio's custodian bank holds the securities until they are repurchased.
In the event of default by the seller under the repurchase agreement, the
Portfolio may have difficulties in exercising its rights to the underlying
securities and may incur costs and experience time delays in disposing of them.
To evaluate potential risks, Schroder reviews the creditworthiness of those
banks and dealers with which the Portfolio enters into repurchase agreements.
ILLIQUID AND RESTRICTED SECURITIES. As a non-fundamental policy, the Portfolio
will not purchase or otherwise acquire any security if, as a result, more than
15% of its net assets (taken at current value) would be invested in securities
that are illiquid by virtue of the absence of a readily available market or
because of legal or contractual restrictions on resale ("restricted
securities"). There may be undesirable delays in selling illiquid securities at
prices representing their fair value. This policy includes over-the-counter
options held by the Portfolio and the "in the money" portion of the assets used
to cover such options. As stated above, this policy also includes assets which
are subject to material legal restrictions on repatriation. The limitation on
investing in restricted securities does not include securities that may not be
resold to the general public but may be resold to qualified institutional
purchasers pursuant to Rule 144A under the Securities Act of 1933. If Schroder
determines that a "Rule 144A security" is liquid pursuant to guidelines adopted
by the Core Trust's board of trustees, it will not be deemed illiquid. These
guidelines take into account trading activity for 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, that security may
become illiquid, which could affect the Portfolio's liquidity. See "Investment
Policies C Illiquid and Restricted Securities" in the SAI for further details.
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend portfolio securities
(other than in repurchase transactions) to brokers, dealers and other financial
institutions meeting specified credit conditions, if the loan is collateralized
in accordance with applicable regulatory requirements and if, after any loan,
the value of the securities loaned does not exceed 25% of the value of the
Portfolio's total assets. By so doing, the Portfolio attempts to earn income
through the receipt of interest on the loan. In the event of the bankruptcy of
the other party to a securities loan, the Portfolio could experience delays in
recovering the securities it lent. To the extent that, in the meantime, the
value of the securities the Portfolio lent has increased, the Portfolio could
experience a loss.
The Portfolio may lend securities from its portfolio if liquid assets in an
amount at least equal to the current market value of the securities loaned
(including accrued interest thereon) plus the interest payable to the Portfolio
with respect to the loan is maintained as collateral by the Portfolio in a
segregated account. Any securities that the Portfolio may receive as collateral
will not become a part of its portfolio at the time of the loan, and, in the
event of a default by the
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borrower, the Portfolio will, if permitted by law, dispose of such collateral
except for such part thereof that is a security in which the Portfolio is
permitted to invest. During the time that the securities are on loan, the
borrower will pay the Portfolio any accrued income on those securities, and the
Portfolio may invest the cash collateral and earn income or receive an agreed
upon fee from a borrower that has delivered cash equivalent collateral. Cash
collateral received by the Portfolio will be invested in U.S. Government
securities and liquid high grade debt obligations. The value of securities
loaned will be marked to market daily. Portfolio securities purchased with cash
collateral are subject to possible depreciation. Loans of securities by the
Portfolio will be subject to termination at the Portfolio's or the borrower's
option. The Portfolio may pay reasonable negotiated fees in connection with
loaned securities, so long as such fees are set forth in a written contract and
approved by the Core Trust's board of trustees.
OPTIONS AND FUTURES TRANSACTIONS. While the Portfolio does not presently intend
to do so, it may write covered call options and purchase certain put and call
options, stock index futures, and options on stock index futures and broadly-
based stock indices, all of which are referred to as "Hedging Instruments." In
general, the Portfolio may use Hedging Instruments: (1) to attempt to protect
against declines in the market value of the Portfolio's portfolio securities or
stock index futures, and thus protect the Portfolio's net asset value per share
against downward market trends, or (2) to establish a position in the equities
markets as a temporary substitute for purchasing particular equity securities.
The Portfolio will not use Hedging Instruments for speculation. The Hedging
Instruments which the Portfolio is authorized to use have certain risks
associated with them. Principal among such risks are: (a) the possible failure
of such instruments as hedging techniques in cases where the price movements of
the securities underlying the options or futures do not follow the price
movements of the portfolio securities subject to the hedge; (b) potentially
unlimited loss associated with futures transactions and the possible lack of a
liquid secondary market for closing out a futures position; and (c) possible
losses resulting from the inability of the Portfolio's investment adviser to
correctly predict the direction of stock prices, interests rates and other
economic factors. The Hedging Instruments the Portfolio may use and the risks
associated with them are described in greater detail under "Options and Futures
Transactions" in the SAI.
SHORT SALES AGAINST-THE-BOX. The Portfolio may not sell securities short except
in "short sales against-the-box." For Federal income tax purposes, short sales
against-the-box may be made to defer recognition of gain or loss on the sale of
securities "in the box" and no income can result and no gain can be realized
from securities sold short against-the-box until the short position is closed
out. Such short sales are subject to the limits described under "Investment
Restrictions" above. See "Short Sales Against-the-Box" in the SAI for further
details.
3. MANAGEMENT
The business of the Trust is managed under the direction of its Board of
Trustees (the "Board"). The Board formulates the general policies of the Fund
and generally meets quarterly to review the results of the Fund, monitor
investment activities and practices and discuss other matters affecting the Fund
and the Trust. In order to minimize potential conflicts of interest, only one
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trustee of Core Trust, John Y. Keffer, is also a trustee of the Trust. The SAI
contains general background information about the trustees and officers of the
Trust and Core Trust. The Board currently consists of seven members.
INVESTMENT ADVISORY SERVICES
NORWEST INVESTMENT MANAGEMENT. Subject to the general supervision of the Board,
Norwest Investment Management continuously reviews, supervises and administers
the 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, 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.
The Fund currently invests all of its assets in the Portfolio. The Fund began
pursuing its investment objective through investment in the Portfolio on
____________ __, 1996. The Fund may withdraw its investment from the Portfolio,
for which Schroder serves as investment adviser, at any time if the Board
determines that it is in the best interests of the Fund and its shareholders to
do so. See "Other Information -- Certain Risks of Investing in the Portfolio."
Accordingly, the Fund has retained the Adviser as its investment adviser and
Schroder as its investment subadviser to manage the Fund's assets in the event
the Fund so withdraws its investment. Neither the Adviser or Schroder will
receive and advisory or subadvisory fees with respect to the Fund as long as the
Fund remains completely invested in the Portfolio or any other investment
company.
SCHRODER CAPITAL MANAGEMENT INC. Schroder acts as investment adviser to the
Portfolio pursuant to an advisory agreement with Core Trust. Subject to the
general control of Core Trust's board of trustees, Schroder manages the
investment and reinvestment of the assets included in the Portfolio's investment
portfolio and continuously reviews, supervises and administers the Portfolio's
investments. In this regard, it is the responsibility of Schroder to make
decisions relating to the Portfolio's investments and to place purchase and sale
orders regarding such investments with brokers or dealers selected by it in its
discretion. Schroder also assists the Adviser in carrying out the Adviser's
obligations under the investment advisory agreement pursuant to an investment
subadvisory agreement among the Trust, Norwest and Schroder. The investment
advisory agreement between Schroder and Core Trust with respect to the Portfolio
is the same in all material respects as the Fund's investment subadvisory
agreement except as to the parties, and the circumstances under which fees will
be paid.
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
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countries worldwide. The Schroder Group specializes in providing investment
management services and as of October 31, 1995, had assets under management in
excess of $100 billion.
Schroder receives an advisory fee from Core Trust with respect to the Portfolio
at an annual rate of 0.50% of the Portfolio's average daily net assets. The
investment advisory agreement for the Fund provides for an investment advisory
fee payable to Norwest by the Trust at an annual rate of 0.65% of the average
daily net assets of the Fund in the event that the Fund is not completely
invested in the Portfolio or another investment company. Pursuant to the Fund's
investment subadvisory agreement with Schroder, the Adviser (and not the Trust)
pays Schroder 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.
PORTFOLIO MANAGERS. The Fund invests all of its assets in the Portfolio and,
accordingly, there is currently no portfolio manager for the Fund. Fariba
Talebi, a Vice President of the Trust and a First Vice President of Schroder,
with the assistance of an investment committee, is primarily responsible for the
day-to-day management of the Portfolio's investment portfolio, and has so
managed the Portfolio since its inception. Ms. Talebi has been employed by
Schroder in the investment research and portfolio management areas since 1987.
ADMINISTRATION 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 the date of this Prospectus, 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 member 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. For its services and facilities, Forum receives from the Fund a
management fee at an annual rate of 0.10% of the average daily net assets
attributable to each class of the Fund. From its own resources, Forum may pay a
fee to broker-dealers or other persons for distribution or other services
related to the Fund.
In addition, pursuant to a separate services agreement, Norwest receives a fee
at an annual rate of 0.25% of the average annual daily net assets of the Fund.
Under this agreement, Norwest is responsible for compiling data for and
preparing communications between the Fund and its shareholders, maintaining
requisite information flows between the Fund and the investment adviser to 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 this service agreement in the event that the Fund is not
completely invested in the Portfolio or another investment company.
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Schroder Advisors, a wholly-owned subsidiary of Schroder, serves as
administrator of Core Trust. For these services, Schroder is compensated by
Core Trust with respect to the Portfolio at an annual rate of 0.10% of the
average daily net assets of the Portfolio. Forum also performs administrative
services to Core Trust, providing certain administrative services necessary for
the Portfolio's operations other than the administrative services provided to
the Portfolio by Schroder Advisors. For these services, Forum is compensated by
Core Trust with respect to the Portfolio at an annual rate of 0.075% of the
average daily net assets of the Portfolio.
Forum may subcontract any or all of its duties with respect to the Fund 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.
Forum also acts as the distributor of the Shares pursuant to a distribution
services agreement with the Trust and in accordance therewith receives and may
reallow the initial sales charge assessed on purchases of A Shares of the Fund.
As authorized by a distribution plan with respect to B Shares of the Fund and
pursuant to the distribution services agreement, Forum receives a distribution
services fee as compensation for its distribution expenses with respect to B
Shares and a maintenance fee for its or certain broker-dealer's shareholder
services with respect to B Shares. For further information about the
distribution services agreement and the distribution plan, including the fees
payable thereunder, see "How to Buy Shares - Alternative Distribution
Arrangements." Pursuant to separate agreements, Forum also provides portfolio
accounting services to the Fund and to the Portfolio.
SHAREHOLDER SERVICING AND CUSTODY
Norwest serves as transfer agent and dividend disbursing agent for the Trust (in
this capacity, the "Transfer Agent"). The Transfer Agent maintains an account
for each shareholder of the Trust (unless such accounts are maintained by sub-
transfer agents or processing agents), performs other transfer agency and
shareholder servicing functions for the Trust, and acts as dividend disbursing
agent for the Trust. The Transfer Agent is permitted to subcontract any or all
of its functions with respect to all or any portion of the Trust's shareholders
to one or more qualified sub-transfer agents or processing agents, which may be
its or Forum's affiliates, who agree to comply with the terms of the Transfer
Agent's agreement with the Trust. The Transfer Agent is permitted to compensate
those agents for their services; however, no such compensation may increase the
aggregate amount of payments by the Trust to the Transfer Agent. For its
services, Norwest is compensated at the annual rate of 0.25% of the Fund's
average annual daily net assets attributable to the Shares.
Norwest also serves as the Trust's custodian and may appoint subcustodians for
the foreign securities and other assets held in foreign countries. Except as
noted below, Norwest currently receives no additional compensation for its
custodial services, but the Fund will incur the expenses and costs of any
subcustodian. The Fund indirectly incurs its pro rata portion of the
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custodial fees of Core Trust. The Chase Manhattan Bank, N.A. serves as custodian
of the Portfolio and is paid a fee by Core Trust for its services.
EXPENSES OF THE FUNDS
The Fund (as well as the Portfolio) is obligated to pay for all of its expenses,
although Norwest has agreed to reimburse the Trust for certain of the 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 "Prospectus Summary - Expense Information." These expenses
include: interest charges; taxes; brokerage fees and commissions; certain
insurance premiums; applicable fees and expenses under the Trust's or Core
Trust's contracts with the Advisers, Forum, the Transfer Agent and any
custodian; fees of pricing, interest, dividend, credit and other reporting
services; costs of membership in trade associations; auditing, legal and
compliance expenses; costs of preparing and printing the Trust's prospectuses,
statements of additional information and shareholder reports and delivering them
to existing shareholders; compensation of certain of the Trust's or Core Trust's
trustees, officers and employees and other personnel performing services for the
Trust or Core Trust; and registration fees and related expenses.
The 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 Fund and the portfolio in proportion to their average net
assets. The Fund's expenses include the Fund's pro rata share of the operating
expenses of the Portfolio, which are borne indirectly by the Fund's
shareholders.
The Advisers, Forum, the Transfer Agent and any other service provider to the
Fund or the Portfolio may elect to waive all or a portion of their fees. Any
such waivers will have the effect of increasing the 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 of the 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 Fund.
4. PURCHASES AND REDEMPTIONS OF SHARES
Shares of the Fund are continuously sold and redeemed at a price equal to their
net asset value on each Fund Business Day (as defined below) without charge. All
transactions in Fund Shares are effected through the Transfer Agent, which
accepts orders for purchases and redemptions only
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from shareholders of record and new investors. Shareholders of record receive
periodic statements from the Trust listing all account activity during the
statement period. I Shares of a Fund are offered to fiduciary, agency and
custodial clients of bank trust departments, trust companies and their
affiliates.
PURCHASE AND REDEMPTION PROCEDURES
PURCHASES AND REDEMPTIONS THROUGH FINANCIAL INSTITUTIONS. Shares may be
purchased and redeemed (and in the case of Plans, generally will be purchased
and redeemed) through certain broker-dealers, banks, trust companies and their
affiliates, including Norwest and its affiliates ("Processing Organizations").
Processing Organizations may charge their customers a fee for their services and
are responsible for promptly transmitting purchase, redemption and other
requests to the Fund.
Investors who purchase shares through a Processing Organization may be charged a
fee if they effect transactions in Fund Shares through a broker or agent and
will be subject to the procedures of their Processing Organization, which may
include limitations, investment minimums, cutoff times and restrictions in
addition to, or different from, those applicable to shareholders who invest in
the Fund directly. These investors should acquaint themselves with their
Processing Organization procedures and should read this Prospectus in
conjunction with any materials and information provided by their Processing
Organization. Customers who purchase the Fund's shares through a Processing
Organization may or may not be the shareholder of record and, subject to their
Processing Organization's and the Fund's procedures, may have Fund shares
transferred into their name. Under their arrangements with the Trust, broker-
dealer Processing Organizations are not generally required to deliver payment
for purchase orders until several business days after a purchase order has been
received by the Fund. Certain other Processing Organizations may also enter
purchase orders with payment to follow.
Certain shareholder services may not be available to shareholders who have
purchased shares through a Processing Organization. These shareholders should
contact their Processing Organization for further information. The Trust may
confirm purchases and redemptions of a Processing Organization's customers
directly to the Processing Organization, which in turn will provide its
customers with such confirmations and periodic statements as may be required by
law or agreed to between the Processing Organization and its customers. The
Trust is not responsible for the failure of any Processing Organization to carry
out its obligations to its customer. Certain states permit shares of the Fund to
be purchased and redeemed only through registered broker-dealers, including the
Fund's distributor.
INITIAL PURCHASES OF SHARES. Investors may obtain the account application form
necessary to open an account by writing the Trust at the address listed on the
cover of this Prospectus.
To participate in shareholder services not referenced on the account application
form and to change information on a shareholder's account (such as addresses),
investors or existing shareholders should contact the Trust. The Trust reserves
the right in the future to modify, limit or terminate any shareholder privilege
upon appropriate notice to shareholders and to charge a
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fee for certain shareholder services, although no such fees are currently
contemplated. Any privilege and participation in any program may be terminated
by the shareholder at any time by writing to the Trust.
BY MAIL. Investors may send a check made payable to the Trust along with a
completed account application form to the Trust at the address listed below.
Checks are accepted at full value subject to collection. Payment by a check
drawn on any member of the Federal Reserve System can normally be converted into
Federal funds within two business days after receipt of the check. Checks drawn
on some non-member banks may take longer.
BY BANK WIRE. To make an initial investment in the Fund using the wire system
for transmittal of money among banks, an investor should first telephone the
Trust Transfer Agent at 612-667-8833 or 800-338-1348 to obtain an account
number. The investor should then instruct a bank to wire the investor's money
immediately to:
Norwest Bank Minnesota, N.A.
ABA 091 000 019
For Credit to: Norwest Advantage Funds 0844-131
Re: Small Cap Opportunities 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.
SUBSEQUENT PURCHASES OF SHARES. Subsequent purchases may be made by mailing a
check, by sending a bank wire or through the shareholder's Processing
Organization as indicated above. All payments should clearly indicate the
shareholder's name and account number.
REDEMPTIONS OF SHARES. Shareholders that wish to redeem shares by telephone or
receive redemption proceeds by bank wire must elect these options by properly
completing the appropriate sections of their account application form. These
privileges may not be available until several weeks after a shareholder's
application is received. Shares for which certificates have been issued may not
be redeemed by telephone.
BY MAIL. Shareholders may redeem shares by sending a written request to the
Transfer Agent accompanied by any share certificate that may have been issued to
the shareholder to evidence the shares being redeemed. All written requests for
redemption must be signed by the shareholder with signature guaranteed, and all
certificates submitted for redemption must be endorsed by the shareholder with
signature guaranteed. See "Purchases and Redemptions of Shares - General
Information."
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BY TELEPHONE. A shareholder who has elected telephone redemption privileges may
make a telephone redemption request by calling the Transfer Agent at 800-338-
1348 or 612-667-8833 and providing the shareholder's account number, the exact
name in which the shares are registered and the shareholder's social security or
taxpayer identification number. In response to the telephone redemption
instruction, the Trust will mail a check to the shareholder's record address or,
if the shareholder has elected wire redemption privileges, wire the proceeds.
See "Purchases and Redemptions of Shares - General Information."
BY BANK WIRE. For redemptions of more than $5,000, a shareholder who has elected
wire redemption privileges may request the Fund to transmit the redemption
proceeds by Federal funds wire to a bank account designated in writing by the
shareholder. To request bank wire redemptions by telephone, the shareholder also
must have elected the telephone redemption privilege. Redemption proceeds are
transmitted by wire on the day after a redemption request in proper form is
received by the Trust Transfer Agent.
EXCHANGES. Shareholders may exchange their Shares for certain other portfolios
of the Trust. The Trust may in the future offer I Shares, Institutional Shares,
or other shares which will be exchangeable with the Shares of the Funds.
The Fund does not charge for exchanges, and there is currently no limit on the
number of exchanges a shareholder may make; the Fund reserves 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. For Federal tax
purposes, an exchange is treated as a redemption and a simultaneous new
purchase. Exchange procedures may be materially amended or terminated by the
Trust at any time upon 60 days' notice to shareholders. See "Additional Purchase
and Redemption Information" in the SAI.
BY MAIL. Exchanges may be made by sending a written request to the Transfer
Agent accompanied by any share certificates for the shares to be exchanged. All
written requests for exchanges must be signed by the shareholder, and all
certificates submitted for exchange must be endorsed by the shareholder with
signature guaranteed. See "Purchases and Redemptions of Shares - General
Redemption Information."
BY TELEPHONE. A shareholder who has elected telephone exchange privileges may
make a telephone exchange by calling the Transfer Agent at 800-338-1348 or 612-
667-8833 and providing the shareholder's account number, the exact name in which
the shareholder's shares are registered and the shareholder's social security or
taxpayer identification number. See "Purchases and Redemptions of Shares -
General Information."
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GENERAL INFORMATION
PURCHASING SHARES. Investments in the Fund may be made either through certain
financial institutions or by an investor directly. An investor who invests in
the Fund directly will be the shareholder of record. Fund Shares are issued
immediately following the next determination of net asset value made after
acceptance of an investor's subscription and funds. An investor's funds will not
be accepted or invested during the period before the Fund's receipt of funds on
deposit at a Federal Reserve Bank ("Federal Funds"). The Fund reserves the right
to reject any subscription for the purchase of its shares. Share certificates
are issued only to shareholders of record upon their written request and are not
issued for fractional shares. With approval of the Trust and the Adviser, shares
may be purchased with portfolio securities in lieu of cash.
REDEEMING SHARES. There is no minimum period of investment and no restriction on
the frequency of redemptions. Fund Shares are redeemed as of the next
determination of the Fund's net asset value following acceptance by the Transfer
Agent of the redemption order in proper form (and any supporting documentation
which the Transfer Agent may require). Normally, redemption proceeds are paid
immediately, but in no event later than 7 days, following acceptance of a
redemption order. Proceeds of a redemption request, however, will not be paid
unless any check used for investment has been cleared by the shareholder's bank,
which may take up to 15 days. Unless otherwise indicated, redemption proceeds
normally are paid by check mailed to the shareholder's record address. The right
of redemption may not be suspended nor the payment dates postponed for more than
7 days except when the New York Stock Exchange is closed (or when trading
thereon is restricted) for any reason other than its customary weekend or
holiday closings or under any emergency or other circumstances as determined by
the SEC.
Shareholders who wish to accomplish redemptions or exchanges by telephone must
elect those privileges. The Trust, the Transfer Agent and Forum are not
responsible for the authenticity of telephone instructions or losses, if any,
resulting from unauthorized telephone redemption or exchange requests which
reasonably are believed to be genuine. The Trust employs reasonable procedures
(including the recording of certain telephone transactions) to insure that
telephone orders are genuine. Shareholders should verify the accuracy of
telephone instructions immediately upon receipt of confirmation statements.
INVESTMENT MINIMUMS. Shares of the Fund are offered without a sales charge and
may be redeemed without charge. The minimum initial investment in I Shares is
$1,000. The minimum subsequent investment 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 - General
Information - Automatic Investment Plan" and "Dividends, Distributions and Tax
Matters."
IRAS AND KEOGHS. Shares may be a suitable investment vehicle for part or all of
the assets held in certain IRAs or KEOGH accounts. An appropriate account
application form may be obtained by contacting the Trust or, for accounts
rolling over from a Plan, the shareholder's
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employer. Under current IRA rules, by directly rolling over a distribution from
a Plan, investors can avoid the 20 percent withholding tax imposed on
distributions from a Plan. Rollover IRA assets must be held separately from
other IRA assets if the investor wishes to invest his Rollover IRA in another
employer's plan in the future. The amount of the deductible contribution to an
IRA will be reduced if the individual or, in the case of a married individual
filing jointly, either the individual or the individual's spouse is an active
participant in an employer-sponsored retirement plan and has adjusted gross
income above certain levels.
Currently, individuals may make tax-deductible IRA contributions of up to a
maximum of $2,000 annually. However, the deduction will be reduced if the
individual or, in the case of a married individual filing jointly, either the
individual or the individual's spouse is an active participant in an employer-
sponsored retirement plan and has adjusted gross income above certain levels.
SIGNATURE GUARANTEES. A signature guarantee is required for any endorsement on a
share certificate and for instructions to change a shareholder's record name or
address, designated bank account for wire redemptions, Automatic Investment or
Withdrawal Plan, dividend election, telephone redemption or any other option
election in connection with the shareholder's account. Signature guarantees may
be provided by any eligible institution acceptable to the Transfer Agent,
including a bank, a broker, a dealer, a national securities exchange, a credit
union, or a savings association that is authorized to guarantee signatures.
Whenever a signature guarantee is required, each person required to sign for the
account must have that person's signature guaranteed.
OTHER REDEMPTION INFORMATION. Proceeds of redemptions normally are paid in cash.
However, payments may be made wholly or partially in portfolio securities if the
Board determines that payment in cash would be detrimental to the best interests
of the Fund. The Company will only effect a redemption in portfolio securities
if the particular shareholder is redeeming more than $250,000 or 1 percent of
the Fund's total net assets, whichever is less, during any 90-day period. Due to
the cost to the Trust of maintaining smaller accounts, the Trust reserves the
right to redeem, upon not less than 60 days written notice, all shares in a Fund
account with an aggregate net asset value of less than $1,000. The Trust will
not redeem accounts that fall below that amount solely as a result of a
reduction in net asset value.
AUTOMATIC INVESTMENT PLAN. Under the Automatic Investment Plan which is
available to shareholders of the 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 the 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 shareholder's account totals $1,000, the Trust reserves
the right to close the account in accordance with the procedures described under
"Other Redemption Information" above.
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AUTOMATIC WITHDRAWAL PLAN. A shareholder of the 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. Provided that the information on the account application
form on file with the Trust is still applicable, a shareholder may reopen an
account, without filing a new account application form, at any time within one
year after the shareholder's account is closed.
DETERMINATION OF NET ASSET VALUE. The Trust determines the net asset value per
share of the 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 the Fund or the
Portfolio 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 or the Core Trust board of trustees or pursuant to procedures approved by
the Board or the Core Trust board of trustees, as applicable. 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.
5. 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 the Fund in
accordance with the Fund's dividend policy. The Fund's net capital gain, if any,
is distributed at least annually, typically in December.
Shareholders may choose to have dividends and distributions of the Fund
reinvested in shares of the 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.
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Under the Reinvestment Option, all dividends and distributions are automatically
invested in additional Shares of the Fund. All dividends and distributions are
reinvested at the 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 the 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
TAXATION OF THE FUNDS. The Fund is treated as a corporation for Federal tax
purposes and intends to qualify for each fiscal year as a regulated investment
company under the Internal Revenue Code of 1986, as amended. In addition, the
Fund intends to distribute all of its net investment income and capital gain
each year. Accordingly, it is anticipated that the Fund will not be liable for
Federal income or excise taxes on its net investment income and capital gain.
THE 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 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.
SHAREHOLDER TAX MATTERS
GENERAL. Dividends paid by the Fund out of its net investment income (including
any realized net short-term capital gain) are taxable to shareholders as
ordinary income. Distributions by the Fund of realized net long-term capital
gain, if any, are taxable to shareholders as long-term capital gain, regardless
of the length of time the shareholder may have held shares in the Fund at the
time of distribution. If Fund shares are sold at a loss after being held for 6
months or less, the loss will be treated as long-term capital loss to the extent
of any long-term capital gain distribution received on those shares.
All capital gain distributions and dividends paid by the Fund and received by a
shareholder reduce the net asset value of the shareholder's shares by the amount
of the distribution or dividend. Furthermore, a dividend or distribution made
shortly after the purchase of shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to the
shareholder as described above.
It is expected that a substantial portion of the 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 the Fund's fiscal
year.
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The Fund may be required by Federal law to withhold 31 percent of reportable
payments (which may include taxable dividends, capital gain distributions and
redemption proceeds) paid to individuals and certain other non-corporate
shareholders. Withholding is not required if a shareholder certifies that the
shareholder's social security or tax identification number provided to the Trust
is correct and that the shareholder is not subject to backup withholding for
prior under-reporting to the Internal Revenue Service.
Reports containing appropriate information with respect to the Federal income
tax status of dividends and distributions paid during the year by the Fund will
be mailed to shareholders shortly after the close of each year.
TAX-DEFERRED ACCOUNTS. Dividends or distributions of net long-term capital gain,
if any, paid with respect to the shares of the 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.
6. OTHER INFORMATION
FUND PERFORMANCE
The Fund's performance may be quoted in advertising in terms of yield or total
return. Both types are based on historical results and are not intended to
indicate future performance. The Fund's advertisements may reference ratings and
rankings among similar funds by independent evaluators such as Morningstar,
Lipper Analytical Services, Inc. and IBC/Donoghue, Inc. In addition, the
performance of the Fund may be compared to recognized indices of market
performance. The comparative material found in the Fund's advertisements, sales
literature or reports to shareholders may contain performance ratings. This
material is not to be considered representative or indicative of future
performance.
YIELD. The Fund's yield is a way of showing the rate of income earned by the
Fund as a percentage of the Fund's share price. Yield is calculated by dividing
the net investment income of the Fund for the stated period by the average
number of shares entitled to receive dividends and expressing the result as an
annualized percentage rate based on the Fund's share price at the end of the
period. The Fund may also quote a compounded annualized yield which assumes the
reinvestment of dividends paid by the Fund and therefore will be somewhat higher
than the annualized yield for the same period.
TOTAL RETURN. Total Return refers to the average annual compounded rates of
return over some representative period that would equate an initial amount
invested at the beginning of a stated period to the ending redeemable value of
the investment, after giving effect to the reinvestment of all dividends and
distributions and deductions of expenses during the period. Because average
annual returns tend to smooth out variations in a Fund's returns, shareholders
should recognize that they are not the same as actual year-by-year results.
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PERFORMANCE BENCHMARKS. The Fund uses a benchmark securities index as a measure
of the Fund's performance. This index is not used in the management of the Fund
but rather is a standard by which the Advisers and shareholders may compare the
performance of the Fund to an unmanaged composite of securities with similar,
but not identical, characteristics as the Fund. Accordingly, the Adviser
generally uses the index as a comparison to measure the performance of the Fund.
The Fund may from time to time advertise a comparison of its performance against
any index.
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.
PORTFOLIO TRANSACTIONS
The 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 Advisers seek "best execution" for all portfolio transactions, but the Fund
may pay higher than the lowest available commission rates when an Adviser
believes it is reasonable to do so in light of the value of the brokerage,
research and other services provided by the broker effecting the transaction.
Subject to the Fund's policy of obtaining the best price consistent with quality
of execution of transactions, each Adviser may employ Norwest Investment
Services, Inc., Schroder Wertheim & Company and other broker-dealer affiliates
of an Adviser (collectively "Affiliated Brokers") to effect brokerage
transactions for the Fund. The Fund's payment of commissions to Affiliated
Brokers is subject to procedures adopted by the Board and, with respect to the
Portfolios of Core Trust, Core Trust's board of trustees, to provide that the
commissions will not exceed the usual and customary broker's commissions charged
by unaffiliated brokers. No specific portion of the Fund's brokerage will be
directed to Affiliated Brokers and in no event will a broker affiliated
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with an Adviser directing the transaction receive brokerage transactions in
recognition of research or other services provided to the Adviser.
Tax rules applicable to short-term trading may affect the timing of the Fund's
portfolio transactions or its ability to realize short-term trading profits or
establish short-term positions.
An annual turnover rate of 100 percent would occur if all of the securities in
the Fund were replaced once in a period of 1 year. Higher portfolio turnover
rates may result in higher taxable income for shareholders and may result in
increased brokerage costs to the Fund. For more information about the portfolio
transactions of the Fund and the Portfolio, see the SAI.
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 under 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 Fund) 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 31 series.
OTHER CLASSES OF SHARES. Each Fund may issue shares of other classes. Funds of
the Trust (except money market funds) currently may issue three classes of
shares, I Shares, A Shares and B Shares, and may in the future create additional
class types. I Shares are offered to fiduciary, agency and custodial clients of
bank trust departments, trust companies and their affiliates without any sales
charges. A Shares are sold with front-end sales charge or, in some cases, a
contingent deferred sales charge. B Shares are sold with a contingent deferred
sales charge and pay distribution fees. Investor Shares are offered with a
minimum investment of $1,000 and incur greater transfer agency and other
expenses than Institutional Shares. Each class of a Fund will have a different
expense ratio and may have different sales charges (including distribution
fees). Each class's performance is affected by its expenses and sales charges.
For more information on any other class of shares of the Fund investors may
contact the Transfer Agent at 612-667-8833 or 800-338-1348. Investors may also
contact their Norwest sales representative to obtain information on the other
classes. Sales personnel of broker-dealers and other financial institutions
selling the Fund's shares may receive differing compensation for selling I
Shares, A Shares and B Shares of the Fund.
SHAREHOLDER VOTING AND OTHER RIGHTS. Each share of each portfolio of the Trust
and each class of shares has equal dividend, distribution, liquidation and
voting rights, and fractional shares have those rights proportionately, except
that expenses related to the distribution of the shares of each class (and
certain other expenses such as transfer agency and administration expenses) are
borne solely by those shares and each class votes separately with respect to the
provisions of any Rule 12b-1 plan which pertain to the class and other matters
for which separate class voting is appropriate under applicable law. Generally,
shares will be voted in the aggregate without
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reference to a particular portfolio or class, except if the matter affects only
one portfolio or class or voting by portfolio or class is required by law, in
which case shares will be voted separately by portfolio or class, as
appropriate. Delaware law does not require the Trust to hold annual meetings of
shareholders, and it is anticipated that shareholder meetings will be held only
when specifically required by Federal or state law. Shareholders have available
certain procedures for the removal of Trustees. There are no conversion or
preemptive rights in connection with shares of the Trust. All shares when issued
in accordance with the terms of the offering will be fully paid and
nonassessable. Shares are redeemable at net asset value, at the option of the
shareholders, subject to any contingent deferred sales charge that may apply. A
shareholder in a portfolio is entitled to the shareholder's pro rata share of
all dividends and distributions arising from that portfolio's assets and, upon
redeeming shares, will receive the portion of the portfolio's net assets
represented by the redeemed shares.
As an investor in the Portfolio, the 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.
From time to time, a shareholder may own a large percentage of the Fund.
Accordingly, that shareholder may be able to greatly affect (if not determine)
the outcome of a shareholder vote.
CORE TRUST STRUCTURE
The 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. Core Trust is registered under the 1940 Act as an open-end
management investment company. Core Trust currently consists of eight
diversified portfolios. The assets of each Portfolio of Core Trust belong only
to, and the liabilities of each Portfolio are borne solely by, the respective
Portfolio and no other Portfolio of Core Trust.
THE PORTFOLIO. The Fund seeks to achieve its investment objective by investing
all of its investable assets in the Portfolio, which has the same investment
objective and policies as the Fund. Accordingly, the Portfolio directly acquires
its own securities and the Fund acquires an indirect interest in those
securities. The investment objective and fundamental investment policies of the
Fund and the Portfolio can be changed only with shareholder approval. See
"Summary," "Investment Objectives, Policies and Risk Considerations,"
"Management of the Funds" and "Appendix A: Investments, Investment Strategies
and Risk Considerations" for a complete description of the Portfolio's
investment objective, policies, restrictions, management, and expenses.
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The Fund's investment in the Portfolio is in the form of a non-transferable
beneficial interest. The Portfolio may permit other investment companies or
institutional investors to invest in the Portfolio. 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. As of the date of this
Prospectus, the Portfolio has one other institutional investor.
The Portfolio will not sell its shares directly to members of the general
public. Another institutional investor in the Portfolio that might sell its
shares to members of the general public would not be required to sell its shares
at the same public offering price as the Fund, could have different advisory and
other fees and expenses than the Fund, and might charge a sales commission.
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 for those of any other portfolio of Core
Trust. The risk to an investor in the Portfolio of incurring financial loss on
account of such liability, however, would be limited to circumstances in which
the Portfolio was unable to meet its obligations. Upon liquidation of the
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Portfolio, investors would be entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND THE FUND'S OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUND'S 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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NORWEST ADVANTAGE FUNDS
STATEMENT OF ADDITIONAL INFORMATION
AUGUST __, 1996
SMALL CAP OPPORTUNITIES FUND
A SHARES
B SHARES
I SHARES
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
AUGUST __, 1996
This Statement of Additional Information ("SAI") supplements the Prospectus
offering A Shares, B Shares and I Shares of Small Cap Opportunities Fund. The
Fund is a diversified series of Norwest Advantage Funds, a registered open-end,
management investment company (the "Trust"). The Fund currently invests all of
its investment assets in the Portfolio of Core Trust (Delaware) ("Portfolio"), a
registered open-end, management investment company. This SAI should be read
only in conjunction with the Fund's Prospectus, copies of which may be obtained
without charge.
TABLE OF CONTENTS
Page
----
1. Norwest Advantage Funds. . . . . . . . . . . . . . .
2. Investment Policies. . . . . . . . . . . . . . . . .
3. Investment Restrictions. . . . . . . . . . . . . . .
4. Performance Data and Advertising . . . . . . . . . .
5. Management . . . . . . . . . . . . . . . . . . . . .
6. Other Information. . . . . . . . . . . . . . . . . .
Appendix A - Description of Securities Ratings. . . . . . A-1
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ ONLY IN CONJUNCTION WITH
THE PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED BY AN INVESTOR WITHOUT CHARGE BY
CONTACTING THE TRUST'S DISTRIBUTOR, FORUM FINANCIAL SERVICES, INC., TWO PORTLAND
SQUARE, PORTLAND, MAINE 04101.
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1. NORWEST ADVANTAGE FUNDS
DEFINITIONS
The Trust was originally organized under the name Prime Value Funds, Inc. as a
Maryland corporation on August 29, 1986. On July 30, 1993, pursuant to a
shareholder vote, the Trust was reorganized as a Delaware business trust. On
October 1, 1995, the Trust's name was changed from "Norwest Funds." As used in
this SAI, the following terms shall have the meanings listed:
"Adviser" shall mean The Fund's investment adviser, Norwest Investment
Management, a part of Norwest. "Advisers" shall mean, collectively, the Adviser
and Schroder.
"Board" shall mean the Board of Trustees of the Trust.
"CFTC" shall mean the U.S. Commodities Futures Trading Commission.
"Core Trust" shall mean Schroder Capital Funds, an open-end, management
investment company registered under the 1940 Act.
"Forum" shall mean Forum Financial Services, Inc., the Trust's
administrator and distributor of the Trust's shares.
"FFC" shall mean Forum Financial Corp., the Trust's fund accountant.
"Fund" shall mean the separate portfolio of the Trust to which this
Statement of Additional Information relates as identified on the cover page.
"Norwest" shall mean Norwest Bank Minnesota, N.A., a subsidiary of Norwest
Corporation.
"NRSRO" shall mean a nationally recognized statistical rating organization.
"Portfolio" shall mean U.S. Smaller Companies Fund, a separate portfolio of
Core Trust.
"Schroder" shall mean Schroder Capital Management Inc., the Fund's
investment subadviser and the Portfolio's investment adviser.
"Schroder Advisors" shall mean Schroder Fund Advisors Inc., the Portfolio's
administrator.
"Stock Index Futures" shall mean futures contracts that relate to broadly-
based stock indices.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Transfer Agent" shall mean Norwest acting in its capacity as transfer and
dividend disbursing agent of the Trust.
"Trust" shall mean Norwest Advantage Funds, an open-end management
investment company registered under the 1940 Act.
"U.S. Government Securities" shall mean obligations issued or guaranteed by
the United States Government, its agencies or instrumentalities.
"1940 Act" shall mean the Investment Company Act of 1940, as amended.
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2. INVESTMENT POLICIES
The following discussion is intended to supplement the disclosure in the
Prospectus concerning the Fund's investments, investment techniques and
strategies and the risks associated therewith (as well as those of the
Portfolio, which has the same investment objective and policies). The Fund is
designed for the investment of that portion of an investor's funds which can
appropriately bear the special risks associated with investment in smaller
capitalization companies with the aim of capital appreciation. The Fund is not
intended for investors whose objective is assured income or preservation of
capital. The Fund may make no investment or employ any investment technique or
strategy not referenced in the Prospectus as relates to the Fund. 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.
U.S. GOVERNMENT SECURITIES
The Portfolio may invest in obligations issued or guaranteed by the United
States government or its agencies or instrumentalities which have remaining
maturities not exceeding one year. Agencies and instrumentalities which issue
or guarantee debt securities and which have been established or sponsored by the
United States government include the Bank for Cooperatives, the Export-Import
Bank, the Federal Farm Credit System, the Federal Home Loan Banks, the Federal
Home Loan Mortgage Corporation, the Federal Intermediate Credit Banks, the
Federal Land Banks, the Federal National Mortgage Association, the Government
National Mortgage Association and the Student Loan Marketing Association.
Except for obligations issued by the United States Treasury and the Government
National Mortgage Association, none of the obligations of the other agencies or
instrumentalities referred to above are backed by the full faith and credit of
the United States government.
BANK OBLIGATIONS
The Portfolio may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) having total assets at the time of purchase in
excess of $1 billion. Such banks must be members of the Federal Deposit
Insurance Corporation.
A certificate of deposit is an interest-bearing negotiable certificate issued by
a bank against funds deposited in the bank. A bankers' acceptance is a short-
term draft drawn on a commercial bank by a borrower, usually in connection with
an international commercial transaction. Although the borrower is liable for
payment of the draft, the bank unconditionally guarantees to pay the draft at
its face value on the maturity date.
SHORT-TERM DEBT SECURITIES
The Portfolio may invest in commercial paper, that is short-term unsecured
promissory notes issued in bearer form by bank holding companies, corporations
and finance companies. The commercial paper purchased by the Portfolio for
temporary defensive purposes consists of direct obligations of domestic issuers
which, at the time of investment, are rated "P-1" by Moody's Investors Service
("Moody's") or "A-1" by Standard & Poor's ("S&P"), or securities which, if not
rated, are issued by companies having an outstanding debt issue currently rated
Aa by Moody's or AAA or AA by S&P. The rating "P-1" is the highest commercial
paper rating assigned by Moody's and the rating "A-1" is the highest commercial
paper rating assigned by S&P.
REPURCHASE AGREEMENTS
The Portfolio may invest in securities subject to repurchase agreements with
U.S. banks or broker-dealers maturing in seven days or less. In a typical
repurchase agreement the seller of a security commits itself at the time of the
sale to repurchase that security from the buyer at a mutually agreed-upon time
and price. The repurchase price exceeds the sale price, reflecting an agreed-
upon interest rate effective for the period the buyer owns the security subject
to repurchase. The agreed-upon rate is unrelated to the interest rate on that
security. Schroder will monitor the value of the underlying security at the
time the transaction is entered into and at all times during the term of the
repurchase agreement to insure that the value of the security always equals or
exceeds the repurchase price. In the
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event of default by the seller under the repurchase agreement, the Portfolio may
have difficulties in exercising its rights to the underlying securities and may
incur costs and experience time delays in connection with the disposition of
such securities. To evaluate potential risks, Schroder reviews the credit-
worthiness of those banks and dealers with which the Portfolio enters into
repurchase agreements.
WARRANTS. As a non-fundamental policy, the Portfolio may not invest more than
5% of its net assets (at the time of investment) in warrants (other than those
that have been acquired in units or attached to other securities). No more than
2% of a Portfolio's net assets (at the time of investment) may be invested in
warrants that are not listed on the New York or American Stock Exchanges.
Warrants are options to purchase equity securities at specific prices valid for
a specific period of time. Their prices do not necessarily move parallel to the
prices of the underlying securities. Warrants have no voting rights, receive no
dividends and have no rights with respect to the assets of the issuer.
HIGH YIELD/JUNK BONDS
The Portfolio may invest up to 5% of its assets in bonds rated below Baa by
Moody's or BBB by S&P (commonly known as "high yield/high risk securities" or
"junk bonds"). Securities rated less than Baa by Moody's or BBB by S&P are
classified as non-investment grade securities and are considered speculative by
those rating agencies. Junk bonds may be issued as a consequence of corporate
restructurings, such as leveraged buyouts, mergers, acquisitions, debt
recapitalizations, or similar events or by smaller or highly leveraged
companies. Although the growth of the high yield securities market in the
1980's had paralleled a long economic expansion, recently many issuers have been
affected by adverse economic and market conditions. It should be recognized
that an economic downturn or increase in interest rates is likely to have a
negative effect on (i) the high yield bond market, (ii) the value of high yield
securities and (iii) the ability of the securities' issuers to service their
principal and interest payment obligations, to meet their projected business
goals or to obtain additional financing. In addition, the market for high yield
securities, which is concentrated in relatively few market makers, may not be as
liquid as the market for investment grade securities. Under adverse market or
economic conditions, the market for high yield securities could contract
further, independent of any specific adverse changes in the condition of a
particular issuer. As a result, the Portfolio could find it more difficult to
sell these securities or may be able to sell the securities only at prices lower
than if such securities were widely traded. Prices realized upon the sale of
such lower rated or unrated securities, under these circumstances, may be less
than the prices used in calculating the Portfolio's net asset value.
In periods of reduced market liquidity, junk bond prices may become more
volatile and may experience sudden and substantial price declines. Also, there
may be significant disparities in the prices quoted for junk bonds by various
dealers. Under such conditions, a Portfolio may have to use subjective rather
than objective criteria to value its junk bond investments accurately and rely
more heavily on the judgment of the Portfolio's investment adviser.
Prices for junk bonds also may be affected by legislative and regulatory
developments. For example, new federal laws require the divestiture by
federally insured savings and loans associations of their investments in high
yield bonds. Also, from time to time, Congress has considered legislation to
restrict or eliminate the corporate tax deduction for interest payments or to
regulate corporate restructurings such as takeovers, mergers or leveraged
buyouts. These laws could adversely affect the Portfolio's net asset value and
investment practices, the market for high yield securities, the financial
condition of issuers of these securities and the value of outstanding high yield
securities.
Lower rated or unrated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, the Portfolio
may have to replace the security with a lower yielding security, resulting in a
decreased return for investors. If the Portfolio experiences unexpected net
redemptions, it may be forced to sell its higher rated securities, resulting in
a decline in the overall credit quality of the Portfolio's portfolio and
increasing the exposure of the Portfolio to the risks of high yield securities.
ILLIQUID AND RESTRICTED SECURITIES
"Illiquid and Restricted Securities" under "Investment Objectives and Policies -
Additional Investment Policies" in the Prospectus sets forth the circumstances
in which the Portfolio may invest in "restricted securities". In
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connection with the Portfolio's original purchase of restricted securities it
may negotiate rights with the issuer to have such securities registered for sale
at a later time. Further, the expenses of registration of restricted securities
that are illiquid may also be negotiated by the Portfolio with the issuer at the
time such securities are purchased by the Portfolio. When registration is
required, however, a considerable period may elapse between a decision to sell
the securities and the time the Portfolio would be permitted to sell such
securities. A similar delay might be experienced in attempting to sell such
securities pursuant to an exemption from registration. Thus, the Portfolio may
not be able to obtain as favorable a price as that prevailing at the time of the
decision to sell.
LOANS OF PORTFOLIO SECURITIES
The Portfolio may lend its portfolio securities subject to the restrictions
stated in the Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral must, on each business day, at least
equal the market value of the loaned securities and must consist of cash, bank
letters of credit, U.S. Government securities, or other cash equivalents in
which the Portfolio is permitted to invest. To be acceptable as collateral,
letters of credit must obligate a bank to pay amounts demanded by the Portfolio
if the demand meets the terms of the letter. Such terms and the issuing bank
must be satisfactory to the Portfolio. In a portfolio securities lending
transaction, the Portfolio receives from the borrower an amount equal to the
interest paid or the dividends declared on the loaned securities during the term
of the loan as well as the interest on the collateral securities, less any
finders' or administrative fees the Portfolio pays in arranging the loan. The
Portfolio may share the interest it receives on the collateral securities with
the borrower as long as it realizes at least a minimum amount of interest
required by the lending guidelines established by the Trust's Board of Trustees.
The Portfolio will not lend its portfolio securities to any officer, director,
employee or affiliate of the Portfolio or Schroder. The terms of the
Portfolio's loans must meet certain tests under the Internal Revenue Code and
permit the Portfolio to reacquire loaned securities on five business days'
notice or in time to vote on any important matter.
COVERED CALLS AND HEDGING
As described in the Prospectus, the Portfolio may write covered calls on up to
100% of its total assets or employ one or more types of Hedging Instruments.
When hedging to attempt to protect against declines in the market value of the
Portfolio's portfolio, to permit the Portfolio to retain unrealized gains in the
value of portfolio securities which have appreciated, or to facilitate selling
securities for investment reasons, the Portfolio would: (i) sell Stock Index
Futures; (ii) purchase puts on such Futures or securities; or (iii) write
covered calls on securities or on Stock Index Futures. When hedging to
establish a position in the equities markets as a temporary substitute for
purchasing particular equity securities (which the Portfolio will normally
purchase and then terminate the hedging position), the Portfolio would:
(i) purchase Stock Index Futures, or (ii) purchase calls on such Futures or on
securities. The Portfolio's strategy of hedging with Stock Index Futures and
options on such Futures will be incidental to the Portfolio's activities in the
underlying cash market.
WRITING COVERED CALL OPTIONS. The Portfolio may write (i.e., sell) call options
("calls") if: (i) the calls are listed on a domestic securities or commodities
exchange, and (ii) the calls are "covered" (i.e., the Portfolio owns the
securities subject to the call or other securities acceptable for applicable
escrow arrangements) while the call is outstanding. A call written on a Stock
Index Future must be covered by deliverable securities or segregated liquid
assets. If a call written by the Portfolio is exercised, the Portfolio forgoes
any profit from any increase in the market price above the call price of the
underlying investment on which the call was written.
When the Portfolio writes a call on a security, it receives a premium and agrees
to sell the underlying securities to a purchaser of a corresponding call on the
same security during the call period (usually not more than 9 months) at a fixed
exercise price (which may differ from the market price of the underlying
security), regardless of market price changes during the call period. The risk
of loss will have been retained by the Portfolio if the price of the underlying
security should decline during the call period, which may be offset to some
extent by the premium.
To terminate its obligation on a call it has written, the Portfolio may be
purchase a corresponding call in a "closing purchase transaction". A profit or
loss will be realized, depending upon whether the net of the amount of option
transaction costs and the premium previously received on the call written was
more or less than the price of the call
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subsequently purchased. A profit may also be realized if the call lapses
unexercised, because the Portfolio retains the underlying security and the
premium received. Any such profits are considered short-term capital gains for
Federal income tax purposes, and when distributed by the Portfolio are taxable
as ordinary income. If the Portfolio could not effect a closing purchase
transaction due to the lack of a market, it would have to hold the callable
securities until the call lapsed or was exercised.
The Portfolio may also write calls on Stock Index Futures without owning a
futures contract or a deliverable bond, provided that at the time the call is
written, the Portfolio covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current value
of the Stock Index Future. In no circumstances would an exercise notice require
the Portfolio to deliver a futures contract; it would simply put the Portfolio
in a short futures position, which is permitted by the Portfolio's hedging
policies.
PURCHASING CALLS AND PUTS. The Portfolio may purchase put options ("puts")
which relate to: (i) securities held by it, (ii) Stock Index Futures (whether
or not it holds such Stock Index Futures in its portfolio), or (iii) broadly-
based stock indices. The Portfolio may not sell puts other than those it
previously purchased, nor purchase puts on securities it does not hold. The
fund may purchase calls: (a) as to securities, broadly-based stock indices or
Stock Index Futures, or (b) to effect a "closing purchase transaction" to
terminate its obligation on a call it has previously written. A call or put may
be purchased only if, after such purchase, the value of all put and call options
held by the Portfolio would not exceed 5% of the Portfolio's total assets.
When the Portfolio purchases a call (other than in a closing purchase
transaction), it pays a premium and, except as to calls on stock indices, has
the right to buy the underlying investment from a seller of a corresponding call
on the same investment during the call period at a fixed exercise price. The
Portfolio benefits only if the call is sold at a profit or if, during the call
period, the market price of the underlying investment is above the sum of the
call price plus the transaction costs and the premium paid for the call and the
call is exercised. If the call is not exercised or sold (whether or not at a
profit), it will become worthless at its expiration date and the Portfolio will
lose its premium payments and the right to purchase the underlying investment.
When the Portfolio purchases a call on a stock index, it pays a premium, but
settlement is in cash rather than by delivery of an underlying investment.
When the Portfolio purchases a put, it pays a premium and, except as to puts on
stock indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on a security or Stock Index Future the Portfolio
owns enables the Portfolio to attempt to protect itself during the put period
against a decline in the value of the underlying investment below the exercise
price by selling the underlying investment at the exercise price to a seller of
a corresponding put. If the market price of the underlying investment is equal
to or above the exercise price and, as a result, the put is not exercised or
resold, the put will become worthless at its expiration date and the Portfolio
will lose its premium payment and the right to sell the underlying investment;
the put may, however, be sold prior to expiration (whether or not at a profit).
Purchasing a put on either a stock index or on a Stock Index Future not held by
the Portfolio permits the Portfolio either to resell the put or to buy the
underlying investment and sell it at the exercise price. The resale price of
the put will vary inversely with the price of the underlying investment. If the
market price of the underlying investment is above the exercise price and, as a
result, the put is not exercised, the put will become worthless on its
expiration date. In the event of a decline in price of the underlying
investment, the Portfolio could exercise or sell the put at a profit to attempt
to offset some or all of its loss on its portfolio securities. When the
Portfolio purchases a put on a stock index, or on a Stock Index Future not held
by it, the put protects the Portfolio to the extent that the index moves in a
similar pattern to the securities held. In the case of a put on a stock index
or Stock Index Future, settlement is in cash rather than by the Portfolio's
delivery of the underlying investment.
STOCK INDEX FUTURES. The Portfolio may buy and sell stock index futures
contracts only if they relate to broadly-based stock indices. A stock index is
"broadly-based" if it includes stocks that are not limited to issuers in any
particular industry or group of industries. Stock Index Futures obligate the
seller to deliver (and the purchaser to take) cash to settle the futures
transaction, or to enter into an offsetting contract. No physical delivery of
the underlying stocks in the index is made.
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No price is paid or received upon the purchase or sale of a Stock Index Future.
Upon entering into a Futures transaction, the Portfolio will be required to
deposit an initial margin payment in cash or U.S. Treasury bills with a futures
commission merchant (the "futures broker"). The initial margin will be
deposited with the Portfolio's Custodian in an account registered in the futures
broker's name; however the futures broker can gain access to that account only
under specified conditions. As the Future is marked to market to reflect
changes in its market value, subsequent margin payments, called variation
margin, will be paid to or by the futures broker on a daily basis. Prior to
expiration of the Future, if the Portfolio elects to close out its position by
taking an opposite position, a final determination of variation margin is made,
additional cash is required to be paid by or released to the Portfolio, and any
loss or gain is realized for tax purposes. Although Stock Index Futures by
their terms call for settlement by the delivery of cash, in most cases the
obligation is fulfilled without such delivery, by entering into an offsetting
transaction. All futures transactions are effected through a clearinghouse
associated with the exchange on which the contracts are traded.
Puts and calls on broadly-based stock indices or Stock Index Futures are similar
to puts and calls on securities or futures contracts except that all settlements
are in cash and gain or loss depends on changes in the index in question (and
thus on price movements in the stock market generally) rather than on price
movements in individual securities or futures contracts. When the Portfolio
buys a call on a stock index or Stock Index Future, it pays a premium. During
the call period, upon exercise of a call by the Portfolio, a seller of a
corresponding call on the same index will pay the Portfolio an amount of cash to
settle the call if the closing level of the stock index or Stock Index Future
upon which the call is based is greater than the exercise price of the call;
that cash payment is equal to the difference between the closing price of the
index and the exercise price of the call times a specified multiple (the
"multiplier") which determines the total dollar value for each point of
difference. When the Portfolio buys a put on a stock index or Stock Index
Future, it pays a premium and has the right during the put period to require a
seller of a corresponding put, upon the Portfolio's exercise of its put, to
deliver to the Portfolio an amount of cash to settle the put if the closing
level of the stock index or Stock Index Future upon which the put is based is
less than the exercise price of the put; that cash payment is determined by the
multiplier, in the same manner as described above as to calls.
ADDITIONAL INFORMATION ABOUT HEDGING INSTRUMENTS AND THEIR USE. The Portfolio's
Custodian, or a securities depository acting for the Custodian, will act as the
Portfolio's escrow agent, through the facilities of the Options Clearing
Corporation ("OCC"), as to the securities on which the Portfolio has written
options, or as to other acceptable escrow securities, so that no margin will be
required for such transactions. OCC will release the securities on the
expiration of the option or upon the Portfolio's entering into a closing
transaction. An option position may be closed out only on a market which
provides secondary trading for options of the same series, and there is no
assurance that a liquid secondary market will exist for any particular option.
The Portfolio's option activities may affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Portfolio may cause
the Portfolio to sell related portfolio securities, thus increasing its turnover
rate in a manner beyond the Portfolio's control. The exercise by the Portfolio
of puts on securities or Stock Index Futures may cause the sale of related
investments, also increasing portfolio turnover. Although such exercise is
within the Portfolio's control, holding a put might cause the Portfolio to sell
the underlying investment for reasons which would not exist in the absence of
the put. The Portfolio will pay a brokerage commission each time it buys or
sells a call, a put or an underlying investment in connection with the exercise
of a put or call. Such commissions may be higher than those which would apply
to direct purchases or sales of the underlying investments. Premiums paid for
options are small in relation to the market value of such investments and
consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options could result in the Portfolio's net asset
value being more sensitive to changes in the value of the underlying investment.
REGULATORY ASPECTS OF HEDGING INSTRUMENTS AND COVERED CALLS. The Portfolio must
operate within certain restrictions as to its long and short positions in Stock
Index Futures and options thereon under a rule (the "CFTC Rule") adopted by the
Commodity Futures Trading Commission (the "CFTC") under the Commodity Exchange
Act (the "CEA"), which excludes the Portfolio from registration with the CFTC as
a "commodity pool operator" (as defined in the CEA) if it complies with the CFTC
Rule. Under these restrictions the Portfolio will not, as to any
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positions, whether short, long or a combination thereof, enter into Stock Index
Futures and options thereon for which the aggregate initial margins and premiums
exceed 5% of the fair market value of its total assets, with certain exclusions
as defined in the CFTC Rule. Under the restrictions, the Portfolio also must,
as to its short positions, use Stock Index Futures and options thereon solely
for bona-fide hedging purposes within the meaning and intent of the applicable
provisions under the CEA.
Transactions in options by the Portfolio are subject to limitations established
by each of the exchanges governing the maximum number of options which may be
written or held by a single investor or group of investors acting in concert,
regardless of whether the options were written or purchased on the same or
different exchanges or are held in one or more accounts or through one or more
exchanges or brokers. Thus, the number of options which the Portfolio may write
or hold may be affected by options written or held by other entities, including
other investment companies having the same or an affiliated investment adviser.
Position limits also apply to Stock Index Futures. An exchange may order the
liquidation of positions found to be in violation of those limits and may impose
certain other sanctions. Due to requirements under the Investment Company Act,
when the Portfolio purchases a Stock Index Future, the Portfolio will maintain,
in a segregated account or accounts with its custodian bank, cash or readily-
marketable, short-term (maturing in one year or less) debt instruments in an
amount equal to the market value of the securities underlying such Stock Index
Future, less the margin deposit applicable to it.
TAX ASPECTS OF HEDGING INSTRUMENTS. The Portfolio intends to qualify as a
"regulated investment company" under the Internal Revenue Code of 1986 (the
"Code"). One of the tests for such qualification is that less than 30% of its
gross income must be derived from gains realized on the sale of securities held
for less than three months. Due to this limitation, the Portfolio will limit
the extent to which it engages in the following activities, but will not be
precluded from them: (i) selling investments, including Stock Index Futures,
held for less than three months, whether or not they were purchased on the
exercise of a call held by the Portfolio; (ii) purchasing calls or puts which
expire in less than three months; (iii) effecting closing transactions with
respect to calls or puts purchased less than three months previously; (iv)
exercising puts held by the Portfolio for less than three months; and (v)
writing calls on investments held for less than three months.
POSSIBLE RISK FACTORS IN HEDGING. In addition to the risks discussed above,
there is a risk in using short hedging by selling Stock Index Futures or
purchasing puts on stock indices that the prices of the applicable index (thus
the prices of the Hedging Instruments) will correlate imperfectly with the
behavior of the cash (i.e., market value) prices of the Portfolio's equity
securities. The ordinary spreads between prices in the cash and futures markets
are subject to distortions due to differences in the natures of those markets.
First, all participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures markets depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities markets.
Therefore, increased participation by speculators in the futures markets may
cause temporary price distortions.
The risk of imperfect correlation increases as the composition of the
Portfolio's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the price of
the equity securities being hedged and movements in the price of the Hedging
Instruments, the Portfolio may use Hedging Instruments in a greater dollar
amount than the dollar amount of equity securities being hedged if the
historical volatility of the prices of such equity securities being hedged is
more than the historical volatility of the applicable index. It is also
possible that where the Portfolio has used Hedging Instruments in a short hedge,
the market may advance and the value of equity securities held in the
Portfolio's portfolio may decline. If this occurred, the Portfolio would lose
money on the Hedging Instruments and also experience a decline in value in its
equity securities. However, while this could occur for a very brief period or
to a very small degree, the value of a diversified portfolio of equity
securities will tend to move over time in the same direction as the indices upon
which the Hedging Instruments are based.
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If the Portfolio uses Hedging Instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual equity
securities (long hedging) by buying Stock Index Futures and/or calls on such
Futures, on securities or on stock indices, it is possible that the market may
decline; if the Portfolio then concludes not to invest in equity securities at
that time because of concerns as to possible further market decline or for other
reasons, the Portfolio will realize a loss on the Hedging Instruments that is
not offset by a reduction in the price of the equity securities purchased.
SHORT SALES AGAINST-THE-BOX
After the Portfolio makes a short sale against-the-box, while the short position
is open, the Portfolio must own an equal amount of the securities sold short, or
by virtue of ownership of securities have the right, without payment of further
consideration, to obtain an equal amount of the securities sold short. Short
sales against-the-box may be made to defer, for Federal income tax purposes,
recognition of gain or loss on the sale of securities "in the box" until the
short position is closed out.
3. INVESTMENT RESTRICTIONS
The Portfolio's significant investment restrictions are described in the
Prospectus. The following investment restrictions, except where stated to be
non-fundamental policies, are also fundamental policies of the Portfolio and,
together with the fundamental policies and investment objective described in the
Prospectus, cannot be changed without the vote of a "majority" of the
Portfolio's outstanding shares. Under the Investment Company Act of 1940 (the
"1940 Act"), such a "majority" vote is defined as the vote of the holders of the
lesser of : (i) 67% of more of the shares present or represented by proxy at a
meeting of shareholders, if the holders of more than 50% of the outstanding
shares are present, or (ii) more than 50% of the outstanding shares. Under
these additional restrictions, the Portfolio may not:
(a) Underwrite securities of other companies except insofar as the
Portfolio might be deemed to be an underwriter in the resale of any
securities held in its portfolio;
(b) Invest in commodities or commodity contracts other than Hedging
Instruments which it may use as permitted by any of its other
fundamental policies, whether or not any such Hedging Instrument is
considered to be a commodity or a commodity contract;
(c) Purchase securities on margin; however, the Portfolio may make margin
deposits in connection with any Hedging Instruments which it may use
as permitted by any of its other fundamental policies;
(d) Purchase or write puts or calls except as permitted by any of its
other fundamental policies;
(e) Lend money except in connection with the acquisition of that portion
of publicly-distributed debt securities which the Portfolio's
investment policies and restrictions permit it to purchase (see
"Investment Objective and Policies" and "Special Investment Methods"
in the Prospectus); the Portfolio may also make loans of portfolio
securities (see "Loans of Portfolio Securities") and enter into
repurchase agreements (see "Repurchase Agreements");
(f) Pledge, mortgage or hypothecate its assets to an extent greater than
10% of the value of the total assets of the Portfolio; however, this
does not prohibit the escrow arrangements contemplated by the put and
call activities of the Portfolio or other collateral or margin
arrangements in connection with any of the Hedging Instruments which
it may use as permitted by any of its other fundamental policies;
(g) Borrow money except from banks for temporary emergency purposes and
then only in an amount not exceeding 5% of the value of the total
assets of the Portfolio;
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(h) As a non-fundamental policy, invest in or hold securities of any
issuer if officers or Trustees of the Company or Schroder individually
owning more than 0.5% of the securities of such issuer together own
more than 5% of the securities of such issuer;
(i) Invest in companies for the purpose of acquiring control or management
thereof;
(j) Invest in interests in oil, gas or other mineral exploration or
development programs but may purchase readily marketable securities of
companies which operate, invest in, or sponsor such programs; or
(k) Invest in real estate or in interests in real estate, but may purchase
readily marketable securities of companies holding real estate or
interests therein.
4. PERFORMANCE DATA AND ADVERTISING
Quotations of performance may from time to time be used in advertisements, sales
literature, shareholder reports or other communications to shareholders or
prospective investors. All performance information supplied by the Fund is
historical and is not intended to indicate future returns. The Fund's yield and
total return fluctuate in response to market conditions and other factors. The
value of the Fund's shares when redeemed may be more or less than their original
cost.
In performance advertising the Fund may compare any of its performance
information with data published by independent evaluators such as Morningstar,
Inc., Lipper Analytical Services, Inc., or other companies which track the
investment performance of investment companies ("Fund Tracking Companies"). The
Fund may also compare any of its performance information with the performance of
recognized stock, bond and other indices, including but not limited to Standard
& Poor's 500 Composite Stock Index, Russell 2000 Index, Morgan Stanley - Europe,
Australian and Far East Index, Lehman Brothers Intermediate Government Index,
Lehman Brothers Intermediate Government/Corporate Index, Salomon Brothers Bond
Index, Shearson Lehman Bond Index, the Dow Jones Industrial Average, U.S.
Treasury bonds, bills or notes and changes in the Consumer Price Index as
published by the U.S. Department of Commerce. The Fund may refer to general
market performances over past time periods such as those published by Ibbotson
Associates (for instance, its "Stocks, Bonds, Bills and Inflation Yearbook").
In addition, the Fund may refer in such materials to mutual fund performance
rankings and other data published by Fund Tracking Companies. Performance
advertising may also refer to discussions of the Fund and comparative mutual
fund data and ratings reported in independent periodicals, such as newspapers
and financial magazines.
SEC YIELD CALCULATIONS
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day and that the Fund's yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Fund's shares. Also, Norwest and others may charge the various retirement
plans or other shareholders that invest in the Fund fees in connection with an
investment in the Fund, which will have the effect of reducing the Fund's net
yield to those shareholders. The yields of the Fund are not fixed or
guaranteed, and an investment in the Fund is not insured or guaranteed.
Accordingly, yield information may not necessarily be used to compare shares of
the Fund with investment alternatives which, like money market instruments or
bank accounts, may provide a fixed rate of interest. Also, it may not be
appropriate to compare the Fund's yield information directly to similar
information regarding investment alternatives which are insured or guaranteed.
Standardized yields for the Fund used in advertising are computed by dividing
the Fund's interest income (in accordance with specific standardized rules) for
a given 30 days or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income in
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accordance with specific standardized rules) in order to arrive at an annual
percentage rate. In general, interest income is reduced with respect to
municipal securities purchased at a premium over their par value by subtracting
a portion of the premium from income on a daily basis. In general, interest
income is increased with respect to municipal securities purchased at original
issue at a discount by adding a portion of the discount to daily income.
Capital gains and losses generally are excluded from these calculations.
Income calculated for the purpose of determining the Fund's standardized yield
differs from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding assumed in
yield calculations, the yield quoted for the Fund may differ from the rate of
distribution the Fund paid over the same period or the rate of income reported
in the Fund's financial statements.
TOTAL RETURN CALCULATIONS
Standardized total returns quoted in advertising and sales literature reflect
all aspects of the Fund's return, including the effect of reinvesting dividends
and capital gain distributions, and any change in the Fund's net asset value per
share over the period. Average annual returns are calculated by determining the
growth or decline in value of a hypothetical historical investment in the Fund
over a stated period, and then calculating the annually compounded percentage
rate that would have produced the same result if the rate of growth or decline
in value had been constant over the period. For example, a cumulative return of
100% over ten years would produce an average annual return of 7.18%, which is
the steady annual rate that would equal 100% growth on a compounded basis in ten
years. While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that the performance is not
constant over time but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance of the Fund.
Average annual total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment, over such periods
according to the following formula:
P(1+T) to the nth power = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 payment made at the
beginning of the applicable period.
In addition to average annual returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in order
to illustrate the relationship of these factors and their contributions to total
return. Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Period total return
is calculated according to the following formula:
PT = (ERV/P-1)
Where:
PT = period total return.
The other definitions are the same as in average annual total return
above.
OTHER ADVERTISEMENT MATTERS
The Fund may advertise other forms of performance. For example, the Fund may
quote unaveraged or cumulative total returns reflecting the change in the value
of an investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single
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investment, a series of investments, and/or a series of redemptions over any
time period. Total returns may be quoted with or without taking into
consideration the Fund's front-end sales charge or contingent deferred sales
charge; excluding sales charges from a total return calculation produces a
higher return figure.
The Fund may also include various information in their advertisements.
Information included in the Fund's advertisements may include, but is not
limited to (i) portfolio holdings and portfolio allocation as of certain dates,
such as portfolio diversification by instrument type, by instrument, by location
of issuer or by maturity, (ii) statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
by an investor to meet specific financial goals, such as funding retirement,
paying for children's education and financially supporting aging parents, (iv)
information (including charts and illustrations) showing the effects of
compounding interest (compounding is the process of earning interest on
principal plus interest that was earned earlier; interest can be compounded at
different intervals, such as annually, quartile or daily), (v) information
relating to inflation and its effects on the dollar; for example, after ten
years the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465
and $12,100, respectively, if the annual rates of inflation were 4%, 5%, 6% and
7%, respectively, (vi) information regarding the effects of automatic investment
and systematic withdrawal plans, including the principle of dollar cost
averaging, (vii) descriptions of the portfolio managers of the Fund and
Portfolio and portfolio management staff of the Advisers or summaries of the
views of the portfolio managers with respect to the financial markets, (viii)
the results of a hypothetical investment in the Fund over a given number of
years, including the amount that the investment would be at the end of the
period, (ix) the effects of earning Federally and, if applicable, state tax-
exempt income from the Fund or investing in a tax-deferred account, such as an
individual retirement account or Section 401(k) pension plan and (x) the net
asset value, net assets or number of shareholders of the Fund as of one or more
dates.
As an example of compounding, $1,000 compounded annually at 9.00% will grow to
$1,090 at the end of the first year (an increase in $90) and $1,118 at the end
of the second year (an increase in $98). The extra $8 that was earned on the
$90 interest from the first year is the compound interest. One thousand dollars
compounded annually at 9.00% will grow to $2,367 at the end of ten years and
$5,604 at the end of 20 years. Other examples of compounding are as follows: at
7% and 12% annually, $1,000 will grow to $1,967 and $3,106, respectively, at the
end of ten years and $3,870 and $9,646, respectively, at the end of twenty
years. These examples are for illustrative purposes only and are not indicative
of the Fund's performance.
The Fund may advertise information regarding the effects of automatic investment
and systematic withdrawal plans, including the principle of dollar cost
averaging. In a dollar cost averaging program, an investor invests a fixed
dollar amount in the Fund at period intervals, thereby purchasing fewer shares
when prices are high and more shares when prices are low. While such a strategy
does not ensure a profit or guard against a loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers of shares
had been purchased at those intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares through periods of
low price levels. For example, if an investor invests $100 a month for a period
of six months in the Fund the following will be the relationship between average
cost per share ($14.35 in the example given) and average price per share:
Systematic Share Shares
Period Investment Price Purchased
------ ---------- ----- ---------
1 $100 $10 10.00
2 $100 $12 8.33
3 $100 $15 6.67
4 $100 $20 5.00
5 $100 $18 5.56
6 $100 $16 6.25
---- --- ----
Total Invested $600 Average Price $15.17 Total Shares 41.81
In connection with its advertisements the Fund may provide "shareholders
letters" which serve to provide shareholders or investors an introduction into
the Fund's, the Trust's or any of the Trust's service provider's policies or
business practices. For instance, advertisements may provide for a message from
Norwest or its parent
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corporation that Norwest has more than 60 years been committed to quality
products and outstanding service in order to assist its customers in meeting
their financial goals and the reasons Norwest believes that it has been
successful as a national financial service firm.
5. MANAGEMENT
TRUSTEES AND OFFICERS
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees and officers of the Trust and their principal occupations during
the past five years are set forth below. Each Trustee who is an "interested
person" (as defined by the 1940 Act) of the Trust is indicated by an asterisk.
John Y. Keffer and David R. Keffer are brothers.
John Y. Keffer, Chairman and President.*
President and Director, Forum Financial Services, Inc. (a registered
broker-dealer), Forum Financial Corp. (a registered transfer agent), Forum
Advisors, Inc. (a registered investment adviser). Mr. Keffer is a
Director, Trustee and officer of various registered investment companies
for which Forum Financial Services, Inc. serves as manager, administrator
and/or distributor. His address is 61 Broadway, New York, New York 10006.
Robert C. Brown, Trustee.*
Director, Federal Farm Credit Banks Funding Corporation and Farm Credit
System Financial Assistance Corp. Prior thereto, he was Manager of the
Capital Markets Group, Norwest Corporation (a multi-bank holding company
and parent of Norwest) until 1991. His address is 1431 Landings Place,
Sarasota, Florida 34231.
Donald H. Burkhardt, Trustee.
Principal, The Burkhardt Law Firm. His address is 777 South Steele Street,
Denver, Colorado 80209.
James C. Harris, Trustee.
President and sole Director of James C. Harris & Co., Inc. (a financial
consulting firm). Mr. Harris is also a liquidating Trustee and former
Director of First Midwest Corporation, a small business investment company.
His address is 6950 France Avenue South, Minneapolis, Minnesota 55435.
Richard M. Leach, Trustee.
Chief Executive Officer, Tee Box Company (a golf equipment manufacturer),
since January 1994 and President of Richard M. Leach Associates (a
financial consulting firm) since 1992. Prior thereto, Mr. Leach was Senior
Adviser of Taylor Investments (a registered investment adviser), a Director
of Mountainview Broadcasting (a radio station) and Managing Director,
Digital Techniques, Inc. (an interactive video design and manufacturing
company). His address is P.O. Box 1888, New London, New Hampshire 03257.
Timothy J. Penny, Trustee
Senior Counselor to the public relations firm Himle-Horner since 1994.
Prior thereto Mr. Penny was the Representative to the United States
Congress from Minnesota's First Congressional District. His address is 500
North State Street, Waseca, Minnesota 56095.
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<PAGE>
Donald C. Willeke, Trustee
Principal of the law firm of Willeke & Daniels. His address is 201
Ridgewood Avenue, Minneapolis, Minnesota 55403.
Michael D. Martins, Vice President and Treasurer
Fund Accounting Manager, Forum Financial Corp., with which he has been
associated since 1995. Prior thereto, Mr. Martins was at the audit firm of
Deloitte & Touche LLP. Mr. Martins is also an officer of various
registered investment companies for which Forum Financial Services, Inc.
serves as manager, administrator and/or distributor. His address is Two
Portland Square, Portland, Maine 04101.
David I. Goldstein, Vice President and Secretary.
Counsel, Forum Financial Services, Inc., with which he has been associated
since 1991. Prior thereto, Mr. Goldstein was associated with the law firm
of Kirkpatrick & Lockhart. Mr. Goldstein is also an officer of various
registered investment companies for which Forum Financial Services, Inc.
serves as manager, administrator and/or distributor. His address is Two
Portland Square, Portland, Maine 04101.
David R. Keffer, Vice President, Assistant Secretary and Assistant Treasurer.
Chief Financial Officer, Forum Financial Services, Inc. Mr. Keffer is also
an officer of various registered investment companies for which Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. His address is 61 Broadway, New York, New York 10006.
Sara M. Clark, Vice President and Assistant Treasurer.
Managing Director, Forum Financial Services, Inc., with which she has been
associated since 1994. Prior thereto, from 1991 to 1994 Ms. Clark was
Controller of Wright Express Corporation (a national credit card company)
and for six years prior thereto was employed at Deloitte & Touche LLP as an
accountant. Ms. Clark is also an officer of various registered investment
companies for which Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. Her address is Two Portland Square,
Portland, Maine 04101.
Thomas G. Sheehan, Vice President and Assistant Secretary.
Counsel, Forum Financial Services, Inc., with which he has been associated
since 1993. Prior thereto, Mr. Sheehan was Special Counsel to the Division
of Investment Management of the SEC. Mr. Sheehan is also an officer of
various registered investment companies for which Forum Financial Services,
Inc. serves as manager, administrator and/or distributor. His address is
Two Portland Square, Portland, Maine 04101.
Renee A. Walker, Assistant Secretary.
Fund Administrator, Forum Financial Services, Inc., with which she has been
associated since 1994. Prior thereto, Ms. Walker was an administrator at
Longwood Partners (the manager of a hedge fund partnership) for a year.
After graduating for college, from 1991 to 1993 Ms. Walker was a sales
representative assistant at PaineWebber Incorporated (a broker-dealer).
Her address is Two Portland Square, Portland, Maine 04101.
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Christopher J. Kelley, Assistant Secretary.
Assistant Counsel, Forum Financial Services, Inc., with which he has been
associated since 1994. Prior thereto and subsequent to attending law
school, Mr. Kelley was employed at Putnam Investments in legal and
compliance capacities. His address is Two Portland Square, Portland, Maine
04101.
COMPENSATION OF TRUSTEES AND OFFICERS
Effective June 1, 1995 each Trustee of the Trust is paid a quarterly retained
fee for the Trustee's service to the Trust and to Norwest Select Funds, a
separate registered open-end management investment company for which each
Trustee serves as trustee. of $4,000. In addition, each Trustee is paid $3,000
for each Board meeting attended (whether in person or by electronic
communication) and is paid $1,000 for each Committee meeting attended on a date
when a Board meeting is not held. Trustees are also reimbursed for travel and
related expenses incurred in attending meetings of the Board. Mr. Keffer
received no compensation for his services as Trustee for the past year and no
officer of the Trust is compensated by the Trust. In addition, Mr. Keffer
currently is not compensated or reimbursed for his expenses in serving as
Trustee. Prior to June 1, 1995 Trustee of the Trust was paid $1,000 for each
Board meeting attended (whether in person or by electronic communication) plus
$100 per active portfolio of the Trust and was paid $1,000 for each Committee
meeting attended on a date when a Board meeting is not held.
Mr. Burkhart, Chairman of the Trust's and Norwest Select Funds' audit
committees, receives additional compensation of $5,000 from the Trust and $1,000
from Norwest Select Funds for his services as Chairman. Mr. Penny was appointed
a Trustee in January 1996 and, accordingly, was not paid any compensation during
the Trust's last fiscal year.
As of October 1, 1995, the Trustees and officers of the Trust in the aggregate
owned less than 1% of the outstanding shares of the Fund.
The following table provides the aggregate compensation paid to the Trustees of
the Trust by the Trust and Norwest Select Funds, combined. Information is
presented for the year ended October 31, 1995, the Funds' fiscal year end. Other
funds of the Trust have a May 31 fiscal year end.
Total Compensation From
Total Compensation the Trust and Norwest
from the Trust Select Funds
-------------- ------------
Mr. Brown $23,565 $26,177
Mr. Burkhart $29,909 $33,023
Mr. Harris $22,567 $25,177
Mr. Leach $22,566 $25,177
Mr. Willeke $14,000 $14,000
Neither the Trust nor Norwest Select Funds has adopted any from of retirement
plan covering Trustees or officers.
TRUSTEES AND OFFICERS OF CORE TRUST
The following information relates to the principal occupations of each Trustee
and executive officer of the Trust during the past five years and shows the
nature of any affiliation with Schroder. Messrs. Keffer, Goldstein and Sheehan,
officers of Core Trust, all currently serve as officers of the Trust.
Accordingly, for background information pertaining to these officers, see
"Trustees and Officers of the Trust" above.
Peter E. Guernsey, Trustee.
Insurance Consultant since August 1986; prior thereto Senior Vice
President, Marsh & McLennan, Inc., insurance brokers. His address is
Oyster Bay, New York.
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Ralph E. Hansmann, Trustee.
Private investor; Director, First Eagle Fund of America, Inc.; Director,
Verde Exploration, Ltd.; Trustee Emeritus, Institute for Advanced Study;
Trustee and Treasurer, New York Public Library; Life Trustee, Hamilton
College. His address is 40 Wall Street, New York, New York.
John I. Howell, Trustee.
Private Consultant since February 1987; Director, American International
Group, Inc.; Director, American International Life Assurance Company of New
York. His address is 7 Riverside Road, Greenwich, Connecticut.
Laura E. Luckyn-Malone(a) (b) (c), President and Trustee.
Managing Director of Schroder since October 1995; Director of SWIS since
July 1995; prior thereto, Director and Senior Vice President of Schroder
since February 1990; Director and President, Schroder Advisors. Her
address is 787 Seventh Avenue, New York, New York.
Clarence F. Michalis, Trustee.
Chairman of the Board of Directors, Josiah Macy, Jr. Foundation (charitable
foundation). His address is 44 East 64th Street, New York, New York.
Hermann C. Schwab, Chairman (Honorary) and Trustee.
Retired since March, 1988; prior thereto, consultant to Schroder since
February 1, 1984. His address is 787 Seventh Avenue, New York, New York.
Mark J. Smith(a) (b), Vice President and Trustee.
First Vice President of Schroder since April 1990; Director and Vice
President, Schroder Advisors. His address is 33 Gutter Lane, London,
England.
Robert G. Davy, Vice President.
Director of Schroder and Schroder Capital Management International Ltd.
since 1994; First Vice President of Schroder since July, 1992; prior
thereto, employed by various affiliates of Schroders plc in various
positions in the investment research and portfolio management areas since
1986. His address is 787 Seventh Avenue, New York, New York.
Richard R. Foulkes, Vice President.
Deputy Chairman of Schroder since October 1995; Director of Schroder since
1979, Director of Schroder Capital Management International Ltd. since
1989, and Executive Vice President of both of these entities. His address
is 787 Seventh Avenue, New York, New York.
John Y. Keffer, Vice President.
Jane P. Lucas(c), Vice President.
Director and Senior Vice President Schroder; Director of SWIS since
September 1995; Assistant Director Schroder Investment Management Ltd.
since June 1991. His address is 787 Seventh Avenue, New York, New York.
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Catherine A. Mazza(b), Vice President.
Senior Vice President Schroder Advisors since December 1995; Vice President
of Schroder since October 1994; prior thereto, held various marketing
positions at Alliance Capital, an investment adviser, since July 1985. His
address is Oyster Bay, New York. Her address is 787 Seventh Avenue, New
York, New York.
Fariba Talebi, Vice President.
First Vice President of Schroder since April 1993, employed in various
positions in the investment research and portfolio management areas since
1987. Her address is 787 Seventh Avenue, New York, New York.
John A. Troiano(b), Vice President.
Managing Director of Schroder since October 1995; Director of Schroder
Advisors since October 1992, Director and Senior Vice President of Schroder
since 1991; prior thereto, employed by various affiliates of Schroder in
various positions in the investment research and portfolio management areas
since 1981. His address is 787 Seventh Avenue, New York, New York.
Ira L. Unschuld, Vice President.
Vice President of Schroder since April, 1993 and an Associate from July,
1990 to April, 1993; prior to July, 1990, employed by various financial
institutions as a securities or financial analyst. His address is 787
Seventh Avenue, New York, New York.
Robert Jackowitz(b) (c), Treasurer.
Vice President of SWIS since September 1995; Treasurer of SWIS and Schroder
Advisers since July 1995; Vice President of Schroder since June 1995; and
Assistant Treasurer of Schroders Incorporated since January 1993. His
address is 787 Seventh Avenue, New York, New York.
Margaret H. Douglas-Hamilton(b) (c), Secretary.
Secretary of SWIS since July 1995; Secretary of Schroder Advisers since
April 1990; First Vice President and General Counsel of Schroders
Incorporated(b) since May 1987; prior thereto, partner of Sullivan &
Worcester, a law firm. Her address is 787 Seventh Avenue, New York, New
York.
David I. Goldstein, Assistant Treasurer and Assistant Secretary.
Thomas G. Sheehan, Assistant Treasurer and Assistant Secretary.
Barbara Gottlieb(c), Assistant Secretary.
Assistant Vice President of SWIS since July 1995 prior thereto held various
positions with SWIS affiliates. Her address is 787 Seventh Avenue, New
York, New York.
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Gerardo Machado, Assistant Secretary.
Associate, Schroder. His address is 787 Seventh Avenue, New York, New York
-.
(a) Interested Trustee of Core Trust as defined by the 1940 Act.
(b) Schroder Advisors is a wholly-owned subsidiary of Schroder, which is a
wholly-owned subsidiary of Schroders Incorporated, which in turn is an indirect,
wholly-owned U.S. subsidiary of Schroders plc.
(c) Schroder Wertheim Investment Services, Inc. ("SWIS") is a wholly-owned
subsidiary of Schroder Wertheim Holdings Incorporated which is a wholly-owned
subsidiary of Schroders, Incorporated, which in turn is an indirect wholly-owned
U.S. subsidiary of Schroders plc.
INVESTMENT ADVISORY SERVICES
ADVISER OF THE FUND
Norwest Investment Management, a part of Norwest Bank Minnesota, N.A., is
required to furnish at its expense all services, facilities and personnel
necessary in connection with managing the Fund's investments and effecting
portfolio transactions for the Fund. Under its advisory agreements, Norwest may
delegate its responsibilities to any investment subadviser approved by the Board
with respect to all or a portion of the assets of the Fund.
The Advisory Agreement between the Fund and Norwest will continue in effect only
if such continuance is specifically approved at least annually by the Board or
by vote of the shareholders of the Fund, and in either case by a majority of the
Trustees who are not parties to the Advisory Agreement or interested persons of
any such party, at a meeting called for the purpose of voting on the Advisory
Agreement.
The Advisory Agreement is terminable without penalty by the Fund on 60 days'
written notice when authorized either by vote of the Fund's shareholders or by a
vote of a majority of the Board, or by the Adviser on not more than 60 days nor
less than 30 days written notice, and will automatically terminate in the event
of its assignment. The Advisory Agreement also provides that, with respect to
the Fund, neither the Adviser nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the performance of its
or their duties to the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of the Adviser's or their duties or by reason of
reckless disregard of its or their obligations and duties under the Advisory
Agreement. The Advisory Agreements provide that the Adviser may render service
to others.
In addition to receiving its advisory fee from the Fund, Norwest may also act
and be compensated as investment manager for its clients with respect to assets
which are invested in the Fund. In some instances Norwest may elect to credit
against any investment management, custodial or other fee received from, or
rebate to, a client who is also a shareholder in the Fund an amount equal to all
or a portion of the fees received by Norwest or any affiliate of Norwest from
the Fund with respect to the client's assets invested in the Fund.
The advisory fees are accrued daily and paid monthly. Norwest, in its sole
discretion, may waive all or any portion of its advisory fee with respect to the
Fund. Norwest has agreed to reimburse the Trust for certain of the Fund's
operating expenses (exclusive of interest, taxes and brokerage fees,
organization expenses and, if applicable, distribution expenses, all to the
extent permitted by applicable state law or regulation) which in any year exceed
the limits prescribed by any state in which the Fund's shares are qualified for
sale. The Trust may elect not to qualify its shares for sale in every state.
For the purpose of this obligation to reimburse expenses, the Fund's annual
expenses are estimated and accrued daily, and any appropriate estimated payments
will be made by Norwest monthly. Subject to these obligations, the Trust pays
for all of its expenses.
No payments will be made under the Fund's Advisory Agreement so long as all of
the Fund's investments consist solely of the Portfolio or any other registered
investment company or series thereof.
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Subject to the obligations of Norwest to reimburse the Trust for its excess
expenses as described above, the Trust has, under the Investment Advisory
Agreements, confirmed its obligation to pay all its other expenses, including:
(i) interest charges, taxes, brokerage fees and commissions; (ii) certain
insurance premiums; (iii) fees, interest charges and expenses of the Trust's
custodian, transfer agent and dividend disbursing agent; (iv) fees of pricing,
interest, dividend, credit and other reporting services; (v) costs of membership
in trade associations; (vi) telecommunications expenses; (vii) auditing, legal
and compliance expenses; (viii) costs of the Trust's formation and maintaining
its existence; (ix) costs of preparing and printing the Trust's prospectuses,
statements of additional information, account application forms and shareholder
reports and delivering them to existing and prospective shareholders; (x) costs
of maintaining books of original entry for portfolio and fund accounting and
other required books and accounts and of calculating the net asset value of
shares of the Trust; (xi) costs of reproduction, stationery and supplies; (xii)
compensation of the Trust's trustees, officers and employees who are not
employees of the Adviser, Forum Financial Services, Inc. or affiliated persons
of the Adviser or Forum Financial Services, Inc. and costs of other personnel
performing services for the Trust; (xiii) costs of corporate meetings; (xiv)
registration fees and related expenses for registration with the SEC and the
securities regulatory authorities of other countries in which the Trust's shares
are sold; (xv) state securities law registration fees and related expenses;
(xvi) fees and out-of-pocket expenses payable to Forum Financial Services, Inc.
under any distribution, management or similar agreement; (xvii) and all other
fees and expenses paid by the Trust pursuant to any distribution or shareholder
service plan adopted pursuant to Rule 12b-1 under the Act.
SUBADVISORY ARRANGEMENTS
Norwest and the Trust have entered into a Subadvisory Agreement with Schroder
with respect to the Fund. Schroder makes investment decisions for the Fund and
continuously reviews, supervises and administers the Fund's investment program.
Schroder is required to furnish at its own expense all services, facilities and
personnel necessary in connection with managing of the Fund's investments and
effecting portfolio transactions for the Fund (to the extent of Norwest's
delegation).
The Subadvisory Agreement among the Fund, Norwest and the Subadviser will
continue in effect only if such continuance is specifically approved at least
annually by the Board or by vote of the shareholders of the Fund, and in either
case by a majority of the Trustees who are not parties to the Subadvisory
Agreement or interested persons of any such party, at a meeting called for the
purpose of voting on the Subadvisory Agreement.
The Subadvisory Agreement with respect to the Fund is terminable without penalty
by the Fund on 60 days' written notice when authorized either by vote of the
Fund's shareholders or by a vote of a majority of the Board, or by the
Subadviser on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of its assignment. The Subadvisory
Agreement also provides that, with respect to the Fund, neither the Subadviser
nor its personnel shall be liable for any error of judgment or mistake of law or
for any act or omission in the performance of its or their duties to the Fund,
except for willful misfeasance, bad faith or gross negligence in the performance
of the Subadviser's or their duties or by reason of reckless disregard of its or
their obligations and duties under the Subadvisory Agreement. The Subadvisory
Agreements provide that the Subadviser may render services to others.
The Subadvisory fees are accrued daily and paid monthly. The Subadviser, in its
sole discretion, may waive all or any portion of its subadvisory fee with
respect to the Fund.
No payments will be made under the Fund's Subadvisory Agreement so long as all
of the Fund's investments consist solely of the Portfolio or any other
registered investment company or series thereof.
ADVISER OF THE PORTFOLIO
Schroder acts as investment adviser to the Portfolio and is required to furnish
at its expense all services, facilities and personnel necessary in connection
with managing the Portfolio's investments and effecting portfolio transactions
for the Portfolio. The Advisory Agreement between the Portfolio and Schroder
will continue in effect only if such continuance is specifically approved at
least annually by the Board of Trustees of Core Trust or by vote
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of the holders of beneficial interest of the Portfolio, and in either case by a
majority of the Trustees of Core Trust who are not parties to the Advisory
Agreement or interested persons of any such party, at a meeting called for the
purpose of voting on the Advisory Agreement.
Pursuant to the Advisory Agreement, Schroder is responsible for managing the
investment and reinvestment of the assets included in the Fund's portfolio and
continuously reviews, supervises and administers the Fund's investments. In
this regard, it is the responsibility of Schroder to make decisions relating to
the Fund's investments and to place purchase and sale orders regarding such
investments with brokers or dealers selected by it in its discretion. Schroder
also furnishes to the Board of Trustees of Core Trust periodic reports on the
investment performance of the Fund. Under the terms of the Advisory Agreement,
Schroder is required to manage the Portfolio's investment portfolio in
accordance with applicable laws and regulations. In making its investment
decisions, Schroder does not use material inside information that may be in its
possession or in the possession of its affiliates.
The Advisory Agreement will continue in effect provided such continuance is
approved annually (i) by the holders of a majority of the outstanding voting
securities of the Portfolio or by the Board of Trustees of Core Trust and (ii)
by a majority of the Trustees who are not parties to such Contract or
"interested persons" (as defined in the 1940 Act) of any such party. The
Advisory Agreement may be terminated without penalty by vote of the Trustees or
the shareholders of the Portfolio on 60 days' written notice to the Adviser, or
by the Adviser on 60 days' written notice to the Trust and it will terminate
automatically if assigned. The Advisory Agreement also provides that, with
respect to the Portfolio, neither Schroder nor its personnel shall be liable for
any error of judgment or mistake of law or for any act or omission in the
performance of its or their duties to the Portfolio, except for willful
misfeasance, bad faith or gross negligence in the performance of the Schroder's
or their duties or by reason of reckless disregard of its or their obligations
and duties under the Advisory Agreement.
The advisory fees are accrued daily and paid monthly. Schroder, in its sole
discretion, may waive all or any portion of its advisory fee with respect to the
Portfolio.
ADMINISTRATION AND DISTRIBUTION
THE TRUST
Forum supervises the overall management of the Trust (which includes, among
other responsibilities, negotiation of contracts and fees with, and monitoring
of performance and billing of, the Trust's transfer agent and custodian and
arranging for maintenance of books and records of the Trust) and provides the
Trust with general office facilities pursuant to a Management Agreement.
The Management Agreement will continue in effect only if such continuance is
specifically approved at least annually by the Board or by the shareholders and,
in either case, by a majority of the Trustees who are not parties to the
Management Agreement or interested persons of any such party.
The Management Agreement terminates automatically if it is assigned and may be
terminated without penalty by vote of the Fund's shareholders or by either party
on not more than 60 days' nor less than 30 days' written notice. The Management
Agreement also provides that, with respect to the Fund, neither Forum nor its
personnel shall be liable for any error of judgment or mistake of law or for any
act or omission in the performance of its or their duties to the Fund, except
for willful misfeasance, bad faith or gross negligence in the performance of
Forum's or their duties or by reason of reckless disregard of its or their
obligations and duties under the Management Agreement.
The Manager is also the Trust's Distributor and acts as the agent of the Trust
in connection with the offering of shares of the Fund on a "best efforts" basis
pursuant to a Distribution Agreement. Under a servicing agreement between the
Trust and Norwest with respect to the Fund, Norwest performs ministerial,
administrative and oversight functions for the Fund and undertakes to reimburse
certain excess expenses of the Fund. Among other things, Norwest gathers
performance and other data from the adviser of the Portfolio and from other
sources, formats the data and prepares reports to the Fund's shareholders and
the Trustees. Norwest also ensures that the adviser to the
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Portfolio is aware of pending net purchases or redemptions of Fund shares and
other matters that may affect the adviser's performance of its duties.
Lastly, Norwest has agreed to reimburse the Fund for any amounts by which its
operating expenses (exclusive of interest, taxes and brokerage fees,
organization expenses and, if applicable, distribution expenses, all to the
extent permitted by applicable state law or regulation) exceed the limits
prescribed by any state in which the Fund's shares are qualified for sale. No
fees will be paid to Norwest under the Servicing Agreement unless the Fund's
assets are invested solely in the International Portfolio or in a portfolio of
another registered investment company. This agreement will continue in effect
only if such continuance is specifically approved at least annually by the Board
or by the shareholders and, in either case, by a majority of the Trustees who
are not parties to the Management Agreement or interested persons of any such
party.
The agreement provides that neither Norwest nor its personnel shall be liable
for any error of judgment or mistake of law or for any act or omission in the
performance of its or their duties to the Fund, except for willful misfeasance,
bad faith or gross negligence in the performance of Forum's or their duties or
by reason of reckless disregard of its or their obligations and duties under the
agreement.
CORE TRUST
Core Trust has entered into an Administrative Services Agreement with Schroder
Fund Advisors Inc. ("Schroder Advisors"), 787 Seventh Avenue, New York, New York
10019, pursuant to which Schroder Advisors provides management and
administrative services necessary for the operation of the Portfolio, including
coordination of the services performed by the Portfolio's investment adviser,
transfer agent, custodian, independent accountants, legal counsel and others.
Schroder Advisors is a wholly-owned subsidiary of Schroder, and is a registered
broker-dealer organized to act as administrator and distributor of mutual funds.
Effective July 5, 1995, Schroder Advisors changed its name from Schroder Capital
Distributors Inc.
For these services, Schroder Advisors will receive a fee from Core Trust at the
annual rate of 0.10% of the average daily net assets of the Portfolio. The
Administrative Services Agreement is terminable with respect to the Portfolio
without penalty, at any time, by vote of a majority of the trustees of Core
Trust who are not "interested persons" of Core Trust and who have no direct or
indirect financial interest in the operation of the Administrative Services
Agreement, upon not more than 60 days' written notice to Schroder Advisors or by
vote of the holders of a majority of the shares of the Portfolio, or, upon 60
days' notice, by Schroder Advisors. The Administrative Services Agreement will
terminate automatically in the event of its assignment.
On behalf of the Portfolio, Core Trust has entered into a Sub-Administration
Agreement with Forum. Pursuant to the Sub-Administration Agreement, Forum
assists Schroder Advisors with certain of its responsibilities under the
Administrative Services Agreement, including shareholder reporting and
regulatory compliance.
The Sub-Administration Agreement is terminable with respect to the Portfolio
without penalty, at any time, by the board of trustees of Core Trust upon 60
days' written notice to Forum or by Forum upon 60 days' written notice to the
Portfolio.
A SHARES AND B SHARES
Under the Distribution Services Agreement related to the Fund, Forum receives,
and may reallow to certain financial institutions, the initial sales charges
assessed on purchases of A Shares of the Fund. With respect to B Shares of the
Fund, the Fund has adopted a distribution plan pursuant to Rule 12b-1 under the
1940 Act (the "Plan") which authorizes the payment to Forum under the
Distribution Services Agreement of a distribution services fee, which may not
exceed an annual rate of 0.75%, and a maintenance fee in an amount equal to
0.25%, of the average daily net assets of the Fund attributable to the B Shares.
The Plan provides that all written agreements relating to the Plan must be in a
form satisfactory to the Board. In addition, the Plan requires the Trust and
Forum to prepare, at least quarterly, written reports setting forth all amounts
expended for distribution purposes by the Fund and Forum pursuant to the Plan
and identifying the distribution activities for which those expenditures were
made.
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The Plan provides that, with respect to each class of the Fund to which it
applies, it will remain in effect for one year from the date of its adoption and
thereafter may continue in effect for successive annual periods provided it is
approved by the shareholders of the respective class or by the Board, including
a majority of trustees who are not interested persons of the Trust and who have
no direct or indirect interest in the operation of the Plan, the Distribution
Services Agreement or any agreement related to the Plan. The Plan further
provides that it may not be amended to increase materially the costs which may
be borne by the Trust for distribution pursuant to the Plan without shareholder
approval and that other material amendments to the Plan must be approved by the
trustees in the manner described in the preceding sentence. The Plan may be
terminated at any time by a vote of the Board or by the shareholders of the
respective classes.
TRANSFER AGENT
Norwest acts as Transfer Agent of the Trust pursuant to a Transfer Agency
Agreement. The Transfer Agency Agreement will continue in effect only if such
continuance is specifically approved at least annually by the Board or by a vote
of the shareholders of the Trust and in either case by a majority of the
Trustees who are not parties to the Transfer Agency Agreement or interested
persons of any such party, at a meeting called for the purpose of voting on the
Transfer Agency Agreement.
Among the responsibilities of the Transfer Agent as agent for the Trust are:
(1) answering customer inquiries regarding account status and history, the
manner in which purchases and redemptions of shares of the Fund may be effected
and certain other matters pertaining to the Fund; (2) assisting shareholders in
initiating and changing account designations and addresses; (3) providing
necessary personnel and facilities to establish and maintain shareholder
accounts and records, (4) assisting in processing purchase and redemption
transactions and receiving wired funds; (5) transmitting and receiving funds in
connection with customer orders to purchase or redeem shares; (6) verifying
shareholder signatures in connection with changes in the registration of
shareholder accounts; (7) furnishing periodic statements and confirmations of
purchases and redemptions; (8) transmitting proxy statements, annual reports,
prospectuses and other communications from the Trust to its shareholders; (9)
receiving, tabulating and transmitting to the Trust proxies executed by
shareholders with respect to meetings of shareholders of the Trust; and (10)
providing such other related services as the Trust or a shareholder may request.
For its services, the Transfer Agent receives from the Trust, with respect to
the Fund a fee computed and paid monthly at the annual rate of 0.25% of the
Fund's average daily net assets attributable to each class).
CUSTODIAN
Pursuant to a Custodian Agreement, Norwest acts as the custodian of the Trust's
assets. The custodian's responsibilities include safeguarding and controlling
the Trust's cash and securities, determining income and collecting interest on
Fund investments. For these services, the custodian receives no fee. The
custodian receives a separate fee for performing certain functions in connection
with loans of portfolio securities.
The Chase Manhattan Bank, N.A. serves as custodian to the Portfolio and is
compensated by Core Trust with respect to the Portfolio.
PORTFOLIO ACCOUNTING
Forum Financial Corp., an affiliate of Forum, performs portfolio accounting
services for the Fund pursuant to a Fund Accounting Agreement with the Trust.
The Fund Accounting Agreement will continue in effect only if such continuance
is specifically approved at least annually by the Board or by a vote of the
shareholders of the Trust and in either case by a majority of the Trustees who
are not parties to the Fund Accounting Agreement or interested persons of any
such party, at a meeting called for the purpose of voting on the Fund Accounting
Agreement.
Under its agreement, FFC prepares maintains books and records of the Fund on
behalf of the Trust that are required to be maintained under the 1940 Act,
calculates the net asset value per share of the Fund (and class thereof) and
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dividends and capital gain distributions and prepares periodic reports to
shareholders and the SEC. For its services, FFC receives from the Trust with
respect to the Fund a fee of $36,000 per year plus, for each class of the Fund
above one, $6,000 per year. In addition, FFC is paid an additional $12,000 per
year with respect to the Fund if it has more than 100 security positions or a
monthly portfolio turnover rate of 10% or greater.
FFC is required to use its best judgment and efforts in rendering fund
accounting services and is not be liable to the Trust for any action or inaction
in the absence of bad faith, willful misconduct or gross negligence. FFC is not
responsible or liable for any failure or delay in performance of its fund
accounting obligations arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control and the Trust has agreed to
indemnify and hold harmless FFC, its employees, agents, officers and directors
against and from any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character arising out of or in any way related to FFC's actions
taken or failures to act with respect to the Fund or based, if applicable, upon
information, instructions or requests with respect to the Fund given or made to
FFC by an officer of the Trust duly authorized. This indemnification does not
apply to FFC's actions taken or failures to act in cases of FFC's own bad faith,
willful misconduct or gross negligence.
FFC performs similar services for the Portfolio and, in addition, acts as the
Portfolio's transfer agent.
6. OTHER INFORMATION
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
PURCHASES
Shares of the Fund are sold on a continuous basis.
Fund shares are normally issued for cash only. In the Adviser's discretion,
however, the Fund may accept portfolio securities that meet the investment
objective and policies of the Fund as payment for Fund shares. The Fund will
only accept securities that (i) are not restricted as to transfer either by law
or liquidity of market and (ii) have a value which is readily ascertainable (and
not established only by valuation procedures).
Set forth below is an example of the method of computing the offering price of
the Fund's A Shares. All other shares of the Trust are offered at their next
determined net asset value. The example assumes a purchase of A Shares of a
hypothetical fund ("Fund Q") in an amount such that the purchase would be
subject to the fund's maximum sales charge (in this case, 4.5%) at a price based
on a hypothetical net asset value per share of A Shares of the fund. Offering
price is determined as follows: Net asset value per share times the sum of one
(1) plus the sales charge expressed as a percentage (for example 4.5% would
equal 0.045).
Net Asset Offering
Value Per Share Price
--------------- -----
Fund Q 11.48 12.00
STATEMENT OF INTENTION
As more fully described in the Prospectus, investors may obtain reduced sales
charges with respect to the purchase of A Shares of the Fund by means of a
written Statement of Intention, which expresses the investor's intention to
invest not less than $100,000 within a period of 13 months in A Shares of the
Fund. The Statement of Intention is not a binding obligation upon the investor
to purchase the full amount indicated. A Shares purchased with the first 5% of
such amount will be held subject to a registered pledge (while remaining
registered in the name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full amount
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indicated is not purchased, and such pledged shares will be involuntarily
redeemed to pay the additional sales charge, if necessary. When the full amount
indicated has been purchased, the shares will be released from pledge.
EXCHANGES AND TELEPHONE TRANSACTIONS
By making an exchange, the investor authorizes the Trust's transfer agent to act
on telephonic instructions from any person representing himself or herself to be
the investor and believed by the Trust's transfer agent to be genuine. The
records of the Trust's transfer agent of such instructions are binding. The
exchange procedures may be modified or terminated at any time upon appropriate
notice to shareholders. For Federal income tax purposes, exchanges are treated
as sales on which a purchaser will realize a capital gain or loss depending on
whether the value of the shares redeemed is more or less than his basis in such
shares at the time of such transaction.
The exchange privilege permits I Share shareholders to exchange their shares for
I Shares of any other Fund. For Federal income tax purposes, an exchange
transaction is treated as a sale and subsequent purchase on which a purchaser
may realize a capital gain or loss depending on whether the value of the shares
redeemed is more or less than his basis in such shares at the time of the
transaction.
Shareholders of A Shares may purchase, with the proceeds from a redemption of
all or part of their shares, A Shares of the other funds of the Trust that offer
A Shares or Investor class shares ("Investor Shares") of Ready Cash Investment
Fund or Municipal Money Market Fund, two money market portfolios of the Trust.
Shareholders of B Shares may purchase, with the proceeds from a redemption of
all or part of their shares, B Shares of the other funds of the Trust that offer
B Shares or Exchange class shares ("Exchange Shares") of Ready Cash Investment
Fund.
Shareholders of Investor Shares of Ready Cash Investment Fund and Municipal
Money Market Fund may purchase, with the proceeds from a redemption of all or
part of their shares, Investor Shares of the other Fund or A Shares of the funds
of the Trust that offer A Shares. Shareholders of Exchange Shares of Ready Cash
Investment Fund may purchase, with the proceeds from a redemption of all or part
of their shares, B Shares of the funds of the Trust that offer B Shares.
Shareholders of A Shares making an exchange will be subject to the applicable
sales charge of any A Shares acquired in the exchange; provided, that the sales
charge charged with respect to the acquired shares will be assessed at a rate
that is equal to the excess (if any) of the rate of the sales charge that would
be applicable to the acquired shares in the absence of an exchange over the rate
of the sales charge previously paid on the exchanged shares. For purposes of
the preceding sentence, A Shares acquired through the reinvestment of dividends
or distributions are deemed to have been acquired with a sales charge rate equal
to that paid on the shares on which the dividend or distribution was paid.
In addition, A Shares acquired by a previous exchange transaction involving
shares on which a sales charge has directly or indirectly been paid (e.g.,
shares purchased with a sales charge or issued in connection with an exchange
transaction involving shares that had been purchased with a sales charge), as
well as additional shares acquired through reinvestment of dividends or
distributions on such shares will be treated as if they had been acquired
subject to that sales charge.
B Shares may be exchanged without the payment of any contingent deferred sales
charge; however, B Shares or Exchange Shares acquired as a result of such
exchange and subsequently redeemed will nonetheless be subject to the contingent
deferred sales charge applicable to the original B Shares as if those shares
were being redeemed at that time. Exchange Shares may be exchanged without the
payment of any contingent deferred sales charge; however, B Shares acquired as a
result of such exchange and subsequently redeemed will nonetheless be subject to
the contingent deferred sales charge applicable to the Exchange Shares as if
those shares were being redeemed at that time.
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<PAGE>
REDEMPTIONS
In addition to the situations described in the Prospectus with respect to the
redemptions of shares, the Trust may redeem shares involuntarily to reimburse
the Fund for any loss sustained by reason of the failure of a shareholder to
make full payment for shares purchased by the shareholder or to collect any
charge relating to transactions effected for the benefit of a shareholder which
is applicable to the Fund's shares as provided in the Prospectus from time to
time.
Proceeds of redemptions normally are paid in cash. However, payments may be
made wholly or partially in portfolio securities if the Board determines that
payment in cash would be detrimental to the best interests of the Fund. If
payment for shares redeemed is made wholly or partially in portfolio securities,
brokerage costs may be incurred by the shareholder in converting securities to
cash. The Trust and Core Trust have each filed a formal election with the SEC
pursuant to which the Fund and the Portfolio will only effect a redemption in
portfolio securities if the particular shareholder is redeeming more than
$250,000 or one percent of the Fund's or the Portfolio's total net assets,
whichever is less, during any 90-day period.
CONTINGENT DEFERRED SALES CHARGE (A SHARES)
Certain A Shares of the Fund on which no initial sales charge was assessed, that
are redeemed within specified periods after the purchase date will be subject
to a contingent deferred sales charge upon redemption.
Right of Accumulation. Contingent deferred sales charges may be charged on
redemptions of A Shares purchased pursuant to the Cumulative Quantity Discount
(Right of Accumulation). The contingent deferred sales charge will apply to A
Shares purchased if the value of those shares on the date of purchase plus the
net asset value (as of the close of business on the previous Fund Business Day)
of all A Shares held by the shareholder exceed $1,000,000. For example, if a
shareholder has made prior purchases of A Shares which now have a value of
$900,000, the purchase of $150,000 of A Shares will not be subject to an initial
sales charge but will be subject to the contingent deferred sales charge. The
$900,000 of A Shares is not subject to the contingent deferred sales charge.
STATEMENT OF INTENTION. Contingent deferred sales charges may be charged on
redemptions of A Shares purchased pursuant to a Statement of Intention ("SOI").
The contingent deferred sales charge will not apply to SOIs of under $1,000,000
and will not be applied to SOIs for a greater amount if the shareholder never
purchases $1,000,000 or more of A Shares under the SOI. If a shareholder
purchases $1,000,000 or more under an SOI, the contingent deferred sales charge
will apply with respect to the entire amount purchased. The holding period for
each A Share, however, shall be determined from the date the share was
purchased. If the shareholder redeems A Shares during the period that the SOI
is in effect, a contingent deferred sales charge will be charged at the time the
shareholder has purchased $1,000,000 or more worth of A Shares pursuant to the
SOI and will be assessed at the rate applicable in the case of a single purchase
of the minimum amount specified in the SOI. If the shareholder purchases less
than the amount specified under the SOI, an additional contingent deferred sales
charge may be assessed in respect of A Shares previously redeemed based on the
amount actually purchased pursuant to the SOI.
A Shares purchased by a shareholder within 60 days following the redemption by
the shareholder of A Shares in the same Fund with a value at least equal to the
A Shares being purchased will not be subject to a contingent deferred sales
charge; provided, however, that this exemption is not applicable to more than
two purchases within a 12-month period.
CONTINGENT DEFERRED SALES CHARGE (A SHARES AND B SHARES)
With respect to A Shares and B Shares of the Fund, certain redemptions are not
subject to any contingent deferred sales charge. No contingent deferred sales
charge is imposed on (i) redemptions of shares acquired through the reinvestment
of dividends and distributions, (ii) involuntary redemptions by the Fund of
shareholder accounts with low account balances, (iii) redemptions of shares
following the death or disability of a shareholder if the Fund is notified
within one year of the shareholder's death or disability, (iv) redemptions to
effect a distribution (other than a lump sum distribution) from an IRA, Keogh
plan or Section 403(b) custodial account or from a qualified
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retirement plan. For these purposes, the term disability shall have the meaning
ascribed thereto in Section 72(m)(7) of the Code. Under that provision, a
person is considered disabled if the person is unable to engage in any
substantial activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of long-continued
and indefinite duration. Appropriate documentation satisfactory to the Fund is
required to substantiate any shareholder death or disability.
CONVERSION OF B SHARES
The conversion of Exchange Shares to Investor Shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the distribution services fee with respect to the Exchange Shares
does not result in the Fund's dividends or distributions constituting
"preferential dividends" under the Code, and (ii) the conversion of Exchange
Shares to Investor Shares does not constitute a taxable event under Federal
income tax law. The conversion of Exchange Shares to Investor Shares may be
suspended if such an opinion is no longer available at the time the conversion
is to occur. In that event, no further conversions of Exchange Shares would
occur, and shares might continue to be subject to a distribution services fee
for an indefinite period, which may extend beyond the specified number of years
for conversion of the original B Shares.
DETERMINATION OF NET ASSET VALUE
Securities owned by the Fund for which market quotations are readily available
are valued at current market value. The Fund values its securities as follows.
A security listed or traded on an exchange is valued at its last sale price
(prior to the time as of which assets are valued) on the exchange where it is
principally traded. Lacking any such sales on the day of valuation, the
security is valued at the mean of the last bid and asked prices. All other
securities for which over-the-counter market quotations are readily available
generally are valued at the mean of the current bid and asked prices. When
market quotations are not readily available, securities are valued at fair value
as determined in good faith by the Board. Debt securities may be valued on the
basis of valuations furnished by pricing services which utilize electronic data
processing techniques to determine valuations for normal institutional-size
trading units of debt securities, without regard to sale or bid prices, when
such valuations are believed to more accurately reflect the fair market value of
such securities. All assets and liabilities of the Fund denominated in foreign
currencies are converted into United States dollars at the mean of the bid and
asked prices of such currencies against the United States dollar last quoted by
a major bank.
Under procedures adopted by the Board, a net asset value for the Fund later
determined to have been inaccurate for any reason will be recalculated.
Purchases and redemptions made at a net asset value determined to have been
inaccurate will be adjusted, although in certain circumstances, such as where
the difference between the original net asset value and the recalculated net
asset value divided by the recalculated net asset value is 0.005 (1/2 of 1%) or
less or shareholder transactions are otherwise insubstantially affected, further
action is not required.
PORTFOLIO TRANSACTIONS
The following discussion concerning portfolio transactions relates to the Fund
and the Portfolio.
Investment decisions for the Fund will be made independently from those for any
other client account or investment company that is or may in the future become
managed by the Adviser or its affiliates. Investment decisions are the product
of many factors including basic suitability for the particular client involved.
Thus, a particular security may be bought or sold for certain clients even
though it could have been bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more clients when one
or more clients are selling the security. In some instances, one client may
sell a particular security to another client. It also sometimes happens that
two or more clients simultaneously purchase or sell the same security, in which
event each day's transactions in such security are, insofar as is possible,
averaged as to price and allocated between such clients in a manner which, in
the respective Adviser's opinion, is equitable to each and in accordance with
the amount being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients. In addition, when purchases or sales of the
same security for the Fund and
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other client accounts managed by the Advisers occur contemporaneously, the
purchase or sale orders may be aggregated in order to obtain any price
advantages available to large denomination purchases or sales.
Purchases and sales of fixed income portfolio securities are generally effected
as principal transactions. These securities are normally purchased directly
from the issuer or from an underwriter or market maker for the securities.
There usually are no brokerage commissions paid for such purchases. Purchases
from underwriters of portfolio securities include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers include the spread between the bid and ask prices. In the case of
securities traded in the foreign and domestic over-the-counter markets, there is
generally no stated commission, but the price usually includes an undisclosed
commission or markup. In underwritten offerings, the price includes a disclosed
fixed commission or discount.
Purchases and sales of equity securities on exchanges are generally effected
through brokers who charge commissions. Allocations of transactions to brokers
and dealers and the frequency of transactions are determined by the Advisers in
their best judgment and in a manner deemed to be in the best interest of
shareholders of the Fund (holders of beneficial interest in the case of the
Portfolio) rather than by any formula. The primary consideration is prompt
execution of orders in an effective manner and at the most favorable price
available to the Fund. In transactions on stock exchanges in the United States,
these commissions are negotiated, whereas on foreign stock exchanges these
commissions are generally fixed. Where transactions are executed in the over-
the-counter market, the Fund will seek to deal with the primary market makers;
but when necessary in order to obtain best execution, it will utilize the
services of others. In all cases the Fund will attempt to negotiate best
execution.
The Fund may not always pay the lowest commission or spread available. Rather,
in determining the amount of commission, including certain dealer spreads, paid
in connection with securities transactions, the Advisers take into account such
factors as size of the order, difficulty of execution, efficiency of the
executing broker's facilities (including the services described below) and any
risk assumed by the executing broker. The Advisers may also take into account
payments made by brokers effecting transactions for the Fund (i) to the Fund or
(ii) to other persons on behalf of the Fund for services provided to it for
which it would be obligated to pay.
In addition, the Advisers may give consideration to research services furnished
by brokers to the Advisers for their use and may cause the Fund to pay these
brokers a higher amount of commission than may be charged by other brokers.
Such research and analysis may be used by the Advisers in connection with
services to clients other than the Fund, and the Advisers' fees are not reduced
by reason of the Advisers' receipt of the research services.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to the obligation to seek the most
favorable price and execution available and such other policies as the Board may
determine, an Adviser may consider sales of shares of the Fund as a factor in
the selection of broker-dealers to execute portfolio transactions for the Fund.
Subject to the general policies regarding allocation of portfolio brokerage as
set forth above, the Board has authorized the Advisers to employ their
respective affiliates to effect securities transactions of the Fund, provided
certain other conditions are satisfied. Payment of brokerage commissions to an
affiliate of an Adviser for effecting such transactions is subject to Section
17(e) of the 1940 Act, which requires, among other things, that commissions for
transactions on securities exchanges paid by a registered investment company to
a broker which is an affiliated person of such investment company, or an
affiliated person of another person so affiliated, not exceed the usual and
customary brokers' commissions for such transactions. It is the Fund's policy
that commissions paid to Schroder Securities Limited, Norwest Investment
Management, Inc. and other affiliates of an Adviser will, in the judgment of the
Adviser responsible for making portfolio decisions and selecting brokers, be (i)
at least as favorable as commissions contemporaneously charged by the affiliate
on comparable transactions for its most favored unaffiliated customers and (ii)
at least as favorable as those which would be charged on comparable transactions
by other qualified brokers having comparable execution capability. The Board,
including a majority of the non-interested Trustees, has adopted procedures to
ensure that commissions paid to affiliates of an Adviser by the Fund satisfy the
foregoing standards.
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<PAGE>
The Fund has no understanding or arrangement to direct any specific portion of
its brokerage to Schroder Securities or its affiliates, and will not direct
brokerage to Schroder Securities or its affiliates in recognition of research
services.
From time to time, the Fund may purchase securities of a broker or dealer
through which its regularly engages in securities transactions.
TAXATION
The Fund intends for each taxable year to qualify for tax treatment as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended. Such qualification does not, of course, involve governmental
supervision of management or investment practices or policies. Investors should
consult their own counsel for a complete understanding of the requirements the
Fund must meet to qualify for such treatment, and of the application of state
and local tax laws to his or her particular situation.
Certain listed options and regulated futures contracts are considered "section
1256 contracts" for Federal income tax purposes. Section 1256 contracts held by
the Fund at the end of each taxable year will be "marked to market" and treated
for Federal income tax purposes as though sold for fair market value on the last
business day of such taxable year. Gain or loss realized by the Fund on section
1256 contracts generally will be considered a 60 percent long-term and 40
percent short-term capital gain or loss. The Fund can elect to exempt its
section 1256 contracts which are part of a "mixed straddle" (as described below)
from the application of section 1256.
With respect to over-the-counter put and call options, gain or loss realized by
the Fund upon the lapse or sale of such options held by such Fund will be either
long-term or short-term capital gain or loss depending upon the Fund's holding
period with respect to such option. However, gain or loss realized upon the
lapse or closing out of such options that are written by the Fund will be
treated as short-term capital gain or loss. In general, if the Fund exercises
an option, or an option that the Fund has written is exercised, gain or loss on
the option will not be separately recognized but the premium received or paid
will be included in the calculation of gain or loss upon disposition of the
property underlying the option.
Any option, futures contract, or other position entered into or held by the Fund
in conjunction with any other position held by the Fund may constitute a
"straddle" for Federal income tax purposes. A straddle of which at least one,
but not all, the positions are section 1256 contracts may constitute a "mixed
straddle". In general, straddles are subject to certain rules that may affect
the character and timing of the Fund's gains and losses with respect to straddle
positions by requiring, among other things, that (i) loss realized on
disposition of one position of a straddle not be recognized to the extent that
the Fund has unrealized gains with respect to the other position in such
straddle; (ii) the Fund's holding period in straddle positions be suspended
while the straddle exists (possibly resulting in any gain being treated as
short-term capital gain rather than long-term capital gain); (iii) losses
recognized with respect to certain straddle positions which are part of a mixed
straddle and which are non-section 1256 positions be treated as 60 percent long-
term and 40 percent short-term capital loss; (iv) losses recognized with respect
to certain straddle positions which would otherwise constitute short-term
capital losses be treated as long-term capital losses; and (v) the deduction of
interest and carrying charges attributable to certain straddle positions may be
deferred. Various elections are available to the Fund which may mitigate the
effects of the straddle rules, particularly with respect to mixed straddles. In
general, the straddle rules described above do not apply to any straddles held
by the Fund if all of the offsetting positions consist of section 1256
contracts.
Each Fund shareholder should include in the shareholder's report of gross income
in his Federal income tax return cash dividends received by the shareholder from
the Fund.
COUNSEL AND AUDITORS
Legal matters in connection with the issuance of shares of beneficial interest
of the Trust are passed upon by the law firm of Seward & Kissel, One Battery
Park Plaza, New York, New York 10004.
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<PAGE>
________, independent auditors, acts as auditors for the Trust.
OWNERSHIP OF FUND SHARES
Prior to the public issuance of shares of the Fund, due to its initial
investment, Forum owned all outstanding shares of the Fund and, accordingly, may
be deemed to be a controlling person of the Fund. Upon the investment in the
Fund by public shareholders, Forum ceased to be a controlling person of the
Fund. As of July [ ], 1996, the Trustees and officers of the Trust in the
aggregate owned less than one percent of the outstanding shares of the Fund.
ADDITIONAL INFORMATION ABOUT THE TRUST
Currently, the Trust is divided into twenty-nine separate series representing
shares of the Fund and shares of Cash Investment Fund, Ready Cash Investment
Fund, U.S. Government Fund, Treasury Fund, Municipal Money Market Fund, Income
Fund, Total Return Bond Fund, Tax-Free Income Fund, Arizona Tax-Free Fund,
Colorado Tax-Free Fund, Minnesota Tax-Free Fund, ValuGrowth Stock Fund, Small
Company Stock Fund, Contrarian Stock Fund, Diversified Equity Fund, Growth
Equity Fund, Large Company Growth Fund, Small Company Growth Fund, International
Fund, Income Equity Fund, Index Fund, Conservative Balanced Fund, Moderate
Balanced Fund, Growth Balanced Fund, Intermediate U.S. Government Fund,
Diversified Bond Fund, Stable Income Fund and Short Maturity Investment Fund.
The Trust has received an order from the SEC permitting the issuance and sale of
separate classes of shares representing interests in each of the Trust's
portfolios. It is anticipated, however, that the Trust will operate the classes
of each Fund in accordance with rules of the SEC adopted after the Trust
obtained its exemptive order.
The Board determined that currently no conflict of interest exists between or
among each Fund's I Shares and its other classes, if any. On an ongoing basis,
the Board, pursuant to its fiduciary duties under the 1940 Act and state law,
will seek to ensure that no such conflict arises.
The Trust's shareholders are not personally liable for the obligations of the
Trust under Delaware law. The Delaware Business Trust Act (the "Delaware Act")
provides that a shareholder of a Delaware business trust shall be entitled to
the same limitation of liability extended to shareholders of private
corporations for profit. However, no similar statutory or other authority
limiting business trust shareholder liability exists in many other states,
including Texas. As a result, to the extent that the Trust or a shareholder is
subject to the jurisdiction of courts in those states, the courts may not apply
Delaware law, and may thereby subject the Trust shareholders to liability. To
guard against this risk, the Trust Instrument of the Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation and instrument entered into by
the Trust or its Trustees, and provides for indemnification out of Trust
property of any shareholder held personally liable for the obligations of the
Trust. Thus, the risk of a shareholder incurring financial loss beyond his
investment because of shareholder liability is limited to circumstances in which
(1) a court refuses to apply Delaware law, (2) no contractual limitation of
liability is in effect, and (3) the Trust itself is unable to meet its
obligations. In light of Delaware law, the nature of the Trust's business, and
the nature of its assets, the Board believes that the risk of personal liability
to a Trust shareholder is extremely remote.
FINANCIAL STATEMENTS
The fiscal year end of the Fund is ________. Financial statements for the Fund's
semi-annual period and fiscal year will be distributed to shareholders of
record. The Board in the future may change the fiscal year end of the Fund.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Funds' registration statement filed with the SEC under the Securities Act of
1933 with respect to the securities offered hereby, certain portions of which
have been omitted pursuant to the rules and regulations of the SEC. The
registration statement, including the exhibits filed therewith, may be examined
at the office of the SEC in Washington, D.C.
-30-
<PAGE>
Statements contained herein and in the Prospectus as to the contents of any
contract of other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
-31-
<PAGE>
APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)
MOODY'S INVESTORS SERVICE ("MOODY'S")
Moody's rates corporate bond issues, including convertible debt issues, as
follows:
Bonds which are rated Aaa are judged by Moody's to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Bonds which are rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payment and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Those bonds in the Aa, A, Baa, Ba or B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1, Baa1, Ba1, and B1.
-A-1-
<PAGE>
STANDARD AND POOR'S ("S&P")
S&P rates corporate bond issues, including convertible debt issues, as follows:
Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
Bonds rated AA have a very strong capacity to pay interest and repay principal
and differ from the highest rated issues only in small degree.
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt rated in higher rated
categories.
Bonds rated BBB are regarded as having an adequate capacity to pay interest and
repay principal. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
Bonds rated BB, B, CCC, CC and C are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. Bonds rated BB have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
Bonds rated B have a greater vulnerability to default but currently have the
capacity to meet interest payments and principal payments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
Bonds rated CCC have currently identifiable vulnerability to default, and are
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, they are not likely to have the
capacity to pay interest and repay principal.
Bonds rated C typically are subordinated to senior debt which as assigned an
actual or implied CCC debt rating. This rating may also be used to indicate
imminent default.
The C rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued. The rating Cl is reserved
for income bonds on which no interest is being paid.
Bonds are rated D when the issue is in payment default, or the obligor has filed
for bankruptcy. Bonds rated D are in payment default or the obligor has filed
for bankruptcy. The D rating category is used when interest payments or
principal payments are not made on the date due, even if the applicable grace
period has not expired, unless S&P believes that such payments will made during
such grace period.
Note: The ratings from AA to CCC may be modified by the addition of a plus (+)
or minus (-) sign to show the relative standing within the rating category.
-A-2-
<PAGE>
FITCH INVESTORS SERVICE, L.P. ("FITCH")
Fitch rates corporate bond issues, including convertible debt issues, as
follows:
AAA Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA Bonds are considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in the AAA
and AA categories are not significantly vulnerable to foreseeable future
developments, shorter-term debt of these issuers is generally rate F-1+.
A Bonds are considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB Bonds are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA, DDD, DD, or D categories.
-A-3-
<PAGE>
PREFERRED STOCK
MOODY'S INVESTORS SERVICE
Moody's rates preferred stock as follows:
An issue rated aaa is considered to be a top-quality preferred stock. This
rating indicates good asset protection and the least risk of dividend impairment
among preferred stock issues.
An issue rated aa is considered a high-grade preferred stock. This rating
indicates that there is a reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
An issue rated a is considered to be an upper-medium grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classification, earnings and asset protection are, nevertheless, expected to be
maintained at adequate levels.
An issue rated baa is considered to be a medium-grade, neither highly protected
nor poorly secured. Earnings and asset protection appear adequate at present
but may be questionable over any great length of time.
An issue rated ba is considered to have speculative elements and its future
cannot be considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.
An issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of
the issue over any long period of time may be small.
An issue which is rated caa is likely to be in arrears on dividend payments.
This rating designation does not purport to indicate the future status of
payments.
An issue which is rated ca is speculative in a high degree and is likely to be
in arrears on dividends with little likelihood of eventual payment.
An issue which is rated c can be regarded as having extremely poor prospects of
ever attaining any real investment standing. This is the lowest rated class of
preferred or preference stock.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification from aa through b in its preferred stock rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issuer ranks in the lower end of its generic rating
category.
STANDARD & POOR'S
S&P rates preferred stock as follows:
AAA is the highest rating that is assigned by S&P to a preferred stock issue and
indicates an extremely strong capacity to pay the preferred stock obligations.
A preferred stock issue rated AA also qualifies as a high-quality fixed income
security. The capacity to pay preferred stock obligations is very strong,
although not as overwhelming as for issues rated AAA.
An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
-A-4-
<PAGE>
An issue rated BBB is regarded as backed by an adequate capacity to pay the
preferred stock obligations. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments for a preferred stock in
this category than for issues in the A category.
Preferred stock rated BB, B, and CCC are regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay preferred stock
obligations. BB indicates the lowest degree of speculation and CCC the highest
degree of speculation. While such issues will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
The rating CC is reserved for a preferred stock issue in arrears on dividends or
sinking fund payments but that is currently paying.
A preferred stock rated C is a non-paying issue.
A preferred stock rated D is a non-paying issue with the issuer in default on
debt instruments.
To provide more detailed indications of preferred stock quality, the ratings
from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign
to show relative standing within the major rating categories.
COMMERCIAL PAPER
MOODY'S INVESTORS SERVICE
Moody's two highest ratings for short-term debt, including commercial paper, are
Prime-1 and Prime-2. Both are judged investment grade, to indicate the relative
repayment ability of rated issuers.
Issuers rated Prime-1 have a superior ability for repayment of senior short-term
debt obligations. Prime-1 repayment ability will often be evidenced by many of
the following characteristics: Leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structure with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 by Moody's have a strong ability for repayment of senior
short-term debt obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1 but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
STANDARD AND POOR'S
S&P's two highest commercial paper ratings are A-1 and A-2. Issues assigned an
A rating are regarded as having the greatest capacity for timely payment.
Issues in this category are delineated with the numbers 1, 2 and 3 to indicate
the relative degree of safety. An A-1 designation indicates that the degree of
safety regarding timely payment is either overwhelming or very strong. Those
issues determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation. The capacity for timely payment on issues
with an A-2 designation is strong. However, the relative degree of safety is
not as high as for issues designated A-1. A-3 issues have a satisfactory
capacity for timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the higher
designations. Issues rated A-2 are regarded as having only an adequate capacity
for timely payment. However, such capacity may be damaged by changing
conditions or short-term adversities.
-A-5-
<PAGE>
FITCH INVESTORS SERVICE
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+. Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1. Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2. Issues assigned this rating have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as for issues assigned
F-1+ or F-1 rating.
F-3. Issues assigned this rating have characteristics suggesting that the
degree of assurance for timely payment is adequate, however, near-term adverse
changes could cause these securities to be rated below investment grade.
F-S. Issues assigned this rating have characteristics suggesting a minimal
degree of assurance for timely payment and are vulnerable to near-term adverse
changes in financial and economic conditions.
D. Issues assigned this rating are in actual or imminent payment default.
-A-6-
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
Included in the Prospectus:
Not applicable to this filing.
Included in the Statement of Additional Information:
Not applicable to this filing.
(b) EXHIBITS.
NOTE: * INDICATES THAT THE EXHIBIT IS INCORPORATED HEREIN BY REFERENCE. ALL
REFERENCES TO A POST-EFFECTIVE AMENDMENT ("PEA") OR PRE-EFFECTIVE AMENDMENT
("PreEA") ARE TO PEAS AND PREEAS TO REGISTRANT'S REGISTRATION STATEMENT ON FORM
N-1A, FILE NO. 33-9645.
(1)* Trust Instrument of Registrant as now in effect (filed as Exhibit 1 to
PEA No. 35).
(2)* By-Laws of Registrant as now in effect (filed as Exhibit 2 to PEA No.
35).
(3) Not Applicable.
(4)* Specimen Certificate for shares of beneficial interest of each class of
each portfolio of Registrant. Except for the names of the classes of
shares and CUSIP numbers. the certificate of each class of each portfolio
of Registrant is substantially the same as the specimen certificate, and
therefore, is omitted pursuant to Rule 483(d)(2) under the 1933 Act
(filed as Exhibit 4 to PEA No. 35).
(5) (a)* Investment Advisory Agreement between Registrant and Norwest Bank
Minnesota, N.A. relating to the Diversified Equity Fund, Growth
Equity Fund, Large Company Growth Fund, Small Company Growth Fund,
International Fund, Income Equity Fund, Index Fund, Conservative
Balanced Fund, Moderate Balanced Fund, Growth Balanced Fund,
Intermediate U.S. Government Fund, Managed Fixed Income Fund and
Stable Income Fund. Except for the names of each series of the
Registrant, the Investment Advisory Agreement of each series of
Registrant is substantially the same as the Investment Advisory
Agreement, and therefore, is omitted pursuant to Rule 483(d)(2)
under the 1933 Act (filed as Exhibit 5(a) to PEA No. 35).
<PAGE>
(b)* Investment Sub-Advisory Agreement between Registrant and Crestone
Capital Management, Inc. relating to Small Company Stock Fund
(filed as Exhibit 5(b) to PEA No. 35).
(c)* Investment Sub-Advisory Agreement between Registrant and Schroder
Capital Management International, Inc. relating to the Diversified
Equity Fund, Growth Equity Fund, International Fund, Conservative
Balanced Fund, Moderate Balanced Fund and Growth Balanced Fund
(filed as Exhibit 5(c) to PEA No. 35).
(d)* Advisory Agreement between Registrant and Norwest Bank Minnesota,
N.A., relating to Cash Investment Fund, Treasury Fund, U.S.
Government Fund, Ready Cash Investment Fund, Municipal Money
Market Fund, Minnesota Tax-Free Fund, Colorado Tax-Free Fund,
Government Income Fund, Income Fund, Tax-Free Income Fund,
Adjustable U.S. Government Reserve Fund, ValuGrowth Stock Fund,
and Income Stock Fund (filed as Exhibit 5(d) to PEA No. 35).
(e) Form of Investment Advisory Agreement between Registrant and
Norwest Bank Minnesota, N.A. relating to Small Cap Opportunities
Fund (to be filed by subsequent amendment prior to the
effectiveness of this PEA No. 36).
(f) Form of Investment Sub-Advisory Agreement between Registrant and
Schroder Capital Management International, Inc. relating to Small
Cap Opportunities Fund (to be filed by subsequent amendment prior
to the effectiveness of this PEA No. 36).
(6)* Distribution Agreement between Registrant and Forum Financial
Services, Inc. relating to each portfolio of Registrant (filed as
Exhibit 6 to PEA No. 35).
(7) Not Applicable.
(8) (a)* Custodian Agreement between Registrant and Norwest Bank Minnesota,
N.A. dated August 1, 1993 as amended November 11, 1994 (filed as
Exhibit 8(a) to PEA No. 35).
(b)* Transfer Agency Agreement to be between Registrant and Norwest
Bank Minnesota, N.A. (filed as Exhibit 8(b) to PEA No. 35).
(9) (a)* Management Agreement between Registrant and Forum Financial
Services, Inc. relating to each portfolio of Registrant (filed as
Exhibit 9(a) to PEA No. 35).
(b)* Fund Accounting Agreement between Registrant and Forum Financial
Corp. (filed as Exhibit 9(b) to PEA No. 35).
<PAGE>
(c)* Administration Services Agreement between Registrant and Norwest
Bank Minnesota, N.A. relating to International Fund (filed as
Exhibit 9(c) to PEA No. 35).
(10) (a)* Opinion of Seward & Kissel (filed on December 31, 1986 as Exhibit
10(a) of PreEA 2).
(b)* Opinion of Seward & Kissel (filed as Exhibit 10(b) to PEA No.
35).
(11) Not applicable to this filing.
(12) Not Applicable.
(13)* Investment representation letter of John Y. Keffer as initial purchaser
of shares of stock of Registrant (filed on December 31, 1986 as Exhibit
13 of PreEA 2).
(14)* Individual Retirement Account materials (filed on April 22, 1994 as
Exhibit 14 to PEA 24).
(15)* Rule 12b-1 Plan adopted by Registrant with respect to the Income Fund,
Tax-Free Income Fund, Minnesota Tax-Free Fund, ValuGrowth Stock Fund,
Adjustable U.S. Government Reserve Fund, Colorado Tax-Free Fund, Income
Stock Fund, Arizona Tax-Free Fund, Contrarian Stock Fund, Small Company
Stock Fund, Government Income Fund, Total Return Bond Fund, Stable Income
Fund, Income Equity Fund, Diversified Equity Fund, Intermediate U.S.
Government Fund, Growth Equity Fund and Exchange Shares of Ready Cash
Investment Fund (filed as Exhibit 15 to PEA No. 35).
(16)* Schedule for Computation of each Performance Quotation provided in the
Registration Statement in response to Item 22 for the Colorado Tax-Free
Fund and Income Stock Fund (filed on February 18, 1994 as Exhibit 16 to
PEA 23).
(17) Not Applicable.
(18)* Multiclass (Rule 18f-3) Plan adopted by Registrant (filed as Exhibit 18
to PEA No. 35).
Other Exhibits
(A)* Power of Attorney of James C. Harris, Trustee of Registrant (filed as
Other Exhibit A to PEA No. 35).
(B)* Power of Attorney of Richard M. Leach, Trustee of Registrant (filed as
Other Exhibit B to PEA No. 35).
(C)* Power of Attorney of Robert C. Brown, Trustee of Registrant (filed as
Other Exhibit C to PEA No. 35).
<PAGE>
(D)* Power of Attorney of Donald H. Burkhardt, Trustee of Registrant (filed as
Other Exhibit D to PEA No. 35).
(E)* Power of Attorney of John Y. Keffer, Trustee of Registrant (filed as
Other Exhibit E to PEA No. 35).
(F)* Power of Attorney of Donald C. Willeke, Trustee of Registrant (filed as
Other Exhibit F to PEA No. 35).
(G)* Power of Attorney of Timothy J. Penny, Trustee of Registrant (filed as
Other Exhibit G to PEA No. 35).
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES AS OF JUNE 30, 1996.
Number of
Title of Class of Unit of Beneficial Interest Record Holders
- --------------------------------------------- --------------
Cash Investment Fund
U.S. Government Fund
Treasury Fund
Municipal Money Market Fund
Investor Shares
Institutional Shares
Ready Cash Investment Fund
Investor Shares
Institutional Shares
Exchange Class
Adjustable U.S. Government Reserve Fund
A Shares
B Shares
I Shares
Government Income Fund
A Shares
B Shares
I Shares
Income Fund
A Shares
B Shares
I Shares
Total Return Bond Fund
<PAGE>
A Shares
B Shares
I Shares
Arizona Tax-Free Fund
A Shares
B Shares
I Shares
Colorado Tax-Free Fund
A Shares
B Shares
I Shares
Minnesota Tax-Free Fund
A Shares
B Shares
I Shares
Tax-Free Income Fund
A Shares
B Shares
I Shares
Income Stock Fund
A Shares
B Shares
I Shares
ValuGrowth Stock Fund
A Shares
B Shares
I Shares
Contrarian Stock Fund
A Shares
B Shares
I Shares
Small Company Stock Fund
A Shares
B Shares
I Shares
Diversified Equity Fund
A Shares
B Shares
I Shares
Growth Equity Fund
I Shares
Large Company Growth Fund
I Shares
Small Company Growth Fund
<PAGE>
I Shares
International Fund
A Shares
B Shares
I Shares
Income Equity Fund
A Shares
B Shares
I Shares
Index Fund
I Shares
Conservative Balanced Fund
I Shares
Moderate Balanced Fund
I Shares
Growth Balanced Fund
A Shares
B Shares
I Shares
Intermediate U.S. Government Fund
A Shares
B Shares
I Shares
Managed Fixed Income Fund
I Shares
Stable Income Fund
A Shares
B Shares
I Shares
ITEM 27. INDEMNIFICATION.
The general effect of Section 10.02 of Registrant's Trust Instrument is to
indemnify existing or former trustees and officers of the Trust to the fullest
extent permitted by law against liability and expenses. There is no
indemnification if, among other things, any such person is adjudicated liable to
Registrant or its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. This description is modified in its entirety by the provisions of
Section 10.02 of Registrant's Trust Instrument contained in this Registration
Statement as Exhibit 1 and incorporated herein by reference.
Registrant's Investment Advisory Agreements, Investment Subadvisory Agreements,
Management and Distribution Agreements and Distribution Services Agreements
provide that Registrant's investment advisers and principal underwriter are
protected against liability to the extent permitted by Section 17(i) of the
Investment Company Act of 1940. Similar provisions
<PAGE>
are contained in the Management Agreement and Transfer Agency and Fund
Accounting Agreement. Registrant's principal underwriter is also provided with
indemnification against various liabilities and expenses under the Management
and Distribution Agreements and Distribution Services Agreements between
Registrant and the principal underwriter; provided, however, that in no event
shall the indemnification provision be construed as to protect the principal
underwriter against any liability to Registrant or its security holders to which
the principal underwriter would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties under those
agreements. Registrant's transfer agent and fund accountant and certain related
individuals are also provided with indemnification against various liabilities
and expenses under the Transfer Agency and Fund Accounting Agreements between
Registrant and the transfer agent and fund accountant; provided, however, that
in no event shall the transfer agent, fund accountant or such persons be
indemnified against any liability or expense that is the direct result of
willful misfeasance, bad faith or gross negligence by the transfer agent or such
persons.
The preceding paragraph is modified in its entirety by the provisions of the
Investment Advisory Agreements, Investment SubAdvisory Agreements, Management
and Distribution Agreements, Distribution Services Agreements, Management
Agreements, Transfer Agency Agreement and Fund Accounting Agreement of
Registrant filed as Exhibits 5, 6, and 9 to Registrant's Registration Statement
and incorporated herein by reference.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such trustee, officer
or controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
NORWEST BANK MINNESOTA, N.A.
The description of Norwest Bank Minnesota, N.A., under the caption
"Management-Adviser" or "Management of the Funds -Norwest Investment Management"
in each Prospectus and under the caption "Management-Adviser" or "Management-
Investment Advisory Services-Norwest Investment Management" in each Statement of
Additional Information constituting Parts A and B, respectively, of this
Registration Statement are incorporated by reference herein.
<PAGE>
The following are the directors and principal executive officers of Norwest Bank
Minnesota, N.A., including their business connections which are of a substantial
nature. The address of Norwest Corporation, the parent of Norwest Bank
Minnesota, N.A., is Norwest Center, Sixth Street and Marquette Avenue,
Minneapolis, MN 55479. Unless otherwise indicated below, the principal business
address of any company with which the directors and principal executive officers
are connected is also Sixth Street and Marquette Avenue, Minneapolis, MN 55479.
A. Rodney Boren, Jr., Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates during the last two years. Mr. Boren is also a Director of
Norwest Trust Company, New York, New York and Norwest Foundation.
James R. Campbell, Director, President and Chief Executive Officer, has
held this position for the last two years. Mr. Campbell is also
Executive Vice President of Norwest Corporation, Director and Chairman of
Norwest Investment Advisors, Inc., and a Director of Flore Properties,
Inc., Centennial Investment Corporation and Peregrine Capital Management,
Inc., which is located at LaSalle Plaza, 800 LaSalle Avenue, Suite 1850,
Minneapolis, Minnesota 55402-2056. Mr. Campbell is also a Director of a
number of non-profit organizations located in Minneapolis, Minnesota.
Within the last two years Mr. Campbell was a Director of Norwest
Insurance, Inc. and Norwest Equipment Finance, Inc.
Michael A. Graf, Controller and Cashier, also serves as Senior Vice
President and Controller of Norwest Corporation.
P. Jay Kiedrowski, Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates since August 1987. Mr. Kiedrowski is also a Director and
Chairman of the Board of Norwest Investment Management, Inc. and
President of Norwest Investment Management, a part of Norwest.
Scott A. Kisting, Director and Executive Vice President, is also a
Director of Norwest Insurance, Inc., IntraWest Insurance Company and
Fidelity National Life Insurance Company.
Edgar M. Morsman, Jr., Executive Vice President and Chief Lending
Officer, has served in various capacities as an employee of Norwest Bank
Minnesota, N.A. and/or its affiliates during the last two years. Mr.
Morsman is also a Director of Centennial Investment Corporation, First
Interstate Equipment Finance, Inc., Flore Properties, Inc., Norwest
Credit, Inc., Norwest Business Credit, Inc., R.D. Leasing, Inc. and
Norwest Equipment Finance, Inc., which is located at 733 Marquette
Avenue, Suite 300, Minneapolis, MN 55479-2048.
Dharani P. Narayana, Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates during the last two years. Mr. Narayana is also a Director
and Chairman of Norwest Bank International, Director
<PAGE>
and Secretary of Norwest Investments Limited, a Director of Norwest Bank
International, Colorado, a Director and Vice President of Norwest Bank
International, Iowa, and a Director of Norwest Bank International,
Wisconsin. Mr. Narayana is also a Director and Secretary of Minnetonka
Overseas Investments Limited, and a Director of Minnetonka
Representaocoes Commerciais Ltda. and Nortico Investments Ltd. all of
which are located at Grand Cayman, Cayman Islands, British West Indies.
William H. Queenan, Director, is also Executive Vice President of Norwest
Corporation.
John T. Thornton, Director, is also Executive Vice President and Chief
Financial Officer of Norwest Corporation. Mr. Thornton is also a
Director of Northern Prairie Indemnity, Limited, Grand Cayman, Cayman
Islands, British West Indies, a Director of Norwest Capital Markets, Inc.
Mr. Thornton is also a Director of Norwest Growth Fund, Inc., Norwest
Venture Capital Management, Inc. and Norwest Equity Capital, Inc., and
Director, President and Treasurer of Norwest Investors, Inc., and
Director, President and CEO of Norwest Limited, Inc., all located at 2800
Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, MN 54402. Mr.
Thornton is also Director and President of Superior Guaranty Insurance
Company and Norwest Holding Company, and a Director of Bettendorf Asset
Management, Inc. Mr. Thornton is also a Director of Eau Claire Asset
Management, Inc., Green Bay Asset Management, Inc., Iowa Asset
Management, Inc., LaCrosse Asset Management, Inc., South Bend Asset
Management, Inc., South Dakota Asset Management, Inc., Waupun Asset
Management, Inc., all located at 100 West Commons Blvd., Suite 303, New
Castle, DE 19720.
Richard C. Westergaard, Executive Vice President, has served in various
capacities as an employee of Norwest Bank Minnesota, N.A. and/or its
affiliates during the last two years. Mr. Westergaard is also a Director
of Norwest Business Credit, Inc., Norwest Credit, Inc., First Interstate
Equipment Finance, Inc. and R.D. Leasing, Inc. and a Director of Norwest
Equipment Finance, Inc. and Commonwealth Leasing Corporation, located at
Investors Building, 733 Marquette, Suite 300, Minneapolis, MN 55479-2048.
Charles D. White, Senior Vice President, has served in various capacities
as an employee of Norwest Bank Minnesota, N.A. and/or its affiliates
during the last two years. Mr. White is also Treasurer and Chief
Financial Officer of Norwest Limited, Inc. Mr. White is also a Director
of Bettendorf Asset Management, Inc., Eau Claire Asset Management, Inc.,
Green Bay Asset Management, Inc., IntraWest Asset Management, Inc., Iowa
Asset Management, Inc., LaCrosse Asset Management, Inc., South Bend Asset
Management, Inc., South Dakota Asset Management, Inc., and Waupun Asset
Management, Inc., located at 100 West Commons Boulevard, Suite 303, New
Castle, DE 19720.
SCHRODER CAPITAL MANAGEMENT INTERNATIONAL, INC.
The description of Schroder Capital Management International, Inc. ("Schroder")
under the caption "Management of the Funds-Investment Advisory Services-Schroder
Capital Management International, Inc." in the Prospectus and "Management-
Investment Advisory Services" in the
<PAGE>
Statement of Additional Information relating to International Fund, Diversified
Equity Fund, Growth Equity Fund, Conservative Balanced Fund, Moderate Balanced
Fund and Growth Balanced Fund, constituting certain of Parts A and B,
respectively, of the Registration Statement, are incorporated by reference
herein.
The following are the directors and principal officers of Schroder, including
their business connections which are of a substantial nature. The address of
each company listed, unless otherwise noted, is 33 Gutter Lane, London EC2V 8AS,
United Kingdom. Schroder Capital Management International Limited ("Schroder
Ltd.") is a United Kingdom affiliate of Schroder which provides investment
management services international clients located principally in the United
States.
I. Peter Sedgwick, Chairman. Mr. Sedgwick is also Group Managing
Director - Investment Management of Schroders PLC, 120 Cheapside, London
EC2V 6DS, United Kingdom, the holding company of the various Schroder
companies, Chairman and Director of Schroder Ltd., Director and Chief
Executive Officer of Schroder Investment Management Limited, an
investment management company, Director of Schroder Investment Management
(UK) Limited, Schroder Personal Financial Management Limited, Schroder
Investment Management (Europe) Limited, Schroder Investment Trust
Management Limited and Church, Charity & Local Authorities Fund Managers
Limited, 2 Fore Street, London EC2Y 5AQ, United Kingdom, each an
investment management company, and Director, The Equitable Life Assurance
Company, Walton Street, Aylesbury, Bucks, United Kingdom, a life
assurance company. Mr. Sedgwick is also a director of various nominee
companies and of various unit trust companies, investment trusts and
closed end investment companies for which Schroder and/or its affiliates
provide investment services.
David M. Salisbury, Chief Executive Officer. Mr. Salisbury is also the
Chief Executive Officer of Schroder Ltd. and Director of Dimensional Fund
Advisors Inc., 1299 Ocean Avenue, Santa Monica, California, an investment
advisory company and DFA Securities Inc., a broker dealer subsidiary of
Dimensional Fund Advisors Inc. located at the same address. Until
October 1992 Mr. Salisbury was Chairman of Schroder Capital Distributors
Inc. ("Schroder Distributors"), 787 Seventh Avenue, New York, New York, a
broker dealer. Mr. Salisbury is a director or former director of various
investment trust companies and closed end investment companies for which
Schroder and/or its affiliates provide investment services.
John S. Ager, Director. Mr. Ager is also a Director of Schroder Ltd.
Richard R. Foulkes, Deputy Chairman and Director. Mr. Foulkes is also a
Director of Schroder Ltd. and Schroder Distributors.
<PAGE>
Laura E. Luckyn-Malone, Managing Director. Ms. Luckyn-Malone is also a
Director of Schroder Wertheim Investment Services, Inc. and Schroder Ltd.
and President and Director of a closed-end investment company for which
Schroder and/or its affiliates provide investment services. Director and
President of Schroder Advisors.
David J. Mumford, Director. Mr. Mumford is also a Director of Schroder
Ltd. and Schroder Investment Management Limited and is Chairman of
Schroders Guernsey Limited, St. Julian's Avenue, St. Peter Port, Guernsey
C.J., a Guernsey based bank, and Director of J. Henry Schroder Wagg &
Company Limited, 120 Cheapside London EC2V 6DS, United Kingdom, a United
Kingdom based bank.
Gavin D.L. Ralston, Director. Mr. Ralston is also a Director of Schroder
Ltd.
Mark J. Smith, Director. Mr. Smith is also Director, Schroder Ltd. and
Schroder Investment Management (Guernsey) Limited, an investment
management company, and Director and Vice President of Schroder
Distributors and Director and Vice President of Schroder Advisors. Mr.
Smith is also a director of various investment trusts and open end
investment companies for which Schroder and/or its affiliates provide
investment services.
Ton F. Tija, Director. Mr. Tija is also a Director of Schroder Ltd.
John A. Trioano, Managing Director. Mr. Trioano is also a Director of
Schroder Ltd. and Schroder Advisors, Chairman of Schroder Distributors
and President and Director open end investment companies for which
Schroder and/or its affiliates provide investment services.
Jane P. Lucas, Director. Ms. Lucas is also a Director of Schroder
Wertheim Investment Services, Inc. and Assistant Director of Schroder
Investment Management, Ltd.
Kathleen Adams, Vice President. Ms. Adams is also Vice President of
Schroder Distributors.
Mark J. Astley, Vice President.
Andrew R. Barker, First Vice President. Mr. Barker is also First Vice
President of Schroder Ltd.
David A.W. Butler, First Vice President. Mr. Butler is also First Vice
President and Treasurer of Schroder Ltd. and an officer of open end
investment companies for which Schroder and/or its affiliates provide
investment services.
Richard J. Conyers, Vice President. Mr. Conyers is also Vice President
of Schroder Ltd. and Manger of Schroder Investment Management Limited.
<PAGE>
Heather F. Crighton, Fund Manger. Ms. Crighton is also Fund Manager of
Schroder Ltd.
Louise Crouset, First Vice President. Mr. Crouset is also First Vice
President of Schroder Ltd. and, until October 1993, was Vice President of
Wellington Management, an investment adviser.
Robert C. Davy, Director. Mr. Davy is also a Director of Schroder Ltd.
and an officer of open end investment companies for which Schroder and/or
its affiliates provide investment services.
Margaret H. Douglas-Hamilton, Secretary. Ms. Douglas-Hamilton is also
First Vice President and General Counsel of Schroders Incorporated
("Schroders Inc."), 787 Seventh Avenue, New York, New York, the holding
company for various United States based Schroder affiliates. Ms.
Douglas-Hamilton is also Secretary to various Schroder affiliates,
including Schroder Distributors.
Lyn M. Fox, Vice President.
Stephen M. Futrell, Comptroller. Mr. Futrell is Treasurer of Schroders
Inc., President, Treasurer and Director of Schroder Distributors and an
officer of various open end investment companies for which Schroder
and/or its affiliates provide investment services.
David Gibson, First Vice President. Mr. Gibson is also First Vice
President of Schroder Ltd. and Assistant Director of Schroder Investment
Management Limited.
Simon C. Hallett, Fund Manager. Mr. Hallett is also Fund Manager of
Schroder Ltd.
Nicholas J. A. Melhuish, Fund Manager. Mr. Melhuish is also Fund Manager
of Schroder Ltd.
Laurette J. Oat, First Vice President. Within the last two years, Ms.
Oat was a Senior Vice President of NatWest Investment Bank, 65 East 55th
Street, New York, New York 10002.
John Stainsby, First Vice President. Mr. Stainsby is also First Vice
President of Schroder Ltd.
Fariba Talebi, First Vice President. Mr. Talebi is also an officer of
various open end investment companies for which Schroder and/or its
affiliates provide investment services.
Jan Kees van Heusde, First Vice President. Mr. van Heusde is also First
Vice President of Schroder Ltd.
<PAGE>
Patrick Vermeulen, Vice First President. Mr. Vermeulen is also Vice
First President of Schroder Ltd.
Susan M. Belson, Vice President.
Alan Gilston, Vice President.
Abdallah Nauphal, First Vice President.
Ellen B. Sullivan, First Vice President.
Ira L. Unschuld, Vice President.
Catherine A. Mazza, Vice President. Ms. Mazza is also Senior Vice
President of Schroder Advisors.
Robert Jackowitz, Vice President. Mr. Jackowitz is also Vice President
and Treasurer of Schroder Wertheim Investment Services, Inc., Treasurer
of Schroder Advisors and Assistant Treasurer of Schroders Incorporated.
CRESTONE CAPITAL MANAGEMENT, INC.
The description of Crestone Capital Management, Inc. ("Crestone") under the
caption "Management-SubAdviser" in the Prospectus and "Management- Adviser-
SubAdviser-Small Company Stock Fund" in the Statement of Additional Information
relating to the Small Company Stock Fund, constituting certain of Parts A and B,
respectively, of the Registration Statement, are incorporated by reference
herein.
The following are the directors and principal officers of Crestone, including
their business connections which are of a substantial nature.
Kirk McCown, President and Director. His address is 7720 East Belleview
Avenue, Suite 220, Englewood, Colorado 80111.
Mark Steven Sunderhuse, Senior Vice President and Director. His address
is 7720 East Belleview Avenue, Suite 220, Englewood, Colorado 80111.
P. Jay Kiedrowski, Director. Mr. Kiedrowski is an Executive Vice
President of Norwest and is also a Director and Chairman of the Board of
Norwest Investment Management, Inc. His address is Sixth and Marquette
Avenue, Minneapolis, Minnesota 55479.
Steven P. Gianoli, Director. Mr. Gianoli is a Vice President of Norwest.
His address is Sixth and Marquette Avenue, Minneapolis, Minnesota 55479.
<PAGE>
Susan Koonsman, Director. Ms. Koonsman is President of Norwest
Investments & Trust. Her address is 1740 Broadway, Denver, Colorado
80274.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Forum Financial Services, Inc., Registrant's underwriter, serves as
underwriter to Avalon Capital, Inc., Core Trust (Delaware), The CRM
Funds, The Cutler Trust, Forum Funds, Monarch Funds, Norwest
Advantage Funds, Norwest Select Funds, Sound Shore Fund, Inc., Stone
Bridge Funds, Inc. and Trans Adviser Funds, Inc.
(b) John Y. Keffer, President and Secretary of Forum Financial Services,
Inc., is the Chairman and President of Registrant. David R. Keffer, Vice
President and Treasurer of Forum Financial Services, Inc., is the Vice
President, Assistant Treasurer and Assistant Secretary of Registrant.
Their business address is Two Portland Square, Portland, Maine
(c) Not Applicable.
ITEM 30. LOCATION OF BOOKS AND RECORDS.
The majority of accounts, books and other documents required to be maintained by
31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained at the offices of Forum Financial Services, Inc. at Two Portland
Square, Portland, Maine 04101 and at Forum Financial Corp., Two Portland Square,
Portland, Maine 04101. The records required to be maintained under Rule 31a-
1(b)(1) with respect to journals of receipts and deliveries of securities and
receipts and disbursements of cash are maintained at the offices of Registrant's
custodian. The records required to be maintained under Rule 31a-1(b)(5), (6)
and (9) are maintained at the offices of Registrant's investment advisers as
indicated in the various prospectuses constituting Part A of this Registration
Statement.
Additional records are maintained at the offices of Norwest Bank Minnesota,
N.A., 733 Marquette Avenue, Minneapolis, MN 55479-0040, Registrant's investment
adviser, custodian and transfer agent.
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
ITEM 32. UNDERTAKINGS.
(i) Registrant undertakes to file a post-effective amendment, using financial
statements which need not be certified, within four to six months from
the latter of the effective date of Registrant's Securities Act of 1933
Registration Statement relating to the prospectuses offering those shares
or the commencement of operations; and
<PAGE>
(ii) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual report to
shareholders relating to the portfolio or class thereof to which the
prospectus relates upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Portland, and State of Maine on the 23rd day of
May, 1996.
NORWEST ADVANTAGE FUNDS
John Y. Keffer
By:/s/ Thomas G. Sheehan
---------------------
Thomas G. Sheehan
Attorney in Fact
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement amendment has been signed below by the following persons on the 23rd
day of May, 1996.
Signatures Title
---------- -----
(a) Principal Executive Officer
John Y. Keffer Chairman and President
By: /s/ Thomas G. Sheehan
----------------------
Thomas G. Sheehan
Attorney in Fact
(b) Principal Financial and Accounting Officer
/s/ Michael D. Martins Treasurer, Principal Financial
----------------------- and Accounting Officer
Michael D. Martins
(c) A Majority of the Trustees
John Y. Keffer* Chairman
Robert C. Brown* Trustee
Donald H. Burkhardt* Trustee
James C. Harris* Trustee
Richard M. Leach* Trustee
Donald C. Willeke* Trustee
By: /s/ Thomas G. Sheehan
----------------------
Thomas G. Sheehan
Attorney in Fact*
